2016 ANNUAL REPORT
151 State Street, Chicago, IL
Dear fellow shareholders:
Although 2016 had its fair share of surprises and volatility, it was a year of
significant accomplishments for our company. We were quite busy, completing
more than $1 billion of acquisitions and dispositions. All of these transactions added
to our company’s net asset value per share. As importantly, these transactions, in
combination with the embedded strength of our existing assets, keep us well
positioned to drive sustainable long-term growth.
From an outsiders’ point of view, this has to be as confusing a time to invest in retail
real estate as I can recall. The noise and confusion is most reminiscent of the 1999
to 2001 period, where there was an increase in retailer bankruptcies (Ames, Caldor,
Phar-Mor, Grand Union) even though the economy was sound. Additionally, e-
commerce was beginning to emerge as a threat to traditional retailing (Pets.com,
Webvan.com). It was a scary time to own retail real estate. But, in hindsight, it was
a great time to invest. In fact, our stock return from 1999 to today is 822%.
WORKING THROUGH THE NOISE.
Today, the retailing industry is also undergoing significant changes. Compared to
prior years, it seems like the pace of retailer disruption has accelerated.
Compounding matters, shifting shopping patterns, retailer bankruptcies and over-
simplified headlines regarding the impact of e-commerce are creating a lot of
confusion about the challenges facing retailers and landlords. This noise is making
it harder to distinguish between ordinary cyclical challenges that retailers have
always faced versus legitimate, long-term secular shifts due to the impact of
technology.
We recognize that retailing has become more challenging. E-commerce is a portion
of this challenge. Equally significant is the new-found price discovery available to
the shopper as a result of mobile smartphones. You can find the price of any given
bottle of wine or pair of sneakers faster than you can read this letter. Some retailers
are adapting to these shifts, others are not. Retailers are also facing shifts in shopping
patterns: fast fashion has hurt slow-to-respond traditional retailers. Off-price fashion
continues to take market share as well. Other retailers, in an attempt to jump on the
e-commerce bandwagon, have acknowledged inadequate investments in their stores,
products or services. Others are realizing that they over expanded in previous years,
and need to refine their portfolio to maintain the value proposition of their physical
stores. These challenges are impacting almost all forms of retailing. Apparel retailers
and department stores are making the headlines today, but supermarket and
drugstores are facing these challenges as well.
The silver lining is that, by addressing these challenges, our retailers will emerge
stronger and better equipped to deliver to the consumer and their shareholders. Over
the next few years, there will be winners and losers, and fresh retail formats will
emerge, from both traditional and online-first retailers, that will embrace the
potential, necessity and profitability of the in-store shopping experience.
As a result of these changes, the quality of retail locations matter more today than
ever. Retailers are being more selective about their store count, size and location,
but they are also willing to step up for the right space. This is true for traditional
retailers as well as formerly online-only merchants. Online-first retailers like Warby
Parker and Bonobos (both tenants of ours) were early to recognize the importance
of physical stores to their business model. Even our traditional retailers, such as
Walgreens, note that those customers who supplement their in-store shopping with
online and mobile, spend multiples of the amount spent by store-only shoppers.
Looking ahead, we shouldn’t be surprised by continued store-closure
announcements. For some retailers, it’s about closing unprofitable stores in weak
locations. For others, like Zara, it’s about closing smaller stores and refocusing on
larger flagships that can display the full range of its collections. The separation
between the “have” locations and the “have nots” has begun and will continue as
part of this retailer evolution.
It is incumbent upon us, as open-air retail landlords, to recognize and respond to
these trends. In our view, our differentiated company is well positioned to thrive in
this ever-evolving retailing environment.
OUR DUAL-PLATFORM COMPANY.
High-quality core portfolio. First, it is essential to have a high-quality core portfolio.
Today, more than 85% of our core portfolio’s gross value is concentrated in five key
gateway cities in the United States: New York, Chicago, San Francisco, Washington
D.C. and Boston. Whether on North Michigan Avenue in Chicago, Tribeca in New
York City or Geary Boulevard in San Francisco, we like these types of locations, as
do our retailers. These properties enable retailers to be in exciting, dense
live/work/play locations with greater control over their brand. This provides them
with opportunities to create shopping destinations that not only sell products or
services but also further enhances the shopper’s connection to the retailer.
Opportunistic and value-add fund platform. Second, we are the sole managing
member of a series of discretionary institutional investment funds. This enables us
to pursue a broad range of opportunities to buy, fix, and sell retail real estate
investments. While our core portfolio is built for long-term holds, our
complementary fund platform, can remain nimble and highly opportunistic,
capitalizing on both dislocations in the capital markets and distress in the retailing
industry.
Significant dry powder. It is also important to note that both platforms are well
capitalized, each having the appropriate amount of leverage and significant dry
powder. And our experienced investment team is energized and ready to put this dry
powder to work.
CORE PORTFOLIO.
Executing on our multi-year growth plan. At the end of 2010, as our nation was
emerging from the global financial crisis, we were very focused on the changes in
retailing as a result of e-commerce and its impact on the type of real estate that we
should own. Our goal was to own a forward-looking real estate portfolio that would
be best positioned to profitably respond to shifts in demographics and changes in
how consumers shop.
Since then, we have more than tripled the size of our core portfolio, focusing our
acquisition activities in our nation’s most dynamic urban and street-retail corridors.
Today, more than 70% of our core portfolio’s gross value is comprised of street and
urban retail in our key markets.
The urban and street-retail thesis. Our thesis has been that retailers will continue to
increase their focus on mission-critical locations. We also expect that retailers will
continue to shed their lower-quality stores. Over the long run, as this process plays
out, we believe that our well-located urban and street-retail properties should
generate NOI growth that is superior to more traditional suburban assets by at least
200 basis points (i.e., if the long-term growth rate for our suburban assets is 2% to
3%, we would expect our street-retail assets to have an annualized growth rate of
between 4% and 5%). This has been the case over the past several years and our full-
year 2016 performance was also consistent with this thesis. The 2016 same-property
NOI growth for our blended portfolio was a solid 3.4%, while the street-retail
component was more than 200 basis points stronger than our suburban. Our 2017 re-
tenanting opportunities are also consistent with these goals.
Growth in 2017 and beyond. Looking ahead, we see strong growth -- especially
from our street and urban assets. The key drivers of this growth are projected to come
roughly equally from two areas:
embedded growth within our 2016 acquisitions; and
value-creation opportunities at seven of our existing core assets.
These two areas are not insignificant as they account for almost half of our urban
and street retail portfolio. Over the next five years, the NOI from these components
is projected to increase by an incremental $11-12 million, from $36 million to $48
million. This equates to a compounded annual growth rate of between 5% and 6%
for this portion of the portfolio.
Our 2016 acquisitions.
During 2016, we acquired $627 million of properties for our core portfolio. Of this
amount, approximately 70% was street retail, and the balance was urban. These
acquisitions represent approximately 30% of our core portfolio’s urban and street-
retail NOI, or roughly 18% of its total NOI.
The properties that we acquired are geographically diverse, located in supply-
constrained gateway cities that overlap with our existing footprint: New York,
Chicago, San Francisco, Washington DC, and Boston. These properties also have
strong tenant diversification, with the right blend of value, necessity, and lifestyle
retailers, including Target and H&M, Trader Joe’s and Walgreens, and lululemon
and Starbucks.
Not only do these investments increase our core portfolio’s downside protection, due
to their in-demand locations and diverse tenancy, but also, they should help to drive
strong growth. In fact, over the next five years, we project that these assets will
deliver an incremental $5 million to $6 million of NOI, which equates to a
compounded annual NOI growth of between 4% and 5%, driven primarily by lease-
up activities.
Our existing value-creation opportunities.
Over the next five years, we also expect to harvest $5 million to $6 million of
incremental NOI from seven urban and street-retail properties in our existing core
portfolio. This equates to a compounded annual growth rate of approximately 7%
from this portion of our portfolio. And, we are already well on our way to harvesting
this value.
For example, on Rush Street, in Chicago’s Gold Coast, we executed a new lease with
our existing-tenant lululemon, who will convert their store into a flagship and
expand into an adjacent building that we also own. At a time when many retailers
are being forced to learn how to do “more with less,” this is an example of a critical
location where a retailer has recognized the importance of doing “more with more.”
The lululemon flagship will join other recent additions to this corridor, including
Aritzia and Tesla, as well as Versace and Dior. These tenancies bode well for the
balance of our ownership in this corridor.
Also in Chicago, we recently finalized a lease with T.J.Maxx, who will occupy all
of the upper-level space at our Clark & Diversey redevelopment in Lincoln Park.
We have also leased one of the street-level small shops to Bluemercury, and
construction is expected to commence this summer. Like Rush Street, we own a
meaningful collection of assets in this submarket, all of which will benefit from our
redevelopment activities.
A final note on street retail. Notwithstanding the collective enthusiasm for street
retail, we do expect this product type to experience bumps in the road, from time to
time. After all, even the best markets can become overheated. Thus, it is incumbent
upon us to remain disciplined. In 2015, we saw demand for street-retail properties,
from both buyers and retailers, grow beyond the level that we thought made sense.
At the time, we were very clear: trees don’t grow to the sky. So, that year, we did
not acquire any street retail for our core portfolio. This discipline has enabled us to
avoid some of the pain that others are experiencing today. It has also kept us well
positioned for new investment opportunities. Because, despite any short-term noise,
our retailers have been clear that their future is dependent on operating stores in
those key locations where the consumer wants to live, work, and play.
FUND PLATFORM.
Over the past year, we also made important progress on our fund platform’s buy-fix-
sell mandate.
Net sellers. During 2015 and the first three quarters of 2016, we were net sellers of
fund assets – in doing so, we generated significant profits for our shareholders and
investors. For example, during 2016, Fund III sold $212 million of properties,
resulting in a blended 41% IRR and 3.4 multiple on the fund’s equity. And, although
Fund IV just completed its acquisition phase, it also remains a proactive seller. As
you recall, in 2014 Fund IV sold its Lincoln Road portfolio in Miami Beach, Florida
ahead of schedule and at a significant profit. More recently, in January 2017 Fund
IV completed a redevelopment project in North Bergen, New Jersey, which
generated a 21% IRR and a 2.5 multiple on the fund’s equity.
A shift in the markets. Notwithstanding some very profitable sales last year, in mid
to late summer, we began to see shifts in the capital markets. Although cap rates and
values for high-quality, well-leased assets have held steady, pricing has declined for
properties requiring significant re-leasing or redevelopment as well as stable
shopping centers in non-primary markets. Most significantly, certainty of execution
is becoming of increased importance to sellers. Since our fund capital is fully
discretionary, our fund platform is a beneficiary of these shifts.
Our barbell investment strategy. Given cross currents in both the capital markets
and the retailing industry, we have been employing a barbell approach to investing
our fund commitments: on one hand, we are selectively acquiring high-yielding,
stable shopping centers in non-primary markets. On the other hand, we continue to
pursue opportunities to acquire well-located assets in key markets, where our team
can add value through lease up and redevelopment.
During 2016, Fund IV acquired $261 million of investments. Both strategies, high-
yield opportunistic and high-quality value add, were represented among these
transactions.
On the high-yield side, during the fourth quarter, Fund IV completed the acquisition
of the Northeast Grocery Portfolio for $92 million. This 1.2 million square-foot
portfolio includes eight grocery-anchored properties located in New York,
Pennsylvania, and Maine. The fund acquired the fee interest in seven properties and
made a $9 million loan on the eighth. The current leased rate is roughly 90%, and
with minimal lease up and rational leverage, this investment should generate
attractive mid-teens cash-on-cash returns throughout the fund’s hold period.
On the value-add side, during the fourth quarter, Fund IV acquired 717 N Michigan
Ave, located in Chicago, for $104 million. This is a 62,000-square foot, four-story
street-retail property located at a prime corner of the Magnificent Mile. The property
is 25% leased to the Disney Store, and we intend to redevelop the balance of the
property, which was previously occupied by the Saks Fifth Avenue men’s store. The
building has unused air rights, so we are also exploring densification opportunities
at this flagship location.
DRY POWDER.
Overall, 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 5.2x at year-end 2016 – one of the
lowest in the industry – and our fixed-charge coverage ratio was 4.7x. Likewise, our
debt to total market capitalization was 25%.
Last year, we also successfully completed the fundraising for Fund V, the latest in
our series of institutional funds. The fund was oversubscribed and has $415 million
of third-party commitments from a diverse group of investors that includes
university endowments, foundations, and pension funds with whom we have a strong
and long lasting relationship. Approximately 98% of these commitments came from
existing investors in one or more of our prior funds. Acadia also made a $105 million
commitment. Thus, with leverage, Fund V has approximately $1.5 billion of buying
power. We greatly appreciate the tremendous support of our new and many
longstanding partners, who have demonstrated strong confidence in our team and
strategy.
IN CONCLUSION.
We enter 2017 well aware of the challenges facing the retailing industry, but
confident about how we have positioned our company. Compared to the 1999 to
2001 period, we have a best-in-class portfolio, opportunistic fund platform, rock-
solid balance sheet and energized and talented management team. Acadia was in its
infancy in 1999. We enter 2017 much more “cycle tested.” We also enter 2017 being
as flexible and opportunistic as we were at our founding, ready for the challenges
and the opportunities that confusion creates. With a few more gray hairs, but plenty
of bounce in our step, Acadia’s best years are ahead of us.
On behalf of the Acadia team, 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
March 2017
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2016
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the transition period from to
Commission File Number 1-12002
ACADIA REALTY TRUST
(Exact name of registrant as specified in its charter)
Maryland
(State of incorporation)
23-2715194
(I.R.S. employer identification no.)
411 Theodore Fremd Avenue, Suite 300 Rye, NY 10580
(Address of principal executive offices)
(914) 288-8100
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, $.001 par value
(Title of Class)
New York Stock Exchange
(Name of Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES
NO
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Securities Act.
YES
NO
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES
NO
YES
NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in
Rule 12b-2 of the Act).
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)
YES
NO
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last
business day of the registrant’s most recently completed second fiscal quarter was approximately $2,623.4 million, based on a price
of $35.09 per share, the average sales price for the registrant’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 22, 2017 was 84,704,511.
DOCUMENTS INCORPORATED BY REFERENCE
Part III – Portions of the registrant’s definitive proxy statement relating to its 2017 Annual Meeting of Shareholders presently
scheduled to be held May 10, 2017 to be filed pursuant to Regulation 14A.
TABLE OF CONTENTS
Item No. Description
Page
1. Business
1A. Risk Factors
1B. Unresolved Staff Comments
2. Properties
3. Legal Proceedings
4. Mine Safety Disclosures
PART I
PART II
5. Market for Registrant’s Common Equity, Related Stockholder Matters, Issuer Purchases of Equity
Securities and Performance Graph
6. Selected Financial Data
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
7A. Quantitative and Qualitative Disclosures about Market Risk
8. Financial Statements and Supplementary Data
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
9A. Controls and Procedures
9B. Other Information
PART III
10. Directors, Executive Officers and Corporate Governance
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management
13. Certain Relationships and Related Transactions and Director Independence
14. Principal Accounting Fees and Services
15. Exhibits and Financial Statement Schedules
16. Form 10-K Summary
Signatures
PART IV
4
9
22
23
33
33
34
36
38
53
55
55
55
56
57
57
57
57
57
57
57
58
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Annual Report on Form 10-K (the "Report") may contain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 and as such
may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or
achievements to be materially different from future results, performance or achievements expressed or implied by such forward-
looking statements. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies
and expectations are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe,"
"intend" or "project" or the negative thereof or other variations thereon or comparable terminology. Factors which could have a
material adverse effect on our operations and future prospects include, but are not limited to those set forth under the headings
"Item 1A. Risk Factors" and "Item 7. Management’s Discussion and Analysis 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.
All references to “Notes” throughout the document refer to the footnotes to the consolidated financial statements of the registrant
referenced in Part II, Item 8. Financial Statements and Supplementary Data, which begin on page F-1 of this Report.
3
ITEM 1. BUSINESS.
GENERAL
PART I
Acadia Realty Trust (the "Trust") was formed on March 4, 1993 as a Maryland real estate investment trust ("REIT"). All references
to "Acadia," "we," "us," "our" and "Company" refer to the Trust and its consolidated subsidiaries. We are a fully integrated REIT
focused on the ownership, acquisition, development and management of high-quality retail properties located primarily in high-
barrier-to-entry, supply-constrained, densely-populated metropolitan areas in the United States. We currently own, or have an
ownership interest in these properties through our Core Portfolio and our Funds (each 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 in which the Operating Partnership owns an interest. As of December 31, 2016, 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 Operating Partnership. The limited partners primarily
represent entities or individuals that contributed their interests in certain properties or entities to the Operating Partnership in
exchange for common or preferred units of limited partnership interest ("Common OP Units" or "Preferred OP Units," respectively,
and collectively, "OP Units") and employees who have been awarded restricted Common OP Units as long-term incentive
compensation ("LTIP Units"). Limited partners holding Common OP and LTIP Units are generally entitled to exchange their units
on a one-for-one basis for our common shares of beneficial interest of the Trust ("Common Shares"). This structure is referred to
as an umbrella partnership REIT, or "UPREIT."
BUSINESS OBJECTIVES AND STRATEGIES
Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to
shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following
fundamentals to achieve this objective:
• Own and operate a Core Portfolio of high-quality retail properties located primarily in high-barrier-to-entry, densely-
populated metropolitan areas. Our goal is to create value through accretive development and re-tenanting activities within
our existing portfolio and grow this platform through the 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 on opportunistic yet disciplined acquisitions with high inherent opportunity for the creation of additional
value, execution on this opportunity and the realization 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 repositioning opportunities,
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 of distressed debt.
Some of these investments historically have also included, and may in the future include, joint ventures with private
equity investors for the purpose of making investments in operating retailers with significant embedded value in their
real estate assets.
• Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to
sufficient capital to fund future growth.
Investment Strategy — Generate External Growth through our Dual Platforms; Core Portfolio and Funds
The 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 and value, 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 the amount 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 best utilize 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 productive formats closer to their shopping population.
Accordingly, our focus for Core Portfolio and Fund acquisitions is on those properties which we believe will not only 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,
development, leasing and management of retail real estate by establishing discretionary opportunity funds. Our Fund platform is
an investment vehicle where the Operating Partnership invests, along with outside institutional investors, including, but not limited
to, endowments, foundations, pension funds and investment management companies, in primarily opportunistic and value-add
retail real estate. To date, we have launched five funds ("Funds"); Acadia Strategic Opportunity Fund, LP ("Fund I," which was
liquidated in 2015), Acadia Strategic Opportunity Fund II, LLC ("Fund II"), Acadia Strategic Opportunity Fund III LLC ("Fund
III"), Acadia Strategic Opportunity Fund IV LLC ("Fund IV") and Acadia Strategic Opportunity Fund V LLC ("Fund V," and our
"current fund"). Due to our level of control, we consolidate these Funds for financial reporting purposes. Fund I and Fund II have
also included investments in operating companies through Acadia Mervyn Investors I, LLC ("Mervyns I"), Acadia Mervyn Investors
II, LLC ("Mervyns II") and, in certain instances, directly through Fund II, all on a non-recourse basis. These investments comprise
and are referred to as the Company's Retailer Controlled Property Venture ("RCP Venture"). As of December 31, 2015, Fund I has
been liquidated.
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 asset management, property management, construction, development, leasing and legal services. Cash
flows from the Funds and the RCP Venture are distributed pro-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 the partners or members
(including the Operating Partnership).
See Note 1 in the Notes to Consolidated Financial Statements, which begin on page F-1 of this Report ("Notes to Consolidated
Financial Statements"), for a detailed discussion of the Funds.
Capital Strategy — Balance Sheet Focus and Access to Capital
Our primary capital objective is to maintain a strong and flexible balance sheet through conservative financial practices, including
moderate use of leverage within our Core Portfolio, while ensuring access to sufficient capital to fund future growth. We intend
to continue financing acquisitions and property development with sources of capital determined by management to be the most
appropriate based on, among other factors, availability in the current capital markets, pricing and other commercial and financial
terms. The sources of capital may include the issuance of public equity, unsecured debt, mortgage and construction loans, and
other capital alternatives including the issuance of OP Units. We manage our interest rate risk through the use of fixed-rate debt
and, where we use variable-rate debt, through the use of certain derivative instruments, including London Interbank Offered Rate
("LIBOR") swap agreements and interest rate caps as discussed further in Item 7A. of this Form 10-K.
We launched an at-the-market ("ATM") equity issuance program in 2012 which provides us an efficient and low-cost vehicle for
raising public equity to fund our capital needs. Through this program, we have been able to effectively "match-fund" a portion of
the required equity for our Core Portfolio and Fund acquisitions through the issuance of Common Shares over extended periods
employing a price averaging strategy. In addition, from time to time, we have issued and intend to continue to issue equity in
follow-on offerings separate from our ATM program. Net proceeds raised through our ATM program and follow-on offerings are
primarily used for acquisitions, both for our Core Portfolio and our pro-rata share of Fund acquisitions and for other general
corporate purposes.
5
Common Share issuances for each of the years ended December 31, 2016, 2015 and 2014 are summarized as follows:
(shares and dollars in millions)
2016
2015
2014
ATM Issuance
Common Shares issued
Gross proceeds
Net proceeds
Follow-on Offering Issuances
Common Shares issued
Gross proceeds
Net proceeds
4.5
157.6 $
155.7 $
8.4
302.0 $
296.6 $
$
$
$
$
2.0
65.6 $
64.4 $
—
— $
— $
4.7
128.9
126.8
7.6
237.4
230.7
During 2014 and 2016, we also issued OP Units equating to 1.6 million and 0.9 million common shares, respectively, in connection
with the acquisition of properties. See Note 10 for further details.
Operating Strategy — Experienced Management Team with Proven Track Record
Our senior management team has decades of experience in the real estate industry. We have capitalized on our expertise in the
acquisition, development, leasing and management of retail real estate by creating value through property development, re-tenanting
and establishing joint ventures, such as the Funds, 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 generally provided 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 to immediately execute on its strategic plan for each
asset.
INVESTING ACTIVITIES
Core Portfolio
Our 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.
During the year ended December 31, 2016, we continued to execute on our strategy of owning a superior Core Portfolio by
acquiring, through our Operating Partnership and its subsidiaries, properties consistent with our existing portfolio for an aggregate
purchase price of $627.0 million. See Note 2 and Note 4, for a detailed discussion of these acquisitions and 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 attract and retain quality tenants, increasing cash flow, and consequently, property
values. From time to time, we also identify certain properties for disposition and redeploy the capital for acquisitions and for the
repositioning of existing properties with greater potential for capital appreciation. During 2016, there were no dispositions within
the Core Portfolio.
We also make investments in first mortgages and other notes receivable collateralized by real estate, ("Structured Finance Program")
either directly or through entities having an ownership interest therein. During 2016, we made investments totaling $132.9 million
in this program and as of December 31, 2016 had $216.4 million invested in this program. See Note 3, for a detailed discussion
of our Structured Finance Program.
6
Funds
During January 2016, the Operating Partnership acquired an additional 8.3% interest in Fund II from a limited partner for $18.4
million, giving the Company an aggregate 28.3% interest in Fund II.
Acquisitions
Fund IV – During 2016, Fund IV acquired 11 consolidated properties for an aggregate purchase price of $237.3 million. See Note
2 for a detailed discussion of these acquisitions.
Dispositions
Fund III – During 2016, Fund III sold two properties located in Cortlandt, NY and Chicago, IL for an aggregate sales price of
$211.6 million. See Note 2 and Note 4, for a detailed discussion of these dispositions. Subsequent to December 31, 2016, Fund
III sold a property located in Glen Burnie, MD for $28.8 million (Note 17).
Fund IV – Subsequent to December 31, 2016, Fund IV sold a property located in North Bergen, NJ for $19.0 million (Note 17).
Development Activities
As part of our Fund strategy, we invest in real estate assets that may require significant development. As of December 31, 2016,
the Funds had 11 development projects, consisting of 13 individual properties, of which seven are under construction and four are
in various stages of the development process as follows:
(dollars in millions)
Property
City Point (b)
Sherman Plaza (b)
Cortlandt Crossing
3104 M Street NW (b)
Broad Hollow Commons
210 Bowery
Owner
Fund II
Fund II
Fund III
Fund III
Fund III
Fund IV
Broughton Street Portfolio (b,e)
Fund IV
27 E. 61st Street
801 Madison Avenue
650 Bald Hill Road (b,e)
Fund IV
Fund IV
Fund IV
36.5
20.4
8.3
15.7
20.9
76.0
22.3
36.2
21.4
Costs
to Date
Anticipated
Additional
Costs (a)
$
408.0
$12.0 - $32.0 (c)
Status
Construction
commenced
Square
Feet Upon
Completion
Anticipated
Completion
Date
763,000
2017/2020 (d)
TBD
Pre-construction
39.6 - 44.6
0.0 - 0.7
Construction
commenced
Construction
commenced
TBD
130,000
10,000
34.3 - 44.3
Pre-construction
180,000 - 200,000
1.1 - 3.1
4.0 - 9.0
3.2 - 6.2
3.8 - 6.8
6.1 - 11.1
Construction
commenced
Construction
commenced
Construction
commenced
Pre-construction
Construction
commenced
TBD
2018
2017
2018
2017
2017
2017
2017
2017
2018
16,000
190,000
9,500
5,000
161,000
62,000
717 N. Michigan Avenue
Fund IV
106.0
14.0 - 21.5
Pre-construction
Total
__________
$
771.7
(a) Anticipated additional costs are estimated ranges for completing the projects and include costs for tenant improvements and
leasing commissions.
(b) These projects are being redeveloped in joint ventures with unaffiliated entities.
(c) Net of actual and anticipated contributions from retail tenants and proceeds from residential tower sales.
(d) Phases I and II have an estimated completion date of 2017. Phase III has an estimated completion date of 2020.
(e) Represents an unconsolidated property.
7
INFLATION
Our long-term leases contain provisions designed to mitigate the adverse impact of inflation on our net income. Such provisions
include clauses enabling us to receive percentage rents based on tenants’ gross sales, which generally increase as prices rise, and/
or, in certain cases, escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses
are often related to increases in the consumer price index or similar inflation indexes. In addition, many of our leases are for terms
of less than ten years, which permits us to seek to increase rents upon re-rental at market rates if current rents are below the then
existing market rates. Most of our leases require the tenants to pay their share of operating expenses, including common area
maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses
resulting from inflation.
ENVIRONMENTAL LAWS
For information relating to environmental laws that may have an impact on our business, please see "Item 1A. Risk Factors—
Possible liability relating to environmental matters."
COMPETITION
There are numerous entities that compete with us in seeking properties for acquisition and tenants that will lease space in our
properties. Our competitors include other REITs, financial institutions, insurance companies, pension funds, private companies
and individuals. Our properties compete for tenants with similar properties primarily on the basis of location, total occupancy
costs (including base rent and operating expenses) and the design and condition of the improvements.
FINANCIAL INFORMATION ABOUT MARKET SEGMENTS
We have three reportable segments: Core Portfolio, Funds and Structured Financing. Structured Financing consists of our first
mortgages and notes receivable and related interest income. 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 the Notes to Consolidated Financial Statements. See Note
12 in the Notes to Consolidated Financial Statements for information regarding, among other things, 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 our
business and each of our segments are not seasonal.
CORPORATE HEADQUARTERS AND EMPLOYEES
Our executive office is located at 411 Theodore Fremd Avenue, Suite 300, Rye, New York 10580, and our telephone number is
(914) 288-8100. As of December 31, 2016, we had 122 employees, of which 98 were located at our executive office and 24 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 WEBSITE
All of our filings with the Securities and Exchange Commission, including our annual reports on Form 10-K, quarterly reports on
Form 10-Q and current reports 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, are available 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 Jason
Blacksberg, Corporate Secretary, at Acadia Realty Trust, 411 Theodore Fremd Avenue, Suite 300, Rye, NY 10580. You may also
call (914) 288-8100 to request 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 POLICIES
The Board of Trustees adopted a Code of Business Conduct and Ethics applicable to all employees, as well as a "Whistleblower
Policy." Copies of these documents are available in the Investor Information section of our website. We intend to disclose future
amendments to, or waivers from (with respect to our senior executive financial officers), our Code of Ethics in the Investor
Information section of our website within four business days following the date of such amendment or waiver.
8
ITEM 1A. RISK FACTORS.
Set forth below are the risk factors that we believe are material to our investors. The occurrence of any of the following risks could
adversely affect our business, results of operations, financial condition and value of our Common Shares. This section includes
or refers to certain forward-looking statements. Refer to the explanation of the qualifications and limitations on such forward-
looking statements discussed in the beginning of this Form 10-K.
The following risk factors are not exhaustive. Other sections of this report may include additional factors that could adversely
affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment.
New risk factors emerge from time to time and it is not possible for us to predict all risk factors, nor can we assess the impact of
all risk factors on our business or the extent to which any factor, or combination of factors, may affect our business. Investors
should also refer to our quarterly reports on Form 10-Q and current reports on Form 8- K for future periods for material updates
to these risk factors.
RISKS RELATED TO OUR BUSINESS AND OUR PROPERTIES
There are risks relating to investments in real estate that may adversely affect our income and cash flow.
Real property investments are subject to multiple risks. Real estate values are affected by a number of factors, including: changes
in the general economic climate, local conditions (such as an oversupply of space or a reduction in demand for real estate in an
area), the quality and philosophy of management, competition from other available space, the ability of the owner to provide
adequate maintenance and insurance and to control variable operating costs. Retail properties, in particular, may be affected by
changing perceptions of retailers or shoppers regarding the safety, convenience and attractiveness of the property 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 is derived 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 viable tenants on economically favorable terms. In the event of default by a tenant,
we may experience delays in enforcing, as well as incur substantial costs to enforce, our rights as a landlord. In addition, certain
significant expenditures associated with each equity investment (such as mortgage payments, real estate taxes and maintenance
costs) are generally not reduced even though there may be a reduction in income from the investment.
We rely on revenues derived from tenants, in particular our key tenants, and a decrease in those revenues may adversely
affect our ability to make distributions.
Revenue from our properties depends primarily on the ability of our tenants to pay the full amount of rent and other charges due
under their leases on a timely basis. We derive significant revenues from a concentration of certain key tenants that occupy space
at more than one property. We could be adversely affected in the event of the bankruptcy 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 they expire 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
with respect to the percentage of our minimum rents received from major tenants.
Anchor tenants and co-tenancy are crucial to the success of retail properties and vacated anchor space directly and indirectly
affects our rental revenues.
We own properties which are supported by “anchor” tenants. Anchor tenants pay a significant portion of the total rents at a property
and contribute to the success of other tenants by drawing large numbers of customers to a property. Vacated anchor space not only
directly reduces rental revenues, but, if not re-tenanted with a similar tenant, or one with equal consumer attraction, could adversely
affect the entire shopping center primarily through the loss of customer drawing power. This can also occur through the exercise
of the right that most anchors have, to vacate and prevent re-tenanting by paying rent for the balance of the lease term ("going
dark"), as would the departure of a "shadow" anchor tenant that is owned by another landlord. In addition, in the event that certain
anchor tenants cease to occupy a property, such an action may result in a significant number of other tenants having the contractual
right to terminate their leases, or pay a reduced rent based on a percentage of the tenant's sales, at the affected property, which
could adversely affect the future income from such property ("co-tenancy"). Although it may not directly reduce our rental revenues,
and there are no contractual co-tenancy conditions, vacant retail space adjacent to, or even on the same block as our street and
urban properties may similarly affect shopper traffic and re-tenanting activities at our properties. See "Item 2. Properties—Major
Tenants" in this Annual Report on Form 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 our cash flows and property values.
The bankruptcy of, or a downturn in the business of, any of our major tenants causing them to reject their leases, or to not renew
their leases as they expire, or renew at lower rental rates, may adversely affect our cash flows and property values. Furthermore,
the impact of vacated anchor space and the potential reduction 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 of the United States Bankruptcy Code ("Chapter 11 Bankruptcy"). Pursuant to bankruptcy law, tenants
have the right to reject some or all of their leases. In the event 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 tenant expense reimbursements) for remaining
terms greater than one year, or 15% of the rent remaining under the balance of the lease term, but not to exceed three years rent.
Actual amounts to be received in satisfaction of those claims will be subject to the tenant's final bankruptcy plan and the availability
of funds to pay its creditors.
Our experience shows that there can be no assurance that one or more of our major tenants will be immune 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 than current lease terms.
Upon the expiration of current leases for space located in our properties, we may not be able to re-let all or a portion of that space,
or the terms of re-letting (including the cost of concessions to tenants) may be less favorable to us than current lease terms. If we
are unable to re-let promptly all or a substantial portion of the space located in our properties or if the rental rates we receive upon
re-letting are significantly lower than current rates, our net income and ability to make expected distributions to our shareholders
will be adversely affected due to the resulting reduction in revenues. There can be no assurance that we will be able to retain
tenants in any of our properties upon the expiration of their leases. See "Item 2. Properties—Lease Expirations" in this Annual
Report on Form 10-K for additional information as to the scheduled lease expirations in our portfolio.
Our business is significantly influenced by demand for retail space generally, and a decrease in such demand may have a
greater adverse effect on our business than if we owned a more diversified real estate portfolio.
A decrease in the demand for retail space, due to the economic factors discussed above or otherwise, may have a greater adverse
effect on our business and financial condition than if we owned a more diversified real estate portfolio. The market for retail space
has been, and could continue to be, adversely affected by weakness in the national, regional and local economies, the adverse
financial condition of some large retailing companies, the ongoing consolidation in the retail sector, the excess amount of retail
space in a number of markets, and increasing consumer purchases through the Internet. To the extent that any of these conditions
occur, they are likely to negatively affect market rents for retail space and could materially and adversely affect our financial
condition, results of operations, cash flow, the trading price of our common shares and our ability to satisfy our debt service
obligations and to pay distributions to our shareholders.
E-commerce can have an impact on our business because it may cause a downturn in the business of our current tenants
and affect future leases.
The use of the internet by consumers continues to gain in popularity. The migration toward e-commerce is expected to continue.
This increase in internet sales 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 predict with 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 because of 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.
10
The economic environment may cause us to lose tenants and may impair our ability to borrow money to purchase properties,
refinance existing debt or finance our current development projects.
Our operations and performance depend on general economic conditions, including the health of the consumer. The U.S. economy
has historically experienced 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 secured
or unsecured loan facilities to meet our needs, including to purchase additional properties, to complete current development
projects, or to successfully refinance our properties as loans become due. To the extent that the availability of credit is limited, it
would also adversely impact our notes receivable as counterparties may not be able to obtain the financing required to repay the
loans upon maturity.
Certain sectors of the United States economy are still experiencing weakness. Over the past several years, this structural weakness
has resulted in periods of high unemployment, the bankruptcy or weakened financial condition of a number of retailers, decreased
consumer spending, increased home foreclosures, low consumer confidence, and reduced demand and rental rates for certain retail
space. There can be no assurance that the recovery will continue. General economic factors that are beyond our control, including,
but not limited to, economic recessions, decreases in consumer confidence, reductions in consumer credit availability, increasing
consumer debt levels, rising energy costs, higher tax rates, continued business layoffs, downsizing and industry slowdowns, and/
or rising inflation, could have a negative impact on the business of our retail tenants. In turn, this could have a material adverse
effect on our business because current or prospective tenants may, among other things, (i) have difficulty paying their rent obligations
as they struggle to sell goods and services to consumers, (ii) be unwilling to enter into or renew leases with us on favorable terms
or at all, (iii) seek to terminate their existing leases with us or request rental concessions on such leases, or (iv) be forced to curtail
operations or declare bankruptcy.
Political and economic uncertainty could have an adverse effect on our business.
We cannot predict how current political and economic uncertainty, including uncertainty related to taxation, will affect our critical
tenants, joint venture partners, lenders, financial institutions and general economic conditions, including the health and confidence
of the consumer and the volatility of the stock market.
Political and economic uncertainty poses a risk to us in that it may cause consumers to postpone discretionary spending in response
to tighter credit, reduced consumer confidence and other macroeconomic factors affecting consumer spending behavior, resulting
in a downturn in the business of our tenants. In the event current political and economic uncertainty results in financial turmoil
affecting the banking system and financial markets generally or significant financial service 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.
Inflation may adversely affect our financial condition and results of operations.
Increased inflation could have a more pronounced negative impact on our mortgage and debt interest and general and administrative
expenses, as these costs could increase at a rate higher than our rents. Also, inflation may adversely affect tenant leases with stated
rent increases or limits on such tenant’s obligation to pay its share of operating expenses, which could be lower than the increase
in inflation at any given time. It may also limit our ability to recover all of our operating expenses. Inflation could also have an
adverse effect on consumer spending, which could impact our tenants’ sales and, in turn, our average rents, and in some cases,
our percentage rents, where applicable. In addition, renewals of leases or future leases may not be negotiated on current terms, in
which event we may recover a smaller percentage of our operating expenses.
Many of our real estate costs are fixed, even if income from our properties decreases, which would cause a decrease in
revenue.
Our financial results depend primarily on leasing space at our properties to tenants on terms favorable to us. Costs associated with
real estate investment, such as real estate taxes, insurance and maintenance costs, generally are not reduced even when a property
is not fully occupied, rental rates decrease, or other circumstances cause a reduction in income from the property. As a result, cash
flow from the operations of our properties may be reduced if a tenant does not pay its rent or we are unable to fully lease our
properties on favorable terms. Additionally, properties that we develop or redevelop may not produce any significant revenue
immediately, and the cash flow from existing operations may be insufficient to pay the operating expenses and debt service
associated with such projects until they are fully occupied.
