CLARK & DIVERSEY, CHICAGO, IL
2017 ANNUAL REPORT
INTENSITYINTELLIGENCE Dear Fellow Shareholders:
In many ways, 2017 was one of the most challenging in our company’s almost 20-year history as a public
company. Excluding the financial crisis, our stock price declined more precipitously than in any previous
cycle. This was due to a variety of factors, including:
legitimate concerns about certain retailers and real estate locations;
bond market jitters over gradual interest rate increases; and
the stock market’s overreaction to frustratingly-oversimplified media headlines.
Looking ahead, here’s the good news:
We are seeing continued improvements in retailer fundamentals and demand;
Our core thesis (i.e., owning high-quality locations in key gateway markets) is proving out; and
Each of our core and fund platforms has powerful growth levers that should enable us to create
superior long-term shareholder value.
1. A landlord’s perspective on the state of retailing
So, what about the “Retail Apocalypse”? Well, we wouldn’t call it an apocalypse, but it would be
dangerous to ignore the headwinds and changes facing the retailing and retail real estate industries:
1. Some legacy retailers are going away. If your value proposition as a retailer was weak before the
rise of ecommerce, your recovery will be much harder (some might say impossible). When the “have nots”
finally go away, it will be easy for the media to blame Amazon. But, astute observers will recognize that the
story is far more nuanced (if you are reading this on an electronic device, click the link).
2. The ecommerce channel continues to grow, as do shoppers’ expectations for fast, and free, home
delivery. Amazon has emerged as a leader in logistics and, so far, has been willing to subsidize free
shipping to gain market share.
Shipping subsidies cannot last forever. In fact, they are already beginning to erode.
Even when the myth ends, and the consumer is required to pay for shipping, ecommerce will likely
remain an important channel.
But, “free” in-store pickup will become even more compelling for both shoppers and retailers.
Thus, retailers who focus on complementing their physical store networks with online and other last-
mile initiatives should be well positioned.
3. Retailers are refining their fleets and doing more with less. Surely, the U.S. is over-retailed,
and certain retailers will continue closing stores. But, in critical gateway locations, the most successful
retailers will continue building even more powerful flagships (doing More with More)… like lululemon
at our Rush St. property in Chicago.
The most successful retailers recognize the unique and essential role their great stores play in
establishing and maintaining their brand and profitability.
4. Many exciting retailing concepts are starting online.
But the best of them understand the value of opening stores.
When they do, they realize there is a steep learning curve.
Thus, one retailer’s success tends to draw others. We are seeing this on Armitage Ave. (Lincoln Park,
Chicago), where our leases with early movers in the screens-to-store trend (Warby Parker and
Bonobos) have led to new leases for us with Serena & Lily and Chubbies, with more to follow...
5. Technology is driving price transparency. Frankly, it is becoming much harder to fool the
consumer on pricing or attract them with 20th-century coupons.
As a result, many retailers’ margins are getting squeezed, forcing some to match best pricing to retain
market share.
This race to the bottom is not sustainable.
Eventually, the market will be controlled by retailers that can differentiate themselves with (among
other things) private-label products, a membership model, or best pricing (e.g., Trader Joe’s, Costco,
and T.J.Maxx, respectively, all of whom are important tenants of ours).
Back to Acadia... Our thesis is that buying high-quality core properties (with superior long-term
growth) on a disciplined basis; operating our company with low leverage; and executing complementary
opportunistic and value-add fund investments should enable us to generate attractive risk-adjusted
returns.
2. Our core portfolio, cutting through the “fake news”
With respect to our core portfolio – location still rules.
Approximately 85% of our core portfolio is concentrated in five gateway markets – Chicago, San
Francisco, New York, Washington DC, and Boston. Our street-retail properties are located primarily
in live-work-play retail corridors, such as Michigan Ave. (Chicago), State St. (Chicago), Geary Blvd.
(San Francisco), Tribeca (New York), and M St. NW (Georgetown, Washington DC).
Our retailers tell us these are still must-have locations. (That said, they must also be profitable.)
So far, we are seeing retailers remain committed to the best locations and foregoing cheap rents for
compromised space.
What else helps us sleep better at night? Recent transactions provide vertical price support for high-
quality urban locations.
Our core portfolio is positioned for growth. Within these great locations, our core is comprised of
higher-quality properties, many with long-dated leases and periodic upgrade or densification
opportunities.
Approximately 70% of our core portfolio is comprised of urban or street-retail properties; the balance
is suburban shopping centers.
Over any extended period, we believe that the same-property net operating income (“NOI”) growth
for our urban and street-retail properties should outperform our suburban by at least 200 basis points
(“bps”). (For example, if our suburban growth is 2% per year, we expect our urban/street growth to be
at least 4%.) We don’t break out suburban vs urban/street growth rates, but anecdotally, our results
have been consistent with this thesis for quite some time.
It’s not always as easy as it should be. From 2013 to 2016, our same-property NOI growth averaged
4.9%. Then, last year, we recaptured nearly 300 bps of high-quality (and higher-value) occupancy, and
our NOI remained flat. What a lousy year to deliver flat!
In 2017, retailers seemed uniquely frozen, unlike any other non-recession period we have seen.
So, it’s taking us longer to re-lease this space than we forecasted. (My bad.)
Looking ahead, we expect same-property NOI growth to bounce back in the second half of 2018 (two
quarters later than we thought). This has been painful in the short term.
But, the long-term prospects for our available spaces remain solid.
We are seeing green shoots. Since the beginning of the year, we have seen material improvement in
retailer interest in our type of real estate. Following a decent holiday season, and more than a year of
sitting on the sidelines, retailers seem ready to go back on offense. While rents in certain submarkets are
down 10-40% from their over-inflated peaks, they are up in others. (Yes, really! Keep reading...) We feel
good about our 2018 and 2019 leasing goals. More importantly, looking ahead to 2020-2022, we see solid
growth opportunities within our portfolio.
Tulips are beautiful, at the right price. So, what happened in NYC? Rents grew too fast, and
investors bid properties too aggressively. In Soho, for example, rents doubled between 2010 and 2015.
Retailers’ sales growth was strong but not strong enough to keep up. In 2015, we said, “rents are growing
too fast” and allocated most of our acquisition capital elsewhere. But, many others did not. At the same
time, retailers, by signing leases at unrealistic rents, helped to perpetuate this growth... for a while. And
then, the bubble burst. Today, Soho rents are down at least 20% from the prior peak and, in some cases,
down 30-40%.
Dodging bullets is not a long-term growth strategy. Throughout this go-go period, we remained
disciplined and, as a result, dodged many bullets. But, post 2015, in a period dominated by headlines and
breaking news, the stock market’s overreaction to our street-retail exposure shouldn’t have surprised us.
What is the impact of the Retail Real Estate Armageddon? First, it is not an Armageddon if you
remained disciplined in execution. I appreciate that it’s hard to reconcile the concept of urban and street
retail providing superior long-term growth with scary headlines and noticeable vacancies. Also, if you own
a single-tenant building with a peak rent, and the tenant bails, your occupancy drops to 0%. And, if you
re-lease the property, at 30% less rent, for example, then the property’s value is down by about the same
(before considering cost and leverage). It’s easy to extrapolate this single-asset problem to an entire
portfolio.
But, we are not a single-asset company. With respect to our core portfolio only, it’s worth noting:
We own 116 properties.
Our Soho and Madison Ave. properties (the poster children for the market rent correction) represent
less than 5% of our NOI.
We only have one $1,000-psf rent.
We have long-dated leases with a diversified tenant base, including Target, Trader Joe’s and
T.J.Maxx. So, despite the re-leasing noise, our occupied percentage should remain in the 90’s.
Unlike the above single-property example, we did not lose a third of our NOI due to the so-called
Armageddon. Last year, our same-property NOI was flat, and, this year, we expect it to grow.
Including a handful of redevelopments, we expect solid growth for many years to come.
Surely the market rent decline cost us something? Yes. As we articulated on our fourth-quarter
earnings call, compared to peak-rent expectations, our core growth over the next several years will likely
be muted by $3-5 million (which equates to roughly $80 million of net asset value). That’s a lot of money;
but, to put it in perspective, it’s less than $1 per share. To our frustration, last year, the market reacted as
if all we own is Soho and Madison Ave. at peak rents.
In reality, we only own one Madison Ave. property (in a structured transaction) in our core portfolio;
the balance, which consists of a limited number of properties, is owned by our funds, which target
transitional assets.
NYC street retail is only a small piece of our story. Furthermore, in markets where we are more active,
we see solid growth.
For example...
Rush St.-Walton St., Gold Coast, Chicago. In Chicago, we own several buildings in the Rush St.-
Walton St. submarket, an example of a high-end corridor where street retail is thriving.
Last year, we expanded our lululemon into an adjacent Acadia-owned property and generated an 18%
lease spread on the expansion space. In connection with this expansion, lululemon remodeled their
entire store.
Our neighbors recently re-anchored a former Urban Outfitters with Versace and Dior.
Tesla and Aritzia are also new entrants to this submarket.
Clark St.-Diversey Pkwy., Lincoln Park, Chicago. Further north, in Lincoln Park, we also own
several buildings clustered around the Clark St.-Diversey Pkwy. intersection, where we are seeing positive
leasing momentum:
At the southeast corner, we are developing a 30k-sf, two-level building. T.J.Maxx will relocate an
existing store at a third-party-owned location to our second level (which has better ceiling heights,
loading, and co-tenancy) and pay new-construction rent.
This project also has 7k sf of available small-shop space. The rents we are negotiating for this space
are higher than any prior peak in this submarket (and up 25-30% from previous in-place rents).
Across the street, we are also exploring the feasibility of combining 15k sf of first-floor retail and
second-floor office space to accommodate another box retailer.
To us, the above underscores the value of achieving scale within a submarket and making targeted capital
improvements to upgrade space.
City Center, San Francisco, CA. In San Francisco, we own two dominant urban shopping centers. At
our Target-anchored property, City Center, we are building 30k sf of additional retail space in the center’s
underutilized parking lot. Construction is already underway, and we are finalizing leases for
approximately 80% of this space. (We also recently recaptured a 55k-sf Best Buy, which provides another
remerchandising opportunity.) In the future, we think urban densification will be a recurring theme. The
city of San Francisco is already supporting this trend by adjusting parking requirements. We see similar
densification opportunities in several of our other urban assets too.
3. Where is our liquidity premium?
Living in an alternate reality. Our long-term thesis remains intact. Nevertheless, REIT stock prices
have disconnected from the private markets. Not since 1999-2000 have we seen a disconnect of this
magnitude while the economy remains strong. More significantly, Acadia owns a fundamentally superior
portfolio than it did back then, and there is still a strong private-market bid for our kind of high-quality
urban and street-retail assets.
Taking matters into our own hands. In response to market conditions, in February, we announced a
share repurchase program under which we may purchase up to $200 million of our common stock. Let’s
be clear – we reluctantly allocate capital to buybacks. In fact, it has been more than 15 years since we last
did it. But, back then it wasn’t for show either. (From 1999 to early 2003, we bought back approximately
30% of our outstanding shares at $6 each). When we see this level of disconnect, I don’t think we have a
choice.
And, with:
approximately 25% core debt to core GAV; and
more than $100 million of borrowing capacity on our corporate lines of credit;
we have the liquidity to do it.
4. Our fund platform, dry powder for days like these
Especially now, it feels good to have dual sources of capital.
So, what was our fund platform up to in 2017? Well, while the public markets sold off quickly and
significantly, the private markets were slower to react. There was still a strong bid for many of our fund
properties, especially our mixed-use assets. Thus, last year, we were net sellers.
On the disposition front, it made sense to:
sell a few of our stabilized Fund IV properties, where we had already achieved our target multiple;
liquidate, at fair pricing, properties in our older-vintage funds; and
take some chips off the table in Savannah, GA, by selling a handful of properties where cap rates met
or exceeded expectations.
