Acadia Realty Trust
Annual Report 2014

Plain-text annual report

2014 ANNUAL REPORT Dear Fellow Shareholders: In 1965, American psychologist and computer scientist Joseph Licklider observed, “People tend to overestimate what can be done in one year and to underestimate what can be done in five or ten years.” Last year, I believe that we delivered on people’s – and our own – high expectations for our company and its dual, core and fund, operating platforms. More importantly, these were just the latest in a series of important milestones that we have celebrated over the past handful of years as we continue to advance our long-term strategic plans and further differentiate our platform from those of our peers. During 2014, we continued to build a best-in- class core retail real estate portfolio by: In response to capital-markets tailwinds, we opportunistically harvested fund profits by:  Acquiring $450 million of high-quality street, urban, or high-barrier-to-entry suburban retail properties within our existing target markets of New York, Chicago, and Boston; and  Expanding our platform to another vibrant, live- work-play city, by agreeing to acquire San Francisco’s CityTarget-anchored City Center for $155 million. (This acquisition closed in 2015.)  Monetizing our Lincoln Rd (Miami Beach, FL) assets for $342 million, generating a 3.0x equity multiple in 3.5 years for Fund III, a 1.9x equity multiple in 1.7 years for Fund IV, and internal rates of return of nearly 50% for both; and  Distributing the capital gains attributed to this sale to our shareholders in the form of a special cash dividend, which totaled $0.30 per share. We delivered further evidence that our forward-thinking strategies should enable our core portfolio to produce above-average operating results by:  Generating 5.2% same property net operating income growth for the year;  Achieving blended cash spreads of 27% on new leases for the year; and  Maintaining the leased occupancy rate at 97.0%. We planted the seeds for future fund profit- taking by:  Acquiring $106 million of assets on behalf of Fund IV, ranging from an opportunistic shopping center purchase in Delaware to next-generation street retail in Savannah, GA; and  Continuing to execute on the strategic business plans for our existing pool of lease-up and development assets, bringing the Fund III promote, in particular, further into focus. And, similar to prior years, we grew our company on a substantially leverage-neutral basis by:  Flexibly funding our acquisition activities through a combination of disciplined common share and operating partnership (OP) unit issuance, opportunistic capital recycling, and conservative borrowing. In doing so, for the year ended December 31, 2014, we achieved solid returns on behalf of our shareholders: 1 Year Period Acadia’s Total Return 34.5% Shopping Centers Total Return: Average 27.8% Shopping Centers Total Return: Median 26.3% Acadia’s Rank Among Shopping Centers #4 of 13 5 Years 10 Years 127.8% 201.6% 66.3% 115.0% 123.5% 44.2% #2 of 10 #4 of 11 15 Years 1,388% 567.8% 376.4% #1 of 9 Between 2011 and 2014, we more than doubled the size of our core, adding $925 million of high-quality properties to our already-solid portfolio. That said, ours is not a “growth-for-growth’s-sake” strategy. Rather, given the clear and inevitable changes in retailing, and the continued urbanization of our nation’s gateway cities, our goal has been to assemble a differentiated portfolio that will remain relevant and deliver strong organic growth over the next 1, 3, 10, and 20 years. Accordingly, we have focused our acquisition activities in two complementary areas: first, street retail in dynamic flagship locations or live-work-play neighborhoods and, second, supermarket or discounter-anchored shopping centers in densely-populated urban or high-barrier-to-entry suburban markets. This is where we believe our shopper will want to live, work, and play; our retailers will want to set up shop; and, in turn, our real estate will continue to benefit from strong demand. Our street-retail portfolio is well diversified and includes:  Established flagships, where retailers are motivated to do “more with more” in order to create unique branding statements, such as 840 N Michigan Ave (Gold Coast, Chicago, IL), home to H&M’s first global flagship in the United States and second in the world after Lisbon, Portugal;  Street retail in affluent live-work-play neighborhoods, ranging from our W Armitage Ave collection (Lincoln Park, Chicago, IL), where online-first retailers Bonobos and Warby Parker have each recently opened studios, to 239 Greenwich Ave (Greenwich, CT), where Betteridge jewelers continues to serve the Greenwich community, as it has since 1897; and  Street retail in authentic, up-and-coming neighborhoods, such as 313-315 Bowery (Nolita, New York, NY), home to Patagonia’s first East Coast surf shop and a rock-&- roll-themed John Varvatos boutique that served as the inspiration for two other “John Varvatos Bowery NYC” concept stores in Miami Beach, FL and Las Vegas, NV. Our recent decision to expand our platform to the West Coast – and, more importantly, to another vibrant, high-barrier-to-entry, gateway city – is consistent with our deep- rooted, location-centric investment philosophy. Our entry point, called City Center, is a former Mervyns department store centrally located within San Francisco. Through our successful Retailer Controlled Property Venture (Fund I & Fund II), we have owned a minority interest in City Center for several years, closely tracking its redevelopment. As a result, when the partnership determined that it was time to sell the property, we were able to move quickly, given our familiarity with both the asset and the market. Today, the 200,000-square-foot center is anchored by CityTarget, Target’s smaller urban concept. Not only does City Center share tenants in common with other urban and high-barrier-to-entry suburban assets within our existing portfolio, but also its immediate trade area is similarly characterized by high population density (nearly 300,000 residents within two miles) and strict zoning regulations that have limited retail competition. Our growth initiatives have had a significant impact on the composition of our core portfolio. More than 85% of its gross asset value is now concentrated in six of the nation’s top 11 metropolitan areas: New York, NY; Chicago, IL; San Francisco, CA; Washington, DC; Boston, MA; and Wilmington-Philadelphia, DE-PA. Our portfolio’s blended three-mile population density exceeds 350,000 people, while its average household income totals approximately $110,000. Most notably, within four years, we have increased our street retail concentration from approximately 15% of gross asset value to nearly 50% and increased urban retail, which includes City Center, from 2% to nearly 20%. Looking ahead, we believe that the acquisition opportunity set remains large in our target markets for street and urban retail properties. Furthermore, we are confident that we can continue to responsibly grow the size of our portfolio at a pace of approximately 20% per year for the foreseeable future. While there is no lack of competition, particularly for street retail, we have found that our ability to issue OP units – essentially, stock – on a tax-deferred basis has proven to be a valuable differentiator. In general, street-retail ownership remains private, non-institutional, and highly fragmented. And, more often than not, these properties have been owned for multiple years, if not multiple generations. When these owners become sellers, we are pleased that they recognize the compatibility between their high-quality assets and ours and consider us, usually among only a few others, for an OP-unit transaction. Over the years, our funds have proven to be both profitable and highly complementary to our core business, enabling us to further strengthen our core competencies, pursue a broader set of entrepreneurial strategies, and “punch above our weight.” You’ll recall that through our successful Mervyns and Albertsons transactions we sharpened our skills with distressed retailers. We also originated our urban and street- retail strategies in the funds. And now, through this platform, we are currently executing on several exciting “next-generation” street-retail strategies, including Broughton Street (Savannah, GA), the Bowery (Lower Manhattan, NY), and off Madison Avenue (Upper East Side, New York, NY). Throughout our many years as a fund manager, we have never lost sight of the fact that discretionary capital is a great asset as long as we remain disciplined in its deployment. After all, the real estate industry is cyclical – there will be times when it’s better to buy and times when it’s better to sell, especially when transacting with finite-life, absolute- return-focused capital. Through it all, responsible managers aspire after the wisdom to know the difference and the resolve to act on it. During 2014, we interpreted the historically-low 10-year U.S. Treasury yield and robust capital markets as strong signals to sell. Accordingly, last year, we were net sellers of fund investments. Most notably, we sold our Lincoln Rd (Miami Beach, FL) assets for $342 million, generating a 3.0x equity multiple in 3.5 years for Fund III, a 1.9x equity multiple in 1.7 years for Fund IV, and internal rates of return of nearly 50% for both. And, subsequent to year end, we continued the profitable monetization of Fund III with the sale of Lincoln Park Centre (Chicago, IL), a former Borders Books location, for $64 million. This sale generated similarly extraordinary profits – a 2.7x equity multiple and 57% internal rate of return in 2.8 years. We firmly believe that companies seeking long-term, responsible growth should also be focused on maintaining low leverage and appropriate levels of liquidity. We are, on all counts. For example, our net debt to EBITDA ratio was 4.0x at year-end 2014 – one of the lowest in the industry – and our fixed-charge coverage ratio was 3.5x. Likewise, our debt to total market capitalization was 21%. In order to protect and grow shareholder value, we also remain disciplined issuers of equity, be it through our at-the-market equity program (which is the most cost effective means for us to generate sufficient proceeds to maintain our ideal capitalization of one-third equity and two-thirds debt) or through periodic block trades (which we primarily use to fund large transactions). Because, by maintaining this discipline, we can create NAV accretion not only as we execute on each asset’s strategic business plan, but also immediately at acquisition. With 16 years of solid performance behind us, we remain well positioned, well capitalized, and highly motivated. Looking ahead, you can expect our energized team to continue to: 1. Grow our core portfolio in a disciplined manner, further elevating the quality of our real estate in order to remain relevant to both our shoppers and our retailers; 2. Pursue a broader, more entrepreneurial set of “buy-fix-sell” strategies through our complementary fund platform, enabling us to opportunistically respond to trends in real estate, retailing, and the capital markets; and 3. Responsibly support the long-term growth of our company by maintaining a healthy balance sheet. In closing, Acadia is still in its early innings. We look forward to continuing to grow this company together with you, our shareholders, and thank you for your support. Kenneth F. Bernstein President & CEO April 2015 UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-KýANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2014oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from toCommission File Number 1-12002ACADIA REALTY TRUST(Exact name of registrant as specified in its charter)Maryland23-2715194(State of incorporation)(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:NoneIndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.YES x NO oIndicate 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 NO xIndicate 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 1934during 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 filingrequirements for the past 90 days.YES x NO oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File requiredto be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter periodthat the registrant was required to submit and post such files).YES x NO oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest 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 thisForm 10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Act).Large Accelerated Filer x Accelerated Filer o Non-accelerated Filer o Smaller Reporting Company oIndicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)YES o NO xThe 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’smost recently completed second fiscal quarter was approximately $1,672.8 million, based on a price of $28.28 per share, the average sales price for theregistrant’s common 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 20, 2015 was 68,147,658.DOCUMENTS INCORPORATED BY REFERENCEPart III – Portions of the registrant’s definitive proxy statement relating to its 2015 Annual Meeting of Shareholders presently scheduled to be held May 27,2015 to be filed pursuant to Regulation 14A.TABLE OF CONTENTSForm 10-K ReportItem No. Page PART I 1.Business 41A.Risk Factors 91B.Unresolved Staff Comments 202.Properties 213.Legal Proceedings 314.Mine Safety Disclosures 31 PART II 5.Market for Registrant’s Common Equity, Related Stockholder Matters, Issuer Purchases of Equity Securities and PerformanceGraph 326.Selected Financial Data 347.Management’s Discussion and Analysis of Financial Condition and Results of Operations 367A.Quantitative and Qualitative Disclosures about Market Risk 528.Financial Statements and Supplementary Data 549.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 549A.Controls and Procedures 549B.Other Information 56 PART III 10.Directors, Executive Officers and Corporate Governance 5711.Executive Compensation 5712.Security Ownership of Certain Beneficial Owners and Management 5713.Certain Relationships and Related Transactions and Director Independence 5714.Principal Accounting Fees and Services 57 PART IV 15.Exhibits and Financial Statement Schedule 572SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSCertain statements contained in this Annual Report on Form 10-K may contain forward-looking statements within the meaning of Section 27A of theSecurities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 and as such may involve known and unknown risks, uncertainties andother factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievementsexpressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our future plans,strategies and expectations are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend" or"project" or the negative thereof or other variations thereon or comparable terminology. Factors which could have a material adverse effect on our operationsand future prospects include, but are not limited to those set forth under the headings "Item 1A. Risk Factors" and "Item 7. Management’s Discussion andAnalysis of Financial Condition and Results of Operations" in this Form 10-K. These risks and uncertainties should be considered in evaluating any forward-looking statements contained or incorporated by reference herein.3PART IITEM 1. BUSINESS.GENERALAcadia 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 "Company" refer to the Trust and its consolidated subsidiaries. We are a fully integrated REIT focused on the ownership, acquisition,redevelopment and management of high-quality retail properties located primarily in high-barrier-to-entry, supply-constrained, densely-populatedmetropolitan areas in the United States. We currently own, or have an ownership interest in these properties through our Core Portfolio (as defined below) andour Funds (as defined in Item 1. of this Form 10-K).All of our assets are held by, and all of our operations are conducted through, Acadia Realty Limited Partnership (the "Operating Partnership") and entities inwhich the Operating Partnership owns an interest. As of December 31, 2014, the Trust controlled 95% 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 OperatingPartnership. The limited partners primarily represent entities or individuals that contributed their interests in certain properties or entities to the OperatingPartnership in exchange for common or preferred units of limited partnership interest ("Common OP Units" or "Preferred OP Units", respectively, andcollectively, "OP Units") and employees who have been awarded restricted Common OP Units as long-term incentive compensation ("LTIP Units"). Limitedpartners holding Common OP and LTIP Units are generally entitled to exchange their units on a one-for-one basis for our common shares of beneficialinterest of the Trust ("Common Shares"). This structure is referred to as an umbrella partnership REIT, or "UPREIT".BUSINESS OBJECTIVES AND STRATEGIESOur primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while alsocreating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective:•Own and operate a Core Portfolio of high-quality retail properties located primarily in high-barrier-to-entry, densely-populated metropolitan areas.Our goal is to create value through accretive redevelopment and re-tenanting activities within our existing portfolio and grow this platform throughthe acquisition of high-quality assets that have the long-term potential to outperform the asset class.•Generate additional growth through our Funds in which we co-invest with high-quality institutional investors. Our Fund strategy focuses onopportunistic yet disciplined acquisitions with high inherent opportunity for the creation of additional value, execution on this opportunity and therealization of value through the sale of these assets. In connection with this strategy, we focus on:◦value-add investments in street retail properties, located in established and "next generation" submarkets, with re-tenanting or repositioningopportunities,◦opportunistic acquisitions of well-located real estate anchored by distressed retailers, and◦other opportunistic acquisitions, which vary based on market conditions and may include high-yield acquisitions and purchases ofdistressed debt.Some of these investments historically have also included, and may in the future include, joint ventures with private equity investors for the purposeof making investments in operating retailers with significant embedded value in their real estate assets.•Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund futuregrowth.Investment Strategy — Generate External Growth through our Dual Platforms; Core Portfolio and FundsThe requirements that acquisitions be accretive on a long-term basis based on our cost of capital, as well as increase the overall Core Portfolio quality andvalue, are key strategic considerations to the growth of our Core Portfolio. As such, we constantly evaluate the blended cost of equity and debt and adjust theamount of acquisition activity to align the level of investment activity with capital flows.4Given the growing importance of technology and e-commerce, many of our retail tenants are appropriately focused on omni-channel sales and how to bestutilize e-commerce initiatives to drive sales at their stores. In light of these initiatives, we have found retailers are becoming more selective as to the location,size and format of their next-generation stores and are focused on dense, high-traffic retail corridors, where they can utilize smaller and more productiveformats closer to their shopping population. Accordingly, our focus for Core Portfolio and Fund acquisitions is on those properties which we believe will notonly remain relevant to our tenants, but become even more so in the future.In addition to our Core Portfolio investments in real estate assets, we have also capitalized on our expertise in the acquisition, redevelopment, leasing andmanagement of retail real estate by establishing discretionary opportunity funds. Our Fund platform is an investment vehicle where the Operating Partnershipinvests, along with outside institutional investors, including, but not limited to, endowments, foundations, pension funds and investment managementcompanies, in primarily opportunistic and value-add retail real estate. To date, we have launched four funds ("Funds"); Acadia Strategic Opportunity Fund,LP ("Fund I"), Acadia Strategic Opportunity Fund II, LLC ("Fund II"), Acadia Strategic Opportunity Fund III LLC ("Fund III") and Acadia StrategicOpportunity Fund IV LLC ("Fund IV"). Due to our level of control, we consolidate these Funds for financial reporting purposes. Fund I and Fund II alsoinclude investments in operating companies through Acadia Mervyn Investors I, LLC ("Mervyns I"), Acadia Mervyn Investors II, LLC ("Mervyns II") and, incertain instances, directly through Fund II, all on a non-recourse basis. These investments comprise and are referred to as the Company's Retailer ControlledProperty Venture ("RCP Venture").The Operating Partnership is the sole general partner or managing member of the Funds and Mervyns I and II and earns priority distributions or fees for assetmanagement, property management, construction, redevelopment, leasing and legal services. Cash flows from the Funds and the RCP Venture are distributedpro-rata to their respective partners and members (including the Operating Partnership) until each receives a certain cumulative return ("Preferred Return"),and the return of all capital contributions. Thereafter, remaining cash flow is distributed 20% to the Operating Partnership ("Promote") and 80% to thepartners or members (including the Operating Partnership).See Note 1 in the Notes to Consolidated Financial Statements, which begin on page F-1 of this Form 10-K ("Notes to Consolidated Financial Statements"), fora detailed discussion of the Funds and RCP Venture.Capital Strategy — Balance Sheet Focus and Access to CapitalOur primary capital objective is to maintain a strong and flexible balance sheet through conservative financial practices, including a moderate use ofleverage, while ensuring access to sufficient capital to fund future growth. We intend to continue financing acquisitions and property redevelopment withsources of capital determined by management to be the most appropriate based on, among other factors, availability in the current capital markets, pricingand 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 OP Units. We manage our interest rate risk primarily through the use of fixed rate debt and, where weuse variable rate debt, through the use of certain derivative instruments, including London Interbank Offered Rate ("LIBOR") swap agreements and interestrate caps as discussed further in Item 7A. of this Form 10-K.During January 2012, we launched an at-the-market ("ATM") equity issuance program which provides us an efficient and low-cost vehicle for raising publicequity to fund our capital needs. Through this program, we have been able to effectively "match-fund" the required equity for our Core Portfolio and Fundacquisitions through the issuance of Common Shares over extended periods employing a price averaging strategy. In addition, from time to time, we haveissued and intend to continue to issue, equity in follow-on offerings separate from our ATM program. Net proceeds raised through our ATM program andfollow-on offerings are primarily used for acquisitions, both for our Core Portfolio and our pro-rata share of Fund acquisitions and for general corporatepurposes.Equity issuances for each of the years ended December 31, 2014, 2013 and 2012 are summarized as follows:5(shares and dollars in millions)201420132012 ATM Shares Issued (1)4.73.06.1ATM Gross Proceeds (1)$128.9$82.2$143.8ATM Net Proceeds (1)$127.1$80.7$140.8 Follow-on Offering Shares Issued7.6—3.5Follow-on Offering Gross Proceeds$237.4$—$86.9Follow-on Offering Net Proceeds$230.7$—$85.9Note:(1) Included 0.5 million shares issued during for the fourth quarter of 2014, which generated gross proceeds of $16.9 million and net proceeds of $16.7million.During 2013 and 2014, we also issued 1.2 million and 1.6 million OP Units, respectively, in connection with the acquisition of properties. See Note 2 in theNotes to Consolidated Financial Statements, for a detailed discussion of these acquisitions.During January 2013, we closed on a new unsecured revolving credit facility providing for up to $150.0 million of borrowings. As of February 20, 2015, noproceeds have been drawn on this facility although there are outstanding letters of credit for an aggregate $12.5 million issued against this facility. DuringNovember 2013, we modified this credit facility by funding an additional $50.0 million term loan, which has the same terms as the aforementioned revolvingcredit facility. During September 2014, the line of credit was extended to January 2018, with a one-year extension option, and the term loan was extended toNovember 2019.Operating Strategy — Experienced Management Team with Proven Track RecordOur senior management team has decades of experience in the real estate industry. We have capitalized on our expertise in the acquisition, redevelopment,leasing and management of retail real estate by creating value through property redevelopment, re-tenanting and establishing joint ventures, such as theFunds, in which we earn, in addition to a return on our equity interest, Promotes, priority distributions and fees.Operating functions such as leasing, property management, construction, finance and legal (collectively, the "Operating Departments") are generallyprovided by our personnel, providing for a vertically integrated operating platform. By incorporating the Operating Departments in the acquisition process,acquisitions are appropriately priced giving effect to each asset’s specific risks and returns and transition time is minimized allowing management toimmediately execute on its strategic plan for each asset.INVESTING ACTIVITIESCore PortfolioOur Core Portfolio consists primarily of high-quality street retail and urban assets, as well as suburban properties located in high-barrier-to-entry, densely-populated trade areas.For the year ended December 31, 2014, we continued to execute on our strategy of owning a superior Core Portfolio by acquiring, through our OperatingPartnership, properties consistent with our existing portfolio for an aggregate purchase price of $473.2 million, of which the Operating Partnership's pro-ratashare was $450.4 million. See Note 2 in the Notes to Consolidated Financial Statements, for a detailed discussion of these acquisitions. During December2014, we entered into a contract to acquire a retail property located in the densely-populated San Francisco Bay area for $155.0 million which will expandour platform to the West Coast of the United States. This contract is subject to certain closing conditions and as such, no assurance can be given that theclosing will be successfully completed. See Item 2. Properties for a description of the other properties in our Core Portfolio.As we typically hold our Core Portfolio properties for long-term investment, we periodically review the portfolio and implement programs to renovate and re-tenant targeted properties to enhance their market position. This in turn is expected to strengthen the competitive position of the leasing program to attractand retain quality tenants, increasing cash flow, and consequently, property values. From time to time, we also identify certain properties for disposition andredeploy the capital for acquisitions and for the6repositioning of existing properties with greater potential for capital appreciation. During 2014, the Walnut Hill Plaza, located in Woonsocket, Rhode Island,was foreclosed upon by the lender. See Note 2 in the Notes to Consolidated Financial Statements, for a detailed discussion of this disposition.We also make investments in first mortgages, preferred equity and other notes receivable collateralized by real estate, ("Structured Finance Program") eitherdirectly or through entities having an ownership interest therein. During 2014, we made investments totaling $31.2 million in this program and as ofDecember 31, 2014 had $102.3 million invested in this program. See Note 5 in the Notes to Consolidated Financial Statements, for a detailed discussion ofour Structured Finance Program.FundsAcquisitionsFund IIIDuring 2014, Fund III, through an already existing unconsolidated joint venture, acquired a parcel adjacent to one of its existing investments for $3.1million. See Note 2 in the Notes to Consolidated Financial Statements, for a detailed discussion of this acquisition. The acquisition period for Fund III hasnow expired and any remaining uncalled investor capital may only be used to complete the plans for existing investments.Fund IVDuring 2014, Fund IV acquired four properties for an aggregate purchase price of $106.6 million. See Note 2 in the Notes to Consolidated FinancialStatements, for a detailed discussion of these acquisitions.DispositionsFund IIDuring 2014, Fund II sold a portion of the residential air rights at its City Point project located in Brooklyn, NY for a sales price of $26.3 million. See Note 2in the Notes to Consolidated Financial Statements, for a detailed discussion of this disposition.Fund IIIDuring 2014, Fund III sold one property located in Brooklyn, NY and a portfolio of three buildings in Miami, FL for an aggregate sales price of $162.0million. See Note 2 in the Notes to Consolidated Financial Statements, for a detailed discussion of these dispositions. During January 2015, Fund III sold theLincoln Park Centre in Chicago, IL for a sales price of $64.0 million.Fund IVDuring 2014, Fund IV sold a portfolio of three buildings in Miami, FL for a sales price of $200.2 million. See Note 2 in the Notes to Consolidated FinancialStatements, for a detailed discussion of this disposition.Redevelopment ActivitiesAs part of our Fund strategy, we invest in real estate assets that may require significant redevelopment. As of December 31, 2014, the Funds had eightredevelopment projects, consisting of 31 individual properties, two of which are under construction and six are in various stages of the redevelopmentprocess as follows:7(dollars in millions) Property Owner Coststo date Anticipatedadditionalcosts (1) Status Squarefeet uponcompletionAnticipatedcompletion dateCity Point (2) Fund II $339.5 ($19.5) - $10.5 (3) Construction commenced 675,0002016Sherman Plaza (2) Fund II 35.3 TBD Pre-construction TBDTBDCortlandt Crossing Fund III 12.9 34.1 - 43.1 Pre-construction 150,000 - 170,00020173104 M Street NW (2) Fund III 3.9 4.1 - 5.1 Pre-construction 10,0002016Broad Hollow Commons Fund III 14.0 36.0 - 46.0 Pre-construction 180,000 - 200,0002016210 Bowery Fund IV 8.2 10.3 - 14.3 Pre-construction 16,0002016Broughton Street Portfolio (2) Fund IV 41.2 20.8 - 26.8 Pre-construction 200,000201627 E. 61st Street Fund IV 19.9 2.9 - 6.9 Construction commenced 9,5002016Total $474.9 Notes:TBD – To be determined(1) Anticipated additional costs are estimated ranges for completing the projects and include costs for tenant improvements and leasing commissions.(2) These projects are being redeveloped in joint ventures with unaffiliated entities.(3) Net of actual and anticipated contributions from retail tenants and proceeds from residential tower sales.RCP VentureThrough Mervyns I and II, and in certain instances, Fund II, we have opportunistically made investments through our RCP Venture in surplus orunderutilized properties owned by retailers. While we are primarily a passive partner in the investments made through the RCP Venture, historically we haveprovided our services in reviewing potential acquisitions and operating and redevelopment assistance in areas where we have both a presence and expertise.To date, we have invested an aggregate $63.2 million in our RCP Venture on a non-recourse basis. See Note 4 in the Notes to Consolidated FinancialStatements, for a detailed discussion of the RCP Venture.ENVIRONMENTAL LAWSFor information relating to environmental laws that may have an impact on our business, please see "Item 1A. Risk Factors - Possible liability relating toenvironmental matters."COMPETITIONThere are numerous entities that compete with us in seeking properties for acquisition and tenants that will lease space in our properties. Our competitorsinclude other REITs, financial institutions, insurance companies, pension funds, private companies and individuals. Our properties compete for tenants withsimilar properties primarily on the basis of location, total occupancy costs (including base rent and operating expenses) and the design and condition of theimprovements.FINANCIAL INFORMATION ABOUT MARKET SEGMENTSWe have three reportable segments: Core Portfolio, Funds and Structured Financing. Structured Financing consists of our notes receivable and related interestincome. The accounting policies of the segments are the same as those described in the summary of significant accounting policies set forth in Note 1 in theNotes to Consolidated Financial Statements. We evaluate property performance primarily based on net operating income before depreciation, amortizationand certain nonrecurring items. Investments in our Core Portfolio are typically held long-term. Given the contemplated finite life of our Funds, theseinvestments are typically held for shorter terms. Priority distributions and fees earned by us as general partner or managing member of the Funds are8eliminated in our Consolidated Financial Statements. See Note 3 in the Notes to Consolidated Financial Statements, for information regarding, among otherthings, revenues from external customers, a measure of profit and loss and total assets with respect to each of our segments. Our profits and losses for both ourbusiness and each of our segments are not seasonal.CORPORATE HEADQUARTERS AND EMPLOYEESOur executive office is located at 1311 Mamaroneck Avenue, Suite 260, White Plains, New York 10605, and our telephone number is (914) 288-8100. As ofDecember 31, 2014, we had 114 employees, of which 94 were located at our executive office and 20 were located at regional property management offices.None of our employees are covered by collective bargaining agreements. Management believes that its relationship with employees is good.COMPANY WEBSITEAll of our filings with the Securities and Exchange Commission, including our annual reports on Form 10-K, quarterly reports on Form 10-Q and currentreports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, areavailable at no cost at our website at www.acadiarealty.com, as soon as reasonably practicable after we electronically file such material with, or furnish it to,the Securities and Exchange Commission. These filings can also be accessed through the Securities and Exchange Commission’s website at www.sec.gov.Alternatively, we will provide paper copies of our filings at no cost upon request. If you wish to receive a copy of the Form 10-K, you may contact RobertMasters, Corporate Secretary, at Acadia Realty Trust, 1311 Mamaroneck Avenue, Suite 260, White Plains, NY 10605. You may also call (914) 288-8100 torequest a copy of the Form 10-K. Information included or referred to on our website is not incorporated by reference in or otherwise a part of this Form 10-K.CODE OF ETHICS AND WHISTLEBLOWER POLICIESThe Board of Trustees adopted a Code of Business Conduct and Ethics applicable to all employees, as well as a "Whistleblower Policy." Copies of thesedocuments are available in the Investor Information section of our website. We intend to disclose future amendments to, or waivers from (with respect to oursenior executive financial officers), our Code of Ethics in the Investor Information section of our website within four business days following the date of suchamendment or waiver.ITEM 1A. RISK FACTORS.If any of the following risks actually occur, our business, results of operations and financial condition would likely suffer. This section includes or refers tocertain forward-looking statements. Refer to the explanation of the qualifications and limitations on such forward-looking statements discussed in thebeginning of this Form 10-K.We rely on revenues derived from key tenants.We derive significant revenues from certain key tenants that occupy space at more than one property. We could be adversely affected in the event of thebankruptcy or insolvency of, or a downturn in the business of, any of our key tenants, or in the event that any such tenant does not renew its leases as theyexpire or renews such leases at lower rental rates. See "Item 2. Properties-Major Tenants" in this Annual Report on Form 10-K for quantified information withrespect to the percentage of our minimum rents received from major tenants.Anchor tenants are crucial to the success of shopping centers.Vacated anchor space not only reduces rental revenues, but if not re-tenanted with a similar tenant, or one with equal consumer attraction, at the same rentalrates, the vacancy could adversely affect the entire shopping center. Loss of customer drawing power also can occur through the exercise of the right, thatmost anchors have, to vacate and prevent re-tenanting by paying rent for the balance of the lease term ("going dark") as would the departure of a "shadow"anchor tenant that owns its own property. In addition, in the event that certain anchor tenants cease to occupy a property, such an action may result in asignificant 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 affectedproperty, which could adversely affect the future income from such property ("co-tenancy"). See "Item 2. Properties-Major Tenants" in this Annual Report onForm 10-K for quantified information with respect to the percentage of our minimum rents received from major tenants.9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 ourcash 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, orrenew at lower rental rates, may adversely affect our cash flows and property values. Furthermore, the impact of vacated anchor space and the potentialreduction in customer traffic may adversely impact the balance of tenants at a shopping center.Historically and from time to time, certain of our tenants experienced financial difficulties and filed for bankruptcy protection, typically under Chapter 11 ofthe United States Bankruptcy Code ("Chapter 11 Bankruptcy"). Pursuant to bankruptcy law, tenants have the right to reject some or all of their leases. In theevent a tenant exercises this right, the landlord generally has the right to file a claim for lost rent equal to the greater of either one year's rent (including tenantexpense reimbursements) for remaining terms greater than one year, or 15% of the rent remaining under the balance of the lease term, but not to exceed threeyears rent. Actual amounts to be received in satisfaction of those claims will be subject to the tenant's final bankruptcy plan and the availability of funds topay its creditors.Although currently none of our major tenants are in bankruptcy, experience shows that there can be no assurance that one or more of our major tenants will beimmune from bankruptcy.We may not be able to renew current leases or the terms of re-letting (including the cost of concessions to tenants) may be less favorable to us thancurrent 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 substantialportion of the space located in our properties or if the rental rates we receive upon re-letting are significantly lower than current rates, our net income andability to make expected distributions to our shareholders will be adversely affected due to the resulting reduction in revenues. There can be no assurancethat 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 AnnualReport on Form 10-K for additional information as to the scheduled lease expirations in our portfolio.E-commerce can have an impact on our business.The use of the internet by consumers continues to gain in popularity. The migration toward e-commerce is expected to continue. This increase in internetsales could result in a downturn in the business of our current tenants in their "brick and mortar" locations and could affect the way future tenants lease space.While we devote considerable effort and resources to analyze and respond to tenant trends, preferences and consumer spending patterns, we cannot predictwith certainty what future tenants will want, what future retail spaces will look like and how much revenue will be generated at traditional "bricks and mortar"locations. If we are unable to anticipate and respond promptly to trends in the market due to the illiquid nature of real estate (See the Risk Factor entitled,"Our ability to change our portfolio is limited because real estate investments are illiquid" below), our occupancy levels and financial results could suffer.The economic environment may cause us to lose tenants and may impair our ability to borrow money to purchase properties, refinance existing debt orfinance our current redevelopment projects.Our operations and performance depend on general economic conditions, including the health of the consumer. The U.S. economy has historicallyexperienced financial downturns from time to time, including a decline in consumer spending, credit tightening and high unemployment.