11
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 is limited, which could adversely affect our financial condition and results of operations and our ability to pay
dividends and make distributions. In addition, the Code contains restrictions on a REITs ability to dispose of properties that are
not applicable to other types of real estate companies. Our Board of Trustees may establish investment criteria or limitations as it
deems appropriate, but our Board of Trustees 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. As discussed under the heading "Our Board of Trustees may
change our investment policy without 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.
Although we have historically used moderate levels of leverage, if we employed higher levels of leverage, it would result
in increased risk of default on our obligations and in an increase in debt service requirements, which could adversely affect
our financial condition and results of operations and our ability to pay dividends and make distributions. In addition, the
viability of the interest rate hedges we use is subject to the strength of the counterparties.
We have incurred, and expect to continue to incur, indebtedness to support our activities. As of December 31, 2016, our outstanding
indebtedness was $1,505.7 million, of which $645.2 million was variable rate indebtedness. None of our Declaration of Trust, our
bylaws or any policy statement formally adopted by our Board of Trustees limits either the total amount of indebtedness or the
specified percentage of indebtedness that we may incur. Accordingly, we could become more highly leveraged, resulting in increased
risk of default on our financial obligations and in an increase in debt service requirements. This in turn could adversely affect our
financial condition, results of operations and our ability to make distributions.
Variable rate debt exposes us to changes in interest rates. Interest expense on our variable rate debt as of December 31, 2016 would
increase by $6.5 million annually for a 100 basis point increase in interest rates. This exposure would increase if we seek additional
variable rate financing based on pricing and other commercial and financial terms.
We enter into interest rate hedging transactions, including interest rate swap and cap agreements, with counterparties, generally,
the same lenders who made the loan in question. There can be no guarantee that the future financial condition of these counterparties
will enable them to fulfill their obligations under these agreements.
Increases in interest rates would cause our borrowing costs to rise and may limit our ability to refinance debt.
Although a significant amount of our outstanding debt has fixed interest rates, we also borrow funds at variable interest rates.
Increases in interest rates would increase our interest expense on any outstanding unhedged variable rate debt and would affect
the terms under which we refinance our existing debt as it matures, which would adversely affect our cash flow, financial condition
and results of operations.
Competition may adversely affect our ability to purchase properties and to attract and retain tenants.
There are numerous commercial developers, real estate companies, financial institutions and other investors with greater financial
resources than we have that compete with us in seeking properties for acquisition and tenants who will lease space in our properties.
Our competitors include other REITs, financial institutions, private funds, insurance companies, pension funds, private companies,
family offices, sovereign wealth funds and individuals. This competition may 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 the Funds) face increasing
competition from outlet malls, discount shopping clubs, e-commerce, direct mail and telemarketing, which could (i) reduce rents
payable to us and (ii) reduce our 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 New York and Chicago metropolitan regions, from which we derive 36% and 28% of the annual base rents
within our Core Portfolio, respectively and 38% and 6% of annual base rents within our Funds, respectively. Our operating results
could be adversely affected if market conditions, such as an oversupply of space or a reduction in demand for real estate, in these
areas occur.
12
We have pursued, and may in the future continue to pursue extensive growth opportunities, including investing in new
markets, which may result in significant 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 can be expected to continue to place a significant strain on our resources. Our
future performance will depend in part on our ability to successfully attract and retain qualified management personnel to manage
the growth and operations of our business. In addition, the acquired properties may fail to operate at expected levels due to the
numerous factors that may affect the value of real estate. There can be no assurance that we will have sufficient resources to
identify and manage the properties.
Our inability to raise capital for our Funds or to carry out our growth strategy could adversely affect our financial condition
and results of operations.
Our earnings growth strategy is based on the acquisition and development of additional properties, including acquisitions of core
properties through our Operating Partnership and our high return investment programs through our Fund platform. The
consummation of any future acquisitions will be subject to satisfactory completion of our extensive valuation analysis and due
diligence review and to the negotiation of definitive documentation. We cannot be sure that we will be able to implement our
strategy because we may have difficulty finding new properties, obtaining necessary entitlements, negotiating with new or existing
tenants or securing acceptable financing. Furthermore, if we were unable to obtain sufficient investor capital commitments in
order to initiate future Funds, this would adversely impact our current growth strategy.
Acquisitions of additional properties entail the risk that investments will fail to perform in accordance with expectations, including
operating and leasing expectations. In the context of our business plan, "development" generally means an expansion or renovation
of an existing property. Development is subject to numerous risks, including risks of construction delays, cost overruns or
uncontrollable events that may increase project costs, new project commencement risks such as the receipt of zoning, occupancy
and other required governmental approvals and permits, and incurring development costs in connection with projects that are not
pursued to completion.
Historically, a component of our growth strategy has been through private-equity type investments made through our RCP Venture.
These have included investments in operating retailers. The inability of the retailers to operate profitably would have an adverse
impact on income realized from these investments. Through our investments in joint ventures we have also invested in operating
businesses that have operational risk in addition to the risks associated with real estate investments, including among other risks,
human capital issues, adequate supply of product and material, and merchandising issues.
Our development and construction activities could affect our operating results.
We intend to continue the selective development and construction of retail properties, with our project at City Point currently being
our largest development project (see "Item 1. Business—Investing Activities–Funds–Development Activities" for a description
of the City Point project).
As opportunities arise, we may delay construction until sufficient pre-leasing is reached and financing is in place. Our development
and construction activities include risks that:
• We may abandon development 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;
•
• We may not complete construction and lease-up on schedule, resulting in increased debt service expense and construction
Financing for development of a property may not be available to us on favorable terms;
costs; and
• We may not be able to obtain, or may experience delays in obtaining necessary zoning and land use approvals as well as
building, occupancy and other required governmental permits and authorizations.
Additionally, the time frame required for development, construction and lease-up of these properties means that we may not realize
a significant cash return for several years. If any of the above events occur, the development of properties may hinder our growth
and have an adverse effect on our results of operations and cash flows. In addition, new development activities, regardless of
whether or not they are ultimately successful, typically require substantial time and attention from management.
13
Developments and acquisitions may fail to perform as expected which could adversely affect our results of operations.
Our investment strategy includes the development and acquisition of retail properties in supply constrained markets in densely
populated areas with high average household incomes and significant barriers to entry. The development and acquisition of
properties entails risks that include the following, any of which 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, in each case, at the time we make 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 until after 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 or property, 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 Operating Partnership in exchange for interests in the Operating Partnership may permit certain tax deferral advantages
to limited partners who contribute properties to the Operating Partnership. Since properties contributed to the Operating Partnership
may have unrealized gains attributable to the differences between the fair market value and adjusted tax basis in such properties
prior to contribution, the sale of such properties could cause adverse tax consequences to the limited partners who contributed
such properties. Although we, as the general partner of the Operating Partnership, generally have no obligation to consider the tax
consequences of our actions to any limited partner, we own several properties subject to material contractual restrictions for varying
periods of time designed to minimize the adverse tax consequences to the limited partners who contributed such properties. Such
restrictions may result in significantly reduced flexibility to manage some of our assets.
We currently have an exclusive obligation to seek investments for our Funds which may prevent us from making acquisitions
directly.
Under the terms of the organizational documents of our current Fund, our primary goal is to seek investments for the Fund, subject
to certain exceptions. We may only pursue opportunities to acquire retail properties directly through the Operating Partnership if
(i) the ownership of the acquisition opportunity by the Fund would create a material conflict of interest for us; (ii) we require the
acquisition opportunity for a "like-kind" exchange; (iii) the consideration payable for the acquisition opportunity is our Common
Shares, OP Units or other securities or (iv) the investment is outside the parameters of our investment goals for the Fund (which,
in general, seeks more opportunistic level returns). As a result, we may not be able to make attractive acquisitions directly and
instead may only receive a minority interest in such acquisitions through the Fund.
Our joint venture investments carry additional risks not present in our direct investments.
Partnership or joint venture investments may involve risks not otherwise present for investments made solely by us, including the
possibility that our partner or co-venturer might become bankrupt, and that our partner or co-venturer may take action contrary
to our instructions, requests, policies or objectives, including with respect to maintaining our qualification as a REIT. Other risks
of joint venture investments include impasse on decisions, such as a sale, because neither we nor a joint venture partner may 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 be invested 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 may or may not be covered by insurance. Finally, partners and co-venturers may engage in illegal activities
which may jeopardize an investment and/or subject us to reputational risk.
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Any disputes that may arise between joint venture partners and us may result in litigation or arbitration that would increase our
expenses and prevent our officers and/or trustees from focusing their time and effort on our business. Consequently, actions by or
disputes with joint venture partners might result in subjecting properties owned by the joint venture to additional risk. In addition,
we may in certain circumstances be liable for the actions of our third-party joint venture partners.
Historically, Fund I, Mervyns I and Fund III have provided Promote income. There can be no assurance that our joint ventures
will continue to operate profitably and thus provide additional Promote income in the future. These factors could limit the return
that we receive from such investments or cause our cash 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 to the 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’s ownership interest in the entities that own the properties and/or by the borrower’s personal guarantee. The
underlying assets are sometimes subordinate in payment 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 lender and/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 satisfied after 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
preferred equity 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.
The market price of our Common Shares or other securities may fluctuate significantly in response to many factors, including:
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actual or anticipated variations in our operating results, funds from operations, cash flows or liquidity;
changes in our earnings estimates or those of analysts;
changes in our dividend policy;
impairment charges affecting the carrying value of one or more of our Properties or other assets;
publication of research reports about us, the retail industry or the real estate industry generally;
increases in market interest rates that lead purchasers of our securities to seek higher dividend or interest rate yields;
changes in market valuations of similar companies;
adverse market reaction to the amount of our outstanding debt at any time, the amount of our maturing debt in the near
and medium term and our ability to refinance such debt and the terms thereof or our plans to incur additional debt in the
future;
additions or departures of key management personnel;
actions by institutional security holders;
proposed or adopted regulatory or legislative changes or developments;
speculation in the press or investment community;
the occurrence of any of the other risk factors included in, or incorporated by reference in, this report; and
general market and economic conditions.
Many of the factors listed above are beyond our control. Those factors may cause the market price of our Common Shares or other
securities to decline significantly, regardless of our financial performance and condition and prospects. It is impossible to provide
any assurance that the market price of our Common Shares or other securities will not fall in the future, and it may be difficult for
holders to sell such securities at prices they find attractive, or at all. A decline in our share price, as a result of this or other market
factors, could unfavorably impact our ability to raise additional equity in the public markets.
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RISKS RELATED TO STRUCTURE AND MANAGEMENT
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 Executive Officer, or other key executive-level employees could have a material adverse effect on our results of operations.
Management continues to strengthen our team and provide for succession planning, but there can be no assurance that such planning
will be capable of implementation or of the success of such efforts. We have obtained key-man life insurance for Mr. Bernstein.
In addition, we have entered into an employment agreement with Mr. Bernstein; however, the employment agreement can be
terminated by Mr. Bernstein at 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 our shareholders. Accordingly, the results
of decisions made by our Board of Trustees as implemented by management may or may not serve the interests of all of our
shareholders and could adversely affect our financial condition or results of operations, including our ability to distribute cash to
shareholders or qualify as a REIT.
Distribution requirements imposed by law limit our operating flexibility.
To maintain our status as a REIT for Federal income tax purposes, we are generally required to distribute to our shareholders at
least 90% of our taxable income for each calendar year. Our taxable income is determined without regard to any deduction for
dividends paid and by excluding net capital gains. To the extent that we satisfy the distribution requirement, but distribute less
than 100% of our taxable income, we will be subject to Federal corporate income tax on our undistributed income. In addition,
we will incur a 4% nondeductible excise tax on the amount, if any, by which our distributions in any year are less than the sum
of (i) 85% of our ordinary income for that year; (ii) 95% of our capital gain net income for that year; and (iii) 100% of our
undistributed taxable income from prior years. We intend to continue to make distributions to our shareholders to comply with
the distribution requirements of the Internal Revenue Code and to minimize exposure to Federal income and excise taxes.
Differences in timing between the receipt of income and the payment of expenses in determining our income as well as required
debt amortization payments and the capitalization of certain expenses could require us to borrow funds on a short-term basis to
meet the distribution requirements that are necessary to achieve the tax benefits associated with qualifying as a REIT. The
distribution requirements also severely limit our ability to retain earnings to acquire and improve properties or retire outstanding
debt.
Changes in accounting standards may adversely impact our financial results.
The Financial Accounting Standards Board (the "FASB"), in conjunction with the U.S. Securities and Exchange Commission, has
issued several key pronouncements that will impact how we currently account for our material transactions, including, but not
limited to, lease accounting, business combinations and the recognition of other revenues. In addition, the FASB has the ability
to introduce new projects to its agenda which may also impact how we account for our material transactions. At this time, we are
unable to predict with certainty which, if any, proposals may be passed, what new legislation may be implemented or what level
of impact any such proposal could have on the presentation of our consolidated financial statements, our results of operations and
our financial ratios required by our debt covenants.
Concentration of ownership by certain investors.
As of December 31, 2016, six institutional shareholders own 5% or more individually, and 59.7% in the aggregate, of our Common
Shares. While this ownership concentration does not jeopardize our qualification as a REIT (due to certain "look-through"
provisions"), a significant concentration of ownership may allow an investor or a group of investors to exert a greater influence
over our management and affairs and may have the effect of delaying, deferring or preventing a change in control of us.
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Restrictions on a potential change of control could prevent changes that would be beneficial to our shareholders.
Our Board of Trustees is authorized by our Declaration of Trust to establish and issue one or more series of preferred shares of
beneficial interest without shareholder approval. We have not established any series of preferred shares other than the Series A
and Series C Preferred Operating Partnership Units. However, the establishment and issuance of a class or series of preferred
shares could make a change of control of us that could be in the best interests of the shareholders more difficult. In addition, we
have entered into an employment agreement with our Chief Executive Officer and severance agreements are in place with certain
of our executives which provide that, upon the occurrence of a change in control of us and either the termination of their employment
without cause (as defined) or their resignation for good reason (as defined), those executive officers would be entitled to certain
termination or severance payments made by us (which may include a lump sum payment equal to defined percentages of annual
salary and prior years' average bonuses, paid in accordance with the terms and conditions of the respective agreement), which
could deter a change of control of us that could be in the best interests of our shareholders generally.
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 a Maryland REIT and any person who beneficially owns 10% or more of the voting
power of the REIT's outstanding voting shares or an affiliate or an associate, as defined in the MGCL, of the REIT 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 REIT, which we refer to as an "interested shareholder," or an
affiliate of the interested shareholder, are prohibited for five years after the most recent date on which the interested shareholder
becomes an interested shareholder. After that five-year period, any such business combination must be recommended by the board
of trustees of the REIT and approved by the affirmative vote of at least (i) 80% of the votes entitled to be cast by holders of
outstanding voting shares of beneficial interest of the REIT and (ii) two-thirds of the votes entitled to be cast by holders of voting
shares of the REIT other than shares held by the interested shareholder with whom, or with whose affiliate, the business combination
is to be effected or held by an affiliate or associate of the interested shareholder, unless, among other conditions, the REIT's
common shareholders 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 previously paid 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 REIT before the interested shareholder becomes an interested shareholder, and a person is not an interested
shareholder if the board of trustees approved in advance the transaction by which the person otherwise would have become an
interested shareholder. In approving a transaction, our Board of Trustees may provide that its approval is subject to compliance,
at or after the time of approval, with any terms and conditions determined by the Board. We have not elected to opt out of the
business combination statute.
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 by the 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 as the direct or indirect acquisition of ownership or
control of "control shares") have no voting rights except to the extent approved by the affirmative vote of holders 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 who
are also trustees of the REIT. Our Bylaws contain a provision exempting from the control share acquisition statute any and all
acquisitions by any person of our 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 will not 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 our Declaration of Trust or Bylaws, to elect to be subject to certain provisions relating to corporate
governance that may have the effect of delaying, deferring or preventing 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 in the best interests of our shareholders. We
are subject to some of these provisions (for example, a two-thirds vote requirement for removing a trustee) by provisions 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 control of 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 our Declaration of Trust on removal of trustees and the provisions of our Bylaws
regarding advance notice of shareholder nominations of trustees and other business proposals and restricting shareholder action
outside of a shareholders meeting unless such action is taken by unanimous written consent could have a similar effect.
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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 the best 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 money damages, except for liability resulting from:
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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 action adjudicated.
In addition, our Declaration of Trust authorizes, and our Bylaws obligate, us to indemnify each present or former trustee or officer,
to the maximum extent permitted by Maryland law, who is made a party to any proceeding because of his or her service to our
Company in those or certain other capacities. As part of these indemnification obligations, 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 electronic information. Any of these systems may be susceptible to outages due to fire, floods, power loss,
telecommunications failures, terrorist or cyber-attacks and similar events. Despite the implementation of network security measures,
our systems and those of third parties on which we rely may also be vulnerable to computer viruses and similar disruptions. If we
or the third parties on whom we rely are unable to prevent such outages and breaches, our operations could be disrupted.
Increased Information Technology ("IT") security threats and more sophisticated computer crime could pose a risk to
our systems, networks and services.
Cyber incidents can result from deliberate attacks or unintentional events. There have been an increased number of significant
cyber-attacks targeted at the retail, insurance, financial and banking industries that include, but are not limited to, gaining
unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data or causing
operational disruption. Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such
as by causing denial-of-service attacks on websites. Cyber-attacks by third parties or insiders utilize techniques that range from
highly sophisticated efforts to electronically circumvent network security or overwhelm a website to more traditional intelligence
gathering 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 the confidentiality, availability and integrity of our data. The open nature of interconnected technologies may
allow for a network or Web outage or a privacy breach that reveals sensitive data or transmission of harmful/malicious code to
business partners and clients. The techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems
change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate 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:
System downtimes and operational disruptions;
• Compromising of confidential information;
• Manipulation and destruction of data;
• Loss of trade secrets;
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• Remediation cost that may include liability for stolen assets or information and repairing system damage that may have
been caused. Remediation may include incentives offered to customers, tenants or other business partners in an effort to
maintain the business relationships or due to legal requirements imposed;
• 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, maintenance of backup systems, utilization of third party service providers to provide redundancy over
multiple locations, and comprehensive monitoring of our networks and systems along with purchasing cyber security insurance
coverage, our systems, networks and services remain potentially vulnerable to advanced threats.
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If a Third-Party Vendor fails to provide agreed upon services, we may suffer losses.
We are dependent and rely on third party vendors including Cloud providers for redundancy of our network, system data, security
and data integrity. If a vendor 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 our operations. We conduct
appropriate due diligence on all services providers and restrict access, use and disclosure of personal information. We engage
vendors with formal written agreements clearly defining the roles of the parties specifying privacy and data security responsibilities.
Use of social media may adversely impact our reputation and business.
There has been a significant increase in the use of social media platforms, including weblogs, social media websites and other
forms of Internet-based communications, which allow individuals access to a broad audience, including our significant business
constituents. The availability of information through these platforms is virtually immediate as is its impact and may be posted at
any time without affording us an opportunity to redress or correct it timely. This information may be adverse to our interests, may
be inaccurate and may harm our reputation, brand image, goodwill, performance, prospects or business. Furthermore, these
platforms increase the risk of unauthorized disclosure of material non-public Company information.
Climate change and catastrophic risk from natural perils could adversely affect our properties.
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 to natural disasters. Any properties located in coastal regions would therefore be affected by any future
increases in sea levels or in the frequency or severity of hurricanes 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. It may 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 fewer extreme 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 can impact 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);
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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;
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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;
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• Changes in the availability or quality of water or other natural resources on which the tenant's business depends;
• Decreased consumer demand for consumer products or services resulting from physical changes associated with climate
change (e.g., warmer temperatures 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
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We are exposed to possible liability relating to environmental matters.
Under various Federal, state and local environmental laws, statutes, ordinances, rules and regulations, as an owner of real property,
we may be liable for the costs of removal or remediation of certain hazardous or toxic substances at, on, in or under our property,
as well as certain other potential costs relating to hazardous or toxic substances (including government fines and penalties and
damages for injuries to persons and adjacent property). These laws may impose liability without regard to whether we knew of,
or were responsible for, the presence or disposal of those substances. This liability may be imposed on us in connection with the
activities of an operator of, or tenant at, the property. The cost of any required remediation, removal, fines or personal or property
damages and our liability therefore could exceed the value of the property and/or our aggregate assets. In addition, the presence
of those substances, or the failure to properly dispose of or remove those substances, may adversely affect our ability to sell or
rent that property or to borrow using that property as collateral, 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 of hazardous or toxic substances, or other contaminants that have or may have emanated from other
properties. Although our tenants are primarily responsible for any environmental damages and claims related to the leased premises,
in the event of the bankruptcy or inability of any of our tenants to satisfy any obligations with respect to the property leased to
that tenant, we may be required to satisfy such obligations. In addition, we may be held directly liable for any such 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 our financing sources, we authorize the preparation of Phase I environmental reports and, when necessary, Phase
II environmental reports, with respect to our properties. Based upon these environmental reports and our ongoing review of our
properties, we are currently not aware of any environmental condition with respect to any of our properties that we believe would
be reasonably likely to have a material adverse effect on us. There can be no assurance, however, that the environmental reports
will reveal all environmental conditions at our properties or that the following will not expose us to material liability in the future:
• The discovery of previously unknown environmental conditions;
• Changes in law;
• Activities of tenants; 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 other conditions may result in significant unanticipated expenditures or may otherwise adversely affect the
operations of our tenants, which could adversely affect our financial condition or results of operations.
Uninsured losses or a loss in excess of insured 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, with policy specifications and insured limits customarily carried for similar properties. However, with respect
to those properties where the leases do not provide for abatement of rent under any circumstances, we maintain a minimum of
twelve months loss of rent insurance. In addition, there are certain types of losses, such as losses resulting from wars, terrorism
or acts of God that generally are not insured because they are either uninsurable or not economically insurable. Should an uninsured
loss or a loss in excess of insured limits occur, we could lose capital invested in a property, as well as the anticipated future revenues
from a property, while remaining obligated for any mortgage indebtedness or other financial obligations related to the property.
Any loss of these types would adversely affect our financial condition.
Future terrorist attacks or civil unrest could harm the demand for, and the value of, our properties.
Over the past several years, a number of highly publicized terrorist acts and shootings have occurred at domestic and international
retail 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 could directly impact the value of our properties through damage, destruction, loss or increased
security costs, and the availability of insurance for such acts may be limited or may be subject to substantial cost increases. To the
extent that our tenants are impacted by future attacks, their ability to continue to honor obligations under their existing leases could
be adversely affected. A decrease in retail 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 business and consumer confidence and spending, and might result in
increased volatility in national and international financial markets and economies. Any one of these 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 of raising
capital.
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We may from time to time be subject to litigation that may negatively impact our cash flow, financial condition, results of
operations and the trading price of our Common Shares.
We may from time to time be a defendant in lawsuits and regulatory proceedings relating to our business. Such litigation and
proceedings may result in defense costs, settlements, fines or judgments against us, some of which may not be covered by insurance.
Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of
any such litigation or proceedings. An unfavorable outcome could negatively impact our cash flow, financial condition, results of
operations and trading price of our Common Shares.
Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make
unplanned expenditures that adversely affect our cash flows.
All of our properties are required to comply with the Americans with Disabilities Act, or ADA. The ADA has separate compliance
requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible
to people with disabilities. Compliance with the ADA requirements could require removal of access barriers, and non-compliance
could result in imposition of fines by the U.S. government or an award of damages to private litigants, or both. While the tenants
to whom we lease properties are obligated by law to comply with the ADA provisions, and are typically obligated to cover costs
of compliance, if required changes involve greater expenditures than anticipated, or if the changes must be made on a more
accelerated basis than anticipated, the ability of these tenants to cover costs could be adversely affected. As a result of the foregoing
or if a tenant is not obligated to cover the cost of compliance, we could be required to expend funds to comply with the provisions
of the ADA, which could adversely affect our results of operations and financial condition and our ability to make distributions
to shareholders. In addition, we are required to operate our properties in compliance with fire and safety regulations, building
codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to the
properties. We may be required to make substantial capital expenditures to comply with those requirements, and these expenditures
could have a material adverse effect on our ability to meet our financial obligations and make distributions to shareholders.
RISKS RELATED TO OUR REIT STATUS
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 ended December 31, 1993, and we intend to continue to meet these requirements in the future. However,
qualification as a REIT involves the application of highly technical and complex provisions of the Internal Revenue Code, for
which there may be only limited judicial or administrative interpretations. No assurance can be given that we have qualified or
will remain qualified as a REIT. The Internal Revenue Code provisions and income tax regulations applicable to REITs differ
significantly from those applicable to other entities. The determination of various factual matters and circumstances not entirely
within our control 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 Federal income tax consequences of such qualification. Under current law, if we
fail to qualify as a REIT, we would not be allowed a deduction for dividends paid to shareholders in computing our net taxable
income. In addition, our income would be subject to tax at the regular corporate rates. Also, we could be disqualified from treatment
as a REIT for the four taxable years following the year during which qualification was lost. Cash available for distribution to our
shareholders would be significantly reduced for each year in which we do not qualify as a REIT. In that event, we would not be
required to continue to make distributions. Although we currently intend to continue to qualify as a REIT, it is possible that future
economic, market, legal, tax or other considerations may cause us, without the consent of 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, the consequences of our failing to continue to qualify as a REIT. At any time, the Federal income tax laws
governing REITs or the administrative interpretations of 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 REIT shareholders since a REIT's income
generally is not subject to corporate level tax. As a result, investment in non-REIT corporations may be viewed as relatively more
attractive than investment in REITs by domestic noncorporate investors. Moreover, in the event that there is a reduction in tax
rates applicable to corporate dividends, or a reduction in the corporate tax rate, such views may strengthen as the perceived benefits
of investing in REITs by domestic noncorporate investors may decline. The foregoing factors could adversely affect the market
price of our shares.
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We may be required to borrow funds or sell assets to satisfy our REIT distribution requirements.
Our cash flows may be insufficient to fund distributions required to maintain our qualification as a REIT as a result of differences
in timing between the actual receipt of income and the recognition of income for U.S. Federal income tax purposes, or the effect
of non-deductible expenditures, such as capital expenditures, payments of compensation for which Section 162(m) of the Code
denies a deduction, the creation of reserves or required amortization payments. If we do not have other funds available in these
situations, we may need to borrow funds on a short-term basis or sell assets, even if the then- prevailing market conditions are not
favorable for these borrowings or sales, in order to satisfy our REIT distribution requirements. Such actions could adversely affect
our cash flow and results of operations.
Dividends payable by REITs generally do not qualify for reduced tax rates.
Certain qualified dividends paid by corporations to individuals, trusts and estates that are U.S. shareholders are taxed at capital
gain rates, which are lower than ordinary income rates. Dividends of current and accumulated earnings and profits payable by
REITs, however, are taxed at ordinary income rates as opposed to the capital gain rates. Dividends payable by REITs in excess of
these earnings and profits generally are treated as a non-taxable reduction of the shareholders’ basis in the shares to the extent
thereof and thereafter as taxable gain. The more favorable rates applicable to regular corporate dividends could cause investors
who are individuals, trusts and estates to perceive investments in REITs, including us, to be relatively less attractive than investments
in the stock of non-REIT corporations that pay dividends, which may negatively impact the trading prices of our securities.
Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise
attractive investments.
To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and
diversification of our assets, the amounts we distribute to our shareholders and the ownership of our Common Shares. In order to
meet these tests, we may be required to forego investments we might otherwise make and refrain from engaging in certain activities.
Thus, compliance with the REIT requirements may hinder our performance.
In addition, if we fail to comply with certain asset ownership tests at the end of any calendar quarter, we must correct the failure
within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT
qualification. As a result, we may be required to liquidate otherwise attractive investments.
We have limits on ownership of our shares of beneficial interest.
For us to qualify as a REIT for Federal income tax purposes, among other requirements, not more than 50% of the value of our
shares of beneficial interest 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 each taxable year, and such shares of beneficial interest must
be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate
part of a shorter taxable year (in each case, other than the first such year). Our Declaration of Trust includes certain restrictions
regarding transfers of our shares of beneficial interest and ownership limits that are intended to assist us in satisfying these
limitations, among other purposes. These restrictions and limits may not be adequate in all cases, however, to prevent the transfer
of our shares of beneficial interest in violation of the ownership limitations. The ownership limits contained in our Declaration of
Trust may have the effect of delaying, deferring or preventing a change of control of us.
Actual or constructive ownership of our shares of beneficial interest in excess of the share ownership limits contained in our
Declaration of Trust would cause the violative transfer or ownership to be null and void from the beginning and subject to purchase
by us at a price equal to the fair market value of such shares (determined in accordance with the rules set forth in our Declaration
of Trust). As a result, if a violative transfer were made, the recipient of the shares would not acquire any economic or voting rights
attributable to the transferred shares. Additionally, the constructive ownership rules for these limits are complex and groups of
related individuals or entities may be deemed a single owner and consequently in violation of the share ownership limits.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
22
ITEM 2. PROPERTIES.
Retail Properties
The discussion and tables in this Item 2. include wholly-owned and partially-owned properties held through our Core Portfolio and
our Funds. We define our Core Portfolio as those properties either 100% owned by, or partially owned through joint venture interests
by, the Operating Partnership, or subsidiaries thereof, not including those properties owned through our Funds.
As of December 31, 2016, there are 116 operating properties in our Core Portfolio totaling approximately 6.3 million square feet
of gross leasable area ("GLA") excluding one property under development. The Core Portfolio properties are located in 12 states
and the District of Columbia and primarily consist of street retail and dense suburban shopping centers. These properties are diverse
in size, ranging from approximately 2,000 to 900,000 square feet and as of December 31, 2016, were in total, excluding the property
under development, 96% occupied.
As of December 31, 2016, we owned and operated 52 properties totaling approximately 3.0 million square feet of GLA in our
Funds, excluding 13 properties under development. In addition to shopping centers, the Funds have invested in mixed-use properties,
which generally include retail activities. The Fund properties are located in 9 states and the District of Columbia and as of
December 31, 2016, were in total, excluding the properties under development, 81% occupied.
Within our Core Portfolio and Funds, we had approximately 852 leases as of December 31, 2016. A majority of our rental revenues
were from national retailers 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 the payment 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 97% of our total revenues for the year ended December 31, 2016.
Four of our Core Portfolio properties and one of our Fund properties are subject to long-term ground leases in which a third party
owns and has leased the underlying land to us. We pay rent for the use of the land and are responsible for all costs and expenses
associated with the building and improvements at all five locations.
No individual property contributed in excess of 10% of our total revenues for the years ended December 31, 2016, 2015 or 2014.
See Note 7 in the Notes to Consolidated Financial Statements, for information on the mortgage debt pertaining to our properties.
The following sets forth more specific information with respect to each of our wholly-owned and partially-owned shopping centers
at December 31, 2016:
Year
Acquired /
Constructed
(A / C)
Location
Ownership
Interest
GLA
%
Occupied (a)
Annualized
Base
Rent (b)
Annual
Base
Rent /
SqFt
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
Property Description
(Number of
Properties)
CORE PORTFOLIO
Street and Urban Retail
Chicago Metro
664 N. Michigan
Chicago
2013 (A)
100%
18,141
100 % $ 4,497,482
840 N. Michigan
Chicago
2014 (A)
88%
87,135
100 %
7,610,395
$ 247.92
Tommy Bahama
2029/2039
Ann Taylor Loft
2028/2033
87.34 H&M 2018/2028
Verizon
2024/2034
Rush and Walton
Streets (6)
Chicago
2011/12 (A)
100%
41,533
100 %
6,633,831
159.72
651-671 West Diversey
Chicago
2011 (A)
100%
46,259
100 %
1,995,310
43.13
Lululemon
2019/2029
Brioni
2023/2033
BHLDN
2023/2033
Marc Jacobs
2024/2034
Trader Joe's
2021/2041
Urban Outfitters
2021/2031
23
Property Description
(Number of
Properties)
Clark Street and W.
Diversey (3)
Halsted and Armitage
(9)
Year
Acquired /
Constructed
(A / C)
2011/12 (A)
Location
Chicago
Ownership
Interest
GLA
%
Occupied (a)
100%
23,531
96 %
Annualized
Base
Rent (b)
1,281,730
Chicago
2011/12 (A)
100%
44,658
95 %
1,879,494
North Lincoln Park (6)
Chicago
2011/14 (A)
100%
50,961
82 %
1,697,089
State and Washington
Chicago
2016 (A)
100%
78,819
100 %
2,969,482
151 N. State Street
Chicago
2016 (A)
100%
27,385
100 %
1,300,000
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
Annual
Base
Rent /
SqFt
57.00 Ann Taylor
2021/2031
Akira 2018/2028
44.21
Intermix
2017/2022
BCBG
2018/2028
Club Monaco
2021
40.57 Aldo 2019/2024
Carhartt
2021/2031
37.67 Nordstrom Rack
2018/2038
H&M 2019/2034
47.47 Walgreens
2019/2034
North and Kingsbury
Chicago
2016 (A)
100%
41,700
100 %
1,576,809
37.81 Old Navy 2024
Concord and
Milwaukee
California and
Armitage
Chicago
2016 (A)
100%
13,105
100 %
393,276
30.01
Chicago
2016 (A)
100%
18,275
75 %
626,417
45.66
Roosevelt Galleria
Chicago
2015 (A)
100%
37,995
63 %
701,982
29.15
Sullivan Center
Chicago
2016 (A)
100%
176,181
99 %
6,367,775
36.65
Total Chicago Metro
705,678
95 % 39,531,072
58.79
New York Metro
83 Spring Street
Manhattan
2012 (A)
100%
3,000
100 %
686,272
228.76
152-154 Spring Street
Manhattan
2014 (A)
100%
2,936
100 %
2,275,971
775.19
15 Mercer Street
Manhattan
2011 (A)
100%
3,375
100 %
431,250
127.78
Pier 1 2027/2037
Petco 2024/2039
Vitamin Shoppe
2028/2038
Target
2028/2063
DSW 2022/2027
Paper Source
2022/2027
3 x 1 Denim
2021/—
5-7 East 17th Street
Manhattan
2008 (A)
100%
11,467
100 %
1,300,014
113.37 Union Fare
200 West 54th Street
Manhattan
2007 (A)
100%
5,773
86 %
2,156,703
433.14
2036/—
Stage Coach
Tavern 2033/—
61 Main Street
181 Main Street
4401 White Plains
Road
Bartow Avenue
Westport
Westport
Bronx
Bronx
2014 (A)
2012 (A)
100%
100%
3,400
11,350
100 %
100 %
351,560
103.40
866,365
2011 (A)
100%
12,964
100 %
625,000
2005 (C)
100%
14,590
100 %
478,227
76.33
TD Bank
2026/2041
48.21 Walgreens
2060/—
32.78 Mattress Firm
2026/—
239 Greenwich Avenue
Greenwich
1998 (A)
75%
16,553 (d)
100 %
1,513,516
91.43
252-256 Greenwich
Avenue
Greenwich
2014 (A)
100%
7,986
100 %
1,308,431
163.84
2914 Third Avenue
Bronx
2006 (A)
100%
40,320
100 %
951,287
23.59
Calypso
2021/2026
Jack Wills
2020/2025
Madewell
2020/2025
Planet Fitness
2027/2042
868 Broadway
Manhattan
2013 (A)
100%
2,031
100 %
723,607
356.28 Dr Martens
2022/2027
313-315 Bowery
Manhattan
2013 (A)
100%
6,600
100 %
479,160
72.60
24
Property Description
(Number of
Properties)
Location
Year
Acquired /
Constructed
(A / C)
Ownership
Interest
GLA
%
Occupied (a)
120 West Broadway
Manhattan
2013 (A)
100%
13,838
100 %
Annualized
Base
Rent (b)
2,133,910
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
Annual
Base
Rent /
SqFt
154.21 HSBC Bank
131-135 Prince Street
Manhattan
2014 (A)
100%
3,200
100 %
1,307,412
408.57
Shops at Grand
Queens
2014 (A)
100%
99,975
97 %
2,965,970
30.59
2520 Flatbush Avenue
Brooklyn
2014 (A)
100%
29,114
100 %
1,059,282
36.38
2021/2031
Citibank
2022/2037
Follie Follie
2020/2030
Uno de 50 2017/
—
Stop and Shop
2023/2043
Bob's Discount
Furniture
2028/2033
Capital One
2024/2034
991 Madison Avenue
Manhattan
2016 (A)
100%
7,513
66 %
1,508,050
306.08 Vera Wang 2031/
Gotham Plaza
Manhattan
2016 (A)
49%
26,180
92 %
1,471,167
61.35
Total New York Metro
322,165
97 % 24,593,154
78.43
San Francisco Metro
City Center
555 9th Street
San
Francisco
San
Francisco
2015 (A)
100%
204,648
98 %
7,657,875
38.39
2016 (A)
100%
148,832
100 %
6,013,669
40.41
Total San Francisco Metro
353,480
99 % 13,671,544
39.25
District of Columbia Metro
1739-53 & 1801-03
Connecticut Avenue (2)
Washington
D.C.
2012 (A)
100%
20,669
92 %
1,125,162
59.26
Rhode Island Place
Shopping Center
Washington
D.C.
M Street and Wisonsin
Corridor (24)
Washington
D.C.