So, we sold $346 million of properties across our fund platform and entered into contracts to sell $34
million more. At the end of last year, we began seeing increased interest from institutional investors for
office and residential. We were, for example, pleasantly surprised by the strong institutional interest in
260 E 161st St., Fund II’s office re-leasing project in the Bronx (1.6x multiple, $37 million profit). This
bodes well for our 2018-2019 disposition pipeline, which is primarily mixed-use.
On the acquisition front, with the private markets still in transition, we felt like the best buying
opportunities were still in front of us. Accordingly, we put less new money to work than anticipated. In
2017, we acquired $203 million of properties, compared to an ideal pace of $500 million. We began 2017
with $1.5 billion of discretionary buying power in Fund V, and, today, we still have $1.2 billion. Looking
ahead, sellers are becoming more motivated, and my sense is there will be more actionable investment
opportunities in 2018.
Our fund mandate is broad – we can pursue a variety of profitable investments in retail and urban
mixed-use properties in the U.S. In doing so:
We can be contrarian, as we are with our higher-yielding strategy (more on this later).
We can pursue highly-profitable transactions in our retailer-controlled property (“RCP”)
venture. These may be larger-scale (non-conforming) transactions, such as Fund II’s Albertsons
supermarkets investment (266% IRR, 3.8x multiple, realized to date), or one-off, such as Fund IV’s
redevelopment of a Toys R Us box in North Bergen, NJ (21% IRR, 2.5x multiple).
We can complete large-scale, ground-up, mixed-use developments in urban markets. More
recently, rising construction costs and retailer headwinds have made ground-up development a less
attractive place to allocate new capital. In fact, the last time we committed to a new ground-up
development was in 2012.
Still, we can use these important skills to re-lease and redevelop mixed-use urban, street-
retail and suburban properties on a smaller scale ($50-250 million project size). Note, retailer
demand is a critical consideration for new value-add investments.
Based on last year’s opportunity set, Fund V stuck to its contrarian higher-yielding strategy. With the
more-aggressive capital providers focused elsewhere, there were fewer bidders for higher-quality
properties in second- and third-tier markets. This caused cap rates to back up 100-150 bps to 7.5-8.5%
(for the type of stable properties our funds want to own). This is the type of dislocation our funds
thrive on.
Using two-thirds leverage, we can achieve a mid-teens total return on these higher-yielding investments...
if the cash flow holds up. And, there’s the rub. We don’t need growth, but we do need stability. So, we
diligence the heck out of these investments, with a sharp eye on co-tenancy, rent to sales, rent to market,
and competitive positioning. Quite frankly, it feels like selecting “needles from a haystack” but we
like that these types of investments can provide an attractive current return that will complement our
other value-add investments.
5. In conclusion…
It’s déjà vu all over again. Acadia became a public company in August 1998, just in time for the
Russian crisis, the rise of the dotcoms, and the meltdown of the REIT market. Sound familiar...?
Since then, we’ve all been through horrific terrorist attacks, wars, a global financial crisis, several more-
typical market cycles and… oh yeah, a retailing revolution. “The only thing that is constant is change;” but,
we still believe we can best serve our stakeholders by:
owning a high-quality core portfolio;
maintaining a strong balance sheet; and
operating an opportunistic/value-add fund platform, paired with discretionary, non-public
institutional capital.
It takes:
a talented and dedicated management team;
best-in-class partners;
a thoughtful board of trustees; and
a thick skin… especially now that stock updates are available at the flick of your wrist.
Our team is energized and committed to creating another 20 years of success. So am I. 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 22, 2018
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, 2017
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, $0.001 par value
(Title of Class)
New York Stock Exchange
(Name of Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
YES
NO
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Securities Act.
YES
NO
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90 days.
YES
NO
Indicate by check mark 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter)
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).
NO
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Smaller Reporting Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 139a) of the Exchange Act.
NO
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) YES
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 $2,347.5 million, based on a price
of $28.06 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 20, 2018 was 83,735,086.
Part III – Portions of the registrant’s definitive proxy statement relating to its 2018 Annual Meeting of Shareholders presently
scheduled to be held May 10, 2018 to be filed pursuant to Regulation 14A.
DOCUMENTS INCORPORATED BY REFERENCE
ACADIA REALTY TRUST AND SUBSIDIARIES
FORM 10-K
INDEX
Item No. Description
1.
1A.
1B.
2.
3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
10.
11.
12.
13.
14.
15.
16.
PART I
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters, Issuer Purchases of Equity
Securities and Performance Graph
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management
Certain Relationships and Related Transactions and Director Independence
Principal Accounting Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
Signatures
Page
4
9
23
24
31
31
32
35
37
53
55
112
112
113
114
114
114
114
114
115
117
118
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, as amended
(the “Exchange Act”) 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 Report. These risks and uncertainties should be considered in evaluating any forward-
looking statements contained or incorporated by reference herein.
SPECIAL NOTE REGARDING CERTAIN REFERENCES
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.
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 below).
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, 2017, 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”).
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 flows are 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, included in Item 8 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, 2017, 2016 and 2015 are summarized as follows:
(shares and dollars in millions)
2017
2016
2015
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
—
—
—
During 2016, we also issued OP Units equating to 0.9 million Common Shares 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, 2017, we exchanged a portion of our Core notes receivable to acquire interests in two
properties we previously had undivided interests in. As a result, we increased our ownership in each property, one of which we
now consolidate. See Note 2 and Note 4, for a detailed discussion of these transactions 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 2017, 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 2017, we made investments totaling $10.0 million
in this program and as of December 31, 2017 had $101.7 million invested in this program and we exchanged a portion of our notes
receivable for interests in two properties as described above. See Note 3, for a detailed discussion of our Structured Finance
Program.
6
Funds
Acquisitions
See Note 2 for a detailed discussion of these acquisitions.
Fund IV – During 2017, Fund IV acquired two consolidated properties for an aggregate purchase price of $44.5 million.
Fund V – During 2017, Fund V acquired four consolidated properties for an aggregate purchase price of $167.2 million.
Dispositions
See Note 2 and Note 4 for a detailed discussion of our consolidated and unconsolidated dispositions, respectively.
Fund II – During 2017, Fund II sold three consolidated properties for an aggregate of $232.3 million.
Fund III – During 2017, Fund III sold one consolidated property for $22.1 million and one unconsolidated property for $28.8
million.
Fund IV – During 2017, Fund IV sold one consolidated property for $27.0 million and seven unconsolidated properties for an
aggregate sales price of $35.6 million.
Development Activities
As part of our investing strategy, we invest in real estate assets that may require significant development. As of December 31,
2017, there were two Core and four Fund development projects, consisting of five consolidated properties and one unconsolidated
property. During the year ended December 31, 2017, the Company placed five consolidated and three unconsolidated properties
into service, reclassified one consolidated property as held for sale and placed one consolidated property into development. See
Item 2. Properties—Development Activities and Note 2.
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— We
are exposed to 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.
7
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, 2017, we had 118 employees, of which 97 were located at our executive office and 21 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. You should carefully consider these risk factors,
together with all of the other information included in this Form 10-K, including our consolidated financial statements and the
related notes thereto, before you decide whether to make an investment in our securities. The occurrence of any of the following
risks could adversely affect our business, results of operations, financial condition and value of our Common Shares. In such case,
the value of our Common Shares and the trading price of our securities could decline, and you may lose all or a significant part
of your investment. 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
9
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.
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, 2017, our outstanding
indebtedness was $1,438.4 million, of which $538.7 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, 2017 would
increase by $5.4 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 34% and 27% of the annual base rents
within our Core Portfolio, respectively and 34% 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, including labor and material 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.
In addition, the entitlement and development of real estate entails extensive approval processes, sometimes involving multiple
regulatory jurisdictions. It is common for a project to require multiple approvals, permits and consents from U.S. federal, state
and local governing and regulatory bodies. Compliance with these and other regulations and standards is time intensive and costly
and may require additional long range infrastructure review and approvals which can add to project cost. In addition, development
of properties containing delineated wetlands may require one or more permits from the U.S. federal government and/or state and
13
local governmental agencies. Any of these issues can materially affect the cost, timing and economic viability of our development
and redevelopment projects.
At times, we may also be required to use unionized construction workers or to pay the prevailing wage in a jurisdiction to unionized
workers. Due to the highly labor intensive and price competitive nature of the construction business, the cost of unionization and/
or prevailing wage requirements for new developments or redevelopments could be substantial. Unionization and prevailing wage
requirements could adversely affect a project’s profitability. In addition, union activity or a union workforce could increase the
risk of a strike, which would adversely affect our ability to meet our construction timetables, which could adversely affect our
reputation and our results of operations.
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.
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.
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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.
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.
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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.
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.
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Concentration of ownership by certain investors.
As of December 31, 2017, five institutional shareholders own 5% or more individually, and 59.5% 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.
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
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Declaration of Trust and Bylaws unrelated to Subtitle 8. However, pursuant to the Articles Supplementary filed November 9, 2017,
which are referenced in Part IV Item 15 hereto, the Board of Trustees approved a resolution to opt out of Section 3-803 of Subtitle
8 of Title 3 of the MGCL that allows the Board, without shareholder approval, to elect to classify into three classes with staggered
three-year terms. The Articles Supplementary prohibit the Company, without the affirmative vote of a majority of the votes cast
on the matter by shareholders entitled to vote generally in the election of trustees, from classifying the Board.
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.
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:
• Compromising of confidential information;
• Manipulation and destruction of data;
• Loss of trade secrets;
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System downtimes and operational disruptions;
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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.
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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Sea level rise; and
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• Extreme temperatures.
As a result of these physical impacts from climate-related events, we may be vulnerable to the following:
• Risks of property damage to our retail properties;
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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;
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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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• Economic disruptions arising from the above.
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.
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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.
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.
21
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.
The Tax Cuts and Jobs Act (the “Act”) signed into law by the President on December 22, 2017 makes significant changes to the
Code, including changes that impact REITs and their shareholders, among others. In particular, the Act reduces the maximum
corporate tax rate from 35% to 21%. In addition, for tax years beginning before January 1, 2026, the Act permits up to a 20%
deduction for individuals, trusts, and estates with respect to their receipt of “qualified REIT dividends”, which are dividends from
a REIT that are not capital gain dividends and are not qualified dividend income. These changes generally result in an effective
maximum U.S. federal income tax rate on such dividends of 29.6%, if the deduction is allowed in full. However, by reducing the
corporate tax rate, it is possible that the Act will nevertheless reduce the relative attractiveness to investors (as compared with
potential alternative investments) of the generally single level of taxation on REIT distributions. Although certain changes to the
Code are generally advantageous to REITs and their shareholders, the full ramifications of the Act remain unclear and will likely
remain unclear for an indeterminate period of time. Key provisions of the Act that could impact us and the market price of our
shares include the following:
•
•
•
•
•
•
•
temporarily reducing individual U.S. federal income tax rates on ordinary income; the highest individual U.S. federal
income tax rate is reduced from 39.6% to 37% (through tax years beginning before January 1, 2026), while eliminating
miscellaneous itemized deductions and limiting state and local tax deductions;
reducing the maximum corporate income tax rate from 35% to 21%, which reduces, but does not eliminate, the competitive
advantage that REITs enjoy relative to non-REIT corporations;
permitting (subject to certain limitations) a deduction for certain pass-through business income, including, as noted above,
dividends received by our shareholders that are not designated by us as capital gain dividends or qualified dividend
income, which will allow individuals, trusts, and estates to deduct up to 20% of such amounts, generally resulting in an
effective maximum U.S. federal income tax rate of 29.6% on such dividends, if the deduction is allowed in full (through
tax years beginning before January 1, 2026);
reducing the highest rate of withholding with respect to our distributions to non-U.S. shareholders that are treated as
attributable to gains from the sale or exchange of U.S. real property interests from 35% to 21%;
limiting our deduction for net operating losses to 80% of taxable income (prior to the application of the dividends paid
deduction), where taxable income is determined without regarding to the net operating loss deduction itself, and generally
eliminating net operating loss carrybacks and allowing unused net operating losses to be carried forward indefinitely;
amending the limitation on the deduction of net interest expense for all businesses, other than certain electing real estate
businesses (which could adversely affect any of our taxable REIT subsidiaries (each, a “TRS”), including any new TRS
that we may form);
expanding the ability of businesses to deduct the cost of certain purchases of property in the year in which such property
is purchased; and
•
eliminating the corporate alternative minimum tax.