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 purchaseadditional properties, obtain financing to complete current redevelopment projects, or successfully refinance our properties as loans become due. To theextent that the availability of credit is limited, it would also adversely impact our notes receivable as counterparties may not be able to obtain the financingrequired to repay the loans upon maturity.Political and economic uncertainty could have an adverse effect on us.We cannot predict how current political and economic uncertainty, including uncertainty related to taxation, will affect our critical tenants, joint venturepartners, lenders, financial institutions and general economic conditions, including the health and confidence of the consumer and the volatility of the stockmarket.10Political and economic uncertainty poses a risk to us in that it may cause consumers to postpone discretionary spending in response to tighter credit, reducedconsumer confidence and other macroeconomic factors affecting consumer spending behavior, resulting in a downturn in the business of our tenants. In theevent current political and economic uncertainty results in financial turmoil affecting the banking system and financial markets or significant financialservice institution failures, there could be a new or incremental tightening in the credit markets, low liquidity, and extreme volatility in fixed income, credit,currency and equity markets. Each of these could have an adverse effect on our business, financial condition and operating results.There are risks relating to investments in real estate.Real property investments are subject to multiple risks. Real estate values are affected by a number of factors, including: changes in the general economicclimate, local conditions (such as an oversupply of space or a reduction in demand for real estate in an area), the quality and philosophy of management,competition from other available space, the ability of the owner to provide adequate maintenance and insurance and to control variable operating costs.Retail properties, in particular, may be affected by changing perceptions of retailers or shoppers regarding the safety, convenience and attractiveness of theproperty and by the overall climate for the retail industry. 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 isderived from rental income from real property. Our income and cash flow would be adversely affected if we were unable to rent our vacant space to viabletenants on economically favorable terms. In the event of default by a tenant, we may experience delays in enforcing, as well as incur substantial costs toenforce, our rights as a landlord. In addition, certain significant expenditures associated with each equity investment (such as mortgage payments, real estatetaxes and maintenance costs) are generally not reduced even though there may be a reduction in income from the investment.Our ability to change our portfolio is limited because real estate investments are illiquid.Equity investments in real estate are relatively illiquid and, therefore, our ability to change our portfolio promptly in response to changed conditions islimited, which could adversely affect our financial condition and results of operations and our ability to make distributions. Our Board of Trustees mayestablish 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 onthe concentration of investments in any one geographic region. As discussed under the heading "Our Board of Trustees may change our investment policywithout shareholder approval " below, we could change our investment, disposition and financing policies and objectives without a vote of our shareholders,but such change may be delayed or more difficult to implement due to the illiquidity of real estate.We could become highly leveraged, resulting in increased risk of default on our obligations and in an increase in debt service requirements, whichcould adversely affect our financial condition and results of operations and our ability to pay distributions. In addition, the viability of the interest ratehedges we use is subject to the strength of the counterparties.We have incurred, and expect to continue to incur, indebtedness to support our activities. Neither our Declaration of Trust nor any policy statement formallyadopted by our Board of Trustees limits either the total amount of indebtedness or the specified percentage of indebtedness that we may incur. Accordingly,we could become more highly leveraged, resulting in increased risk of default on our obligations and in an increase in debt service requirements, which couldadversely affect our financial condition and results of operations and our ability to make distributions.Interest expense on our variable rate debt as of December 31, 2014 would increase by $3.3 million annually for a 100 basis point increase in interest rates. Wemay seek additional variable rate financing if and when pricing and other commercial and financial terms warrant. As such, we often hedge against theinterest rate risk related to such additional variable rate debt, primarily through interest rate swaps but can use other means.We enter into interest rate hedging transactions, including interest rate swaps and cap agreements, with counterparties, generally, the same lenders who madethe loan in question. There can be no guarantee that the future financial condition of these counterparties will enable them to fulfill their obligations underthese agreements.Competition may adversely affect our ability to purchase properties and to attract and retain tenants.There are numerous commercial developers, real estate companies, financial institutions and other investors with greater financial resources than we have thatcompete with us in seeking properties for acquisition and tenants who will lease space in our properties. Our competitors include other REITs, financialinstitutions, private funds, insurance companies, pension funds, private companies, family offices, sovereign wealth funds and individuals. This competitionmay result in a higher cost for properties than we wish to pay. In addition, retailers at our properties (both in our Core Portfolio and in the portfolios of theFunds) face increasing11competition from outlet malls, discount shopping clubs, e-commerce, direct mail and telemarketing, which could (i) reduce rents payable to us and (ii) reduceour ability to attract and retain tenants at our properties leading to increased vacancy rates at our properties.We could be adversely affected by poor market conditions where our 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 NewYork and Chicago metropolitan regions, from which we derive 44% and 24% of the annual base rents within our Core Portfolio, respectively and 47% and15% of annual base rents within our Funds, respectively. Our operating results could be adversely affected if market conditions, such as an oversupply ofspace or a reduction in demand for real estate, in these areas occur.We have pursued, and may in the future continue to pursue extensive growth opportunities, including investing in new markets, which may result insignificant demands on our operational, administrative and financial resources.We are pursuing extensive growth opportunities, some of which have been, and in the future may be, in locations in which we have not historically invested.This expansion places significant demands on our operational, administrative and financial resources. The continued growth of our real estate portfolio canbe expected to continue to place a significant strain on our resources. Our future performance will depend in part on our ability to successfully attract andretain qualified management personnel to manage the growth and operations of our business. In addition, the acquired properties may fail to operate atexpected levels due to the numerous factors that may affect the value of real estate. There can be no assurance that we will have sufficient resources toidentify and manage the properties.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 redevelopment of additional properties, including acquisitions of core properties through ourOperating Partnership and our high return investment programs through Fund IV. The consummation of any future acquisitions will be subject to satisfactorycompletion of our extensive valuation analysis and due diligence review and to the negotiation of definitive documentation. We cannot be sure that we willbe able to implement our strategy because we may have difficulty finding new properties, obtaining necessary entitlements, negotiating with new or existingtenants or securing acceptable financing.Acquisitions of additional properties entail the risk that investments will fail to perform in accordance with expectations, including operating and leasingexpectations. In the context of our business plan, "redevelopment" generally means an expansion or renovation of an existing property. Redevelopment issubject to numerous risks, including risks of construction delays, cost overruns or uncontrollable events that may increase project costs, new projectcommencement risks such as the receipt of zoning, occupancy and other required governmental approvals and permits, and incurring redevelopment costs inconnection with projects that are not pursued to completion.A component of our growth strategy is through private-equity type investments made through our RCP Venture. These include investments in operatingretailers. The inability of the retailers to operate profitably would have an adverse impact on income realized from these investments. Through ourinvestments in joint ventures we have also invested in operating businesses that have operational risk in addition to the risks associated with real estateinvestments, including among other risks, human capital issues, adequate supply of product and material, and merchandising issues.Our redevelopment and construction activities could affect our operating results.We intend to continue the selective redevelopment and construction of retail properties, with our project at City Point currently being our largestredevelopment project (see "Item 1. BUSINESS - INVESTING ACTIVITIES - Funds - Redevelopment Activities" for a description of the CityPoint project).As opportunities arise, we expect to delay construction until sufficient pre-leasing is reached and financing is in place. Our redevelopment and constructionactivities include risks that:•We may abandon redevelopment opportunities after expending resources to determine feasibility;•Construction costs of a project may exceed our original estimates;•Occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable;•Financing for redevelopment of a property may not be available to us on favorable terms;12•We may not complete construction and lease-up on schedule, resulting in increased debt service expense and construction costs; and•We may not be able to obtain, or may experience delays in obtaining necessary zoning, land use, building, occupancy and other requiredgovernmental permits and authorizations.Additionally, the time frame required for redevelopment, construction and lease-up of these properties means that we may not realize a significant cash returnfor several years. If any of the above events occur, the redevelopment of properties may hinder our growth and have an adverse effect on our results ofoperations and cash flows. In addition, new redevelopment activities, regardless of whether or not they are ultimately successful, typically require substantialtime and attention from management.Redevelopments and acquisitions may fail to perform as expected.Our investment strategy includes the redevelopment and acquisition of retail properties in supply constrained markets in densely populated areas with highaverage household incomes and significant barriers to entry. The redevelopment and acquisition of properties entails risks that include the following, any ofwhich could adversely affect our results of operations and our ability to meet our obligations:•The property may fail to achieve the returns we have projected, either temporarily or for extended periods;•We may not be able to identify suitable properties to acquire or may be unable to complete the acquisition of the properties we identify;•We may not be able to integrate an acquisition into our existing operations successfully;•Properties we redevelop or acquire may fail to achieve the occupancy or rental rates we project, within the time frames we project, at the time wemake the decision to invest, which may result in the properties' failure to achieve the returns we projected;•Our pre-acquisition evaluation of the physical condition of each new investment may not detect certain defects or identify necessary repairs untilafter the property is acquired, which could significantly increase our total acquisition costs or decrease cash flow from the property; and•Our investigation of a property or building prior to our acquisition, and any representations we may receive from the seller of such building orproperty, may fail to reveal various liabilities, which could reduce the cash flow from the property or increase our acquisition cost.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 OperatingPartnership in exchange for interests in the Operating Partnership may permit certain tax deferral advantages to limited partners who contribute properties tothe Operating Partnership. Since properties contributed to the Operating Partnership may have unrealized gains attributable to the differences between the fairmarket value and adjusted tax basis in such properties prior to contribution, the sale of such properties could cause adverse tax consequences to the limitedpartners who contributed such properties. Although we, as the general partner of the Operating Partnership, generally have no obligation to consider the taxconsequences of our actions to any limited partner, we own several properties subject to material contractual restrictions for varying periods of time designedto minimize the adverse tax consequences to the limited partners who contributed such properties. Such restrictions may result in significantly reducedflexibility to manage some of our assets.Exclusivity obligation to our Funds.Under the terms of Fund IV, our primary goal is to seek investments for Fund IV, subject to certain exceptions. We may only pursue opportunities to acquireretail properties directly through the Operating Partnership if (i) the ownership of the acquisition opportunity by Fund IV would create a material conflict ofinterest for us; (ii) we require the acquisition opportunity for a "like-kind" exchange; (iii) the consideration payable for the acquisition opportunity is ourCommon Shares, OP Units or other securities or (iv) the investment is outside the parameters of our investment goals for Fund IV (which, in general, seeksmore opportunistic level returns). As a result, we may not be able to make attractive acquisitions directly and instead may only receive a minority interest insuch acquisitions through Fund IV.Risks of joint ventures.Partnership or joint venture investments may involve risks not otherwise present for investments made solely by us, including the possibility that our partneror co-venturer might become bankrupt, and that our partner or co-venturer may take action contrary to our instructions, requests, policies or objectives,including our policy with respect to maintaining our qualification as a REIT. Other risks of joint venture investments include impasse on decisions, such as asale, because neither we nor a joint venture partner13would have full control over the joint venture. Also, there is no limitation under our organizational documents as to the amount of our funds that may beinvested in joint ventures.Additionally, our partners or co-venturers may engage in malfeasance in spite of our efforts to perform a high level of due diligence on them. Such acts mayor may not be covered by insurance. Finally, partners and co-venturers may engage in illegal activities which may jeopardize an investment and/or subject usto reputational risk.Any disputes that may arise between joint venture partners and us may result in litigation or arbitration that would increase our expenses and prevent ourofficers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes with joint venture partners might result insubjecting properties owned by the joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our third-partyjoint venture partners.Historically our Fund I and Mervyns I joint ventures provided Promote income. There can be no assurance that the joint ventures will continue to operateprofitably and thus provide additional Promote income in the future. These factors could limit the return that we receive from such investments or cause ourcash flows to be lower than our estimates. In addition, a partner or co-venturer may not have access to sufficient capital to satisfy its funding obligations tothe joint venture.Our structured financing portfolio is subject to specific risks relating to the structure and terms of the instruments and the underlying collateral.We invest in notes receivables and preferred equity investments that are collateralized by the underlying real estate, a direct interest or the borrower’sownership interest in the entities that own the properties and/or by the borrower’s personal guarantee. The underlying assets are sometimes subordinate inpayment and collateral to more senior loans. The ability of a borrower or entity to make payments on these investments may be subject to the senior lenderand/or the performance of the underlying real estate. In the event of a default by the borrower or entity on its senior loan, our investment will only be satisfiedafter the senior loan and we may not be able to recover the full value of the investment. In the event of a bankruptcy of an entity in which we have a preferredequity interest, or in which the borrower has pledged its interest, the assets of the entity may not be sufficient to satisfy our investment.Market factors could have an adverse effect on our share price and our ability to access the public equity markets.One of the factors that may influence the trading price of our Common Shares is the annual dividend rate on our Common Shares as a percentage of its marketprice. An increase in market interest rates may lead purchasers of our Common Shares to seek a higher annual dividend rate, which could adversely affect themarket price of our Common Shares. A decline in our share price, as a result of this or other market factors, could unfavorably impact our ability to raiseadditional equity in the public markets.The loss of a key executive officer could have an adverse effect on us.Our success depends on the contribution of key management members. The loss of the services of Kenneth F. Bernstein, President and Chief ExecutiveOfficer, or other key executive-level employees could have a material adverse effect on our results of operations. Management continues to strengthen ourteam and provide for succession planning, but there can be no assurance that such planning will be capable of implementation or of the success of suchefforts. We have obtained key-man life insurance for Mr. Bernstein. In addition, we have entered into an employment agreement with Mr. Bernstein; however,it can be terminated by Mr. Bernstein in his discretion. We have not entered into employment agreements with other key executive-level employees.Our Board of Trustees may change our investment policy or objectives without shareholder approval.Our Board of Trustees may determine to change our investment and financing policies or objectives, 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 ourshareholders. Accordingly, the results of decisions made by our Board of Trustees as implemented by management may or may not serve the interests of all ofour shareholders and could adversely affect our financial condition or results of operations, including our ability to distribute cash to shareholders or qualifyas a REIT.Distribution requirements imposed by law limit our operating flexibility.14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 taxableincome for each calendar year. Our taxable income is determined without regard to any deduction for dividends paid and by excluding net capital gains. Tothe extent that we satisfy the distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income taxon 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 lessthan 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 taxableincome from prior years. We intend to continue to make distributions to our shareholders to comply with the distribution requirements of the InternalRevenue Code and to minimize exposure to federal income and excise taxes. Differences in timing between the receipt of income and the payment ofexpenses in determining our income as well as required debt amortization payments and the capitalization of certain expenses could require us to borrowfunds on a short-term basis to meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT. Thedistribution 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 requirements for qualification as a REIT for federal income tax purposes beginning with our taxable year endedDecember 31, 1993, and we intend to continue to meet these requirements in the future. However, qualification as a REIT involves the application of highlytechnical and complex provisions of the Internal Revenue Code, for which there may be only limited judicial or administrative interpretations. No assurancecan be given that we have qualified or will remain qualified as a REIT. The Internal Revenue Code provisions and income tax regulations applicable toREITs differ significantly from those applicable to other corporations. The determination of various factual matters and circumstances not entirely within ourcontrol can potentially affect our ability to continue to qualify as a REIT. In addition, no assurance can be given that future legislation, regulations,administrative interpretations or court decisions will not significantly change the requirements for qualification as a REIT or adversely affect the federalincome 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 toshareholders in computing our net taxable income. In addition, our income would be subject to tax at the regular corporate rates. Also, we could bedisqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost. Cash available for distribution to ourshareholders 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 makedistributions. Although we currently intend to continue to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerationsmay cause us, without the consent of our shareholders, to revoke the REIT election or to otherwise take action that would result in disqualification.Legislative or regulatory tax changes could have an adverse effect on us.There are a number of issues associated with an investment in a REIT that are related to the federal income tax laws, including, but not limited to, theconsequences of our failing to continue to qualify as a REIT. At any time, the federal income tax laws governing REITs or the administrative interpretationsof those laws may be amended or modified. Any new laws or interpretations may take effect retroactively and could adversely affect us or our shareholders.Reduced tax rates applicable to certain corporate dividends paid to most domestic noncorporate shareholders are not generally available to REITshareholders since a REITs income generally is not subject to corporate level tax. As a result, investment in non-REIT corporations may be viewed asrelatively more attractive than investment in REITs by domestic noncorporate investors. This could adversely affect the market price of our shares.Changes in accounting standards may adversely impact our financial results.The Financial Accounting Standards Board ("FASB"), in conjunction with the Securities and Exchange Commission, has several key projects on their agendathat could impact how we currently account for our material transactions, including, but not limited to, lease accounting and other convergence projects withthe International Accounting Standards Board. In addition, the FASB has the ability to introduce new projects to its agenda which may also impact how weaccount for our material transactions. At this time, we are unable to predict with certainty which, if any, proposals may be passed, what new legislation maybe implemented or what level of impact any such proposal could have on the presentation of our consolidated financial statements, our results of operationsand our financial ratios required by our debt covenants.Limits on ownership of our capital shares.For us 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) at any time during the last half of eachtaxable year, 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 aproportionate part of a shorter taxable year (in each case, other than the first such year). Our Declaration of Trust includes certain restrictions regardingtransfers of our capital15shares and ownership limits that are intended to assist us in satisfying these limitations, among other purposes. These restrictions and limits may not beadequate in all cases, however, to prevent the transfer of our capital shares in violation of the ownership limitations. The ownership limit discussed abovemay have the effect of delaying, deferring or preventing someone from taking control of us.Actual or constructive ownership of our capital shares in excess of the share ownership limits contained in our Declaration of Trust would cause the violativetransfer or ownership to be null and void from the beginning and subject to purchase by us at a price equal to the fair market value of such shares (determinedin accordance with the rules set forth in our Declaration of Trust). As a result, if a violative transfer were made, the recipient of the shares would not acquireany economic or voting rights attributable to the transferred shares. Additionally, the constructive ownership rules for these limits are complex and groups ofrelated individuals or entities may be deemed a single owner and consequently in violation of the share ownership limits.Concentration of ownership by certain investors.As of December 31, 2014, four institutional shareholders own 5% or more individually, and 39.8% in the aggregate, of our Common Shares. A significantconcentration of ownership may allow an investor or a group of investors to exert a greater influence over our management and affairs and may have theeffect of delaying, deferring or preventing a change in control of us.Restrictions on a potential change of control.Our Board of Trustees is authorized by our Declaration of Trust to establish and issue one or more series of preferred shares without shareholder approval. Wehave not established any series of preferred shares. However, the establishment and issuance of a series of preferred shares could make more difficult a changeof control of us that could be in the best interests of the shareholders. In addition, we have entered into an employment agreement with our Chief ExecutiveOfficer and severance agreements are in place with our executives which provide that, upon the occurrence of a change in control of us and either thetermination of their employment without cause (as defined) or their resignation for good reason (as defined), those executive officers would be entitled tocertain 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 inthe best interests of the shareholders.Certain provisions of Maryland law may limit the ability of a third party to acquire control of our Company.Under the Maryland General Corporation Law, as amended, which we refer to as the "MGCL," as applicable to REITs, certain "business combinations,"including certain mergers, consolidations, share exchanges and asset transfers and certain issuances and reclassifications of equity securities, between aMaryland REIT and any person who beneficially owns 10% or more of the voting power of the trust's outstanding voting shares or an affiliate or an associate,as defined in the MGCL, of the trust who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10%or more of the voting power of the then-outstanding shares of beneficial interest of the trust, which we refer to as an "interested shareholder," or an affiliate ofthe interested shareholder, are prohibited for five years after the most recent date on which the interested shareholder becomes an interested shareholder. Afterthat five-year period, any such business combination must be recommended by the board of trustees of the trust and approved by the affirmative vote of atleast (1) 80% of the votes entitled to be cast by holders of outstanding voting shares of beneficial interest of the trust and (2) two-thirds of the votes entitledto be cast by holders of voting shares of the trust other than shares held by the interested shareholder with whom, or with whose affiliate, the businesscombination is to be effected or held by an affiliate or associate of the interested shareholder, unless, among other conditions, the trust's commonshareholders receive a minimum price, as defined in the MGCL, for their shares and the consideration is received in cash or in the same form as previouslypaid by the interested shareholder for its Common Shares.These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by the board of trustees of the trust before theinterested shareholder becomes an interested shareholder, and a person is not an interested shareholder if the board of trustees approved in advance thetransaction by which the person otherwise would have become an interested shareholder. In approving a transaction, our Board of Trustees may provide thatits approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the Board.The MGCL also provides that holders of "control shares" of a Maryland REIT (defined as voting shares that, when aggregated with all other shares owned bythe acquirer or in respect of which the acquirer is entitled to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy),would entitle the acquirer to exercise one of three increasing ranges of voting power in electing trustees) acquired in a "control share acquisition" (defined asthe direct or indirect acquisition of ownership or control of "control shares") have no voting rights except to the extent approved by the affirmative vote ofholders of at least two-thirds of all the votes entitled to be cast on the matter, excluding shares owned by the acquirer, by officers or by employees who16are also trustees of the trust. Our Bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person ofour shares of beneficial interest. Our Bylaws can be amended by our Board of Trustees by majority vote, and there can be no assurance that this provision willnot be amended or eliminated at any time in the future.Additionally, Title 3, Subtitle 8 of the MGCL permits our Board of Trustees, without shareholder approval and regardless of what is currently provided in ourDeclaration of Trust or Bylaws, to elect to be subject to certain provisions relating to corporate governance that may have the effect of delaying, deferring orpreventing a transaction or a change of control of our Company that might involve a premium to the market price of our Common Shares or otherwise be inthe best interests of our shareholders. We are subject to some of these provisions (for example, a two-thirds vote requirement for removing a trustee) byprovisions of our Declaration of Trust and Bylaws unrelated to Subtitle 8.Becoming subject to, or the potential to become subject to, these provisions of the MGCL could inhibit, delay or prevent a transaction or a change of controlof our Company that might involve a premium price for our shareholders or otherwise be in our or their best interests. In addition, the provisions of ourDeclaration of Trust on removal of trustees and the provisions of our Bylaws regarding advance notice of shareholder nominations of trustees and otherbusiness proposals and restricting shareholder action outside of a shareholders meeting unless such action is taken by unanimous written consent could havea similar effect.Our rights and shareholders' rights to take action against trustees and officers are limited, which could limit recourse in the event of actions not in thebest interests of shareholders.As permitted by Maryland law, our Declaration of Trust eliminates the liability of our trustees and officers to the Company and its shareholders for moneydamages, except for liability resulting from:•actual receipt of an improper benefit or profit in money, property or services; or•a final judgment based upon a finding of active and deliberate dishonesty by the trustee or officer that was material to the cause of actionadjudicated.In addition, our Declaration of Trust authorizes, and our Bylaws obligate, us to indemnify each present or former trustee or officer, to the maximum extentpermitted by Maryland law, who is made a party to any proceeding because of his or her service to our Company. As part of these indemnificationobligations, we may be obligated to fund the defense costs incurred by our trustees and officers.Outages, computer viruses and similar events could disrupt our operations.We rely on information technology networks and systems, some of which are owned and operated by third parties, to process, transmit and store electronicinformation. Any of these systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, terrorist attacks and similarevents. Despite the implementation of network security measures, our systems and those of third parties on which we rely may also be vulnerable to computerviruses and similar disruptions. If we and the third parties on whom we rely are unable to prevent such outages and breaches, our operations could bedisrupted.Increased Information Technology ("IT") security threats and more sophisticated computer crime could pose a risk to our systems, networks andservices.Cyber incidents can result from deliberate attacks or unintentional events. There have been an increased number of significant cyber attacks targeted at theretail, insurance, financial and banking industries that include, but are not limited to, gaining unauthorized access to digital systems for purposes ofmisappropriating assets or sensitive information, corrupting data or causing operational disruption. Cyber attacks may also be carried out in a manner thatdoes not require gaining unauthorized access, such as by causing denial-of-service attacks on websites. Cyber attacks by third parties or insiders utilizestechniques that range from highly sophisticated efforts to electronically circumvent network security or overwhelm website to more traditional intelligencegathering and social engineering aimed at obtaining information necessary to gain access.Increased global IT security threats are more sophisticated and targeted computer crimes pose a risk to the security of our systems and networks and theconfidentiality, availability and integrity of our data. The open nature of interconnected technologies may allow for a network or Web outage or a privacybreach that reveals sensitive data or transmission of harmful/malicious code to business partners and clients. The techniques used to obtain unauthorizedaccess, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable toanticipate these techniques or implement adequate preventive measures.Cyber attacks may cause substantial cost and other negative consequences, which may include, but are not limited to:17•Compromising of confidential information;•Manipulation and destruction of data;•Loss of trade secrets;•System downtimes and operational disruptions;•Remediation cost that may include liability for stolen assets or information and repairing system damage that may have been caused. Remediationmay include incentives offered to customers, tenants or other business partners in an effort to maintain the business relationships or due to legalrequirements imposed by the Gramm-Leach-Bliley Act of 1999 or the Privacy of Consumer Financial Information Rule;•Loss of revenues resulting from unauthorized use of proprietary information;•Cost to deploy additional protection strategies, training employees and engaging third party experts and consultants;•Reputational damage adversely affecting investor confidence; and•Litigation.While we attempt to mitigate these risks by employing a number of measures, including a dedicated IT team, employee training and background checks,comprehensive monitoring of our networks and systems, and maintenance of backup systems and redundancy along with purchasing available insurancecoverage, our systems, networks and services remain potentially vulnerable to advanced threats.Third Party Vendor Risk - Network and Data redundancyWe are dependent and rely on third party vendors including Cloud providers for redundancy of our network, system data, security and data integrity. If avendor fails to provide services as agreed, suffers outages, business interruptions, financial difficulties or bankruptcy we may experience service interruption,delays or loss of information. Cloud computing is dependent upon having access to an internet connection in order to retrieve data. If a natural disaster,blackout or other unforeseen event were to occur that disrupted the ability to obtain an internet connection we may experience a slowdown or delay in ouroperations. We conduct appropriate due diligence on all services providers and restrict access, use and disclosure of personal information. We engagevendors with formal written agreements clearly defining the roles of the parties specifying privacy and data security responsibilities.Climate change and catastrophic risk from natural perils.Some of our current properties could be subject to potential natural or other disasters. We may acquire properties that are located in areas which are subject tonatural disasters. Any properties located in coastal regions would therefore be affected by any future increases in sea levels or in the frequency or severity ofhurricanes and tropical storms, whether such increases are caused by global climate changes or other factors.Climate change is a long-term change in the statistical distribution of weather patterns over periods of time that range from decades to millions of years. Itmay be a change in the average weather conditions or a change in the distribution of weather events with respect to an average, for example, greater or fewerextreme weather events. Climate change may be limited to a specific region, or may occur across the whole Earth.There may be significant physical effects of climate change that have the potential to have a material effect on our business and operations. These effects canimpact our personnel, physical assets, tenants and overall operations.Physical impacts of climate change may include:•Increased storm intensity and severity of weather (e.g., floods or hurricanes);•Sea level rise; and•Extreme temperatures.As a result of these physical impacts from climate-related events, we may be vulnerable to the following:•Risks of property damage to our retail properties;•Indirect financial and operational impacts from disruptions to the operations of major tenants located in our retail properties from severe weather,such as hurricanes or floods;•Increased insurance premiums and deductibles, or a decrease in the availability of coverage, for properties in areas subject to severe weather;•Increased insurance claims and liabilities;•Increases in energy costs impacting operational returns;•Changes in the availability or quality of water, or other natural resources on which the tenant's business depends;18•Decreased consumer demand for consumer products or services resulting from physical changes associated with climate change (e.g., warmertemperatures or decreasing shoreline could reduce demand for residential and commercial properties previously viewed as desirable);•Incorrect long term valuation of an equity investment due to changing conditions not previously anticipated at the time of the investment; and•Economic disruptions arising from the above.