2012 (A)
100%
57,529
100 %
1,735,379
30.17
2011/16 (A)
50%/20%
242,582
93 % 17,076,374
75.71
Total District of Columbia Metro
320,780
94 % 19,936,915
66.00
Boston Metro
330-340 River Street
(2)
Cambridge
2012 (A)
165 Newbury Street
Boston
2016 (A)
Total Boston Metro
Total Street and Urban Retail
100%
100%
54,226
1,050
55,276
100 %
1,200,045
22.13
100 %
100 %
254,153
242.05
1,454,198
26.31
58.63
1,757,379
97 % 99,186,883
25
—
Perrin Paris
2031/—
Bank of America
2017/2022
The Children's
Place 2017
City Target
2025/2035
Best Buy
2018/2042
Bed, Bath and
Beyond
2028/2043
Nordstrom Rack
2021/2031
Ruth Chris
Steakhouse
2020/—
TD Bank
2024/2044
TJ Maxx 2017/
—
Lacoste
2019/2025
Juicy Couture
2018/2028
Coach 2017/—
Whole Foods
2021/2051
Starbucks
2025/2030
Year
Acquired /
Constructed
(A / C)
Location
Ownership
Interest
GLA
%
Occupied (a)
Annualized
Base
Rent (b)
Annual
Base
Rent /
SqFt
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
Property Description
(Number of
Properties)
Suburban Properties
New Jersey
Elmwood Park
Shopping Center
Elmwood
Park
1998 (A)
100%
149,070
97 %
3,870,422
26.69 Acme 2017/2052
Marketplace of
Absecon
Absecon
1998 (A)
100%
104,556
92 %
1,385,256
60 Orange Street
Bloomfield
2012 (A)
98%
101,715
100 %
695,000
New York
Village Commons
Shopping Center
Branch Shopping
Center
Smithtown
1998 (A)
100%
87,128
98 %
2,816,751
32.96
Smithtown
1998 (A)
100% (c)
123,339
91 %
2,837,192
25.40
Amboy Road
Staten Island
2005 (A)
100% (c)
63,290
100 %
2,059,483
32.54
Pacesetter Park
Shopping Center
West Shore
Expressway
Crossroads Shopping
Center
Ramapo
1999 (A)
100%
97,806
98 %
1,270,976
13.28
Staten Island
2007 (A)
100%
55,000
100 %
1,391,500
25.30
White Plains
1998 (A)
49%
311,539
92 %
6,685,878
23.30 Kmart
New Loudon Center
Latham
1993 (A)
100%
255,673
100 %
2,140,344
8.37
28 Jericho Turnpike
Westbury
2012 (A)
100%
96,363
100 %
1,650,000
17.12 Kohl's
Bedford Green
Bedford Hills
2014 (A)
100%
90,589
82 %
2,370,392
31.99
Connecticut
Town Line Plaza
Rocky Hill
1998 (A)
100%
206,346
99 %
1,753,152
16.49
2020/2050
Shop Rite
2021/2031
Stop & Shop
2024/2064
Wal-Mart(e)
Massachusetts
Methuen Shopping
Center
Methuen
1998 (A)
100%
130,021
96 %
1,186,018
9.54 Market Basket
Crescent Plaza
Brockton
1993 (A)
100%
218,148
96 %
1,880,513
201 Needham Street
Newton
2014 (A)
100%
20,409
100 %
591,861
163 Highland Avenue
Needham
2015 (A)
100%
40,505
100 %
1,275,673
31.49
Vermont
Gateway Shopping
Center
South
Burlington
Illinois
1999 (A)
100%
101,655
100 %
2,046,885
20.14
Staples
2020/2035
Petco 2025/2040
Supervalu
2024/2053
Hobson West Plaza
Naperville
1998 (A)
100%
99,137
95 %
1,146,315
12.15 Garden Fresh
Markets
2017/2022
26
Walgreen’s
2022/2062
14.37
Rite Aid
2020/2040
White Horse
Liquors
2019/202024
6.83 Home Depot
2032/2052
CVS 2020/—
LA Fitness
2027/2042
Stop & Shop
2028/2043
Stop & Shop
2020/2040
LA Fitness
2022/2037
2017/2032
Home Goods
2018/2033
PetSmart
2024/2039
Price Chopper
2020/2035
Hobby Lobby
2021/2031
2025/2035
Wal-Mart
2021/2051
8.98
Supervalu
2017/2047
Home Depot
2021/2056
29.00 Michael's
2023/2033
Delaware
Brandywine Town
Center
Market Square
Shopping Center
Route 202 Shopping
Center
Pennsylvania
Mark Plaza
Property Description
(Number of
Properties)
Location
Year
Acquired /
Constructed
(A / C)
Indiana
Ownership
Interest
GLA
%
Occupied (a)
Annualized
Base
Rent (b)
Annual
Base
Rent /
SqFt
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
Merrillville Plaza
Hobart
1998 (A)
100%
236,087
97 %
3,301,079
14.44
Michigan
Bloomfield Town
Square
Bloomfield
Hills
1998 (A)
100%
235,786
94 %
3,320,083
14.91
Ohio
Mad River Station (f)
Dayton
1999 (A)
100%
123,335
83 %
1,396,788
13.69
Wilmington
2003 (A)
22%
824,411
93 % 12,480,721
16.25
Wilmington
2003 (A)
22%
102,047
99 %
2,962,290
29.41
TJ Maxx
2019/2034
Art Van
2023/2038
TJ Maxx
2019/2034
Home Goods
2021/2026
Best Buy
2021/2041
Dick's Sporting
Goods
2023/2043
Babies ‘R’ Us
2020/—
Bed, Bath &
Beyond
2019/2029
Dick’s Sporting
Goods
2018/2033
Lowe’s Home
Centers
2018/2048
Target
2018/2058
HH Gregg
2020/2035
TJ Maxx 2021/
—
Trader Joe’s
2019/2034
Wilmington
2006 (C)
100%
19,984
75 %
637,701
42.55
Edwardsville
1993 (C)
100% (c)
106,856
100 %
244,279
2.29 Kmart
2019/2049
Plaza 422
Lebanon
1993 (C)
100%
156,279
100 %
850,978
5.45 Home Depot
2028/2058
Route 6 Plaza
Honesdale
1994 (C)
100%
175,589
98 %
1,255,941
7.32 Kmart
Chestnut Hill (h)
Abington Towne
Center
Philadelphia
Abington
2006 (A)
1998 (A)
100%
100%
37,646
216,278
100 %
96 %
930,489
1,054,026
Total Suburban Properties
TOTAL CORE PORTFOLIO
4,586,587
6,343,966
96 % 67,487,986
96% 166,674,869
2020/2070
Dollar Tree
2018/2033
Peebles
2024/2034
TJ Maxx 2021/
—
Target (g)
24.72
21.38
16.37
28.69
FUND PORTFOLIO
Fund II Properties
New York
216th Street
Manhattan
2005 (A)
28%
60,000
100 %
2,574,000
42.90
City of New
York 2027/2032
161st Street
Bronx
2005 (A)
28%
255,428
41 %
5,633,106
53.56
Total Fund II Properties
315,428
52%
8,207,106
49.69
27
Property Description
(Number of
Properties)
Location
Year
Acquired /
Constructed
(A / C)
Ownership
Interest
GLA
%
Occupied (a)
Annualized
Base
Rent (b)
Annual
Base
Rent /
SqFt
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
Fund III Properties
New York
654 Broadway
Manhattan
2011 (A)
640 Broadway
Manhattan
2012 (A)
25%
16%
2,896
4,247
100 %
601,000
207.53
100 %
1,202,418
283.12
New Hyde Park
Shopping Center
3780-3858 Nostrand
Avenue
Maryland
New Hyde
Park
Brooklyn
2011 (A)
25%
32,287
80 %
1,148,942
44.36
2013 (A)
25%
42,628
77 %
1,564,470
47.47
Penguin
2023/2033
Swatch
2023/2028
Petsmart
2024/2039
Arundel Plaza
Glen Burnie
2012 (A)
22%
265,116
73 %
1,146,390
5.91 Giant Food
2021/2026
Lowes
2019/2059
Total Fund III Properties
347,174
75 %
5,663,220
21.78
Fund IV Properties
New York
1151 Third Avenue
Manhattan
2013 (A)
23%
13,250
100 %
1,751,863
132.22 Vineyard Vines
17 East 71st Street
Manhattan
2014 (A)
23%
8,432
100 %
1,848,724
219.25
1035 Third Avenue
Manhattan
Colonie Plaza
Albany
2015 (A)
2016 (A)
23%
23%
7,617
153,483
71 %
97 %
945,722
173.94
1,666,687
11.21
2025/2035
The Row
2025/2035
Price Chopper
2029/2059
Big Lots 2018/
—
New Jersey
2819 Kennedy
Boulevard
Paramus Plaza
Massachusetts
Restaurants at Fort
Point
Maine
North Bergen
2013 (A)
23%
47,539
100 %
1,147,458
24.14 Aldi 2030/2050
Paramus
2013 (A)
12%
152,509
72 %
1,835,118
16.74
Babies R Us
2019/2044
Ashley Furniture
2024/2034
Boston
2016 (A)
23%
15,711
100 %
312,019
19.86
Airport Mall
Bangor
2016 (A)
23%
221,760
89 %
1,325,139
6.69 Hannaford
2018/2068
Marshalls
2019/2029
Wells Plaza
Wells
2016 (A)
23%
93,263
93 %
647,973
7.50
Shaw's Plaza
Waterville
2016 (A)
23%
119,015
100 %
1,405,516
11.81
Reny's
2019/2024
Dollar Tree
2020/2025
Shaw's
2020/2045
JFK Plaza
Waterville
2016 (A)
23%
151,107
78 %
744,207
6.31 Hannaford
2027/2047
TJ Maxx
2018/2038
28
Property Description
(Number of
Properties)
Pennsylvania
Year
Acquired /
Constructed
(A / C)
Location
Ownership
Interest
GLA
%
Occupied (a)
Annualized
Base
Rent (b)
Annual
Base
Rent /
SqFt
Anchor Tenants
Current Lease
Expiration/
Lease Option
Expiration
Dauphin Plaza
Harrisburg
2016 (A)
23%
205,727
86 %
1,666,419
9.40
Price Rite
2021/2041
Ashley Furniture
2021/2031
Shop N Bag
2018/2043
2031/2071
HH Gregg
2020/2030
Food Lion
2023/2043
Mayfair Shopping
Center
Virginia
Promenade at
Manassas
Philadelphia
2016 (A)
23%
115,411
81 %
1,607,597
17.21
Manassas
2013 (A)
23%
265,442
98 %
3,497,730
13.42 Home Depot
Lake Montclair Center
Dumfries
2013 (A)
23%
105,832
96 %
1,956,034
19.20
Maryland
1701 Belmont Avenue
Catonsville
2012 (A)
23%
58,674
— %
—
—
Delaware
Eden Square
Bear
2014 (A)
23%
231,436
72 %
2,353,417
14.17 Giant, 2024/2059
Lowe's
2017/2032
Illinois
938 W. North Avenue
Chicago
2013 (A)
23%
33,228
16 %
326,350
61.00
Georgia
Broughton Street
Portfolio
North Carolina
Savannah
2014 (A)
12%
100,660
90 %
3,334,017
36.73
Sephora
2024/2029
J. Crew
2025/2035
L'Occitane
2025/2030
Wake Forest Crossing
Wake Forest
2016 (A)
23%
203,006
97 %
2,854,296
14.47
California
146 Geary Street
Union and Fillmore
Collection (4)
San
Francisco
San
Francisco
2015 (A)
23%
11,436
100 %
300,000
26.23
2015/16 (A)
21%
10,148
90 %
641,286
70.44
Total Fund IV Properties
TOTAL FUND OPERATING PROPERTIES (i)
2,324,686
2,987,288
85 % 32,167,572
16.22
81% $ 46,037,898
$ 19.03
__________
(a) Does not include space for which the lease term had not yet commenced as of December 31, 2016.
(b) These amounts include, where material, the effective rent, net of concessions, including free rent.
(c) The Company is a ground lessee under a long-term ground lease.
(d)
In addition to the 16,834 square feet of retail GLA, this property also has 21 apartments comprising 14,434 square feet
Includes a 97,300 square foot Wal-Mart which is not owned by us.
(e)
(f) The GLA for this property excludes 29,857 square feet of office space.
(g) Property consists of two buildings.
(h)
(i)
Includes a 157,616 square foot Target Store that is not owned by us.
In addition to the operating properties, there are 14 properties under development: 613-623 West Diversey (Core), Sherman Plaza (Fund II), City Point
(Fund II), Broad Hollow Commons (Fund III), Cortlandt Crossing (Fund III), 3104 M Street (Fund III), Broughton Street Portfolio (Fund IV, includes
3 properties), 27 E. 61st (Fund IV), 210 Bowery (Fund IV), 801 Madison Avenue (Fund IV), 650 Bald Hill Road (Fund IV) and 717 North Michigan
Avenue (Fund IV).
29
Major Tenants
No individual retail tenant accounted for more than 4.7% of base rents for the year ended December 31, 2016, or occupied more
than 8.3% of total leased GLA as of December 31, 2016. The following table sets forth certain information for the 20 largest retail
tenants by base rent for leases in place as of December 31, 2016. 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):
Retail Tenant
Target Corp.
Walgreens
The Stop & Shop Supermarket Co.
Best Buy Co., Inc.
LA Fitness International LLC
Ann Inc.
Bed Bath & Beyond Inc.
Verizon Wireless
TJX Companies, Inc.
The Home Depot, Inc.
Supervalue Inc.
Trader Joe's Co., Inc.
Tommy Bahama Group Inc.
Gap, Inc.
JP Morgan Chase Co.
Ulta Salon Cosm & Fragrance
Lululemon Athletica, Inc.
DSW
Sleepy's Inc.
Price Chopper
Total
__________
Number of
Stores in
Portfolio (a)
Percentage of Total
Represented by Retail Tenant
Total GLA
Annualized
Base Rent (b)
Total Portfolio
GLA
Annualized Base
Rent
7
6
5
3
4
4
4
2
11
6
4
5
2
3
8
3
2
2
10
2
93
494
$
81
208
87
112
16
95
31
227
233
138
37
4
29
24
31
3
36
41
104
6,979
3,666
3,639
3,595
2,624
2,395
2,388
2,386
2,199
2,102
2,068
1,935
1,844
1,468
1,419
1,395
1,305
1,287
1,273
1,234
8.3%
1.4%
3.5%
1.4%
1.9%
0.3%
1.6%
0.5%
3.8%
3.9%
2.3%
0.6%
0.1%
0.5%
0.4%
0.5%
0.1%
0.6%
0.7%
1.7%
4.7%
2.5%
2.5%
2.4%
1.8%
1.6%
1.6%
1.6%
1.5%
1.4%
1.4%
1.3%
1.2%
1.0%
1.0%
0.9%
0.9%
0.9%
0.9%
0.8%
2,031
$
47,201
34.1%
31.9%
(a) Does not include the following tenants that only operate at one location within the Company's portfolio: H&M, Union Fare, Marc Jacobs,
and Kohl's.
(b) Base rents do not include percentage rents, additional rents for property expense reimbursements and contractual rent escalations.
30
Lease Expirations
The following tables show scheduled lease expirations for retail tenants in place as of December 31, 2016, assuming that none of
the tenants exercise renewal options (GLA and Annualized Base Rent in thousands):
Core Portfolio
Leases Maturing in
Month to Month
2017 (b)
2018
2019
2020
2021
2022
2023
2024
2025
2026
Thereafter
Total
Fund Portfolio
Leases Maturing in
Month to Month
2017 (b)
2018
2019
2020
2021
2022
2023
2024
2025
2026
Thereafter
Total
__________
Annualized Base Rent (a)
GLA
Number of
Leases
Current Annual
Rent
Percentage of
Total
10
72
76
54
51
81
34
29
43
42
26
38
556
$
$
924
14,880
18,102
10,749
13,029
20,772
9,428
15,103
17,517
11,201
6,078
28,892
166,675
1%
8%
11%
6%
8%
12%
6%
9%
11%
7%
4%
17%
100%
Square Feet
32
574
723
506
625
919
222
397
534
306
136
843
5,817
Percentage
of Total
1%
10%
12%
9%
11%
16%
4%
7%
9%
5%
2%
14%
100%
Annualized Base Rent (a)
GLA
Number of
Leases
Current Annual
Rent
Percentage of
Total
7
28
46
34
31
30
18
13
13
24
26
26
296
$
$
399
3,142
3,163
5,282
3,096
2,649
2,399
2,176
3,318
4,984
3,875
13,615
48,098
1%
11%
10%
10%
9%
7%
7%
4%
6%
5%
8%
22%
100%
Square Feet
12
263
254
246
214
186
185
100
142
116
186
534
2,438
Percentage
of Total
1%
7%
7%
11%
6%
6%
5%
4%
7%
10%
8%
28%
100%
(a) Base rents do not include percentage rents, additional rents for property expense reimbursements, nor contractual rent
escalations.
(b) The 100 leases scheduled to expire during 2017 are for tenants at 29 properties located in 17 markets. No single market
represents a material amount of exposure to the Company as it relates to the rents from these leases. Given the diversity
of these markets, properties and characteristics of the individual spaces, the Company cannot make any general
representations as it relates to the expiring rents and the rates for which these spaces may be re-leased.
31
Geographic Concentrations
The following table summarizes our operating retail properties by region as of December 31, 2016. 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):
Annualized
Base
Rent per
Occupied
Square
Foot (c)
Annualized
Base
Rent (b,c)
Percentage of Total
Represented by
Region
GLA
Annualized
Base Rent
Region
GLA (a,c) % Occupied (b)
Core Portfolio:
Operating Properties:
New York Metro
New England
Chicago Metro
Midwest
Washington D.C Metro
San Francisco Metro
Mid-Atlantic
Total Core Operating
Properties
Fund Portfolio:
Operating Properties:
New York Metro
San Francisco Metro
Chicago Metro
Northeast
Southeast
Mid-Atlantic
Total Fund Operating
Properties
__________
1,680
96% $
49,214
$
772
696
694
140
353
918
98%
95%
93%
94%
99%
95%
10,188
38,648
9,164
7,498
13,672
8,405
30.57
13.49
58.31
14.15
56.99
39.25
9.60
32%
15%
13%
13%
3%
7%
17%
36%
8%
28%
7%
5%
10%
6%
5,253
96% $
136,789
$
27.21
100%
100%
179
5
21
210
59
212
686
72% $
3,492
$
95%
24%
87%
95%
57%
203
552
1,710
1,045
2,090
26.97
44.81
111.79
9.34
18.82
17.25
26%
1%
3%
31%
8%
31%
38%
2%
6%
19%
12%
23%
73% $
9,092
$
18.16
100%
100%
(a) Property GLA includes a total of 255,000 square feet, which is not owned by us. This square footage has been excluded for calculating
annualized base rent per square foot.
(b) The above occupancy and rent amounts do not include space that is currently leased, but for which payment of rent had not commenced
as of December 31, 2016.
(c) The amounts presented reflect the Operating Partnership's pro-rata shares of properties included within each region.
32
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 any particular matter, Management is of the opinion that, when such litigation is resolved, our resulting
exposure to loss contingencies, if any, will not have a significant effect on our consolidated financial position, results of operations,
or liquidity.
During August 2009, we terminated the employment of a former Senior Vice President (the "Former Employee") for engaging in
conduct that materially violated the Company's employee handbook. We determined that the behavior fell within the definition
of "cause" in his severance agreement with 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 us, as defendant, and against plaintiff, the Former
Employee, finding that his conduct in fact and law, constituted "cause" under his severance agreement. The Court rendered two
decisions, one granting our motion for summary judgment and a second denying the Former Employee's motion to dismiss our
answer as an abuse of judicial discretion. The Former Employee appealed the latter decision, but the decision of the Court was
affirmed by the appellate court.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
33
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES AND PERFORMANCE GRAPH.
Market Information, Dividends and Holders of Record of our Common Shares
The following table shows, for the period indicated, the high and low sales price for our Common Shares as reported on the New
York Stock Exchange, and cash dividends declared during the two years ended December 31, 2016 and 2015:
Quarter Ended
2016
March 31, 2016
June 30, 2016
September 30, 2016
December 31, 2016
2015
March 31, 2015
June 30, 2015
September 30, 2015
December 31, 2015
(a)
(b)
__________
High
Low
Dividend
Per Share
$
$
$
$
35.24
35.98
38.01
36.02
36.82
35.36
32.67
34.06
$
$
30.25
32.76
34.91
31.31
32.13
29.05
28.34
29.80
0.25
0.25
0.25
0.41
0.24
0.24
0.24
0.50
(a) Includes a special dividend of $0.15 for the quarter ended December 31, 2016
(b) Includes a special dividend of $0.25 for the quarter ended December 31, 2015
At February 24, 2017, there were 206 holders of record of our Common Shares.
We have determined for income tax purposes that 66% of the total dividends distributed to shareholders during 2016 represented
ordinary income and 34% represented capital gains. The dividend for the quarter ended December 31, 2016, was paid on January
15, 2017, and is taxable in 2016. Our cash flow is affected by a number of factors, including the revenues received from rental
properties, our operating expenses, the interest expense on our borrowings, the ability of lessees to meet their obligations to us
and unanticipated capital expenditures. Future dividends paid by us will be at the discretion of the Trustees and will depend on
our actual cash flows, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions
of the Code and such other factors as the Trustees deem relevant. In addition, we have the ability to pay dividends in cash, Common
Shares or a combination thereof, subject to a minimum of 10% in cash.
Issuer Purchases of Equity Securities
We have an existing share repurchase program that authorizes management, at its discretion, to repurchase up to $20.0 million of
our outstanding Common Shares. The program may be discontinued or extended at any time and there is no assurance that we
will purchase the full amount authorized. There were no Common Shares repurchased by us during the year ended December 31,
2016. Under this program we have repurchased 2.1 million Common Shares, none of which were repurchased after December
2001. As of December 31, 2016, management may repurchase up to approximately $7.5 million of our outstanding Common
Shares under this program.
Securities Authorized for Issuance Under Equity Compensation Plans
At the 2016 annual shareholders' meeting, the shareholders' approved the Second Amended and Restated 2006 Incentive Plan (the
"Second Amended 2006 Plan"). This plan replaced all previous share incentive plans and increased the authorization to issue
options, Restricted Shares and LTIP Units (collectively "Awards") available to officers and employees by 1.6 million shares, for
a total of 3.7 million shares available to be issued. See Note 13 in the Notes to Consolidated Financial Statements, for a summary
of our Share Incentive Plans.
34
The following table provides information related to the Second Amended 2006 Plan as of December 31, 2016:
Equity Compensation Plan Information
(a)
(b)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
Weighted - average
exercise price of
outstanding options,
warrants and rights
(c)
Number of securities
remaining available
for future issuance under
equity compensation plans
(excluding securities
reflected in column (a))
Equity compensation plans approved by
security holders
Equity compensation plans not approved
by security holders
Total
— $
—
— $
—
—
—
Remaining Common Shares available under the Amended 2006 Plan are as follows:
Outstanding Common Shares as of December 31, 2016
Outstanding OP Units as of December 31, 2016
Total Outstanding Common Shares and OP Units
Common Shares and OP Units pursuant to the Second Amended 2006 Plan
Total Common Shares available under equity compensation plans
Less: Issuance of Restricted Shares and LTIP Units Granted
Issuance of Options Granted
Number of Common Shares remaining available
Share Price Performance
2,093,419
—
2,093,419
83,597,680
4,528,798
88,126,478
8,893,681
8,893,681
(4,028,489)
(2,771,773)
2,093,419
The following graph compares the cumulative total shareholder return for our Common Shares for the period commencing
December 31, 2011, through December 31, 2016, with the cumulative total return on the Russell 2000 Index ("Russell 2000"),
the NAREIT All Equity REIT Index (the "NAREIT") and the SNL Shopping Center REITs (the "SNL") over the same period.
Total return values for the Russell 2000, the NAREIT, the SNL and the Common Shares were calculated based upon cumulative
total return assuming the investment of $100.00 in each of the Russell 2000, the NAREIT, the SNL and our Common Shares on
December 31, 2011, and assuming reinvestment of dividends. The shareholder return as set forth in the table below is not necessarily
indicative of future performance. The information in this section is not "soliciting material," is not deemed "filed" with the SEC,
and is not to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act, whether made
before or after the date hereof and irrespective of any general incorporation language contained in such filing.
35
Comparison of five Year Cumulative Total Return among Acadia Realty Trust, the Russell 2000, the NAREIT and the SNL:
Index
Acadia Realty Trust
Russell 2000
NAREIT All Equity REIT Index
SNL REIT Retail Shopping Ctr Index
$
2011
2012
2013
2014
2015
2016
$
100.00
100.00
100.00
100.00
$
128.35
116.35
119.70
126.26
$
131.42
161.52
123.12
134.90
$
176.74
169.43
157.63
174.80
$
189.97
161.95
162.08
184.16
193.76
196.45
176.07
190.57
At December 31,
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth, on a historical basis, our selected financial data. This information should be read in conjunction
with our audited Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Results
of Operations appearing elsewhere in this Form 10-K. Funds from operations ("FFO") amounts for the year ended December 31,
2016 have been adjusted as set forth in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Reconciliation of Net Income to Funds from Operations."
36
(dollars in thousands, except per share amounts)
2016
2015
2014
2013
2012
Year Ended December 31,
OPERATING DATA:
Revenues
Operating expenses, excluding depreciation and reserves
Depreciation and amortization
Impairment of asset
Equity in earnings of unconsolidated affiliates
Gain on involuntary conversion of asset
Interest income
Other
Interest expense
Income from continuing operations before income taxes
Income tax benefit (provision)
Income from continuing operations before
gain on disposition of properties
Income from discontinued operations, net of tax
Gain on disposition of properties, net of tax
Net income
(Income) loss attributable to noncontrolling interests:
Continuing operations
Discontinued operations
Net income attributable to noncontrolling interests
$
189,939
$
199,063
$
179,681
$
156,486
$ 106,960
98,039
70,011
—
39,449
—
25,829
—
34,645
52,522
105
52,627
—
81,965
134,592
88,850
60,751
(5,000)
37,330
—
16,603
1,596
37,297
62,694
(1,787)
60,907
—
89,063
149,970
(61,816)
(84,262)
—
—
(61,816)
(84,262)
79,104
49,645
—
111,578
—
12,607
2,724
39,426
138,415
(629)
137,786
1,222
13,138
152,146
(80,059)
(1,023)
(81,082)
72,108
40,299
(1,500)
12,382
—
11,800
—
40,239
26,522
(19)
26,503
18,137
—
59,344
27,888
(2,032)
3,611
2,368
8,027
—
23,009
8,693
574
9,267
80,669
—
44,640
89,936
7,523
(12,048)
(4,525)
14,352
(64,582)
(50,230)
Net income attributable to Acadia
$
72,776
$
65,708
$
71,064
$
40,115
$
39,706
Supplemental Information:
Income from continuing operations attributable to Acadia
Income from discontinued operations attributable to Acadia
Net income attributable to Acadia
Basic earnings per share:
Income from continuing operations
Income from discontinued operations
Basic earnings per share
Diluted earnings per share:
Income from continuing operations
Income from discontinued operations
Diluted earnings per share
Weighted average number of Common Shares outstanding
Basic
Diluted
Cash dividends declared per Common Share
$
$
$
$
$
$
$
72,776
$
65,708
$
70,865
$
34,026
$
23,619
—
72,776
0.94
—
0.94
0.94
—
0.94
$
$
$
$
$
—
65,708
0.94
—
0.94
0.94
—
0.94
$
$
$
$
$
199
71,064
1.18
—
1.18
1.18
—
1.18
$
$
$
$
$
6,089
40,115
0.61
0.11
0.72
0.61
0.11
0.72
$
$
$
$
$
16,087
39,706
0.51
0.34
0.85
0.51
0.34
0.85
76,231
76,244
68,851
68,870
59,402
59,426
54,919
54,982
45,854
46,335
1.16
$
1.22
$
1.23
$
0.86
$
0.72
37
(dollars in thousands, except per share amounts)
2016
2015
2014
2013
2012
BALANCE SHEET DATA:
Year Ended December 31,
Real estate before accumulated depreciation
$ 3,382,000
$ 2,736,283
$ 2,208,595
$ 1,819,053
$1,287,198
Total assets
Total indebtedness
Total common shareholders’ equity
Noncontrolling interests
Total equity
OTHER:
Funds from operations attributable to Common
Shareholders and Common OP Unit holders (a)
Cash flows provided by (used in):
Operating activities
Investing activities
Financing activities
3,995,960
1,488,718
1,588,577
589,548
3,032,319
1,358,606
1,100,488
420,866
2,720,721
2,264,957
1,908,440
1,118,602
1,039,997
1,055,541
380,416
704,236
417,352
613,181
622,797
447,459
2,178,125
1,521,354
1,435,957
1,121,588
1,070,256
117,070
111,560
78,882
67,161
48,845
147,225
113,598
82,519
65,233
59,001
(646,435)
(354,503)
(268,516)
(87,879)
(136,745)
498,239
96,101
324,388
10,022
79,745
(a) Funds from operations is a non-GAAP measure. For an explanation of the measure and a reconciliation to the nearest
GAAP measure, see "Item 7. Managements Discussion and Analysis —Non-GAAP Measures."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
OVERVIEW
As of December 31, 2016, we operated 182 properties, which we own or have an ownership interest in, within our Core Portfolio
or Funds. Our Core Portfolio consists of those properties either 100% owned, or partially owned through joint venture interests
by the Operating Partnership, or subsidiaries thereof, not including those properties owned through our Funds. These 182 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 116 properties in our Core Portfolio totaling approximately
6.3 million square feet excluding one in development. Fund II has four properties, two of which (representing 0.3 million square
feet) are currently operating, one is under construction, and one is in the design phase. Fund III has eight properties, of which five
(representing 0.3 million square feet) are currently operating and three are under development. Fund IV has 53 properties, 45 of
which (representing 2.3 million square feet) are operating and eight are under development. The majority of our operating income
is derived from rental revenues from operating properties, including expense recoveries from tenants, offset by operating and
overhead expenses. As our RCP Venture invests in operating companies, we consider these investments to be private-equity style,
as opposed to real estate, investments. Since these are not traditional investments in operating rental real estate but investments
in operating businesses, the Operating Partnership typically invests in these through a taxable REIT subsidiary ("TRS").
Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to
shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following
fundamentals to achieve this objective:
• Own and operate a Core Portfolio of high-quality retail properties located primarily in high-barrier-to-entry, densely-
populated metropolitan areas and create value through accretive development 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 with high 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 repositioning opportunities,
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.
38
Some of these investments historically have also included, and may in the future include, joint ventures with private
equity investors for the purpose of making investments in operating retailers with significant embedded value in their
real estate assets.
• Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient
capital to fund future growth.
SIGNIFICANT DEVELOPMENTS DURING 2016
Investments
During the year ended December 31, 2016 ("2016"), within our Core and Fund portfolios we acquired 22 properties aggregating
$864.3 million as follows:
•
•
In our Core portfolio we acquired nine consolidated properties with an aggregate purchase price of $519.6 million and
two unconsolidated properties with an aggregate purchase price of $107.4 million (Note 4).
In Fund IV we acquired 11 consolidated properties with an aggregate purchase price of $237.3 million (Note 2).
In addition to our real estate investments we:
•
Issued one Core note receivable and three Fund IV notes receivable aggregating $47.5 million, which were collateralized
by four mixed-use real estate properties (Note 3);
• Restructured a $30.9 million Core mezzanine loan and replaced it with a new $153.4 million loan, which was made to
our partners in the Brandywine Portfolio (Note 4); and
• Obtained through our Operating Partnership an additional 8.3% interest in Fund II from a limited partner for $18.4 million
(Note 10).
Dispositions of Real Estate
During 2016, within our Fund portfolio we sold two properties for an aggregate sales price of $211.6 million and recognized
aggregate gains of $94.6 million as follows:
•
•
Fund III sold two consolidated properties with an aggregate sales price of $153.8 million and recognized an aggregate
gain on disposition of properties of $82.0 million (Note 2). One of these properties was a 65% interest in the Cortlandt
Town Center, for which the remaining 35% interest was carried as an unconsolidated investment after the sale.
Subsequently, Fund III sold the remaining 35% interest in the Cortlandt Town Center for $57.8 million, for which the
gain was $36.0 million and our pro rata share was $12.6 million and was recognized within equity in earnings of
unconsolidated affiliates on the consolidated statement of income (Note 4).
Capital Raised
• During 2016, we issued approximately 12.9 million shares of our common stock to raise net proceeds of $452.4 million.
Of these issuances, 4.5 million shares were issued under our at-the-market equity program, 4.8 million shares were issued
in a follow-on public offering and 3.6 million shares were issued in a forward sale agreement (Note 10).
• During 2016, we also issued Common and Preferred OP Units aggregating $31.4 million to a third party to acquire real
estate (Note 10).
Financings
• During 2016, we obtained $150.0 million of new unsecured term loans in our Core Portfolio. In addition, we obtained
or assumed 14 new consolidated mortgages aggregating $252.9 million (Note 7).
Development Activity
• During 2016, Fund IV acquired two properties in development. Fund II also placed a portion of its City Point project
into service with an accumulated cost of $187.4 million (Note 2).
39
Change in Management
On June 27, 2016, John Gottfried assumed the role of Chief Financial Officer of Acadia Realty Trust.
RESULTS OF OPERATIONS
See Note 12 in the Notes to Consolidated Financial Statements for an overview of our three reportable segments. During the year
ended December 31, 2016, we revised how we allocate general and administrative and income tax expenses among our segments.
All prior periods presented have been revised to conform to this new presentation.
A discussion of the significant variances and primary factors contributing thereto within the results of operations for the years
ended December 31, 2016, 2015 and 2014 are addressed below:
Comparison of the year ended December 31, 2016 ("2016") to the year ended December 31, 2015 ("2015")
Revenues
2016
2015
(dollars in millions)
Rental income
Expense reimbursements
Other
Total revenues
Core
Portfolio
Funds
Structured
Financings
Unallocated
Core
Portfolio
Funds
Structured
Financings
Unallocated
$ 120.2
$
32.5
$
— $
— $ 121.2
$
37.5
$
— $
26.7
3.3
5.6
1.6
—
—
—
—
26.5
2.3
9.8
1.7
—
—
$ 150.2
$
39.7
$
— $
— $ 150.0
$
49.0
$
— $
—
—
—
—
Rental income in the Core Portfolio decreased $1.0 million primarily as a result of a $9.3 million decrease due to the change in
control of the Brandywine Portfolio (Note 4) offset by property acquisitions in 2015 and 2016 ("2016 Core Acquisitions"). Rental
income in the Funds decreased $5.0 million primarily as a result of a decrease of $12.7 million relating to property dispositions
in 2015 and 2016 ("2016 Fund Dispositions"). These decreases were offset by additional rental income of $4.3 million related to
property acquisitions in 2015 and 2016 ("2016 Fund Acquisitions").
Expense reimbursements in the Funds decreased $4.2 million primarily due to the 2016 Fund Dispositions and a decrease in
property operating expenses during 2016.
The $1.0 million increase in other income in the Core Portfolio relates to termination income received at a property.
Operating Expenses
2016
2015
(dollars in millions)
Core
Portfolio
Funds
Structured
Financings Unallocated
Core
Portfolio
Funds
Structured
Financings Unallocated
Depreciation and amortization
$
54.6
$
15.4
$
— $
— $
46.2
$
14.5
$
— $
General and administrative
Real estate taxes
Property operating
Other operating
Impairment of an asset
—
19.2
15.7
4.7
—
—
6.4
8.6
2.8
—
—
—
—
—
—
40.6
—
—
—
—
—
16.9
19.2
1.1
5.0
—
8.5
9.2
3.5
—
—
—
—
—
—
—
30.4
—
—
—
—
Total operating expenses
$
94.2
$
33.2
$
— $
40.6
$
88.4
$
35.7
$
— $
30.4
The $8.4 million increase in depreciation and amortization in the Core Portfolio was primarily attributable to the 2016 Core
Acquisitions.
Unallocated general and administrative increased $10.2 million due to the acceleration of equity-based compensation awards
related to retirements in 2016 totaling $4.2 million as well as increased compensation expense of $4.7 million, which included
$3.9 million related to the Program (Note 13). The remaining $1.3 million relates to an increase in other professional fees.
Real estate taxes in the Core Portfolio increased $2.3 million due to the 2016 Core Acquisitions and a general increase in real
estate taxes. Real estate taxes in the Funds decreased $2.1 million primarily due to the 2016 Fund Dispositions.
40
Property operating expenses in the Core Portfolio decreased $3.5 million primarily as a result of lower snow costs during 2016
and due to the change in control of the Brandywine Portfolio in 2016.
Other operating expenses in the Core Portfolio increased $3.6 million as a result of higher acquisition costs in 2016 due to higher
transactional volume.
The impairment of an asset in the Core Portfolio during 2015 of $5.0 million relates to a property within the Brandywine Portfolio
(Note 8).