In addition to the foregoing, the Act may impact our tenants, the retail real estate market, and the overall economy, which may
have an effect on us. It is not possible to state with certainty at this time the effect of the Tax Reform Act on us and on an investment
in our shares
22
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. From 2018 through 2025, certain REIT
shareholders will be permitted to deduct 20% of ordinary REIT dividends received. 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.
23
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, 2017, there are 116 operating properties in our Core Portfolio totaling approximately 6.3 million square feet
of gross leasable area (“GLA”) excluding two properties 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 1,000 to 800,000 square feet and as of December 31, 2017, were in total, excluding the
properties under development, 93.5% occupied.
As of December 31, 2017, we owned and operated 54 properties totaling approximately 4.2 million square feet of GLA in our
Funds, excluding four 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 13 states and the District of Columbia and
as of December 31, 2017, were in total, excluding the properties under development, 86.5% occupied.
Within our Core Portfolio and Funds, we had approximately 900 leases as of December 31, 2017. 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, 2017.
Five of our Core Portfolio properties and two 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 of these locations.
No individual property contributed in excess of 10% of our total revenues for the years ended December 31, 2017, 2016 or 2015.
See Note 7 in the Notes to Consolidated Financial Statements, for information on the mortgage debt pertaining to our properties.
The following table sets forth more specific information with respect to each of our Core properties at December 31, 2017:
Property (a)
Key Tenants
Year
Acquired
Acadia's
Interest
Gross
Leasable
Area (GLA)
In Place
Occupancy
Leased
Occupancy
Annualized
Base Rent
(ABR)
ABR/ Per
Square
Foot
STREET AND URBAN RETAIL
Chicago Metro
664 N. Michigan Avenue
840 N. Michigan Avenue
Tommy Bahama, Ann Taylor Loft
H & M, Verizon Wireless
Rush and Walton Streets Collection - 5 properties Lululemon, BHLDN, Marc Jacobs
651-671 West Diversey
Trader Joe's, Urban Outfitters
Clark Street and W. Diversey Collection - 3
properties
Ann Taylor, Akira
Halsted and Armitage Collection - 9 properties
Club Monaco
North Lincoln Park Chicago Collection - 6
properties
State and Washington
151 N. State Street
North and Kingsbury
Concord and Milwaukee
California and Armitage
Roosevelt Galleria
Sullivan Center
Forever 21, Aldo, Carhartt
H & M, Nordstrom Rack
Walgreens
Old Navy, Pier 1 Imports
—
—
Petco, Vitamin Shoppe
Target, DSW
100.0 %
88.4 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
18,141
87,135
32,501
46,259
23,531
45,151
50,961
78,819
27,385
41,700
13,105
18,275
37,995
176,181
100.0 %
100.0 %
85.3 %
100.0 %
91.3 %
75.9 %
85.0 %
100.0 %
100.0 %
100.0 %
87.8 %
70.6 %
63.4 %
98.6 %
100.0 % $
4,597,909
$
253.45
100.0 %
85.3 %
100.0 %
91.3 %
75.9 %
85.0 %
100.0 %
100.0 %
100.0 %
87.8 %
70.6 %
63.4 %
7,673,433
5,854,996
2,008,816
1,244,789
1,235,966
1,733,715
2,969,482
1,430,000
1,608,789
355,976
612,519
701,982
100.0 %
6,444,079
88.06
211.19
43.43
57.94
36.07
40.02
37.67
52.22
38.58
30.94
47.47
29.14
37.10
2013
2014
2011/12
2011
2011/12
2011/12
2011/14
2016
2016
2016
2016
2016
2015
2016
24
Property (a)
Key Tenants
New York Metro
Year
Acquired
Acadia's
Interest
Gross
Leasable
Area (GLA)
In Place
Occupancy
Leased
Occupancy
Annualized
Base Rent
(ABR)
ABR/ Per
Square
Foot
Soho Collection - 4 properties
Paper Source, Kate Spade, 3x1 Jeans
2011/14
5-7 East 17th Street
200 West 54th Street
61 Main Street
181 Main Street
4401 White Plains Road
Bartow Avenue
239 Greenwich Avenue
252-256 Greenwich Avenue
2914 Third Avenue
868 Broadway
313-315 Bowery (b)
120 West Broadway
2520 Flatbush Avenue
991 Madison Avenue
Shops at Grand
Gotham Plaza
San Francisco Metro
City Center
555 9th Street
Union Fare
Stage Coach Tavern
—
TD Bank
Walgreens
Mattress Firm
Betteridge Jewelers
Madewell, Jack Wills
Planet Fitness
Dr. Martens
John Varvatos, Patagonia
HSBC Bank
Bob's Discount Furniture, Capital One
Vera Wang, Perrin Paris
Stop & Shop (Ahold)
Bank of America, Children's Place
City Target, Best Buy
Bed, Bath & Beyond, Nordstrom Rack
District of Columbia Metro
1739-53 & 1801-03 Connecticut Avenue
Ruth Chris Steakhouse, TD Bank
Rhode Island Place Shopping Center
Ross Dress for Less
2008
2007
2014
2012
2011
2005
1998
2014
2006
2013
2013
2013
2014
2016
2014
2016
2015
2016
2012
2012
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
75.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
49.0 %
100.0 %
100.0 %
100.0 %
100.0 %
12,511
11,467
5,777
3,400
11,350
12,964
14,590
16,553
7,986
40,320
2,031
6,600
13,838
29,114
7,513
99,975
26,182
204,648
148,832
20,669
57,667
82.4 %
100.0 %
77.8 %
— %
100.0 %
100.0 %
100.0 %
100.0 %
71.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
65.6 %
92.7 %
68.6 %
98.1 %
100.0 %
100.0 %
45.5 %
82.4 %
100.0 %
77.8 %
— %
100.0 %
100.0 %
100.0 %
100.0 %
71.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
65.6 %
92.7 %
68.6 %
98.1 %
100.0 %
100.0 %
93.4 %
3,157,177
1,300,014
1,941,814
—
870,274
625,000
485,495
1,546,912
1,027,271
963,001
745,315
479,160
2,255,814
1,064,374
1,553,292
2,873,056
1,064,361
7,759,488
6,105,614
1,266,138
1,246,065
306.25
113.37
432.04
—
76.68
48.21
33.28
93.45
181.17
23.88
366.97
72.60
163.02
36.56
315.16
31.00
59.26
38.65
41.02
61.26
47.49
M Street and Wisconsin Corridor -
25 Properties (c)
Boston Metro
330-340 River Street
165 Newbury Street
Total Street and Urban Retail
Acadia Share Total Street and Urban Retail
SUBURBAN PROPERTIES
New Jersey
Lululemon, North Face, Coach
2011/16
25.4 %
241,182
91.5 %
91.5 %
15,168,759
68.74
Whole Foods
Starbucks
2012
2016
100.0 %
100.0 %
54,226
1,050
1,747,584
1,540,088
100.0 %
100.0 %
92.4%
92.8%
100.0 %
100.0 %
94.2%
95.1%
1,200,045
261,777
93,432,667
80,531,452
22.13
249.31
57.86
56.35
Elmwood Park Shopping Center
Walgreens, Acme
Marketplace of Absecon
60 Orange Street
New York
Rite Aid, Dollar Tree
Home Depot
Village Commons Shopping Center
—
Branch Plaza
Amboy Center
Pacesetter Park Shopping Center
LA Fitness
LA Fitness, The Fresh Market
Stop & Shop (Ahold)
Stop & Shop (Ahold)
LA Fitness
Crossroads Shopping Center
Home Goods, PetSmart, Kmart, DSW
Price Chopper, Marshalls
Kohl's
Shop Rite, CVS
1998
1998
2012
1998
1998
2005
1999
2007
1998
1993
2012
2014
100.0 %
100.0 %
98.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
49.0 %
100.0 %
100.0 %
100.0 %
143,910
104,556
101,715
87,128
123,378
63,290
97,806
55,000
311,958
255,673
96,363
90,589
97.2 %
90.3 %
97.2 %
90.3 %
100.0 %
100.0 %
91.1 %
92.2 %
100.0 %
100.0 %
100.0 %
94.6 %
100.0 %
100.0 %
84.9 %
91.1 %
92.2 %
100.0 %
100.0 %
100.0 %
94.6 %
100.0 %
100.0 %
84.9 %
4,046,223
1,362,152
695,000
2,612,204
3,024,863
2,072,234
1,338,641
1,485,287
6,834,714
2,153,484
1,815,000
2,495,885
28.93
14.43
6.83
32.91
26.59
32.74
13.69
27.01
23.16
8.42
18.84
32.45
Wal-Mart, Stop & Shop (Ahold)
1998
100.0 %
206,346
98.7 %
98.7 %
1,756,884
16.32
New Loudon Center
28 Jericho Turnpike
Bedford Green
Connecticut
Town Line Plaza (d)
Massachusetts
Methuen Shopping Center
Wal-Mart, Market Basket
Crescent Plaza
201 Needham Street
163 Highland Avenue
Vermont
Home Depot, Shaw's (Supervalu)
Michael's
Staples, Petco
1998
1993
2014
2015
100.0 %
100.0 %
100.0 %
100.0 %
130,021
218,148
20,409
40,505
100.0 %
90.9 %
100.0 %
100.0 %
100.0 %
90.9 %
100.0 %
100.0 %
1,360,858
1,764,520
591,861
1,311,747
10.47
8.90
29.00
32.38
The Gateway Shopping Center
Shaw's (Supervalu)
1999
100.0 %
101,655
95.3 %
98.2 %
1,956,540
20.20
Illinois
Hobson West Plaza
Garden Fresh Markets
1998
100.0 %
99,137
83.0 %
85.8 %
897,118
10.90
25
Property (a)
Key Tenants
Year
Acquired
Acadia's
Interest
Gross
Leasable
Area (GLA)
In Place
Occupancy
Leased
Occupancy
Annualized
Base Rent
(ABR)
ABR/ Per
Square
Foot
Jo-Ann Fabrics, TJ Maxx
1998
100.0 %
236,087
96.8 %
96.8 %
3,350,975
14.66
Best Buy, Home Goods, TJ Maxx, Dick's
Sporting Goods
1998
100.0 %
235,786
90.6 %
90.6 %
3,266,797
15.29
Babies 'R' Us
1999
100.0 %
123,335
77.1 %
82.7 %
1,255,391
13.20
Indiana
Merrillville Plaza
Michigan
Bloomfield Town Square
Ohio
Mad River Station
Delaware
Town Center
Lowes, Bed Bath & Beyond, Target,
Dick's Sporting Goods
Market Square Shopping Center
Trader Joe's, TJ Maxx
—
Kmart
Home Depot
Kmart
—
Target, TJ Maxx
Naamans Road
Pennsylvania
Mark Plaza
Plaza 422
Route 6 Plaza
Chestnut Hill
Abington Towne Center (e)
Total Suburban Properties
Acadia Share Total Suburban Properties
TOTAL CORE PROPERTIES
Acadia Share Total Core Properties
__________
2003
2003
2006
1993
1993
1994
2006
1998
61.1 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
824,411
102,047
19,850
106,856
156,279
175,589
37,646
216,278
4,581,751
4,099,922
6,329,335
5,640,010
89.2 %
100.0 %
30.1 %
100.0 %
100.0 %
100.0 %
100.0 %
94.5 %
93.9%
94.3%
93.5%
93.9%
93.8 %
100.0 %
63.9 %
100.0 %
100.0 %
100.0 %
100.0 %
94.5 %
95.1%
95.3%
94.9%
95.3%
12,107,759
3,034,567
433,785
244,279
850,978
1,327,169
953,589
914,927
67,315,431
59,105,909
160,748,098
139,637,361
16.46
29.74
72.60
2.29
5.45
7.56
25.33
16.50
16.57
16.30
28.30
27.61
(a) The above occupancy and rent amounts do not include space which is currently leased, other than "leased occupancy," but for which rent payment has
not yet commenced. Residential and office GLA are excluded.