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 thecosts 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 tohazardous or toxic substances (including government fines and penalties and damages for injuries to persons and adjacent property). These laws may imposeliability 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 inconnection with the activities of an operator of, or tenant at, the property. The cost of any required remediation, removal, fines or personal or propertydamages and our liability therefore could exceed the value of the property and/or our aggregate assets. In addition, the presence of those substances, or thefailure to properly dispose of or remove those substances, may adversely affect our ability to sell or rent that property or to borrow using that property ascollateral, which, in turn, could reduce our revenues and affect our 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 ofhazardous or toxic substances, or other contaminants that have or may have emanated from other properties. Although our tenants are primarily responsiblefor any environmental damages and claims related to the leased premises, in the event of the bankruptcy or inability of any of our tenants to satisfy anyobligations with respect to the property leased to that tenant, we may be required to satisfy such obligations. In addition, we may be held directly liable forany such damages or claims irrespective of the provisions of any lease.From time to time, in connection with the conduct of our business, and prior to the acquisition of any property from a third party or as required by ourfinancing sources, we authorize the preparation of Phase I environmental reports and, when necessary, Phase II environmental reports, with respect to ourproperties. Based upon these environmental reports and our ongoing review of our properties, we are currently not aware of any environmental condition withrespect to any of our properties that we believe would be reasonably likely to have a material adverse effect on us. There can be no assurance, however, thatthe environmental reports will reveal all environmental conditions at our properties or that the following will not expose us to material liability in the future:•The discovery of previously unknown environmental conditions;•Changes in law;•Activities of tenants; and•Activities relating to properties in the vicinity of our properties.Changes in laws increasing the potential liability for environmental conditions existing on properties or increasing the restrictions on discharges or otherconditions may result in significant unanticipated expenditures or may otherwise adversely affect the operations of our tenants, which could adversely affectour financial condition or results of operations.Uninsured losses or a loss in excess of insured limits could adversely affect our financial condition.We carry comprehensive general liability, all-risk property, extended coverage, loss of rent insurance, and environmental liability on our properties, withpolicy specifications and insured limits customarily carried for similar properties. However, with respect to those properties where the leases do not providefor 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 lossesresulting from wars, terrorism or acts of God that generally are not insured because they are either uninsurable or not economically insurable. Should anuninsured loss or a loss in excess of insured limits occur, we could lose capital invested in a property, as well as the anticipated future revenues from aproperty, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property. Any loss of these types wouldadversely affect our financial condition.Future terrorist attacks or civil unrest could harm the demand for, and the value of, our properties.Future terrorist attacks, civil unrest and other acts of terrorism or war, could harm the demand for, and the value of, our properties. Terrorist attacks coulddirectly impact the value of our properties through damage, destruction, loss or increased security costs, and the availability of insurance for such acts may belimited or may be subject to substantial cost increases. To the extent that19our tenants are impacted by future attacks, their ability to continue to honor obligations under their existing leases could be adversely affected. A decrease inretail demand could make it difficult for us to renew or re-lease our properties at lease rates equal to or above historical rates. These acts might erode businessand consumer confidence and spending, and might result in increased volatility in national and international financial markets and economies. Any one ofthese events might decrease demand for real estate, decrease or delay the occupancy of our properties, and limit our access to capital or increase our cost ofraising capital.ITEM 1B. UNRESOLVED STAFF COMMENTS.None.20ITEM 2. PROPERTIES.RETAIL PROPERTIESThe discussion and tables in this Item 2. include properties held through our Core Portfolio and our Funds. We define our Core Portfolio as those propertieseither 100% owned by, or partially owned through joint venture interests by, the Operating Partnership, or subsidiaries thereof, not including those propertiesowned through our Funds.As of December 31, 2014, there are 87 operating properties in our Core Portfolio totaling approximately 5.4 million square feet of gross leasable area("GLA"). The Core Portfolio properties are located in 12 states and the District of Columbia and primarily consist of street retail and dense suburban shoppingcenters. These properties are diverse in size, ranging from approximately 2,000 to 900,000 square feet and as of December 31, 2014, were, in total, 96%occupied.As of December 31, 2014, we owned and operated 25 properties totaling approximately 3.0 million square feet of GLA in our Funds, excluding 31 propertiesunder redevelopment. In addition to shopping centers, the Funds have invested in mixed-use properties, which generally include retail activities. The Fundproperties are located in 10 states and the District of Columbia and as of December 31, 2014, were, in total, 85% occupied.Within our Core Portfolio and Funds, we had approximately 700 leases as of December 31, 2014. A majority of our rental revenues were from nationalretailers and consist of rents received under long-term leases. These leases generally provide for the monthly payment of fixed minimum rent and the tenants'pro-rata share of the real estate taxes, insurance, utilities and common area maintenance of the shopping centers. Certain of our leases also provide for thepayment of rent based on a percentage of a tenant's gross sales in excess of a stipulated annual amount, either in addition to, or in place of, minimum rents.Minimum rents, percentage rents and expense reimbursements accounted for approximately 91% of our total revenues for the year ended December 31, 2014.Three of our Core Portfolio properties and five of our Fund properties are subject to long-term ground leases in which a third party owns and has leased theunderlying land to us. We pay rent for the use of the land and are responsible for all costs and expenses associated with the building and improvements at alleight locations.No individual property contributed in excess of 10% of our total revenues for the years ended December 31, 2014, 2013 or 2012. See Note 8 in the Notes toConsolidated Financial Statements, for information on the mortgage debt pertaining to our properties. The following sets forth more specific information withrespect to each of our shopping centers at December 31, 2014:Retail Property Location YearConstructed(C)Acquired(A) OwnershipInterest GLA Occupancy%12/31/14 (1) AnnualBaseRent (2) AnnualBaseRentPSF Anchor TenantsCurrent LeaseExpiration/Lease OptionExpirationCore Portfolio STREET AND URBANRETAIL Chicago Metro 664 N. Michigan Chicago 2013 (A) Fee 18,141 100% $4,303,538 $237.23 Tommy Bahama2029/2039Ann Taylor Loft2028/2033840 N. Michigan Chicago 2014 (A) Fee/JV 87,135 100% 7,044,900 80.85 H&M 2018/2028Verizon 2024/2034Rush and Walton Streets(4) Chicago 2011/14 Fee 41,432 100% 6,303,696 152.15 Lululemon2019/2029Brioni 2023/2033BHLDN 2023/2033Marc Jacobs613-623 West Diversey Chicago 2006 Fee 19,265 67% 708,951 54.53 651-671 West Diversey Chicago 2011 Fee 46,259 100% 1,909,285 41.27 Trader Joe's2021/2041Urban Outfitters2021/2031Clark Street and W.Diversey (5) Chicago 2011/12 Fee 23,531 87% 1,053,247 51.62 Ann Taylor2021/2031Akira 2018/202821Retail Property Location YearConstructed(C)Acquired(A) OwnershipInterest GLA Occupancy%12/31/14 (1) AnnualBaseRent (2) AnnualBaseRentPSF Anchor TenantsCurrent LeaseExpiration/Lease OptionExpirationHalsted and Armitage(6) Chicago 2011/12 Fee 44,658 95% 1,836,615 43.26 Intermix 2017/2022BCBG 2018/2028Club Monaco2016/2021North Lincoln Park (7) Chicago 2011/14 Fee 51,255 87% 1,698,169 38.29 Aldo 2019/2024Carhartt 2021/2031Total Chicago Metro 331,676 94% 24,858,401 79.37 New York Metro 83 Spring Street Manhattan 2012 (A) Fee 3,000 100% 623,884 207.96 Paper Source2022/2027152-154 Spring Street Manhattan 2014 (A) Fee/JV 2,936 100% 2,139,360 728.66 Kate SpadeSaturday2015/202515 Mercer Street Manhattan 2011 (A) Fee 3,375 100% 406,494 120.44 3 x 1 Denim 2021/—East 17th Street Manhattan 2008 (A) Fee 11,467 —% — — West 54th Street Manhattan 2007 (A) Fee 5,773 92% 2,196,061 412.09 Stage Coach Tavern2033/—61 Main Street Westport 2014 (A) Fee 3,400 100% 351,560 103.40 181 Main Street Westport 2012 (A) Fee 11,350 100% 848,683 74.77 TD Bank2026/20414401 White Plains Road Bronx 2011 (A) Fee 12,964 100% 625,000 48.21 Walgreens 2060/—Bartow Avenue Bronx 2005 (C) Fee 14,676 100% 467,987 31.89 Sleepy's 2019/—239 Greenwich Avenue Greenwich 1998 (A) Fee/JV 16,553(8)27% 388,573 85.58 252-256 GreenwichAvenue Greenwich 2014 (A) Fee 9,172 100% 1,210,630 131.99 Calypso 2016/2026Jack Wills2020/2025Madewell2020/20252914 Third Avenue Bronx 2006 (A) Fee 40,320 100% 887,172 22.00 Planet Fitness2027/2042868 Broadway Manhattan 2013 (A) Fee 2,031 100% 682,069 335.83 Dr Martens2022/2027313-315 Bowery Manhattan 2013 (A) Fee 6,600 100% 435,600 66.00 120 West Broadway Manhattan 2013 (A) Fee 13,638 82% 1,613,503 144.86 HSBC Bank2021/2031Citibank 2022/2037131-135 Prince Street Manhattan 2014 (A) Fee 3,200 100% 1,232,352 385.11 Follie Follie2020/2030 Uno de50 2017/2022Shops at Grand Queens 2014 (A) Fee 99,975 91% 2,736,357 29.99 Stop and Shop2023/20432520 Flatbush Avenue Brooklyn 2014 (A) Fee 29,114 100% 1,049,538 36.05 Bob's DiscountFurniture2028/2033 CapitalOne 2024/2034Total New York Metro 289,544 88% 17,894,823 70.35 22Retail Property Location YearConstructed(C)Acquired(A) OwnershipInterest GLA Occupancy%12/31/14 (1) AnnualBaseRent (2) AnnualBaseRentPSF Anchor TenantsCurrent LeaseExpiration/Lease OptionExpirationDistrict of ColumbiaMetro 1739-53 & 1801-03Connecticut Avenue WashingtonD.C. 2012 (A) Fee 22,907 100% 1,328,703 58.00 Ruth ChrisSteakhouse 2020/—TD Bank2024/2044Rhode Island PlaceShopping Center WashingtonD.C. 2012 (A) Fee 57,529 100% 1,647,929 28.65 TJ Maxx 2017/—M Street and WisonsinCorridor (9) WashingtonD.C. 2011/14 (A) Fee/JV 31,629 100% 2,523,512 79.78 Lacoste 2015/2025Juicy Couture2018/2028Coach 2017/—Total District ofColumbia Metro 112,065 100% 5,500,144 49.08 Boston Metro 330-340 River Street Cambridge 2012 (A) Fee 54,226 100% 1,130,470 20.85 Whole Foods2021/2051Total Boston Metro 54,226 100% 1,130,470 20.85 TOTAL STREET ANDURBAN RETAIL 787,511 93% 49,383,838 67.29 SUBURBANPROPERTIES New Jersey Elmwood ParkShopping Center Elmwood Park 1998 (A) Fee 149,070 97% 3,685,445 25.41 A&P 2017/2052Walgreen’s2022/2062Marketplace of Absecon Absecon 1998 (A) Fee 104,556 95% 1,427,696 14.41 Rite Aid 2020/2040White HorseLiquors2019/20202460 Orange Street Bloomfield 2012 (A) Fee/JV 101,715 100% 695,000 6.83 Home Depot2032/2052New York Village CommonsShopping Center Smithtown 1998 (A) Fee 87,330 98% 2,689,355 31.40 Branch ShoppingCenter Smithtown 1998 (A) LI (3) 127,241 76% 2,411,650 25.07 CVS 2020/— LA Fitness2027/2042Amboy Road Staten Island 2005 (A) LI (3) 63,290 100% 1,957,236 30.92 Stop & Shop2028/2043Pacesetter ParkShopping Center Ramapo 1999 (A) Fee 97,604 88% 1,074,806 12.58 Stop & Shop2020/2040West Shore Expressway Staten Island 2007 (A) Fee 55,000 100% 1,391,500 25.30 LA Fitness2022/2037Crossroads ShoppingCenter White Plains 1998 (A) Fee/JV (10) 310,652 94% 6,717,288 23.00 Kmart 2017/2032Home Goods2018/2033PetSmart2024/2039New Loudon Center Latham 1993 (A) Fee 255,673 100% 1,989,333 7.78 Price Chopper2015/2035AC Moore 2016/—Hobby Lobby2021/203128 Jericho Turnpike Westbury 2012 (A) Fee 96,363 100% 1,650,000 17.12 Kohl's 2020/2050Bedford Green Bedford Hills 2014 (A) Fee 90,472 91% 2,450,543 29.70 Shop Rite2016/2031 23Retail Property Location YearConstructed(C)Acquired(A) OwnershipInterest GLA Occupancy%12/31/14 (1) AnnualBaseRent (2) AnnualBaseRentPSF Anchor TenantsCurrent LeaseExpiration/Lease OptionExpirationConnecticut Town Line Plaza Rocky Hill 1998 (A) Fee 206,346 99% 1,716,160 16.14 Stop & Shop2024/2064Wal-Mart(11)Massachusetts Methuen ShoppingCenter Methuen 1998 (A) Fee 130,021 100% 1,027,936 7.91 Market Basket2015/—Wal-Mart2016/2051Crescent Plaza Brockton 1993 (A) Fee 218,148 94% 1,765,676 8.60 Supervalu2017/2047Home Depot2021/2056201 Needham Street Newton 2014 (A) Fee 20,409 100% 591,861 29.00 Michael's2023/2033Vermont Gateway ShoppingCenter SouthBurlington 1999 (A) Fee 101,655 100% 2,033,128 20.00 Supervalu2024/2053Illinois Hobson West Plaza Naperville 1998 (A) Fee 99,137 94% 1,121,625 11.99 Garden FreshMarkets 2017/2022Indiana Merrillville Plaza Hobart 1998 (A) Fee 236,087 100% 3,347,323 14.25 TJ Maxx2019/2034Art Van 2023/2038Michigan Bloomfield TownSquare Bloomfield Hills 1998 (A) Fee 235,786 100% 3,570,885 15.14 TJ Maxx2019/2034Home Goods2016/2026Best Buy2021/2041Dick's SportingGoods 2023/2043Ohio Mad River Station (12) Dayton 1999 (A) Fee 123,335 83% 1,332,503 13.06 Babies ‘R’ Us2015/2020Delaware Brandywine TownCenter Wilmington 2003 (A) Fee/JV (13) 900,869 94% 13,929,238 16.39 Bed, Bath &Beyond 2019/2029Dick’s SportingGoods 2018/2033Lowe’s HomeCenters 2018/2048Target 2018/2058HH Gregg2020/2035Market SquareShopping Center Wilmington 2003 (A) Fee/JV (13) 102,047 95% 2,475,028 25.49 TJ Maxx2016/2021Trader Joe’s2019/2034Route 202 ShoppingCenter Wilmington 2006 (C) LI/JV (3) (13) 19,984 100% 867,517 43.41 Pennsylvania Mark Plaza Edwardsville 1993 (C) LI/Fee (3) 106,856 100% 240,664 2.25 Kmart 2019/2049Plaza 422 Lebanon 1993 (C) Fee 156,279 100% 835,956 5.35 Home Depot2028/205824Retail Property Location YearConstructed(C)Acquired(A) OwnershipInterest GLA Occupancy%12/31/14 (1) AnnualBaseRent (2) AnnualBaseRentPSF Anchor TenantsCurrent LeaseExpiration/Lease OptionExpirationRoute 6 Plaza Honesdale 1994 (C) Fee 175,589 99% 1,271,587 7.30 Kmart 2020/2070Dollar Tree2018/2033 Peebles2024/2034Chestnut Hill (14) Philadelphia 2006 (A) Fee 37,646 100% 904,845 24.04 Abington Towne Center Abington 1998 (A) Fee 216,278 96% 1,016,040 20.61 TJ Maxx2016/2021Target (15)TOTAL SUBURBANPROPERTIES 4,625,438 96% 66,187,824 15.84 Total Core Portfolio 5,412,949 96% 115,571,662 23.52 Fund Portfolio Fund I Properties VARIOUS REGIONS Kroger/SafewayPortfolio 3 locations (16) 2003 (A) LI/JV (3) 97,500 35% 103,074 3.03 Kroger 2019/2049Total Fund I Properties 97,500 35% 103,074 3.03 Fund II Properties New York Liberty Avenue Queens 2005 (A) LI (3) 26,125 100% 937,724 35.89 CVS 2032/2052216th Street (17) Manhattan 2005 (A) Fee/JV 60,000 100% 2,574,000 42.90 City of New York2027/2032161st Street Manhattan 2005 (A) Fee/JV 232,252 47% 3,166,025 28.85 Total Fund IIProperties 318,377 62% 6,677,749 34.10 Fund III Properties New York Cortlandt Towne Center Mohegan Lake 2009 (A) Fee 639,353 92% 9,868,707 16.77 Walmart 2018/2048A&P 2022/2047Best Buy2017/2032Petsmart 2019/2034654 Broadway Manhattan 2011 (A) Fee 2,896 100% 566,500 195.61 Penguin 2023/2033640 Broadway Manhattan 2012 (A) Fee/JV 4,145 61% 600,884 236.49 Swatch 2023/2028New Hyde ParkShopping Center New Hyde Park 2011 (A) Fee 32,602 89% 1,254,488 43.47 Petsmart 2024/20393780-3858 NostrandAvenue Brooklyn 2013 (A) Fee 40,315 76% 1,419,696 46.39 Massachusetts White City ShoppingCenter Shrewsbury 2010 (A) Fee/JV (18) 256,661 92% 6,149,628 25.98 Shaw’s 2018/2033Maryland Parkway Crossing Baltimore 2011 (A) Fee/JV (19) 260,241 95% 1,722,440 6.94 Home Depot 2032/—Big Lots 2016/—Shop Rite 2032/—25Retail Property Location YearConstructed(C)Acquired(A) OwnershipInterest GLA Occupancy%12/31/14 (1) AnnualBaseRent (2) AnnualBaseRentPSF Anchor TenantsCurrent LeaseExpiration/Lease OptionExpirationArundel Plaza Glen Burnie 2012 (A) Fee/JV (19) 265,116 95% 1,318,478 5.24 Giant Food2015/2025Lowes 2019/2059Illinois Heritage Shops Chicago 2011 (A) Fee 81,730 96% 3,149,752 40.15 LA Fitness2025/2040Ann Taylor2015/2025Lincoln Park Centre Chicago 2012 (A) Fee (20) 61,761 100% 2,917,267 47.23 Design Within Reach2029/2044Total Fund IIIProperties 1,644,820 93% 28,967,840 18.93 Fund IV Properties New York 1151 Third Avenue Manhattan 2013 (A) Fee/JV 13,158 100% 545,000 66.07 Vineyard Vines2025/203517 East 71st Street Manhattan 2014 (A) Fee 9,230 64% 610,894 103.54 New Jersey 2819 KennedyBoulevard North Bergen 2013 (A) Fee/JV (21) 41,477 4% 100,000 65.10 Aldi 2030/2050Paramus Plaza Paramus 2013 (A) Fee/JV (22) 154,409 63% 1,847,945 18.89 Babies R Us2019/2044Ashley Furniture2024/2034Virginia Promenade at Manassas Manassas 2013 (A) Fee/JV (21) 265,442 98% 3,402,218 13.02 Home Depot2031/2071HH Gregg2020/2030Lake Montclair Center Dumfries 2013 (A) Fee 105,850 93% 1,843,740 18.68 Food Lion 2023/2043Maryland 1701 Belmont Avenue Catonsville 2012 (A) Fee/JV (21) 58,674 100% 936,166 15.96 Best Buy 2017/2032Delaware Eden Square Bear 2014 (A) Fee/JV (21) 235,508 94% 2,526,376 11.42 Giant, 2024/2059Lowe's 2017/2032Illinois 938 W. North Avenue Chicago 2013 (A) Fee/JV (23) 33,228 63% 988,726 47.56 RestorationHardware2020/2030Sephora 2024/2029Total Fund IVProperties 916,976 84% 12,801,065 16.54 Total Fund OperatingProperties (24) 2,977,673 85% $48,549,728 $19.18 Notes: (1)Does not include space for which lease term had not yet commenced as of December 31, 2014. (2)These amounts include, where material, the effective rent, net of concessions, including free rent. (3)We are a ground lessee under a long-term ground lease. (4)Includes 5 properties (56 E. Walton, 8-12 E. Walton, 930 Rush Street, 50-54 E. Walton, 11 E. Walton and 21 E. Chestnut). (5)Includes 3 properties (639 W. Diversey, 2731 N. Clark and 662 W. Diversey). (6)Includes 9 properties (841 W. Armitage, 853 W. Armitage, 843-45 W. Armitage, 2206-08 N. Halsted, 2633 N. Halsted, 837 W.Armitage, 823 W. Armitage, 851 W. Armitage and 819 W. Armitage). 26Retail Property Location YearConstructed(C)Acquired(A) OwnershipInterest GLA Occupancy%12/31/14 (1) AnnualBaseRent (2) AnnualBaseRentPSF Anchor TenantsCurrent LeaseExpiration/Lease OptionExpiration (7)Includes 6 properties (2140 N. Clybourn, 2299 N. Clybourn,1520 Milwaukee Avenue,1521 W Belmont, 865 W North Avenue and1240 W. Belmont). (8)In addition to the 16,834 square feet of retail GLA, this property also has 21 apartments comprising 14,434 square feet. (9)Includes seven properties (1533 Wisconsin Ave., 3025 M St., 3034 M St., 3146 M St, 3259-61 M St. and 2809 M St., in which wehave a 50% investment, and 3200 M Street in which we have a 100% investment). (10)We have a 49% investment in this property. (11)Includes a 97,300 square foot Wal-Mart which is not owned by us. (12)The GLA for this property excludes 29,857 square feet of office space. (13)We have a 22% investment in this property. (14)Property consists of two buildings. (15)Includes a 157,616 square foot Target Store that is not owned by us. (16)Three remaining assets including locations in Benton, AR, Tulsa, OK and Indianapolis, IN. (17)This property is under contract for sale as of December 31, 2014. (18)The Fund has an 84% investment in this property. (19)The Fund has a 90% investment in this property. (20)Subsequent to December 31, 2014, this property was sold. (21)The Fund has a 98% investment in this property. (22)The Fund has a 50% investment in this property. (23)The Fund has a 80% investment in this property. (24)In addition to the Fund operating properties, there are 31 properties under redevelopment; Sherman Plaza (Fund II), CityPoint(Fund II) , Broad Hollow Commons (Fund III), Cortlandt Crossing (Fund III), 3104 M Street (Fund III), Broughton Street Portfolio(Fund IV, includes 24 properties), 27 E. 61st (Fund IV) and 210 Bowery (Fund IV). 27MAJOR TENANTSNo individual retail tenant accounted for more than 3.4% of base rents for the year ended December 31, 2014 or occupied more than 7.2% of total leased GLAas of December 31, 2014. The following table sets forth certain information for the 20 largest retail tenants by base rent for leases in place as of December 31,2014. 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 Funds (GLA and Annualized Base Rent in thousands): Number of Percentage of TotalRepresented by Retail TenantRetail Tenant Stores inPortfolio (1) Total GLA Annualized BaseRent (2) Total PortfolioGLA Annualized Base RentAhold (Stop and Shop) 5 217 $3,552 4.4% 3.4%Home Depot 5 358 2,763 7.2% 2.6%LA Fitness 3 110 2,551 2.2% 2.4%TJX Companies 10 225 2,375 4.5% 2.3%Verizon Wireless 2 31 2,267 0.6% 2.2%Supervalu (Shaw's) 3 134 2,061 2.7% 2.0%Walgreens 4 40 1,552 0.8% 1.5%A&P 2 61 1,367 1.2% 1.3%Citibank 6 18 1,251 0.4% 1.2%Ann Taylor Loft 3 15 1,238 0.3% 1.2%Sleepy's 9 43 1,224 0.9% 1.2%Sears 3 274 1,170 5.5% 1.1%JP Morgan Chase 7 19 1,106 0.4% 1.1%Bob's Discount Furniture 2 35 1,064 0.7% 1.0%TD Bank 2 16 1,061 0.3% 1.0%Trader Joe's 2 19 967 0.4% 0.9%Gap (Banana Republic and Old Navy) 4 17 928 0.3% 0.9%Shop Rite 2 48 926 1.0% 0.9%Walmart 2 115 887 2.3% 0.8%Dicks Sporting Goods 2 60 860 1.2% 0.8%Total 78 1,855 $31,170 37.3% 29.8%Notes: (1)Does not include the following tenants that only operate at one location within the Company's portfolio; Tommy Bahama, H&M,Kohl's and Lululemon.(2)Base rents do not include percentage rents, additional rents for property expense reimbursements and contractual rent escalations.28LEASE EXPIRATIONSThe following table shows scheduled lease expirations for retail tenants in place as of December 31, 2014, assuming that none of the tenants exercise renewaloptions. (GLA and Annualized Base Rent in thousands):Core Portfolio: Annualized Base Rent (1) GLALeases maturing in Number ofLeases Current Annual Rent Percentage of Total Square Feet Percentage of TotalMonth to Month 7 $535 —% 21 —%2015 (2) 41 7,609 7% 384 8%2016 65 10,260 9% 574 12%2017 60 12,870 11% 578 12%2018 66 16,142 14% 654 13%2019 43 8,387 7% 445 9%2020 31 8,920 8% 423 9%2021 28 7,399 6% 389 8%2022 28 6,978 6% 173 4%2023 21 7,409 7% 291 6%2024 37 12,303 11% 376 8%Thereafter 28 16,051 14% 588 11%Total 455 $114,863 100% 4,896 100%Fund Portfolio: Annualized Base Rent (1) GLALeases maturing in Number ofLeases Current Annual Rent Percentage of Total Square Feet Percentage of TotalMonth to Month 4 $279 1% 18 1%2015 (2) 20 2,593 5% 133 5%2016 33 2,870 6% 114 4%2017 30 5,187 11% 300 12%2018 40 6,757 14% 404 16%2019 26 4,663 10% 403 16%2020 11 1,141 2% 65 3%2021 10 1,845 4% 99 4%2022 13 2,660 5% 132 5%2023 17 3,685 8% 127 5%2024 17 4,843 10% 172 7%Thereafter 21 12,026 24% 567 22%Total 242 $48,549 100% 2,534 100%Notes: (1)Base rents do not include percentage rents, additional rents for property expense reimbursements, nor contractual rent escalations.(2)The 61 leases scheduled to expire during 2015 are for tenants at 32 properties located in 25 markets. No single market represents a materialamount of exposure to the Company as it relates to the rents from these leases. Given the diversity of these markets, properties andcharacteristics of the individual spaces, the Company cannot make any general representations as it relates to the expiring rents and the ratesfor which these spaces may be re-leased.29GEOGRAPHIC CONCENTRATIONSThe following table summarizes our retail properties by region as of December 31, 2014. The amounts below include our pro-rata share of GLA andannualized base rent for the Operating Partnership’s partial ownership interest in properties, including the Funds (GLA and Annualized Base Rent inthousands): Percentage of TotalRepresented byRegionRegion GLA (1)(3) Occupied %(2) AnnualizedBaseRent (2) (3) Annualized BaseRent perOccupied SquareFoot (3) GLA AnnualizedBase RentCore Portfolio: Operating Properties: New York Metro 1,664 94% $42,498 $27.27 37% 44%New England 731 98% 8,265 11.56 17% 9%Chicago Metro 302 96% 23,332 80.33 7% 24%Midwest 694 96% 9,372 14.06 16% 10%Washington D.C Metro 100 100% 4,565 45.77 2% 5%Mid-Atlantic 920 96% 8,107 9.17 21% 8%Total Core Operating Properties 4,411 96% $96,139 $22.81 100% 100% Fund Portfolio: Operating Properties: New York Metro 199 83% $4,337 $26.10 36% 47%New England 43 92% 1,028 25.98 8% 11%Chicago Metro 35 91% 1,391 43.97 6% 15%Mid-Atlantic 245 96% 2,517 10.74 45% 27%Other 28 35% 29 3.03 5% —%Total Fund Operating Properties 550 88% $9,302 $19.17 100% 100%Redevelopment Properties: New York Metro 56 41% $676 $29.42 79% 85%Mid-Atlantic 1 —% — — 1% —%Southeast 14 29% 121 30.92 20% 15%Total Fund RedevelopmentProperties 71 37% $797 $30.60 100% 100%Notes: (1)Property GLA includes a total of 255,000 square feet, which is not owned by us. This square footage has beenexcluded 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 renthad not commenced as of December 31, 2014.(3)The amounts presented reflect the Operating Partnership's pro-rata shares of properties included within each region.30ITEM 3. LEGAL PROCEEDINGS.We are involved in various matters of litigation arising in the normal course of business. While we are unable to predict with certainty the outcome of anyparticular matter, Management is of the opinion that, when such litigation is resolved, our resulting exposure to loss contingencies, if any, will not have asignificant effect on our consolidated financial position, results of operations, or liquidity.In addition to the foregoing, we recently settled or are currently involved in the following litigation matters:During August 2009, we terminated the employment of a former Senior Vice President (the "Former Employee") for engaging in conduct that materiallyviolated the Company's employee handbook. The Company determined that the behavior fell within the definition of "cause" in his severance agreementwith us and therefore did not pay him anything thereunder. The Former Employee brought a lawsuit against us in New York State Supreme Court (the"Court"), in the amount of $0.9 million alleging breach of the severance agreement. On August 7, 2014, the Court granted summary judgment in favor of theCompany, as defendant, and against plaintiff, the Former Employee, finding that his conduct in fact and law, constituted "cause" under his severanceagreement. Plaintiff has filed a notice of appeal but has not yet perfected his appeal. The Company continues to believe that termination was justified for“cause” and that it will be successful on appeal.During July 2013, a lawsuit was brought against us relating to the 2011 flood at Mark Plaza by Kmart Corporation in the Luzerne County Court of CommonPleas, State of Pennsylvania. The lawsuit alleges a breach of contract and negligence relating to landlord responsibility for damages incurred by the tenant asa result of the flood. The tenant is seeking damages in excess of $9.0 million. We believe that this lawsuit is without merit.During December 2013, in connection with Phase 2 of Fund II's City Point Project, Albee Development LLC ("Albee"), and a non-affiliated constructionmanager were served with a Summons With Notice as well as a Demand for Arbitration by Casino Development Group, Inc. ("Casino"), the former contractorresponsible for the excavation and concrete work at the City Point Project. Albee terminated the contract with Casino for cause prior to completion of thecontract. Casino is seeking approximately $7.4 million, which has now been bonded. Albee believes that it has meritorious defenses to, and is prepared tovigorously defend itself against the claims. Presently, the parties are before the New York State Supreme Court in Kings County on various proceduralmatters.ITEM 4. MINE SAFETY DISCLOSURES.Not applicable.31PART IIITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES AND PERFORMANCE GRAPH.(a) Market Information, dividends and record holders of our Common SharesThe 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, andcash dividends declared during the two years ended December 31, 2014 and 2013:Quarter Ended Dividend2014 High Low Per ShareMarch 31, 2014 $27.06 $24.47 $0.23June 30, 2014 28.60 25.98 0.23September 30, 2014 29.36 27.00 0.23December 31, 2014(1)33.18 27.52 0.542013 March 31, 2013 $28.11 $25.04 $0.21June 30, 2013 29.32 23.34 0.21September 30, 2013 26.78 22.89 0.21December 31, 2013 27.59 24.10 0.23Note:(1) Includes a special dividend of $0.30 for the quarter ended December 31, 2014At February 20, 2015, there were 538 holders of record of our Common Shares.We have determined for income tax purposes that 69% of the total dividends distributed to shareholders during 2014 represented ordinary income and 31%represented capital gains. The dividend for the quarter ended December 31, 2014 was paid on January 15, 2015 and is taxable in 2014. Our cash flow isaffected by a number of factors, including the revenues received from rental properties, our operating expenses, the interest expense on our borrowings, theability of lessees to meet their obligations to us and unanticipated capital expenditures. Future dividends paid by us will be at the discretion of the Trusteesand will depend on our actual cash flows, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of theCode and such other factors as the Trustees deem relevant. In addition, we have the ability to pay dividends in cash, Common Shares or a combinationthereof, subject to a minimum of 10% in cash.(b) Issuer purchases of equity securitiesWe have an existing share repurchase program that authorizes management, at its discretion, to repurchase up to $20.0 million of our outstanding CommonShares. 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 noCommon Shares repurchased by us during the year ended December 31, 2014. Under this program we have repurchased 2.1 million Common Shares, none ofwhich were repurchased after December 2001. As of December 31, 2014, management may repurchase up to approximately $7.5 million of our outstandingCommon Shares under this program.(c) Securities authorized for issuance under equity compensation plansDuring 2012, the Company terminated the 1999 and 2003 Share Incentive Plans (the "1999 and 2003 Plans") and adopted the Amended and Restated 2006Share Incentive Plan (the "Amended 2006 Plan"). The Amended 2006 Plan amended and restated our 2006 Share Incentive Plan and increased theauthorization to issue options, Restricted Shares and LTIP Units (collectively "Awards") available to officers and employees by 1.9 million shares. See Note15 in the Notes to Consolidated Financial Statements, for a summary of our Share Incentive Plans. The following table provides information related to theAmended 2006 Plan as of December 31, 2014:32 Equity Compensation Plan Information (a) (b) (c) Number of securities tobe issued upon exerciseof outstanding options,warrants and rights Weighted - averageexercise price ofoutstanding options,warrants and rights Number of securitiesremaining availablefor future issuance underequity compensation plans(excluding securitiesreflected in column (a))Equity compensation plans approved bysecurity holders 55,347 $20.93 1,118,288Equity compensation plans notapproved by security holders — — —Total 55,347 $20.93 1,118,288Remaining Common Shares available under the Amended 2006 Plan are as follows:Outstanding Common Shares as of December 31, 201468,109,287Outstanding OP Units as of December 31, 20143,663,644Total Outstanding Common Shares and OP Units71,772,931 Common Shares and OP Units pursuant to the 1999 and 2003 Plans5,193,681Common Shares pursuant to the Amended 2006 Plan2,100,000Total Common Shares available under equity compensation plans7,293,681 Less: Issuance of Restricted Shares and LTIP Units Granted(3,400,620)Issuance of Options Granted(2,774,773)Number of Common Shares remaining available1,118,288(d) Share Price Performance GraphThe following graph compares the cumulative total shareholder return for our Common Shares for the period commencing December 31, 2009 throughDecember 31, 2014 with the cumulative total return on the Russell 2000 Index ("Russell 2000"), the NAREIT All Equity REIT Index (the "NAREIT") and theSNL Shopping Center REITs (the "SNL") over the same period. Total return values for the Russell 2000, the NAREIT, the SNL and the Common Shares werecalculated based upon cumulative total return assuming the investment of $100.00 in each of the Russell 2000, the NAREIT, the SNL and our CommonShares on December 31, 2009, and assuming reinvestment of dividends. The shareholder return as set forth in the table below is not necessarily indicative offuture performance. The information in this section is not "soliciting material," is not deemed "filed" with the SEC, and is not to be incorporated by referenceinto any of our filings under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any generalincorporation language contained in such filing.Comparison of five Year Cumulative Total Return among Acadia Realty Trust, the Russell 2000, the NAREIT and the SNL:33 Period EndedIndex 12/31/09 12/31/10 12/31/11 12/31/12 12/31/13 12/31/14Acadia Realty Trust $100.00 $112.51 $128.92 $165.47 $169.43 $227.86Russell 2000 100.00 126.86 121.56 141.43 196.34 205.95NAREIT All Equity REIT Index 100.00 127.95 138.55 165.84 170.58 218.38SNL REIT Retail Shopping Ctr Index 100.00 129.81 126.10 159.21 170.11 220.42ITEM 6. SELECTED FINANCIAL DATAThe following table sets forth, on a historical basis, our selected financial data. This information should be read in conjunction with our audited ConsolidatedFinancial Statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing elsewhere in this Form 10-K.Funds from operations ("FFO") amounts for the year ended December 31, 2014 have been adjusted as set forth in "Item 7. Management’s Discussion andAnalysis of Financial Condition and Results of Operations – Reconciliation of Net Income to Funds from Operations."34 Years ended December 31,(dollars in thousands, except per share amounts) 2014 2013 2012 2011 2010OPERATING DATA: Revenues $195,012 $168,286 $114,987 $97,857 $100,108Operating expenses, excluding depreciation and reserves 79,104 72,108 58,939 51,024 47,265Interest expense 39,091 39,474 22,811 23,343 26,146Gain on disposition of properties 13,138 — — — —Depreciation and amortization 49,645 40,299 27,888 20,975 20,093Equity in earnings of unconsolidated affiliates 8,723 12,382 550 1,555 12,450Gain (loss) on sale of properties of unconsolidated affiliates 102,855 — 3,061 — (1,479)Impairment of investment in unconsolidated affiliates — — (2,032) — —Impairment of asset — (1,500) — — —Reserve for notes receivable — — (405) — —Gain from bargain purchase — — — — 33,805Gain on involuntary conversion of asset — — 2,368 — —(Loss) gain on debt extinguishment (335) (765) (198) 1,268 —Income tax (provision) benefit (629) (19) 574 (461) (2,869)Income from continuing operations 150,924 26,503 9,267 4,877 48,511Income from discontinued operations 1,222 18,137 80,669 48,838 2,156Net income 152,146 44,640 89,936 53,715 50,667(Income) loss attributable to noncontrolling interests: Continuing operations (80,059) 7,523 14,352 13,734 (20,138)Discontinued operations (1,023) (12,048) (64,582) (15,894) (472)Net income attributable to noncontrolling interests (81,082) (4,525) (50,230) (2,160) (20,610)Net income attributable to Common Shareholders $71,064 $40,115 $39,706 $51,555 $30,057Supplemental Information: Income from continuing operations attributable to Common Shareholders $70,865 $34,026 $23,619 $18,611 $28,373Income from discontinued operations attributable to Common Shareholders 199 6,089 16,087 32,944 1,684Net income attributable to Common Shareholders $71,064 $40,115 $39,706 $51,555 $30,057Basic earnings per share: Income from continuing operations $1.18 $0.61 $0.51 $0.45 $0.69Income from discontinued operations — 0.11 0.34 0.80 0.04Basic earnings per share $1.18 $0.72 $0.85 $1.25 $0.73Diluted earnings per share: Income from continuing operations $1.18 $0.61 $0.51 $0.45 $0.69Income from discontinued operations — 0.11 0.34 0.80 0.04Diluted earnings per share $1.18 $0.72 $0.85 $1.25 $0.73Weighted average number of Common Shares outstanding basic 59,402 54,919 45,854 40,697 40,136diluted 59,426 54,982 46,335 40,986 40,406Cash dividends declared per Common Share $1.23 $0.86 $0.72 $0.72 $0.72 35 Years ended December 31,(dollars in thousands, except per share amounts) 2014 2013 2012 2011 2010BALANCE SHEET DATA: Real estate before accumulated depreciation $2,208,595 $1,819,053 $1,287,198 $897,370 $753,989Total assets 2,732,600 2,264,957 1,908,440 1,653,319 1,524,806Total mortgage indebtedness 1,130,481 1,039,997 613,181 531,881 627,649Total common shareholders’ equity 1,055,541 704,236 622,797 384,114 318,212Noncontrolling interests 380,416 417,352 447,459 385,195 269,310Total equity 1,435,957 1,121,588 1,070,256 769,309 587,522OTHER: Funds from Operations (1) 78,882 67,139 48,827 42,913 50,440Cash flows provided by (used in): Operating activities 82,519 65,233 59,001 65,715 44,377Investing activities (268,516) (87,879) (136,745) (153,157) (60,745)Financing activities 324,388 10,022 79,745 56,662 43,152Note: (1)The Company considers funds from operations ("FFO") as defined by the National Association of Real Estate Investment Trusts ("NAREIT")and net property operating income ("NOI") to be appropriate supplemental disclosures of operating performance for an equity REIT due totheir widespread acceptance and use within the REIT and analyst communities. FFO and NOI are presented to assist investors in analyzing theperformance of the Company. They are helpful as they exclude various items included in net income that are not indicative of the operatingperformance, such as gains (losses) from sales of depreciated property, depreciation and amortization, and impairment of depreciable realestate. In addition, NOI excludes interest expense. The Company's method of calculating FFO and NOI may be different from methods used byother REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash generated from operations as definedby generally accepted accounting principles ("GAAP") and is not indicative of cash available to fund all cash needs, including distributions. Itshould not be considered as an alternative to net income for the purpose of evaluating the Company's performance or to cash flows as ameasure 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 and impairment of depreciable real estate, plus depreciation and amortization, andafter adjustments for unconsolidated partnerships and joint ventures.ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.OVERVIEWAs of December 31, 2014, we operated 143 properties, which we own or have an ownership interest in, within our Core Portfolio or Funds. Our Core Portfolioconsists of those properties either 100% owned, or partially owned through joint venture interests by the Operating Partnership, or subsidiaries thereof, notincluding those properties owned through our Funds. These 143 properties primarily consist of street and urban retail, and dense suburban shopping centers.The properties we operate are located primarily in markets within the United States' top ten metropolitan areas. There are 87 properties in our Core Portfoliototaling approximately 5.4 million square feet. Fund I has three remaining properties comprising approximately 0.1 million square feet. Fund II has fiveproperties, three of which (representing 0.3 million square feet) are currently operating, one is under construction, and one is in the design phase. Fund III has13 properties, 10 of which (representing 1.6 million square feet) are currently operating and three of which are in the design phase. Fund IV has 35 properties,nine of which (representing 0.9 million square feet) are operating and 26 are under development. The majority of our operating income is derived from rentalrevenues from operating properties, including expense recoveries from tenants, offset by operating and overhead expenses. As our RCP Venture invests inoperating companies, we consider these investments to be private-equity style, as opposed to real estate, investments. Since these are not traditionalinvestments in operating rental real estate but investments in operating businesses, the Operating Partnership typically invests in these through a taxableREIT subsidiary ("TRS").Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while alsocreating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective:36•Own and operate a Core Portfolio of high-quality retail properties located primarily in high-barrier-to-entry, densely-populated metropolitan areasand create value through accretive redevelopment and re-tenanting activities coupled with the acquisition of high-quality assets that have the long-term potential to outperform the asset class as part of our Core asset recycling and acquisition initiative.•Generate additional external growth through an opportunistic yet disciplined acquisition program within our Funds. We target transactions withhigh inherent opportunity for the creation of additional value through:◦value-add investments in street retail properties, located in established and "next generation" submarkets, with re-tenanting or repositioningopportunities,◦opportunistic acquisitions of well-located real-estate anchored by distressed retailers, and◦other opportunistic acquisitions which may include high-yield acquisitions and purchases of distressed debt.These may also include joint ventures with private equity investors for the purpose of making investments in operating retailers with significantembedded value in their real estate assets.•Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund futuregrowth.RESULTS OF OPERATIONSSee Note 3 in the Notes to Consolidated Financial Statements for an overview of our three reportable segments.A discussion of the significant variances and primary factors contributing thereto within the results of operations for the years ended December 31, 2014,2013 and 2012 are addressed below:Comparison of the year ended December 31, 2014 ("2014") to the year ended December 31, 2013 ("2013")Revenues 2014 2013(dollars in millions) CorePortfolio Funds StructuredFinancings CorePortfolio Funds StructuredFinancingsRental income $102.1 $43.0 $— $90.2 $32.5 $—Interest income — — 12.6 — — 11.8Expense reimbursements 22.1 10.6 — 19.1 9.3 —Other 0.8 1.1 2.7 1.1 4.3 —Total revenues $125.0 $54.7 $15.3 $110.4 $46.1 $11.8Rental income in the Core Portfolio increased $11.9 million primarily as a result of additional rents of (i) $9.0 million related to 2014 Core Portfolio propertyacquisitions as detailed in Note 2 in the Notes to Consolidated Financial Statements ("2014 Core Acquisitions") and (ii) $4.8 million following theacquisitions of 664 N. Michigan Avenue, 8-12 East Walton, 3200-3204 M Street, 868 Broadway, 313-315 Bowery and 120 West Broadway ("2013 CoreAcquisitions"). These increases were partially offset by a $1.7 million reduction in rental income following the disposition of Walnut Hill Plaza. Rentalincome in the Funds increased $10.5 million primarily as a result of additional rents of (i) $6.0 million related to 2014 Fund Portfolio property acquisitions asdetailed in Note 2 in the Notes to Consolidated Financial Statements ("2014 Fund Acquisitions") and (ii) $4.3 million as a result of re-anchoring and leasingactivities within the Fund Portfolio ("Fund Re-tenanting").Expense reimbursements in the Core Portfolio increased $3.0 million primarily as a result of (i) $1.4 million related to 2014 Core Acquisitions, (ii) $0.7million related to reimbursement of higher winter related operating costs in 2014 and (iii) $0.6 million related to 2013 Core Acquisitions. Expensereimbursements in the Funds increased $1.3 million primarily as a result of the 2014 Fund Acquisitions and reimbursement of higher winter related operatingcosts in 2014.Other income in the Funds decreased $3.2 million primarily due to the recognition of income upon the collection of a note receivable during 2013, whichhad been previously written off. Other income in Structured Financing increased $2.7 million as a result of the collection of two notes that had been reservedprior to 2014.37Operating Expenses 2014 2013(dollars in millions) CorePortfolio Funds StructuredFinancings CorePortfolio Funds StructuredFinancingsProperty operating $15.1 $9.7 $— $13.5 $7.5 $—Other operating 3.6 0.2 — 2.7 1.9 —Real estate taxes 14.4 8.7 — 12.8 8.1 —General and administrative 24.8 1.7 0.9 24.4 1.2 —Depreciation and amortization 35.9 13.8 — 29.0 11.3 —Total operating expenses $93.8 $34.1 $0.9 $82.4 $30.0 $—Property operating expenses in the Core Portfolio increased $1.6 million primarily as a result of the 2014 and 2013 Core Acquisitions. Property operatingexpenses in the Funds increased $2.2 million primarily as a result of (i) $1.5 million attributable to the 2014 Fund Acquisitions and (ii) $0.5 million relatedto Fund Re-tenanting.Real estate taxes in the Core Portfolio increased $1.6 million primarily as a result of the 2014 and 2013 Core Acquisitions.General and administrative expenses increased $0.9 million in Structured Financing primarily as a result of legal fees incurred during 2014 associated withcollection efforts on non-performing notes receivable.Depreciation and amortization expenses in the Core Portfolio increased $6.9 million primarily as a result of the 2014 and 2013 Core Acquisitions.Depreciation and amortization expenses in the Funds increased $2.5 million primarily as a result of the 2014 Fund Acquisitions.Other 2014 2013(dollars in millions) CorePortfolio Funds StructuredFinancings CorePortfolio Funds StructuredFinancingsEquity in (losses) earnings ofunconsolidated affiliates $(0.1) $111.7 $— $(0.1) $12.5 $—Impairment of asset — — — (1.5) — —Loss on debt extinguishment — (0.3) — (0.3) (0.5) —Interest and other finance expense (27.0) (12.1) — (26.2) (13.3) —Gain on disposition of properties 12.6 0.5 — — — —Income tax (provision) benefit (0.2) (0.4) — 0.1 (0.1) —Income from discontinued operations — 1.2 — 6.9 11.2 —(Loss) income attributable tononcontrolling interests: - Continuing operations (3.2) (76.9) — (1.0) 8.5 — - Discontinued operations — (1.0) — (2.4) (9.6) —Equity in (losses) earnings of unconsolidated affiliates in the Funds increased $99.2 million primarily as a result of the gain on sale of our investments in theFund III and Fund IV Lincoln Road Portfolios during 2014.Impairment of asset in the Core Portfolio represents a charge related to Walnut Hill Plaza during 2013.Interest expense in the Funds decreased $1.2 million primarily as a result of a (i) $3.4 million increase in capitalized interest related to our City Pointredevelopment project during 2014 and (ii) a $1.7 million decrease related to lower average interest rates during 2014. These decreases were partially offsetby a (i) $2.8 million increase related to higher average outstanding borrowings during 2014 and (ii) $0.8 million related to an increase in market rateadjustments of assumed debt interest expense during 2014.Gain on disposition of properties in the Core Portfolio during 2014 represents the gain on the foreclosure of the Walnut Hill Plaza (See Note 2 in the Notes toConsolidated Financial Statements).38Income from discontinued operations primarily represents activity related to properties sold during 2013.(Loss) income attributable to noncontrolling interests - Continuing operations and Discontinued operations primarily represents the noncontrolling interests'share of all the Funds variances discussed above.Comparison of the year ended December 31, 2013 ("2013") to the year ended December 31, 2012 ("2012")Revenues 2013 2012(dollars in millions) CorePortfolio Funds StructuredFinancings CorePortfolio Funds StructuredFinancingsRental income $90.2 $32.5 $— $56.0 $28.0 $—Interest income — — 11.8 — — 8.0Expense reimbursements 19.1 9.3 — 12.8 7.6 —Other 1.1 4.3 — 1.6 1.0 —Total revenues $110.4 $46.1 $11.8 $70.4 $36.6 $8.0Rental income in the Core Portfolio increased $34.2 million primarily as a result of additional rents of (i) $16.5 million following the consolidation of ourBrandywine investment formerly presented under the equity method ("Consolidation of Brandywine"), (ii) $11.4 million related to the acquisitions of 1520Milwaukee Avenue, 330-340 River Street, our Chicago Street Retail Portfolio, 930 Rush Street, 28 Jericho Turnpike, Rhode Island Shopping Center, 83Spring Street, 60 Orange Street, 181 Main Street, Connecticut Avenue and 639 West Diversey ("2012 Core Acquisitions"), (iii) $5.1 million related to 2013Core Acquisitions and (iv) $1.1 million as a result of re-anchoring and leasing activities at Bloomfield Town Square and Branch Plaza ("Core Re-tenanting").Rental income in the Funds increased $4.5 million primarily as a result of additional rents of (i) $2.9 million related to 3780-3858 Nostrand Avenue, ParamusPlaza, 1151 Third Avenue, Lake Montclair Center, and 938 W. North Avenue ("2013 Fund Acquisitions"), and (ii) $0.7 million related to the acquisitions of640 Broadway, Lincoln Park Centre and 3104 M Street ("2012 Fund Acquisitions").Interest income increased $3.8 million as a result of the origination of two notes during December 2012. This was partially offset by the repayment of fournotes during 2012 and 2013.Expense reimbursements in the Core Portfolio increased $6.3 million primarily as a result of (i) $2.9 million from the Consolidation of Brandywine, (ii) $1.5million from 2012 Core Acquisitions and (iii) $0.6 million from 2013 Core Acquisitions. Expense reimbursements in the Funds increased $1.7 million as aresult of 2013 and 2012 Fund Acquisitions.Other income in the Funds increased $3.3 million primarily as a result of the 2013 collection of a note receivable originated in 2010, which had been writtenoff prior to 2013.Operating Expenses 2013 2012(dollars in millions) CorePortfolio Funds StructuredFinancings CorePortfolio Funds StructuredFinancingsProperty operating $13.5 $7.5 $— $10.3 $7.1 $—Other operating 2.7 1.9 — 1.8 2.1 —Real estate taxes 12.8 8.1 — 9.7 6.7 —General and administrative 24.4 1.2 — 19.6 1.6 —Reserve for notes receivable———0.4——Depreciation and amortization 29.0 11.3 — 17.1 10.8 —Total operating expenses $82.4 $30.0 $— $58.9 $28.3 $—Property operating expenses for the Core Portfolio increased $3.2 million as a result of $2.0 million from (i) the Consolidation of Brandywine and (ii) $1.2million from 2013 and 2012 Core Acquisitions.39Real estate tax expense in the Core Portfolio increased $3.1 million as a result of (i) $1.4 million from the Consolidation of Brandywine and (ii) $1.7 millionfrom 2013 and 2012 Core Acquisitions. Real estate tax expense in the Funds increased $1.4 million as a result of 2013 and 2012 Fund Acquisitions.General and administrative expense in the Core Portfolio increased $4.8 million primarily due to non-cash executive retirement expenses as well asadditional hiring during 2013.Depreciation and amortization for the Core Portfolio increased $11.9 million primarily as a result of (i) $4.8 million from 2012 Core Acquisitions, (ii) $3.6million from the Consolidation of Brandywine and (iii) $2.0 million from 2013 Core Acquisitions.Other 2013 2012(dollars in millions) CorePortfolio Funds StructuredFinancings CorePortfolio Funds StructuredFinancingsEquity in (losses) earnings ofunconsolidated affiliates $(0.1) $12.5 $— $0.2 $0.3 $—Gain on disposition of properties ofunconsolidated affiliates — — — — 3.1 —Impairment of unconsolidated affiliates — — — — (2.0) —Impairment of asset (1.5) — — — — —Loss on debt extinguishment (0.3) (0.5) — — (0.2) —Gain on involuntary conversion of asset — — — 2.4 — —Interest and other finance expense (26.2) (13.3) — (15.4) (7.4) —Income tax (provision) benefit 0.1 (0.1) — (0.2) 0.8 —Income from discontinued operations 6.9 11.2 — 0.3 80.4 —(Loss) income attributable tononcontrolling interests: - Continuing operations (1.0) 8.5 — 0.1 14.3 — - Discontinued operations (2.4) (9.6) — (0.1) (64.5) —Equity in (losses) earnings of unconsolidated affiliates in the Funds increased $12.2 million primarily as a result of (i) $8.2 million from the acquisitions ofArundel Plaza, Lincoln Road Portfolio, 1701 Belmont Avenue, 2819 Kennedy Boulevard and Promenade at Manassas ("2012 and 2013 FundUnconsolidated Acquisitions") and (ii) $4.0 million from our share of earnings from our investment in the Self-Storage Management company during 2013("Self-Storage Management").Gain on disposition of properties of unconsolidated affiliates represents our share of a $3.4 million gain on sale of an unconsolidated Fund investment during2012.Impairment of unconsolidated affiliate represents the settlement of legal proceedings from our Mervyns investment during 2012.Impairment of asset in the Core Portfolio represents an impairment charge on Walnut Hill Plaza during 2013.Gain on involuntary conversion of asset of $2.4 million related to insurance proceeds received in excess of net basis for flood damage at Mark Plaza during2012.Interest expense in the Core Portfolio increased $10.8 million primarily as a result of the Consolidation of Brandywine. Interest expense in the Fundsincreased $5.9 million primarily due to an increase of $9.4 million related to higher average outstanding borrowings offset by an increase in capitalizedinterest related to redevelopment activities during 2013.Income from discontinued operations primarily represents activity related to properties sold during 2013 and 2012.(Loss) income attributable to noncontrolling interests - Continuing operations and Discontinued operations primarily represents the noncontrolling interests'share of all the Funds variances discussed above.40CORE PORTFOLIOThe following discussion of net property operating income ("NOI") and rent spreads on new and renewal leases includes the activity from both ourconsolidated and our pro-rata share of unconsolidated properties within our Core Portfolio. Our Funds invest primarily in properties that typically requiresignificant leasing and redevelopment. Given that the Funds are finite-life investment vehicles, these properties are sold following stabilization. For thesereasons, we believe NOI and rent spreads are not meaningful measures for our Fund investments.NOI represents property revenues less property expenses. We consider NOI and rent spreads on new and renewal leases for our Core Portfolio to be appropriatesupplemental disclosures of portfolio operating performance due to their widespread acceptance and use within the REIT investor and analyst communities.NOI and rent spreads on new and renewal leases are presented to assist investors in analyzing our property performance, however, our method of calculatingthese may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.Net Property Operating IncomeNOI is determined as follows:RECONCILIATION OF CONSOLIDATED OPERATING INCOME TO NET OPERATING INCOME - CORE PORTFOLIO(dollars in millions) Year EndedDecember 31, 2014 2013Consolidated Operating Income $66.3 $55.9Add back: General and administrative 27.4 25.5 Depreciation and amortization 49.6 40.3Less: Management fee income — (0.1) Interest income (12.6) (11.8) Straight-line rent and other adjustments (8.6) (5.8)Consolidated NOI 122.1 104.0 Noncontrolling interest in consolidated NOI (38.9) (33.9)Less: Operating Partnership's interest in Fund NOI included above (6.3) (5.3)Add: Operating Partnership's share of unconsolidated joint ventures NOI 1 4.4 2.8NOI - Core Portfolio $81.3 $67.6Note:(1) Does not include the Operating Partnership's share of NOI from unconsolidated joint ventures within the FundsSame-Property NOI includes Core Portfolio properties that we owned for both the current and prior periods presented, but excludes those properties which weacquired, sold or expected to be sold, and redeveloped during these periods. The following table summarizes Same-Property NOI for our Core Portfolio for theyears ended December 31, 2014 and 2013:41SAME-PROPERTY NET OPERATING INCOME - CORE PORTFOLIO Year Ended December 31,(dollars in millions) 2014 2013Core Portfolio NOI - Continuing Operations $81.3 $67.6Less properties excluded from Same-Property NOI (19.0) (8.4)Same-Property NOI $62.3 $59.2 Percent change from 2013 5.2% Components of Same-Property NOI Same-Property Revenues $85.1 $81.0Same-Property Operating Expenses 22.8 21.8Same-Property NOI $62.3 $59.2The 5.2% increase in Same-Property NOI was primarily attributable to increased rents and occupancy gains during 2014.Rent Spreads on Core Portfolio New and Renewal LeasesThe following table summarizes rent spreads on both a cash basis and straight-line basis for new and renewal leases based on leases executed within our CorePortfolio for the year ended December 31, 2014. Cash basis represents a comparison of rent most recently paid on the previous lease as compared to the initialrent paid on the new lease. Straight-line basis represents a comparison of rents as adjusted for contractual escalations, abated rent and lease incentives for thesame comparable leases. Year Ended December 31, 2014Core Portfolio New and Renewal LeasesCash Basis Straight-Line BasisNumber of new and renewal leases executed45 45Gross leasable area324,132 324,132New base rent$26.03 $28.22Previous base rent$22.76 $21.93Percent growth in base rent14.4% 28.7%Average cost per square foot (1)$27.18 $27.18Weighted average lease term (years)6.1 6.1Note:(1) The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances.42RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS For the Years Ended December 31,(dollars in thousands) 2014 2013 2012 2011 2010Net income attributable to Common Shareholders $71,064 $40,115 $39,706 $51,555 $30,057Depreciation of real estate and amortization of leasing costs: (net of noncontrolling interests' share) 38,020 31,432 24,671 19,823 20,006Gain on disposition of properties (net of noncontrolling interests' share) (33,438) (6,378) (16,060) (31,716) —Income attributable to noncontrolling interests in operating partnership (1) 3,203 470 510 635 377Impairment of asset — 1,500 — 2,616 —Distributions - Preferred OP Units 33 22 18 18 18Funds from operations (2) $78,882 $67,161 $48,845 $42,931 $50,458Funds From Operations per Share - Diluted Weighted average number of Common Shares and OP Units 62,420 55,954 46,940 41,467 40,876Diluted Funds from operations, per share $1.26 $1.20 $1.04 $1.04 $1.23Notes: (1)Represents income attributable to Common OP Units (2)We consider funds from operations ("FFO") as defined by the National Association of Real Estate Investment Trusts ("NAREIT") and netproperty operating income ("NOI") to be an appropriate supplemental disclosure of operating performance for an equity REIT due to itswidespread acceptance and use within the REIT and analyst communities. FFO and NOI are presented to assist investors in analyzing ourperformance. They are helpful as they exclude various items included in net income that are not indicative of the operating performance,such as gains (losses) from sales of depreciated property, depreciation and amortization, and impairment of depreciable real estate. Inaddition, NOI excludes interest expense. Our method of calculating FFO and NOI 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 generallyaccepted accounting principles ("GAAP") and is not indicative of cash available to fund all cash needs, including distributions. It shouldnot be considered as an alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity.Consistent with the NAREIT definition, we define FFO as net income (computed in accordance with GAAP), excluding gains (losses) fromsales of depreciated property and impairment of depreciable real estate, plus depreciation and amortization, and after adjustments forunconsolidated partnerships and joint ventures.LIQUIDITY AND CAPITAL RESOURCESUses of LiquidityOur principal uses of liquidity are (i) distributions to our shareholders and OP unit holders, (ii) investments which include the funding of our capitalcommitted to the Funds and property acquisitions and redevelopment/re-tenanting activities within our Core Portfolio, (iii) distributions to our Fundinvestors and (iv) debt service and loan repayments.DistributionsIn order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. For theyear ended December 31, 2014, we paid dividends and distributions on our Common Shares and Common OP Units totaling $56.4 million, which werefunded from the Operating Partnership's share of operating cash flow.Distributions of $132.1 million were made to noncontrolling interests in Fund III during the year ended December 31, 2014. Of this, $95.0 million was fromproceeds following the disposition of property, $29.1 million resulted from financing proceeds and$8.0 million was made from operating cash flows.Distributions of $73.8 million were made to noncontrolling interests in Fund IV during the year ended December 31, 2014. Of this, $71.3 million was fromthe proceeds following the disposition of property and $2.5 million resulted from financing proceeds.43Distributions to other noncontrolling interests within Fund joint ventures totaled $9.3 million for the year ended December 31, 2014.InvestmentsFund I and Mervyns IFund I and Mervyns I have returned all invested capital and accumulated preferred return thus triggering our Promote in all future Fund I and Mervyns Iearnings and distributions. As of December 31, 2014, $86.6 million has been invested in Fund I and Mervyns I, of which the Operating Partnershipcontributed $19.2 million.As of December 31, 2014, Fund I currently owned, or had ownership interests in three remaining assets comprising approximately 0.1 million square feet.In addition, we, along with our Fund I investors, have invested in Mervyns as discussed in Note 4 to the Consolidated Financial Statements of this Form 10-K.Fund II and Mervyns IITo date, Fund II’s primary investment focus has been in investments involving significant redevelopment activities and the RCP Venture. As of December 31,2014, $300.0 million has been invested in Fund II and Mervyns II, of which the Operating Partnership contributed $60.0 million.During September of 2004, through Fund II, we launched our New York Urban/Infill Redevelopment Initiative. Fund II, together with an unaffiliated partner,formed Acadia Urban Development LLC ("Acadia Urban Development") for the purpose of acquiring, constructing, redeveloping, owning, operating, leasingand managing certain retail or mixed-use real estate properties in the New York City metropolitan area. The unaffiliated partner agreed to invest 10% ofrequired 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 UrbanDevelopment agreed to invest. Of the eight properties acquired by Acadia Urban Development, three have been sold. Of the remaining five assets, two arecurrently at, or near, stabilization, one is under contract for disposition, one is currently under construction and one is in the pre-construction phase aspreviously discussed in "-INVESTING ACTIVITIES- REDEVELOPMENT ACTIVITIES" in Item 1. of this Form 10-K. Redevelopment costs incurred during2014 by Acadia Urban Development in connection with the New York Urban/Infill Redevelopment Initiative totaled $84.7 million. Anticipated additionalcosts for the property currently under construction are currently estimated to range between ($14.2) and $15.8 million. These amounts are net of anticipatedcontributions from the proceeds of residential tower sales and the sale of air rights.RCP VentureSee Note 4 in the Notes to Consolidated Financial Statements, for a table summarizing the RCP Venture investments from inception through December 31,2014.Fund IIIDuring 2007, we formed Fund III with 14 institutional investors, including all of the investors from Fund I and a majority of the investors from Fund II with$502.5 million of committed discretionary capital. During 2012, the committed capital amount was reduced to $475.0 million. As of December 31, 2014,$381.6 million has been invested in Fund III, of which the Operating Partnership contributed $75.9 million. The remaining $93.4 million of unfunded capitalwill be used to fund current redevelopment projects.Fund III has invested in three redevelopment projects as previously discussed in "—INVESTING ACTIVITIES-REDEVELOPMENT ACTIVITIES" in Item 1.of this Form 10-K. Remaining anticipated costs for the three projects currently owned by Fund III that can be estimated aggregate between $74.2 million and$94.2 million.In addition to its three redevelopment projects noted above, Fund III also owns, or has ownership interests in, the following 10 assets comprisingapproximately 1.7 million square feet as follows:44(dollars in millions) PropertyLocationDate AcquiredPurchase PriceGLA3780-3858 Nostrand AvenueBrooklyn, NYFebruary 2013$18.540,300Arundel PlazaGlen Burnie, MDAugust 201217.6265,100Lincoln Park CentreChicago, ILApril 201231.561,700640 BroadwayNew York, NYFebruary 201232.539,600New Hyde ParkNew Hyde Park, NYDecember 201111.232,600654 BroadwayNew York, NYDecember 201113.718,700Parkway CrossingBaltimore, MDDecember 201121.6260,200The Heritage Shops at Millennium ParkChicago, ILApril 201131.681,700White City Shopping CenterShrewsbury, MADecember 201056.0256,700Cortlandt Towne CenterWestchester Co. NYJanuary 200978.0639,400Total $312.21,696,000Fund IVDuring 2012, we formed Fund IV with 17 principally institutional investors as well as some high-net worth individuals with $540.6 million of committeddiscretionary capital. As of December 31, 2014, $140.2 million has been invested in Fund IV, of which the Operating Partnership contributed $32.4 million.The remaining $400.4 million of unfunded capital will be used to fund future acquisitions and current redevelopment projects.Fund IV has invested in three redevelopment projects as previously discussed in "—INVESTING ACTIVITIES-REDEVELOPMENT ACTIVITIES" in Item 1.of this Form 10-K. Remaining costs for these projects are currently estimated to aggregate between $34.0 million and $48.0 million.In addition to its redevelopment projects, Fund IV also owns, or has ownership interests in, the following nine assets compromising0.9 million square feet as follows:(dollars in millions) PropertyLocationDate AcquiredPurchase PriceGLA17 East 71st StreetNew York, NYOctober 2014$28.09,330Eden SquareBear, DEJuly 201425.4235,5081151 Third AvenueNew York, NYOctober 201318.012,0402819 Kennedy BoulevardNorth Bergen, NJJune 20139.041,480Paramus PlazaParamus, NJSeptember 201318.9152,060Promenade at ManassasManassas, VAJuly 201338.0265,440Lake Montclair CenterDumfries, VAOctober 201319.3105,8501701 Belmont AvenueCatonsville, MDDecember 20124.758,670938 W. North AvenueChicago, ILNovember 201320.035,400Total $181.3915,778Development ActivitiesDuring the year ended December 31, 2014, costs associated with redevelopment and leasing activities totaled $144.0 million. Of this amount, $140.1 millionrepresented costs associated with redevelopment, primarily related to Fund II's City Point project, and re-tenant costs and $3.9 million represented directleasing costs.45Structured FinancingsAs of December 31, 2014, our structured financing portfolio, net of allowances aggregated $102.3 million, with related accrued interest of $9.8 million. Thenotes were collateralized by the underlying properties, the borrower’s ownership interest in the entities that own the properties and/or by the borrower’spersonal guarantee. Effective interest rates on our notes receivable ranged from 5.5% to 24.0% with maturities from January 2015 through May 2024.Investments made in our structured financing portfolio during 2014 are discussed in Note 5 in the Notes to Consolidated Financial Statements.Other InvestmentsAcquisitions made during 2014 are discussed in Note 2 in the Notes to Consolidated Financial Statements.Core Portfolio Property Redevelopment and Re-tenantingOur Core Portfolio redevelopment and re-anchoring programs focus on selecting well-located street retail locations and dense suburban shopping centers andcreating significant value through re-tenanting and property redevelopment. During 2013, we initiated the re-anchoring of a former A&P supermarketlocation at our Crossroads Shopping Center. The re-anchoring is substantially completed. Costs associated with this redevelopment were $8.8 million.Purchase of Convertible NotesPurchases of the Convertible Notes have been another use of our liquidity. As of December 31, 2014 $114.6 million of the $115.0 million of ConvertibleNotes originally issued during 2006 have been retired. In January 2015 we notified the remaining noteholders that we had exercised our right to redeem theirnotes, which is expected to be concluded no later than April 2015. See Note 9 in the Notes to Consolidated Financial Statements for further discussion of ourConvertible Notes.Share RepurchaseWe have an existing share repurchase program as further described in Item 5. of this Form 10-K. Management has not repurchased any shares under thisprogram since December 2001, although it has the authority to repurchase up to approximately $7.5 million of our outstanding Common Shares.SOURCES OF LIQUIDITYOur primary sources of capital for funding our liquidity needs include (i) the issuance of both public equity and OP Units, (ii) the issuance of both securedand unsecured debt, of which we had availability of $210.4 million as of December 31, 2014, (iii) unfunded capital commitments from noncontrollinginterests within our Funds III and IV of $74.8 million and $307.8 million, respectively, (iv) future sales of existing properties and (v) cash on hand of $217.6million as of December 31, 2014 and future cash flow from operating activities.Issuance of EquityDuring January 2012, we launched an at-the-market ("ATM") equity issuance program which provides us an efficient and low-cost vehicle for raising publicequity to fund our capital needs. Through this program, we have been able to effectively "match-fund" the required equity for our Core Portfolio and Fundacquisitions through the issuance of Common Shares over extended periods employing a price averaging strategy. In addition, from time to time, we haveissued and intend to continue to issue, equity in follow-on offerings separate from our ATM program. Net proceeds raised through our ATM program andfollow-on offerings are primarily used for acquisitions, both for our Core Portfolio and our pro-rata share of Fund acquisitions and for general corporatepurposes.Equity issuances for each of the years ended December 31, 2014, 2013 and 2012 are summarized as follows:46(shares and dollars in millions)201420132012 ATM Shares Issued4.73.06.1ATM Gross Proceeds$128.9$82.2$143.8ATM Net Proceeds$127.1$80.7$140.8 Follow-on Offering Shares Issued7.6—3.5Follow-on Offering Gross Proceeds$237.4$—$86.9Follow-on Offering Net Proceeds$230.7$—$85.9Fund CapitalDuring 2014, noncontrolling interest capital contributions to Fund III and IV of $19.3 million and $34.1 million, respectively, were primarily used to fundacquisitions and to pay down existing credit facilities.Asset SalesIn April 2014, we closed on the sale of Fund III's Sheepshead Bay property for $20.2 million, of which the Operating Partnership's share was $4.0 million.During June 2014, we completed the sale of air rights for market-rate rental housing at Fund II's City Point project ("Tower 2") for initial net proceeds of $12.4million of which the Operating Partnership's share was $2.4 million. An additional $13.7 million of the purchase price was deferred and is anticipated to becollected prior to December 2015. During July 2014, we completed the sale of undeveloped land in New Castle, Pennsylvania for $0.4 million. In August2014, we completed the sale of six unconsolidated properties within Fund III and Fund IV for $342.0 million, of which the Operating Partnership's share was$35.7 million. See Note 2 in the Notes to the Consolidated Financial Statements for additional information related to our asset dispositions. During January2015, we completed the sale of Fund III's Lincoln Park Centre for $64.0 million, of which the Operating Partnership's share was $12.7 million.Structured Financing RepaymentsSee Note 5 in the Notes to Consolidated Financial Statements, for an overview of our notes receivable and for payments received during the years endedDecember 31, 2014, 2013 and 2012.Financing and DebtAs of December 31, 2014, our outstanding mortgage, convertible notes and other notes payable aggregated $1,130.5 million, including an unamortizedpremium of $2.9 million, and were collateralized by 40 properties and related tenant leases. Interest rates on our outstanding indebtedness ranged from 1.00%to 6.65% with maturities that ranged from April 2015 to April 2023. Taking into consideration $223.8 million of notional principal under variable to fixed-rate swap agreements currently in effect, $801.4 million of the portfolio debt, or 71%, was fixed at a 4.85% weighted average interest rate and $326.2 million,or 29% was floating at a 2.05% weighted average interest rate as of December 31, 2014. There is $271.9 million of debt maturing in 2015 at a weightedaverage interest rate of 2.46%. Of this amount, $7.7 million represents scheduled annual amortization. The loans relating to $119.4 million of the 2015maturities provide for extension options, which we believe we will be able to exercise. As it relates to the remaining 2015 maturities, we may not havesufficient cash on hand to repay such indebtedness and, as such, we may have to refinance this indebtedness or select other alternatives based on marketconditions at that time.As of December 31, 2014, we had $210.4 million of additional capacity under existing revolving debt facilities. The following table sets forth certaininformation pertaining to our secured credit facilities:47(dollars in millions)Borrower Totalavailablecreditfacilities Amountborrowedas ofDecember 31,2013 Netborrowings(repayments)during the yearended December 31, 2014 Amountborrowedas ofDecember 31,2014 Lettersof creditoutstanding asof December 31, 2014 Amount availableundercreditfacilitiesas of December 31, 2014OperatingPartnership $150.0 $— $— $— $12.5 $137.5Fund IV 150.0 68.8 8.3 77.1 — 72.9Total $300.0 $68.8 $8.3 $77.1 $12.5 $210.4See Note 8 and Note 9 to our Consolidated Financial Statements, for a summary of our debt financing transactions during the year ended December 31, 2014.CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTSThe following table summarizes: (i) principal and interest obligations under mortgage and other notes, (ii) rents due under non-cancelable operating leases,which includes ground leases at eight of our properties and the lease for our corporate office and (iii) construction commitments as of December 31, 2014:(dollars in millions) Payments due by periodContractual obligations: Total Less than1 year 1 to 3years 3 to 5years More than5 yearsPrincipal obligations on debt $1,127.6 $271.9 $457.4 $154.2 $244.1Interest obligations on debt 139.9 46.4 53.1 29.2 11.2Operating lease obligations 35.0 2.8 8.1 4.7 19.4Construction commitments (1) 88.1 88.1 — — —Total $1,390.6 $409.2 $518.6 $188.1 $274.7Note: (1)In conjunction with the redevelopment of our Core Portfolio and Fund properties, we have entered into constructioncommitments with general contractors. We intend to fund these requirements with existing liquidity.OFF BALANCE SHEET ARRANGEMENTSWe have investments in the following joint ventures for the purpose of investing in operating properties. We account for these investments using the equitymethod of accounting. As such, our financial statements reflect our share of income and loss from, but not the individual assets and liabilities, of these jointventures.See Note 4 in the Notes to Consolidated Financial Statements, for a discussion of our unconsolidated investments. The Operating Partnership's pro-rata shareof unconsolidated debt related to those investments is as follows:48(dollars in millions) Investment Pro-rata share ofmortgage debt OperatingPartnership Interest rate at December31, 2014 Maturity dateArundel Plaza $1.6 5.60% April, 2015Parkway Crossing 2.3 2.37% January, 2016Promenade at Manassas 5.7 1.57% November, 20161701 Belmont Avenue 0.8 4.00% January, 20172819 Kennedy Boulevard 1.4 2.32% December, 2017Eden Square 3.6 2.17% December, 2017White City Shopping Center 9.5 2.32% February, 2021Crossroads 33.1 3.94% September, 2024840 N. Michigan 65.0 4.36% February, 2025Georgetown Portfolio 9.0 4.72% December, 2027Total $132.0 In addition to our derivative financial instruments, one of our unconsolidated affiliates is a party to two separate interest rate LIBOR swaps with a notionalvalue of $28.1 million, which effectively fix the interest rate at 5.54% and expire in December 2017. The Operating Partnership's pro-rata share of the fairvalue of such affiliates' derivative liabilities totaled $0.2 million at December 31, 2014.HISTORICAL CASH FLOWThe following table compares the historical cash flow for the year ended December 31, 2014 ("2014") with the cash flow for the year ended December 31,2013 ("2013"). Years Ended December 31,(dollars in millions) 2014 2013 VarianceNet cash provided by operating activities $82.5 $65.2 $17.3Net cash used in investing activities (268.5) (87.9) (180.6)Net cash provided by financing activities 324.4 10.0 314.4Total $138.4 $(12.7) $151.1A discussion of the significant changes in cash flow for 2014 versus 2013 is as follows:The increase of $17.3 million in net cash provided by operating activities was primarily attributable to the following:Items which contributed to an increase in cash from operating activities:•Additional cash of $17.2 million used to fund prepaid ground rent for Fund II's City Point project during 2013•Additional cash flow during 2014 from Core and Fund Property acquisitions