Other Income (Expense)
2016
2015
(dollars in millions)
Equity in earnings (losses) of
unconsolidated affiliates
Gain on disposition of
properties of unconsolidated
affiliates
Interest income
Other
Interest and other finance
expense
Income tax provision
Gain on disposition of
properties
Income attributable to
noncontrolling interests
Core
Portfolio
Funds
Structured
Financings
Unallocated
Core
Portfolio
Funds
Structured
Financings
Unallocated
$
3.8
$
(0.3) $
— $
— $
1.2
$
12.2
$
— $
—
—
—
(27.4)
—
—
36.0
—
—
(7.2)
—
82.0
(3.4)
(58.4)
—
25.8
—
—
—
—
—
—
—
—
—
0.1
—
—
—
—
—
(27.9)
—
—
24.0
—
—
(9.4)
—
89.1
(0.1)
(84.1)
—
16.6
1.6
—
—
—
—
—
—
—
—
—
(1.8)
—
—
Equity in earnings of unconsolidated affiliates in the Core Portfolio increased $2.6 million primarily due to the change in control
of the Brandywine Portfolio and the Company's new investment in Gotham Plaza. Equity in earnings of unconsolidated affiliates
in the Funds decreased $12.5 million primarily as a result of $5.2 million of additional distributions in excess of basis from the
Mervyns I & II portfolios in 2015, additional depreciation expense related to the demolition of a building at an unconsolidated
affiliate of $5.6 million and the disposition of a property in 2015 of $1.8 million.
Other income decreased $1.6 million due to the collection of a note receivable, default interest and other costs, in excess of carrying
value during 2015.
The $9.2 million increase in interest income in the Structured Financing Portfolio was primarily the result of earnings from loans
originated during 2015 and 2016 and the recapture of previously established reserves of $3.4 million during 2016.
The $36.0 million gain on disposition of properties of unconsolidated affiliates in the Funds during 2016 represents our pro-rata
share from the sale of 35% of Cortlandt Town Center. The $24.0 million gain on disposition of properties of unconsolidated
affiliates in the Funds during 2015 represents our pro-rata share from the sales of White City Shopping Center and Parkway
Crossing.
Interest and other finance expense in the Funds decreased $2.2 million primarily due to an increase in capitalized interest related
to our City Point development project during 2016.
The gain on disposition of properties in the Funds during 2016 of $82.0 million represents our gain on sale from 65% of Cortlandt
Town Center and Heritage Shops. Gain on disposition of properties in the Funds in 2015 of $89.1 million represents our gain on
sale from Lincoln Park Center, Liberty Avenue and the air rights at Fund II's City Point project.
The $1.7 million variance in the income tax provision resulted from 2015 corporate Federal income taxes incurred by a Fund IV
investor.
41
The variance in net income attributable to noncontrolling interests in the Core Portfolio is due to the change in control of the
Brandywine Portfolio. Net income attributable to noncontrolling interests in the Funds represents their share of all Fund variances
discussed above.
Comparison of the year ended December 31, 2015 ("2015") to the year ended December 31, 2014 ("2014")
Revenues
2015
2014
(dollars in millions)
Rental income
Expense reimbursements
Other
Total revenues
Core
Portfolio
Funds
Structured
Financings
Unallocated
Core
Portfolio
Funds
Structured
Financings
Unallocated
$ 121.2
$
37.5
$
— $
— $ 102.1
$
26.5
2.3
9.8
1.7
—
—
—
—
22.1
0.8
43.0
10.6
1.1
$
— $
—
—
$ 150.0
$
49.0
$
— $
— $ 125.0
$
54.7
$
— $
—
—
—
—
Rental income in the Core Portfolio increased $19.1 million primarily as a result of additional rents from property acquisitions in
2014 and 2015 ("2015 Core Acquisitions"). Rental income in the Funds decreased $5.5 million due to decreases of $4.7 million
relating to property dispositions in 2015 ("2015 Fund Dispositions") and an anticipated significant vacancy at 161st Street in
connection with its development. These decreases were partially offset by property acquisitions in 2015 and 2014 ("2015 Fund
Acquisitions").
Expense reimbursements in the Core Portfolio increased $4.4 million primarily as a result of the 2015 Core Acquisitions as well
as additional repairs and maintenance during 2015.
Other income in the Core Portfolio increased $1.5 million primarily as a result of a gain on the acquisition of the unaffiliated
partner's remaining interest in the Route 202 Shopping Center during 2015.
Operating Expenses
(dollars in millions)
2015
2014
Core
Portfolio
Funds
Structured
Financings
Unallocated
Core
Portfolio
Funds
Structured
Financings
Unallocated
Depreciation and amortization
$
46.2
$
14.5
$
— $
— $
35.9
$
13.8
$
— $
General and administrative
Real estate taxes
Property operating
Other operating
Impairment of asset
—
16.9
19.2
1.1
5.0
—
8.5
9.2
3.5
—
—
—
—
—
—
30.4
—
—
—
—
—
14.4
15.1
3.6
—
—
8.7
9.7
0.2
—
—
—
—
—
—
—
27.4
—
—
—
—
Total operating expenses
$
88.4
$
35.7
$
— $
30.4
$
69.0
$
32.4
$
— $
27.4
Property operating expenses in the Core Portfolio increased $4.1 million primarily as a result of the 2015 Core Acquisitions as
well as additional repairs and maintenance during 2015.
Other operating expenses in the Core Portfolio decreased $2.5 million as a result of lower acquisition costs during 2015. Other
operating expenses in the Funds increased $3.3 million as a result of higher acquisition costs during 2015.
Real estate taxes in the Core Portfolio increased $2.5 million primarily as a result of the 2015 Core Acquisitions.
Unallocated general and administrative expenses increased $3.0 million primarily as a result of increased compensation expense
of $2.5 million in 2015 and higher legal and other professional fees of $0.9 million in 2015.
The $10.3 million increase in depreciation and amortization in the Core Portfolio was attributable to the 2015 Core Acquisitions.
The impairment of an asset in the Core Portfolio of $5.0 million reflects a charge related to a property within the Brandywine
Portfolio (Note 8).
42
Other
2015
2014
Core
Portfolio
Funds
Structured
Financings
Unallocated
Core
Portfolio
Funds
Structured
Financings Unallocated
$
1.2
$
12.2
$
— $
— $
0.1
$
8.8
$
— $
(dollars in millions)
Equity in earnings (losses) of
unconsolidated affiliates
Gain on disposition of properties of
unconsolidated affiliates
Interest income
Other
—
—
—
89.1
—
—
(9.3)
—
24.0
—
Interest and other finance expense
(27.9)
Income tax (provision) benefit
Gain on disposition of properties
Income from discontinued operations
Income attributable to noncontrolling
interests:
—
—
—
Continuing operations
Discontinued operations
(0.1)
—
(84.1)
—
—
16.6
1.6
—
—
—
—
—
—
—
—
—
—
(1.8)
—
—
—
—
—
—
—
102.9
—
—
(27.0)
(12.4)
—
12.6
—
—
0.5
1.2
(3.2)
—
(76.9)
(1.0)
—
12.6
2.7
—
—
—
—
—
—
—
—
—
—
—
(0.6)
—
—
—
—
Equity in earnings of unconsolidated affiliates in the Funds increased $3.4 million primarily due to additional distributions in
excess of basis from an unconsolidated affiliate in 2015.
The $4.0 million increase in interest income in the Structured Financing Portfolio was a result of $2.7 million of additional interest
from loans originated in 2014 and 2015 as well as the collection of $1.5 million of interest that was previously reserved in 2015.
The $1.1 million variance in other income results from $1.6 million in 2015 due to the collection of a note receivable, default
interest and other costs, in excess of carrying value and in 2014, we collected two notes previously reserved for of $2.7 million.
The $89.1 million gain on disposition of properties of unconsolidated affiliates in the Funds during 2015 represents our pro-rata
share of the gains from Parkway Crossing and the White City Shopping Center. The $102.9 million gain on disposition of properties
of unconsolidated affiliates in the Funds in 2014 resulted from our pro-rata share of the gain on sale of investments in the Fund
III and Fund IV Lincoln Road Portfolios.
Interest and other finance expense in the Funds decreased $3.1 million from a $3.7 million increase in capitalized interest related
to our City Point development project and a $3.3 million decrease related to lower average interest rates during 2015. These
decreases were offset by a $4.0 million increase related to higher average outstanding borrowings during 2015.
The $1.2 million variance in the income tax provision resulted from 2015 corporate Federal income taxes incurred by a Fund IV
investor.
The $12.5 million gain on disposition of properties in the Core Portfolio during 2014 represents the gain on the foreclosure of
Walnut Hill Plaza. The $24.0 million gain on disposition of properties in the Funds in 2015 represents our gain on the sales of
Lincoln Park Centre, Liberty Avenue and air rights on Phase III at our City Point development.
Net income attributable to noncontrolling interests in the Funds represents their share of all Fund variances discussed above.
NON-GAAP MEASURES
Net Property Operating Income
The following discussion of net property operating income ("NOI") and rent spreads on new and renewal leases includes the
activity from both our consolidated and our pro-rata share of unconsolidated properties within our Core Portfolio. Our Funds
invest primarily in properties that typically require significant leasing and development. Given that the Funds are finite-life
investment vehicles, these properties are sold following stabilization. For these reasons, we believe NOI and rent spreads are not
meaningful measures for our Fund investments.
43
NOI represents property revenues less property expenses. We consider NOI and rent spreads on new and renewal leases for our
Core Portfolio to be appropriate supplemental 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 calculating these may be different from methods used
by other REITs and, accordingly, may not be comparable to such other REITs.
A reconciliation of consolidated operating income to net operating income - Core Portfolio follows (in millions):
Consolidated Operating Income
Add back:
General and administrative
Depreciation and amortization
Impairment of asset
Less:
Above/below market rent, straight-line rent and other adjustments
Consolidated NOI
Noncontrolling interest in consolidated NOI
Less: Operating Partnership's interest in Fund NOI included above
Add: Operating Partnership's share of unconsolidated joint ventures NOI (a)
NOI - Core Portfolio
__________
Year Ended December 31,
2016
2015
$
21.9
$
44.5
40.7
70.0
—
(5.3)
127.3
(20.8)
(5.0)
16.5
$
118.0
$
30.4
60.7
5.0
(8.2)
132.4
(34.7)
(5.8)
10.4
102.3
(a) Does not include the Operating Partnership's share of NOI from unconsolidated joint ventures within the Funds
Same-Property NOI includes Core Portfolio properties that we owned for both the current and prior periods presented, but excludes
those properties which we acquired, sold or expected to be sold, and redeveloped during these periods.
The following table summarizes Same-Property NOI for our Core Portfolio (in millions):
Core Portfolio NOI
Less properties excluded from Same-Property NOI
Same-Property NOI
Percent change from 2015
Components of Same-Property NOI:
Same-Property Revenues
Same-Property Operating Expenses
Same-Property NOI
Year Ended December 31,
2016
2015
$
$
$
$
118.0
(22.3)
95.7
3.4%
126.7
31.0
95.7
$
$
$
$
102.3
(9.8)
92.5
125.1
32.6
92.5
The 3.4% increase in Same-Property NOI was primarily attributable to contractual rent increases and lease renewals at increased
rents during 2016.
44
Rent Spreads on Core Portfolio New and Renewal Leases
The 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 Core Portfolio for the year ended December 31, 2016. Cash basis represents a comparison of rent
most recently paid on the previous lease as compared to the initial rent paid on the new lease. Straight-line basis represents a
comparison of rents as adjusted for contractual escalations, abated rent and lease incentives for the same comparable leases.
Core Portfolio New and Renewal Leases
Number of new and renewal leases executed
Gross leasable area
New base rent
Previous base rent
Percent growth in base rent
Average cost per square foot (a)
Weighted average lease term (years)
__________
Year Ended
December 31, 2016
Cash
Basis
Straight-Line
Basis
63
390,521
$
$
23.17
21.36
$
$
8.5%
24.54
20.96
17.1%
$11.46
5.8
(a) The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances.
Funds from Operations
We consider funds from operations ("FFO") as defined by the National Association of Real Estate Investment Trusts ("NAREIT")
to be an appropriate supplemental disclosure of operating performance for an equity REIT due to its widespread acceptance and
use within the REIT and analyst communities. FFO is presented to assist investors in analyzing our performance. It is helpful as
it excludes various items included in net income that are not indicative of the operating performance, such as gains (losses) from
sales of depreciated property, depreciation and amortization, and impairment of depreciable real estate. Our method of calculating
FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does
not represent cash generated from operations as defined by generally accepted accounting principles ("GAAP") and is not indicative
of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the
purpose of evaluating our performance or to cash flows as a measure of liquidity. Consistent with the NAREIT definition, we
define FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated property and
impairment of depreciable real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships
and joint ventures.
45
A reconciliation of net income attributable to Acadia to FFO follows (dollars and shares in thousands, except per share amounts):
(dollars in thousands)
Net income attributable to Acadia
For the Year Ended December 31,
2016
2015
2014
2013
2012
$ 72,776
$
65,708
$ 71,064
$ 40,115
$ 39,706
Depreciation of real estate and amortization of leasing costs:
(net of noncontrolling interests' share)
67,446
52,013
38,020
31,432
24,671
Gain on sale (net of noncontrolling interests’ share)
Income attributable to Common OP Unit holders
Impairment of asset (net of noncontrolling interests’ share)
Distributions - Preferred OP Units
Funds from operations attributable to Common Shareholders
and Common OP Unit holders
Funds From Operations per Share - Diluted
Weighted average number of Common Shares
and Common OP Units (a)
Diluted Funds from operations, per Common Share
and Common OP Unit
__________
(28,154)
4,442
(11,114)
3,811
(33,438)
3,203
—
560
1,111
31
—
33
(6,378)
470
1,500
22
(16,060)
510
—
18
$117,070
$ 111,560
$ 78,882
$ 67,161
$ 48,845
81,250
73,067
62,420
55,954
46,940
$
1.44
$
1.53
$
1.26
$
1.20
$
1.04
(a) In addition to the weighted-average Common Shares outstanding (Note 15), basic and diluted FFO per common share
also assume full conversion of a weighted-average 4,435, 3,895, 2,684, 618 and 604 OP Units into Common Shares for
the years ended December 31, 2016, 2015, 2014, 2013 and 2012, respectively. Diluted FFO per common share also
includes the assumed conversion of 433, 25, 25, 25 and 25, respectively Preferred OP Units into Common Shares for the
years ended December 31, 2016, 2015, 2014, 2013 and 2012, respectively. In addition, diluted FFO includes the effect
of 151, 297, 309, 392 and 456 employee share options, restricted share units and LTIP units for the years ended December
31, 2016, 2015, 2014, 2013 and 2012, respectively.
46
LIQUIDITY AND CAPITAL RESOURCES
Uses of Liquidity and Cash Requirements
Our principal uses of liquidity are (i) distributions to our shareholders and OP unit holders, (ii) investments which include the
funding of our capital committed to the Funds and property acquisitions and development/re-tenanting activities within our Core
Portfolio, (iii) distributions to our Fund investors and (iv) debt service and loan repayments.
Distributions
In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to
our shareholders. For the year ended December 31, 2016, we paid dividends and distributions on our Common Shares, Common
OP Units and Preferred OP Units totaling $98.7 million. This amount included an $18.8 million special dividend that was paid in
January 2016, which related to the Operating Partnership's share of cash proceeds from property dispositions during 2015. The
balance of the distribution was funded from the Operating Partnership's share of operating cash flow.
Distributions of $78.3 million were made to noncontrolling interests in Fund III during the year ended December 31, 2016. This
resulted from proceeds related to the financing of 640 Broadway and dispositions of Cortlandt Town Center and Heritage Shops
as discussed in Note 2 and Note 4.
Investments in Real Estate
During the year ended December 31, 2016, within our Core and Fund portfolios we acquired 22 properties aggregating $864.3
million as follows: (i) in our Core portfolio we acquired nine consolidated properties with an aggregate purchase price of $519.6
million and two unconsolidated properties with an aggregate purchase price of $107.4 million (Note 4) and (ii) in Fund IV we
acquired 11 consolidated properties with an aggregate purchase price of $237.3 million (Note 2).
Capital Commitments
During 2016, we made capital contributions of $58.4 million to the Funds in connection with acquisitions and development costs.
Capital contributed will be used by the Funds to acquire and operate real estate assets. At December 31, 2016, our share of the
remaining capital commitments to our Funds aggregated $155.9 million as follows:
•
•
•
•
Fund II was launched in June 2004 with total committed capital of $300.0 million of which our original share was $85.0
million, which has been fully funded.
$13.1 million to Fund III. Fund III was launched in May 2007 with total committed capital of $502.5 million of which
our original share was $123.3 million.
$38.3 million to Fund IV. Fund II was launched in June 2004 with total committed capital of $300.0 million of which
our original share was $85.0 million.
$104.5 million to Fund V. Fund V was launched in August 2016 with total committed capital of $520.0 million of which
our original share is $104.5 million.
Development Activities
During the year ended December 31, 2016, costs associated with development activities totaled $142.6 million. These costs
primarily related to Fund II's City Point project, Fund IV's Broughton Street Portfolio and Fund IV's 210 Bowery project. At
December 31, 2016, we had 14 properties under development for which the estimated total cost to complete these projects through
2020 was $118.1 million to $179.3 million and our share was approximately $28.8 million to $44.1 million.
Structured Financings
During 2016, the Company received total collections of $42.8 million on its notes receivable, including full repayment of five
notes issued in prior periods aggregating $29.6 million (Note 3).
47
Debt
A summary of our consolidated debt is as follows (in millions):
Total Debt - Fixed and Effectively Fixed Rate
Total Debt - Variable Rate
Net unamortized debt issuance costs
Unamortized premium
Total Indebtedness
December 31,
2016
2015
$
$
860.5
645.2
(18.3)
1.3
552.2
816.7
(11.7)
1.4
$
1,488.7
$
1,358.6
As of December 31, 2016, our consolidated outstanding mortgage, convertible notes and other notes payable aggregated $1,505.7
million, excluding unamortized premium of $1.3 million and unamortized loan costs of $18.3 million, and were collateralized by
39 properties and related tenant leases. Interest rates on our outstanding indebtedness ranged from 1.0% to 6.0% with maturities
that ranged from March 1, 2017, to April 15, 2035. Taking into consideration $365.3 million of notional principal under variable
to fixed-rate swap agreements currently in effect, $860.5 million of the portfolio debt, or 57.1%, was fixed at a 4.08% weighted
average interest rate and $645.2 million, or 42.9% was floating at a 2.68% weighted average interest rate as of December 31, 2016.
During 2016, we repaid 15 consolidated mortgages in full aggregating $292.3 million with a weighted-average interest rate of
4.61% and made scheduled principal payments of $6.5 million. During 2016 we obtained a new $150.0 million unsecured term
loan. There is $389.1 million of debt maturing in 2017 at a weighted-average interest rate of 3.26%. In addition, there is $6.9
million of scheduled principal amortization due in 2016. In addition, the Company's share scheduled 2017 principal payments and
maturities on its unconsolidated debt was $16.2 million at December 31, 2016. As it relates to the maturing debt in 2017, we may
not have sufficient cash on hand to repay such indebtedness, and, therefore, we expect to refinance at least a portion of this
indebtedness or select other alternatives based on market conditions as these loans mature; however, there can be no assurance
that the Company will be able to obtain financing at acceptable terms.
Sources of Liquidity
Our 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 secured and unsecured debt, (iii) unfunded capital commitments from noncontrolling interests within our Funds,
(iv) future sales of existing properties and (v) cash on hand and future cash flow from operating activities. Our cash on hand in
our consolidated subsidiaries at December 31, 2016 totaled $71.8 million. Our remaining sources of liquidity are described further
below.
Issuance of Equity
We have an at-the-market ("ATM") equity issuance program which provides us an efficient and low-cost vehicle for raising public
equity to fund our capital needs. Through this program, we have been able to effectively "match-fund" the required equity for our
Core Portfolio and Fund acquisitions through the issuance of Common Shares over extended periods employing a price averaging
strategy. In addition, from time to time, we have issued and intend to continue to issue, equity in follow-on offerings separate from
our ATM program. Net proceeds raised through our ATM program and follow-on offerings are primarily used for acquisitions,
both for our Core Portfolio and our pro-rata share of Fund acquisitions and for general corporate purposes.
Net proceeds from equity issuances totaled $452.3 million, $64.4 million and $357.8 million for the years ended December 31,
2016, 2015 and 2014 respectively. See "Item 1. Business—Capital Strategy–Balance Sheet Focus and Access to Capital" for more
detail on these issuances.
Fund Capital
During 2016, noncontrolling interest capital contributions to Fund II, III and IV of $33.8 million, $6.9 million and $142.4 million,
respectively, were primarily used to fund the aforementioned acquisitions and to pay down existing credit facilities. At December
31, 2016, unfunded capital commitments from noncontrolling interests within our Funds III, IV and V were $40.2 million, $127.2
million and $415.5 million, respectively.
48
Asset Sales
During 2016, within our Fund portfolio we sold two properties for an aggregate sales price of $211.6 million and recognized
aggregate gains of $94.6 million. Fund III sold two consolidated properties with an aggregate sales price of $153.8 million and
recognized an aggregate gain on disposition of properties of $82.0 million (Note 2). One of these properties was a 65% interest
in the Cortlandt Town Center, for which the remaining 35% interest was carried as an unconsolidated investment after the sale.
Subsequently, Fund III sold the remaining 35% interest in the Cortlandt Town Center for $57.8 million, for which the gain was
$36.0 million and our pro rata share was $12.6 million and was recognized within equity in earnings of unconsolidated affiliates
on the consolidated statement of income (Note 4). Subsequent to December 31, 2016 we also received proceeds from dispositions
of Fund properties of $47.8 million (Note 17).
Structured Financing Repayments
During 2016, we received total collections on our notes receivable of $42.8 million, including full repayment of five notes issued
in prior periods aggregating $29.6 million (Note 3). Scheduled principal collections for 2017 total $40.5 million.
Financing and Debt
As of December 31, 2016, we had $212.9 million of additional capacity under existing revolving debt facilities. In addition, at
that date we had 85 unleveraged consolidated properties with an aggregate carrying value of approximately $1.3 billion and 27
unleveraged unconsolidated properties for which our share of the carrying value was $74.5 million, although there can be no
assurance that we would be able to obtain financing for these properties at favorable terms if at all.
CONTRACTUAL OBLIGATIONS
The following table summarizes: (i) principal and interest obligations under mortgage and other notes, (ii) rents due under non-
cancelable operating and capital leases, which includes ground leases at six of our properties and the lease for our corporate office
and (iii) construction commitments as of December 31, 2016 (in millions):
Contractual Obligations
Principal obligations on debt
Interest obligations on debt
Lease obligations (a)
Construction commitments (b)
Total
__________
Payments Due by Period
Total
$ 1,505.7
235.0
204.3
85.4
$ 2,030.4
Less than
1 Year
$
$
396.0
56.4
3.7
85.4
541.5
1 to 3
Years
$ 275.0
92.9
7.5
—
$ 375.4
3 to 5
Years
$ 575.5
46.7
7.4
—
$ 629.6
More
than
5 Years
259.2
39.0
185.6
—
483.8
$
$
(a) The ground lease expiring during 2078 has an option to purchase the underlying land during 2031. If we do not exercise
the option, the rents that will be due are based on future values and as such are not determinable at this time. Accordingly,
the above table does not include rents for this lease beyond 2031.
(b) In conjunction with the development of our Core Portfolio and Fund properties, we have entered into construction
commitments with general contractors. We intend to fund these requirements with existing liquidity.
49
OFF-BALANCE SHEET ARRANGEMENTS
We have the following investments made through joint ventures for the purpose of investing in operating properties. We account
for these investments using the equity method of accounting. As such, our financial statements reflect our investment and our
share of income and loss from, but not the individual assets and liabilities, of these joint ventures.
See Note 4 in the Notes to Consolidated Financial Statements, for a discussion of our unconsolidated investments. The Operating
Partnership's pro-rata share of unconsolidated debt related to those investments is as follows (dollars in millions):
Investment
1701 Belmont Avenue
Arundel Plaza
Promenade at Manassas
2819 Kennedy Boulevard
Eden Square
230/240 W. Broughton
Gotham Plaza
Renaissance Portfolio
Crossroads
840 N. Michigan
Georgetown Portfolio
Total
Operating
Partnership
Ownership
Percentage
Operating
Partnership
Pro-rata Share of
Mortgage Debt
Interest Rate at
December 31,
2016
22.8% $
35.7%
22.8%
22.8%
22.8%
11.6%
49.0%
20.0%
49.0%
88.4%
50.0%
$
0.7
3.6
5.7
1.9
3.6
1.2
10.3
32.0
33.1
65.0
8.6
165.7
4.00%
2.62%
2.02%
2.77%
2.62%
3.62%
2.22%
2.32%
3.94%
4.36%
4.72%
Maturity Date
January 2017
April 2017
November 2017
December 2017
December 2017
May 2018
June 2023
August 2023
October 2024
February 2025
December 2027
In addition, we have arranged for the provision of one separate letter of credit in connection with certain leases and investments.
As of December 31, 2016 there was no outstanding balance under the letters of credit. If the letters of credit were fully drawn, the
maximum amount of our exposure would be $2.5 million.
One of our unconsolidated affiliates is a party to an interest rate LIBOR swap with a notional value of $20.9 million, which
effectively fixes the interest rate at 3.49% and matures in June 2023. Our pro-rata share of the fair value of such affiliate's derivative
assets totaled $0.2 million as of December 31, 2016.
HISTORICAL CASH FLOW
Cash Flows for 2016 Compared to 2015
The following table compares the historical cash flow for the year ended December 31, 2016 with the cash flow for the year ended
December 31, 2015 (dollars in millions):
Year Ended December 31,
2015
Variance
2016
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Total
Operating Activities
$
$
$
111.8
(611.0)
498.2
(1.0) $
$
113.6
(354.5)
96.1
(144.8) $
(1.8)
(256.5)
402.1
143.8
Our operating activities provided $1.8 million less cash during 2016, primarily due to (i) $7.8 million of lease payments relating
to 991 Madison Avenue during 2016, and (ii) additional distributions from the Mervyns I & II portfolios during 2015. These items
were partially offset by additional cash flow from 2016 acquisitions.
50
Investing Activities
During 2016, our investing activities used an additional $256.5 million of cash, primarily for (i) an additional $156.9 million used
for the acquisition of real estate, (ii) $108.9 million of additional cash used for the issuance of notes receivable, (iii) $47.9 million
more cash used in investments and advances to unconsolidated affiliates, and (iii) $32.3 million less cash received from the
disposition of properties, including unconsolidated affiliates. These items were partially offset by (i) $42.8 million more cash
received from return of capital from unconsolidated affiliates (ii) $26.8 million more cash received from repayments of notes
receivable and (iii) $14.9 million less cash used for development and property improvement costs,
Financing Activities
Our financing activities provided $402.1 million more cash during 2016, primarily from (i) $386.9 million more cash received
from the issuance of Common Shares and (ii) an increase of $259.6 million from capital contributions from noncontrolling
interests. These items were partially offset by (i) a decrease of $210.7 million of cash provided from net borrowings , (ii) distributions
to noncontrolling interests increased $21.4 million, (iii) $7.3 million more cash used for deferred financing and other costs, and
(iv) an additional $5.0 million of cash used to pay dividends to Common Shareholders.
Cash Flows for 2015 Compared to 2014
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Total
Operating Activities
Year Ended December 31,
2015
2014
Variance
$
$
$
113.6
(354.5)
96.1
(144.8) $
$
82.5
(268.5)
324.4
138.4
$
31.1
(86.0)
(228.3)
(283.2)
Our operating activities provided $31.1 million of additional cash during 2015, primarily from (i) an increase in cash flow from
Core and Fund Property acquisitions and (ii) an increase in cash flow from our Structured Financing Portfolio.
Investing Activities
During 2015, our investing activities used an additional $86.0 million of cash, primarily for (i) an additional $94.1 million was
used for the acquisition of real estate, (ii) $62.5 million less cash was collected from the return of capital from unconsolidated
affiliates, (iii) $28.5 million more was used for development and property improvement costs, (iv) $17.3 million of additional
cash was issued for notes receivable, (v) $14.3 million less cash received from the disposition of properties, including unconsolidated
affiliates, and (vi) $4.3 million more was used for deferred leasing costs. These items were partially offset by $132.8 million less
cash used in investments and advances to unconsolidated affiliates.
Financing Activities
Our financing activities provided $228.3 million less cash during 2015, primarily from (i) $294.2 million less cash received from
the issuance of Common Shares, (ii) cash provided from net borrowings decreased $16.4 million, (iii) an additional $33.1 million
of cash was used to pay dividends to Common Shareholders, and (iv) capital contributions from noncontrolling interests decreased
$22.5 million. These items were partially offset by $136.7 million of less cash distributed to noncontrolling interests.
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial
Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these Consolidated Financial Statements
requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.
We base our estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the
51
following 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 Sale
On a quarterly basis, we review the carrying value of both properties held for use and for sale. We perform an impairment analysis
by calculating and reviewing net operating income on a property-by-property basis. We evaluate leasing projections and perform
other analyses to conclude whether an asset is impaired. We record impairment losses and reduce the carrying value of properties
when indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their
carrying amounts. In cases where we do not expect to recover our carrying costs on properties held for use, we reduce our carrying
cost to fair value. For properties held for sale, we reduce our carrying value to the fair value less costs to sell.
See Note 8 of the Notes to the Consolidated Financial Statements for a discussion of impairments recognized during the periods
presented.
Investments in and Advances to Unconsolidated Joint Ventures
We periodically review our investment in unconsolidated joint ventures for other than temporary declines in market value. Any
decline that is not expected to be recovered in the next twelve months is considered other-than-temporary and an impairment
charge is recorded as a reduction in the carrying value of the investment. No impairment charges related to our investment in
unconsolidated joint ventures were recognized for the years ended December 31, 2016, 2015 and 2014.
Bad Debts
We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make payments on
arrearages in billed rents, as well as the likelihood that tenants will not have the ability to make payments on unbilled rents including
estimated expense recoveries. We also maintain a reserve for straight-line rent receivables. For the years ended December 31,
2016 and 2015, the allowance for doubtful accounts totaled $5.7 million and $7.5 million, respectively. If the financial condition
of our tenants were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be
required.
Real Estate
Real estate assets are stated at cost less accumulated depreciation. Expenditures for acquisition, development, construction and
improvement of properties, as well as significant renovations are capitalized. Interest costs are capitalized until construction is
substantially complete. Construction in progress includes costs for significant property expansion and development. Depreciation
is computed on the straight-line basis over estimated useful lives of 30 to 40 years for buildings, the shorter of the useful life or
lease term for tenant improvements and five years for furniture, fixtures and equipment. Expenditures for maintenance 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 as above and below market leases and acquired in-place leases and customer relationships) and acquired
liabilities in accordance with the FASB Accounting Standards Codification ("ASC") Topic 805 "Business Combinations" and ASC
Topic 350 "Intangibles – Goodwill and Other," and allocate purchase price based on these assessments. We assess fair value based
on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information.
Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and
market/economic conditions that may affect the property.
Revenue Recognition and Accounts Receivable
Leases with tenants are accounted for as operating leases. Minimum rents are recognized on a straight-line basis over the non-
cancelable term of the respective leases, beginning when the tenant takes possession of the space. Certain of these leases also
provide for percentage rents based upon the level of sales achieved by the tenant. Percentage rent is recognized in the period when
the tenants’ sales breakpoint is met. In addition, leases typically provide for the reimbursement to us of real estate taxes, insurance
and other property operating expenses. These reimbursements are recognized as revenue in the period the expenses are incurred.
We make estimates of the uncollectability of our accounts receivable related to tenant revenues. An allowance for doubtful accounts
has been provided against certain tenant accounts receivable that are estimated to be uncollectible. See "Bad Debts" above. Once
the amount is ultimately deemed to be uncollectible, it is written off.
52
Structured Financings
Real estate notes receivable investments and preferred equity investments ("Structured Financings") are intended to be held to
maturity and are carried at cost. Interest income from Structured Financings are recognized on the effective interest method over
the expected life of the loan. Under the effective interest method, 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 to yield.
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 amount and status of any senior debt, and the prospects for the borrower. Because
this determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately
realized from the 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
becomes doubtful. Income recognition is resumed when the suspended investment becomes contractually current and performance
is demonstrated to be resumed.
Recently Issued Accounting Pronouncements
Reference is made to Note 1 for information about recently issued and recently adopted accounting pronouncements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information as of December 31, 2016
Our primary market risk exposure is to changes in interest rates related to our mortgage and other debt. See Note 7 in the Notes
to Consolidated Financial Statements, 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 of December 31, 2016, we had total mortgage and other notes payable of $1,505.7 million, excluding the
unamortized premium of $1.3 million and unamortized loan costs of $18.3 million, of which $860.5 million, or 57.1% was fixed-
rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $645.2 million, or 42.9%, was
variable-rate based upon LIBOR or Prime rates plus certain spreads. As of December 31, 2016, we were a party to 18 interest rate
swap transactions and 4 interest rate cap transaction to hedge our exposure to changes in interest rates with respect to $365.3
million and $196.4 million of LIBOR-based variable-rate debt, respectively.
The following table sets forth information as of December 31, 2016 concerning our long-term debt obligations, including principal
cash flows by scheduled maturity and weighted average interest rates of maturing amounts (dollars in millions):
Core Consolidated Mortgage and Other Debt
Year
2017
2018
2019
2020
2021
Thereafter
Scheduled
Amortization
Maturities
Total
Weighted-Average
Interest Rate
$
$
4.4
3.2
3.2
3.4
3.5
21.9
39.6
$
$
79.2
40.1
—
50.0
200.0
208.2
577.5
$
$
83.6
43.3
3.2
53.4
203.5
230.1
617.1
5.6%
2.3%
—%
1.9%
1.9%
3.4%
53
Scheduled
Amortization
Maturities
Total
Weighted-Average
Interest Rate
Fund Consolidated Mortgage and Other Debt
Year
2017
2018
2019
2020
2021
Thereafter
$
$
2.5
1.6
2.0
1.1
0.3
0.9
8.4
$
$
312.4
26.5
202.1
268.2
50.4
29.0
888.6
Mortgage Debt in Unconsolidated Partnerships (at our Pro-Rata Share)
Year
2017
2018
2019
2020
2021
Thereafter
Scheduled
Amortization
Maturities
$
$
1.1
1.0
1.0
1.1
1.1
3.7
9.0
$
$
15.1
1.2
—
—
—
140.4
156.7
$
$
$
$
312.4
26.5
202.1
268.2
50.4
29.0
888.6
2.7%
3.6%
3.7%
4.7%
3.1%
2.6%
Total
Weighted-Average
Interest Rate
16.2
2.2
1.0
1.1
1.1
144.1
165.7
2.5%
3.6%
—%
—%
—%
3.7%
$396.0 million of our total consolidated debt and $16.2 million of our pro-rata share of unconsolidated outstanding debt will
become due in 2017. $69.8 million of our total consolidated debt and $2.2 million of our pro-rata share of unconsolidated debt
will become due in 2018. As we intend on refinancing some or all of such debt at the then-existing market interest rates, which
may be greater than the current interest rate, our interest expense would increase by approximately $4.7 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 $1.9 million. Interest expense on our variable-rate debt of $645.2 million, net of variable to fixed-rate swap
agreements currently in effect, as of December 31, 2016 would increase $6.4 million if LIBOR increased by 100 basis points.
After giving effect to noncontrolling interests, our share of this increase would be $2.0 million. We may seek additional variable-
rate financing if and when pricing and other commercial and financial terms warrant. As such, we would consider hedging against
the interest rate risk related to such additional variable-rate debt through interest rate swaps and protection agreements, or other
means.
Based on our outstanding debt balances as of December 31, 2016, the fair value of our total consolidated outstanding debt would
decrease by approximately $20.3 million if interest rates increase by 1%. Conversely, if interest rates decrease by 1%, the fair
value of our total outstanding debt would increase by approximately $22.8 million.
As of December 31, 2016 and 2015, we had consolidated notes receivable of $276.2 million and $147.2 million, respectively. We
determined the estimated fair value of our notes receivable equated the carrying values by discounting future cash receipts utilizing
a discount rate equivalent to the rate at which similar notes receivable would be originated under conditions then existing.
Based on our outstanding notes receivable balances as of December 31, 2016, the fair value of our total outstanding notes receivable
would decrease by approximately $5.4 million if interest rates increase by 1%. Conversely, if interest rates decrease by 1%, the
fair value of our total outstanding notes receivable would increase by approximately $5.6 million.
Summarized Information as of December 31, 2015
As of December 31, 2015, we had total mortgage and convertible notes payable of $1,369.0 million, excluding the unamortized
premium of 1.4 million and unamortized loan costs of $11.7 million, of which $808.7 million, or 59% was fixed-rate, inclusive
of interest rate swaps, and $560.2 million, or 41%, was variable-rate based upon LIBOR plus certain spreads. As of December 31,
2015, we were a party to 15 interest rate swap transactions and one interest rate cap transactions to hedge our exposure to changes
in interest rates with respect to $256.5 million and $29.5 million of LIBOR-based variable-rate debt, respectively. We were also
a party to one forward-starting interest rate swaps with respect to $50.0 million of LIBOR-based variable-rate debt.
54
Interest expense on our variable debt of $560.2 million as of December 31, 2015 would have increased $5.6 million if LIBOR
increased by 100 basis points. Based on our outstanding debt balances as of December 31, 2015, the fair value of our total
outstanding debt would have decreased by approximately $12.8 million if interest rates increased by 1%. Conversely, if interest
rates decreased by 1%, the fair value of our total outstanding debt would have increased by approximately $13.6 million.