(b) Represents the annual base rent paid to Acadia pursuant to a master lessee and does not reflect the rent paid by the retail tenants at the property.
(c) Excludes 94,000 square feet of office GLA.
(d) Anchor GLA includes a 97,300 square foot Wal-Mart store which is not owned by the Company. This square footage has been excluded for calculating
annualized base rent per square foot.
(e) Anchor GLA includes a 157,616 square foot Target store which is not owned by the Company. This square footage has been excluded for calculating
annualized base rent per square foot.
The following table sets forth more specific information with respect to each of our Fund properties at December 31, 2017:
Property (a)
Key Tenants
Year
Acquired
Acadia's
Interest
Gross
Leasable
Area (GLA)
In Place
Occupancy
Leased
Occupancy
Annualized
Base Rent
(ABR)
ABR/ Per
Square
Foot
Fund II Portfolio Detail
New York
City Point - Phase I and II
—
2007
26.7%
475,000
475,000
72.6 %
72.6 %
80.1 % $
9,384,250
80.1 % $
9,384,250
$
$
27.21
27.21
Total - Fund II
Fund III Portfolio Detail
New York
654 Broadway
640 Broadway
3104 M Street
Nostrand Avenue
Total - Fund III
— % $
— $
—
975,313
325.28
—
1,738,116
—
46.71
67.51
82.9 % $
2,713,429
$
70.6 %
— %
96.8 %
—
Swatch
—
—
2011
2012
2012
2013
24.5%
15.5%
19.6%
24.5%
2,896
4,247
3,608
42,628
53,379
— %
70.6 %
— %
87.3 %
75.3 %
26
Property (a)
Key Tenants
Year
Acquired
Acadia's
Interest
Gross
Leasable
Area (GLA)
In Place
Occupancy
Leased
Occupancy
Annualized
Base Rent
(ABR)
ABR/ Per
Square
Foot
Fund IV Portfolio Detail
New York
801 Madison Avenue
210 Bowery
27 East 61st Street
17 East 71st Street
1035 Third Avenue (b)
Colonie Plaza
New Jersey
Paramus Plaza
Massachusetts
—
—
—
The Row
—
Price Chopper, Big Lots
2015
2012
2014
2014
2015
2016
23.1%
23.1%
23.1%
23.1%
23.1%
23.1%
2,625
2,300
4,177
8,432
7,617
153,483
— %
— %
— %
— % $
— $
— %
— %
—
—
100.0 %
100.0 %
1,988,159
67.1 %
96.9 %
67.1 %
96.9 %
982,035
1,680,527
—
—
—
235.79
192.14
11.30
Babies R Us, Ashley Furniture
2013
11.6%
152,509
88.3 %
88.3 %
2,385,448
17.71
Restaurants at Fort Point
—
2016
23.1%
15,711
100.0 %
100.0 %
329,155
20.95
Maine
Airport Mall
Wells Plaza
Shaw's Plaza (Waterville)
Shaw's Plaza (Windham)
JFK Plaza
Pennsylvania
Dauphin Plaza
Hannaford, Marshalls
Reny's, Dollar Tree
Shaw's
Shaw's
Hannaford, TJ Maxx
Price Rite, Ashley Furniture
Mayfair Shopping Center
—
Home Depot
Food Lion
Virginia
Promenade at Manassas
Lake Montclair
Delaware
Eden Square
Illinois
938 W. North Avenue
Lincoln Place
Georgia
2016
2016
2016
2017
2016
2016
2016
2013
2013
23.1%
23.1%
23.1%
23.1%
23.1%
23.1%
23.1%
22.8%
23.1%
221,830
90,434
119,015
124,330
151,107
205,727
115,411
265,442
105,832
89.2 %
92.4 %
89.2 %
94.4 %
100.0 %
100.0 %
86.5 %
78.0 %
84.2 %
62.4 %
86.4 %
98.5 %
86.5 %
78.0 %
84.2 %
62.4 %
86.4 %
98.5 %
1,272,679
680,143
1,407,316
1,008,393
761,510
1,656,365
1,365,002
2,978,427
2,009,651
6.43
8.14
11.82
9.38
6.46
9.56
18.95
12.99
19.28
Giant Food, LA Fitness
2014
22.8%
231,044
73.9 %
88.9 %
2,432,867
14.25
Sephora
Kohl's, Marshall's
2013
2017
23.1%
23.1%
33,228
271,866
16.1 %
91.2 %
16.1 %
91.2 %
326,350
2,884,796
61.00
11.63
Broughton Street Portfolio - 19 properties
J. Crew, L'Occitane, Lululemon, Michael
Kors
2014
11.6%
115,640
76.3 %
76.3 %
3,441,130
39.00
North Carolina
Wake Forest Crossing
California
146 Geary Street
Union and Fillmore Collection - 4 properties
Total - Fund IV
Fund V Portfolio Detail
—
—
—
2016
23.1%
203,131
98.5 %
98.5 %
2,955,442
14.77
2015
2015
23.1%
20.8%
11,436
10,048
2,622,375
— %
71.1 %
85.3 %
— %
71.1 %
—
689,790
86.7 % $
33,235,185
$
—
96.55
14.86
New Mexico
Plaza Santa Fe
Michigan
New Towne Plaza
Fairlane Green
North Carolina
Hickory Ridge
Total - Fund V
TOTAL FUND PROPERTIES
Acadia Share of Total Fund Properties
__________
TJ Maxx, Best Buy, Ross Dress for Less
2017
20.1%
224,223
88.3 %
97.3 % $
3,401,093
$
17.18
Kohl's, Jo-Ann's, DSW
TJ Maxx, Bed Bath & Beyond, Michaels
2017
2017
20.1%
20.1%
190,530
252,904
96.3 %
100.0 %
96.3 %
100.0 %
2,163,338
5,225,804
Kohl's, Best Buy, Dick's
2017
20.1%
380,565
1,048,222
4,198,976
923,247
98.7 %
96.4 %
86.5%
86.3%
98.7 %
4,140,630
98.3 % $
14,930,865
88.8% $
60,263,729
88.5% $
13,058,882
$
$
$
11.79
20.66
11.02
14.78
16.59
16.39
(a) Excludes properties under development, see “Development Activities” section below. The above occupancy and rent amounts do not include space
which is currently leased, other than "leased occupancy," but for which rent payment has not yet commenced. Residential and office GLA are excluded.
(b) Property also includes 12,371 square feet of 2nd floor office space and a 29,760 square foot parking garage (131 spaces).
27
Major Tenants
No individual retail tenant accounted for more than 5.3% of base rents for the year ended December 31, 2017, or occupied more
than 6.5% of total leased GLA as of December 31, 2017. The following table sets forth certain information for the 20 largest retail
tenants by base rent for leases in place as of December 31, 2017. 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
H & M
Royal Ahold (b)
Walgreens
Best Buy (c)
Nordstrom, Inc.
Albertsons Companies (d)
Bed, Bath, and Beyond (e)
Ascena Retail Group (f)
LA Fitness International LLC
Lululemon
Trader Joe's
TJX Companies (g)
Home Depot
Gap
Tapestry 8
JP Morgan Chase
Ulta Salon Cosmetic & Fragrance
DSW
Mattress Firm
Total
__________
Number of
Stores in
Portfolio (a)
Percentage of Total
Represented by Retail Tenant
Total GLA
Annualized
Base Rent (a)
Total Portfolio
GLA
Annualized Base
Rent
3
2
4
5
2
2
3
3
5
2
2
3
7
3
3
2
7
3
2
8
367
$
81
208
78
87
89
171
115
23
100
8
41
208
313
37
4
29
31
36
39
7,424
5,310
3,653
3,599
3,595
3,339
3,304
2,797
2,567
2,525
2,268
2,226
2,095
1,894
1,747
1,463
1,405
1,395
1,319
1,289
6.5%
1.4%
3.7%
1.4%
1.5%
1.6%
3.0%
2.0%
0.4%
1.8%
0.1%
0.7%
3.7%
5.5%
0.7%
0.1%
0.5%
0.6%
0.6%
0.7%
5.3%
3.8%
2.6%
2.6%
2.6%
2.4%
2.4%
2.0%
1.8%
1.8%
1.6%
1.6%
1.5%
1.4%
1.3%
1.0%
1.0%
1.0%
0.9%
0.9%
71
2,065
$
55,214
36.6%
39.5%
(a) Does not include tenants that operate at only one Acadia Core location
(b) Stop and Shop (4 locations)
(c) One of these Best Buy leases with GLA of 57,298 square feet was terminated in January 2018
(d) Shaw’s (2 locations), Acme (1 location)
(e) Bed Bath and Beyond (2 locations), Christmas Tree Shops (1 location)
(f) Ann Taylor Loft (2 locations), Catherine’s (1 location), Dress Barn (1 location), Lane Bryant (1 location)
(g) TJ Maxx (4 locations), Marshalls (1 location), HomeGoods (2 locations)
28
Lease Expirations
The following tables show scheduled lease expirations on a pro rata basis for retail tenants in place as of December 31, 2017,
assuming that none of the tenants exercise renewal options (GLA and Annualized Base Rent in thousands):
Core Portfolio
Funds
Leases Maturing in
Month to Month
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Thereafter
Total
Leases Maturing in
Month to Month
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
Thereafter
Total
Annualized Base Rent (a, b)
GLA
Number of
Leases
Current Annual
Rent
Percentage of
Total
8
55
56
58
78
56
44
44
41
30
27
38
535
$
$
525
9,734
9,391
12,592
17,065
12,320
16,588
15,202
11,446
5,203
5,270
24,301
139,637
0.4%
7.0%
6.7%
9.0%
12.2%
8.8%
11.9%
10.9%
8.2%
3.7%
3.8%
17.4%
100.0%
Square Feet
28
313
508
595
837
426
517
485
262
133
172
763
5,039
Percentage
of Total
0.4%
2.9%
10.1%
9.7%
10.8%
15.7%
8.4%
6.9%
9.4%
5.3%
2.6%
17.8%
100.0%
Annualized Base Rent (a, b)
GLA
Number of
Leases
Current Annual
Rent
Percentage of
Total
8
41
33
44
68
43
30
18
20
27
20
21
373
$
$
63
604
545
1,205
2,031
1,266
842
956
769
782
824
3,172
13,059
0.6%
4.6%
5.7%
13.8%
16.9%
9.9%
8.6%
5.9%
2.9%
5.1%
4.4%
21.6%
100.0%
Square Feet
4
37
45
110
134
78
69
47
23
40
35
172
794
Percentage
of Total
0.5%
4.6%
4.2%
9.2%
15.6%
9.7%
6.4%
7.3%
5.9%
6.0%
6.3%
24.3%
100.0%
__________
(a) Base rents do not include percentage rents, additional rents for property expense reimbursements, nor contractual rent
escalations.
(b) 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.