and redevelopmentsItems which contributed to a decrease in cash from operating activities:•A reduction in cash flow from Core and Fund Property dispositions during 2014The increase of $180.6 million in net cash used in investing activities primarily resulted from the following:Items which contributed to an increase in cash used in investing activities:•A decrease of $173.3 million in proceeds from the sale of properties during 2014•An increase of $100.8 million in investments and advances to unconsolidated affiliates during 2014•A decrease of $34.5 million in return of capital from unconsolidated affiliates during 2014•An increase of $33.2 million used in redevelopment and improvement of properties during 2014 primarily attributable to the redevelopment of FundII's City Point project49•An increase of $30.3 million used for the acquisition of real estate during 2014•A decrease of $11.5 million in proceeds from notes receivable in 2014Items which contributed to a decrease in cash used in investing activities:•An increase of $190.4 million in proceeds from disposition of properties of unconsolidated affiliates during 2014, primarily attributable to theLincoln Road Portfolios•A decrease of $13.9 million related to advances of notes receivable during 2014The $314.4 million increase in net cash provided by financing activities resulted primarily from the following:Items which contributed to an increase in cash from financing activities:•An increase of $276.8 million of net proceeds from the issuance of Common Shares, net of issuance costs during 2014•An additional $161.8 million in mortgage debt proceeds, net of principal payments and funding of a restricted cash account during 2014•An increase of $8.6 million in capital contributions from noncontrolling interests during 2014•A decrease of $8.1 million used for deferred financing and other costs during 2014Items which contributed to a decrease in cash from financing activities:•An increase of $132.4 million in distributions to noncontrolling interests during 2014•An increase of $9.1 million in dividends paid to Common Shareholders during 2014CRITICAL ACCOUNTING POLICIESManagement’s discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial Statements, which havebeen prepared in accordance with U.S. GAAP. The preparation of these Consolidated Financial Statements requires management to make estimates andjudgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and assumptions thatare believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilitiesthat are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe thefollowing critical accounting policies affect the significant judgments and estimates used by us in the preparation of our Consolidated Financial Statements.Valuation of Property Held for Use and SaleOn a quarterly basis, we review the carrying value of both properties held for use and for sale. We perform an impairment analysis by calculating andreviewing net operating income on a property-by-property basis. We evaluate leasing projections and perform other analyses to conclude whether an asset isimpaired. We record impairment losses and reduce the carrying value of properties when indicators of impairment are present and the expected undiscountedcash flows related to those properties are less than their carrying amounts. In cases where we do not expect to recover our carrying costs on properties held foruse, 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. During the yearended December 31, 2013, we determined that the value of the Walnut Hill Plaza, a Core Portfolio property, was impaired as a result of a deterioration in thelocal economic environment. Accordingly, we recorded an impairment loss of $1.5 million. This property was collateral for $23.1 million of non-recoursemortgage debt which matured October 1, 2016. During 2014, this property was foreclosed upon during the lender. Additionally, during the year endedDecember 31, 2013, we entered into a firm contract to sell our Sheepshead Bay property owned by Fund III at an amount less than the carrying value.Accordingly, we recorded an impairment loss of $6.7 million to adjust the carrying value to the net realizable value from the sale, which was subsequentlycompleted during 2014. For the years ended December 31, 2014 and 2012, no impairment losses on our properties were recognized. Management does notbelieve that the value of any other properties in our portfolio was impaired as of December 31, 2014.Investments in and Advances to Unconsolidated Joint VenturesWe periodically review our investment in unconsolidated joint ventures for other than temporary declines in market value. Any decline that is not expectedto be recovered in the next twelve months is considered other than temporary and an impairment charge is recorded as a reduction in the carrying value of theinvestment. During the year ended December 31, 2012, we recorded a reduction in the carrying amount of our investments in Mervyn's of $2.0 million relatedto the estimated value of the remaining assets. No impairment charges related to our investment in unconsolidated joint ventures were recognized for theyears ended50December 31, 2014 and 2013. Management does not believe that the value of any other investments in unconsolidated joint ventures was impaired as ofDecember 31, 2014.Bad DebtsWe maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make payments on arrearages in billed rents, aswell as the likelihood that tenants will not have the ability to make payments on unbilled rents including estimated expense recoveries. We also maintain areserve for straight-line rent receivables. For the years ended December 31, 2014 and 2013, the allowance for doubtful accounts totaled $6.0 million and $6.0million, respectively. If the financial condition of our tenants were to deteriorate, resulting in an impairment of their ability to make payments, additionalallowances may be required.Real EstateReal estate assets are stated at cost less accumulated depreciation. Expenditures for acquisition, redevelopment, construction and improvement of properties,as well as significant renovations are capitalized. Interest costs are capitalized until construction is substantially complete. Construction in progress includescosts for significant property expansion and redevelopment. Depreciation is computed on the straight-line basis over estimated useful lives of 30 to 40 yearsfor buildings, the shorter of the useful life or lease term for tenant improvements and five years for furniture, fixtures and equipment. Expenditures formaintenance 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 improvements, and identified intangibles such asabove and below market leases and acquired in-place leases and customer relationships) and acquired liabilities in accordance with the FASB AccountingStandards Codification ("ASC") Topic 805 "Business Combinations" and ASC Topic 350 "Intangibles – Goodwill and Other," and allocate purchase pricebased on these assessments. We assess fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates andavailable market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, andmarket/economic conditions that may affect the property.Involuntary Conversion of AssetWe experienced significant flooding resulting in extensive damage to one of our properties during September 2011. Costs related to the clean-up andredevelopment were insured to a limit sufficient that we believed would allow for full restoration of the property. Loss of rents during the redevelopment werecovered by business interruption insurance subject to a $0.1 million deductible. Subsequent to the flood, we planned to restore the improvements that weredamaged by the flooding and expected that the costs of such restoration and rebuilding would be recoverable from insurance proceeds. In accordance withASC Topic 360 "Property, Plant and Equipment" and as a result of the above-described property damage, we provided a $0.1 million provision in the 2011consolidated statement of income for its exposure to the insurance deductible attributable to the loss of rents. During the year ended, December 31, 2011, wereceived initial insurance proceeds of approximately $6.9 million. During the year ended December 31, 2012, we received additional insurance proceeds ofapproximately $3.7 million. In connection with these proceeds, we recognized a gain on involuntary conversion of asset of $2.4 million during 2012.Revenue Recognition and Accounts ReceivableLeases 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 bythe tenant. Percentage rent is recognized in the period when the tenants’ sales breakpoint is met. In addition, leases typically provide for the reimbursement tous of real estate taxes, insurance and other property operating expenses. These reimbursements are recognized as revenue in the period the expenses areincurred.We make estimates of the uncollectability of our accounts receivable related to tenant revenues. An allowance for doubtful accounts has been providedagainst certain tenant accounts receivable that are estimated to be uncollectible. See "Bad Debts" above. Once the amount is ultimately deemed to beuncollectible, it is written off.51Structured FinancingsReal estate notes receivable investments and preferred equity investments ("Structured Financings") are intended to be held to maturity and are carried atcost. Interest income from Structured Financings are recognized on the effective interest method over the expected life of the loan. Under the effective interestmethod, interest or fees to be collected at the origination of the Structured Financing investment is recognized over the term of the loan as an adjustment toyield.Allowances for Structured Financing investments are established based upon management’s quarterly review of the investments. In performing this review,management considers the estimated net recoverable value of the investment as well as other factors, including the fair value of any collateral, the amountand status of any senior debt, and the prospects for the borrower. Because this determination is based upon projections of future economic events, which areinherently subjective, the amounts ultimately realized from the Structured Financings may differ materially from the carrying value at the balance sheet date.Interest income recognition is generally suspended for investments when, in the opinion of management, a full recovery of income and principal becomesdoubtful. Income recognition is resumed when the suspended investment becomes contractually current and performance is demonstrated to be resumed.During 2012, we provided for a $0.4 million net reserve on Structured Financings as a result of a decrease in the value of the underlying collateral properties.During January 2014, we received a $1.5 million payment on this investment, which had a net carrying value of $0.8 million as of December 31, 2013.Accordingly, we recognized $0.7 million of income related to this repayment.During 2013, we recognized income of $2.5 million relating to the repayment of a note receivable that had previously been written off.During 2014, we recognized income of $2.0 million relating to the repayment in full of a note receivable for which we had previously established a reserve.INFLATIONOur long-term leases contain provisions designed to mitigate the adverse impact of inflation on our net income. Such provisions include clauses enabling usto receive percentage rents based on tenants’ gross sales, which generally increase as prices rise, and/or, in certain cases, escalation clauses, which generallyincrease rental rates during the terms of the leases. Such escalation clauses are often related to increases in the consumer price index or similar inflationindexes. In addition, many of our leases are for terms of less than ten years, which permits us to seek to increase rents upon re-rental at market rates if currentrents are below the then existing market rates. Most of our leases require the tenants to pay their share of operating expenses, including common areamaintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTSReference is made to the Notes to Consolidated Financial Statements.ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.Information as of December 31, 2014Our primary market risk exposure is to changes in interest rates related to our mortgage and other debt. See Note 8 in the Notes to Consolidated FinancialStatements, for certain quantitative details related to our mortgage and other debt.Currently, we manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap agreements. As ofDecember 31, 2014, we had total mortgage, convertible and other notes payable of $1,127.6 million, excluding the unamortized premium of $2.9 million, ofwhich $801.4 million, or 71% was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $326.2 million, or29%, was variable-rate based upon LIBOR or Prime rates plus certain spreads. As of December 31, 2014, we were a party to 14 interest rate swap transactionsand four interest rate cap transactions to hedge our exposure to changes in interest rates with respect to $223.8 million and $139.6 million of LIBOR-basedvariable-rate debt, respectively. We were also a party to two forward-starting interest rate swaps with respect to $50.0 million of LIBOR-based variable-ratedebt.52The following table sets forth information as of December 31, 2014 concerning our long-term debt obligations, including principal cash flows by scheduledmaturity and weighted average interest rates of maturing amounts (dollars in millions):Consolidated mortgage and other debt:Year Scheduledamortization Maturities Total Weighted averageinterest rate2015 $7.7 $264.2 $271.9 2.5%2016 4.9 321.9 326.8 5.1%2017 3.6 127.1 130.7 4.4%2018 2.2 69.6 71.8 2.2%2019 1.2 81.2 82.4 1.6%Thereafter 4.5 239.5 244.0 4.3% $24.1 $1,103.5 $1,127.6 Mortgage debt in unconsolidated partnerships (at our pro-rata share):Year Scheduledamortization Maturities Total Weighted averageinterest rate2015 $0.3 $3.9 $4.2 3.7%2016 0.3 5.6 5.9 1.6%2017 0.4 5.6 6.0 2.5%2018 0.9 — 0.9 —%2019 0.9 — 0.9 —%Thereafter 5.3 108.8 114.1 4.1% $8.1 $123.9 $132.0 $271.9 million of our total consolidated debt and $4.2 million of our pro-rata share of unconsolidated outstanding debt will become due in 2015. $326.8million of our total consolidated debt and $5.9 million of our pro-rata share of unconsolidated debt will become due in 2016. As we intend on refinancingsome or all of such debt at the then-existing market interest rates, which may be greater than the current interest rate, our interest expense would increase byapproximately $6.0 million annually if the interest rate on the refinanced debt increased by 100 basis points. After giving effect to noncontrolling interests,our share of this increase would be $2.3 million. Interest expense on our variable-rate debt of $326.2 million, net of variable to fixed-rate swap agreementscurrently in effect, as of December 31, 2014 would increase $3.3 million if LIBOR increased by 100 basis points. After giving effect to noncontrollinginterests, our share of this increase would be $0.5 million. We may seek additional variable-rate financing if and when pricing and other commercial andfinancial terms warrant. As such, we would consider hedging against the interest rate risk related to such additional variable-rate debt through interest rateswaps and protection agreements, or other means.Based on our outstanding debt balances as of December 31, 2014, the fair value of our total consolidated outstanding debt would decrease by approximately$13.7 million if interest rates increase by 1%. Conversely, if interest rates decrease by 1%, the fair value of our total outstanding debt would increase byapproximately $12.6 million.As of December 31, 2014 and 2013, we had notes receivable of $102.3 million and $126.7 million, respectively. We determined the estimated fair value ofour notes receivable equated the carrying values by discounting future cash receipts utilizing a discount rate equivalent to the rate at which similar notesreceivable would be originated under conditions then existing.Based on our outstanding notes receivable balances as of December 31, 2014, the fair value of our total outstanding notes receivable would decrease byapproximately $2.2 million if interest rates increase by 1%. Conversely, if interest rates decrease by 1%, the fair value of our total outstanding notesreceivable would increase by approximately $2.3 million.Summarized Information as of December 31, 2013As of December 31, 2013, we had total mortgage and convertible notes payable of $1,038.1 million, excluding the unamortized premium of $1.9 million, ofwhich $814.1 million, or 78% was fixed-rate, inclusive of interest rate swaps, and $224.0 million, or 22%, was variable-rate based upon LIBOR plus certainspreads. As of December 31, 2013, we were a party to 11 interest rate swap transactions and four interest rate cap transactions to hedge our exposure tochanges in interest rates with respect to $179.7 million and $140.7 million of LIBOR-based variable-rate debt, respectively.53Interest expense on our variable debt of $224.0 million as of December 31, 2013 would have increased $2.2 million if LIBOR increased by 100 basis points.Based on our outstanding debt balances as of December 31, 2013, the fair value of our total outstanding debt would have decreased by approximately $18.5million if interest rates increased by 1%. Conversely, if interest rates decreased by 1%, the fair value of our total outstanding debt would have increased byapproximately $7.2 million.Changes in Market Risk Exposures from 2013 to 2014Our interest rate risk exposure from December 31, 2013 to December 31, 2014 has increased on an absolute basis, as the $224.0 million of variable-rate debtas of December 31, 2013 has increased to $326.2 million as of December 31, 2014. As a percentage of our overall debt, our interest rate risk exposure hasincreased as our variable-rate debt accounted for 22% of our consolidated debt as of December 31, 2013 and was increased to 29% as of December 31, 2014.ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.The financial statements beginning on page F-1 of this Form 10-K are incorporated herein by reference.ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.None.ITEM 9A. CONTROLS AND PROCEDURES.(i) Disclosure Controls and ProceduresWe conducted an evaluation, under the supervision and with the participation of management including our Chief Executive Officer and Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officerconcluded that our disclosure controls and procedures were effective as of December 31, 2014 to provide reasonable assurance that information required to bedisclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified inSEC rules and forms, and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, asappropriate to allow timely decisions regarding required disclosure.(ii) Internal Control Over Financial Reporting(a) Management’s Annual Report on Internal Control Over Financial ReportingManagement of Acadia Realty Trust is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is definedin the Securities Exchange Act of 1934 Rule 13(a)-15(f). Under the supervision and with the participation of our management, including our principalexecutive officer and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting as ofDecember 31, 2014 as required by the Securities Exchange Act of 1934 Rule 13(a)-15(c). In making this assessment, we used the criteria set forth in theframework in Internal Control–Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission(the "COSO criteria"). Based on our evaluation under the COSO criteria, our management concluded that our internal control over financial reporting waseffective as of December 31, 2014 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statementsfor external reporting purposes in accordance with U.S. generally accepted accounting principles.BDO USA, LLP, an independent registered public accounting firm that audited our Financial Statements included in this Annual Report, has issued anattestation report on our internal control over financial reporting as of December 31, 2014, which appears in paragraph (b) of this Item 9A.Acadia Realty TrustWhite Plains, New YorkFebruary 20, 201554(b) Attestation report of the independent registered public accounting firmThe Shareholders and Trustees ofAcadia Realty TrustWhite Plains, New YorkWe have audited Acadia Realty Trust’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control -Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Acadia Realty Trust’smanagement is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal controlover financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting. Our responsibility is toexpress an opinion on the company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, andtesting and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such otherprocedures 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 reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely 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 ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.In our opinion, Acadia Realty Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based onthe COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheetsof Acadia Realty Trust as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, shareholders’ equity,and cash flows for each of the three years in the period ended December 31, 2014 and our report dated February 20, 2015, expressed an unqualified opinionthereon./s/ BDO USA, LLPNew York, New YorkFebruary 20, 201555(c) Changes in internal control over financial reportingThere was no change in our internal control over financial reporting during our fourth fiscal quarter ended December 31, 2014 that has materially affected, oris reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B. OTHER INFORMATION.None56PART IIIIn accordance with the rules of the SEC, certain information required by Part III is omitted and is incorporated by reference into this Form 10-K from ourdefinitive proxy statement relating to our 2015 annual meeting of stockholders (our "2015 Proxy Statement") that we intend to file with the SEC no later thanApril 16, 2015.ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.The information under the following headings in the 2015 Proxy Statement is incorporated herein by reference:•"PROPOSAL 1 — ELECTION OF TRUSTEES"•"MANAGEMENT"•"SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE"ITEM 11. EXECUTIVE COMPENSATION.The information under the following headings in the 2015 Proxy Statement is incorporated herein by reference:•"ACADIA REALTY TRUST COMPENSATION COMMITTEE REPORT"•"COMPENSATION DISCUSSION AND ANALYSIS"•"EXECUTIVE AND TRUSTEE COMPENSATION"•"COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION"ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.The information under the heading "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" in the 2015 Proxy Statement isincorporated herein by reference.The information under Item 5. of this Form 10-K under the heading "(c) Securities authorized for issuance under equity compensation plans" is incorporatedherein by reference.ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.The information under the following headings in the 2015 Proxy Statement is incorporated herein by reference:•"CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS"•"PROPOSAL 1 — ELECTION OF TRUSTEES—Trustee Independence"ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.The information under the heading "AUDIT COMMITTEE INFORMATION" in the 2015 Proxy Statement is incorporated herein by reference.PART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.1. Financial Statements: See "Index to Financial Statements" at page F-1 below.2. Financial Statement Schedule: See "Schedule III—Real Estate and Accumulated Depreciation" at page F-48 below.3. Exhibits: The index of exhibits below is incorporated herein by reference.57SIGNATURESPursuant 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 itsbehalf by the undersigned, thereto duly authorized. ACADIA REALTY TRUST (Registrant) By:/s/ Kenneth F. Bernstein Kenneth F. Bernstein Chief Executive Officer, President and Trustee By:/s/ Jonathan W. Grisham Jonathan W. Grisham Senior Vice President and Chief Financial Officer By:/s/ Richard Hartmann Richard Hartmann Senior Vice President and Chief Accounting OfficerDated: February 20, 2015Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrantand in the capacities and on the dates indicated. Signature Title Date /s/ Kenneth F. Bernstein(Kenneth F. Bernstein) Chief Executive Officer,President and Trustee(Principal Executive Officer) February 20, 2015 /s/ Jonathan W. Grisham(Jonathan W. Grisham) Senior Vice Presidentand Chief Financial Officer(Principal Financial Officer) February 20, 2015 /s/ Richard Hartmann(Richard Hartmann) Senior Vice Presidentand Chief Accounting Officer(Principal Accounting Officer) February 20, 2015 /s/ Douglas Crocker II(Douglas Crocker II) Trustee February 20, 2015 /s/ Lorrence T. Kellar(Lorrence T. Kellar) Trustee February 20, 2015 /s/ Wendy Luscombe(Wendy Luscombe) Trustee February 20, 2015 /s/ William T. Spitz(William T. Spitz) Trustee February 20, 2015 /s/ Lee S. Wielansky(Lee S. Wielansky) Trustee February 20, 201558EXHIBIT INDEXThe following is an index to all exhibits including (i) those filed with this Annual Report on Form 10-K and (ii) those incorporated by reference herein:Exhibit No.Description3.1Declaration of Trust of the Company (incorporated by reference to the copy thereof filed as Exhibit 3.1 to the Company's Annual Report onForm 10-K filed for the year ended December 31, 2012.) 3.2First Amendment to Declaration of Trust of the Company (incorporated by reference to the copy thereof filed as Exhibit 3.2 to the Company'sAnnual Report on Form 10-K filed for the year ended December 31, 2012.) 3.3Second Amendment to Declaration of Trust of the Company (incorporated by reference to the copy thereof filed as Exhibit 3.3 to theCompany's Annual Report on Form 10-K filed for the year ended December 31, 2012.) 3.4Third Amendment to Declaration of Trust of the Company (incorporated by reference to the copy thereof filed as Exhibit 3.4 to the Company'sAnnual Report on Form 10-K filed for the year ended December 31, 2012.) 3.5Fourth Amendment to Declaration of Trust (incorporated by reference to the copy thereof filed as Exhibit 3.1 (a) to the Company's QuarterlyReport on Form 10-Q filed for the quarter ended September 30, 1998.) 3.6Fifth Amendment to Declaration of Trust (incorporated by reference to the copy thereof filed as Exhibit 3.4 to the Company's Quarterly Reporton Form 10-Q filed for the quarter ended March 31, 2009.) 3.7Amended and Restated Bylaws of the Company (incorporated by reference to the copy thereof filed as Exhibit 3.1 to the Company's CurrentReport on Form 8-K filed on November 18, 2013.) 3.8Amendment No. 1 to Amended and Restated Bylaws of the Company (incorporated by reference to the copy thereof filed as Exhibit 3.1 to theCompany's Current Report on Form 8-K filed on April 1, 2014.) 4.1Voting Trust Agreement between the Company and Yale University dated February 27, 2002 (incorporated by reference to the copy thereoffiled as Exhibit 99.1 to Yale University's Schedule 13D filed on September 25, 2002.) 10.1Amended and Restated Acadia Realty Trust 2006 Share Incentive Plan (incorporated by reference to the copy thereof filed as Appendix A tothe Company's Definitive Proxy Statement on Schedule 14A filed on April 5, 2012.) (2) 10.2Certain information regarding the compensation arrangements with certain officers of registrant (incorporated by reference to the copy thereoffiled as to Item 5.02 of the registrant's Form 8-K filed with the SEC on February 4, 2008.) 10.3Description of Long Term Investment Alignment Program (incorporated by reference to the copy thereof filed as Exhibit 10.13 to theCompany's Quarterly Report on Form 10-Q filed for the quarter ended March 31, 2009.) 10.4Form of Share Award Agreement (incorporated by reference to the copy thereof filed as Exhibit 99.1 to the Company's Current Report on FormS-8 filed on July 2, 2003.) (2) 10.5Registration Rights and Lock-Up Agreement (RD Capital Transaction) (incorporated by reference to the copy thereof filed as Exhibit 99.1 (a)to the Company's Registration Statement on Form S-3 filed on March 3, 2000.) 10.6Registration Rights and Lock-Up Agreement (Pacesetter Transaction) (incorporated by reference to the copy thereof filed as Exhibit 99.1 (b) tothe Company's Registration Statement on Form S-3 filed on March 3, 2000.) 10.7Form of Registration Rights Agreement and Lock-Up Agreement (incorporated by reference to the copy thereof filed as Exhibit 10.4 to theCompany's Annual Report on Form 10-K filed for the fiscal year ended December 31, 2003.) 5910.8Contribution and Share Purchase Agreement dated as of April 15, 1998 among Mark Centers Trust, Mark Centers Limited Partnership, theContributing Owners and Contributing Entities named therein, RD Properties, L.P. VI, RD Properties, L.P. VIA and RD Properties, L.P. VIB(incorporated by reference to the copy thereof filed as Exhibit 10.1 to the Company's Form 8-K filed on April 20, 1998.) 10.9Agreement of Contribution among Acadia Realty Limited Partnership, Acadia Realty Trust and Klaff Realty, LP and Klaff Realty, Limited(incorporated by reference to the copy thereof filed as Exhibit 10.8 to the Company's Annual Report on Form 10-K filed for the fiscal yearended December 31, 2003.) 10.10Amended and Restated Employment agreement between the Company and Kenneth F. Bernstein (incorporated by reference to the copythereof filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 1, 2014.) (2) 10.15Form of Amended and Restated Severance Agreement, dated June 12, 2008, that was entered into with each of Joel Braun, Executive VicePresident and Chief Investment Officer; Michael Nelsen, Senior Vice President and Chief Financial Officer; Robert Masters, Senior VicePresident, General Counsel, Chief Compliance Officer and Secretary; and Joseph Hogan, Senior Vice President and Director of Construction(incorporated by reference to the copy thereof filed as Exhibit 10.1 to the Company's Form 8-K filed on June 12, 2008.) (2) 10.16First 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 President, General Counsel, Chief ComplianceOfficer and Secretary and Joseph Hogan, Senior Vice President and Director of Construction dated January 19, 2007 (incorporated by referenceto the copy thereof filed as Exhibits 10.2, 10.3, 10.4 and 10.5 to the Company's Current Report on Form 8-K filed on January 24, 2007.) (2) 10.17Amended and Restated Severance Agreement, dated April 19, 2011, that was entered into with Christopher Conlon, Senior Vice President,Leasing and Development (incorporated by reference to the copy thereof filed as Exhibit 10.43 to the Company's Quarterly Report on Form10-Q filed for the quarter ended March 31, 2011.) (2) 10.18Amended and Restated Loan Agreement among Acadia Cortlandt LLC and Bank of America, N.A., Note between Acadia Cortlandt LLC andBank of America, N.A., Note Consolidation and Modification Agreement between Acadia Cortlandt LLC and Bank of America, N.A., Notebetween Acadia Cortlandt LLC and Bank of America, N.A., Mortgage Consolidation and Modification Agreement between Acadia CortlandtLLC and Bank of America, N.A., Mortgage Security Agreement between Acadia Cortlandt LLC and Bank of America, N.A. and Amended andRestated Guaranty Agreement between Acadia Cortlandt LLC and Bank of America, N.A., all dated October 26, 2010 (incorporated byreference to the copy thereof filed as Exhibit 10.36 to the Company's Annual Report on Form 10-K filed for the year ended December 31,2010.) 10.19Revolving Credit Agreement Dated as of November 21, 2012 by and among Acadia Strategic Opportunity Fund IV LLC as Borrower, AcadiaRealty Acquisition IV LLC as Borrowers Managing Member, Acadia Realty Limited Partnership as Guarantor, Acadia Realty Trust asGuarantor General Partner, Acadia Investors IV Inc. as Pledgor and Bank of America, N.A. as Administrative Agent, Structuring Agent, SoleBookrunner, Sole Lead Arranger, Letter of Credit Issuer, and Lender (incorporated by reference to the copy thereof filed as Exhibit 10.23 to theCompany's Annual Report on Form 10-K filed for the year ended December 31, 2012.) 10.20Credit Agreement, dated as of January 31, 2013, among Acadia Realty Limited Partnership, as the Borrower, and Acadia Realty Trust andCertain Subsidiaries of Acadia Realty Limited Partnership from time to time party thereto, as Guarantors, Bank of America, N.A., asAdministrative Agent, Swing Line Lender, L/C Issuer, and as a Lender, PNC Bank, National Association and Wells Fargo Bank, NationalAssociation, as Co-Documentation Agents, Merrill Lynch, Pierce, Fenner & Smith Incorporated, as a Joint Lead Arranger and Sole Bookrunnerand PNC Bank, National Association and Wells Fargo Securities, LLC, as Joint Lead Arrangers. (incorporated by reference to the copy thereoffiled as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 5, 2013.) 10.21Agreement 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 BHLLC, Samuel Ginsburg 2000 Trust Agreement #1, Martin Ginsburg 2000 Trust Agreement #1, Martin Ginsburg, Samuel Ginsburg and AdamGinsburg, and GDC SMG, LLC, GDC Beechwood, LLC, Aspen Cove Apartments, LLC and SMG Celebration, LLC (incorporated by referenceto the copy thereof filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on January 4, 2006.) 6010.22Agreement of Purchase and Sale between Acadia Pelham Manor LLC, Acadia East Fordham Acquisitions LLC, Fordham Place Office LLC, asSellers and RPAI Acquisitions, Inc., as Purchaser. (incorporated by reference to the copy thereof filed as Exhibit 99.2 to the Company's CurrentReport on Form 8-K filed on November 6, 2013.) 10.23Amended and Restated Agreement of Limited Partnership of the Operating Partnership (incorporated by reference to the copy thereof filed asExhibit 10.1 (c) to the Company's Registration Statement on Form S-3 filed on March 3, 2000.) 10.24First and Second Amendments to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (incorporated byreference to the copy thereof filed as Exhibit 10.1 (d) to the Company's Registration Statement on Form S-3 filed on March 3, 2000.) 10.24Third Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (incorporated by reference to thecopy thereof filed as Exhibit 99.3 to the Company's Annual Report on Form 10-K filed for the fiscal year ended December 31, 2003.) 10.25Fourth Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (incorporated by reference to thecopy thereof filed as Exhibit 99.4 to the Company's Annual Report on Form 10-K filed for the fiscal year ended December 31, 2003.) 21List of Subsidiaries of Acadia Realty Trust (1) 23.1Consent of Registered Public Accounting Firm to incorporation by reference its reports into Forms S-3 and Forms S-8 (1) 31.1Certification of Chief Executive Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 (1) 31.2Certification of Chief Financial Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant toSection 302 of the Sarbanes-Oxley Act of 2002 (1) 32.1Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002 (1) 32.2Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of2002 (1) 99.1Certificate of Designation of Series A Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty LimitedPartnership (incorporated by reference to the copy thereof filed as Exhibit 99.5 to Company's Quarterly Report on Form 10-Q filed for thequarter ended June 30, 1997.) 99.2Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty LimitedPartnership (incorporated by reference to the copy thereof filed as Exhibit 99.6 to the Company's Annual Report on Form 10-K filed for thefiscal year ended December 31, 2003.) 101.INSXBRL Instance Document* (1)101.SCHXBRL Taxonomy Extension Schema Document* (1)101.CALXBRL Taxonomy Extension Calculation Document* (1)101.DEFXBRL Taxonomy Extension Definitions Document* (1)101.LABXBRL Taxonomy Extension Labels Document* (1)101.PREXBRL Taxonomy Extension Presentation Document* (1)*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes ofSections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, andotherwise is not subject to liability under these sections. 61Notes: (1)Filed herewith. (2)Management contract or compensatory plan or arrangement.62ACADIA REALTY TRUST AND SUBSIDIARIESINDEX TO FINANCIAL STATEMENTSReport of Independent Registered Public Accounting Firm F-2Consolidated Balance Sheets as of December 31, 2014 and 2013 F-3Consolidated Statements of Income for the years ended December 31, 2014, 2013 and 2012 F-4Consolidated Statements of Comprehensive Income for the years ended December 31, 2014, 2013 and 2012 F-5Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2014, 2013 and 2012 F-6Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012 F-9Notes to Consolidated Financial Statements F-11Schedule III – Real Estate and Accumulated Depreciation F-48 F-1Report of Independent Registered Public Accounting FirmThe Shareholders and Trustees ofAcadia Realty TrustWhite Plains, New YorkWe have audited the accompanying consolidated balance sheets of Acadia Realty Trust and its subsidiaries as of December 31, 2014 and 2013 and therelated consolidated statements of income and comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period endedDecember 31, 2014. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule listed inthe accompanying index. These consolidated financial statements and schedule are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these consolidated financial statements and the 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 thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An auditincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that ouraudits 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 atDecember 31, 2014 and 2013, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, inconformity with accounting principles generally accepted in the United States of America.Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presentsfairly, 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's internalcontrol over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 26, 2014 expressed an unqualified opinionthereon./s/ BDO USA, LLPNew York, New YorkFebruary 20, 2015F-2ACADIA REALTY TRUST AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS December 31,(dollars in thousands) 2014 2013ASSETS Operating real estate Land $424,661 $336,251Buildings and improvements 1,329,080 1,140,613Construction in progress 7,464 4,836 1,761,205 1,481,700Less: accumulated depreciation 256,015 229,538Net operating real estate 1,505,190 1,252,162Real estate under development 447,390 337,353Notes receivable and preferred equity investments, net 102,286 126,656Investments in and advances to unconsolidated affiliates 184,352 181,322Cash and cash equivalents 217,580 79,189Cash in escrow 20,358 19,822Restricted cash 30,604 109,795Rents receivable, net 36,962 29,574Deferred charges, net 30,679 30,775Acquired lease intangibles, net 44,618 33,663Prepaid expenses and other assets 56,508 44,212Assets of discontinued operations and properties held for sale 56,073 20,434Total assets $2,732,600 $2,264,957 LIABILITIES Mortgage and other notes payable $1,130,481 $1,039,997Distributions in excess of income from, and investments in, unconsolidated affiliates 12,564 8,701Accounts payable and accrued expenses 34,026 38,050Dividends and distributions payable 39,339 13,455Acquired lease intangibles, net 29,585 22,394Other liabilities 25,148 18,265Liabilities of discontinued operations and properties held for sale 25,500 2,507Total liabilities 1,296,643 1,143,369EQUITY Shareholders' Equity Common shares, $.001 par value, authorized 100,000,000 shares, issued and outstanding 68,109,287 and55,643,068 shares, respectively 68 56Additional paid-in capital 1,027,861 665,301Accumulated other comprehensive (loss) income (4,005) 1,132Retained earnings 31,617 37,747Total shareholders’ equity 1,055,541 704,236Noncontrolling interests 380,416 417,352Total equity 1,435,957 1,121,588Total liabilities and equity $2,732,600 $2,264,957The accompanying notes are an integral part of these consolidated financial statementsF-3ACADIA REALTY TRUST AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME Years ended December 31,(dollars in thousands except per share amounts) 2014 2013 2012Revenues Rental income $145,103 $122,730 $84,002Interest income 12,607 11,800 8,027Expense reimbursements 32,642 28,373 20,433Other 4,660 5,383 2,525Total revenues 195,012 168,286 114,987Operating Expenses Property operating 24,833 21,026 17,430Other operating 3,776 4,605 3,899Real estate taxes 23,062 20,922 16,387General and administrative 27,433 25,555 21,223Reserve for notes receivable — — 405Depreciation and amortization 49,645 40,299 27,888Total operating expenses 128,749 112,407 87,232Operating income 66,263 55,879 27,755Equity in earnings of unconsolidated affiliates 8,723 12,382 550Gain on disposition of properties of unconsolidated affiliates 102,855 — 3,061Impairment of unconsolidated affiliates — — (2,032)Impairment of asset — (1,500) —Loss on debt extinguishment (335) (765) (198)Gain on involuntary conversion of asset — — 2,368Interest and other finance expense (39,091) (39,474) (22,811)Gain on disposition of properties 13,138— —Income from continuing operations before income taxes 151,553 26,522 8,693Income tax (provision) benefit (629) (19) 574Income from continuing operations 150,924 26,503 9,267Discontinued operations Operating income from discontinued operations — 6,818 12,007Impairment of asset — (6,683) —Loss on debt extinguishment — (800) (2,541)Gain on disposition of properties 1,222 18,802 71,203Income from discontinued operations 1,222 18,137 80,669Net income 152,146 44,640 89,936Noncontrolling interests Continuing operations (80,059) 7,523 14,352Discontinued operations (1,023) (12,048) (64,582)Net income attributable to noncontrolling interests (81,082) (4,525) (50,230)Net income attributable to Common Shareholders $71,064 $40,115 $39,706Basic earnings per share Income from continuing operations $1.18 $0.61 $0.51Income from discontinued operations — 0.11 0.34Basic earnings per share $1.18 $0.72 $0.85Diluted earnings per share Income from continuing operations $1.18 $0.61 $0.51Income from discontinued operations — 0.11 0.34Diluted earnings per share $1.18 $0.72 $0.85The accompanying notes are an integral part of these consolidated financial statementsF-4ACADIA REALTY TRUST AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years ended December 31, 2014 2013 2012(dollars in thousands) Net income $152,146 $44,640 $89,936Other Comprehensive (loss) income: Unrealized (loss) gain on valuation of swap agreements (9,061) 3,610 (3,519)Reclassification of realized interest on swap agreements 3,776 2,892 2,268Other comprehensive (loss) income (5,285) 6,502 (1,251)Comprehensive income 146,861 51,142 88,685Comprehensive income attributable to noncontrolling interests (80,934) (5,588) (49,373)Comprehensive income attributable to Common Shareholders $65,927 $45,554 $39,312The accompanying notes are an integral part of these consolidated financial statements.F-5ACADIA REALTY TRUST AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY(amounts in thousands, except pershare amounts)CommonShares ShareAmount AdditionalPaid-inCapital AccumulatedOtherComprehensive(Loss) Income RetainedEarnings TotalCommonShareholders’Equity NoncontrollingInterests TotalEquityBalance at January 1, 201242,586 $43 $348,667 $(3,913) $39,317 $384,114 $385,195 $769,309Conversion of OP Units toCommon Shares by limitedpartners of the OperatingPartnership334 — 5,880 — — 5,880 (5,880) —Issuance of Common Shares, netof issuance costs9,510 9 226,712 — — 226,721 — 226,721Dividends declared ($0.72 perCommon Share)— — — — (33,896) (33,896) (1,098) (34,994)Issuance of OP Units to acquirereal estate— — — — — — 2,279 2,279Employee and trustee stockcompensation, net52 — 666 — — 666 6,025 6,691Noncontrolling interestdistributions— — — — — — (160,663) (160,663)Noncontrolling interestcontributions— — — — — — 172,228 172,228 52,482 52 581,925 (3,913) 5,421 583,485 398,086 981,571Comprehensive income (loss): Net income— — — — 39,706 39,706 50,230 89,936Unrealized loss on valuation ofswap agreements— — — (1,815) — (1,815) (1,704) (3,519)Reclassification of realizedinterest on swap agreements— — — 1,421 — 1,421 847 2,268Total comprehensive (loss)income— — — (394) 39,706 39,312 49,373 88,685Balance at December 31, 201252,482 52 581,925 (4,307) 45,127 622,797 447,459 1,070,256F-6ACADIA REALTY TRUST AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY(amounts in thousands,except per share amounts)CommonShares ShareAmount AdditionalPaid-inCapital AccumulatedOtherComprehensive(Loss) Income RetainedEarnings TotalCommonShareholders’Equity NoncontrollingInterests TotalEquityConversion of OP Units toCommon Shares by limitedpartners of the OperatingPartnership93 — 1,548 — — 1,548 (1,548) —Issuance of CommonShares, net of issuancecosts3,013 4 80,686 — — 80,690 — 80,690Dividends declared ($0.86per Common Share)— — — — (47,495) (47,495) (1,664) (49,159)Issuance of OP Units toacquire real estate— — — — — — 33,300 33,300Employee and trustee stockcompensation, net55 — 1,142 — — 1,142 6,530 7,672Consolidation of previouslyunconsolidated investment— — — — — — (33,949) (33,949)Noncontrolling interestdistributions— — — — — — (87,688) (87,688)Noncontrolling interestcontributions— — — — — — 49,324 49,324 55,643 56 665,301 (4,307) (2,368) 658,682 411,764 1,070,446Comprehensive income: Net income— — — — 40,115 40,115 4,525 44,640Unrealized income onvaluation of swapagreements— — — 3,541 — 3,541 69 3,610Reclassification of realizedinterest on swapagreements— — — 1,898 — 1,898 994 2,892Total comprehensiveincome— — — 5,439 40,115 45,554 5,588 51,142Balance at December 31,201355,643 56 665,301 1,132 37,747 704,236 417,352 1,121,588F-7ACADIA REALTY TRUST AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY(amounts in thousands, except pershare amounts)CommonShares ShareAmount AdditionalPaid-inCapital AccumulatedOtherComprehensive(Loss) Income RetainedEarnings TotalCommonShareholders’Equity NoncontrollingInterests TotalEquityConversion of OP Units toCommon Shares by limitedpartners of the OperatingPartnership136 — 3,181 — — 3,181 (3,181) —Issuance of Common Shares, netof issuance costs12,237 12 357,447 — — 357,459 — 357,459Issuance of OP Units to acquirereal estate— — — — — — 44,051 44,051Dividends declared ($1.23 perCommon Share)— — — — (77,194) (77,194) (5,085) (82,279)Employee and trustee stockcompensation, net93 — 1,932 — — 1,932 6,528 8,460Noncontrolling interestdistributions— — — — — — (218,152) (218,152)Noncontrolling interestcontributions— — — — — — 57,969 57,969 68,109 68 1,027,861 1,132 (39,447) 989,614 299,482 1,289,096Comprehensive income: Net income— — — — 71,064 71,064 81,082 152,146Unrealized loss on valuation ofswap agreements— — — (7,814) — (7,814) (1,247) (9,061)Reclassification of realizedinterest on swap agreements— — — 2,677 — 2,677 1,099 3,776Total comprehensive (loss)income— — — (5,137) 71,064 65,927 80,934 146,861Balance at December 31, 201468,109 $68 $1,027,861 $(4,005) $31,617 $1,055,541 $380,416 $1,435,957 The accompanying notes are an integral part of these consolidated financial statements.F-8ACADIA REALTY TRUST AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2014 2013 2012(dollars in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net income $152,146 $44,640 $89,936Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 49,645 43,071 38,769Amortization of financing costs 3,003 3,082 3,569Gain on sale of property (14,360) (18,802) (71,203)Loss on debt extinguishment 335 1,565 2,739Gain on involuntary conversion of asset — — (2,368)Reserve for notes receivable — — 405Impairment of asset — 8,183 —Share compensation expense 6,744 7,667 3,350Equity in earnings of unconsolidated affiliates (8,723) (12,382) 1,482Gain on disposition of properties of unconsolidated affiliates (102,855) — (3,061)Distributions of operating income from unconsolidated affiliates 9,579 9,829 3,733Other, net (4,147) (4,771) 278Changes in assets and liabilities Cash in escrow (686) 218 2,035Rents receivable, net (8,097) 997 (6,757)Prepaid expenses and other assets 852 (22,524) 1,033Accounts payable and accrued expenses (4,016) 5,586 (5,648)Other liabilities 3,099 (1,126) 709Net cash provided by operating activities 82,519 65,233 59,001CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of real estate (250,353) (220,041) (241,894)Redevelopment and property improvement costs (140,118) (106,883) (88,787)Deferred leasing costs (3,914) (4,617) (7,275)Insurance proceeds from involuntary conversion of asset — — 3,672Investments in and advances to unconsolidated affiliates (156,972) (56,171) (160,888)Return of capital from unconsolidated affiliates 74,371 108,899 22,296Proceeds from disposition of properties of unconsolidated affiliates 190,356 — —Consolidation of previously unconsolidated investment — 1,864 —Proceeds from notes receivable 18,095 29,583 25,388Issuance of notes receivable (31,169) (45,050) (108,629)Proceeds from disposition of properties 31,188 204,537 419,372Net cash used in investing activities (268,516) (87,879) (136,745)F-9ACADIA REALTY TRUST AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2014 2013 2012(dollars in thousands) CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on mortgage and other notes (176,323) (437,257) (549,095)Proceeds received on mortgage and other notes 284,303 572,443 433,815Loan proceeds held as restricted cash 79,191 (109,795) —Purchase of convertible notes payable — (550) —Deferred financing and other costs (3,672) (11,741) (6,772)Capital contributions from noncontrolling interests 57,970 49,324 172,228Distributions to noncontrolling interests (221,330) (88,975) (161,765)Dividends paid to Common Shareholders (53,210) (44,115) (32,143)Proceeds from issuance of Common Shares, net of issuance costs of $2,112, $1,645, and $3,054respectively 357,459 80,688 223,477Net cash provided by financing activities 324,388 10,022 79,745 Increase (decrease) in cash and cash equivalents 138,391 (12,624) 2,001Cash and cash equivalents, beginning of period 79,189 91,813 89,812Cash and cash equivalents, end of period $217,580 $79,189 $91,813 Supplemental disclosure of cash flow information Cash paid during the period for interest, net of capitalized interest of $12,650, $9,193, and $5,955,respectively $46,542 $41,543 $32,327 Cash paid for income taxes, net of refunds received of $2,045, $0 and $0, respectively $(1,772) $301 $941 Supplemental disclosure of non-cash investing activities Acquisition of real estate through assumption of debt $29,794 $— $63,766Disposition of real estate through forgiveness of debt $(22,865) $— $—Acquisition of real estate through issuance of OP Units $38,937 $33,300 $2,279Investments in and advances to unconsolidated affiliates through issuance of OP Units $5,114 $— $—Acquisition of real estate through conversion of notes receivable $38,000 $18,500 $14,000 Consolidation of previously unconsolidated investment Real estate, net $— $(118,484) $—Mortgage notes payable — 166,200 —Distributions in excess of income from, and investments in, unconsolidated affiliates — (10,298) —Other assets and liabilities — (1,605) —Noncontrolling interest — (33,949) —Cash included in consolidation of previously unconsolidated investment $— $1,864 $—The accompanying notes are an integral part of these consolidated financial statements.F-10ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Organization, Basis of Presentation and Summary of Significant Accounting PoliciesAcadia Realty Trust (the "Trust") and subsidiaries (collectively, the "Company"), is a fully-integrated equity real estate investment trust ("REIT") focused onthe ownership, acquisition, redevelopment, and management of high-quality retail properties located primarily in high-barrier-to-entry, supply-constrained,densely-populated metropolitan areas in the United States.All of the Company’s assets are held by, and all of its operations are conducted through, Acadia Realty Limited Partnership (the "Operating Partnership") andentities in which the Operating Partnership owns an interest. As of December 31, 2014, the Trust controlled approximately 95% of the Operating Partnershipas 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 profitsand losses of the Operating Partnership. The limited partners primarily represent entities or individuals that contributed their interests in certain properties orentities to the Operating Partnership in exchange for common or preferred units of limited partnership interest ("Common OP Units" or "Preferred OP Units")and employees who have been awarded restricted Common OP Units ("LTIP Units") as long-term incentive compensation (Note 15). Limited partners holdingCommon OP and LTIP Units are generally entitled to exchange their units on a one-for-one basis for common shares of beneficial interest of the Trust("Common Shares"). This structure is referred to as an umbrella partnership REIT or "UPREIT."As of December 31, 2014, the Company has ownership interests in 87 properties within its core portfolio, which consist of those properties either 100%owned, or partially owned through joint venture interests, by the Operating Partnership, or subsidiaries thereof, not including those properties owned throughits funds ("Core Portfolio"). The Company also has ownership interests in 56 properties within its funds, Acadia Strategic Opportunity Fund I, LP ("Fund I"),Acadia Strategic Opportunity II, LLC ("Fund II"), Acadia Strategic Opportunity Fund III LLC ("Fund III") and Acadia Strategic Opportunity Fund IV LLC(("Fund IV") and together with Funds I, II, and III, the "Funds"). The 143 Core Portfolio and Fund properties primarily consist street and urban retail, anddense suburban shopping centers. In addition, the Company, together with the investors in the Funds, invest in operating companies through Acadia MervynInvestors I, LLC ("Mervyns I"), Acadia Mervyn Investors II, LLC ("Mervyns II") and Fund II, all on a non-recourse basis.The Operating Partnership is the sole general partner or managing member of the Funds and Mervyns I and II and earns fees or priority distributions for assetmanagement, property management, construction, redevelopment, leasing, and legal services. Cash flows from the Funds and Mervyns I and II are distributedpro-rata to their respective partners and members (including the Operating Partnership) until each receives a certain cumulative return ("Preferred Return"),and the return of all capital contributions. Thereafter, remaining cash flow is distributed 20% to the Operating Partnership ("Promote") and 80% to thepartners or members (including the Operating Partnership).Following is a table summarizing the general terms and Operating Partnership's equity interests in the Funds and Mervyns I and II:EntityFormationDateOperatingPartnership Shareof CapitalCommittedCapital Capital Called asof December 31,2014 (3)Equity InterestHeld By OperatingPartnershipPreferred ReturnTotal Distributionsas of December 31,2014 (3)Fund I and Mervyns I (1)9/200122.22%$90.0 $86.637.78%9%$192.3Fund II and Mervyns II (2)6/200420.00%300.0 300.020.00%8%131.6Fund III5/200719.90%475.0 381.619.90%6%368.5Fund IV5/201223.12%540.6 140.223.12%6%95.9F-11ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continuedNotes:(1) Fund I and Mervyns I have returned all capital and preferred return. The Operating Partnership is now entitled to a Promote on all future cash distributions.(2) During 2013, a distribution of $47.1 million was made to the Fund II investors, including the Operating Partnership. This amount is subject to recontribution to Fund II untilDecember 2016, if needed to fund the on-going development and construction of existing projects.(3) Represents the total for the Funds, including the Operating Partnership and noncontrolling interests' shares.Principles of ConsolidationThe consolidated financial statements include the consolidated accounts of the Company and its controlling investments in partnerships and limited liabilitycompanies in which the Company has control in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification("ASC") Topic 810 "Consolidation" ("ASC Topic 810"). The ownership interests of other investors in these entities are recorded as noncontrolling interests.All significant intercompany balances and transactions have been eliminated in consolidation. Investments in entities for which the Company has the abilityto exercise significant influence 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 losses) of these entities are included in consolidated net income.Variable interest entities are accounted for within the scope of ASC Topic 810 and are required to be consolidated by their primary beneficiary. The primarybeneficiary of a variable interest entity is the enterprise that has the power to direct the activities that most significantly impact the variable interest entity’seconomic performance and the obligation to absorb losses or the right to receive benefits of the variable interest entity that could be significant to thevariable interest entity. Management has evaluated the applicability of ASC Topic 810 to its investments in certain joint ventures and determined that thesejoint ventures are not variable interest entities or that the Company is not the primary beneficiary and, therefore, consolidation of these ventures is notrequired. These investments are accounted for using the equity method of accounting.The Company owns a 22.22% interest in an approximately one million square foot retail portfolio (the "Brandywine Portfolio") located in Wilmington,Delaware. Effective January 1, 2013, following certain changes in the financial and operating controls of the joint venture agreement, in which theunaffiliated third party joint venture partner waived all of their substantive participating rights, the Company now accounts for this investment on aconsolidated basis.Investments in and Advances to Unconsolidated Joint VenturesThe Company primarily accounts for its investments in unconsolidated joint ventures using the equity method as it does not exercise control over significantasset decisions such as buying, selling or financing nor is it the primary beneficiary under ASC Topic 810, as discussed above in most of these investments.The Company does have significant influence over most of these investments, which requires equity method accounting. Under the equity method, theCompany increases its investment for its proportionate share of net income and contributions to the joint venture and decreases its investment balance byrecording its proportionate share of net loss and distributions. The Company accounts for some of its investments under the cost method. Due to its minorownership of three investments as well as the terms of the underlying operating agreements, the Company has no influence over such entities' operating andfinancial policies. Other than the minority investor rights to which the Company is entitled pursuant to statute, it has no rights other than to receive its pro-rata share of cash distributions as declared by the managers of these investments. The Company has no rights with respect to the control and operation ofthese investments vehicles, nor with the formulation and execution of business and investment policies. The Company recognizes income for distributions inexcess of its investment where there is no recourse to the Company. For investments in which there is recourse to the Company, distributions in excess of theinvestment are recorded as a liability. Although the Company accounts for its investment in Albertson’s (Note 4) under the equity method of accounting, theCompany adopted the policy of not recording its equity in earnings or losses of this unconsolidated affiliate until it receives the audited financial statementsof Albertson’s to support the equity earnings or losses in accordance with ASC Topic 323, "Investments – Equity Method and Joint Ventures."F-12ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continuedThe Company periodically reviews its investment in unconsolidated joint ventures for other-than-temporary losses in investment value. Any decline that isnot expected to be recovered is considered other than temporary and an impairment charge is recorded as a reduction in the carrying value of the investment.During 2012, the Company recorded an impairment charge of $2.0 million in connection with the estimated fair value in its investment in Mervyns. Duringthe years ended December 31, 2014 and 2013, there were no impairment charges related to the Company’s investment in unconsolidated joint ventures.Use of EstimatesAccounting principles generally accepted in the United States of America ("GAAP") require the Company’s management to make estimates and assumptionsthat affect the amounts reported in the financial statements and accompanying notes. The most significant assumptions and estimates relate to the valuationof real estate, depreciable lives, revenue recognition and the collectability of notes receivable and rents receivable. Application of these estimates andassumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.Real EstateReal estate assets are stated at cost less accumulated depreciation. Construction in progress includes costs for significant property expansion andredevelopment. 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 orlease term for tenant improvements and five years for furniture, fixtures and equipment. Expenditures for maintenance and repairs are charged to operations asincurred.Upon acquisitions of real estate, the Company assesses the fair value of acquired assets and assumed liabilities (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 inaccordance with ASC Topic 805 "Business Combinations" and ASC Topic 350 "Intangibles – Goodwill and Other," and allocates the acquisition price basedon these assessments. Fixed-rate renewal options have been included in the calculation of the fair value of acquired leases where applicable. To the extentthere were fixed-rate options at below-market rental rates, the Company included these along with the current term below-market rent in arriving at the fairvalue of the acquired leases. The discounted difference between contract and market rents is being amortized over the remaining applicable lease term,inclusive of any option periods. The Company assesses fair value based on estimated cash flow projections that utilize appropriate discount andcapitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operatingresults, known trends, and market/economic conditions that may affect the property.The Company capitalizes certain costs related to the development and redevelopment of real estate including initial project acquisition costs, pre-construction costs, interest, real estate taxes, insurance, construction costs and salaries and related costs of personnel directly involved with the specificproject. Additionally, the Company capitalizes interest costs related to development and redevelopment activities. Capitalization of these costs begin whenthe activities and related expenditures commence, and cease when the property is held available for occupancy upon substantial completion of tenantimprovements, but no later than one year from the completion of major construction activity at which time the project is placed in service and depreciationcommences.The Company reviews its long-lived assets for impairment when there is an event or a change in circumstances that indicates that the carrying amount maynot be recoverable. The Company measures and records impairment losses and reduces the carrying value of properties when indicators of impairment arepresent and the expected undiscounted cash flows related to those properties are less than their carrying amounts. In cases where the Company does notexpect to recover its carrying costs on properties held for use, the Company reduces its carrying costs to fair value, and for properties held for sale, theCompany reduces its carrying value to the fair value less costs to sell. During the year ended December 31, 2013, the Company determined that the values ofthe Walnut Hill Plaza and Fund III's Sheepshead Bay property were impaired. Accordingly, impairment charges of $1.5 million and $6.7 million, respectivelywere recorded. The Operating Partnership's share of the impairment charge related to Sheepshead Bay was $1.3 million. During the years ended December 31,2014 and 2012, no impairment charges were recorded. Management does not believe that the values of any other properties within the portfolio are impairedas of December 31, 2014.F-13ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continuedThe Company recognizes property sales in accordance with ASC Topic 970 "Real Estate." The Company generally records the sales of operating propertiesand outparcels using the full accrual method at closing when the earnings process is deemed to be complete. Sales not qualifying for full recognition at thetime of sale are accounted for under other appropriate deferral methods. 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 heldfor sale once management has initiated an active program to market them for sale and has received a firm purchase commitment.On occasion, the Company will receive unsolicited offers from third parties to buy individual Company properties. Under these circumstances, the Companywill classify the properties as held for sale when a sales contract is executed with no contingencies and the prospective buyer has funds at risk to ensureperformance.Involuntary Conversion of AssetThe Company experienced significant flooding resulting in extensive damage to one of its properties during September 2011. Costs related to the clean-upand redevelopment were insured for an amount sufficient that would allow for full restoration of the property. Loss of rents during the redevelopment werecovered by business interruption insurance subject to a $0.1 million deductible.In accordance with ASC Topic 360 "Property, Plant and Equipment" and as a result of the above-described property damage, the Company had recorded awrite-down of the asset's carrying value of approximately $1.4 million, as well as an insurance recovery in the same amount. During the years endedDecember 31, 2012 and 2011, the Company received insurance proceeds of approximately $3.7 million and $6.9 million, respectively. The Companyrecognized a gain on involuntary conversion of $2.4 million in 2012 as these proceeds exceeded the asset's net basis.Deferred CostsFees and costs paid in the successful negotiation of leases are deferred and amortized on a straight-line basis over the terms of the respective leases. Fees andcosts incurred in connection with obtaining financing are deferred and amortized over the term of the related debt obligation. The Company capitalizessalaries, commissions and benefits related to time spent by leasing and legal department personnel involved in originating leases.Revenue Recognition and Accounts ReceivableLeases with tenants are accounted for as operating leases. Minimum rents are recognized, net of any rent concessions or tenant lease incentives, including freerent, on a straight-line basis over the term of the respective leases, beginning when the tenant is entitled to take possession of the space. As of December 31,2014 and 2013, unbilled rents receivable relating to the straight-lining of rents of $28.0 million and $23.1 million, respectively are included in RentsReceivable, net on the accompanying consolidated balance sheets. Certain of these leases also provide for percentage rents based upon the level of salesachieved by the tenant. Percentage rent is recognized in the period when the tenants’ sales breakpoint is met. In addition, leases typically provide for thereimbursement to the Company of real estate taxes, insurance and other property operating expenses. These reimbursements are recognized as revenue in theperiod the related expenses are incurred.F-14ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continuedThe Company makes estimates of the uncollectability of its accounts receivable related to tenant revenues. An allowance for doubtful accounts has beenprovided against certain tenant accounts receivable that are estimated to be uncollectible. Once the amount is ultimately deemed to be uncollectible, it iswritten off. Rents receivable at December 31, 2014 and 2013 are shown net of an allowance for doubtful accounts of $6.0 million and $6.0 million,respectively.Notes Receivable and Preferred EquityNotes receivable and preferred equity investments are intended to be held to maturity and are carried at amortized cost. Interest income from notes receivableand preferred equity investments are recognized on the effective interest method over the expected life of the loan. Under the effective interest method,interest or fees collected at the origination of the investment or the payoff of the investment are recognized over the term of the loan as an adjustment toyield.Allowances for real estate notes receivable are established based upon management’s quarterly review of the investments. In performing this review,management considers the estimated net recoverable value of the loan as well as other factors, including the fair value of any collateral, the amount and statusof any senior debt, and the prospects for the borrower. Because this determination is based upon projections of future economic events, which are inherentlysubjective, the amounts ultimately realized from the loans may differ materially from their carrying values at the balance sheet date. Interest incomerecognition is generally suspended for loans when, in the opinion of management, a full recovery of income and principal becomes doubtful. Incomerecognition is resumed when the suspended loan becomes contractually current and performance is demonstrated to be resumed.During 2012, the Company provided a $0.4 million net reserve on note receivables as a result of changes in the value of the underlying collateral properties.During 2014, the Company recognized income of $2.7 million as a result of collections on notes that previously had reserves.Cash and Cash EquivalentsThe Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cashequivalents are maintained at financial institutions and, at times, balances may exceed the federally insured limit by the Federal Deposit InsuranceCorporation. The Company has never experienced any losses related to these balances.Restricted Cash and Cash in EscrowRestricted cash and cash in escrow consist principally of cash held for real estate taxes, construction costs, property maintenance, insurance, minimumoccupancy and property operating income requirements at specific properties as required by certain loan agreements.Income TaxesThe 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, asamended (the "Code"). To maintain REIT status for Federal income tax purposes, the Company is generally required to distribute at least 90% of its REITtaxable income to its shareholders 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 Federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year.Although it may qualify for REIT status for Federal income tax purposes, the Company is subject to state income or franchise taxes in certain states in whichsome of its properties 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.The Company accounts for TRS income taxes under the liability method as required by ASC Topic 740, "Income Taxes." Under the liability method, deferredincome taxes are recognized for the temporary differences between the GAAP basis and tax basis of the TRS income, assets and liabilities.F-15ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS1. Organization, Basis of Presentation and Summary of Significant Accounting Policies, continuedIn accordance with ASC Topic 740, the Company believes that it has appropriate support for the income tax positions taken and, as such, does not have anyuncertain tax positions that, if successfully challenged, could result in a material impact on the Company's financial position or results of operation. The priorthree years' income tax returns are subject to review by the Internal Revenue Service. The Company recognizes potential interest and penalties related touncertain tax positions as a component of the provision for income taxes.Stock-based CompensationThe Company accounts for stock-based compensation pursuant to ASC Topic 718, "Compensation – Stock Compensation." As such, all equity based awardsare reflected as compensation expense in the Company’s consolidated financial statements over their vesting period based on the fair value at the date ofgrant.Recent Accounting PronouncementsDuring January 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-01, "Income Statement -Extraordinary and Unusual Items." ASU 2015-01 eliminates the concept of extraordinary items. However, the presentation and disclosure requirements foritems that are either unusual or in nature or infrequent in occurrence remain and will be expanded to include items that are both unusual in nature andinfrequent in occurrence. ASU 2015-01 is effective for periods beginning after December 15, 2015. ASU 2015-01 is not expected to have a material impact onthe Company's financial statements.During August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements - Going Concern." ASU 2014-15 requires an entity'smanagement to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity's ability to continueas a going concern within one year after the date that the financial statements are issued. ASU 2014-15 is effective for periods beginning after December 15,2016. ASU 2014-15 is not expected to have a material impact on the Company's financial statements.During June 2014, the FASB issued ASU No. 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Provide That a PerformanceTarget Could Be Achieved after the Requisite Service Period." ASU 2014-12 provides explicit guidance on how to account for share-based payments thatrequire a specific performance target to be achieved which may be achieved after an employee completes the requisite service period. ASU 2014-12 iseffective for periods beginning after December 15, 2015 and may be applied either prospectively or retrospectively. ASU 2014-12 is not expected to have amaterial impact on the Company's financial statements.During May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers," which supersedes nearly all existing revenue recognitionguidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in anamount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process toachieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required underexisting GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the followingtransition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certainpractical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (whichincludes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidatedfinancial statements and has not yet determined the method by which the standard will be adopted in 2017.During April 2014, the FASB issued ASU No. 2014-08, "Presentation of Financial Statements and Property, Plant and Equipment; Reporting DiscontinuedOperations and Disclosures of Disposals of Components of an Entity." ASU 2014-08 modifies the requirements for reporting discontinued operations. Underthe amendments in ASU 2014-08, the definition of discontinued operation has been modified to only include those disposals of an entity that represent astrategic shift that has (or will have) a major effect on an entity's operations and financial results. ASU 2014-08 shall be applied prospectively for periodsbeginning on or after December 15, 2014, with early adoption permitted. The Company adopted ASU 2014-08 for the quarter ended March 31, 2014. TheCompany has adopted this standard on a prospective basis for transactions that have occurred after the adoption date. The adoption of ASU 2014-08 did nothave a material effect on the Company's financial position or results of operations.F-16ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS2. Acquisition and Disposition of Properties, Discontinued Operations and Properties Held For SaleA. Acquisition and Disposition of PropertiesAcquisitionsDuring 2014, the Company acquired the following properties through its Core Portfolio and Funds as follows:Core Portfolio(dollars in millions) PropertyGLAPercent OwnedTypeMonth ofAcquisitionPurchase PriceDebt AssumptionLocation11 E. Walton6,738100%Street RetailJanuary$44.0$—Chicago, IL61 Main Street3,400100%Street RetailFebruary7.3—Westport, CT865 W. North Avenue16,000100%Street RetailMarch14.8—Chicago, IL252-256 Greenwich Avenue9,172100%Street RetailMarch24.5—Greenwich, CT152-154 Spring Street2,93690%Street RetailApril38.0—New York, NY2520 Flatbush Avenue29,114100%Urban RetailMay17.1—Brooklyn, NYBedford Green90,472100%Shopping CenterJuly46.829.8Bedford, NY131-135 Prince Street (1)3,200100%Street RetailAugust51.4—New York, NYShops at Grand Ave99,975100%Shopping CenterOctober56.0—Queens, NY201 Needham Street20,409100%Suburban RetailNovember10.1—Newton, MA840 N. Michigan (2)87,13588%Street RetailDecember163.255.0Chicago, ILTotal368,551$473.2$84.8Notes:(1) This acquisition was primarily funded with the issuance of 1.4 million Common OP Units.(2) As the tenancy in common partner to this investment maintains operating control over this investment, it is accounted for under the equity method. Thisacquisition was partially funded with the issuance of 0.2 million Common OP Units.The Company expensed $4.8 million of acquisition costs for the year ended December 31, 2014 related to the Core Portfolio.Fund IIIDuring December, Fund III, through an already existing unconsolidated joint venture, acquired a parcel adjacent to one of its existing investments $3.1million.The Company expensed $0.2 million of acquisition costs for the year ended December 31, 2014 related to Fund III.F-17ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS2. Acquisition and Disposition of Properties, Discontinued Operations and Properties Held For Sale, continuedFund IV(dollars in millions)PropertyGLAPercentOwnedTypeMonth ofAcquisitionPurchasePriceLocationBroughton Street Portfolio (1)218,07650%Street RetailVarious$33.9Savannah, GAEden Square (2)235,50890%Shopping CenterJuly25.4Bear, DE17 E. 71st Street9,330100%Street RetailOctober28.0New York, NY27 E. 61st Street (3)9,637100%Street RetailOctober19.3New York, NYTotal472,551$106.6Notes:(1) The Broughton Street Portfolio consists of 24 properties. As the joint venture partner to these investments maintains operating control over theinvestments, these are accounted for under the equity method. Of the 24 properties, nine of them are accounted for as asset acquisitions as they werepurchased vacant and require future development.(2) As the joint venture partner to this investment maintains operating control over this investment, it is accounted for under the equity method.