Changes in Market Risk Exposures from 2015 to 2016
Our interest rate risk exposure from December 31, 2015 to December 31, 2016 has increased on an absolute basis, as the $560.2
million of variable-rate debt as of December 31, 2015 has increased to $645.2 million as of December 31, 2016. As a percentage
of our overall debt, our interest rate risk exposure has increased as our variable-rate debt accounted for 41% of our consolidated
debt as of December 31, 2015 and was increased to 43% as of December 31, 2016.
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.
Disclosure Controls and Procedures
We conducted an evaluation, under the supervision and with the participation of management including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of
December 31, 2016 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit
under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and
forms, and is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Management of Acadia Realty Trust is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13(a)-15(f). Under the supervision and with the
participation of our management, including our principal executive officer and principal financial officer, we conducted an
assessment of the effectiveness of our internal control over financial reporting as of December 31, 2016 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 the framework 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 was effective as of December 31, 2016 to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for 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 an attestation report on our internal control over financial reporting as of December 31, 2016, which appears
in paragraph (b) of this Item 9A.
Acadia Realty Trust
Rye, New York
February 24, 2017
55
Changes in Internal Control Over Financial Reporting
During the three months ended December 31, 2016, there were no changes in the Company’s internal control over financial
reporting that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
Attestation Report of the Independent Registered Public Accounting Firm
Shareholders and Board of Trustees
Acadia Realty Trust
Rye, New York
We have audited Acadia Realty Trust’s internal control over financial reporting as of December 31, 2016, 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’s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Item 9(a), Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is
to express 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 that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Acadia Realty Trust maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2016, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Acadia Realty Trust as of December 31, 2016 and 2015, 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, 2016, and our report dated February 24, 2017, expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
February 24, 2017
ITEM 9B. OTHER INFORMATION.
None
56
PART III
In 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 our definitive proxy statement relating to our 2017 annual meeting of stockholders (our "2017 Proxy
Statement") that we intend to file with the SEC no later than March 28, 2017.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information under the following headings in the 2017 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 2017 Proxy Statement is incorporated herein by reference:
•
•
•
•
"ACADIA REALTY TRUST COMPENSATION COMMITTEE REPORT"
"COMPENSATION DISCUSSION AND ANALYSIS"
"BOARD OF TRUSTEES 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 2017 Proxy Statement is incorporated 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 incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.
The information under the following headings in the 2017 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 2017 Proxy Statement is incorporated
herein by reference.
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
PART IV
1. Financial Statements: See "Index to Financial Statements" at page F-1 below.
2. Financial Statement Schedule: See "Schedule II—Valuation and Qualifying Accounts" at page F-48 below.
3. Financial Statement Schedule: See "Schedule III—Real Estate and Accumulated Depreciation" at page F-49 below.
4. Financial Statement Schedule: See "Schedule IV—Mortgage Loans on Real Estate" at page F-53 below.
5. Exhibits: The index of exhibits below is incorporated herein by reference.
ITEM 16. FORM 10-K SUMMARY.
None.
57
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereto duly authorized.
SIGNATURES
ACADIA REALTY TRUST
(Registrant)
By:
By:
By:
/s/ Kenneth F. Bernstein
Kenneth F. Bernstein
Chief Executive Officer,
President and Trustee
/s/ John Gottfried
John Gottfried
Senior Vice President and
Chief Financial Officer
/s/ Richard Hartmann
Richard Hartmann
Senior Vice President and
Chief Accounting Officer
Dated: February 24, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Kenneth F. Bernstein
(Kenneth F. Bernstein)
/s/ John Gottfried
(John Gottfried)
/s/ Richard Hartmann
(Richard Hartmann)
/s/ Douglas Crocker II
(Douglas Crocker II)
/s/ Lorrence T. Kellar
(Lorrence T. Kellar)
/s/ Wendy Luscombe
(Wendy Luscombe)
/s/ William T. Spitz
(William T. Spitz)
/s/ Lynn Thurber
(Lynn Thurber)
/s/ Lee S. Wielansky
(Lee S. Wielansky)
/s/ C. David Zoba
(C. David Zoba)
Chief Executive Officer,
President and Trustee
(Principal Executive Officer)
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
Senior Vice President
and Chief Accounting Officer
(Principal Accounting Officer)
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
58
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
The 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 INDEX
Exhibit No. Description
3.1
Declaration of Trust of the Company
3.2
First Amendment to Declaration of Trust of the Company
3.3
Second Amendment to Declaration of Trust of the Company
3.4
Third Amendment to Declaration of Trust of the Company
3.5
Fourth Amendment to Declaration of Trust
3.6
Fifth Amendment to Declaration of Trust
3.7
Amended and Restated Bylaws of the Company
3.8
Amendment No. 1 to Amended and Restated Bylaws of the Company
10.1
Amended and Restated Acadia Realty Trust 2006 Share Incentive Plan (a)
10.2
Certain information regarding the compensation arrangements with certain
officers of registrant
Method of Filing
Incorporated by reference to the
copy thereof filed as Exhibit 3.1
to the Company's Annual Report
on Form 10-K filed for the year
ended December 31, 2012.
Incorporated by reference to the
copy thereof filed as Exhibit 3.2
to the Company's Annual Report
on Form 10-K filed for the year
ended December 31, 2012.
Incorporated by reference to the
copy thereof filed as Exhibit 3.3
to the Company's Annual Report
on Form 10-K filed for the year
ended December 31, 2012.
Incorporated by reference to the
copy thereof filed as Exhibit 3.4
to the Company's Annual Report
on Form 10-K filed for the year
ended December 31, 2012.
Incorporated by reference to the
copy thereof filed as Exhibit 3.1
(a) to the Company's Quarterly
Report on Form 10-Q filed for
the quarter ended September 30,
1998.
Incorporated by reference to the
copy thereof filed as Exhibit 3.4
to the Company's Quarterly
Report on Form 10-Q filed for
the quarter ended March 31,
2009.
Incorporated by reference to the
copy thereof filed as Exhibit 3.1
to the Company's Current
Report on Form 8-K filed on
November 18, 2013.
Incorporated by reference to the
copy thereof filed as Exhibit 3.1
to the Company's Current
Report on Form 8-K filed on
April 1, 2014.
Incorporated by reference to the
copy thereof filed as Appendix
A to the Company's Definitive
Proxy Statement on Schedule
14A filed on April 5, 2012.
Incorporated by reference to the
copy thereof filed as to Item
5.02 of the registrant's Form 8-
K filed with the SEC on
February 4, 2008.
59
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
Exhibit No. Description
10.3
Description of Long Term Investment Alignment Program
10.4
Form of Share Award Agreement (a)
Form of 2014-15 Long-Term Incentive Plan Award Agreement (a)
Registration Rights and Lock-Up Agreement (RD Capital Transaction)
Method of Filing
Incorporated by reference to the
copy thereof filed as Exhibit
10.13 to the Company's
Quarterly Report on Form 10-Q
filed for the quarter ended
March 31, 2009.
Incorporated by reference to the
copy thereof filed as Exhibit
99.1 to the Company's Current
Report on Form S-8 filed on
July 2, 2003.
Filed herewith
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.
Contribution and Share Purchase Agreement dated as of April 15, 1998
among Mark Centers Trust, Mark Centers Limited Partnership, the
Contributing Owners and Contributing Entities named therein, RD
Properties, L.P. VI, RD Properties, L.P. VIA and RD Properties, L.P. VIB
Incorporated by reference to the
copy thereof filed as Exhibit
10.1 to the Company's Form 8-
K filed on April 20, 1998.
Amended and Restated Employment agreement between the Company and
Kenneth F. Bernstein (a)
Form of Amended and Restated Severance Agreement, dated June 12,
2008, that was entered into with each of Joel Braun, Executive Vice
President and Chief Investment Officer; Michael Nelsen, Senior Vice
President and Chief Financial Officer; Robert Masters, Senior Vice
President, Senior Legal Counsel, Chief Compliance Officer and Secretary;
and Joseph Hogan, Senior Vice President and Director of Construction (a)
Amended and Restated Severance Agreement, dated April 19, 2011, that
was entered into with Christopher Conlon, Senior Vice President, Leasing
and Development (a)
Revolving Credit Agreement Dated as of November 21, 2012 by and
among Acadia Strategic Opportunity Fund IV LLC as Borrower, Acadia
Realty Acquisition IV LLC as Borrowers Managing Member, Acadia
Realty Limited Partnership as Guarantor, Acadia Realty Trust as
Guarantor General Partner, Acadia Investors IV Inc. as Pledgor and Bank
of America, N.A. as Administrative Agent, Structuring Agent, Sole
Bookrunner, Sole Lead Arranger, Letter of Credit Issuer, and Lender
Credit Agreement, dated as of January 31, 2013, among Acadia Realty
Limited Partnership, as the Borrower, and Acadia Realty Trust and Certain
Subsidiaries of Acadia Realty Limited Partnership from time to time party
thereto, as Guarantors, Bank of America, N.A., as Administrative Agent,
Swing Line Lender, L/C Issuer, and as a Lender, PNC Bank, National
Association and Wells Fargo Bank, National Association, as Co-
Documentation Agents, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as a Joint Lead Arranger and Sole Bookrunner and PNC
Bank, National Association and Wells Fargo Securities, LLC, as Joint
Lead Arrangers
Incorporated by reference to the
copy thereof filed as Exhibit
10.1 to the Company's Current
Report on Form 8-K filed on
April 1, 2014.
Incorporated by reference to the
copy thereof filed as Exhibit
10.1 to the Company's Form 8-
K filed on June 12, 2008.
Incorporated by reference to the
copy thereof filed as Exhibit
10.43 to the Company's
Quarterly Report on Form 10-Q
filed for the quarter ended
March 31, 2011.
Incorporated by reference to the
copy thereof filed as Exhibit
10.23 to the Company's Annual
Report on Form 10-K filed for
the year ended December 31,
2012.
Incorporated by reference to the
copy thereof filed as Exhibit
10.1 to the Company's Current
Report on Form 8-K filed on
February 5, 2013.
60
Exhibit No. Description
10.13
First Amendment to Credit Agreement, among Acadia Realty Limited
Partnership, as the Borrower, and Acadia Realty Trust and Certain
Subsidiaries of Acadia Realty Limited Partnership from time to time party
thereto, as Guarantors, Bank of America, N.A., as Administrative Agent,
Swing Line Lender, L/C Issuer, and as a Lender, PNC Bank, National
Association and Wells Fargo Bank, National Association, as Co-
Documentation Agents, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as a Joint Lead Arranger and Sole Bookrunner and PNC
Bank, National Association and Wells Fargo Securities, LLC, as Joint
Lead Arrangers, dated September 30, 2014
10.14
10.15
Second Amendment to Credit Agreement, among Acadia Realty Limited
Partnership, as the Borrower, and Acadia Realty Trust and Certain
Subsidiaries of Acadia Realty Limited Partnership from time to time party
thereto, as Guarantors, Bank of America, N.A., as Administrative Agent,
Swing Line Lender, L/C Issuer, and as a Lender, PNC Bank, National
Association and Wells Fargo Bank, National Association, as Co-
Documentation Agents, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as a Joint Lead Arranger and Sole Bookrunner and PNC
Bank, National Association and Wells Fargo Securities, LLC, as Joint
Lead Arrangers, dated May 22, 2015
Agreement and Plan Of Merger Dated as of December 22, 2005 by and
among Acadia Realty Acquisition I, LLC, Ara Btc LLC, ARA MS LLC,
ARA BS LLC, ARA BC LLC and ARA BH LLC, Acadia Investors, Inc.,
AII BTC LLC, AII MS LLC, AII BS LLC, AII BC LLC And AII BH LLC,
Samuel Ginsburg 2000 Trust Agreement #1, Martin Ginsburg 2000 Trust
Agreement #1, Martin Ginsburg, Samuel Ginsburg and Adam Ginsburg,
and GDC SMG, LLC, GDC Beechwood, LLC, Aspen Cove Apartments,
LLC and SMG Celebration, LLC
10.16
Form of Assignments and Assumptions of Carried Interest with respect to
the Company's Long-Term Incentive Alignment Program
10.17
Form of Omnibus Amendment to the Series of Assignments and
Assumptions of Carried Interest with respect to the Company's Long-Term
Incentive Alignment Program
21
23.1
31.1
31.2
32.1
32.2
99.1
List of Subsidiaries of Acadia Realty Trust
Consent of Registered Public Accounting Firm to incorporation by
reference its reports into Forms S-3 and Forms S-8
Certification of Chief Executive Officer pursuant to rule 13a-14(a)/15d-14
(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to rule 13a-14(a)/15d-14
(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
Amended and Restated Agreement of Limited Partnership of the
Operating Partnership (not including immaterial amendments)
Method of Filing
Incorporated by reference to the
copy thereof filed as Exhibit
10.2 to the Company's Quarterly
Report on Form 10-Q filed for
the quarter ended June 30, 2015.
Incorporated by reference to the
copy thereof filed as Exhibit
10.3 to the Company's Quarterly
Report on Form 10-Q filed for
the quarter ended June 30, 2015.
Incorporated by reference to the
copy thereof filed as Exhibit
99.1 to the Company's Current
Report on Form 8-K filed on
January 4, 2006.
Incorporated by reference to the
copy thereof filed as Exhibit
10.4 to the Company's Quarterly
Report on Form 10-Q filed for
the quarter ended June 30, 2015.
Incorporated by reference to the
copy thereof filed as Exhibit
10.5 to the Company's Quarterly
Report on Form 10-Q filed for
the quarter ended June 30, 2015.
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Incorporated by reference to the
copy thereof filed as Exhibit
10.1 (c) to the Company's
Registration Statement on Form
S-3 filed on March 3, 2000.
61
Exhibit No. Description
99.2
Third Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
99.3
99.4
Eighth Amendment to Amended and Restated Agreement of Limited
Partnership of the Operating Partnership
Certificate of Designation of Series A Preferred Operating Partnership
Units of Limited Partnership Interest of Acadia Realty Limited Partnership
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
XBRL Taxonomy Extension Calculation Document
101.DEF
XBRL Taxonomy Extension Definitions Document
101.LAB
XBRL Taxonomy Extension Labels Document
101.PRE
XBRL Taxonomy Extension Presentation Document
__________
Method of Filing
Incorporated by reference to the
copy thereof filed as Exhibit
99.2 to the Company's Quarterly
Report on Form 10-Q filed for
the quarter ended June 30, 2015.
Incorporated by reference to the
copy thereof filed as Exhibit
10.8 to the Company's
Registration Statement on Form
S-3 filed on March 12, 2009.
Incorporated by reference to the
copy thereof filed as Exhibit
99.5 to the Company's Quarterly
Report on Form 10-Q filed for
the quarter ended June 30, 1997.
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
Filed herewith
(a) The referenced exhibit is a management contract or compensation plan or arrangement required to be filed as an
exhibit pursuant to Item 15 (a)(3) of Form 10-K.
62
ACADIA REALTY TRUST AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Financial Statements:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2016 and 2015
Consolidated Statements of Income for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014
Notes to Consolidated Financial Statements
Financial Statement Schedules:
Schedule II – Valuation and Qualifying Accounts
Schedule III – Real Estate and Accumulated Depreciation
Schedule IV – Mortgage Loans on Real Estate
Page
F-2
F-3
F-4
F-5
F-6
F-8
F-10
F-48
F-49
F-53
F-1
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Trustees
Acadia Realty Trust
Rye, New York
We have audited the accompanying consolidated balance sheets of Acadia Realty Trust (the “Company”) as of December 31, 2016
and 2015, 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, 2016. In connection with our audits of the financial statements, we have
also audited the financial statement schedules listed in the accompanying index. These financial statements and schedules are the
responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedules
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements and schedules. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Acadia Realty Trust at December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States
of America.
Also, in our opinion, the financial statement schedules, when considered in relation to the basic consolidated financial statements
taken as a whole, present fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Acadia Realty Trust’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) and our report dated February 24, 2017, expressed an unqualified opinion thereon.
/s/ BDO USA, LLP
February 24, 2017
F-2
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
ASSETS
Investments in real estate, at cost
Operating real estate, net
Real estate under development, at cost
Net investments in real estate
Notes receivable, net
Investments in and advances to unconsolidated affiliates
Other assets, net
Cash and cash equivalents
Rents receivable, net
Restricted cash
Assets of properties held for sale
Total assets
LIABILITIES
Mortgage and other notes payable, net
Unsecured notes payable, net
Unsecured line of credit
Accounts payable and other liabilities
Capital lease obligations
Dividends and distributions payable
Distributions in excess of income from, and investments in, unconsolidated affiliates
Total liabilities
Commitments and contingencies
EQUITY
Acadia shareholders' Equity
Common shares, $0.001 par value, authorized 100,000,000 shares, issued and
outstanding 83,597,741 and 70,258,415 shares, respectively
Additional paid-in capital
Accumulated other comprehensive loss
(Distributions in excess of accumulated earnings) retained earnings
Total Acadia shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
December 31,
2016
2015
$ 2,551,448
543,486
3,094,934
276,163
272,028
192,786
71,805
43,842
22,904
21,498
$ 3,995,960
$ 1,828,006
609,574
2,437,580
147,188
173,277
123,789
72,776
40,425
37,284
—
$ 3,032,319
$ 1,055,728
432,990
—
208,672
70,129
36,625
13,691
1,817,835
$ 1,050,051
287,755
20,800
101,563
—
37,552
13,244
1,510,965
84
1,594,926
(798)
(5,635)
1,588,577
589,548
2,178,125
$ 3,995,960
70
1,092,239
(4,463)
12,642
1,100,488
420,866
1,521,354
$ 3,032,319
The accompanying notes are an integral part of these consolidated financial statements
F-3
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands except per share amounts)
Revenues
Rental income
Expense reimbursements
Other
Total revenues
Operating expenses
Depreciation and amortization
General and administrative
Real estate taxes
Property operating
Other operating
Impairment of asset
Total operating expenses
Operating income
Equity in earnings and gains of unconsolidated affiliates
Interest income
Other
Interest expense
Income from continuing operations before income taxes
Income tax benefit (provision)
Income from continuing operations before gain
on disposition of properties
Income from discontinued operations, net of tax
Gain on disposition of properties, net of tax
Net income
Noncontrolling interests
Continuing operations
Discontinued operations
Net income attributable to noncontrolling interests
Net income attributable to Acadia
Basic and diluted earnings per share
Income from continuing operations attributable to Acadia
Income from discontinued operations attributable to Acadia
Basic and diluted earnings per share
Year Ended December 31,
2016
2015
2014
152,814
32,282
4,843
189,939
70,011
40,648
25,630
24,244
7,517
—
168,050
21,889
39,449
25,829
—
(34,645)
52,522
105
52,627
—
81,965
134,592
(61,816)
—
(61,816)
72,776
0.94
—
0.94
$
$
$
$
158,632
36,306
4,125
199,063
60,751
30,368
25,384
28,423
4,675
5,000
154,601
44,462
37,330
16,603
1,596
(37,297)
62,694
(1,787)
60,907
—
89,063
149,970
(84,262)
—
(84,262)
65,708
0.94
—
0.94
$
$
$
$
145,103
32,642
1,936
179,681
49,645
27,433
23,062
24,833
3,776
—
128,749
50,932
111,578
12,607
2,724
(39,426)
138,415
(629)
137,786
1,222
13,138
152,146
(80,059)
(1,023)
(81,082)
71,064
1.18
—
1.18
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements
F-4
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Year Ended December 31,
2015
2014
2016
$
134,592
$
149,970
$
152,146
Other comprehensive income (loss):
Unrealized loss on valuation of swap agreements
Reclassification of realized interest on swap agreements
Other comprehensive income (loss)
Comprehensive income
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Acadia
$
(646)
4,576
3,930
138,522
(62,081)
76,441
$
(5,061)
5,524
463
150,433
(85,183)
65,250
$
(9,061)
3,776
(5,285)
146,861
(80,934)
65,927
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except per
share amounts)
Common
Shares
Share
Amount
Acadia Shareholders
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
(Loss) Income
(Distributions
in Excess of
Accumulated
Earnings)
Retained
Earnings
Total
Common
Shareholders’
Equity
Noncontrolling
Interests
Total
Equity
Balance at
January 1, 2014
Conversion of OP Units to
Common Shares by limited
partners of the Operating
Partnership
Issuance of Common
Shares, net of issuance costs
Issuance of OP Units to
acquire real estate
Dividends declared ($1.23
per Common Share) (a)
Employee and trustee stock
compensation, net
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Comprehensive (loss)
income
Balance at
December 31, 2014
Conversion of OP Units to
Common Shares by limited
partners of the Operating
Partnership
Issuance of Common
Shares, net of issuance costs
Dividends declared ($1.22
per Common Share) (b)
Acquisition of
noncontrolling interests
Issuance of OP Units to
acquire real estate
Employee and trustee stock
compensation, net
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Comprehensive (loss)
income
Balance at
December 31, 2015
55,643
$
56
$ 665,301
$
1,132
$
37,747
$
704,236
$
417,352
$ 1,121,588
136
12,237
—
—
93
—
—
—
—
12
—
—
—
—
—
—
3,181
357,447
—
—
1,932
—
—
—
—
—
—
—
—
—
—
—
—
—
3,181
(3,181)
—
357,459
—
357,459
—
44,051
44,051
(77,194)
(77,194)
(5,085)
(82,279)
—
—
—
1,932
6,528
8,460
—
—
(218,152)
(218,152)
57,969
57,969
(5,137)
71,064
65,927
80,934
146,861
68,109
$
68
$ 1,027,861
$
(4,005) $
31,617
$
1,055,541
$
380,416
$ 1,435,957
101
1,973
—
—
—
75
—
—
—
—
2
—
—
—
—
—
—
—
2,451
64,415
—
(4,409)
—
1,921
—
—
—
—
—
—
—
—
—
—
—
—
—
2,451
64,417
(2,451)
—
—
64,417
(84,683)
(84,683)
(5,983)
(90,666)
—
—
—
—
—
(4,409)
(3,561)
(7,970)
—
1,921
—
—
—
—
6,723
8,644
(74,950)
(74,950)
35,489
35,489
(458)
65,708
65,250
85,183
150,433
70,258
$
70
$ 1,092,239
$
(4,463) $
12,642
$
1,100,488
$
420,866
$ 1,521,354
F-6
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except per
share amounts)
Common
Shares
Share
Amount
Acadia Shareholders
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
(Loss) Income
(Distributions
in Excess of
Accumulated
Earnings)
Retained
Earnings
Total
Common
Shareholders’
Equity
Noncontrolling
Interests
Total
Equity
70,258
$
70
$ 1,092,239
$
(4,463) $
12,642
$
1,100,488
$
420,866
$ 1,521,354
Balance at
January 1, 2016
Conversion of OP Units to
Common Shares by limited
partners of the Operating
Partnership
Issuance of Common
Shares, net of issuance costs
Issuance of OP Units to
acquire real estate
Dividends declared ($1.16
per Common Share) (c)
Change in control of
previously unconsolidated
investment
Windfall tax benefit
Acquisition of
noncontrolling interests
Employee and trustee stock
compensation, net
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Reallocation of
noncontrolling interests
Comprehensive income
Balance at
December 31, 2016
__________
351
12,961
—
—
—
—
—
28
—
—
—
—
1
13
—
—
—
—
—
—
—
—
—
—
7,891
450,117
—
—
—
555
7,546
926
—
—
35,652
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7,892
(7,892)
—
450,130
—
450,130
—
31,429
31,429
(91,053)
(91,053)
(6,753)
(97,806)
—
—
—
—
—
—
—
—
555
(75,713)
(75,713)
—
555
7,546
(25,925)
(18,379)
926
—
—
12,768
13,694
(80,769)
(80,769)
295,108
295,108
35,652
76,441
(35,652)
—
62,081
138,522
83,598
$
84
$ 1,594,926
$
(798) $
(5,635) $
1,588,577
$
589,548
$ 2,178,125
3,665
72,776
(a) Includes a special dividend of $0.30 announced on December 5, 2014 and paid on January 15, 2015.
(b) Includes a special dividend of $0.25 declared on November 10, 2015 and paid on January 15, 2016.
(c) Includes a special cash dividend of $0.15 declared on November 8, 2016 and paid on January 13, 2017 (Note 10).
The accompanying notes are an integral part of these consolidated financial statements.
F-7
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2015
2014
2016
$ 134,592
$ 149,970
$ 152,146
(81,965)
70,011
7,256
(39,449)
13,695
3,204
—
(8,095)
26,532
(11,677)
(4,847)
1,912
591
111,760
(495,644)
(149,434)
(157,352)
150,378
(72,098)
54,444
42,819
24,586
(7,515)
(2,578)
1,424
(610,970)
(89,063)
60,751
12,291
(37,330)
7,438
3,537
5,000
(6,483)
5,354
12,690
(5,673)
(6,168)
1,284
113,598
(338,700)
(164,315)
(48,500)
168,895
(24,168)
11,892
15,984
38,392
(8,207)
—
(5,776)
(354,503)
(14,360)
49,645
9,579
(111,578)
6,744
3,003
—
(3,812)
3,099
852
(8,097)
(686)
(4,016)
82,519
(256,453)
(140,118)
(31,169)
31,188
(156,972)
74,371
18,095
190,356
(3,914)
—
6,100
(268,516)
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on disposition of properties
Depreciation and amortization
Distributions of operating income from unconsolidated affiliates
Equity in earnings and gains of unconsolidated affiliates
Stock compensation expense
Amortization of financing costs
Impairment of asset
Other, net
Changes in assets and liabilities:
Other liabilities
Prepaid expenses and other assets
Rents receivable, net
Cash in escrow
Accounts payable and accrued expenses
Net cash provided by operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of real estate
Development and property improvement costs
Issuance of notes receivable
Proceeds from the disposition of properties
Investments in and advances to unconsolidated affiliates
Return of capital from unconsolidated affiliates
Proceeds from notes receivable
Proceeds from disposition of properties of unconsolidated affiliates
Deferred leasing costs
Change in control of previously consolidated affiliate
Deposits for properties under contract
Net cash used in investing activities
F-8
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and other notes
Proceeds received on mortgage and other notes
Proceeds from issuance of Common Shares, net of
issuance costs of $9,238, $1,150 and $2,112 respectively
Capital contributions from noncontrolling interests
Distributions to noncontrolling interests
Dividends paid to Common Shareholders
Deferred financing and other costs
Loan proceeds held as restricted cash
Purchase of convertible notes payable
Net cash provided by financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information
Cash paid during the period for interest, net of
capitalized interest of $21,109, $16,447 and $12,650, respectively
Cash paid for income taxes, net of refunds received
of $0, $0 and $2,045, respectively
Supplemental disclosure of non-cash investing activities
Acquisition of real estate through assumption of debt
Acquisition of real estate through issuance of OP Units
Acquisition of capital lease obligation
Mortgage debt financed at time of acquisition
Assumption of accounts payable and accrued expenses
through acquisition of real estate
Assumption of prepaid expenses and other assets through acquisition of real estate
Disposition of air rights through issuance of notes receivable
Acquisition of real estate through assumption of restricted cash
Acquisition of real estate through conversion of notes receivable
Disposition of real estate through forgiveness of debt
Investments in and advances to unconsolidated affiliates
through issuance of OP Units
Change in control of previously consolidated investment
Real estate, net
Investments in and advances to unconsolidated affiliates
Other assets and liabilities
Noncontrolling interest
Cash removed in de-consolidation of previously consolidated investment
Year Ended December 31,
2016
2015
2014
(936,654)
888,787
(383,238)
507,659
(176,323)
284,303
63,234
357,459
450,130
295,108
(105,994)
(91,334)
(11,678)
9,874
—
498,239
35,489
(84,610)
(86,353)
(4,376)
48,676
(380)
96,101
57,970
(221,330)
(53,210)
(3,672)
79,191
—
324,388
138,391
79,189
(971)
72,776
(144,804)
217,580
$
71,805
$
72,776
$ 217,580
47,960
2,038
$
$
46,542
(1,772)
91,885
$
29,794
— $
38,937
$
$
42,279
2,036
$ 120,672
29,336
76,461
63,900
3,587
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
— $
— $
— $
—
—
—
—
—
—
38,000
2,226
$
— $
— $ (29,539) $
— $ (28,912) $
$
— $
13,386
— $
— $ (22,865)
— $
— $
5,114
$
90,559
(21,421)
3,997
(75,713)
(2,578) $
— $
—
—
—
— $
—
—
—
—
—
The accompanying notes are an integral part of these consolidated financial statements.
F-9
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies
Organization
Acadia Realty Trust and subsidiaries (collectively, the "Company") is a fully-integrated equity real estate investment trust ("REIT")
focused on the ownership, acquisition, development, and management of 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") and entities in which the Operating Partnership owns an interest. As of December 31, 2016 and 2015,
the Company controlled approximately 95% of the Operating Partnership as the sole general partner and is entitled to share, in
proportion to its percentage interest, in the cash distributions and profits and losses of the Operating Partnership. The limited
partners primarily represent entities or individuals that contributed their interests in certain properties or entities to the Operating
Partnership in exchange for common or preferred units of limited partnership interest ("Common OP Units" or "Preferred OP
Units") and employees who have been awarded restricted Common OP Units ("LTIP Units") as long-term incentive compensation
(Note 13). Limited partners holding Common 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 Company ("Common Shares"). This structure is referred to as an umbrella
partnership REIT or "UPREIT."
As of December 31, 2016, the Company has ownership interests in 117 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 through its funds ("Core Portfolio"). The Company also has ownership interests in
65 properties within its opportunity funds, Acadia Strategic Opportunity Fund I, LP ("Fund I"), Acadia Strategic Opportunity Fund
II, LLC ("Fund II"), Acadia Strategic Opportunity Fund III LLC ("Fund III"), Acadia Strategic Opportunity Fund IV LLC, and
Acadia Strategic Opportunity Fund V LLC (("Fund V") and together with Funds I, II, III and IV, the "Funds"). The 182 Core
Portfolio and Fund properties primarily consist of street and urban retail, and dense suburban shopping centers. In addition, the
Company, together with the investors in the Funds, invest in operating companies through Acadia Mervyn Investors I, LLC
("Mervyns I"), Acadia Mervyn Investors II, LLC ("Mervyns II") and Fund II, all on a non-recourse basis. The Company consolidates
the Funds as it has (i) the power to direct the activities that most significantly impact their economic performance, (ii) is obligated
to absorb their losses and (iii) has the right to receive benefits from the Funds that could potentially be significant.
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 asset management, property management, construction, development, leasing, and legal services. Cash
flows from the Funds and Mervyns I and II are distributed pro-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 the partners or members
(including the Operating Partnership). All transactions between the Funds and the Operating Partnership have been eliminated in
consolidation.
The following table summarizes the general terms and Operating Partnership's equity interests in the Funds and Mervyns I and II
(dollars in millions):
Entity
Formation
Date
Operating
Partnership
Share of
Capital
Fund Size
Capital
Called as of
December
31, 2016 (a)
Unfunded
Commitment
Equity
Interest Held
By
Operating
Partnership
Total
Distributions
as of
December
31, 2016 (e)
Preferred
Return
Fund I and Mervyns I (a)
9/2001
22.22%
$
90.0
$
86.6
$
—
37.78%
9%
$
194.5
Fund II and
Mervyns II (b) (c)
Fund III (d)
Fund IV
Fund V
__________
6/2004
5/2007
5/2012
8/2016
28.33%
24.54%
23.12%
20.10%
300.0
502.5
540.6
520.1
347.1
387.5
179.4
—
—
62.5
361.2
520.1
28.33%
39.63%
23.12%
20.10%
8%
6%
6%
6%
131.6
445.7
101.9
—
(a) As of December 31, 2015, Fund I had been liquidated.
(b) During 2013, a distribution of $47.1 million was made to the Fund II investors, including the Operating Partnership. This amount was subject
to recontribution to Fund II until December 2016, and was recontributed during 2016.
F-10
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(c) During 2016, the Company acquired an additional 8.3% interest in Fund II from a limited partner for $18.4 million, giving the Operating
Partnership an aggregate 28.33% interest.
(d) During 2015, the Company acquired an additional 4.6% interest in Fund III from a limited partner for $7.3 million, giving the Operating
Partnership an aggregate 24.54% interest.
(e) Represents the total for the Funds, including the Operating Partnership and noncontrolling interests' shares.
Basis of Presentation
Segments
At December 31, 2016, the Company had three reportable operating segments: Core Portfolio, Funds and Structured Financing. The
Company’s chief operating decision maker may review operational and financial data on a property basis and does not differentiate
properties on a geographical basis for purposes of allocating resources or capital. The Company evaluates individual property
performance primarily based on net operating income before depreciation, amortization and certain nonrecurring items. Each
property is considered a separate operating segment; however, each property on a stand-alone basis represents less than 10% of
revenues, profit or loss, and assets of the combined reported operating segment and meets the majority of the aggregations criteria
under the applicable standard.
Principles of Consolidation
The consolidated financial statements include the consolidated accounts of the Company and its investments in partnerships and
limited liability companies 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 ability to 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 primary beneficiary of a variable interest entity is the enterprise that has the power to direct the activities that
most significantly impact the variable interest entity’s economic performance and the obligation to absorb losses or the right to
receive benefits of the variable interest entity that could be significant to the variable interest entity. Management has evaluated
the applicability of ASC Topic 810 to its investments in certain joint ventures and determined that these joint ventures are not
variable interest entities or that the Company is not the primary beneficiary and, therefore, consolidation of these ventures is not
required. These investments are accounted for using the equity method of accounting.
At December 31, 2016, the Company had investments in three tenancy-in-common interests in various underlying properties.
Consolidation of these investments is not required as such interests do not qualify as variable interest entities or meet the control
requirement for consolidation. Accordingly, the Company accounts for these investments using the equity method of accounting
because the shared decision-making involved in a tenancy-in-common interest investment provides the Company with significant
influence on the operating and financial decisions of these investments.
Cost Method Investments
The Company has certain investments to which it applies the cost method of accounting. The Company recognizes as income
distributions from net accumulated earnings of the investee since the date of acquisition. The net accumulated earnings of an
investee subsequent to the date of investment are recognized by the Company only to the extent distributed by the investee.
Distributions received in excess of earnings subsequent to the date of investment are considered a return of investment and are
recorded as reductions of cost of the investment. For the periods presented, there have been no events or changes in circumstances
that may have a significant adverse effect on the fair value of the Company's cost-method investments.
Use of Estimates
Accounting principles generally accepted in the United States of America ("GAAP") require the Company’s management to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant
assumptions and estimates relate to the valuation of real estate, depreciable lives, revenue recognition and the collectability of
notes receivable and rents receivable. Application of these estimates and assumptions requires the exercise of judgment as to future
uncertainties and, as a result, actual results could differ from these estimates.
F-11
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Out-of-Period Adjustments
During the year ended December 31, 2016, the Company identified and recorded out-of-period adjustments related to accounting
for certain leases whose tenants have early termination and renewal options and for interest expense related to a loan that is in
default. The Company's management concluded that these non-cash adjustments are not material to the consolidated financial
statements for any of the periods presented. The net impact of the adjustments on the consolidated statement of income for the
year ended December 31, 2016 is reflected as a decrease to rental income of $2.1 million, an increase to depreciation and amortization
expense of $1.7 million, an increase in interest expense of $0.7 million and an increase to equity in earnings of unconsolidated
affiliates of $0.2 million, resulting in a net decrease to net income of $4.2 million, of which $1.6 million was attributable to
noncontrolling interests.
During the second quarter of 2016, management determined that certain transactions involving the issuance of Common Shares
of the Company and Common OP Units, Preferred OP Units, and LTIP Units of the Operating Partnership, should have resulted
in an adjustment to the Operating Partnership’s non-controlling interest ("OPU NCI") and the Company’s Additional Paid-in-
Capital ("APIC") to reflect the difference between the fair value of the consideration received or paid and the book value of the
Common Shares, Common OP Units, Preferred OP Units, and LTIP Units involving these changes in ownership (the "Rebalancing").
During the year ended December 31, 2016, the Company increased its APIC with an offsetting reduction to the OPU NCI of
approximately $35.7 million, of which approximately $31.8 million of this Rebalancing related to prior years. Management
concluded that the Rebalancing adjustments were not meaningful to the Company’s financial position for any of the prior years,
and the quarterly periods in 2016, and as such, this cumulative change was recorded in the consolidated balance sheet and statement
of shareholder’s equity in the second quarter of 2016 as an out-of-period adjustment. The misclassification had no impact on the
previously reported consolidated assets, liabilities or total equity or on the consolidated statements of income, comprehensive
income, or cash flows.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation.
Summary of Significant Accounting Policies
Real Estate
Land, buildings, and personal property are carried at cost less accumulated depreciation. Improvements and significant renovations
that extend the useful life of the properties are capitalized, while replacements, maintenance, and repairs that do not improve or
extend the lives of the respective assets are expensed as incurred. Real estate under development includes costs for significant
property expansion and development.
Depreciation is computed on the straight-line basis over estimated useful lives of the assets as follows:
Buildings and improvements
Furniture and fixtures
Tenant improvements
Useful lives, ranging from 30 to 40 years
Useful lives, ranging from five years to 20 years
Shorter of economic life or lease terms
Purchase Accounting – 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 in accordance with ASC Topic 805, "Business
Combinations" and ASC Topic 350 "Intangibles – Goodwill and Other," and allocates the acquisition price based on these
assessments.
The Company assesses fair value of its tangible assets acquired and assumed liabilities based on estimated cash flow projections
that utilize appropriate discount and capitalization rates and available market information at the measurement period. Estimates
of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic
conditions that may affect the property.