29
Geographic Concentrations
The following table summarizes our operating retail properties by region as of December 31, 2017. 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
Midwest
Southeast
Southwest
Mid-Atlantic
Total Fund Operating
Properties
__________
1,675
772
687
694
140
354
1,318
5,640
198
5
70
241
89
137
45
138
923
87% $
47,459
$
96%
93%
89%
75%
99%
94%
10,204
37,583
8,770
6,600
13,865
15,157
32.53
15.66
58.88
14.16
63.36
39.68
13.91
30%
14%
12%
12%
2%
6%
24%
34%
7%
27%
6%
5%
10%
11%
94% $
139,638
$
27.61
100%
100%
78% $
4,434
$
31%
83%
85%
98%
96%
88%
84%
143
742
1,959
1,485
1,914
684
1,698
28.66
96.56
12.68
9.56
16.93
14.51
17.18
14.72
21%
1%
8%
26%
10%
15%
5%
14%
34%
1%
6%
15%
11%
15%
5%
13%
86% $
13,059
$
16.39
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, 2017.
(c) The amounts presented reflect the Operating Partnership's pro-rata shares of properties included within each region.
30
Development Activities
As part of our strategy, we invest in real estate assets that may require significant development. As of December 31, 2017, we had
6 development projects, of which two are under construction and four are in various stages of the development process.
Property
Location
(dollars in millions)
Costs
to Date
Anticipated
Additional
Costs (a)
Status
Square
Feet Upon
Completion
Estimated
Stabilization Date
Cortlandt Crossing
Mohegan Lake, NY
$
40.4
$ 20.0 to
$ 25.0
Construction commenced
Broad Hollow Commons
Farmingdale, NY
Total Fund III
650 Bald Hill Road (b,c)
717 N. Michigan Avenue
Total Fund IV
613-623 West Diversey
56 E. Walton Street
Total Core
Total
__________
Warwick, RI
Chicago, IL
Chicago, IL
Chicago, IL
16.5
56.9
33.0
109.2
142.2
16.1
8.5
24.6
2.5 to
10.8 to
13.3
6.9 to
2.0 to
8.9
18.3
21.8
8.4
3.0
11.4
$
223.7
$ 75.7
$ 101.7
33.5 to
53.5
43.5
68.5
Pre-construction
3.5
Construction commenced
Pre-construction
130,000
180,000 -
200,000
161,000
62,000
Construction commenced
Construction commenced
30,000
TBD
2019
2020
2018
2018
2018
2018
(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) Represents an unconsolidated property.
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.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
31
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, 2017 and 2016:
Quarter Ended
2017
March 31, 2017
June 30, 2017
September 30, 2017
December 31, 2017
2016
March 31, 2016
June 30, 2016
September 30, 2016
December 31, 2016
__________
(a)
High
Low
Dividend
Per Share
$
$
$
$
33.45
32.02
30.36
30.63
35.24
35.98
38.01
36.02
$
$
29.23
26.70
26.97
26.85
30.25
32.76
34.91
31.31
0.26
0.26
0.26
0.27
0.25
0.25
0.25
0.41
(a) Includes a special dividend of $0.15 for the quarter ended December 31, 2016
At February 20, 2018, there were 280 holders of record of our Common Shares.
We have determined for income tax purposes that 78% of the total dividends distributed to shareholders during 2017 represented
ordinary income and 22% represented capital gains. The dividend for the quarter ended December 31, 2017, was paid on January
12, 2018, and is taxable in 2017. 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 Board of Trustees and will
depend on our actual cash flows, our financial condition, capital requirements, the annual distribution requirements under the
REIT provisions of the Internal Revenue Code and such other factors as the Board of 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% paid in cash.
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.
32
The following table provides information related to the Second Amended 2006 Plan as of December 31, 2017:
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, 2017
Outstanding OP Units as of December 31, 2017
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
1,727,407
—
1,727,407
83,708,140
4,716,572
88,424,712
8,893,681
8,893,681
(4,394,501)
(2,771,773)
1,727,407
The following graph compares the cumulative total shareholder return for our Common Shares for the period commencing
December 31, 2012, through December 31, 2017, 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, 2012, 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.
33
Index
Acadia Realty Trust
Russell 2000
NAREIT All Equity REIT Index
SNL REIT Retail Shopping Ctr Index
$
2012
2013
At December 31,
2015
2014
2016
2017
$
100.00
100.00
100.00
100.00
$
102.39
138.82
102.86
106.84
$
137.70
145.62
131.68
138.44
$
148.00
139.19
135.40
145.85
$
150.95
168.85
147.09
150.94
131.10
193.58
159.85
134.21
Recent Sales of Unregistered Securities Use of Proceeds from Registered Securities
None.
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,
2017. Under this program we have repurchased 2.1 million Common Shares, none of which were repurchased after December
2001. As of December 31, 2017, management may repurchase up to approximately $7.5 million of our outstanding Common
Shares under this program. On February 20, 2018, this plan was revised as discussed in Note 17.
34
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,
2017 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.”
(dollars in thousands, except per share amounts)
2017
2016
2015
2014
2013
Year Ended December 31,
OPERATING DATA:
Revenues
Operating expenses, excluding depreciation and reserves
Depreciation and amortization
Impairment charges
Equity in earnings and gains unconsolidated affiliates
inclusive of gains on disposition of properties
Interest income
Gain on change in control and other
Interest expense
Income from continuing operations before income taxes
Income tax (provision) benefit
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
$
250,262
$
189,939
$
199,063
$
179,681
$ 156,486
(113,554)
(104,934)
(14,455)
23,371
29,143
5,571
(58,978)
16,426
(1,004)
15,422
—
48,886
64,308
(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
(79,104)
(49,645)
—
111,578
12,607
2,724
(72,108)
(40,299)
(1,500)
12,382
11,800
—
(37,297)
(39,426)
(40,239)
62,694
(1,787)
138,415
26,522
(629)
(19)
60,907
137,786
—
89,063
149,970
1,222
13,138
26,503
18,137
—
152,146
44,640
(2,838)
(61,816)
(84,262)
(80,059)
7,523
—
—
—
(1,023)
(12,048)
Net income attributable to noncontrolling interests
(2,838)
(61,816)
(84,262)
(81,082)
(4,525)
Net income attributable to Acadia
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
61,470
$
72,776
$
65,708
$
71,064
$
40,115
61,470
—
61,470
0.73
—
0.73
0.73
—
0.73
$
$
$
$
$
$
72,776
—
72,776
0.94
—
0.94
0.94
—
0.94
$
$
$
$
$
$
65,708
—
65,708
0.94
—
0.94
0.94
—
0.94
$
$
$
$
$
$
70,865
199
71,064
1.18
—
1.18
1.18
—
1.18
$
$
$
$
$
$
34,026
6,089
40,115
0.61
0.11
0.72
0.61
0.11
0.72
83,683
83,685
76,231
76,244
68,851
68,870
59,402
59,426
54,919
54,982
1.05
$
1.16
$
1.22
$
1.23
$
0.86
$
$
$
$
$
$
$
$
35
BALANCE SHEET DATA:
Real estate before accumulated depreciation
$ 3,466,482
$ 3,382,000
$ 2,736,283
$ 2,208,595
$1,819,053
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
3,960,247
1,424,409
1,567,199
648,440
3,995,960
1,488,718
1,588,577
589,548
3,032,319
2,720,721
2,264,957
1,358,606
1,118,602
1,039,997
1,100,488
1,055,541
420,866
380,416
704,236
417,352
2,215,639
2,178,125
1,521,354
1,435,957
1,121,588
134,667
117,070
111,560
78,882
67,161
119,833
10,082
111,760
113,598
82,519
65,233
(610,970)
(354,503)
(268,516)
(87,879)
(126,897)
498,239
96,101
324,388
10,022
(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. Management’s Discussion and Analysis — Supplemental Financial Measures.”
36
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
OVERVIEW
As of December 31, 2017, there were 176 properties, which we own or have an ownership interest in, within our Core Portfolio
and 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 properties
primarily consist of street and urban retail, and dense suburban shopping centers. See Item 2. Properties for a summary of our
wholly-owned and partially-owned retail properties and their physical occupancies at December 31, 2017.
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, the Operating
Partnership invests 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.
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 THE YEAR ENDED DECEMBER 31, 2017
Investments
During the year ended December 31, 2017, within our Core and Fund portfolios we invested in six new properties as follows (Note
2):
• On December 20, 2017, Fund V acquired a consolidated suburban shopping center in Allen Park, Michigan for $62.0
million referred to as “Fairlane Green.”
• On August 4, 2017, Fund V acquired a consolidated suburban shopping center in Canton, Michigan for $26.0 million
referred to as “New Towne Plaza.”
• On July 27, 2017, Fund V acquired a consolidated suburban shopping center in Hickory, North Carolina for $44.0 million
referred to as “Hickory Ridge.”
• On June 5, 2017, Fund V acquired a consolidated suburban shopping center in Santa Fe, New Mexico for $35.2 million
referred to as “Plaza Santa Fe.”
• On March 13, 2017, Fund IV acquired a consolidated shopping center for $35.4 million referred to as “Lincoln Place”
•
in Fairview Heights, Illinois.
In our Core portfolio one of our investments, in which we hold a 20% interest (Note 4), acquired a property in Alexandria,
Virginia for $3.0 million referred to as “907 King Street” on January 4, 2017.
37
In addition, we converted existing notes receivable (Note 3) into interests in the underlying real estate collateral as follows:
• On May 1 and November 16, 2017, we exchanged a total of $92.7 million of our $153.4 million Core notes receivable
plus accrued interest of $1.8 million for the remaining undivided interest in Market Square, which was subsequently
consolidated, as well as an incremental 38.89% undivided interest in Town Center (Note 4).
• On June 30, 2017, Fund IV exchanged a $9.0 million note receivable for a consolidated shopping center located in
Windham, Maine referred to as “Shaw’s Plaza – Windham.”
Dispositions of Real Estate
During the year ended December 31, 2017, within our Funds we sold 13 properties for an aggregate sales price of $345.8 million
and our proportionate share of the aggregate gains was $15.6 million as follows (Note 2, Note 4):
• On December 21 and October 3, 2017, Fund IV sold five unconsolidated properties for aggregate proceeds of $11.0
million and recognized a gain of $0.6 million, of which our pro-rata share was $0.1 million and was recognized within
equity in earnings of unconsolidated affiliates in the consolidated statements of income.
• On December 13, 2017, Fund II sold a consolidated property, 260 East 161st Street, for $105.7 million and recognized
a gain of $31.5 million, of which our share was $9.0 million net of amounts attributable to noncontrolling interests.
• On November 16, 2017, Fund IV sold a consolidated property, 1151 Third Avenue, for $27 million and recognized a gain
of $5.2 million, of which our share was $1.2 million net of amounts attributable to noncontrolling interests.
• On October 13, 2017, Fund II sold a consolidated property, City Point Tower I, for $96 million and recognized a loss of
$0.8 million, of which our share was $1.6 million net of amounts attributable to noncontrolling interests. In addition, we
recognized an impairment charge of $3.8 million, inclusive of an amount attributable to a noncontrolling interest of $2.7
million on the property (Note 8).
• On September 11, 2017, Fund II sold a consolidated property, 216th Street, for $30.6 million and recognized a gain of
$6.5 million, of which our share was $1.8 million net of amounts attributable to noncontrolling interests.
• On July 6, 2017, Fund III sold a consolidated property, New Hyde Park Shopping Center, for $22.1 million and recognized
a gain of $6.4 million, of which our share was $1.6 million net of amounts attributable to noncontrolling interests.
• On June 30, 2017, Fund IV sold an unconsolidated property, 1701 Belmont Avenue, for $5.6 million for which the gain
was $3.3 million of which our pro-rata share was $0.8 million and was recognized within equity in earnings of
unconsolidated affiliates in the consolidated statements of income.
• On February 15, 2017, Fund III sold an unconsolidated property, Arundel Plaza, for $28.8 million for which the gain was
$8.2 million of which our pro-rata share was $1.3 million and was recognized within equity in earnings of unconsolidated
affiliates in the consolidated statements of income.