(3) This property was purchased vacant and requires future development and as such, it is accounted for as an asset acquisition.The Company expensed $2.7 million of acquisition costs for the year ended December 31, 2014 related to Fund IV.Purchase Price AllocationsWith the exception of the asset acquisitions, the above acquisitions have been accounted for as business combinations. The purchase prices were allocated tothe acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition. The preliminary measurements of fair valuereflected below are subject to change. The Company expects to finalize the valuations and complete the purchase price allocations within one year from thedates of acquisition.The following table summarizes both the Company's preliminary allocations of the purchase prices of assets acquired and liabilities assumed during 2014:(dollars in thousands)Preliminary PurchasePrice AllocationLand$145,833Buildings and Improvements411,896Acquisition-related intangible liabilities (in Acquired lease intangibles, net)(6,434)Above-below market debt assumed (included in Mortgages and other notes payable)(2,100)Total Consideration$549,195F-18ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS2. Acquisition and Disposition of Properties, Discontinued Operations and Properties Held For Sale, continuedDuring 2013, the Company acquired properties and recorded the preliminary allocation of the purchase price to the assets acquired based on provisionalmeasurements of fair value. During 2014, the Company finalized the allocation of the purchase price and made certain measurement period adjustments. Thefollowing table summarizes the preliminary allocation of the purchase price of properties as recorded as of December 31, 2013, and the finalized allocation ofthe purchase price as adjusted as of December 31, 2014:(dollars in thousands)Preliminary PurchasePrice AllocationAdjustmentsFinalized PurchasePrice AllocationLand$65,804$14,720$80,524Buildings and Improvements245,925(65,320)180,605Acquisition-related intangible assets (in Acquired lease intangibles,net)—56,87156,871Acquisition-related intangible liabilities (in Acquired leaseintangibles, net)—(6,271)(6,271)Total Consideration$311,729$—$311,729DispositionsDuring 2014, the Company disposed of the following properties:(dollars in thousands) DispositionsGLASale PriceGain/(Loss) on SaleMonth SoldOwnerWalnut Hill Plaza (1)297,905$—$12,402MarchCoreSheepshead Bay96,41820,2001,399AprilFund IIICity Point (2)—26,300561JuneFund IIOther post-sale adjustments——(176)-Fund IILand sale—340190JulyCoreLincoln Road Portfolio (3)61,443141,80086,600AugustFund IIILincoln Road Portfolio (3)54,453200,20054,642AugustFund IVTotal510,219$388,840$155,618 Notes:(1) This property was subject to $22.9 million of non-recourse debt and was foreclosed upon by the lender during March 2014, resulting in a $12.4 milliongain.(2) Represents the sale of a portion of the residential air rights known as "Tower 2" associated with the Company's City Point development project.(3) Both the Fund III and Fund IV Lincoln Road Portfolios were unconsolidated and as such, the Company's share of gains related to these sales, whichaggregated $102.9 million, are included in gain on disposition of properties of unconsolidated affiliates in the 2014 Consolidated Statement of Income.F-19ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS2. Acquisition and Disposition of Properties, Discontinued Operations and Properties Held For Sale, continuedB. Discontinued OperationsThe Company previously reported properties sold as discontinued operations. The assets and liabilities and results of operations of discontinued operationsare reflected as a separate component within the accompanying consolidated financial statements for all periods presented. As a result of the adoption of ASU2014-08, there were no assets or liabilities classified as discontinued operations as of December 31, 2014.The combined assets and liabilities as of December 31, 2013 and the results of operations of the properties classified as discontinued operations for the yearsended December 31, 2014, 2013 and 2012, are summarized as follows:(dollars in thousands) BALANCE SHEETS December 31, 2013ASSETS Net real estate $17,991Rents receivable, net 565Deferred charges, net 38Prepaid expenses and other assets 1,840Total assets of discontinued operations $20,434LIABILITIES Accounts payable and accrued expenses $1,473Other liabilities 1,034Total liabilities of discontinued operations $2,507(dollars in thousands) Years ended December 31,STATEMENTS OF INCOME 2014 2013 2012Total revenues $— $20,920 $56,902Total expenses — 14,102 44,895Operating income — 6,818 12,007Impairment of assets — (6,683) —Loss on debt extinguishment — (800) (2,541)Gain on disposition of properties 1,222 18,802 71,203Income from discontinued operations 1,222 18,137 80,669Income from discontinued operations attributable to noncontrolling interests (1,023) (12,048) (64,582)Income from discontinued operations attributable to Common Shareholders $199 $6,089 $16,087F-20ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS2. Acquisition and Disposition of Properties, Discontinued Operations and Properties Held For Sale, continuedC. Properties Held For SaleAt December 31, 2014, The Company had two properties classified as held-for-sale. The assets and liabilities relating to those properties are summarized asfollows:(dollars in thousands) BALANCE SHEETSDecember 31, 2014Assets of properties held for sale$56,073Liabilities of properties held for sale$25,500F-21ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS3. Segment ReportingThe Company has three reportable segments: Core Portfolio, Funds and Structured Financing. The accounting policies of the segments are the same as thosedescribed in the summary of significant accounting policies. The Company evaluates property performance primarily based on net operating income beforedepreciation, amortization and certain nonrecurring items. Investments in the Core Portfolio are typically held long-term. Given the contemplated finite lifeof the Funds, these investments are typically held for shorter terms. Fees earned by the Company as the general partner or managing member of the Funds areeliminated in the Company’s consolidated financial statements. The following table sets forth certain segment information for the Company, reclassified fordiscontinued operations, as of and for the years ended December 31, 2014, 2013 and 2012 (does not include unconsolidated affiliates or discontinuedoperations):2014(dollars in thousands) Core Portfolio Funds Structured Financing TotalRevenues $125,022 $54,659 $15,331 $195,012Property operating expenses, other operating and real estate taxes (33,097) (18,574) — (51,671)General and administrative expenses (24,853) (1,665) (915) (27,433)Depreciation and amortization (35,875) (13,770) — (49,645)Operating income 31,197 20,650 14,416 66,263Equity in (losses) earnings of unconsolidated affiliates (77) 8,800 — 8,723Gain on disposition of properties of unconsolidated affiliates — 102,855 — 102,855Loss on debt extinguishment (3) (332) — (335)Interest and other finance expense (27,021) (12,070) — (39,091)Gain on disposition of property 12,577 561 — 13,138Income tax provision (176) (453) — (629)Income from continuing operations 16,497 120,011 14,416 150,924Discontinued operations Gain on disposition of properties — 1,222 — 1,222Income from discontinued operations — 1,222 — 1,222Net income 16,497 121,233 14,416 152,146Noncontrolling interests Income from continuing operations (3,213) (76,846) — (80,059)Income from discontinued operations (9) (1,014) — (1,023)Net income attributable to noncontrolling interests (3,222) (77,860) — (81,082)Net income attributable to Common Shareholders $13,275 $43,373 $14,416 $71,064 Real Estate at Cost $1,366,017 $842,578 $— $2,208,595Total Assets $1,615,436 $1,014,878 $102,286 $2,732,600Acquisition of Real Estate $203,103 $47,250 $— $250,353Redevelopment and Property Improvement Costs $5,432 $134,686 $— $140,118F-22ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS3. Segment Reporting, continued2013(dollars in thousands) Core Portfolio Funds StructuredFinancing TotalRevenues $110,355 $46,131 $11,800 $168,286Property operating expenses, other operating and real estatetaxes (29,040) (17,513) — (46,553)General and administrative expenses (24,387) (1,168) — (25,555)Depreciation and amortization (28,989) (11,310) — (40,299)Operating Income 27,939 16,140 11,800 55,879Equity in (losses) earnings of unconsolidated affiliates (99) 12,481 — 12,382Impairment of asset(1,500)——(1,500)Loss on debt extinguishment (309) (456) — (765)Interest and other finance expense (26,158) (13,316) — (39,474)Income tax benefit (provision) 131 (150) — (19)Income from continuing operations 4 14,699 11,800 26,503Discontinued operations Operating income from discontinued operations 535 6,283 — 6,818Impairment of asset—(6,683)—(6,683)Loss on debt extinguishment (145) (655) — (800)Gain on disposition of properties 6,488 12,314 — 18,802Income from discontinued operations 6,878 11,259 — 18,137Net income 6,882 25,958 11,800 44,640Noncontrolling interests (Income) loss from continuing operations (1,002) 8,525 — 7,523Income from discontinued operations (2,406) (9,642) — (12,048)Net income attributable to noncontrolling interests (3,408) (1,117) — (4,525)Net income attributable to Common Shareholders $3,474 $24,841 $11,800 $40,115 Real Estate at Cost $1,059,257 $759,796 $— $1,819,053Total Assets $1,012,553 $1,105,264 $126,706 $2,244,523Acquisition of Real Estate $143,616 $76,425 $— $220,041Redevelopment and Property Improvement Costs $10,611 $96,272 $— $106,883F-23ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS3. Segment Reporting, continued2012(dollars in thousands) Core Portfolio Funds StructuredFinancing TotalRevenues $70,400 $36,560 $8,027 $114,987Property operating expenses, other operating and real estatetaxes (21,817) (15,899) — (37,716)Reserve for notes receivable — — (405) (405)General and administrative expenses (19,578) (1,645) — (21,223)Depreciation and amortization (17,065) (10,823) — (27,888)Operating Income 11,940 8,193 7,622 27,755Equity in earnings of unconsolidated affiliates 262 288 — 550Gain on disposition of properties of unconsolidated affiliates — 3,061 — 3,061Impairment of unconsolidated affiliates — (2,032) — (2,032)Loss on debt extinguishment — (198) — (198)Gain on involuntary conversion of asset 2,368 — — 2,368Interest and other finance expense (15,431) (7,380) — (22,811)Income tax (provision) benefit (241) 815 — 574(Loss) income from continuing operations (1,102) 2,747 7,622 9,267Discontinued operations Operating income from discontinued operations 319 11,688 — 12,007Loss on debt extinguishment — (2,541) — (2,541)Gain on disposition of properties — 71,203 — 71,203Income from discontinued operations 319 80,350 — 80,669Net (loss) income (783) 83,097 7,622 89,936Noncontrolling interests Loss from continuing operations 60 14,292 — 14,352Income from discontinued operations (128) (64,454) — (64,582)Net income attributable to noncontrolling interests (68) (50,162) — (50,230)Net (loss) income attributable to Common Shareholders $(851) $32,935 $7,622 $39,706 Real Estate at Cost $722,345 $564,853 $— $1,287,198Total Assets $727,423 $811,855 $130,885 $1,670,163Acquisition of Real Estate $175,556 $66,338 $— $241,894Redevelopment and Property Improvement Costs $3,862 $78,265 $— $82,127F-24ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS4. Investments In and Advances to Unconsolidated AffiliatesCore PortfolioThe Company owns a 49% interest in a 311,000 square foot shopping center located in White Plains, New York ("Crossroads), a 50% interest in a 28,000square foot retail portfolio located in Georgetown, Washington D.C. (the "Georgetown Portfolio"), a 22.22% interest in a 20,000 square foot retail propertylocated in Wilmington, Delaware ("Route 202 Shopping Center") and a 88.43% tenancy in common interest in an 87,000 square foot retail property locatedin Chicago, Illinois. As our unaffiliated partners in these investments maintain operating control, these are accounted for under the equity method.FundsFund InvestmentsDuring 2014, Fund IV, entered into a joint venture (the "Broughton Street Portfolio") with an unaffiliated entity, to acquire and operate properties located inSavannah, Georgia. Fund IV invested $8.1 million of equity and made a loan commitment of up to $69.0 million of which $28.4 million was funded to thejoint venture as of December 31, 2014. As of December 31, 2014, the joint venture had acquired 24 properties for an aggregate purchase price of $33.9million.In addition, Fund IV, through a joint venture with an unaffiliated entity, purchased a shopping center in Bear, Delaware for $25.4 million.During the third quarter of 2014, an unconsolidated joint venture between Fund III and an unaffiliated entity sold three properties located on Lincoln Roadin Miami, Florida for an aggregate sales price of $141.8 million. In addition, an unconsolidated joint venture between Fund IV and an unaffiliated entitysold three properties located on Lincoln Road in Miami, Florida for an aggregate sales price of $200.2 million during the third quarter of 2014. The sales ofthe Fund III and Fund IV Lincoln Road portfolios resulted in gains of $86.6 million and $54.6 million, respectively.The unaffiliated partners in Fund II's investment in Albee Tower I Owners, Fund III's investments in Parkway Crossing, Arundel Plaza and the White CityShopping Center as well as Fund IV's investments in 1701 Belmont Avenue, 2819 Kennedy Boulevard, Promenade at Manassas, Eden Square and theBroughton Street Portfolio, maintain control over these entities. The Company accounts for these investments under the equity method as it has the ability toexercise significant influence, but does not have any rights with respect to financial or operating control.Self-Storage Management, a Fund III investment, was determined to be a variable interest entity. Management has evaluated the applicability of ASC Topic810 to this joint venture and determined that the Company is not the primary beneficiary and, therefore, consolidation of this venture is not required. TheCompany accounts for this investment using the equity method of accounting.RCP VentureThe Funds, together with two unaffiliated partners formed an investment group, the RCP Venture, for the purpose of making investments in surplus orunderutilized properties owned by retailers and, in some instances, the retailers' operating company. The RCP Venture is neither a single entity nor a specificinvestment and the Company has no control or rights with respect to the formation and operation of these investments. The Company has made theseinvestments through its subsidiaries, Mervyns I, Mervyns II and Fund II, (together the "Acadia Investors"), all on a non-recourse basis. Through December 31,2014, the Acadia Investors have made investments in Mervyns Department Stores ("Mervyns") and Albertsons including additional investments in locationsthat are separate from these original investments ("Add-On Investments"). Additionally, they have invested in Shopko, Marsh and Rex Stores Corporation(collectively "Other RCP Investments").F-25ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS4. Investments In and Advances to Unconsolidated Affiliates, continuedThe following table summarizes activity related to the RCP Venture investments from inception through December 31, 2014: Operating Partnership ShareInvestment YearAcquired InvestedCapitaland Advances Distributions InvestedCapitaland Advances DistributionsMervyns 2004 $26,058 $48,547 $4,901 $11,801Mervyns Add-On investments 2005/2008 7,547 5,789 1,252 1,284Albertsons 2006 20,717 81,594 4,239 16,318Albertsons Add-On investments 2006/2007 2,416 4,864 388 972Shopko 2006 1,110 2,460 222 492Marsh and Add-On investments 2006/2008 2,667 2,639 533 528Rex Stores 2007 2,701 3,729 535 747Total $63,216 $149,622 $12,070 $32,142The Company accounts for the original investments in Mervyns and Albertson’s under the equity method of accounting as the Company has the ability toexercise significant influence, but does not have financial or operating control.The Company accounts for the Add-On Investments and Other RCP Investments under the cost method. Due to its minor ownership interest, based on the sizeof the investments as well as the terms of the underlying operating agreements, the Company has no influence over such entities' operating and financialpolicies. Other than the minority investor rights to which the Company is entitled pursuant to statute, it has no rights other than to receive its pro-rata share ofcash distributions as declared by the managers of the Add-On Investments and Other RCP Investments. The Company has no rights with respect to the controland operation of these investment vehicles, nor with the formulation and execution of business and investment policies.The Acadia Investors have non-controlling interests in the individual investee LLC’s as follows: Acadia InvestorsOwnership % in:Investment Investee LLC Acadia InvestorsEntity InvesteeLLC Underlyingentity(s)Mervyns KLA/Mervyn's, L.L.C Mervyns I and Mervyns II 10.5% 5.8%Mervyns Add-On Investments KLA/Mervyn's, L.L.C Mervyns I and Mervyns II 10.5% 5.8%Albertsons KLA A Markets, LLC Mervyns II 18.9% 5.7%Albertsons Add-On Investments KLA A Markets, LLC Mervyns II 20.0% 6.0%Shopko KA-Shopko, LLC Fund II 20.0% 2.0%Marsh and Add-On Investments KA Marsh, LLC Fund II 20.0% 3.3%Rex Stores KLAC Rex Venture, LLC Mervyns II 13.3% 13.3%F-26ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS4. Investments In and Advances to Unconsolidated Affiliates, continuedSummary of Investments in Unconsolidated AffiliatesThe following combined and condensed Balance Sheets and Statements of Income, in each period, summarize the financial information of the Company’sinvestments in unconsolidated affiliates.(dollars in thousands) December 31, 2014 December 31, 2013Combined and Condensed Balance Sheets Assets: Rental property, net $387,739 $380,268Real estate under development 60,476 5,573Investment in unconsolidated affiliates 11,154 63,745Other assets 62,862 66,895Total assets $522,231 $516,481Liabilities and partners’ equity: Mortgage notes payable $315,897 $265,982Other liabilities 66,116 43,733Partners’ equity 140,218 206,766Total liabilities and partners’ equity $522,231 $516,481Company’s investment in and advances to unconsolidated affiliates $184,352 $181,322Company's share of distributions in excess of income and investments inunconsolidated affiliates $(12,564) $(8,701)F-27ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS4. Investments In and Advances to Unconsolidated Affiliates, continued Years Ended December 31,(dollars in thousands) 2014 2013 2012Combined and Condensed Statements of Income Total revenues $44,422 $51,638 $49,729Operating and other expenses (17,069) (18,700) (18,919)Interest expense (9,363) (8,943) (18,547)Equity in (losses) earnings of unconsolidated affiliates (328) 13,651 583Depreciation and amortization (10,967) (10,599) (9,551)Loss on debt extinguishment (187) — (293)Gain on disposition of properties 142,615 — 3,402Net income $149,123 $27,047 $6,404 Company’s share of net income $111,970 $12,774 $1,971Amortization of excess investment (392) (392) (392)Company’s equity in earnings of unconsolidated affiliates $111,578 $12,382 $1,5795. Notes Receivable, Preferred Equity and Other Real Estate Related InvestmentsDuring 2014, the Company made total investments in notes receivable and preferred equity investments of $31.2 million and total collections of $18.1million.The following table reconciles notes receivable investments from January 1, 2012 to December 31, 2014: For the years ended December 31,(dollars in thousands) 2014 2013 2012Beginning Balance $126,656 $129,278 $59,989Additions during period: New investments 31,169 45,000 108,629Deductions during period: Collections of principal (18,095) (29,583) (25,388)Conversion to real estate through receipt of deed or throughforeclosure (38,000) (18,500) (14,000)Non-cash accretion of notes receivable 556 461 453Reserves — — (405)Ending Balance $102,286 $126,656 $129,278As of December 31, 2014, the Company’s notes receivable, net, approximated $102.3 million and were collateralized by the underlying properties, theborrower’s ownership interest in the entities that own the properties and/or by the borrower’s personal guarantee. Notes receivable were as follows atDecember 31, 2014:F-28ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS5. Notes Receivable, Preferred Equity and Other Real Estate Related Investments, continuedNote Description Effectiveinterest rate (1) First Priority Liens Net Carrying Amount ofNotes Receivable as ofDecember 31, 2014 Net Carrying Amount ofNotes Receivable as ofDecember 31, 2013 Maturity Date Extension Options(dollars in thousands) First Mortgage Loan 7.7% $— $12,000 $12,000 1/1/2015 —Mezzanine Loan 12.7% 18,900 8,000 — 10/3/2015 First Mortgage Loan 8.8% — 7,500 — 10/31/2015 1 x 12 MonthsZero Coupon Loan (2) 24.0% 166,200 4,986 4,431 1/3/2016 —First Mortgage Loan 5.5% — 4,000 42,000 4/1/2016 1 x 6 MonthsPreferred Equity 13.5% — 4,000 — 5/9/2016 Other 18.0% — 3,307 — 7/1/2017 Preferred Equity 8.1% 20,855 13,000 13,000 9/1/2017 —Mezzanine Loan 15.0% — 30,879 30,879 11/9/2020 —First Mortgage Loan 6.0% — — 6,400 Demand —Other LIBOR + 2.5% — 4,000 3,000 12/30/2020 Mezzanine Loan (3) 10.0% 87,477 7,983 9,089 Demand —Mezzanine Loan 15.0% 16,668 — 3,834 Upon CapitalEvent —Individually less than3% (4) 2.7% to 17.5% — 2,631 2,023 12/31/2015 to5/1/2024 —Total $102,286 $126,656 Notes:(1) Includes origination and exit fees(2) The principal balance for this accrual-only loan is increased by the interest accrued(3) Comprised of three cross-collateralized loans from one borrower, which are non-performing(4) Consists of three loans as of December 31, 2014During January 2014, the Company received a repayment of $6.4 million, representing the full principal amount on a note receivable.During January 2014, the Company also received a payment of $1.4 million for a mezzanine loan with a carrying value, net of reserves, of $0.7 million. TheCompany recognized income of approximately $0.7 million relating to the payoff, which is included in Other, a component of revenue for the year endedDecember 31, 2014.During April 2014, the Company made a $13.0 million loan, which is collateralized by a property and bears interest at 12.7% and matures October 2015.During July 2014, the borrower repaid $5.0 million of the loan. The outstanding balance at December 31, 2014 was $8.0 million.During April 2014, the Company made a $1.9 million loan, which is collateralized by a property, bears interest at LIBOR plus 375 basis points and maturesMay 2024.During April 2014, the Company converted a $38.0 million loan into an equity interest in 152-154 Spring Street (Note 4).F-29ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS5. Notes Receivable, Preferred Equity and Other Real Estate Related Investments, continuedDuring April 2014, the Company received payment of $10.3 million representing principal and accrued interest on a mezzanine loan for which the Companyhad a carrying value of $8.3 million, net of a $2.0 million reserve. Following the full collection of all amounts due under this note, the Company recognizedincome of approximately $2.0 million, which is included in Other, a component of revenue for the year ended December 31, 2014.During May 2014, the Company made a $4.0 million preferred equity investment in an entity which owns a property located in the Bronx. The investmenthas a preferred return of 13.5% and matures May 2016.During July 2014, the Company made an additional $1.0 million loan, which is collateralized by Common OP Units, to an existing borrower, bringing thetotal outstanding amount to $4.0 million. This loan bears interest at LIBOR plus 250 basis points and matures 12/20/20.During July 2014, the Company made a $4.8 million loan, which is collateralized by the borrower's interest in a property, bears interest at 18% and maturesJuly 2017. As of December 31, 2014, $3.3 million has been drawn down on the loan.During September 2014, the Company received payment of $1.9 million on a note, representing $0.7 million of accrued interest and $1.2 million ofprincipal.During October 2014, the Company made a $7.5 million loan, which is collateralized by a property, bears interest at 8.8% and matures October 2015.The Company monitors the credit quality of its notes receivable on an ongoing basis and considers indicators of credit quality such as loan payment activity,the estimated fair value of the underlying collateral, the seniority of the Company's loan in relation to other debt secured by the collateral and the prospectsof the borrower. As of December 31, 2014, the Company held three non-performing notes.The following table reconciles the activity in the allowance for notes receivable from December 31, 2012 to December 31, 2014: Allowance for(dollars in thousands) Notes ReceivableBalance at December 31, 2012 $3,681Additional reserves —Recoveries —Charge-offs and reclassifications —Balance at December 31, 2013 $3,681Additional reserves —Recoveries (2,724)Charge-offs and reclassifications (957)Balance at December 31, 2014 $—F-30ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS6. Deferred ChargesDeferred charges consist of the following as of December 31, 2014 and 2013: December 31,(dollars in thousands) 2014 2013Deferred financing costs $39,660 $36,481Deferred leasing and other costs 37,275 33,664 76,935 70,145Accumulated amortization (46,256) (39,370)Total $30,679 $30,7757. Acquired Lease IntangiblesUpon acquisitions of real estate, the Company assesses the fair value of acquired assets (including land, buildings and improvements, and identifiedintangibles such as above and below market leases, including below market options, acquired in-place leases and customer relationships) and assumedliabilities in accordance with ASC Topic 805. The lease intangibles are amortized over the remaining terms of the respective leases, including option periodswhere applicable.The scheduled amortization of acquired lease intangible assets and assumed liabilities as of December 31, 2014 is as follows:(dollars in thousands) Acquired lease intangibles Assets Liabilities2015 $6,687 $5,1262016 6,330 4,9322017 5,126 4,3012018 4,676 3,7052019 4,119 3,569Thereafter 17,680 7,952Total $44,618 $29,585F-31ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS8. Mortgage and Other Notes PayableAt December 31, 2014 and 2013, mortgage, convertible and other notes payable, excluding the net valuation premium on the assumption of debt, aggregated$1,127.6 million and $1,038.1 million respectively, and were collateralized by 40 properties and related tenant leases. Interest rates on the Company’soutstanding mortgage indebtedness ranged from 1.00% to 6.65% with maturities that ranged from April 2015 to April 2023. Certain loans are cross-collateralized and contain cross-default provisions. The loan agreements contain customary representations, covenants and events of default. Certain loanagreements require the Company to comply with affirmative and negative covenants, including the maintenance of debt service coverage and leverage ratios.The following table reflects mortgage loan activity for the year ended December 31, 2014:(dollars inthousands) Borrowings RepaymentsPropertyDateDescriptionAmountInterest RateMaturity DateAmountInterest Rate664 N.MichiganAvenueJanuaryNew Borrowing$45,000LIBOR + 1.65%6/28/2018$—New Hyde ParkShoppingCenterJanuaryAdditional Draw1,500LIBOR + 2.25%11/10/2015—Heritage ShopsFebruaryRefinancing24,500LIBOR + 1.55%2/28/201620,900LIBOR + 2.25%654 BroadwayMarchNew Borrowing9,000LIBOR + 1.88%3/7/2017—Paramus PlazaMarchNew Borrowing12,600LIBOR + 1.70%2/20/2019—613-623 W.DiverseyAprilRepayment—7/1/20144,2006.35%Lake MontclairCenterAprilNew Borrowing15,500LIBOR + 2.15%5/1/2019—New Hyde ParkShoppingCenterAprilRefinancing12,000LIBOR + 1.85%5/1/20177,700LIBOR + 2.25%938 W. NorthAvenueMayNew Borrowing12,500LIBOR + 2.35%5/1/2017—1151 Third AveJuneNew Borrowing12,500LIBOR + 1.75%6/3/2017—New LoudonCenterJuneRepayment—5.64%9/6/201413,3005.64%Bedford GreenJulyAssumption29,7945.10%9/5/2017—City PointOctoberRefinancing20,000LIBOR + 2.00%11/1/202120,0007.25%City PointDecemberRefinancing20,000LIBOR + 1.70%8/23/201520,000LIBOR + 5.00%Lincoln ParkCenterDecemberAdditional Draw5,0003104 M StreetDecemberNew Borrowing103Prime + 0.50%12/10/2021—City Point (1)VariousAdditional Draw81,191Total $301,188 $86,100 F-32ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS8. Mortgage and Other Notes Payable, continuedNote:(1) As of December 31, 2014, $199.0 million of funds have been released under the Company's EB-5 loan relating to its City Point project into a restrictedcash account. $168.4 million has been drawn to fund construction activities, with $30.6 million remaining in the restricted cash account at December 31,2014.Unsecured Credit Facilities:During the year ended December 31, 2014, the Company borrowed $15.0 million on its unsecured credit facility and paid down $15.0 million. As ofDecember 31, 2014, there was no outstanding balance under this facility. During September 2014, the Company amended its unsecured credit facility and its$50.0 million term loan. The amendment extended the maturity date of the unsecured credit facility to January 31, 2018, reduced the interest rate fromLIBOR plus 155 basis points to LIBOR plus 140 basis points and reduced the unused fee from 35 basis points to 25 basis points. The amendment alsoextended the maturity date of the Company's $50.0 million term loan to November 25, 2019 and reduced the interest rate from LIBOR plus 140 basis pointsto LIBOR plus 130 basis points.During the year ended December 31, 2014, the Company borrowed $112.2 million on its Fund IV subscription line and paid down $103.9 million. Theoutstanding balance under this facility is $77.1 million as of December 31, 2014.The following table sets forth certain information pertaining to our credit facilities as of December 31, 2014:(dollars in thousands)Borrower Total amount ofcredit facility Amountborrowedas ofDecember 31, 2013 Net borrowings(repayments) during theyear endedDecember 31, 2014 Amountborrowed as ofDecember 31,2014 Lettersof credit outstandingas ofDecember 31, 2014 Amount availableunder credit facilitiesas ofDecember 31, 2014Operating Partnership $150,000 $— $— $— $12,500 $137,500Fund IV 150,000 68,750 8,350 77,100 — 72,900Total $300,000 $68,750 $8,350 $77,100 $12,500 $210,400F-33ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS8. Mortgage and Other Notes Payable, continuedThe following table summarizes the Company’s mortgage and other indebtedness as of December 31, 2014 and December 31, 2013:(dollars in thousands) Description of Debt and Collateral 12/31/2014 12/31/2013 Interest Rate at December31, 2014 Maturity PaymentTermsMortgage notes payable – variable-rate Liberty Avenue $8,973 $9,090 2.92% (LIBOR+2.75%) 4/30/2015 Monthly principal and interest.210 Bowery 4,600 4,600 2.12% (LIBOR+1.95%) 6/1/2015 Interest only monthly.640 Broadway 22,564 22,750 3.12% (LIBOR+2.95%) 7/1/2015 Monthly principal and interest.Heritage Shops — 20,871 2.42% (LIBOR+2.25%) 8/10/2015 Interest only monthly.CityPoint 20,650 20,650 4.17% (LIBOR+4.00%) 8/12/2015 Interest only monthly.CityPoint 20,000 20,000 1.87% (LIBOR+1.70%) 8/23/2015 Interest only monthly.Cortlandt Towne Center 83,936 84,745 1.82% (LIBOR+1.65%) 10/26/2015 Monthly principal and interest.New Hyde Park Shopping Center — 6,294 2.40% (LIBOR+1.85%) 11/10/2015 Monthly principal and interest.3780-3858 Nostrand Avenue 12,046 12,567 2.82% (LIBOR+2.65%) 2/1/2016 Monthly principal and interest.Heritage Shops 24,500 — 1.72% (LIBOR+1.55%) 2/28/2016 Interest only monthly.Lincoln Park Centre 28,000 23,000 1.62% (LIBOR+1.45%) 12/3/2016 Interest only monthly.654 Broadway 9,000 — 2.05% (LIBOR+1.88%) 3/1/2017 Interest only monthly.New Hyde Park Shopping Center 11,720 — 2.02% (LIBOR+1.85%) 5/1/2017 Monthly principal and interest.938 W. North Avenue 12,500 — 2.52% (LIBOR+2.35%) 5/1/2017 Interest only monthly.1151 Third Avenue 12,481 — 1.92% (LIBOR+1.75%) 6/3/2017 Interest only monthly.161st Street 29,500 29,500 2.67% (LIBOR+2.50%) 4/1/2018 Interest only monthly.664 N. Michigan 44,369 — 1.82% (LIBOR+1.65%) 6/28/2018 Monthly principal and interest.Paramus Plaza 12,600 — 1.87% (LIBOR+1.70%) 2/20/2019 Interest only monthly.Lake Montclair Center 15,284 — 2.32% (LIBOR+2.15%) 5/1/2019 Monthly principal and interest.City Point 20,000 — 1.56% (LIBOR+1.39%) 11/1/2021 Interest only monthly.3104 M Street 103 — 3.75% (Prime+0.5%) 12/10/2021 Interest only monthly.4401 N. White Plains Road 6,141 6,263 2.07% (LIBOR+1.90%) 9/1/2022 Monthly principal and interest.28 Jericho Turnpike 15,747 16,164 2.07% (LIBOR+1.90%) 1/23/2023 Monthly principal and interest.60 Orange Street 8,236 8,457 1.92% (LIBOR+1.75%) 4/3/2023 Monthly principal and interest.Sub-total mortgage notes payable $422,950 $284,951 F-34ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS8. Mortgage and Other Notes Payable, continued(dollars in thousands) Description of Debt and Collateral 12/31/2014 12/31/2013 Interest Rate atDecember 31, 2014 Maturity PaymentTermsUnsecured Debt Fund IV revolving subscription line of credit(2) $77,100 $68,750 1.82% (LIBOR+1.65%) 11/20/2015 Interest only monthly.Unsecured Line of Credit — — 1.57% (LIBOR+1.40%) 1/31/2018 Interest only monthly.Term Loan 50,000 50,000 1.47% (LIBOR+130%) 11/25/2019 Interest only monthly.Interest rate swaps (1) (223,829) (179,660) Total variable-rate debt 326,221 224,041 Mortgage notes payable – fixed-rate 613-623 W. Diversey $— $4,192 6.35% 7/1/2014 Monthly principal and interest.New Loudon Center — 13,369 5.64% 9/6/2014 Monthly principal and interest.CityPoint — 20,000 7.25% 11/1/2014 Interest only quarterly.Crescent Plaza 16,455 16,747 4.98% 9/6/2015 Monthly principal and interest.Pacesetter Park Shopping Center 11,307 11,530 5.12% 11/6/2015 Monthly principal and interest.Elmwood Park Shopping Center 32,201 32,744 5.53% 1/1/2016 Monthly principal and interest.Chicago Street Retail Portfolio 15,265 15,558 5.61% 2/1/2016 Monthly principal and interest.Gateway Shopping Center 19,440 19,746 5.44% 3/1/2016 Monthly principal and interest.330-340 River Street 10,668 10,904 5.30% 5/1/2016 Monthly principal and interest.Brandywine Town Center 166,200 166,200 5.99% 7/1/2016 Interest only monthly.Walnut Hill Plaza — 22,910 6.06% 10/1/2016 Monthly principal and interest.Rhode Island Place Shopping Center 15,975 16,208 6.35% 12/1/2016 Monthly principal and interest.239 Greenwich Avenue 26,000 26,000 5.42% 2/11/2017 Interest only monthly.639 West Diversey 4,245 4,341 6.65% 3/1/2017 Monthly principal and interest.Merrillville Plaza 25,504 25,837 5.88% 8/1/2017 Monthly principal and interest.Bedford Green 29,586 — 5.10% 9/5/2017Monthly principal and interest.216th Street — 25,500 5.80% 10/1/2017 Interest only monthly.CityPoint 5,262 5,262 1.00% 8/23/2019 Interest only monthly.CityPoint 199,000 197,000 4.75% 2020 (3) Interest only monthly.Convertible Notes380380 3.75% (4)Interest only semi-annually.Interest rate swaps (1) 223,829 179,660 2.15% Total fixed-rate debt 801,317 814,088 Unamortized premium 2,943 1,868 Total $1,130,481 $1,039,997 Notes:(1)Represents the amount of the Company’s variable-rate debt that has been fixed through certain cash flow hedge transactions (Note 10).(2)The Fund IV revolving subscription line of credit is secured by unfunded investor capital commitments.(3)The maturity date of this loan is five years after the final advancing of funds which is currently anticipated to occur by the end of 2015.(4)Holders of the Convertible Notes may require the Company to repurchase them at par on December 15, 2016 and December 15, 2021. The Company mayredeem the Convertible Notes, in whole, or in part, at any time.F-35ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS8. Mortgage and Other Notes Payable, continuedThe scheduled principal repayments of all indebtedness, including Convertible Notes (Note 9), as of December 31, 2014 are as follows (does not include$2,943 net valuation premium on assumption of debt): (dollars in thousands)2015$271,7842016326,7672017130,721201871,790201982,423Thereafter244,053 $1,127,5389. Convertible Notes PayableIn December 2006 and January 2007, the Company issued a total of $115.0 million of convertible notes with a fixed interest rate of 3.75% due 2026 (the"Convertible Notes"). The Convertible Notes were issued at par and require interest payments semi-annually in arrears on June 15 and December 15 of eachyear. The Convertible Notes are unsecured, unsubordinated obligations and rank equally with all other unsecured and unsubordinated indebtedness. TheConvertible Notes were accounted for under ASC Topic 470-20, “Debt with Conversion and Other Options,” which required the Company to allocate theproceeds from the issuance between a debt component and an equity component. The resulting discount on the debt component was amortized over theperiod the convertible debt was expected to be outstanding, which was December 11, 2006 to December 20, 2011, as additional non-cash interest expense.Until December 20, 2011, the Convertible Notes had an effective interest rate of 6.03% after giving effect to ASC Topic 470-20.As of December 31, 2014, $114.6 million of the Convertible Notes have been repurchased. The remaining Convertible Notes bear interest at 3.75% and theCompany has 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 thenotes plus any accrued and unpaid interest to, but not including, the redemption date. The Holders of notes may require the Company to repurchase theirnotes, in whole or in part, on December 15, 2016 and December 15, 2021 for cash equal to 100% of the principal amount of the notes to be repurchased plusany accrued and unpaid interest to, but not including, the repurchase date.10. Financial Instruments and Fair Value MeasurementsThe FASB’s fair value measurements and disclosure guidance requires the valuation of certain of the Company’s financial assets and liabilities, based on athree-level fair value hierarchy. Market participant assumptions obtained from sources independent of the Company are observable inputs that are classifiedwithin Levels 1 and 2 of the hierarchy, and the Company’s own assumptions about market participant assumptions are unobservable inputs classified withinLevel 3 of the hierarchy.The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31,2014:(dollars in thousands) Level 1 Level 2 Level 3Assets Derivative financial instruments $— $226 $—Liabilities Derivative financial instruments $— $4,567 $—F-36ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS10. Financial Instruments and Fair Value Measurements, continuedDuring the year ended December 31, 2012, the Company determined that the carrying value in its investment in Mervyns was impaired and recorded animpairment of $2.0 million (Note 1). The analysis performed consisted of discounted cash flows which were used to determine the fair value of the Mervynsinvestment and were classified as Level 3 under authoritative guidance for fair value measurements.During the year ended December 31, 2013, the Company determined that the value of the Walnut Hill Plaza was impaired and recorded an impairment loss of$1.5 million (Note 1). The Company estimated the fair value by using projected future cash flows, which it determined were not sufficient to recover theproperty's net book value. The inputs used to determine this fair value are classified within Level 3 under authoritative guidance for fair value measurements.During the year ended December 31, 2013, the Company entered into a firm contract to sell Sheepshead Bay for $20.2 million. As this amount is less than thecarrying cost, the Company recorded an impairment loss of $6.7 million (Note 1).Derivative Financial InstrumentsThe FASB’s derivative and hedging guidance establishes accounting and reporting standards for derivative instruments, including certain derivativeinstruments embedded in other contracts, and for hedging activities. As required by the FASB guidance, the Company records all derivatives on the balancesheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation.Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interestrate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasttransactions, are considered cash flow hedges.For derivatives designated as fair value hedges, changes in the fair value of the derivative and the hedged item related to the hedged risk are recognized inearnings. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in othercomprehensive (loss) income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffectiveportion of changes in the fair value of the derivative is recognized directly in earnings. The Company assesses the effectiveness of each hedging relationshipby comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designatedhedged item or transaction. For derivatives not designated as hedges, changes in fair value would be recognized in earnings.As of December 31, 2014, the Company’s derivative financial instruments consisted of 14 interest rate LIBOR swaps with an aggregate notional value of$223.8 million, which fix interest at rates from 0.70% to 3.77%, and mature between May 2015 and March 2025. The Company also has four derivativefinancial instruments with a notional value of $139.6 million which cap interest rates ranging from 3.0% to 4.3% and mature between July 2015 and April2018. The fair value of the derivative liability of these instruments, which is included in other liabilities in the consolidated balance sheets, totaled $4.6million and $2.0 million at December 31, 2014 and 2013, respectively. The fair value of these derivative instruments, included in prepaid expenses and otherassets in the Consolidated Balance Sheets, totaled $0.2 million and $3.1 million at December 31, 2014 and 2013, respectively. The notional value does notrepresent exposure to credit, interest rate or market risks. The Company is also a party to two forward starting interest rate swap transactions with respect to$50.0 million of LIBOR-based variable debt.These derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on variable rate mortgage debt. Such instrumentsare reported at the fair value reflected above. As of December 31, 2014 and 2013, unrealized (losses) and income totaling ($4.0 million) and $1.1 million,respectively, were reflected in accumulated other comprehensive (loss) income. It is estimated that approximately $4.3 million included in accumulated othercomprehensive (loss) income related to derivatives will be reclassified to interest expense in the 2015 results of operations.As of December 31, 2014 and 2013, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, theCompany does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges. As ofDecember 31, 2014, none of the Company’s hedges were ineffective.F-37ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS10. Financial Instruments and Fair Value Measurements, continuedFinancial InstrumentsCertain of the Company’s assets and liabilities meet the definition of financial instruments. Except as disclosed below, the carrying amounts of thesefinancial instruments approximates their fair value due to the short-term nature of such accounts.The Company has determined the estimated fair values of the following financial instruments within Level 2 of the hierarchy by discounting future cashflows utilizing a discount rate equivalent to the rate at which similar financial instruments would be originated at the reporting date: December 31, 2014 December 31, 2013(dollars in thousands) CarryingAmount EstimatedFairValue CarryingAmount EstimatedFairValueNotes Receivable and Preferred Equity Investments $102,286 $102,286 $126,656 $126,656Mortgage, Convertible Notes and Other Notes Payable $1,130,481 $1,141,371 $1,039,997 $1,056,45711. Shareholders’ Equity and Noncontrolling InterestsCommon SharesDuring 2014, 3,886 employee Restricted Shares were canceled to pay the employees’ income taxes due on the value of the portion of their Restricted Sharesthat vested. During 2014, the Company recognized accrued Common Share and Common OP Unit-based compensation totaling $6.2 million in connectionwith the vesting of Restricted Shares and Units (Note 15).During 2014, the Company issued approximately 4.4 million Common Shares from the ATM program generating net proceeds of approximately $127.1million and completed two public share offerings aggregating approximately 7.6 million Common Shares generating net proceeds of approximately $230.7million.During 2014, the Company issued approximately 1.6 million OP units to acquire real estate.During 2013, the Company issued approximately 3.0 million Common Shares from the ATM program generating net proceeds of approximately $80.7million.During 2013, the Company issued approximately 1.2 million OP units to acquire real estate.During 2012, the Company issued approximately 6.1 million Common Shares from the ATM program generating net proceeds of approximately $140.8million and completed a public share offering of approximately 3.5 million Common Shares generating net proceeds of approximately $85.9 million.During 2012, Kenneth Bernstein, President and CEO, converted 250,000 Common OP Units into Common Shares.Noncontrolling InterestsThe following table summarizes the change in the noncontrolling interests since December 31, 2013:F-38ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS11. Shareholders’ Equity and Noncontrolling Interests, continued NoncontrollingInterestsin OperatingPartnership NoncontrollingInterestsin Partially-OwnedAffiliates(dollars in thousands) Balance at December 31, 2013 $48,948 $368,404Distributions declared of $1.23 per Common OP Unit (5,085) —Net income for the period January 1 through December 31, 2014 3,204 77,878Conversion of 136,128 OP Units to Common Shares by limited partners of the Operating Partnership (3,181) —Issuance of OP Units to acquire real estate 44,051 —Other comprehensive income - unrealized loss on valuation of swap agreements (345) (902)Reclassification of realized interest expense on swap agreements 115 984Noncontrolling interest contributions — 57,969Noncontrolling interest distributions and other reductions — (218,152)Employee Long-term Incentive Plan Unit Awards 6,528 —Balance at December 31, 2014 $94,235 $286,181Noncontrolling interests in the Operating Partnership represents (i) the limited partners’ 2,988,277 and 1,457,467 Common OP Units at December 31, 2014and 2013, respectively, (ii) 188 Series A Preferred OP Units at both December 31, 2014 and 2013, with a stated value of $1,000 per unit, which are entitled toa 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 aSeries A Preferred OP Unit if such unit was converted into a Common OP Unit and (iii) 1,719,206 and 1,368,086 LTIP units as of December 31, 2014 and2013, respectively, as discussed in Share Incentive Plan (Note 15).Noncontrolling interests in partially-owned affiliates include third-party interests in Fund I, II, III and IV, and Mervyns I and II, and five other entities.The Series A Preferred OP Units were issued in 1999 in connection with the acquisition of a property. Through December 31, 2014, 1,392 Series A PreferredOP Units were converted into 185,600 Common OP Units and then into Common Shares. The 188 remaining Series A Preferred OP Units are currentlyconvertible 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 theSeries A Preferred OP Units at the lesser of $7.50 or the market price of the Common Shares as of the conversion date.12. Related Party TransactionsThe Company earned property management, construction, development, legal and leasing fees from its investments in unconsolidated partnerships totaling$0.2 million, $0.1 million and $0.8 million for the years ended December 31, 2014, 2013 and 2012, 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, 2013 and 2012. Theconsulting agreement was terminated as of December 31, 2013 and no such fees were incurred for the year ended December 31, 2014.F-39ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS13. Tenant LeasesSpace in the shopping centers and other retail properties is leased to various tenants under operating leases that usually grant tenants renewal options andgenerally provide for additional rents based on certain operating expenses as well as tenants’ sales volume.Minimum future rentals to be received under non-cancelable leases for shopping centers and other retail properties as of December 31, 2014 are summarizedas follows: (dollars in thousands)2015$124,6992016118,0392017107,338201894,846201982,356Thereafter418,588Total$945,866During the years ended December 31, 2014, 2013 and 2012, no single tenant collectively accounted for more than 10% of the Company’s total revenues.14. Lease ObligationsThe Company leases land at eight of its shopping centers, which are accounted for as operating leases and generally provide the Company with renewaloptions. Ground rent expense was $1.8 million, $1.8 million, and $1.7 million (including capitalized ground rent at properties under redevelopment of $0.8million, $0.8 million and $0.8 million) for the years ended December 31, 2014, 2013 and 2012, respectively. The leases terminate at various dates between2019 and 2066. These leases provide the Company with options to renew for additional terms aggregating from 23 to 71 years. The Company also leasesspace for its corporate office. Office rent expense under this lease was $1.5 million, $1.4 million and $1.4 million for the years ended December 31, 2014,2013 and 2012, respectively. Future minimum rental payments required for leases having remaining non-cancelable lease terms are as follows:(dollars in thousands)2015$2,75620161,76120176,33620182,37620192,346Thereafter19,424Total$34,999F-40ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS15. Share Incentive PlanDuring 2012, the Company terminated the 1999 and 2003 Plans and adopted the Amended 2006 Plan. The Amended 2006 Plan increased the authorizationto issue options, Restricted Shares and LTIP Units (collectively "Awards") available to officers and employees by 1.9 million shares to 2.1 million shares.Options are granted by the Compensation Committee (the "Committee"), which currently consists of three non-employee Trustees, and will not have anexercise price less than 100% of the fair market value of the Common Shares and a term of greater than ten years at the grant date. Vesting of options is at thediscretion of the Committee. The Committee determines the restrictions placed on Awards, including the dividends or distributions thereon and the term ofsuch restrictions. The Committee also determines the award and vesting of the awards based on the attainment of specified performance objectives of theCompany within a specified performance period.On February 28, 2014, the Company issued a total of 326,230 LTIP Units and 918 Restricted Share Units to officers of the Company and 10,527 RestrictedShare Units to other employees of the Company. Vesting with respect to these awards is generally recognized ratably over the five annual anniversariesfollowing the issuance date. Vesting with respect to 16% of the awards issued to officers is also generally subject to achieving certain Company performancemeasures. LTIP Units are similar to Restricted Shares but provide for a quarterly partnership distribution in a like amount as paid to Common OP Units. Thisdistribution is paid on both unvested and vested LTIP Units. The LTIP Units are convertible into Common OP Units and Common Shares upon vesting and arevaluation of the book capital accounts.On March 31, 2014 , the Company entered into an Amended and Restated Employment Agreement with Kenneth Bernstein, Chief Executive Officer, andissued an additional 114,198 LTIP Units which are subject to a five-year vesting period.These awards were measured at their fair value as if they were vested on the grant date. Fair value was established as the market price of the Company'sCommon Shares as of the close of trading on the day preceding the grant date.The total value of the above Restricted Share Units and LTIP Units as of the grant date was $11.9 million, of which $0.5 million was recognized ascompensation expense in 2013, and $11.4 million will be recognized as compensation expense over the vesting period. The weighted average fair value forRestricted Shares and LTIP Units granted for the years ended December 31, 2014, 2013 and 2012 were $26.30, $26.40 and $22.31, respectively.Total long-term incentive compensation expense, including the expense related to the above mentioned plans, was $6.2 million, $7.3 million and $3.6million for the years ended December 31, 2014, 2013 and 2012, respectively and is recorded in General and Administrative on the consolidated statements ofincome.On June 4, 2014, the Company issued 17,118 Restricted Shares and 1,518 LTIP Units to Trustees of the Company in connection with Trustee fees. Vestingwith respect to 6,276 of the Restricted Shares and 1,518 of the LTIP Units will be on the first anniversary of the date of issuance and 10,842 of the RestrictedShares vest over three years with 33% vesting on each of the next three anniversaries of the issuance date. The Restricted Shares do not carry voting rights orother rights of Common Shares until vesting and may not be transferred, assigned or pledged until the recipients have a vested non-forfeitable right to suchshares. Dividends are not paid currently on unvested Restricted Shares, but are paid cumulatively from the issuance date through the applicable vesting dateof such Restricted Shares. Trustee fee expense of $0.2 million for the year ended December 31, 2014 has been recognized in the accompanying consolidatedstatement of income related to this issuance.In 2009, the Company adopted the Long Term Investment Alignment Program (the "Program") pursuant to which the Company may award units primarily tosenior executives which would entitle them to receive up to 25% of any future Fund III Promote when and if such Promote is ultimately realized. TheCompany has awarded all of the units under the Program, and these units were determined to have no value at issuance or as of December 31, 2014. Inaccordance with ASC Topic 718, "Compensation - Stock Compensation," compensation relating to these awards will be recorded based on the change in theestimated fair value at each reporting period.As of December 31, 2014, the Company had 46,347 options outstanding to officers and employees and 9,000 options outstanding to non-employee Trusteesof the Company all of which have vested. These options are for ten-year terms from the grant date and vested in three equal annual installments, which beganon their respective grant dates.A summary of option activity under all option arrangements as of December 31, 2014 and 2013, and changes during the years then ended, is presented below:F-41ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS15. Share Incentive Plan, continuedOptions Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (dollars in thousands)Outstanding and exercisable at December 31, 2012 137,647 $18.71 2.6 $877Granted — — — —Exercised (23,815) 15.96 — 211Forfeited or Expired (746) 20.65 — —Outstanding and exercisable at December 31, 2013 113,086 19.28 3.5 628Granted — — — —Exercised (57,739) 17.68 — 828Forfeited or Expired — — — —Outstanding and exercisable at December 31, 2014 55,347 $20.93 1.1 $614The total intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $0.8 million, $0.2 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, 2014 and 2013 and changes during the years thenended is presented below:Unvested Restricted Shares and LTIP Units Restricted Shares Weighted Grant-Date Fair Value LTIP Units Weighted Grant-Date Fair ValueUnvested at December 31, 2012 60,916 $19.36 943,686 $19.27Granted 31,830 23.75 290,912 26.69Vested (28,179) 18.77 (350,264) 19.51Forfeited (830) 23.00 — —Unvested at December 31, 2013 63,737 23.34 884,334 21.62Granted 28,563 27.18 441,946 26.24Vested (34,598) 23.40 (263,556) 20.23Forfeited (2,684) 23.54 (800) 24.66Unvested at December 31, 2014 55,018 $25.90 1,061,924 $23.92As of December 31, 2014, there was $16.1 million of total unrecognized compensation cost related to unvested share-based compensation arrangementsgranted under share incentive plans. That cost is expected to be recognized over a weighted-average period of 2.4 years. The total fair value of RestrictedShares that vested during the years ended December 31, 2014, 2013 and 2012 was $0.8 million, $0.5 million and $0.8 million, respectively. The total fairvalue of LTIP Units that vested during the years ended December 31, 2014, 2013 and 2012 was $5.3 million, $6.8 million and $3.0 million, respectively.F-42ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS16. Employee Share Purchase and Deferred Share PlanThe Acadia Realty Trust Employee Share Purchase Plan (the "Purchase Plan"), allows eligible employees of the Company to purchase Common Sharesthrough payroll deductions. The Purchase Plan provides for employees to purchase Common Shares on a quarterly basis at a 15% discount to the closingprice of the Company’s Common Shares on either the first day or the last day of the quarter, whichever is lower. A participant may not purchase more the$25,000 in Common Shares per year. Compensation expense will be recognized by the Company to the extent of the above discount to the closing price ofthe Common Shares with respect to the applicable quarter. During 2014, 2013 and 2012, a total of 4,668, 3,678, and 3,829 Common Shares, respectively,were purchased by employees under the Purchase Plan. Associated compensation expense of $0.01 million was recorded in each of the years ended December31, 2014, 2013 and 2012.During May of 2006, the Company adopted a Trustee Deferral and Distribution Election ("Trustee Deferral Plan"), under which the participating Trusteeshave deferred compensation of $0.09 million for 2014, $0.07 million for 2013 and $0.06 million for 2012.17. Employee 401(k) PlanThe 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 theemployee’s annual salary. A plan participant may contribute up to a maximum of 15% of their compensation, up to $17,500, for the year ended December 31,2014. The Company contributed $0.3 million for each of the years ended December 31, 2014, 2013 and 2012.18. Dividends and Distributions PayableOn November 4, 2014, the Board of Trustees declared a regular quarterly cash dividend of $0.24 per Common Share which was paid on January 15, 2015 toholders of record as of December 31, 2014. In addition, on December 5, 2014, the Board of Trustees declared a special cash dividend of $0.30 per CommonShare with the same record and payment date as the regular quarterly dividend. The special dividend is a result of the taxable capital gains for 2014 arisingfrom property dispositions, primarily the sale of Fund III and IV’s Lincoln Road Portfolios.19. Federal Income TaxesThe Company has elected to qualify as a REIT in accordance with Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"),and intends at all times to qualify as a REIT under the Code. To qualify as a REIT, the Company must meet a number of organizational and operationalrequirements, including a requirement that it currently distribute at least 90% of its annual REIT taxable income to its shareholders. As a REIT, the Companygenerally will not be subject to corporate Federal income tax, provided that distributions to its shareholders equal at least the amount of its REIT taxableincome as defined under the Code. As the Company distributed sufficient taxable income for the years ended December 31, 2014, 2013 and 2012, 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 theregular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable years.Even though the Company qualifies for taxation as a REIT, the Company is subject to certain state and local taxes on its income and property and Federalincome and excise taxes on any undistributed taxable income. In addition, taxable income from non-REIT activities managed through the Company’sTaxable REIT Subsidiaries ("TRS") is subject to Federal, state and local income taxes.F-43ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS19. Federal Income Taxes, continuedCharacterization of Distributions:The Company has determined that the cash distributed to the shareholders is characterized as follows for Federal income tax purposes: For the years ended December 31, 2014 2013 2012Ordinary income 69% 87% 63%Qualified dividend —% —% —%Capital gain 31% 13% 37% 100% 100% 100%Taxable REIT SubsidiariesIncome taxes have been provided for using the liability method as required by ASC Topic 740, "Income Taxes." The Company’s TRS income and provisionfor income taxes for the years ended December 31, 2014, 2013 and 2012 are summarized as follows:(dollars in thousands) 2014 2013 2012TRS loss before income taxes $(36) $(2,225) $(2,056)(Provision) benefit for income taxes: Federal (377) 276 592State and local (97) 71 147TRS net loss before noncontrolling interests (510) (1,878) (1,317)Noncontrolling interests (508) 267 702TRS net loss $(1,018) $(1,611) $(615)The income tax provision differs from the amount computed by applying the statutory federal income tax rate to income before income taxes as follows (notadjusted for temporary book/tax differences):(dollars in thousands) 2014 2013 2012Federal benefit at statutory tax rate $(12) $(757) $(699)TRS state and local taxes, net of federal benefit (2) (117) (109)Tax effect of: Permanent differences, net 446 496 809Prior year overaccrual, net 1 128 (553)Restricted stock vesting (20) (2) (159)Other 61 127 (41)REIT state and local income and franchise taxes 155 144 178Total provision (benefit) for income taxes $629 $19 $(574)F-44ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS20. Earnings Per Common ShareBasic earnings per Common Share is computed by dividing net income attributable to Common Shareholders by the weighted average Common Sharesoutstanding. At December 31, 2014, the Company has unvested LTIP Units (Note 15) which provide for non-forfeitable rights to dividend equivalentpayments. Accordingly, these unvested LTIP Units are considered participating securities and are included in the computation of basic earnings per CommonShare pursuant to the two-class method.Diluted earnings per Common Share reflects the potential dilution of the conversion of obligations and the assumed exercises of securities including theeffects of restricted share unit ("Restricted Share Units") and share option awards issued under the Company’s Share Incentive Plans (Note 15). The effect ofthe assumed conversion of 188 Series A Preferred OP Units into 25,067 Common Shares would be anti-dilutive and therefore is not included in thecomputation of diluted earnings per share for the years ended December 2014, 2013 and 2012.The effect of the conversion of Common OP Units is not reflected in the computation of basic and diluted earnings per share, as they are exchangeable forCommon Shares on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in theaccompanying consolidated financial statements. As such, the assumed conversion of these units would have no net impact on the determination of dilutedearnings per share. Based on the market price of the Common Shares as of December 31, 2014, the issuance of additional Common Shares assumingconversion of the Company's convertible notes payable (Note 9) would be dilutive and is included in the computation of basic and diluted earnings per sharefor the year ended December 31, 2014. Years ended December 31,(dollars in thousands, except per share amounts) 2014 2013 2012Numerator: Income from continuing operations $70,865 $34,026 $23,619Less: net income attributable to participating securities 1,152 581 458Income from continuing operations net of income 69,713 33,445 23,161attributable to participating securities Denominator: Weighted average shares for basic earnings per share 59,402 54,919 45,854Effect of dilutive securities: Employee share options 24 38 40Denominator for diluted earnings per share 59,426 54,957 45,894Basic earnings per Common Share from continuing operationsattributable to Common Shareholders $1.18 $0.61 $0.51Diluted earnings per Common Share from continuing operationsattributable to Common Shareholders $1.18 $0.61 $0.51F-45ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS21. Summary of Quarterly Financial Information (unaudited)The quarterly results of operations of the Company for the years ended December 31, 2014 and 2013 are as follows:(amounts in thousands, except per share amounts) March 31, 2014 June 30, 2014 September 30, 2014 December 31, 2014Revenue $46,685 $49,511 $47,660 $51,156Income from continuing operations attributable to CommonShareholders $21,595 $11,365 $28,564 $9,341Income from discontinued operations attributable toCommon Shareholders — 99 — 100Net income attributable to Common Shareholders $21,595 $11,464 $28,564 $9,441Net income attributable to Common Shareholders perCommon Share - basic: Income from continuing operations $0.38 $0.19 $0.47 $0.13Income from discontinued operations — — — —Net income per share $0.38 $0.19 $0.47 $0.13Net income attributable to Common Shareholders perCommon Share - diluted: Income from continuing operations $0.38 $0.19 $0.47 $0.15Income from discontinued operations — — — —Net income per share $0.38 $0.19 $0.47 $0.15Cash dividends declared per Common Share $0.23 $0.23 $0.23 $0.54(amounts in thousands, except per share amounts) March 31, 2013 June 30, 2013 September 30, 2013 December 31, 2013Revenue $42,291 $40,808 $41,085 $44,102Income from continuing operations attributable to CommonShareholders $9,590 $7,967 $8,893 $7,576Income from discontinued operations attributable toCommon Shareholders 33 790 591 4,675Net income attributable to Common Shareholders $9,623 $8,757 $9,484 $12,251Net income attributable to Common Shareholders perCommon Share - basic: Income from continuing operations $0.18 $0.14 $0.16 $0.14Income from discontinued operations — 0.02 0.01 0.08Net income per share $0.18 $0.16 $0.17 $0.22Net income attributable to Common Shareholders perCommon Share - diluted: Income from continuing operations $0.18 $0.14 $0.16 $0.14Income from discontinued operations — 0.02 0.01 0.08Net income per share $0.18 $0.16 $0.17 $0.22Cash dividends declared per Common Share $0.21 $0.21 $0.21 $0.23F-46ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS22. Commitments and ContingenciesUnder various Federal, state and local laws, ordinances and regulations relating to the protection of the environment, a current or previous owner or operatorof real estate may be liable for the cost of removal or remediation of certain hazardous or toxic substances disposed, stored, generated, released, manufacturedor discharged from, on, at, under, or in a property. As such, the Company may be potentially liable for costs associated with any potential environmentalremediation 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 ofasbestos, underground storage tanks and polychlorinated biphenyls (PCBs). Although such reviews are intended to evaluate the environmental condition ofthe subject property as well as surrounding properties, there can be no assurance that the review conducted by the Company will be adequate to identifyenvironmental or other problems that may exist. Where a Phase II assessment is so recommended, a Phase II assessment is conducted to further determine theextent of possible environmental contamination. In all instances where a Phase I or II assessment has resulted in specific recommendations for remedialactions, the Company has either taken or scheduled the recommended remedial action. To mitigate unknown risks, the Company has obtained environmentalinsurance for most of its properties, which covers only unknown environmental risks.The Company believes that it is in compliance in all material respects with all Federal, state and local ordinances and regulations regarding hazardous ortoxic substances. Management is not aware of any environmental liability that it believes would have a material adverse impact on the Company’s financialposition or results of operations. Management is unaware of any instances in which the Company would incur significant environmental costs if any or allproperties were sold, disposed of or abandoned. However, there can be no assurance that any such non-compliance, liability, claim or expenditure will notarise in the future.The Company is involved in various matters of litigation arising in the normal course of business. While the Company is unable to predict with certainty theamounts involved, the Company’s management and counsel are of the opinion that, when such litigation is resolved, the Company’s resulting liability, ifany, will not have a significant effect on the Company’s consolidated financial position, results of operations, or liquidity. The Company's policy is to accruelegal expenses as they are incurred.During August 2009, the Company terminated the employment of a former Senior Vice President (the "Former Employee") for engaging in conduct that fellwithin the definition of "cause" in his severance agreement with the Company. Had the Former Employee not been terminated for "cause," he would havebeen eligible to receive approximately $0.9 million under the severance agreement. Because the Company terminated him for "cause," it did not pay theFormer Employee any severance benefits under the agreement. The Former Employee has brought a lawsuit against the Company in New York State SupremeCourt (the "Court"), alleging breach of the severance agreement. On August 7, 2014, the Court granted summary judgment in favor of the Company, asdefendant, and against plaintiff, the Former Employee, finding that his conduct in fact and law, constituted "cause" under his severance agreement. Plaintiffhas filed a notice of appeal but has not yet perfected his appeal. The Company continues to believe that termination was justified for “cause” and that it willbe successful on appeal.In connection with Phase 2 of the City Point Project, Albee Development LLC ("Albee"), and a non-affiliated construction manager have been served with aSummons With Notice by Casino Development Group, Inc. ("Casino"), the former contractor responsible for the excavation and concrete work at the CityPoint Project. Albee terminated the contract with Casino for cause prior to completion of the contract. The plaintiff is seeking approximately $7.4 million ,which has now been bonded. Albee believes that it has meritorious defenses to, and is prepared to vigorously defend itself against the claims. Presently, theparties are before the New York State Supreme Court in Kings County on procedural matters; Albee’s position is that Casino waived any right to arbitrate. Asthe case is in the early stages of litigation, the outcome of these claims cannot be determined at this time.23. Subsequent EventsDuring January 2015, Fund IV completed the acquisition of 1035 Third Avenue in Manhattan, New York, for a purchase price of $51.0 million.During January 2015, Fund III completed the disposition of Lincoln Park Centre in Chicago, Illinois, for a sales price of $64.0 million.F-47ACADIA REALTY TRUSTSCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATIONDecember 31, 2014 Initial Costto Company Amount at whichCarried at December 31, 2014 Description Encumbrances Land Buildings &Improvements CostsCapitalizedSubsequent toAcquisition Land Buildings &Improvements Total AccumulatedDepreciation Date ofAcquisition (a)Construction (c) Shopping Centers Core Portfolio: Crescent PlazaBrockton, MA $16,455 $1,147 $7,425 $1,376 $1,147 $8,801 $9,948 $6,913 1993 (a)New Loudon CenterLatham, NY — 505 4,161 13,052 505 17,213 17,718 13,112 1993 (a)Mark PlazaEdwardsville, PA — — 4,268 (872) — 3,396 3,396 2,783 1993 (c)Plaza 422Lebanon, PA — 190 3,004 2,309 190 5,313 5,503 4,963 1993 (c)Route 6 MallHonesdale, PA — 1,664 — 12,276 1,664 12,276 13,940 7,624 1994 (c)Abington Towne CenterAbington, PA — 799 3,197 2,357 799 5,554 6,353 3,307 1998 (a)Bloomfield Town SquareBloomfield Hills, MI — 3,207 13,774 21,579 3,207 35,353 38,560 15,511 1998 (a)Elmwood Park ShoppingCenterElmwood Park, NJ 32,201 3,248 12,992 15,855 3,798 28,297 32,095 15,647 1998 (a)Merrillville PlazaHobart, IN 25,503 4,288 17,152 5,553 4,288 22,705 26,993 9,400 1998 (a)Marketplace of AbseconAbsecon, NJ — 2,573 10,294 4,900 2,577 15,190 17,767 6,616 1998 (a)239 Greenwich AvenueGreenwich, CT 26,000 1,817 15,846 597 1,817 16,443 18,260 6,545 1998 (a)Hobson West PlazaNaperville, IL — 1,793 7,172 1,842 1,793 9,014 10,807 4,308 1998 (a)Village CommonsShopping CenterSmithtown, NY — 3,229 12,917 4,048 3,229 16,965 20,194 7,799 1998 (a)Town Line PlazaRocky Hill, CT — 878 3,510 7,609 907 11,090 11,997 8,615 1998 (a)Branch Shopping CenterSmithtown, NY — 3,156 12,545 11,457 3,401 23,757 27,158 7,045 1998 (a)Methuen Shopping CenterMethuen, MA — 956 3,826 594 961 4,415 5,376 2,070 1998 (a)Gateway Shopping CenterSouth Burlington, VT 19,440 1,273 5,091 12,258 1,273 17,349 18,622 7,608 1999 (a)Mad River StationDayton, OH — 2,350 9,404 1,149 2,350 10,553 12,903 4,590 1999 (a)Pacesetter Park ShoppingCenterRamapo, NY 11,307 1,475 5,899 2,235 1,475 8,134 9,609 3,757 1999 (a)Brandywine Town CenterWilmington, DE 141,825 21,993 87,988 16,329 24,213 102,097 126,310 28,808 2003 Brandywine MarketSquareWilmington, DE 24,375 4,308 17,239 970 4,262 18,255 22,517 5,916 2003 Bartow AvenueBronx, NY — 1,691 5,803 638 1,691 6,441 8,132 2,310 2005 (c)Amboy RoadStaten Island, NY — — 11,909 2,514 — 14,423 14,423 4,306 2005 (a)613-623 W. DiverseyChicago, IL — 10,061 2,773 355 10,061 3,128 13,189 793 2006 (a)Chestnut HillPhiladelphia, PA — 8,289 5,691 4,242 8,289 9,933 18,222 2,143 2006 (a)2914 Third AvenueBronx, NY — 11,108 8,038 4,397 11,855 11,688 23,543 1,851 2006 (a)F-48 Initial Costto Company Amount at whichCarried at December 31, 2014 Description Encumbrances Land Buildings &Improvements CostsCapitalizedSubsequent toAcquisition Land Buildings &Improvements Total AccumulatedDepreciation Date ofAcquisition (a)Construction(c) Shopping Centers West ShoreExpresswayStaten Island, NY — 3,380 13,554 (55) 3,380 13,499 16,879 2,969 2007 (a)West 54th StreetManhattan, NY — 16,699 18,704 949 16,699 19,653 36,352 3,692 2007 (a)5-7 East 17th StreetManhattan, NY — 3,048 7,281 376 3,048 7,657 10,705 1,321 2008 (a)651-671 W DiverseyChicago, IL — 8,576 17,256 8 8,576 17,264 25,840 1,546 2011 (a)15 Mercer StreetNew York, NY — 1,887 2,483 7 1,887 2,490 4,377 217 2011 (a)4401 White PlainsBronx, NY 6,141 1,581 5,054 — 1,581 5,054 6,635 421 2011 (a)Chicago Street RetailPortfolioChicago, IL 15,485 18,521 55,627 1,576 18,559 57,165 75,724 3,692 2012 (a)330 River StreetCambridge, MA 3,974 3,510 2,886 — 3,510 2,886 6,396 237 2012 (a)Rhode Island PlaceShopping CenterWashington, D.C. 16,560 7,458 15,968 158 7,458 16,126 23,584 1,141 2012 (a)1520 MilwaukeeAvenueChicago, IL — 2,110 1,306 — 2,110 1,306 3,416 155 2012 (a)340 River StreetCambridge, MA 6,820 4,894 11,349 — 4,894 11,349 16,243 840 2012 (a)930 Rush StreetChicago, IL — 4,933 14,587 11 4,933 14,598 19,531 1,003 2012 (a)28 Jericho TurnpikeWestbury, NY 15,747 6,220 24,416 — 6,220 24,416 30,636 1,654 2012 (a)181 Main StreetWestport, CT — 1,908 12,158 — 1,908 12,158 14,066 644 2012 (a)83 Spring StreetManhattan, NY — 1,754 9,200 — 1,754 9,200 10,954 575 2012 (a)60 Orange StreetBloomfield, NJ 8,236 3,609 10,790 — 3,609 10,790 14,399 669 2012 (a)179-53 & 1801-03Connecticut AvenueWashington, D.C. — 11,690 10,135 318 11,689 10,454 22,143 579 2012 (a)639 West DiverseyChicago, IL 4,480 4,429 6,102 313 4,429 6,415 10,844 332 2012 (a)664 North MichiganChicago, IL 44,369 15,240 65,331 — 15,240 65,331 80,571 3,089 2013 (a)8-12 E. WaltonChicago, IL — 5,398 15,601 22 5,398 15,623 21,021 626 2013 (a)3200-3204 M StreetWashington, DC — 6,899 4,249 — 6,899 4,249 11,148 133 2013 (a)868 BroadwayManhattan, NY — 3,519 9,247 5 3,519 9,252 12,771 248 2013 (a)313-315 BoweryManhattan, NY — — 5,516 — — 5,516 5,516 223 2013 (a)120 West BroadwayManhattan, NY — — 32,819 20 — 32,839 32,839 497 2013 (a)11 E. WaltonChicago, IL — 11,000 33,000 — 11,000 33,000 44,000 756 2014 (a)61 Main StreetWestport, CT — 1,825 5,505 — 1,825 5,505 7,330 114 2014 (a)865 W. North AvenueChicago, IL — 3,688 11,063 — 3,688 11,063 14,751 230 2014 (a)152-154 Spring StreetManhattan, NY — 9,500 28,500 — 9,500 28,500 38,000 475 2014 (a)2520 Flatbush AvenueBrooklyn, NY — 4,275 12,825 — 4,275 12,825 17,100 187 2014 (a)252-256 GreenwichAvenueGreenwich, CT — 6,113 18,378 — 6,113 18,378 24,491 344 2014 (a)Bedford GreenBedford Hill, NY 31,363 13,788 35,153 — 13,788 35,153 48,941 450 2014 (a)F-49 Initial Costto Company Amount at whichCarried at December 31, 2014 Description Encumbrances Land Buildings &Improvements CostsCapitalizedSubsequent toAcquisition Land Buildings &Improvements Total AccumulatedDepreciation Date ofAcquisition (a)Construction (c) Shopping Centers 131-135 Prince StreetManhattan, NY — 19,274 38,519 — 19,274 38,519 57,793 321 2014 (a)Shops at Grand AveQueens, NY — 14,000 42,000 — 14,000 42,000 56,000 263 2014 (a)201 Needham StreetNewton, MA — 2,531 7,594 — 2,531 7,594 10,125 16 2014 (a)Undeveloped Land — 100 — — 100 — 100 — ARLP 50,000 — — — — — — — Fund I: Kroger/Safeway Various — — 4,215 — — 4,215 4,215 4,027 2003 (a)Fund II: Liberty AveOzone Park, NY 8,973 — 12,627 647 — 13,274 13,274 3,060 2004 (a)CityPointBrooklyn, NY — — — 7,473 — 7,473 7,473 186 2010 (c)161st StreetBronx, NY 29,500 16,679 28,410 18,231 16,679 46,641 63,320 9,494 2005 (a)Fund III: Cortlandt Towne CenterMohegan Lake, NY 83,936 7,293 61,395 9,213 7,293 70,608 77,901 17,637 2009 (a)Heritage ShopsChicago, IL 24,500 13,131 15,409 386 13,131 15,795 28,926 2,012 2011 (a)654 BroadwayManhattan, NY 9,000 9,040 3,654 1,435 9,040 5,089 14,129 352 2011 (a)New Hyde Park ShoppingCenterNew Hyde Park, NY 11,720 3,016 7,733 4,019 3,016 11,752 14,768 1,050 2011 (a)640 BroadwayManhattan, NY 22,564 12,503 19,960 6,430 12,503 26,390 38,893 1,814 2012 (a)Lincoln Park CentreChicago, IL 28,000 — — — — — — — 2012 (a)3780-3858 NostrandAvenueBrooklyn, NY 12,047 6,229 11,216 3,128 6,229 14,344 20,573 594 2013 (a)Fund IV: 210 Bowery LLCManhattan, NY 4,600 1,875 5,625 22 1,875 5,647 7,522 281 2012 (a)Paramus PlazaParamus, NJ 12,600 11,052 7,037 1,852 11,052 8,889 19,941 272 2013 (a)1151 Third AveManhattan, NY 12,481 8,306 9,685 978 8,306 10,663 18,969 321 2013 (a)Lake Montclair CenterPrince William County, VA 15,284 7,077 12,028 25 7,077 12,053 19,130 381 2013 (a)938 W. North AvenueChicago, IL 12,500 2,314 17,067 34 2,314 17,101 19,415 449 2013 (a)17 E. 71st StreetManhattan, NY — 7,000 21,000 — 7,000 21,000 28,000 86 2014 (a)Fund IV 77,100 — — — — — — — Real Estate UnderDevelopment 265,015 30,830 19,253 397,307 54,215 393,175 447,390 — Total $1,130,101 $451,700 $1,152,388 $604,507 $478,876 $1,729,719 $2,208,595 $256,015 Notes:(1) Depreciation on buildings and improvements reflected in the consolidated statements of income is calculated over the estimated useful life of the assets asfollows:Buildings: 30 to 40 yearsImprovements: Shorter of lease term or useful lifeF-50(2) The aggregate gross cost of property included above for Federal income tax purposes was $1,811.2 million as of December 31, 2014(3) (a) Reconciliation of Real Estate Properties:The following table reconciles the activity for real estate properties from January 1, 2012 to December 31, 2014: For the years ended December 31,(dollars in thousands) 2014 2013 2012Balance at beginning of year $1,819,053 $1,287,198 $897,370Other improvements 162,827 112,622 65,480Property acquisitions 299,793 272,661 324,348Property dispositions (73,078) — —Consolidation of previously unconsolidated investments — 146,572 —Balance at end of year $2,208,595 $1,819,053 $1,287,198(3) (b) Reconciliation of Accumulated Depreciation:The following table reconciles accumulated depreciation from January 1, 2012 to December 31, 2014: For the years ended December 31,(dollars in thousands) 2014 2013 2012Balance at beginning of year $229,538 $169,718 $147,626Depreciation related to real estate 26,477 31,732 22,092Consolidation of Previously Unconsolidated Investments — 28,088 —Balance at end of year $256,015 $229,538 $169,718F-51

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