In determining the value of above- and below-market leases, the Company estimates the present value difference between
contractual rent obligations and estimated market rate of leases at the time of the transaction. To the extent there 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
fair value of the acquired leases. The discounted difference between contract and market rents is being amortized to rental income
over the remaining applicable lease term, inclusive of any option periods.
F-12
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In determining the value of acquired in-place leases and customer relationships, the Company considers market conditions at the
time of the transaction and values the costs to execute similar leases during the expected lease-up period from vacancy to existing
occupancy, including carrying costs. The value assigned to in-place leases and tenant relationships is amortized over the estimated
remaining term of the leases. If a lease were to be terminated prior to its scheduled expiration, all unamortized costs relating to
that lease would be written off.
The Company estimates the value of any assumption of mortgage debt based on market conditions at the time of acquisitions
including prevailing interest rates, terms and ability to obtain financing for a similar asset. Mortgage debt discounts or premiums
are amortized into interest expense over the remaining term of the related debt instrument.
Real Estate Under Development – The Company capitalizes certain costs related to the development of real estate. Interest and
real estate taxes incurred during the period of the construction, expansion or development of real estate are capitalized and
depreciated over the estimated useful life of the building. The Company will cease the capitalization of these costs when construction
activities are substantially completed and the property is available for occupancy by tenants, but no later than one year from the
completion of major construction activity at which time the project is placed in service and depreciation commences. If the Company
suspends substantially all activities related to development of a qualifying asset, the Company will cease capitalization of interest
and taxes until activities are resumed.
Real Estate Impairment – The Company reviews its real estate and real estate under development for impairment when there is
an event or a change in circumstances that indicates that the carrying amount may not be recoverable. In cases where the Company
does not expect to recover its carrying costs on properties held for use, the Company reduces its carrying costs to fair value. The
determination of anticipated undiscounted cash flows is inherently subjective, requiring significant estimates made by management,
and considers the most likely expected course of action at the balance sheet date based on current plans, intended holding periods
and available market information. If the Company is evaluating the potential sale of an asset, the undiscounted future cash flows
analysis is probability-weighted based upon management’s best estimate of the likelihood of the alternative courses of action as
of the balance sheet date. Such cash flow projections consider factors such as expected future operating income, trends and
prospects, as well as the effects of demand, competition and other factors. If an impairment is indicated, an impairment loss is
recognized based on the excess of the carrying amount of the asset over its fair value.
The Company did not record any impairment charges during the years ended December 31, 2016 or 2014. During the year ended
December 31, 2015, as a result of the loss of a key anchor tenant at a property located in Wilmington, Delaware, the Company
recorded an impairment charge of $5.0 million, which is included in the statement of income for the year ended December 31,
2015. The Operating Partnership's share of this charge, net of the noncontrolling interest, was $1.1 million. The property is collateral
for $26.3 million of non-recourse mortgage debt which matured July 1, 2016 and is currently in default.
Dispositions of Real Estate – The Company recognizes property sales in accordance with ASC Topic 970 "Real Estate." Sales of
real estate include the sale of land, operating properties and investments in real estate joint ventures. Gains from dispositions are
recognized using the full accrual or partial sale methods, provided that various criteria relating to the terms of sale and any
subsequent involvement by the Company with the asset sold are met.
Real Estate Held for Sale – The Company generally considers assets to be held for sale when it has entered into a contract to sell
the property, all material due diligence requirements have been satisfied, and management believes it is probable that the disposition
will occur within one year. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair
value, less cost to sell.
Notes Receivable
Notes receivable include certain loans that are held for investment and are collateralized by real estate-related investments and
may be subordinate to other senior loans. Notes receivable are recorded at stated principal amounts or at initial investment less
accretive yield for loans purchased at a discount, which is accreted over the life of the note. The Company defers loan origination
and commitment fees, net of origination costs, and amortizes them over the term of the related loan. The Company evaluates the
collectability of both principal and interest based upon an assessment of the underlying collateral value to determine whether it
is impaired. A reserve is recorded when, based upon current information and events, it is probable that the Company will be unable
to collect all amounts due according to the existing contractual terms. The amount of the reserve is calculated by comparing the
recorded investment to the value of the underlying collateral. As the underlying collateral for a majority of the notes receivable
is real estate-related investments, the same valuation techniques are used to value the collateral as those used to determine the fair
value of real estate investments for impairment purposes. Given the small number of notes outstanding, the Company does not
provide for an additional reserve based on the grouping of loans, as the Company believes the characteristics of its notes are not
F-13
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
sufficiently similar to allow an evaluation of these notes as a group for a possible loan loss allowance. As such, all of the Company’s
notes are evaluated individually for this purpose. Interest income on performing notes is accrued as earned. A note is placed on
non-accrual status when, based upon current information and events, it is probable that the Company will not be able to collect
all amounts due according to the existing contractual terms. Recognition of interest income on an accrual basis on non-performing
notes is resumed when it is probable that the Company will be able to collect amounts due according to the contractual terms.
Investments in and Advances to Unconsolidated Joint Ventures
Some of the Company’s joint ventures obtain non-recourse third-party financing on their property investments, contractually
limiting the Company’s exposure to losses. The Company recognizes income for distributions in excess of its investment where
there is no recourse to the Company and no intention or obligation to contribute additional capital. For investments in which there
is recourse to the Company or an obligation or intention to contribute additional capital exists, distributions in excess of the
investment are recorded as a liability.
When characterizing distributions from equity investees within the Company's consolidated statements of cash flows, all
distributions received are first applied as returns on investment to the extent there are cumulative earnings related to the respective
investment and are classified as cash inflows from operating activities. If cumulative distributions are in excess of cumulative
earnings, distributions are considered return of investment. In such cases, the distribution is classified as cash inflows from investing
activities.
To the extent that the Company’s carrying basis in an unconsolidated affiliate is different from the basis reflected at the joint
venture level, the basis difference is amortized over the life of the related assets and included in the Company’s share of equity in
net income (loss) of investments in unconsolidated affiliates the joint venture.
The Company periodically reviews its investments in unconsolidated joint ventures for other-than-temporary losses in investment
value. Any decline that is not expected to be recovered based on the underlying assets of the investment, is considered other than
temporary and an impairment charge is recorded as a reduction in the carrying value of the investment. During the years ended
December 31, 2016, 2015 and 2014, there were no impairment charges related to the Company’s investments in unconsolidated
joint ventures.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash
equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed the limits insured
by the Federal Deposit Insurance Corporation.
Restricted Cash
Restricted cash consists principally of cash held for real estate taxes, construction costs, property maintenance, insurance, minimum
occupancy and property operating income requirements at specific properties as required by certain loan agreements.
Deferred Costs
Fees 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 and costs incurred in connection with obtaining financing are deferred and amortized as a component of
interest expense over the term of the related debt obligation on a straight-line basis, which approximates the effective interest
method. The Company capitalizes salaries, commissions and benefits related to time spent by leasing and legal department personnel
involved in originating leases.
Derivative Instruments and Hedging Activities
The Company measures derivative instruments at fair value and record them as assets or liabilities, depending on its rights or
obligations under the applicable derivative contract. Derivatives that are not designated as hedges must be adjusted to fair value
through earnings. For a derivative designated and that qualified as a cash flow hedge, the effective portion of the change in fair
value of the derivative is recognized in Other comprehensive (loss) income until the hedged item is recognized in earnings. The
ineffective portion of a derivative’s change in fair value is immediately recognized in earnings. The ineffective portion of the
change in fair value of the derivative is recognized directly in earnings.
F-14
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Although the Company's derivative contracts are subject to master netting arrangements, which serve as credit mitigants to both
the Company and its counterparties under certain situations, the Company does not net its derivative fair values or any existing
rights or obligations to cash collateral on the consolidated balance sheets. The Company does not use derivatives for trading or
speculative purposes. For the periods presented, all of the Company's derivatives qualified and were designated as cash flow
hedges, and none of its derivatives were deemed ineffective.
Noncontrolling Interests
Noncontrolling interests represent the portion of equity that the Company does not own in those entities it consolidates. The
Company identifies its noncontrolling interests separately within the equity section on the Company’s consolidated balance sheets.
The amounts of consolidated net earnings attributable to the Company and to the noncontrolling interests are presented separately
on the Company’s consolidated statements of income. Noncontrolling interests also include amounts related to common and
preferred OP Units issued to unrelated third parties in connection with certain property acquisitions. In addition, the Company
periodically issues common OP Units to certain employees of the Company under its share-based incentive program. Unit holders
generally have the right to redeem their units for shares of the Company's common stock subject to blackout and other limitations.
Common and restricted OP Units are included in the caption Noncontrolling interest within the equity section on the Company’s
consolidated balance sheets.
Revenue Recognition and Accounts Receivable
Minimum rents from tenants are recognized using the straight-line method over the non-cancelable lease term of the respective
leases. Lease termination fees are recognized upon the effective termination of a tenant’s lease when the Company has no further
obligations under the lease. As of December 31, 2016 and 2015, unbilled rents receivable relating to the straight-lining of rents
of $31.7 million and $31.3 million, respectively, are included in Rents Receivable, net on the accompanying consolidated balance
sheets. Certain of these leases also provide for percentage rents based upon the level of sales achieved by the tenant. Percentage
rent is recognized in the period when the tenants’ sales breakpoint is met. In addition, leases typically provide for the reimbursement
to the Company of real estate taxes, insurance and other property operating expenses. These reimbursements are recognized as
revenue in the period the related expenses are incurred.
The Company makes estimates of the uncollectability of its accounts receivable related to tenant revenues. An allowance for
doubtful accounts has been provided against certain tenant accounts receivable that are estimated to be uncollectible. Once the
amount is ultimately deemed to be uncollectible, it is written off. Rents receivable at December 31, 2016 and 2015 are shown net
of an allowance for doubtful accounts of $5.7 million and $7.5 million, respectively.
Stock-Based Compensation
Stock-based compensation expense for all equity-classified stock-based compensation awards is based on the grant date fair value
estimated in accordance with current accounting guidance for share-based payments. The Company recognizes these compensation
costs for only those shares or units expected to vest on a straight-line or graded-vesting basis, as appropriate, over the requisite
service period of the award. The Company includes stock-based compensation within the Additional paid-in capital caption of
equity.
Income Taxes
The Company has made an election to be taxed, and believes it qualifies, as a REIT under Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the "Code"). To maintain REIT status for Federal income tax purposes, the Company is
generally required to distribute at least 90% of its REIT taxable 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.
In connection with the REIT Modernization Act, the Company is permitted to participate in certain activities and still maintain its
qualification as a REIT, so long as these activities are conducted in entities that elect to be treated as taxable subsidiaries under
the Code. As such, the Company is subject to Federal and state income taxes on the income from these activities. The Protecting
Americans from Tax Hikes Act (PATH Act) was enacted in December 2015, and included numerous law changes applicable to
REITs. The provisions have various effective dates beginning as early as 2016. These changes did not materially impact the
Company's operations or consolidated financial statements.
F-15
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Although it may qualify for REIT status for Federal income tax purposes, the Company is subject to state income or franchise
taxes in certain states in which some of its 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, deferred income taxes are recognized for the temporary differences between the GAAP basis and tax basis
of the TRS income, assets and liabilities.
The Company records net deferred tax assets to the extent it believes it is more likely than not that these assets will be realized
and would record a valuation allowance to reduce deferred tax assets when it has determined that an uncertainty exists regarding
their realization, which would increase the provision for income taxes. In making such determination, the Company considers all
available positive and negative evidence, including forecasts of future taxable income, the reversal of other existing temporary
differences, available net operating loss carry-forwards, tax planning strategies and recent results of operations. Several of these
considerations require assumptions and significant judgment about the forecasts of future taxable income and are consistent with
the plans and estimates that the Company is utilizing to manage its business. To the extent facts and circumstances change in the
future, adjustments to the valuation allowances may be required.
Recently Issued Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, "Revenue from Contracts with Customers."
ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer
of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or
services. ASU 2014-09 does not apply to the Company's lease revenues, but will apply to reimbursed tenant costs. Additionally,
this guidance modifies disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from
contracts with customers. In August 2015, the FASB issued ASU 2015-14, which defers the effective date of ASU 2014-09 for all
entities by one year, until years beginning in 2018, with early adoption permitted but not before 2017. Entities may adopt ASU
2014-09 using either a full retrospective approach reflecting the application of the standard in each prior reporting period with the
option to elect certain practical expedients or a retrospective approach with the cumulative effect recognized at the date of adoption.
While the Company is still completing the assessment of the impact of this standard to its consolidated financial statements,
management believes the majority of the Company's revenue falls outside of the scope of this guidance. The Company intends
to implement the standard retrospectively with the cumulative effect recognized in retained earnings at the date of application.
In February 2016, the FASB issued ASU No. 2016-02, "Leases." ASU 2016-02 outlines a new model for accounting by lessees,
whereby their rights and obligations under substantially all leases, existing and new, would be capitalized and recorded on the
balance sheet. For lessors, however, the accounting remains largely unchanged from the current model, with the distinction between
operating and financing leases retained, but updated to align with certain changes to the lessee model and the new revenue
recognition standard discussed above. The new guidance requires that internal leasing costs be expensed as incurred, as opposed
to capitalized and deferred. ASU 2016-02 will also require extensive quantitative and qualitative disclosures and is effective
beginning after December 15, 2018, but early adoption is permitted. The Company is evaluating the impact of the new standard
and has not yet determined if it will have a material impact on its consolidated financial statements; however, the Company
capitalized internal leasing costs of $1.1 million, $1.4 million and $0.9 million during the years ended December 31, 2016, 2015
and 2014, respectively.
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses." ASU 2016-13 introduces a new model
for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities,
and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 also modifies the impairment
model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models,
and methods for estimating the allowance for losses. ASU 2016-13 is effective for periods beginning after December 15, 2019,
with adoption permitted for fiscal years beginning after December 15, 2018. Retrospective adjustments shall be applied through
a cumulative-effect adjustment to retained earnings. The adoption of ASU 2016-13 is not expected to have a material impact on
the Company's consolidated financial statements.
In August 2016, the FASB issued No. 2016-15, "Statement of Cash Flows – Classification of Certain Cash Receipts and Cash
Payments." ASU 2016-15 provides guidance on certain specific cash flow issues, including, but not limited to, debt prepayment
or extinguishment costs, contingent consideration payments made after a business combination and distributions received from
equity method investees. ASU 2016-15 is effective for periods beginning after December 15, 2017, with early adoption permitted
and shall be applied retrospectively where practicable. The adoption of ASU 2016-15 is not expected to have a material impact
on the Company's consolidated financial statements.
F-16
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In January 2017, the FASB issued ASU No. 2017-01 "Business Combinations – Clarifying the Definition of a Business." ASU
2017-01 clarifies that to be considered a business, the elements must include, at a minimum, an input and a substantive process
that together significantly contribute to the ability to create output. The new standard illustrates the circumstances under which
real estate with in-place leases would be considered a business and provides guidance for the identification of assets and liabilities
in purchase accounting. ASU 2017-01 is effective for periods beginning after December 15, 2017 and early adoption is permitted.
The Company is currently evaluating the impact ASU 2014-15 will have on its consolidated financial statements; however, it is
expected that the new standard would reduce the number of future real estate acquisitions that will be accounted for as business
combinations and, therefore, reduce the amount of acquisition costs that will be expensed.
In January 2017, the FASB issued ASU No. 2017-03 "Accounting Changes and Error Corrections (Topic 250) and Investments –
Equity Method and Joint Ventures (Topic 323)." ASU 2017-03 amends certain SEC guidance in the FASB Accounting Standards
Codification in response to SEC staff announcements made during 2016 EITF meetings which addressed (i) the additional
qualitative disclosures that a registrant is expected to provide when it cannot reasonably estimate the impact that ASUs 2014-09,
2016-02 and 2016-13 will have in applying the guidance in SAB Topic 11.M and (ii) guidance in ASC 323 related to the amendments
made by ASU 2014-01 regarding use of the proportional amortization method in accounting for investments in qualified affordable
housing projects (announcement made at the November 17, 2016, EITF meeting. The adoption of ASU 2017-03 is not expected
to have a material impact on the Company's consolidated financial statements.
Recently Adopted Accounting Pronouncements
On January 1, 2016, the Company adopted 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 for items that are
either unusual in nature or infrequent in occurrence remain and will be expanded to include items that are both unusual in nature
and infrequent in occurrence. The adoption did not have a material impact on the Company's consolidated financial statements.
On January 1, 2016, the Company adopted ASU No. 2015-02, "Consolidation – Amendments to the Consolidation Analysis," which
modified the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIE's"), particularly
those with fee arrangements and related party relationships. Consolidated VIE's are those where the Company is considered to be
the primary beneficiary of a VIE. The primary beneficiary is the entity that has a controlling financial interest in the VIE, which
is defined by the entity having both of the following characteristics: (i) the power to direct the activities that, when taken together,
most significantly impact the VIE’s performance and (ii) the obligation to absorb losses or the right to receive the returns from
the VIE that could potentially be significant to the VIE. The Company reviewed all of its entities in accordance with ASU 2015-02
and concluded that certain of its legal entities, including the Operating Partnership and the Funds, which have always been
consolidated, are now VIE's. There were no entities qualifying under the scope of the revised guidance that were consolidated as
a result of the adoption. As a result of the classification of the Operating Partnership as a VIE, substantially all of the Company's
assets and liabilities are assets and liabilities of a VIE. Accordingly, the adoption of ASU 2015-02 had no other impact on the
Company's consolidated financial statements.
F-17
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Real Estate
The Company's consolidated real estate is comprised of the following (in thousands):
Land
Buildings and improvements
Tenant improvements
Construction in progress
Properties under capital lease
Total
Less: Accumulated depreciation
Operating real estate, net
Real estate under development at cost
Net investment in real estate
Acquisitions
December 31,
2016
2015
$
693,252
$
514,120
1,916,288
132,220
19,789
76,965
2,838,514
(287,066)
2,551,448
543,486
1,457,351
135,999
19,239
—
2,126,709
(298,703)
1,828,006
609,574
$
3,094,934
$
2,437,580
During 2016 and 2015, the Company acquired the following consolidated retail properties (dollars in thousands):
Property
2016 Acquisitions
Core Portfolio:
991 Madison Avenue - New York, NY (a)
165 Newbury Street - Boston, MA
Concord & Milwaukee - Chicago, IL
151 North State Street - Chicago, IL
State & Washington - Chicago, IL
North & Kingsbury - Chicago, IL
Sullivan Center - Chicago, IL
California & Armitage - Chicago, IL
555 9th Street - San Francisco, CA
Subtotal Core Portfolio
Fund IV:
Restaurants at Fort Point - Boston, MA
1964 Union Street - San Francisco, CA
Wake Forest Crossing - Wake Forest, NC
Airport Mall - Bangor, ME
Colonie Plaza - Albany, NY
Dauphin Plaza - Harrisburg, PA
JFK Plaza - Waterville, ME
Mayfair Shopping Center - Philadelphia, PA
Shaw's Plaza - Waterville, ME
Wells Plaza - Wells, ME
717 N Michigan - Chicago, IL
Subtotal Fund IV
Total 2016 Acquisitions
Percent
Acquired
Date of
Acquisition
Purchase
Price
Debt
Assumed
Mar 26, 2016
$
76,628
$
May 13, 2016
Jul 28, 2016
Aug 10, 2016
Aug 22, 2016
Aug 29, 2016
Aug 31, 2016
Sep 12, 2016
Nov 2, 2016
Jan 14, 2016
Jan 28, 2016
Sep 27, 2016
Oct 28, 2016
Oct 28, 2016
Oct 28, 2016
Oct 28, 2016
Oct 28, 2016
Oct 28, 2016
Oct 28, 2016
Dec 1, 2016
6,250
6,000
30,500
70,250
34,000
146,939
9,250
139,775
519,592
11,500
2,250
36,600
10,250
15,000
16,000
6,500
16,600
13,800
5,250
—
—
2,902
14,556
25,650
13,409
—
2,692
60,000
119,209
—
1,463
—
—
—
—
—
—
—
—
103,500
237,250
756,842
$
—
1,463
120,672
$
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
90%
100%
100%
100%
100%
100%
100%
100%
100%
100%
F-18
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property
2015 Acquisitions
Core Portfolio:
City Center - San Francisco, CA
163 Highland Avenue - Needham, MA
Route 202 Shopping Center - Wilmington, DE
Roosevelt Galleria - Chicago, IL
Subtotal Core Portfolio
Fund II:
City Point Tower I - Brooklyn, NY (a)
Fund IV:
1035 Third Avenue - New York, NY
801 Madison Avenue - New York, NY
650 Bald Hill Road - Warwick, RI (a)
2208-2216 Fillmore Street - San Francisco, CA
146 Geary Street - San Francisco, CA
2207 Fillmore Street - San Francisco, CA
1861 Union Street - San Francisco, CA
Subtotal Fund IV
Total 2015 Acquisitions
__________
Percent
Acquired
Date of
Acquisition
Purchase
Price
Debt
Assumed
100%
100%
100%
100%
95%
100%
100%
90%
90%
100%
90%
90%
Mar 13, 2015
$
155,000
$
Mar 26, 2015
Apr 1, 2015
Sep 11, 2015
24,000
5,643
19,600
204,243
—
9,765
—
—
9,765
100,800
81,000
Jan 28, 2015
Apr 1, 2015
Sep 30, 2015
Oct 22, 2015
Nov 12, 2015
Nov 19, 2015
Dec 2, 2015
51,036
33,000
9,216
8,625
38,000
2,800
3,500
146,177
451,220
$
$
—
—
—
—
—
1,120
—
1,120
91,885
(a) These acquisitions were accounted for as asset acquisitions.
All of the above acquisitions were deemed to be business combinations except 991 Madison Avenue, 1964 Union Street, City
Point Tower I, and 650 Bald Hill Road. The Company expensed $5.5 million, $1.3 million and $4.8 million of acquisition costs
for the years ended December 31, 2016, 2015 and 2014, respectively, related to the Core Portfolio; $0.2 million of acquisition
costs for the year ended December 31, 2014 related to Fund III; and $2.7 million, $3.5 million and $2.7 million of acquisition
costs for the years ended December 31, 2016, 2015 and 2014, respectively, related to Fund IV.
Purchase Price Allocations
With the exception of the asset acquisitions noted above, the above acquisitions have been accounted for as business combinations.
The purchase prices for the business combinations were allocated to the acquired assets and assumed liabilities based on their
estimated fair values at the dates of acquisition. The preliminary measurements of fair value reflected below are subject to change.
The Company expects to finalize the valuations and complete the purchase price allocations within one year from the dates of
acquisition. During 2016 and 2015, the Company acquired properties and recorded the preliminary allocation of the purchase price
to the assets acquired based on provisional measurements of fair value. During 2016, the Company made certain measurement
period adjustments related to its 2015 acquisitions.
F-19
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the allocation of the purchase price of properties acquired during 2016 and 2015 (in thousands):
Net assets acquired:
Land
Buildings and improvements
Other assets
Acquisition-related intangible assets (in Acquired lease
intangibles, net)
Acquisition-related intangible liabilities (in Acquired lease
intangibles, net)
Above and below market debt assumed (included in
Mortgages and other notes payable, net)
Net assets acquired
Consideration:
Cash
Debt assumed
Total Consideration
2016
Purchase
Price
Allocation
Year Ended December 31,
2015
Preliminary
Purchase
Price
Allocation
Adjustments
Finalized
Purchase
Price
Allocation
$
225,729
$
83,890
$
458,525
3,481
63,606
(72,985)
258,926
—
—
—
4,178
(14,023)
—
$
88,068
244,903
—
22,660
22,660
(12,094)
(12,094)
(119,601)
558,755
$
(10,885)
331,931
$
(721)
— $
(11,606)
331,931
677,964
(119,209)
558,755
$
$
342,816
(10,885)
331,931
$
$
$
Dispositions and Discontinued Operations
During 2016 and 2015, the Company disposed of the following consolidated properties (in thousands):
2016 Dispositions:
Cortlandt Town Center - 65% (Note 4)
Heritage Shops
Total 2016 Dispositions
2015 Dispositions:
Lincoln Park Centre
Liberty Avenue
City Point - Air Rights
Kroger-Safeway
Total 2015 Dispositions
Owner
Date Sold
Sale Price
Gain on Sale
Fund III
Fund III
Jan 28, 2016
Apr 26, 2016
$
$
107,250
46,500
153,750
Fund III
Jan 15, 2015
$
Fund II
Fund II
Fund I
May 6, 2015
May 29, 2015
Aug 31, 2015
$
64,000
24,000
115,600
278
203,878
$
$
$
$
65,393
16,572
81,965
27,143
11,957
49,884
79
89,063
F-20
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The aggregate rental revenue, expenses and pre-tax income reported within continuing operations for the aforementioned
consolidated properties that were sold during 2016 and 2015 were as follows (in thousands):
Rental revenues
Expenses
Gain on disposition of properties
Loss on extinguishment of debt
Provision for income taxes
Income from continuing operations of
disposed properties, net of income taxes
Amounts attributable to noncontrolling interests
Year Ended December 31,
2016
2015
2014
$
$
$
$
3,503
(1,179)
81,965
(15)
—
$
21,987
(16,246)
89,063
(111)
(2)
84,274
(64,374)
$
$
94,691
(76,277)
$
$
26,374
(19,753)
—
(181)
(2)
6,438
—
In addition, during the year ended December 31, 2014, the Company reported one consolidated property sold within discontinued
operations, comprised of a net gain on the disposition of properties of $1.2 million of which $1.0 million was attributable to
noncontrolling interests.
Properties Held For Sale
At December 31, 2016, the Company had one property in Fund II classified as held-for-sale with net assets of $21.5 million and
subject to a mortgage of $25.5 million, which will be repaid prior to the sale. The property held for sale had net income (loss) of
$0.4 million, ($0.3 million) and $0.6 million for the years ended December 31, 2016, 2015 and 2014, respectively. At December
31, 2015 the Company had no properties classified as held for sale.
Pro Forma Financial Information (Unaudited)
The following unaudited pro forma operating data is presented for the year ended December 31, 2016, as if the acquisition of the
properties acquired in 2016 were completed on January 1, 2015 and as if the acquisition of the properties acquired in 2015 were
completed on January 1, 2014, including recognition of the related acquisition expenses of $8.2 million and $4.8 million,
respectively. The unaudited supplemental pro forma operating data is not necessarily indicative of what the actual results of
operations of the Company would have been, assuming the transactions had been completed as set forth above, nor do they purport
to represent the Company's results of operations for future periods.
Pro forma revenues
Pro forma income from continuing operations
Pro forma net income attributable to Acadia
Pro forma basic and diluted earnings per share
Real Estate Under Development and Construction in Progress
Year Ended December 31,
2016
2015
2014
$
$
$
$
252,702
141,612
79,680
0.94
$
$
$
$
274,972
150,498
67,788
0.81
$
$
$
$
215,991
145,398
67,888
1.03
Real estate under development represents the Company's consolidated properties which have not yet been placed into service
while undergoing substantial development or construction. At December 31, 2015, the Company had two properties in Fund II,
two properties in Fund III and four properties in Fund IV aggregating $609.6 million under development. During 2016, the Company
acquired two properties in Fund IV that were under development. Also during 2016, the Company placed a portion of its City
Point property in Fund II aggregating $187.4 million into service and capitalized $98.4 million related to City Point and $22.9
million relating to its other projects. At December 31, 2016, the Company had one Core property, two properties in Fund II, three
properties in Fund III and four properties in Fund IV classified as real estate under development with accumulated costs aggregating
$543.5 million.
Construction in progress pertains to the Company's operating properties which have already been placed into service.
F-21
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Notes Receivable, Net
The Company’s notes receivable, net were collateralized either by the underlying properties, the borrower’s ownership interest in
the entities that own the properties and/or by the borrower’s personal guarantee, and were as follows (dollars in thousands):
Number of
Instruments
December 31,
2016
10
1
1
3
15
December 31,
2016
2015
$
216,400
$
113,048
Maturity Date at
December 31, 2016
May 2017 -
September 2019
Interest Rate at
December 31,
2016
6.0% - 9.0%
31,007
30,234
May 2020
4,506
3,906
July 2017
2.5%
18.0%
24,250
—
$
276,163
$
147,188
April 2017 -
February 2021
6.0% - 15.3%
Description
Core Portfolio
Fund II
Fund III
Fund IV
During 2016, the Company:
•
•
•
issued one Core note receivable and three Fund IV notes receivable aggregating $47.5 million with a weighted-average
effective interest rate of 9.8%, which were collateralized by four mixed-use real estate properties;
received total collections of $42.8 million, including full repayment of five notes issued in prior periods aggregating
$29.6 million; and
restructured a $30.9 million Core mezzanine loan, which bore interest at 15.0%, and replaced it with a new $153.4 million
loan collateralized by a first mortgage in the borrower's tenancy-in-common interest. The new loan, which was made to
our partners in the Brandywine Portfolio, bears interest at 8.1% (Note 4).
During 2015, the Company:
• made total investments in six notes receivable of $78.0 million, with a weighted-average effective interest rate of 6.2%,
•
which were collateralized by six mixed-use real estate properties; and
received total collections of $29.4 million, including full repayment of four notes issued in prior periods aggregating
$22.9 million.
At December 31, 2016 and 2015, one of the Core notes receivable in the amount of $12.0 million was in default; however, no
principal reserve was established because the estimated fair value of the real estate collateral exceeded the carrying value of the
note.
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 prospects of the borrower.
Earnings from these notes and mortgages receivable are reported within the Company's Structured Financing segment (Note 12).
F-22
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Investments In and Advances to Unconsolidated Affiliates
The Company accounts for its investments in and advances to unconsolidated affiliates under the equity method of accounting as
it has the ability to exercise significant influence, but does not have financial or operating control over the investment, which is
maintained by each of the unaffiliated partners who co-invest with the Company. The Company's investments in and advances to
unconsolidated affiliates consist of the following (dollars in thousands):
Fund
Core:
Property
840 N. Michigan (a)
Renaissance Portfolio
Gotham
Brandywine Portfolio (a)
Georgetown Portfolio
Nominal
Ownership Interest
at December 31,
2016
December 31,
2016
2015
88.43% $
20%
49%
22.22%
50%
74,131
36,437
29,421
20,755
4,287
165,031
$
76,898
—
—
—
4,688
81,586
Mervyns I & II: KLA/Mervyn's, LLC (b)
10.5%
—
—
Fund III:
Fund IV:
Core:
__________
Fund III Other Portfolio
Self Storage Management (c)
Broughton Street Portfolio
Fund IV Other Portfolio
650 Bald Hill Road
90%
95%
50%
90%
90%
Due from Related Parties (d)
Other
Investments in and advances to unconsolidated affiliates
$
8,108
241
8,349
54,839
21,817
18,842
95,498
2,193
957
272,028
Crossroads (e)
Distributions in excess of income from,
and investments in, unconsolidated affiliates
49% $
13,691
$
13,691
12,784
654
13,438
43,786
24,104
9,072
76,962
725
566
173,277
13,244
13,244
$
$
$
(a) Represents a tenancy-in-common interest.
(b) Distributions have exceeded the Company's non-recourse investment, therefore the carrying value is zero.
(c) Represents a variable interest entity.
(d) Represents deferred fees.
(e) Distributions have exceeded the Company's investment; however, the Company recognizes a liability balance as it
may fund future obligations of the entity.
F-23
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Core Portfolio
The 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 28,000 square foot retail portfolio located in Georgetown, Washington D.C. (the "Georgetown Portfolio"), and
a 88.43% tenancy-in-common interest in an 87,000 square foot retail property located in Chicago, Illinois.
During January 2016, the Company completed the acquisition of a 49% noncontrolling interest in an approximately 123,000 square
foot retail property located in Manhattan, New York ("Gotham Plaza"), for a purchase price of $39.8 million. Consideration for
this purchase consisted of the assumption of 49% of the existing non-recourse debt of $21.4 million and the issuance of both
442,478 Common and 141,593 Preferred OP Units (Note 10).
During June 2016, the Company completed the acquisition of a 20% noncontrolling interest in a 211,000 square-foot portfolio of
17 mixed-use properties, 16 of which are located in Georgetown, Washington D.C. and one which is located in Alexandria, Virginia
(the "Renaissance Portfolio"), for a purchase price of $67.6 million and the assumption of $20 million in debt.
The Company owns a 22.22% interest in an approximately one million square foot retail portfolio (the "Brandywine Portfolio")
located in Wilmington, Delaware. Prior to the second quarter of 2016, the Company had a controlling interest in the Brandywine
Portfolio, and it was therefore consolidated within the Company’s financial statements. During April 2016, the arrangement with
the partners of the Brandywine Portfolio was modified to change the legal ownership from a partnership to a tenancy-in-common
interest, as well as to provide certain participating rights to the outside partners. As a result of these modifications, the Company
de-consolidated the Brandywine Portfolio and accounts for its interest under the equity method of accounting effective May 1,
2016. Furthermore, as the owners of the Brandywine Portfolio had consistent ownership interests before and after the modification
and the underlying net assets are unchanged, the Company has reflected the change from consolidation to equity method based
upon its historical cost.
Additionally, in April 2016, the Company repaid the outstanding balance of $140.0 million of non-recourse debt collateralized by
the Brandywine Portfolio. The Company provided a loan collateralized by the partners’ tenancy-in-common interest, as further
described in Note 7, for their proportionate share of the repayment.
Fund Investments
Fund III Other Portfolio includes the Company's investment in Arundel Plaza. Fund IV Other Portfolio includes the Company's
investment in 1701 Belmont Avenue, 2819 Kennedy Boulevard, Promenade at Manassas, and Eden Square.
Self-Storage Management, a Fund III investment, was determined to be a variable interest entity. Management has evaluated the
applicability of ASC Topic 810 to this joint venture and determined that the Company is not the primary beneficiary and, therefore,
consolidation of this venture is not required.
During April 2015, Fund III sold White City Shopping Center for $96.8 million resulting in a gain on sale of which the Operating
Partnership's share was $16.2 million.
During September 2015, Fund IV entered into a joint venture with an unaffiliated entity and completed the acquisition of a 90%
interest in a property under development located in Warwick, Rhode Island ("650 Bald Hill Road") for a purchase price of $9.2
million.
During January 2016, Fund III completed the disposition of a 65% interest in Cortlandt Town Center for $107.3 million resulting
in a gain of $65.4 million and the deconsolidation of its remaining interest (Note 2). During December 2016, Fund III completed
the disposition of its remaining 35% interest in Cortlandt Town Center for $57.8 million less $32.6 million debt repayment for a
net sales price of $25.2 million resulting in a gain on sale of $36.0 million, of which the Operating Partnership's share was $8.8
million, which is included in equity earnings and gains from unconsolidated affiliates in the consolidated financial statements.
Revenues from Unconsolidated Affiliates
The Company earned property management, construction, development, legal and leasing fees from its investments in
unconsolidated partnerships totaling $1.2 million, $0.3 million and $0.2 million for the years ended December 31, 2016, 2015 and
2014, respectively, which is included in other revenues in the consolidated financial statements.
In addition, the Company paid $1.1 million, $0.8 million, and $2.8 million to certain unaffiliated partners of our joint ventures
partners during the the years ended December 31, 2016, 2015 and 2014, respectively.
F-24
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Summarized Financial Information of Unconsolidated Affiliates
The following combined and condensed Balance Sheets and Statements of Income, in each period, summarize the financial
information of the Company’s investments in unconsolidated affiliates (in thousands):
Combined and Condensed Balance Sheets
Assets:
Rental property, net
Real estate under development
Investment in unconsolidated affiliates
Other assets
Total assets
Liabilities and partners’ equity:
Mortgage notes payable
Other liabilities
Partners’ equity
Total liabilities and partners’ equity
Company's share of accumulated equity
Basis differential
Deferred fees, net of portion related to the Company's interest
Amounts receivable by the Company
Investments in and advances to unconsolidated affiliates, net of Company's share of
distributions in excess of income and investments in unconsolidated affiliates
December 31,
2016
2015
$
$
$
$
$
$
$
$
$
$
576,505
18,884
6,853
75,254
677,496
407,344
30,117
240,035
677,496
191,049
61,827
3,268
2,193
302,976
35,743
6,853
47,083
392,655
262,130
21,945
108,580
392,655
106,442
11,620
5,342
36,629
$
258,337
$
160,033
Amounts receivable by the Company as of December 31, 2015 in the table above includes $35.9 million related to Broughton
Street portfolio's note receivable which was converted to preferred equity during 2016.
Combined and Condensed Statements of Income
Total revenues
Operating and other expenses
Interest expense
Equity in earnings (losses) of unconsolidated affiliates
Depreciation and amortization
Loss on debt extinguishment
(Loss) gain on disposition of properties
Net income attributable to unconsolidated affiliates
Company’s share of equity in
net income of unconsolidated affiliates
Basis differential adjustments
Company’s equity in earnings of
unconsolidated affiliates
Year Ended December 31,
2015
2014
2016
$
$
$
$
$
$
$
84,218
(25,724)
(16,300)
—
(35,432)
—
(1,340)
5,422
40,538
(1,089)
43,990
(13,721)
(9,178)
66,655
(12,154)
—
32,623
108,215
37,722
(392)
$
$
$
44,422
(17,069)
(9,363)
(328)
(10,967)
(187)
142,615
149,123
111,970
(392)
39,449
$
37,330
$
111,578
Equity in earnings of unconsolidated affiliates in the table above for the year ended December 31, 2015 of $66.7 million, of which
the Company's share was $5.9 million, is related to a sale of a property within the Mervyn's I and II portfolios.