• On January 31, 2017, Fund IV sold an unconsolidated property, 2819 Kennedy Boulevard, for $19.0 million, for which
the gain was $6.3 million of which our pro-rata share was $1.4 million and was recognized within equity in earnings of
unconsolidated affiliates in the consolidated statements of income.
Financings
During the year ended December 31, 2017, we obtained aggregate financing of $352.9 million including (Note 7):
• We obtained an aggregate of $162.9 million in financings with eleven new non-recourse mortgages, primarily for Fund
IV.
• On September 30, 2017, Fund II closed on a new $40.0 million term loan.
• On May 4, 2017, Fund V closed on a new $150.0 million subscription line.
We also repaid thirteen mortgages aggregating $280.8 million.
Structured Financing
During the year ended December 31, 2017 (Note 3) we entered into the following structured financing transactions:
• On May 1 and November 16, 2017, we exchanged a total of $92.7 million of our $153.4 million Core notes receivable
plus accrued interest of $1.8 million for the remaining undivided interest in Market Square, which was subsequently
consolidated, as well as an incremental 38.89% undivided interest in Town Center (Note 4).
• On June 30, 2017, Fund IV exchanged a $9.0 million note receivable plus accrued interest of $0.1 million thereon for an
investment in a shopping center in Windham, Maine (Note 2).
38
• We received full settlement of a $12.0 million Core note receivable plus $4.8 million interest and fees thereon. The note
had previously been in default and was settled in bankruptcy proceedings during the second quarter.
• We funded an additional $10.0 million on an existing $10.0 million note receivable, all of which was subsequently repaid.
Retail Real Estate Trends
Our performance is driven, in part, by factors affecting the retail sector. Trends affecting the retail sector over the past few years
include changes related to: department stores, apparel spending, consumer demographics and retail technology including internet
shopping; as well as the maturity of the retail industry. The number of full-line department stores has been declining steadily and
many tenants are reducing both the number and size of stores they lease. Further, consumers are spending less on apparel and
housewares and more on entertainment and dining out. Although internet sales are continuing to trend up, these sales constitute
a relatively small portion of total consumer spending. As delivery costs impede growth, internet retailers are continuing to move
towards an “omni-channel” retailing approach whereby brick and mortar retail still plays a critical role in attracting and retaining
consumers. We have and will continue to focus on owning assets in locations that maximize our potential to address these ongoing
industry changes and challenges.
Tax Cuts and Jobs Act
The Tax Cuts and Jobs Act (the ‘‘Act’’) enacted in December 2017, makes substantial changes to the Federal income tax laws.
These changes include a reduction in the generally applicable corporate tax rate to 21%, substantial limitations on the deductibility
of interest, and preferential rates of taxation on most ordinary REIT dividends and certain business income derived by non-corporate
taxpayers. The Act also limits the use of net operating losses, which may require us to make additional distributions to our
stockholders. The effect of these, and the many other, changes made in the Act is highly uncertain, both in terms of their direct
effect on the taxation of an investment in our common stock and their indirect effect on the value of our assets or market conditions
generally. Furthermore, many of the provisions of the Act will require guidance through the issuance of Treasury regulations in
order to assess their effect. There may be a substantial delay before such regulations are promulgated, increasing the uncertainty
as to the ultimate effect of the Act on us. There may be technical corrections legislation with respect to the Act this year, the effect
of which cannot be predicted. However, the Company has recorded an adjustment of $2.0 million to its deferred tax assets at
December 31, 2017 owned by its taxable subsidiaries to reflect the lower Federal corporate tax rate and other provisions effective
in 2018.
Share Repurchase Plan
In February 2018, our board of trustees elected to terminate the existing repurchase program and authorized a new common share
repurchase program under which we may repurchase, from time to time, up to a maximum of $200.0 million of our common shares
(Note 17). The shares may be repurchased in the open market or in privately negotiated transactions. The timing and actual number
of shares repurchased will depend on a variety of factors, including, share price in relation to the estimated value of our assets,
corporate and regulatory requirements, market conditions and other corporate liquidity requirements and priorities. The common
share repurchase program does not obligate us to repurchase any specific number of shares and may be suspended or terminated
at any time at our discretion without prior notice.
39
RESULTS OF OPERATIONS
See Note 12 in the Notes to Consolidated Financial Statements for an overview of our three reportable segments.
Comparison of Results for the Year Ended December 31, 2017 to the Year Ended December 31, 2016
The results of operations by reportable segment for the year ended December 31, 2017 compared to the year ended December 31,
2016 are summarized in the table below (in millions, totals may not add due to rounding):
Year Ended December 31, 2017
Year Ended December 31, 2016
Increase (Decrease)
Core
Funds
SF
Total
Core
Funds
SF
Total
Core
Funds
SF
Total
$170.0
$ 80.3
$ — $ 250.3
$150.2
$ 39.7
$ — $189.9
$ 19.8
$ 40.6
$ — $ 60.4
(61.7)
(43.2)
— (104.9)
(54.6)
(15.4)
— (70.0)
7.1
27.8
—
34.9
(39.6)
(17.8)
— (57.4)
(45.3)
(34.4)
— (14.5)
—
—
62.9
(11.8)
—
—
5.6
48.9
— 29.1
—
—
(79.8)
(14.5)
(33.8)
17.3
48.9
29.1
5.6
—
—
56.0
—
—
—
—
—
6.5
82.0
—
—
— (40.6)
—
—
21.9
82.0
25.8
— 25.8
—
—
—
5.7
—
—
6.9
16.6
14.5
—
(18.3)
—
—
—
—
22.4
14.5
(6.8)
(4.6)
— (33.1)
— (33.1)
—
5.6
—
—
3.3
—
3.3
5.6
3.7
19.6
(28.6)
(30.4)
—
43.6
—
26.3
29.1
23.4
3.8
(59.0)
(27.4)
35.7
(7.2)
—
39.4
(0.1)
(16.1)
— (16.0)
— (34.6)
1.2
23.2
—
24.4
(1.0)
64.3
—
—
—
0.1
—
—
32.4
116.9
25.8
134.6
11.2
(90.6)
—
3.3
(1.1)
(70.3)
(1.1)
(1.7)
—
(2.8)
(3.4)
(58.4)
— (61.8)
(2.3)
(56.7)
— (59.0)
$ 42.5
$ 24.6
$29.1
$ 61.5
$ 29.0
$ 58.5
$ 25.8
$ 72.8
$ 13.5
$(33.9) $ 3.3
$(11.3)
—
—
—
—
—
—
—
—
Revenues
Depreciation and
amortization
Property operating
expenses, other operating
and real estate taxes
Impairment charges
General and administrative
expenses
Operating income
Gain on disposition of
properties
Interest income
Gain on change in control
Equity in earnings and
gains of unconsolidated
affiliates inclusive of gains
on disposition of properties
Interest expense
Income tax (provision)
benefit
Net income
Net income attributable to
noncontrolling interests
Net income attributable
to Acadia
Core Portfolio
The results of operations for our Core Portfolio segment are depicted in the table above under the headings labeled “Core.” Segment
net income attributable to Acadia for our Core Portfolio increased by $13.5 million for the year ended December 31, 2017 compared
to the prior year as a result of the changes as further described below.
Revenues from our Core Portfolio increased by $19.8 million for the year ended December 31, 2017 compared to the prior year
due to $22.7 million related to Core property acquisitions in 2016 partially offset by $3.8 million attributable to the deconsolidation
of the Brandywine Portfolio in 2016.
Depreciation and amortization for our Core Portfolio increased by $7.1 million for the year ended December 31, 2017 compared
to the prior year due to $10.3 million of additional depreciation related to Core property acquisitions in 2016 partially offset by
$3.4 million of additional depreciation and amortization related to an adjustment for tenant kick-out options in 2016 (Note 1).
Property operating, other operating expenses and real estate taxes for our Core Portfolio increased by $5.7 million for the year
ended December 31, 2017 compared to the prior year primarily due to Core property acquisitions in 2016.
40
The gain on change in control of $5.6 million during the year ended December 31, 2017 resulted from the consolidation of our
investment in Market Square upon acquisition of the outstanding third party interests (Note 4).
Interest expense for the Core Portfolio increased $1.2 million for the year ended December 31, 2017 compared to the prior year
due to $2.1 million from higher average principal balance in 2017 and a $0.9 million increase in capital lease interest in 2017,
partially offset by $1.0 million due to lower average interest rates.
Net income attributable to noncontrolling interests decreased $2.3 million due to the change in control of the Brandywine Portfolio
in 2016.
Funds
The results of operations for our Funds segment are depicted in the table above under the headings labeled “Funds.” Segment net
income attributable to Acadia for the Funds decreased by $33.9 million for the year ended December 31, 2017 compared to the
prior year as a result of the changes described below.
Revenues from the Funds increased by $40.6 million for the year ended December 31, 2017 compared to the prior year primarily
due to $26.1 million related to Fund property acquisitions in 2016 and 2017 as well as $13.6 million from development projects
being placed in service during 2017 (Note 2).
Depreciation and amortization for the Funds increased by $27.8 million for the year ended December 31, 2017 compared to the
prior year primarily due to $15.9 million related to Fund property acquisitions in 2016 and 2017 as well as $11.0 million from the
development projects being placed in service during 2017.
Property operating, other operating expenses and real estate taxes for the Funds increased by $16.6 million for the year ended
December 31, 2017 compared to the prior year due to $8.5 million from the development projects placed into service in 2017 as
well as $6.8 million from Fund property acquisitions in 2016 and 2017.
Impairment charges during the year ended December 31, 2017 totaled $14.5 million, comprised of charges of $10.6 million for a
property classified as held for sale in 2017 and $3.8 million,for a property sold in 2017 (Note 8).
Gain on disposition of properties for the Funds decreased by $33.1 million for the year ended December 31, 2017 compared to
the prior year. Gains during the current year period comprised $31.5 million from the sale of Fund II’s 260 E. 161st Street property,
$6.5 million from the sale of Fund II’s 216th Street property, $5.2 million from Fund IV’s 1151 Third Avenue property and $6.4
million from the sale of Fund III’s New Hyde Park Shopping Center. Gains during the prior year period comprised $16.6 million
from the sale of Fund III’s Heritage Shops and $65.4 million from the sale of a 65% interest in Cortlandt Town Center.
Equity in earnings of unconsolidated affiliates for the Funds decreased by $16.1 million for the year ended December 31, 2017
compared to the prior year primarily due to the Fund’s proportionate share of $14.8 million in aggregate gains from the sales of
1701 Belmont Avenue, Arundel Plaza and 2819 Kennedy Boulevard during the current year period as well as distributions in
excess of our carrying value related to investments in Mervyn’s and Albertsons (Note 4) versus the Fund’s proportionate share of
$36.0 million from the sale of Cortlandt Town Center in 2016.
Interest expense for the Funds increased $23.2 million for the year ended December 31, 2017 compared to the prior year due to
$7.8 million less interest capitalized during 2017, a $6.0 million increase related to higher average interest rates in 2017, a $5.1
million increase related to higher average outstanding borrowings in 2017, and a $2.9 million increase in amortization of additional
loan costs in 2017.
Net income attributable to noncontrolling interests in the Funds decreased by $56.7 million for the year ended December 31, 2017
compared to the prior year due to the noncontrolling interests’ share of the variances discussed above.
Structured Financing
The results of operations for our Structured Financing segment are depicted in the table above under the headings labeled “SF.” Net
income for Structured Financing increased by $3.3 million compared to the prior year primarily due to the recognition of additional
interest of $3.6 million during the current year on the repayment of a note (Note 3) and new loans originated during 2016. These
increases were partially offset by the conversion of a portion of a note receivable into increased ownership in the real estate (Note
4).