F-25
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Other Assets, net and Accounts Payable and Other Liabilities
Other assets, net and accounts payable and other liabilities are comprised of the following for the periods presented:
December 31,
2016
2015
$
114,584
$
25,221
14,351
9,514
9,354
4,412
4,300
3,733
2,921
1,655
1,241
1,500
52,593
22,568
14,707
9,486
11,039
5,837
—
2,664
818
336
2,985
756
$
$
$
$
192,786
$
123,789
40,728
5,915
46,643
(21,422)
25,221
$
$
39,310
4,072
43,382
(20,814)
22,568
105,028
$
48,290
35,267
14,975
3,590
1,287
235
31,808
38,755
8,334
15,288
5,876
1,269
233
$
208,672
$
101,563
(in thousands)
Other assets, net:
Lease intangibles, net (Note 6)
Deferred charges, net
Prepaid expenses
Other receivables
Accrued interest receivable
Deposits
Due from seller
Deferred tax assets
Derivative financial instruments (Note 8)
Due from related parties
Corporate assets
Income taxes receivable
Deferred charges, net:
Deferred leasing and other costs
Deferred financing costs
Accumulated amortization
Deferred charges, net
Accounts payable and other liabilities:
Lease intangibles, net (Note 6)
Accounts payable and accrued expenses
Deferred income
Tenant security deposits, escrow and other
Derivative financial instruments (Note 8)
Income taxes payable (Note 14)
Other
F-26
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Lease Intangibles
Upon acquisitions of real estate accounted for as business combinations, the Company assesses the fair value of acquired assets
(including land, buildings and improvements, and identified intangibles such as above- and below-market leases, including below-
market options and acquired in-place leases) and assumed liabilities in accordance with ASC Topic 805. The lease intangibles are
amortized over the remaining terms of the respective leases, including option periods where applicable.
Intangible assets and liabilities are summarized as follows (in thousands):
December 31, 2016
December 31, 2015
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net Carrying
Amount
Amortizable
Intangible Assets
In-place lease
intangible assets
Above-market rent
Amortizable
Intangible Liabilities
Below-market rent
$
$
$
$
156,420
16,649
173,069
$
$
(47,827) $
108,593
(10,658)
5,991
(58,485) $
114,584
$
$
84,443
19,545
103,988
$
$
(37,996) $
(13,399)
(51,395) $
46,447
6,146
52,593
(137,032) $
(137,032) $
32,004
32,004
$
$
(105,028) $
(105,028) $
(65,607) $
(65,607) $
33,799
33,799
$
$
(31,808)
(31,808)
During the year ended December 31, 2016, the Company acquired in-place lease intangible assets of $62.9 million, above-market
rents of $0.7 million and below-market rents of $73.0 million with weighted-average useful lives of 7.2, 5.8 and 15.8 years,
respectively.
The scheduled amortization of acquired lease intangible assets and assumed liabilities as of December 31, 2016 is as follows (in
thousands):
2017
2018
2019
2020
2021
Thereafter
Total
Net Increase in
Lease Revenues
Increase to
Amortization
Net
$
9,253
$
21,433
$
9,415
9,157
8,117
6,974
56,121
17,966
12,416
10,413
9,066
37,299
$
99,037
$
108,593
$
(12,180)
(8,551)
(3,259)
(2,296)
(2,092)
18,822
(9,556)
F-27
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Debt
A summary of the Company's consolidated indebtedness is as follows (dollars in thousands):
Effective Interest Rate, December 31,
2016
2015
Maturity Date at
December 31, 2016
Carrying Value, December 31,
2016
2015
Mortgages Payable
Core Fixed Rate
3.88%-6.65%
3.50%-6.65%
July 2016 - April 2035
$
234,875
$
301,340
Core Variable Rate - Swapped (a)
1.71%-3.77%
1.75%-3.77%
Total Core Mortgages Payable
Fund II Fixed Rate
1.00%-5.80%
1.00%-5.80%
September 2022 - June
2026
October 2017 - May
2020
82,250
317,125
72,444
373,784
249,762
249,762
Fund II Variable Rate
LIBOR+0.62%-
LIBOR+2.50%
LIBOR+1.39%-
LIBOR+3.02%
August 2017 -
November 2021
Fund II Variable Rate - Swapped (a)
2.88%
2.88%
November 2021
Total Fund II Mortgages Payable
Fund III Variable Rate
Prime+0.50%-
LIBOR+4.65%
Prime+0.50%-
LIBOR+4.65%
March 2017 - December
2021
Fund IV Fixed Rate
3.4%-4.50%
4.5%
October 2025-June
2026
Fund IV Variable Rate
LIBOR+1.70%-
LIBOR+3.95%
LIBOR+1.70%-
LIBOR+3.00%
May 2017 - January
2021
Fund IV Variable Rate - Swapped (a)
1.78%
1.78%
May 2019
Total Fund IV Mortgages Payable
Net unamortized debt issuance costs
Unamortized premium
Total Mortgages Payable
Unsecured Notes Payable
Core Unsecured Term Loans
Core Variable Rate Unsecured
Term Loans - Swapped (a)
Total Core Unsecured Notes Payable
LIBOR+1.30%-
LIBOR+1.60%
LIBOR+1.30%-
LIBOR+1.60%
November 2019 -
December 2022
1.24%-3.77%
1.31%-3.77%
July 2018 - March 2025
Fund II Subscription Facility
LIBOR+2.75%
LIBOR+2.75%
October 2016
Fund IV Term Loan/Subscription Facility
LIBOR+1.65%-
LIBOR+2.75%
LIBOR+1.65%-
LIBOR+2.75%
February 2017-
November 2017
Net unamortized debt issuance costs
Total Unsecured Notes Payable
Unsecured Line of Credit
Core Unsecured Line of Credit
LIBOR+1.40%
LIBOR+1.40%
June 2020
Total Unsecured Line of Credit
Total Debt - Fixed and Effectively Fixed Rate
Total Debt - Variable Rate
Net unamortized debt issuance costs
Unamortized premium
Total Indebtedness
__________
142,750
19,779
412,291
83,467
10,503
233,139
14,509
258,151
(16,642)
1,336
111,500
19,984
381,246
164,280
1,120
123,920
14,904
139,944
(10,567)
1,364
$
$
$
$
$
$
1,055,728
$
1,050,051
51,194
$
841
248,806
300,000
—
134,636
(1,646)
149,159
150,000
12,500
126,410
(1,155)
432,990
$
287,755
— $
— $
20,800
20,800
860,486
$
645,185
(18,289)
1,336
552,222
816,740
(11,720)
1,364
$
1,488,718
$
1,358,606
(a) At December 31, 2016, the stated rates ranged from LIBOR + 1.08% to LIBOR +1.90% for Core Variable rate debt; LIBOR + 1.70% to LIBOR +1.70% for
Fund II Variable rate debt; LIBOR + 2.15% to LIBOR +2.15% for Fund IV rate debt; and LIBOR + 1.30% to LIBOR +1.60% for Core variable rate unsecured
notes.
F-28
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mortgages Payable
During 2016, the Company obtained or assumed 14 new mortgages totaling $252.9 million with a weighted-average interest rate
of 4.07% collateralized by 14 properties. During 2016, the Company repaid 15 mortgages in full aggregating $292.3 million with
a weighted-average interest rate of 4.61% and made scheduled principal payments of $6.5 million. At December 31, 2016 and
2015, the Company's mortgages were collateralized by 39 properties and the related tenant leases. Certain loans are cross-
collateralized and contain cross-default provisions. The loan agreements contain customary representations, covenants and events
of default. Certain loan agreements require the Company to comply with affirmative and negative covenants, including the
maintenance of debt service coverage and leverage ratios. A portion of the Company's variable-rate mortgage debt has been
effectively fixed through certain cash flow hedge transactions (Note 8).
One of the mortgage loans in our Core Portfolio amounting to $26.3 million is in default at December 31, 2016 and is collateralized
by a property, in which the Company holds a 22% controlling interest.
Unsecured Term Loans
At December 31, 2016 and 2015, the Company had a total of $9.9 million and $15.5 million, respectively, available under its
unsecured term loans. A portion of the Company's variable-rate term loan debt has been effectively fixed through certain cash flow
hedge transactions (Note 8). The Company completed the following transactions related to its unsecured term loans during the
year ended December 31, 2016:
• The Company repaid a $50.0 million term loan in June 2016, which bore interest at LIBOR+1.30%.
• The Company closed on a new $150.0 million unsecured term loan in June, 2016, which bears interest at LIBOR+1.30%
and matures on June 27, 2021.
• The Company closed on a new $50.0 million unsecured term loan in January 2016, which bears interest at LIBOR+1.30%
and matures on January 4, 2021.
• The Company borrowed $12.5 million on its Fund II credit facility. The outstanding balance under this facility was $25.5
million, and was repaid upon maturity in October, 2016.
• The Company borrowed $5.6 million on its Fund IV term loan bringing the outstanding balance under this facility to
$40.1 million as of December 31, 2016. At December 31, 2016, Fund IV was not in compliance with the liquidity covenant
on its term loan. Consequently, this loan is recourse to the Company until the condition is cured. Fund IV expects to cure
the covenant violation by repaying certain debt during the first quarter of 2017. During February 2017, the Company
exercised its option to extend the maturity date of this loan by six months to August, 2017.
• The Company drew an additional $2.6 million on its Fund IV subscription line. The outstanding balance under this facility
is $94.5 million as of December 31, 2016.
Unsecured Lines of Credit
At December 31, 2016 and 2015 the Company had a total of $203.0 million and $182.3 million, respectively available under its
unsecured line of credit. The Company completed the following transactions related to its unsecured line of credit during the year
ended December 31, 2016:
• The Company repaid the remaining $20.8 million of its revolving unsecured credit facility.
• The Company canceled the existing credit facility and entered into a new $150.0 million revolving unsecured credit
facility. The new facility bears interest at LIBOR plus 140 basis points and matures June 27, 2020 with a one-year extension
option. There is no outstanding balance as of December 31, 2016.
F-29
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Scheduled Debt Principal Payments
The scheduled principal repayments of the Company's consolidated indebtedness, as of December 31, 2016 are as follows (in
thousands):
2017
2018
2019
2020
2021
Thereafter
Unamortized fair market value of assumed debt
Net unamortized debt issuance costs
Total indebtedness
See Note 4 for information about liabilities of the Company's unconsolidated affiliates.
8. Financial Instruments and Fair Value Measurements
$
$
395,999
69,753
205,295
321,559
253,927
259,138
1,505,671
1,336
(18,289)
1,488,718
The fair value of an asset is defined as the exit price, which is the amount that would either be received when an asset is sold or
paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes
a three-tier fair value hierarchy based on the inputs used in measuring fair value. These tiers are: Level 1, for which quoted market
prices for identical instruments are available in active markets, such as money market funds, equity securities, and U.S. Treasury
securities; Level 2, for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument,
such as certain derivative instruments including interest rate caps and interest rate swaps; and Level 3, for financial instruments
or other assets/liabilities that do not fall into Level 1 or Level 2 and for which little or no market data exists, therefore requiring
us to develop our own assumptions.
Items Measured at Fair Value on a Recurring Basis
The methods and assumptions described below were used to estimate the fair value of each class of financial instrument. For
significant Level 3 items, we have also provided the unobservable inputs along with their weighted-average ranges.
Money Market Funds — The Company has money market funds, which are included in Cash and cash equivalents in the consolidated
financial statements, are comprised of government securities and/or U.S. Treasury bills. These funds were classified as Level 1
as we used quoted prices from active markets to determine their fair values.
Derivative Assets — Our derivative assets, which are included in Other assets, net in the consolidated financial statements, are
comprised of interest rate swaps. The interest rate swaps were measured at fair value using readily observable market inputs, such
as quotations on interest rates, and were classified as Level 2 as these instruments are custom, over-the-counter contracts with
various bank counterparties that are not traded in an active market. See "Derivative Financial Instruments," below.
Derivative Liabilities — Our derivative liabilities, which are included in Accounts payable and other liabilities in the consolidated
financial statements, are comprised of interest rate swaps. These derivative instruments were measured at fair value using readily
observable market inputs, such as quotations on interest rates, and were classified as Level 2 because they are custom, over-the-
counter contracts with various bank counterparties that are not traded in an active market. See "Derivative Financial Instruments,"
below.
We did not have any transfers into or out of Level 1, Level 2, and Level 3 measurements during either the years ended December 31,
2016 or 2015.
F-30
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring
basis (in thousands):
December 31, 2016
December 31, 2015
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Assets
Money Market Funds
$
20,001
$
— $
— $
Derivative financial instruments
Liabilities
Derivative financial instruments
—
—
2,921
3,590
—
—
4
—
—
$
— $
818
5,876
—
—
—
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value
hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level
input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Derivative Financial Instruments
The Company had the following interest rate swaps for the periods presented (in thousands):
Strike Rate
Fair Value at December 31,
Aggregate
Notional
Amount
Effective
Date
Maturity
Date
Low
High
Balance
Sheet
Location
2016
2015
Derivative Instrument
Core
Interest Rate Swaps
$ 140,651
Interest Rate Swaps
190,407
$ 331,058
Oct 2011 -
Mar 2015
Jul 2018 -
Mar 2025
Sep 2012 -
Jul 2016
Jul 2020 -
Jun 2026
1.38% — 3.77%
Other
Liabilities
1.24% — 3.77% Other Assets
Fund II
Interest Rate Swaps
Interest Rate Caps
$
$
Fund III
19,779 Oct 2014
Nov 2021
2.88% — 2.88%
Other
Liabilities
29,500 Apr 2013
Apr 2018
4% — 4% Other Assets
49,279
$
$
$
$
(3,218) $
(5,255)
2,609
815
(609) $
(4,440)
(228) $
—
(228) $
(385)
3
(382)
Interest Rate Caps
$
58,000 Dec 2016
Jan 2020
3% — 3% Other Assets
$
127
$
—
Fund IV
Interest Rate Swaps
$
14,509 May 2014 May 2019
1.78% — 1.78%
Other
Liabilities
Jul 2016 -
Nov 2016
Aug 2019 -
Dec 2019
3% — 3% Other Assets
Interest Rate Caps
108,900
$ 123,409
Total asset derivatives
Total liability derivatives
$
$
$
$
(144) $
185
41
2,921
$
$
(236)
—
(236)
818
(3,590) $
(5,876)
These derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on variable rate
mortgage debt (Note 7).
F-31
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages
economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its
debt funding and, from time to time, through the use of derivative financial instruments. The Company enters into derivative
financial instruments to manage exposures that result in the receipt or payment of future known and uncertain cash amounts, the
values of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences
in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments
principally related to the Company’s investments and borrowings.
The Company is exposed to credit risk in the event of non-performance by the counterparties to the Swaps if the derivative position
has a positive balance. The Company believes it mitigates its credit risk by entering into Swaps with major financial
institutions. The Company continually monitors and actively manages interest costs on its variable-rate debt portfolio and may
enter into additional interest rate swap positions or other derivative interest rate instruments based on market conditions. The
Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes.
The following table presents the location in the financial statements of the (losses) income recognized related to the Company's
cash flow hedges (in thousands):
Amount of loss related to the effective portion recognized
in other comprehensive income (loss)
Amount of loss related to the effective portion subsequently reclassified to earnings
Amount of gain (loss) related to the ineffective portion
and amount excluded from effectiveness testing
Credit Risk-Related Contingent Features
Year Ended December 31,
2016
2015
2014
$
646
$ 5,061
$ 9,061
—
—
—
—
—
—
The Company has agreements with each of its Swap counterparties that contain a provision whereby if the Company defaults on
certain of its unsecured indebtedness the Company could also be declared in default on its swaps, resulting in an acceleration of
payment under the swaps.
Other Financial Instruments
Our other financial instruments had the following carrying values and fair values as of the dates shown (dollars in thousands):
Notes Receivable (a)
Mortgage and Other Notes Payable, net (a)
Investment in non-traded equity securities
Unsecured notes payable, net (b)
Unsecured line of credit (c)
December 31, 2016
December 31, 2015
Level
Carrying
Amount
Estimated
Fair
Value
Carrying
Amount
Estimated
Fair
Value
3
3
3
2
2
$
276,163
$
272,052
$
147,188
$
147,188
1,055,728
1,077,926
1,050,051
1,072,473
802
432,990
—
25,194
435,779
—
411
287,755
20,800
25,194
288,964
20,881
(a) The Company determined the estimated fair value of these financial instruments using a discounted cash flow model
with rates that take into account the credit of the borrower or tenant, where applicable, and interest rate risk. The Company
also considered the value of the underlying collateral, taking into account the quality of the collateral, the credit quality
of the borrower, the time until maturity and the current market interest rate environment.
(b) The Company determined the estimated fair value of the unsecured notes payable using quoted market prices in an open
market with limited trading volume where available. In cases where there was no trading volume, the Company determined
the estimated fair value using a discounted cash flow model using a rate that reflects the average yield of similar market
participants.
F-32
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(c) The Company determined the estimated fair value of the unsecured line of credit using a discounted cash flow model
with rates that take into account the market-based credit spread and the Company's credit rating.
The Company's cash and cash equivalents, restricted cash, accounts receivable, accounts payable and certain financial instruments
included in other assets and other liabilities had fair values that approximated their carrying values at December 31, 2016 and
2015.
Items Measured at Fair Value on a Non-Recurring Basis (Including Impairment Charges)
During the year ended December 31, 2015, the Company determined that the value of one of the properties in its Brandywine
Portfolio was impaired and recorded an impairment loss of $5.0 million. The Company estimated the fair value by using discounted
future cash flows and applying a market-specific capitalization rate to the property's net operating income. The inputs used to
determine this fair value are classified within Level 3 of the fair value hierarchy.
9. Commitments and Contingencies
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 the amounts involved, the Company’s management and counsel are of the opinion that, when such litigation
is resolved, the Company’s resulting liability, if any, will not have a significant effect on the Company’s consolidated financial
position, results of operations, or liquidity. The Company's policy is to accrue legal 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 materially violated the Company's employee handbook. The Company determined that the behavior fell
within the definition of "cause" in his severance agreement with us and therefore did not pay him anything thereunder. The Former
Employee brought a lawsuit against the Company 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 the Company,
as defendant, and against plaintiff, the Former Employee, finding that his conduct in fact and law, constituted "cause" under his
severance agreement. The Court rendered two decisions, one granting the Company’s motion for summary judgment and a second
denying the Former Employee's motion to dismiss the Company’s answer as an abuse of judicial discretion. The Former Employee
appealed the latter decision, but the decision of the Court was affirmed by the appellate court.
Commitments and Guaranties
In conjunction with the development and expansion of various properties, the Company has entered into agreements with general
contractors for the construction or development of properties aggregating approximately $85.4 million as of December 31, 2016.
At December 31, 2016, the Company had letters of credit outstanding of $2.5 million. The Company has not recorded any obligation
associated with these letters of credit. The majority of the letters of credit are collateral for existing indebtedness and other
obligations of the Company.
In connection with certain of the Company’s unconsolidated joint ventures, the Company agreed to fund amounts due to the joint
ventures' lenders, under certain circumstances, if such amounts are not paid by the joint venture based on the Company’s pro rata
share of such amount, aggregating $165.7 million at December 31, 2016.
10. Shareholders’ Equity, Noncontrolling Interests and Other Comprehensive Income
Common Shares
The Company completed the following transactions in its common shares during the year ended December 31, 2016:
• The Company issued 4,500,000 Common Shares under its at-the-market ("ATM") equity programs, generating gross
proceeds of $157.6 million and net proceeds of $155.7 million. The Company has established a new ATM equity program,
effective July 2016, with an additional aggregate offering amount of up to $250.0 million of gross proceeds from the sale
of Common Shares, replacing its $200.0 million program that was launched in 2014. As of December 31, 2016, there
was $218.0 million remaining under this $250.0 million program.
• The Company entered into a forward sale agreement to issue 3,600,000 Common Shares for for gross proceeds of $126.8
million and net proceeds of $124.5 million. As of December 31, 2016, these shares have been physically settled.
F-33
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• The Company issued 4,830,000 Common Shares in a public offering, generating gross proceeds of $175.2 million and
net proceeds of $172.1 million.
• The Company withheld 3,152 Restricted Shares to pay the employees’ statutory minimum income taxes due on the value
of the portion of their Restricted Shares that vested. During 2016, the Company recognized accrued Common Share and
Common OP Unit-based compensation totaling $10.9 million in connection with the vesting of Restricted Shares and
Units (Note 13).
The Company completed the following transactions in its common shares during the year ended December 31, 2015:
• The Company withheld 2,481 Restricted Shares to pay the employees’ statutory minimum income taxes due on the value
of the portion of their Restricted Shares that vested. During 2015, the Company recognized accrued Common Share and
Common OP Unit-based compensation totaling $6.8 million in connection with the vesting of Restricted Shares and Units
(Note 13).
• The Company issued approximately 2,000,000 Common Shares from the ATM program generating net proceeds of
approximately $64.4 million.
The Company completed the following transactions in its common shares during the year ended December 31, 2014:
• The Company issued approximately 4,700,000 Common Shares from the ATM program generating net proceeds of
approximately $126.8 million and completed two public share offerings aggregating approximately 7,600,000 Common
Shares generating net proceeds of approximately $230.7 million.
Share Repurchases
The Company has a share repurchase program that authorizes management, at its discretion, to repurchase up to $20.0 million of
its outstanding Common Shares. The program may be discontinued or extended at any time. There were no Common Shares
repurchased by the Company during the years ended December 31, 2016 or 2015. Under this program the Company has repurchased
2.1 million Common Shares, none of which were repurchased after December 2001. As of December 31, 2016, management may
repurchase up to approximately $7.5 million of our outstanding Common Shares under this program.
Dividends and Distributions
On November 8, 2016, the Board of Trustees declared an increase of $0.01 to the regular quarterly cash dividend of $0.25 to $0.26
per Common Share, which was paid on January 13, 2017 to holders of record as of December 30, 2016. In addition, on November
8, 2016, the Board of Trustees declared a special cash dividend of $0.15 per Common Share with the same record and payment
date as the regular quarterly dividend. The special dividend is a result of the taxable capital gains for 2016 arising from property
dispositions within the Funds. See Note 14 for the characterization of the Company's distributions.
F-34
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accumulated Other Comprehensive Income
The following table sets forth the activity in accumulated other comprehensive income for the three years ended December 31,
2016 (in thousands):
Gains or
Losses on
Derivative
Instruments
$
1,132
(9,061)
3,776
(5,285)
148
(4,005)
(5,061)
5,524
463
(921)
(4,463)
(646)
4,576
3,930
(265)
(798)
Balance at January 1, 2014
Other comprehensive loss before reclassifications
Reclassification of realized interest on swap agreements
Net current period other comprehensive loss
Net current period other comprehensive loss attributable to noncontrolling interests
Balance at December 31, 2014
Other comprehensive loss before reclassifications
Reclassification of realized interest on swap agreements
Net current period other comprehensive income
Net current period other comprehensive income attributable to noncontrolling interests
Balance at December 31, 2015
Other comprehensive loss before reclassifications
Reclassification of realized interest on swap agreements
Net current period other comprehensive income
Net current period other comprehensive income attributable to noncontrolling interests
Balance at December 31, 2016
$
F-35
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Noncontrolling Interests
The following table summarizes the change in the noncontrolling interests for the periods presented (in thousands):
Noncontrolling
Interests in
Operating
Partnership (a)
Noncontrolling
Interests in
Partially-
Owned
Affiliates (b)
Total
$
368,404
$
Balance at December 31, 2013
$
Distributions declared of $1.23 per Common OP Unit
Net income for the period January 1 through December 31, 2014
Conversion of 136,128 Common OP Units to Common Shares
by limited partners of the Operating Partnership
Issuance of Common OP Units to acquire real estate
Other comprehensive income - unrealized loss
on valuation of swap agreements
Reclassification of realized interest expense on swap agreements
Noncontrolling interest contributions
Noncontrolling interest distributions and other reductions
Employee Long-term Incentive Plan Unit Awards
Balance at December 31, 2014
Distributions declared of $1.22 per Common OP Unit
Net income for the period January 1 through December 31, 2015
Conversion of 100,620 Common OP Units to Common Shares
by limited partners of the Operating Partnership
Acquisition of noncontrolling interests
Other comprehensive income - unrealized loss
on valuation of swap agreements
Reclassification of realized interest expense on swap agreements
Noncontrolling interest contributions
Noncontrolling interest distributions and other reductions
Employee Long-term Incentive Plan Unit Awards
Balance at December 31, 2015
Distributions declared of $1.16 per Common OP Unit
Net income for the period January 1 through December 31, 2016
Conversion of 351,250 Common OP Units to Common Shares
by limited partners of the Operating Partnership
Change in control of previously consolidated investment (Note 4)
Acquisition of noncontrolling interests (c)
Issuance of Common and Preferred OP Units to acquire real estate
Other comprehensive income - unrealized loss
on valuation of swap agreements
Reclassification of realized interest expense on swap agreements
Noncontrolling interest contributions
Noncontrolling interest distributions and other reductions
Employee Long-term Incentive Plan Unit Awards
Rebalancing adjustment (Note 1)
Balance at December 31, 2016
F-36
48,948
(5,085)
3,204
(3,181)
44,051
(345)
115
—
—
6,528
94,235
(5,983)
3,836
(2,451)
—
(117)
97
—
—
6,723
96,340
(6,753)
5,002
(7,892)
(75,713)
—
31,429
(43)
223
—
—
12,768
(35,652)
19,709
$
$
—
77,878
—
—
(902)
984
57,969
(218,152)
—
286,181
—
80,426
—
(3,561)
(897)
1,838
35,489
(74,950)
—
324,526
—
56,814
—
—
(25,925)
—
(288)
373
295,108
(80,769)
—
—
569,839
$
417,352
(5,085)
81,082
(3,181)
44,051
(1,247)
1,099
57,969
(218,152)
6,528
380,416
(5,983)
84,262
(2,451)
(3,561)
(1,014)
1,935
35,489
(74,950)
6,723
420,866
(6,753)
61,816
(7,892)
(75,713)
(25,925)
31,429
(331)
596
295,108
(80,769)
12,768
(35,652)
589,548
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
(a) Noncontrolling interests in the Operating Partnership are comprised of (i) the limited partners’ 3,365,668 and 2,931,198
Common OP Units at December 31, 2016 and 2015, respectively; (ii) 188 Series A Preferred OP Units at December 31,
2016 and 2015; (iii) 141,593 Series C Preferred OP Units at December 31, 2016; and (iv) 1,996,388 and 1,922,623 LTIP
units as of December 31, 2016 and 2015, respectively, as discussed in Share Incentive Plan (Note 13). Distributions
declared for Preferred OP Units are reflected in net income in the table above.
(b) Noncontrolling interests in partially-owned affiliates comprise third-party interests in Fund I, II, III, IV and V, and Mervyns
I and II, and six other subsidiaries.
(c) During 2016, the Company acquired an additional 8.3% interest in Fund II from a limited partner for $18.4 million, giving
the Company an aggregate 28.33% interest. Amount in the table above represents the book value of this transaction.
Preferred OP Units
The Series A Preferred OP Units were issued in 1999 in connection with the acquisition of a property, have a stated value of $1,000
per unit, and are entitled to a preferred quarterly distribution of the greater of (i) $22.50 (9% annually) per Series A Preferred OP
Unit or (ii) the quarterly distribution attributable to a Series A Preferred OP Unit if such unit was converted into a Common OP
Unit. Through December 31, 2016, 1,392 Series A Preferred OP Units were converted into 185,600 Common OP Units and then
into Common Shares. The 188 remaining Series A Preferred OP Units are currently convertible into Common OP Units based on
the stated value divided by $7.50. Either the Company or the holders can currently call for the conversion of the Series A Preferred
OP Units at the lesser of $7.50 or the market price of the Common Shares as of the conversion date.
During 2016, the Operating Partnership issued 442,478 Common OP Units and 141,593 Series C Preferred OP Units to a third
party to acquire Gotham Plaza (Note 4). The Series C Preferred OP Units have a value of $100.00 per unit and are entitled to a
preferred quarterly distribution of $0.9375 per unit and are convertible into Common OP Units at a rate based on the share price
at the time of conversion. If the share price is below $28.80 on the conversion date, each Series C Preferred OP Unit will be
convertible into 3.4722 Common OP Units. If the share price is between $28.80 and $35.20 on the conversion date, each Series
C Preferred OP Units will be convertible a number of Common OP Units equal to $100.00 divided by the closing share price. If
the share price is above $35.20 on the conversion date, each Series C Preferred OP Units will be convertible into 2.8409 Common
OP Units. The Series C Preferred OP Units have a mandatory conversion date of December 31, 2025, at which time all units that
have not been converted will automatically be converted into Common OP Units based on the same calculations.
During 2015, the Operating Partnership issued approximately 1,600,000 OP units to a third party to acquire real estate.
11. Leases
Operating Leases
The Company is engaged in the operation of shopping centers and other retail properties that are either owned or, with respect to
certain shopping centers, operated under long-term ground leases that expire at various dates through June 20, 2066, with renewal
options. Space in the shopping centers is leased to tenants pursuant to agreements that provide for terms ranging generally from
one month to ninety nine years and generally provide for additional rents based on certain operating expenses as well as tenants’
sales volumes.
The Company leases land at six of its shopping centers, which are accounted for as operating leases and generally provide the
Company with renewal options. Ground rent expense was $2.5 million, $1.7 million, and $1.8 million (including capitalized
ground rent at properties under development of $0.9 million, $0.9 million and $0.8 million) for the years ended December 31,
2016, 2015 and 2014, respectively. The leases terminate at various dates between 2020 and 2066. These leases provide the Company
with options to renew for additional terms aggregating from 25 to 71 years. The Company also leases space for its corporate office.
Office rent expense under this lease was $0.9 million, $1.4 million and $1.5 million for the years ended December 31, 2016, 2015
and 2014, respectively.
F-37
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capital Leases
During 2016, the Company entered into a 49-year master lease at 991 Madison Avenue, which is accounted for as a capital lease.
During the year ended December 31, 2016, lease payments totaling $7.8 million were made under this lease. The lease was initially
valued at $76,628, which represents the total discounted payments to be made under the lease. Properties under capital leases are
discussed in Note 2.
Lease Obligations
The scheduled future minimum rental revenues from rental properties under the terms of all non-cancelable tenant leases, assuming
no new or renegotiated leases or option extensions for such premises and the scheduled minimum rental payments under the terms
of all non-cancelable operating and capital leases in which the Company is the lessee, principally for office space and ground
leases, as of December 31, 2016 are summarized as follows (in thousands):
2017
2018
2019
2020
2021
Thereafter
Total
Minimum
Rental
Revenues
Minimum
Rental
Payments
$
$
152,464
147,025
135,796
122,071
109,383
591,541
$
1,258,280
$
3,737
3,756
3,776
3,669
3,744
185,621
204,303
A ground lease expiring during 2078 provides the Company with an option to purchase the underlying land during 2031. If the
Company does not exercise the option, the rents that will be due are based on future values and as such are not determinable at
this time. Accordingly, the above table does not include rents for this lease beyond 2031.
During the years ended December 31, 2016, 2015 and 2014, no single tenant collectively comprised more than 10% of the
Company’s total revenues.
12. Segment Reporting
The Company has three reportable segments: Core Portfolio, Funds and Structured Financing. The Company's Core Portfolio
consists primarily of high-quality retail properties located primarily in high-barrier-to-entry, densely-populated metropolitan areas
with a long-term investment horizon. The Company's Funds hold primarily retail real estate in which the Company co-invests
with high-quality institutional investors. The Company's Structured Financing segment consists of earnings and expenses related
to notes and mortgages receivable which are held within the Core Portfolio or the Funds (Note 3). Fees earned by the Company
as the general partner or managing member of the Funds are eliminated in the Company’s consolidated financial statements and
are not presented in the Company's segments. During 2016, the Company revised how it allocates general and administrative and
income tax expenses among its segments to reflect all such expenses as unallocated corporate expenses. The presentation of the
years ended 2015 and 2014 has been revised to reflect this change.
F-38
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables set forth certain segment information for the Company (in thousands):
(dollars in thousands)
Revenues
As of or for the Year Ended December 31, 2016
Core
Portfolio
Funds
Structured
Financing
Unallocated
Total
$
150,211
$
39,728
$
— $
— $
189,939
Property operating expenses, other operating and real estate taxes
(39,598)
(17,793)
General and administrative expenses
Depreciation and amortization
Operating income
Equity in earnings of unconsolidated affiliates
Interest income
Interest and other finance expense
Gain on disposition of properties
Income tax benefit
Net income
Net income attributable to noncontrolling interests
Net income attributable to Acadia
Real estate at cost
Total assets
Acquisition of real estate
Development and property improvement costs
—
—
(54,582)
(15,429)
56,031
3,774
—
(27,435)
—
—
32,370
(3,411)
28,959
1,982,763
2,271,620
323,880
13,434
$
$
$
$
$
6,506
35,675
—
(7,210)
81,965
—
116,936
(58,405)
58,531
1,399,237
1,448,177
171,764
136,000
$
$
$
$
$
$
$
$
$
$
—
—
—
—
—
25,829
—
—
—
25,829
—
—
(40,648)
—
(40,648)
—
—
—
—
105
(40,543)
—
(57,391)
(40,648)
(70,011)
21,889
39,449
25,829
(34,645)
81,965
105
134,592
(61,816)
25,829
$
(40,543) $
72,776
— $
— $
3,382,000
276,163
$
— $
3,995,960
— $
— $
— $
— $
495,644
149,434
(dollars in thousands)
Revenues
As of or for the Year Ended December 31, 2015
Core
Portfolio
Funds
Structured
Financing
Unallocated
Total
$
150,015
$
49,048
$
— $
— $
199,063
Property operating expenses, other operating and real estate taxes
(37,259)
(21,223)
General and administrative expenses
Depreciation and amortization
Impairment of asset
Operating income
Equity in (losses) earnings of unconsolidated affiliates
Interest income
Other
Interest and other finance expense
Gain on disposition of properties
Income tax provision
Net income
Net income attributable to noncontrolling interests
Net income attributable to Acadia
Real estate at cost
Total assets
Acquisition of real estate
Development and property improvement costs
—
(46,223)
(5,000)
61,533
1,169
—
—
(27,945)
—
—
34,757
(140)
34,617
1,572,681
1,662,092
181,884
16,505
$
$
$
$
$
—
(14,528)
—
13,297
36,161
—
—
(9,352)
89,063
—
129,169
(84,122)
45,047
1,163,602
1,223,039
156,816
147,810
$
$
$
$
$
F-39
—
—
—
—
—
—
16,603
1,596
—
—
—
18,199
—
—
(30,368)
—
—
(30,368)
—
—
—
—
—
(1,787)
(32,155)
—
(58,482)
(30,368)
(60,751)
(5,000)
44,462
37,330
16,603
1,596
(37,297)
89,063
(1,787)
149,970
(84,262)
$
$
$
$
$
18,199
$
(32,155) $
65,708
— $
— $
2,736,283
147,188
$
— $
3,032,319
— $
— $
— $
— $
338,700
164,315
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands)
Revenues
As of or for the Year Ended December 31, 2014
Core
Portfolio
Funds
Structured
Financing
Unallocated
Total
$
125,022
$
54,659
$
— $
— $
179,681
Property operating expenses, other operating and real estate taxes
(33,097)
(18,574)
General and administrative expenses
Depreciation and amortization
Operating income
Equity in (losses) earnings of unconsolidated affiliates
Gain on disposition of properties
Interest income
Other
Interest and other finance expense
Income tax provision
Income from continuing operations
Income from discontinued operations
Net income
Net income attributable to noncontrolling interests
Net income attributable to Acadia
Real estate at cost
Total assets
Acquisition of real estate
Development and property improvement costs
13. Share Incentive and Other Compensation
Share Incentive Plan
—
(35,875)
56,050
(77)
12,577
—
—
—
(13,770)
22,315
111,655
561
—
—
(27,024)
(12,402)
—
41,526
—
41,526
(3,222)
38,304
1,366,017
1,613,290
206,203
5,432
$
$
$
$
$
—
122,129
1,222
123,351
(77,860)
45,491
842,578
1,005,145
50,250
134,686
$
$
$
$
$
$
$
$
$
$
—
—
—
—
—
—
12,607
2,724
—
—
15,331
—
15,331
—
—
(27,433)
—
(27,433)
—
—
—
—
—
(629)
(28,062)
—
(28,062)
—
(51,671)
(27,433)
(49,645)
50,932
111,578
13,138
12,607
2,724
(39,426)
(629)
150,924
1,222
152,146
(81,082)
15,331
$
(28,062) $
71,064
— $
— $
2,208,595
102,286
$
— $
2,720,721
— $
— $
— $
— $
256,453
140,118
At the 2016 annual shareholders' meeting, the shareholders' approved the Second Amended and Restated 2006 Incentive Plan (the
"Second Amended 2006 Plan"). This plan replaced all previous share incentive plans and increased the authorization to issue
options, Restricted Shares and LTIP Units (collectively "Awards") available to officers and employees by 1,600,000 shares, for a
total of 3,700,000 shares available to be issued.
Restricted Shares and LTIP Units
During 2016, the Company issued 319,244 LTIP Units and 11,092 Restricted Share Units to employees of the Company pursuant
to the Share Incentive Plan. These awards were measured at their fair value on the grant date, which was established as the market
price of the Company's Common Shares as of the close of trading on the day preceding the grant date. The total value of the above
Restricted Share Units and LTIP Units as of the grant date was $10.1 million, of which $1.9 million was recognized as compensation
expense in 2015, and $8.2 million will be recognized as compensation expense over the vesting period. Additionally, during the
quarter ended September 30, 2016, in connection with the retirement of two executives, an additional 29,418 LTIP Units were
issued. The value of these LTIP units was $1.1 million and was recognized as compensation expense during 2016. Also in connection
with these retirements, the Company recognized $1.8 million as compensation expense relating to the acceleration of LTIP Units
granted prior to 2016. Total long-term incentive compensation expense, including the expense related to the above mentioned
plans, was $10.9 million, $6.8 million and $6.2 million for the years ended December 31, 2016, 2015 and 2014, respectively and
is recorded in General and Administrative on the Consolidated Statements of Income.
In addition, members of the Board of Trustees (the "Board") have been issued units under the Share Incentive Plan. During 2016,
the Company issued 13,491 Restricted Shares and 10,822 LTIP Units to Trustees of the Company in connection with Trustee fees.
Vesting with respect to 4,674 of the Restricted Shares and 5,532 of the LTIP Units will be on the first anniversary of the date of
issuance and 8,817 of the Restricted Shares and 5,290 of the LTIP Units vest over three years with 33% vesting on each of the
next three anniversaries of the issuance date. The Restricted Shares do not carry voting rights or other rights of Common Shares
until vesting and may not be transferred, assigned or pledged until the recipients have a vested non-forfeitable right to such shares.
Dividends are not paid currently on unvested Restricted Shares, but are paid cumulatively from the issuance date through the
F-40
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
applicable vesting date of such Restricted Shares. Total trustee fee expense, included the expense related to the above-mentioned
plans, was $1.1 million and $0.9 million during 2016 and 2015, respectively.
In 2009, the Company adopted the Long Term Investment Alignment Program (the "Program") pursuant to which the Company
may grant awards to employees, entitling them to receive up to 25% of any potential future payments of Promote to the Operating
Partnership from Funds III and IV. The Company has awarded units to employees representing 25% of the potential Promote
payments from Fund III to the Operating Partnership and 9.3% of the potential Promote payments from Fund IV to the Operating
Partnership. Payments to senior executives under the Program require further Board approval at the time any potential payments
are due pursuant to these grants. Compensation relating to these awards will be recognized in each reporting period in which Board
approval is granted.
As payments to other employees are not subject to further Board approval, compensation relating to these awards will be recorded
based on the estimated fair value at each reporting period in accordance with ASC Topic 718, "Compensation– Stock Compensation."
During 2016, compensation expense of $5.0 million was recognized related to the Program in connection with Fund III.
The awards in connection with Fund IV were determined to have no intrinsic value as of December 31, 2016.
A summary of the status of the Company’s unvested Restricted Shares and LTIP Units is presented below:
Unvested Restricted Shares
and LTIP Units
Common
Restricted
Shares
Weighted
Grant-
Date
Fair Value LTIP Units
Weighted
Grant-
Date
Fair Value
Unvested at January 1, 2014
63,737
$
Granted
Vested
Forfeited
Unvested at December 31, 2014
Granted
Vested
Forfeited
Unvested at December 31, 2015
Granted
Vested
Forfeited
Unvested at December 31, 2016
28,563
(34,598)
(2,684)
55,018
22,819
(24,744)
(3,194)
49,899
24,583
(24,886)
(189)
49,407
23.34
27.18
23.40
23.54
25.90
32.78
25.44
26.25
25.90
33.35
29.17
35.37
27.92
884,334
$
441,946
(263,556)
(800)
1,061,924
258,464
(292,544)
(7,723)
1,020,121
359,484
(522,680)
(48)
856,877
21.62
26.24
20.23
24.66
23.92
34.00
22.82
25.90
23.92
34.40
26.08
35.37
26.99
The weighted-average fair value for Restricted Shares and LTIP Units granted for the years ended December 31, 2016, 2015 and
2014 were $34.50, $33.90 and $26.30, respectively. As of December 31, 2016, there was $15.5 million of total unrecognized
compensation cost related to unvested share-based compensation arrangements granted under share incentive plans. That cost is
expected to be recognized over a weighted-average period of 1.9 years. The total fair value of Restricted Shares that vested during
the years ended December 31, 2016, 2015 and 2014 was $0.7 million, $0.6 million and $0.8 million, respectively. The total fair
value of LTIP Units that vested during the years ended December 31, 2016, 2015 and 2014 was $13.6 million, $6.7 million and
$5.3 million, respectively.
F-41
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Options
A summary of option activity under all option arrangements is presented below (dollars in thousands except exercise prices):
Options
Outstanding and exercisable at January 1, 2014
Granted
Exercised
Forfeited or Expired
Outstanding and exercisable at December 31, 2014
Granted
Exercised
Forfeited or Expired
Outstanding and exercisable at December 31, 2015
Granted
Exercised
Forfeited or Expired
Outstanding and exercisable at December 31, 2016
$
Weighted-
Average
Exercise Price
19.28
$
—
17.68
—
20.93
—
20.76
22.40
20.93
—
22.40
20.65
—
$
Shares
113,086
—
(57,739)
—
55,347
—
(49,098)
(3,000)
3,249
—
(3,000)
(249)
— $
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
$
$
3.5
—
—
—
1.1
—
—
—
0.3
—
—
—
— $
628
—
828
—
614
—
608
—
35
—
—
—
—
The total intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014 was less than $0.1 million,
$0.6 million and $0.8 million, respectively. At December 31, 2016 there were no outstanding options and there was no stock-based
compensation expense related to options during the periods presented.
Employee Share Purchase Plan
The Acadia Realty Trust Employee Share Purchase Plan (the "Purchase Plan"), allows eligible employees of the Company to
purchase Common Shares through payroll deductions. The Purchase Plan provides for employees to purchase Common Shares
on a quarterly basis at a 15% discount to the closing price of the Company’s Common Shares on either the first day or the last day
of the quarter, whichever is lower. 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 of the Common Shares with
respect to the applicable quarter. During the years ended December 31, 2016, 2015 and 2014, a total of 3,491, 3,761 and 4,668
Common Shares, respectively, were purchased by employees under the Purchase Plan. Associated compensation expense was
insignificant for each of the years ended December 31, 2016, 2015 and 2014.
Deferred Share Plan
During May of 2006, the Company adopted a Trustee Deferral and Distribution Election ("Trustee Deferral Plan"), under which
the participating Trustees have deferred compensation of $0.1 million for each of the three years ended December 31, 2016, 2015
and 2014.
Employee 401(k) Plan
The Company maintains a 401(k) plan for employees under which the Company currently matches 50% of a plan participant’s
contribution up to 6% of the employee’s annual salary. A plan participant may contribute up to a maximum of 15% of their
compensation, up to $18,000, for the year ended December 31, 2016. The Company contributed $0.3 million for each of the years
ended December 31, 2016, 2015 and 2014.
F-42
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Federal Income Taxes
The Company has elected to qualify as a REIT in accordance with Sections 856 through 860 of 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 operational
requirements, including a requirement that it currently distribute at least 90% of its annual REIT taxable income to its shareholders.
As a REIT, the Company generally will not be subject to corporate Federal income tax, provided that distributions to its shareholders
equal at least the amount of its REIT taxable income as defined under the Code. As the Company distributed sufficient taxable
income for the years ended December 31, 2016, 2015 and 2014, no U.S. Federal income or excise taxes were incurred. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to Federal income taxes at the regular corporate rates
(including any applicable alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable years.
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 Federal income and excise taxes on any undistributed taxable income. In addition, taxable income from non-
REIT activities managed through the Company’s TRS's is subject to Federal, state and local income taxes. For taxable years
beginning after 2017, no more than 20% of the value of our total assets may consist of the securities of one or more taxable REIT
subsidiaries.
In the normal course of business, the Company or one or more of its subsidiaries is subject to examination by Federal, state and
local jurisdictions as well as certain jurisdictions outside the United States, in which it operates, where applicable. The Company
expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense. For the three years
ended December 31, 2016, the Company recognized no material adjustments regarding its tax accounting treatment for uncertain
tax provisions. As of December 31, 2016, the tax years that remain subject to examination by the major tax jurisdictions under
applicable statutes of limitations are generally the year 2013 and forward.
Reconciliation of Net Income to Taxable Income
Reconciliation of GAAP net income attributable to Acadia to taxable income is as follows:
(dollars in thousands)
Year Ended December 31,
2016
2015
2014
Net income attributable to Acadia
$
72,776
$
65,708
$
71,064
Deferred cancellation of indebtedness income
Deferred rental and other income (a)
Book/tax difference - depreciation and amortization (a)
Straight-line rent and above- and below-market rent adjustments (a)
Book/tax differences - equity-based compensation
Joint venture equity in earnings, net (a)
Impairment charges and reserves
Acquisition costs (a)
Gains
Book/tax differences - miscellaneous
Taxable income
Distributions declared
__________
2,050
1,610
15,189
(7,882)
10,307
(2,011)
769
5,116
—
(4,924)
93,000
91,053
$
$
2,050
82
9,983
(8,041)
5,833
5,776
(714)
1,190
(760)
2,573
$
$
83,680
84,683
$
$
2,050
2,120
7,337
(4,917)
4,540
(105)
3,735
4,505
(11,663)
(6,041)
72,625
77,194
(a) Adjustments from certain subsidiaries and affiliates, which are consolidated for financial reporting but not for tax reporting,
are included in the reconciliation item "Joint venture equity in earnings, net."
F-43
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Characterization of Distributions
The Company has determined that the cash distributed to the shareholders for the periods presented is characterized as follows
for Federal income tax purposes:
2016
Year Ended December 31,
2015
2014
Per Share
%
Per Share
%
Per Share
%
$
$
0.77
—
0.39
1.16
66% $
—%
34%
0.83
—
0.39
68% $
—%
32%
0.85
—
0.38
69%
—%
31%
100% $
1.22
100% $
1.23
100%
Ordinary income
Qualified dividend
Capital gain
Total
Taxable REIT Subsidiaries
Income taxes have been provided for using the liability method as required by ASC Topic 740, "Income Taxes." The Company’s
TRS income and provision for income taxes associated with the TRS for the periods presented are summarized as follows (in
thousands):
TRS (loss) income before income taxes
Benefit (provision) for income taxes:
Federal
State and local
TRS net (loss) income before noncontrolling interests
Noncontrolling interests
TRS net (loss) income
Year Ended December 31,
2015
2014
2016
$
(1,583)
$
1,008
$
(36)
378
97
(1,108)
(9)
(1,117)
$
$
(526)
(134)
348
(208)
140
$
(377)
(97)
(510)
(508)
(1,018)
The income tax provision for the Company differs from the amount computed by applying the statutory Federal income tax rate
to income before income taxes as follows. Amounts are not adjusted for temporary book/tax differences. (dollars in thousands):
Federal tax (benefit) provision at statutory tax rate
TRS state and local taxes, net of Federal benefit
Tax effect of:
Permanent differences, net
Prior year under-accrual, net
Other
REIT state and local income and franchise taxes
Total (benefit) provision for income taxes
Year Ended December 31,
2015
2014
2016
$
$
$
(538)
(84)
1,663
—
(1,516)
370
(105)
$
343
53
396
938
(131)
188
1,787
$
$
(12)
(2)
446
1
41
155
629
F-44
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. Earnings Per Common Share
Basic earnings per Common Share is computed by dividing net income attributable to Common Shareholders by the weighted
average Common Shares outstanding. At December 31, 2016, the Company has unvested LTIP Units which provide for non-
forfeitable rights to dividend equivalent payments. Accordingly, these unvested LTIP Units are considered participating securities
and are included in the computation of basic earnings per Common Share 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 the effects of restricted share unit ("Restricted Share Units") and share option awards issued under the
Company’s Share Incentive Plans (Note 13). The effect of the assumed conversion of 188 Series A Preferred OP Units into 25,067
Common Shares would be anti-dilutive and therefore is not included in the computation of diluted earnings per share for the years
ended December 2016, 2015 and 2014. The effect of the assumed conversion of 141,593 Series C Preferred OP Units into 407,845
Common Shares, would be anti-dilutive and therefore is not included in the computation of diluted earnings per share for the year
ended December 2016.
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 for Common Shares on a one-for-one basis. The income allocable to such units is allocated on this same
basis and reflected as noncontrolling interests in the accompanying consolidated financial statements. As such, the assumed
conversion of these units would have no net impact on the determination of diluted earnings per share.
(shares and dollars in thousands, except per share amounts)
Numerator:
Income from continuing operations
Less: net income attributable to participating securities
Income from continuing operations net of income
attributable to participating securities
Denominator:
Weighted average shares for basic earnings per share
Effect of dilutive securities:
Employee share options
Denominator for diluted earnings per share
Basic earnings per Common Share from
continuing operations attributable to Acadia
Diluted earnings per Common Share from
continuing operations attributable to Acadia
Year Ended December 31,
2016
2015
2014
72,776
(793)
71,983
$
$
65,708
(927)
64,781
$
$
70,865
(1,152)
69,713
76,231
68,851
59,402
13
76,244
19
68,870
0.94
0.94
$
$
0.94
0.94
$
$
24
59,426
1.18
1.18
$
$
$
$
F-45
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. Summary of Quarterly Financial Information (unaudited)
The quarterly results of operations of the Company for the years ended December 31, 2016 and 2015 are as follows (in thousands,
except per share amounts):
Revenues
Net income
Net (income) loss attributable to
noncontrolling interests
Net income attributable to Acadia
Earnings per share attributable to Acadia:
Basic
Diluted
Weighted average number of shares:
Basic
Diluted
March 31,
2016
Three Months Ended (a, b, c, d)
September 30,
June 30,
2016
2016
December 31,
2016
$
48,045
73,875
$
43,918
26,155
$
43,855
326
(44,950)
28,925
(8,237)
17,918
5,786
6,112
54,121
34,236
(14,415)
19,821
$
0.40
0.40
$
0.24
0.24
$
0.08
0.08
0.24
0.24
$
$
70,756
71,215
72,896
72,896
78,449
78,624
82,728
82,728
Cash dividends declared per Common Share
$
0.25
$
0.25
$
0.25
$
0.41
__________
(a) The three months ended March 31, 2016 includes Fund III's $65.4 million gain on sale of its 65% consolidated interest
in Cortlandt Town Center of which $49.4 million was attributable to noncontrolling interests (Note 2).
(b) The three months ended June 30, 2016 includes a $16.6 million gain on sale of Fund III's consolidated Heritage Shops
property of which $12.5 million was attributable to noncontrolling interests (Note 2).
(c) The three months ended June 30, 2016, September 30, 2016 and December 31, 2016 reflect the impact of the de-
consolidation of the Company's investment in the Brandywine portfolio, which was effective May 1, 2016 (Note 4).
(d) The three months ended December 31, 2016 reflect the impact of an out-of-period adjustment resulting in a net decrease
to net income of $4.2 million, of which $1.6 million was attributable to noncontrolling interests (Note 1).
Revenues
Net income
Net (income) loss attributable to
noncontrolling interests
Net income attributable to Acadia
Earnings per share attributable to Acadia:
Basic
Diluted
Weighted average number of shares:
Basic
Diluted
March 31,
2015
Three Months Ended (a, b, c)
June 30,
2015
September 30,
2015
December 31,
2015
$
49,073
$
49,176
$
51,124
$
38,537
85,458
18,104
(21,990)
16,547
(58,963)
26,495
(4,328)
13,776
51,286
7,871
1,019
8,890
$
$
0.24
0.24
$
0.38
0.38
$
0.20
0.20
0.13
0.13
68,295
68,360
68,825
68,870
68,943
68,957
69,328
69,330
Cash dividends declared per Common Share
$
0.24
$
0.24
$
0.24
$
0.50
F-46
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
__________
(a) The three months ended March 31, 2015 includes a gain on the disposition of Fund III's consolidated Lincoln Park Centre
property of $27.1 million of which $21.7 million was attributable to noncontrolling interests (Note 2).
(b) The three months ended June 30, 2015 includes: Acadia's $17.1 million share of the gain on disposition of Fund III's
unconsolidated White City Shopping Center (Note 4); a $12.0 million gain on disposition of Fund II's consolidated Liberty
Avenue property and a $49.9 million gain on disposition of Fund II's consolidated City Point property's air rights, of
which a total of $15.8 million was attributable to noncontrolling interests (Note 2); and a $5.0 million asset impairment
charge within the Brandywine portfolio inclusive of $3.9 million attributable to noncontrolling interests (Note 8).
(c) The three months ended September 30, 2015 includes Acadia's $6.9 million share of the gain on disposition of Fund III's
unconsolidated Parkway Crossing property of which $5.6 million was attributable to noncontrolling interests.
17. Subsequent Events
Dispositions
In February 2017, Fund III completed the disposition of Arundel Plaza, located in Glen Burnie, MD, for a sales price of $28.8
million.
In January 2017, Fund IV completed the disposition of 2819 Kennedy Boulevard, located in North Bergen, NJ, for a sales price
of $19.0 million.
In February 2017, there was an auction pursuant to an Order of the United States Bankruptcy Court for the Southern District of
New York for the property which is collateral for the Company's non-performing note (Note 3). The winning bid was in excess
of the Company's carrying value and accrued interest. The sale of this property is expected to be approved by Order of the
Bankruptcy Court confirming the Chapter 11 Plan of Reorganization of the note issuer and close during the first half of 2017. In
connection with this, the Company anticipates recovering its full carrying value of principal and accrued interest upon settlement
of this transaction.
Financings
In February 2017, the Company completed the financing of Fund IV's Wake Forest property (Note 2) for $24.0 million. The new
loan bears interest at LIBOR plus 160 basis points and matures February 14, 2020.
F-47
Year ended December 31, 2016:
Allowance for deferred tax asset
Allowance for uncollectible
accounts
Allowance for notes receivable
Year ended December 31, 2015:
Allowance for deferred tax asset
Allowance for uncollectible
accounts
Allowance for notes receivable
Year ended December 31, 2014:
Allowance for deferred tax asset
Allowance for uncollectible
accounts
Allowance for notes receivable
$
$
$
$
$
$
$
$
$
ACADIA REALTY TRUST
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
Balance at
Beginning of
Year
Charged to
Expenses
Adjustments
to Valuation
Accounts
Deductions
Balance at
End of Year
— $
— $
859
$
— $
859
7,451
$
— $
— $
— $
— $
— $
(1,731)
$
5,720
— $
—
—
7,451
—
—
5,952
—
— $
— $
— $
— $
5,952
$
1,499
$
— $
— $
— $
— $
— $
— $
— $
— $
— $
— $
6,242
3,681
$
$
— $
— $
— $
— $
(290)
(3,681)
$
$
F-48
ACADIA REALTY TRUST
SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2016
Initial Cost
to Company
Amount at Which
Carried at December 31, 2016
Description
Encumbrances
Land
Buildings &
Improvements
Increase
(Decrease)
in Net
Investments
Land
Buildings &
Improvements
Total
Accumulated
Depreciation
Date of
Acquisition (a)
Construction (c)
Life on which
Depreciation
in Latest
Statement of
Income is
Compared
Core Portfolio:
Crescent Plaza
Brockton, MA
New Loudon Center
Latham, NY
Mark Plaza
Edwardsville, PA
Plaza 422
Lebanon, PA
Route 6 Mall
Honesdale, PA
Abington Towne
Center
Abington, PA
Bloomfield Town
Square
Bloomfield Hills, MI
Elmwood Park
Shopping Center
Elmwood Park, NJ
Merrillville Plaza
Hobart, IN
Marketplace of
Absecon
Absecon, NJ
239 Greenwich Avenue
Greenwich, CT
Hobson West Plaza
Naperville, IL
Village Commons
Shopping Center
Smithtown, NY
Town Line Plaza
Rocky Hill, CT
Branch Shopping
Center
Smithtown, NY
Methuen Shopping
Center
Methuen, MA
Gateway Shopping
Center
South Burlington, VT
Mad River Station
Dayton, OH
Pacesetter Park
Shopping Center
Ramapo, NY
Brandywine Holdings
Wilmington, DE
Bartow Avenue
Bronx, NY
Amboy Road
Staten Island, NY
Clark Diversey
Chicago, IL
Chestnut Hill
Philadelphia, PA
2914 Third Avenue
Bronx, NY
West Shore
Expressway
Staten Island, NY
West 54th Street
Manhattan, NY
5-7 East 17th Street
Manhattan, NY
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
— $
1,147
$
7,425
$
3,027
$
1,147
$
10,452
11,599
$
7,395
1993
(a)
40 years
505
—
190
4,161
3,396
3,004
13,353
—
2,765
505
—
190
17,514
18,019
13,968
1993
(a)
40 years
3,396
5,769
3,396
5,959
2,887
5,155
8,559
1993
(c)
40 years
1993
(c)
40 years
1994
(c)
40 years
1,664
—
12,437
1,664
12,437
14,101
799
3,197
2,400
799
5,597
6,396
3,754
1998
(a)
40 years
3,207
13,774
22,463
3,207
36,237
39,444
19,922
1998
(a)
40 years
3,248
12,992
15,860
3,798
28,302
32,100
18,112
1998
(a)
40 years
24,779
4,288
17,152
5,647
4,288
22,799
27,087
11,276
1998
(a)
40 years
—
2,573
10,294
4,900
2,577
15,190
17,767
27,000
1,817
15,846
776
1,817
16,622
18,439
1,793
7,172
1,970
1,793
9,142
10,935
3,229
878
12,917
4,225
3,229
17,142
20,371
3,510
7,736
907
11,217
12,124
7,612
7,389
4,855
8,852
8,914
1998
(a)
40 years
1998
(a)
40 years
1998
(a)
40 years
1998
(a)
40 years
1998
(a)
40 years
3,156
12,545
15,883
3,401
28,183
31,584
9,719
1998
(a)
40 years
956
3,826
993
961
4,814
5,775
2,369
1998
(a)
40 years
1,273
2,350
5,091
9,404
12,258
1,273
17,349
18,622
1,579
2,350
10,983
13,333
8,902
5,256
1999
(a)
40 years
1999
(a)
40 years
1,475
5,899
3,350
1,475
9,249
10,724
4,603
1999
(a)
40 years
26,250
5,063
15,252
2,495
5,201
17,609
22,810
—
—
—
—
—
—
—
—
1,691
5,803
1,111
1,691
6,914
8,605
—
11,909
2,482
—
14,391
14,391
10,061
8,289
11,108
3,380
16,699
3,048
2,773
5,691
8,038
13,499
18,704
972
10,061
3,745
13,806
4,509
8,289
10,200
18,489
4,701
11,855
11,992
23,847
—
3,380
13,499
16,879
992
16,699
19,696
36,395
7,281
5,147
3,048
12,428
15,476
6,392
2,732
5,812
984
3,175
2,456
3,732
4,837
2,027
2003
(a)
40 years
2005
(c)
40 years
2005
(a)
40 years
2006
(a)
40 years
2006
(a)
40 years
2006
(a)
40 years
2007
(a)
40 years
2007
(a)
40 years
2008
(a)
40 years
F-49
Initial Cost
to Company
Amount at Which
Carried at December 31, 2016
Description
Encumbrances
Land
Buildings &
Improvements
Increase
(Decrease)
in Net
Investments
Land
Buildings &
Improvements
Total
Accumulated
Depreciation
Date of
Acquisition (a)
Construction (c)
Life on which
Depreciation
in Latest
Statement of
Income is
Compared
651-671 W Diversey
Chicago, IL
15 Mercer Street
New York, NY
4401 White Plains
Bronx, NY
Chicago Street Retail
Portfolio
Chicago, IL
1520 Milwaukee
Avenue
Chicago, IL
330-340 River Street
Cambridge, MA
Rhode Island Place
Shopping Center
Washington, D.C.
930 Rush Street
Chicago, IL
28 Jericho Turnpike
Westbury, NY
181 Main Street
Westport, CT
83 Spring Street
Manhattan, NY
60 Orange Street
Bloomfield, NJ
179-53 & 1801-03
Connecticut Avenue
Washington, D.C.
639 West Diversey
Chicago, IL
664 North Michigan
Chicago, IL
8-12 E. Walton
Chicago, IL
3200-3204 M Street
Washington, DC
868 Broadway
Manhattan, NY
313-315 Bowery
Manhattan, NY
120 West Broadway
Manhattan, NY
11 E. Walton
Chicago, IL
61 Main Street
Westport, CT
865 W. North Avenue
Chicago, IL
152-154 Spring Street
Manhattan, NY
2520 Flatbush Avenue
Brooklyn, NY
252-256 Greenwich
Avenue
Greenwich, CT
Bedford Green
Bedford Hills, NY
131-135 Prince Street
Manhattan, NY
Shops at Grand Ave
Queens, NY
201 Needham Street
Newton, MA
City Center
San Francisco, CA
163 Highland Avenue
Needham, MA
Roosevelt Galleria
Chicago, IL
Route 202 Shopping
Center,
Wilmington, DE
991 Madison Avenue
New York, NY
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
8,576
1,887
5,884
1,581
17,256
2,483
5,054
8
—
—
8,576
1,887
1,581
17,264
25,840
2,409
2011
(a)
40 years
2,483
5,054
4,370
6,635
341
674
2011
(a)
40 years
2011
(a)
40 years
18,521
55,627
1,923
18,560
57,511
76,071
6,761
2012
(a)
40 years
2,110
1,306
11,884
8,404
14,235
—
—
7,458
4,933
14,869
6,220
—
—
1,908
1,754
15,968
14,587
24,416
12,158
9,200
7,769
3,609
10,790
—
—
2,110
8,404
1,306
3,416
161
2012
(a)
40 years
14,235
22,639
1,812
2012
(a)
40 years
917
7,458
16,885
24,343
9
—
41
—
—
4,933
6,220
1,908
1,754
3,609
14,596
19,529
24,416
30,636
12,199
14,107
9,200
10,954
10,790
14,399
2,142
1,732
2,935
1,278
1,035
1,264
2012
(a)
40 years
2012
(a)
40 years
2012
(a)
40 years
2012
(a)
40 years
2012
(a)
40 years
2012
(a)
40 years
11,690
10,135
726
11,689
10,862
22,551
1,199
2012
(a)
40 years
4,429
6,102
804
4,429
6,906
11,335
41,846
15,240
65,331
15,601
4,249
9,247
5,516
32,819
28,346
2,645
11,594
27,001
10,419
5,398
6,899
3,519
—
—
16,744
4,578
1,893
8,544
6,613
—
29
15,240
65,331
80,571
5,398
15,630
21,028
168
6,899
5
—
919
3,519
—
—
4,417
9,252
5,516
11,316
12,771
5,516
33,738
33,738
192
16,744
28,538
45,282
20
23
—
4,578
1,893
8,544
2,665
7,243
11,617
13,510
193
6,613
10,612
17,225
10,175
12,641
119
10,175
12,760
22,935
28,697
12,425
32,730
1,801
12,425
34,531
46,956
103
—
57,639
57,639
279
20,264
33,410
53,674
4,550
4,564
9,114
—
—
—
—
—
20,264
4,550
57,536
33,131
4,459
36,063
109,098
9,359
12,679
4,838
—
—
—
—
11,213
14,574
6,346
76,965
105
658
—
26
—
—
775
6,345
1,414
401
711
670
1,593
2,198
243
813
2012
(a)
40 years
2013
(a)
40 years
2013
(a)
40 years
2013
(a)
40 years
2013
(a)
40 years
2013
(a)
40 years
2013
(a)
40 years
2014
(a)
40 years
2014
(a)
40 years
2014
(a)
40 years
754
978
2,264
6,344
1,898
303
2014
(a)
40 years
2014
(a)
40 years
2014
(a)
40 years
2014
(a)
40 years
2014
(a)
40 years
2014
(a)
40 years
36,063
109,756
145,819
4,909
2015
(a)
40 years
12,679
11,213
23,892
4,838
14,600
19,438
—
—
6,346
6,346
76,965
76,965
624
489
302
—
2015
(a)
40 years
2015
(a)
40 years
2015
(a)
40 years
2016
(a)
40 years
F-50
27,001
35,545
1,834
2014
(a)
40 years
Initial Cost
to Company
Amount at Which
Carried at December 31, 2016
Description
Encumbrances
Land
Buildings &
Improvements
Increase
(Decrease)
in Net
Investments
Land
Buildings &
Improvements
Total
Accumulated
Depreciation
Date of
Acquisition (a)
Construction (c)
Life on which
Depreciation
in Latest
Statement of
Income is
Compared
165 Newbury Street
Boston, MA
Concord & Milwaukee
Chicago, IL
State & Washington
Chicago, IL
151 N. State Street
Chicago, IL
North & Kingsbury
Chicago, IL
Sullivan Center
Chicago, IL
California & Armitage
Chicago, IL
555 9th Street
San Francisco, CA
Undeveloped Land
Fund II:
161st Street
Bronx, NY
City Point
Brooklyn, NY
Fund III:
654 Broadway
Manhattan, NY
New Hyde Park
Shopping Center
New Hyde Park, NY
640 Broadway
Manhattan, NY
3780-3858 Nostrand
Avenue
Brooklyn, NY
Fund IV:
Paramus Plaza
Paramus, NJ
1151 Third Ave
Manhattan, NY
Lake Montclair Center
Dumfries, VA
938 W. North Avenue
Chicago, IL
17 E. 71st Street
Manhattan, NY
1035 Third Ave
Manhattan, NY
801 Madison Avenue
Manhattan, NY
2208-2216 Fillmore
Street
San Francisco, CA
146 Geary Street
San Francisco, CA
2207 Fillmore Street
San Francisco, CA
1861 Union Street
San Francisco, CA
Restaurants at Fort
Point
Boston, MA
Wakeforest Crossing
Wake Forest, NC
Airport Mall
Bangor, ME
Colonie Plaza
Albany, NY
Dauphin Plaza
Harrisburg, PA
JFK Plaza
Waterville, ME
Mayfair Shopping
Center
Philadelphia, PA
Shaw's Plaza
Waterville, ME
—
1,918
2,874
2,739
25,485
3,907
14,464
1,941
13,292
18,731
3,980
2,746
70,943
25,529
16,292
—
13,433
137,327
2,675
6,770
60,000
75,591
—
100
2,292
73,268
—
—
—
—
—
—
10
—
—
—
1,918
2,739
3,907
1,941
3,980
2,746
5,898
5,485
70,943
74,850
25,529
27,470
18,731
16,292
35,023
66
30
591
266
141
2016
(a)
40 years
2016
(a)
40 years
2016
(a)
40 years
2016
(a)
40 years
2016
(a)
40 years
13,443
137,327
150,770
1,145
2016
(a)
40 years
6,770
2,292
9,062
75,591
100
73,268
—
148,859
100
21
308
—
2016
(a)
40 years
2016
(a)
40 years
46,500
16,679
28,410
28,272
16,679
56,682
73,361
13,067
2005
(a)
40 years
326,042
—
—
207,561
—
207,561
207,561
1,848
2010
(c)
40 years
8,615
9,040
3,654
2,869
9,040
6,523
15,563
656
2011
(a)
40 years
10,760
3,016
7,733
4,151
3,016
11,884
14,900
48,470
12,503
19,960
10,953
12,503
30,913
43,416
2,225
3,799
2011
(a)
40 years
2012
(a)
40 years
11,137
6,229
11,216
5,612
6,229
16,828
23,057
1,463
2013
(a)
40 years
14,099
11,052
12,481
8,306
14,509
7,077
12,500
2,314
19,000
7,391
41,826
14,099
—
4,178
7,037
9,685
12,028
17,067
20,176
39,928
28,470
5,606
3,027
6,376
27,700
9,500
28,500
8,280
11,052
15,317
26,369
1,412
8,306
11,097
19,403
439
176
263
671
—
—
7
7,077
2,314
7,391
12,467
19,544
17,243
19,557
20,439
27,830
14,099
40,599
54,698
4,178
28,470
32,648
3,027
9,500
6,376
9,403
28,507
38,007
1,120
1,498
2,315
2,188
6,500
1,041
—
—
—
—
—
—
—
7,570
2,294
2,852
5,290
751
6,178
828
1,735
1,293
10,905
24,829
7,067
9,619
9,464
5,991
9,266
11,814
108
1,498
2,188
1,041
7,570
2,294
2,852
5,290
751
—
—
1
11
—
4
2
2
1
1,843
1,293
3,341
3,481
10,905
11,946
24,830
32,400
7,078
9,619
9,468
5,993
9,372
12,471
14,758
6,744
6,178
9,268
15,446
828
11,815
12,643
F-51
962
990
1,103
1,310
1,149
1,858
890
186
831
48
35
273
197
40
48
50
32
42
55
2013
(a)
40 years
2013
(a)
40 years
2013
(a)
40 years
2013
(a)
40 years
2014
(a)
40 years
2015
(a)
40 years
2015
(a)
40 years
2015
(a)
40 years
2015
(a)
40 years
2015
(a)
40 years
2015
(a)
40 years
2016
(a)
40 years
2016
(a)
40 years
2016
(a)
40 years
2016
(a)
40 years
2016
(a)
40 years
2016
(a)
40 years
2016
(a)
40 years
2016
(a)
40 years
Initial Cost
to Company
Amount at Which
Carried at December 31, 2016
Description
Encumbrances
Land
Buildings &
Improvements
Increase
(Decrease)
in Net
Investments
Land
Buildings &
Improvements
Total
Accumulated
Depreciation
Date of
Acquisition (a)
Construction (c)
Life on which
Depreciation
in Latest
Statement of
Income is
Compared
Wells Plaza
Wells, ME
717 N. Michigan
Chicago, IL
Real Estate Under
Development
Debt of Assets Held
For Sale
Unamortized Loan
Costs
Unamortized Premium
—
1,892
2,585
63,900
72,174
34,606
—
—
1,892
2,585
4,477
72,174
34,606
106,780
55,327
105,442
61,172
376,872
58,403
485,083
543,486
25,500
(16,642)
1,336
—
—
—
—
—
—
—
—
—
—
—
—
18
72
—
—
—
Total
$
1,055,728
$ 796,928
$
1,774,296
$
810,776
$ 751,655
$
2,630,345
$
3,382,000
$
287,066
2016
(a)
40 years
2016
(a)
40 years
(a)
Notes:
1. Depreciation on buildings and improvements reflected in the consolidated statements of income is calculated over the estimated
useful life of the assets as follows: Buildings at 30 to 40 years and improvements at the shorter of lease term or useful life.
2. The aggregate gross cost of property included above for Federal income tax purposes was $2,550.5 million as of December
31, 2016.
The following table reconciles the activity for real estate properties from January 1, 2014 to December 31, 2016 (in thousands):
Balance at beginning of year
Other improvements
Property acquisitions
Property dispositions or held for sale assets
Prior year purchase price allocation adjustments
Deconsolidation of Previously Consolidated Investments
Consolidation of Previously Unconsolidated Investments
Year Ended December 31,
2015
$ 2,208,595
162,760
418,396
(66,359)
—
2014
$ 1,819,053
162,827
299,793
(73,078)
—
—
12,891
—
—
2016
$ 2,736,283
152,129
761,400
(134,332)
(9,844)
(123,636)
—
Balance at end of year
$ 3,382,000
$ 2,736,283
$ 2,208,595
The following table reconciles accumulated depreciation from January 1, 2014 to December 31, 2016 (in thousands):
Balance at beginning of year
Depreciation related to real estate
Property Dispositions
Deconsolidation of Previously Consolidated Investments
Consolidation of previously unconsolidated investments
$
$
Year Ended December 31,
2015
256,015
49,775
(7,087)
—
$
2016
298,703
49,269
(27,829)
(33,077)
—
—
2014
229,538
26,477
—
—
—
Balance at end of year
$
287,066
$
298,703
$
256,015
F-52
ACADIA REALTY TRUST
SCHEDULE IV-MORTGAGE LOANS ON REAL ESTATE
(in thousands)
December 31, 2016
Description
First Mortgage Loan
First Mortgage Loan
Mezzanine Loan
First Mortgage Loan
First Mortgage Loan
Preferred Equity
Zero Coupon Loan
Preferred Equity
First Mortgage Loan
Total
Effective
Interest Rate
Final Maturity
Date
Face Amount of Notes
Receivable
Net Carrying Amount
of Notes Receivable as
of December 31, 2016
6.0%
6.0%
18.0%
LIBOR + 7.1%
8.1%
8.7%
2.5%
15.3%
9.0%
4/28/2017
$
9,000
$
5/1/2017
7/1/2017
6/25/2018
4/30/2019
9/9/2019
5/31/2020
2/3/2021
Demand
15,000
3,007
26,000
153,400
10,000
29,793
14,000
12,000
$
272,200
$
9,000
15,000
4,506
26,000
153,400
10,000
31,007
15,250
12,000
276,163
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, the personal guarantees of the borrower and the prospects of the borrower. As of December
31, 2016, the Company held one non-performing note in the amount of $12.0 million.
The following table reconciles the activity for loans on real estate from January 1, 2014 to December 31, 2016 (in thousands):
Reconciliation of Loans on Real Estate
Year Ended December 31,
2016
2015
2014
$
147,188
$
102,286
$
171,794
—
—
(42,819)
—
—
$
276,163
$
48,500
29,539
—
(15,984)
(13,386)
(3,767)
147,188
126,656
31,169
—
556
(18,095)
(38,000)
—
$
102,286
Balance at beginning of year
Additions
Disposition of air rights through issuance of notes
Amortization and accretion
Repayments
Conversion to real estate through receipt of deed or through foreclosure
Other
Balance at end of year
F-53