41
Unallocated
The Company does not allocate general and administrative expense and income taxes to its reportable segments. These unallocated
amounts are depicted in the table above under the headings labeled “Total.” General and administrative expenses decreased by
$6.8 million primarily as a result of the acceleration of equity-based compensation awards related to retirements in 2016 totaling
$4.2 million as well as increased compensation expense in 2016, which included $3.9 million related to the Program (Note 13).
The income tax provision for 2017 relates to increased income of the taxable REIT subsidiaries and adjustments to reflect the new
provisions of the Tax Cuts and Jobs Act (Note 14).
Comparison of Results for the Year Ended December 31, 2016 to the Year Ended December 31, 2015
The results of operations by reportable segment for the year ended December 31, 2016 compared to the year ended December 31,
2015 are summarized in the table below (in millions, totals may not add due to rounding):
Year Ended December 31, 2016
Year Ended December 31, 2015
Increase (Decrease)
Core
Funds
SF
Total
Core
Funds
SF
Total
Core
Funds
SF
Total
$150.2
$ 39.7
$ — $189.9
$150.0
$ 49.0
$ — $199.1
$ 0.2
$ (9.3) $ — $ (9.2)
(54.6)
(15.4)
— (70.0)
(46.2)
(14.5)
— (60.8)
8.4
0.9
—
9.2
Revenues
Depreciation and
amortization
Property operating
expenses, other operating
and real estate taxes
Impairment charges
General and
administrative expenses
(39.6)
(17.8)
— (57.4)
(37.3)
(21.2)
— (58.5)
Operating income (loss)
56.0
Gain on disposition of
properties
Interest income
—
—
82.0
—
—
—
—
—
6.5
—
—
(5.0)
— (40.6)
—
—
25.8
21.9
82.0
25.8
—
61.5
—
—
—
—
13.3
89.1
—
—
(5.0)
2.3
(5.0)
— (30.4)
—
(3.4)
—
—
—
—
—
(1.1)
(5.0)
10.2
—
—
16.6
44.5
(5.5)
(6.8)
— (22.6)
89.1
16.6
—
—
(7.1)
—
—
9.2
(7.1)
9.2
Equity in earnings and
gains of unconsolidated
affiliates inclusive of
gains on disposition of
properties
Other
Interest expense
Income tax benefit
(provision)
Net income (loss)
Net (income) loss
attributable to
noncontrolling interests
Net income attributable
to Acadia
Core Portfolio
3.8
—
35.7
—
—
—
39.4
—
1.2
—
36.2
—
—
1.6
37.3
1.6
2.6
—
(0.5)
—
(27.4)
(7.2)
— (34.6)
(27.9)
(9.4)
— (37.3)
(0.5)
(2.2)
—
—
—
0.1
—
—
—
(1.8)
—
—
32.4
116.9
25.8
134.6
34.8
129.2
18.2
150.0
(2.4)
(12.3)
—
(1.6)
—
2.1
(1.6)
(2.7)
—
7.6
1.9
(15.4)
$ (3.4) $(58.4) $ — $(61.8) $ (0.1) $(84.1) $ — $(84.3) $ 3.3
$(25.7) $ — $(22.5)
$ 29.0
$ 58.5
$ 25.8
$ 72.8
$ 34.6
$ 45.0
$ 18.2
$ 65.7
$ (5.6) $ 13.5
$ 7.6
$ 7.1
Segment net income attributable to Acadia for our Core Portfolio decreased by $5.6 million for the year ended December 31, 2016
compared to the prior year as a result of the changes described below.
Revenues from our Core Portfolio increased by $0.2 million for the year ended December 31, 2016 compared to the prior year as
a result of Core property acquisitions in 2016 and 2015 partially offset by a $9.3 million decrease in revenues due to the change
in control of the Brandywine Portfolio in 2016 (Note 4).
42
Depreciation and amortization for our Core Portfolio increased by $8.4 million for the year ended December 31, 2016 compared
to the prior year due to Core property acquisitions in 2016 and 2015.
Property operating, other operating expenses and real estate taxes for our Core Portfolio increased by $2.3 million for the year
ended December 31, 2016 compared to the prior year due to real estate taxes related to the Core property acquisitions in 2016 and
2015 and a general increase in real estate taxes.
Impairment charges of $5.0 million in 2015 relate to a property within the Brandywine Portfolio (Note 8).
Equity in earnings of unconsolidated affiliates for the Core Portfolio increased by $2.6 million due to the change in control of the
Brandywine Portfolio in 2016 of $1.3 million and the Company's new investment in Gotham Plaza of $0.8 million.
Net income attributable to noncontrolling interests in our Core Portfolio increased by $3.3 million for the year ended December 31,
2016 compared to the prior year primarily due to the deconsolidation of the Brandywine Portfolio during 2016 (Note 4).
Funds
Segment net income attributable to Acadia for the Funds increased by $13.5 million for the year ended December 31, 2016 compared
to the prior year as a result of the changes described below.
Revenues from the Funds decreased by $9.3 million for the year ended December 31, 2016 compared to the prior year primarily
as a result of a decrease of $12.7 million relating to Fund property dispositions in 2016 and 2015 partially offset by additional
rental income of $4.3 million related to Fund property acquisitions in 2016 and 2015.
Property operating, other operating expenses and real estate taxes for the Funds decreased by $3.4 million for the year ended
December 31, 2016 compared to the prior year due to real estate taxes, which decreased $2.1 million primarily as a result of the
Fund property dispositions in 2016.
Gain on disposition of properties for the Funds decreased by $7.1 million for the year ended December 31, 2016 compared to the
prior year (Note 2). 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.
Equity in earnings of unconsolidated affiliates for the Funds decreased by $0.5 million for the year ended December 31, 2016
compared to the prior year (Note 4). The amount for 2016 includes a $36.0 million gain on disposition of properties of unconsolidated
affiliates in the Funds representing our pro-rata share from the sale of 35% of Cortlandt Town Center. The amount for 2015 includes
a $24.0 million gain on disposition of properties of unconsolidated affiliates in the Funds representing our pro-rata share from the
sales of White City Shopping Center and Parkway Crossing. This was offset by distributions at the Mervyns/Shopko investments
of $5.3 million in 2015 and additional depreciation expense related to the demolition of a building at Arundel Plaza for $5.6 million
in 2015.
Interest expense for the Funds decreased by $2.2 million for the year ended December 31, 2016 compared to the prior year due
to $4.7 million more interest capitalized and a $0.3 million decrease in amortization of additional loan costs in 2016. These were
offset by a $1.6 million increase related to higher average outstanding borrowings in 2016 and a $1.2 million increase related to
higher average interest rates in 2016.
Net income attributable to noncontrolling interests in the Funds decreased by $25.7 million for the year ended compared to the
prior year due to the noncontrolling interests’ share of the variances discussed above.
Structured Financing
Interest income and segment net income attributable to Acadia from Structured Financing increased by $9.2 million for the year
ended December 31, 2016 compared to the prior year primarily due to earnings from loans originated during 2015 and 2016 and
the recapture of previously established reserves of $3.4 million during 2016. Other income decreased $1.6 million for the year
ended December 31, 2016 compared to the prior year due to the collection of a note receivable, default interest and other costs,
in excess of carrying value during 2015.
43
Unallocated
The Company does not allocate general and administrative expense and income taxes to its reportable segments. General and
administrative expenses increased by $10.2 million or the year ended December 31, 2016 compared to the prior year 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.
The provision for income taxes changed by $1.9 million primarily as a result of 2015 corporate Federal income taxes incurred by
a Fund IV investor.
SUPPLEMENTAL FINANCIAL 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.
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 thousands):
Consolidated Operating Income
Add back:
General and administrative
Depreciation and amortization
Impairment charges
Less:
Above/below market rent, straight-line rent and other adjustments
Consolidated NOI
Year Ended December 31,
2016
2015
2017
$
17,319
$
21,889
$
44,462
33,756
104,934
14,455
(21,110)
149,354
40,648
70,011
—
30,368
60,751
5,000
(5,313)
127,235
(8,192)
132,389
Noncontrolling interest in consolidated NOI
(28,379)
(20,872)
(34,675)
Less: Operating Partnership's interest in Fund NOI included above
(7,927)
(4,981)
(5,767)
Add: Operating Partnership's share of
unconsolidated joint ventures NOI (a)
NOI - Core Portfolio
__________
19,539
16,547
$
132,587
$
117,929
$
10,382
102,329
(a) Does not include the Operating Partnership’s share of NOI from unconsolidated joint ventures within the Funds
44
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 sell, and developed during these periods. The following table summarizes
Same-Property NOI for our Core Portfolio (in thousands):
Core Portfolio NOI
Less properties excluded from Same-Property NOI
Same-Property NOI
Percent change from prior year period
Components of Same-Property NOI:
Same-Property Revenues
Same-Property Operating Expenses
Same-Property NOI
Year Ended December 31,
2017
132,587
(31,778)
100,809
0.1%
137,590
(36,781)
100,809
$
$
$
$
$
$
$
$
2016
117,929
(17,172)
100,757
133,086
(32,329)
100,757
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, 2017. 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
GLA commencing
New base rent
Expiring base rent
Percent growth in base rent
Average cost per square foot
Weighted average lease term (years)
__________
Year Ended
December 31, 2017
Cash Basis
Straight-Line
Basis
72
500,028
23.63
21.66
9.1%
6.16
5.3
$
$
$
72
500,028
24.23
20.48
18.3%
6.16
5.3
$
$
$
(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
45
and joint ventures. A reconciliation of net income attributable to Acadia to FFO follows (dollars in thousands, except per share
amounts):
(dollars in thousands except per share data)
Year Ended December 31,
2016
2015
2017
Net income attributable to Acadia
$
61,470
$
72,776
$
65,708
Depreciation of real estate and amortization of leasing costs (net of
noncontrolling interests' share)
Impairment charges (net of noncontrolling interests’ share)
Gain on sale (net of noncontrolling interests’ share)
Income attributable to Common OP Unit holders
Distributions - Preferred OP Units
Funds from operations attributable to Common Shareholders and
Common OP Unit holders
83,515
1,088
(15,565)
3,609
550
67,446
—
(28,154)
4,442
560
52,013
1,111
(11,114)
3,811
31
$
134,667
$
117,070
$
111,560
Funds From Operations per Share - Diluted
Basic weighted-average shares outstanding,
GAAP earnings
Weighted-average OP Units outstanding
Basic weighted-average shares outstanding, FFO
Assumed conversion of Preferred OP Units
to common shares
Assumed conversion of options, LTIP units and
restricted share units to common shares
Diluted weighted-average number of Common Shares
and Common OP Units outstanding, FFO
Diluted Funds from operations, per Common Share
and Common OP Unit
LIQUIDITY AND CAPITAL RESOURCES
Uses of Liquidity and Cash Requirements
83,682,789
4,741,058
88,423,847
76,231,000
4,435,041
80,666,041
68,851,083
3,894,542
72,745,625
505,045
435,274
25,067
69,488
150,843
296,815
88,998,380
81,252,158
73,067,507
$
1.51
$
1.44
$
1.53
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. During the year ended December 31, 2017, we paid dividends and distributions on our Common Shares, Common
OP Units and Preferred OP Units totaling $106.7 million. This amount included a $13.3 million special dividend that was paid in
January 2017, which related to the Operating Partnership’s share of cash proceeds from property dispositions during 2016. The
balance of the distributions were funded from the Operating Partnership’s share of operating cash flow.
Distributions of $8.4 million were made to noncontrolling interests in Fund III during the year ended December 31, 2017. These
resulted from proceeds related to the dispositions of New Hyde Park Shopping Center (Note 2) and Arundel Plaza (Note 4).
Distributions of $23.5 million were made to noncontrolling interests in Fund IV during the year ended December 31, 2017. These
resulted from proceeds related to the dispositions of 1151 Third Avenue (Note 2), 2819 Kennedy Boulevard, 1701 Belmont Avenue,
and five properties within our Broughton Street Portfolio (Note 4).
46
Investments in Real Estate
During the year ended December 31, 2017, within our Core and Fund portfolios we acquired seven properties aggregating $214.7
million as follows:
•
•
•
•
Fund V acquired four consolidated properties totaling $167.2 million (Note 2);
Fund IV acquired a consolidated property for $35.4 million (Note 2);
Fund IV acquired a consolidated property in exchange for a $9.1 million note receivable plus accrued interest (Note 2,
Note 3); and
In our Core portfolio, our Renaissance investment, in which we hold a 20% interest, acquired a $3.0 million property
(Note 4).
Capital Commitments
During the year ended December 31, 2017, we made capital contributions of $11.1 million to Fund IV, $9.2 million to Fund V,
and $3.6 million to Fund III in connection with acquisitions and development costs. At December 31, 2017, our share of the
remaining capital commitments to our Funds aggregated $131.9 million as follows:
•
•
•
•
Fund II was launched in June 2004 with total committed capital of $300.0 million of which our share was $85.0 million,
which has been fully funded.
$9.5 million to Fund III. Fund III was launched in May 2007 with total committed capital of $450.0 million of which our
original share was $89.6 million. During 2015, we acquired an additional interest, which had an original capital
commitment of $20.9 million.
$27.1 million to Fund IV. Fund IV was launched in May 2012 with total committed capital of $530.0 million of which
our original share was $122.5 million.
$95.3 million to Fund V. Fund V was launched in August 2016 with total committed capital of $520.0 million of which
our initial share is $104.5 million.
Development Activities
During the year ended December 31, 2017, capitalized costs associated with development activities totaled $108.1 million. These
costs primarily related to Fund II’s City Point project. At December 31, 2017, we had 6 properties under development for which
the estimated total cost to complete these projects through 2020 was $75.7 million to $101.7 million and our share was approximately
$25.1 million to $33.2 million.
Debt
A summary of our consolidated debt, which includes the full amount of Fund related obligations and excludes our pro rata share
of debt at our unconsolidated subsidiaries, is as follows (in thousands):
Total Debt - Fixed and Effectively Fixed Rate
Total Debt - Variable Rate
Net unamortized debt issuance costs
Unamortized premium
Total Indebtedness
December 31,
2017
December 31,
2016
$
899,650
$
538,736
1,438,386
(14,833)
856
860,486
645,185
1,505,671
(18,289)
1,336
$
1,424,409
$
1,488,718
As of December 31, 2017, our consolidated outstanding mortgage and notes payable aggregated $1,438.4 million, excluding
unamortized premium of $0.9 million and unamortized loan costs of $14.8 million, and were collateralized by 42 properties and
related tenant leases. Interest rates on our outstanding indebtedness ranged from 1.00% to 5.89% with maturities that ranged from
May 1, 2018, to April 15, 2035. Taking into consideration $504.0 million of notional principal under variable to fixed-rate swap
agreements currently in effect, $899.7 million of the portfolio debt, or 62.5%, was fixed at a 3.74% weighted-average interest rate
and $538.7 million, or 37.5% was floating at a 3.44% weighted average interest rate as of December 31, 2017. Our variable-rate
debt includes $196.4 million of debt subject to interest rate caps.
47
There is $87.7 million of debt maturing in 2018 at a weighted-average interest rate of 4.17%; there is $6.7 million of scheduled
principal amortization due in 2018; and our share of scheduled remaining 2018 principal payments and maturities on our
unconsolidated debt was $7.9 million at December 31, 2017. In addition, $213.6 million of our total consolidated debt and $1.0
million of our pro-rata share of unconsolidated debt will come due in 2019. As it relates to the maturing debt in 2018 and 2019,
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 we will be able to obtain financing at acceptable terms.
A mortgage loan in the Company’s Core Portfolio for $26.3 million was in default at December 31, 2017 and December 31, 2016
(Note 7). In April 2017, the lender on this mortgage initiated a lawsuit against the Company for the full balance of the principal,
accrued interest as well as penalties and fees aggregating approximately $32.1 million. The Company’s management believes that
the mortgage is not recourse to the Company and that the suit is without merit.
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, 2017 totaled $74.8 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. There were no issuances
of equity under the ATM program during the year ended December 31, 2017.
Fund Capital
During the year ended December 31, 2017, noncontrolling interest capital contributions to Fund IV of $37.0 million, to Fund V
of $36.6 million, and to Fund III of $11.2 million were primarily used to fund recent acquisitions and development activities. At
December 31, 2017, unfunded capital commitments from noncontrolling interests within our Funds III, IV and V were $29.1
million, $90.2 million and $378.9 million, respectively.
Asset Sales
As previously discussed, during the year ended December 31, 2017, within our Fund portfolio we sold five consolidated and eight
unconsolidated properties for an aggregate sales price of $345.8 million for which our proportionate share of the aggregate gains
was $15.6 million (Note 2, Note 4).
Structured Financing Repayments
During 2017, we received total collections on our notes receivable of $32.0 million, including full repayment of two notes issued
in prior periods (Note 3). Scheduled principal collections for 2018 total $41.0 million.
Financing and Debt
As of December 31, 2017, we had $166.5 million of additional capacity under existing revolving debt facilities. In addition, at
that date we had 71 unleveraged consolidated properties with an aggregate carrying value of approximately $1.6 billion and 25
unleveraged unconsolidated properties for which our share of the carrying value was $62.9 million, although there can be no
assurance that we would be able to obtain financing for these properties at favorable terms, if at all.
48
HISTORICAL CASH FLOW
Cash Flows for 2017 Compared to 2016
The following table compares the historical cash flow for the year ended December 31, 2017 with the cash flow for the year ended
December 31, 2016 (in millions):
Year Ended December 31,
2016
2017
Variance
Net cash provided by operating activities
Net cash provided by (used in) investing activities
Net cash (used in) provided by financing activities
Increase (decrease) in cash and cash equivalents
Operating Activities
$
$
119.8
10.1
(126.9)
3.0
$
$
$
111.8
(611.0)
498.2
(1.0) $
8.0
621.1
(625.1)
4.0
Our operating activities provided $8.0 million more cash during the year ended December 31, 2017, primarily due to additional
cash flow from 2016 and 2017 Core and Fund acquisitions partially offset by a $27.0 million rent prepayment received from a
tenant in 2016.
Investing Activities
During the year ended December 31, 2017 as compared to the year ended December 31, 2016, our investing activities used $621.1
million less cash, primarily due to (i) $291.8 million less cash used for the acquisition of real estate, (ii) $146.8 million less cash
used for the issuance of notes receivable, (iii) $111.8 million more cash received from disposition of properties, including
unconsolidated affiliates, (iv) $65.6 million less cash used for investments and advances to unconsolidated investments, and (v)
$41.3 million less cash used for development and property improvement costs. These items were partially offset by (i) $30.5
million less cash received from return of capital from unconsolidated affiliates, and (ii) $10.8 million less cash received from
repayments of notes receivable.
Financing Activities
Our financing activities provided $625.1 million less cash during the year ended December 31, 2017, primarily from (i) $450.1
million less cash received from the issuance of Common Shares, (ii) a decrease in cash of $209.9 million from capital contributions
from noncontrolling interests, and (iii) a decrease of $19.4 million of cash provided from net borrowings. These items were partially
offset by a decrease of $66.1 million in cash distributions to noncontrolling interests.
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.
49
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.
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 seven of our properties and the lease for our corporate
office and (iii) construction commitments as of December 31, 2017 (in millions):
Contractual Obligations
Principal obligations on debt
Interest obligations on debt
Lease obligations (a)
Construction commitments (b)
Total
__________
Payments Due by Period
Total
$ 1,438.4
217.3
207.2
92.2
$ 1,955.1
Less than
1 Year
$
$
94.4
60.7
4.5
92.2
251.8
1 to 3
Years
$ 790.0
92.5
8.9
—
$ 891.4
3 to 5
Years
$ 353.9
34.4
8.7
—
$ 397.0
$
$
More
than
5 Years
200.1
29.7
185.1
—
414.9
(a) A ground lease expiring during 2078 provides the Company with 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.
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 non-recourse debt related to those investments is as follows (dollars in millions):
50
Investment
230/240 W. Broughton
Promenade at Manassas
650 Bald Hill
Eden Square
Gotham Plaza (a)
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,
2017
11.6% $
22.8%
20.8%
22.8%
49.0%
20.0%
49.0%
88.4%
50.0%
$
1.2
5.7
2.9
5.1
10.0
32.0
33.0
65.0
8.4
163.3
4.37%
3.07%
4.02%
3.52%
2.97%
3.07%
3.94%
4.36%
4.72%
Maturity Date
May 2018
November 2018
April 2020
June 2020
June 2023
August 2023
October 2024
February 2025
December 2027
(a) Our unconsolidated affiliate is a party to an interest rate LIBOR swap with a notional value of $20.4 million, which
effectively fixes the interest rate at 3.49% and matures in June 2023.
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
following critical accounting policies affect the significant judgments and estimates used by us in the preparation of our Consolidated
Financial Statements.
Valuation of Properties
On a quarterly basis, we review the carrying value of properties held for use and for sale as well as our development properties.
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, 2017, 2016 and 2015.
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,
2017 and 2016, the allowance for doubtful accounts totaled $5.9 million and $5.7 million, respectively. If the financial condition
51
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 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.
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 accounting pronouncements.
52
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information as of December 31, 2017
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 and cap agreements. As of December 31, 2017, we had total mortgage and other notes payable of $1,438.4 million, excluding
the unamortized premium of $0.9 million and unamortized loan costs of $14.8 million, of which $899.7 million, or 62.5% was
fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $538.7 million, or 37.5%,
was variable-rate based upon LIBOR or Prime rates plus certain spreads. As of December 31, 2017, we were party to 27 interest
rate swap and four interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $504.0 million
and $196.4 million of LIBOR-based variable-rate debt, respectively.
The following table sets forth information as of December 31, 2017 concerning our long-term debt obligations on a pro-rata share
basis, 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
Scheduled
Amortization
Maturities
Total
Weighted-Average
Interest Rate
2018
2019
2020
2021
2022
Thereafter
Fund Consolidated Mortgage and Other Debt
Year
2018
2019
2020
2021
2022
Thereafter
$
$
$
$
3.1
3.0
3.1
3.2
3.4
17.4
33.2
Scheduled
Amortization
0.7
0.8
0.5
0.5
0.4
0.1
3.0
$
$
$
$
45.9
—
91.5
200.0
50.0
147.7
535.1
Maturities
5.1
46.0
111.8
11.3
10.1
7.0
191.3
Mortgage Debt in Unconsolidated Partnerships (at our Pro-Rata Share)
Scheduled
Amortization
Maturities
2018
2019
2020
2021
2022
Thereafter
$
$
6.9
—
8.0
—
—
140.4
155.3
$
$
1.0
1.0
1.1
1.1
1.2
2.6
8.0
53
$
$
$
$
$
$
49.0
3.0
94.6
203.2
53.4
165.1
568.3
4.2%
—%
2.7%
2.7%
3.0%
3.7%
Total
Weighted-Average
Interest Rate
5.8
46.8
112.3
11.8
10.5
7.1
194.3
3.6%
4.2%
3.9%
3.5%
3.4%
3.6%
Total
Weighted-Average
Interest Rate
7.9
1.0
9.1
1.1
1.2
143.0
163.3
3.1%
—%
1.9%
—%
—%
3.9%
In 2018, $94.4 million of our total consolidated debt and $7.9 million of our pro-rata share of unconsolidated outstanding debt
will become due. In addition, $213.6 million of our total consolidated debt and $1.0 million of our pro-rata share of unconsolidated
debt will become due in 2019. 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 $3.1 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 $1.0 million. Interest expense on our variable-rate debt of $538.7 million, net of variable to fixed-rate
swap agreements currently in effect, as of December 31, 2017, would increase $5.4 million if LIBOR increased by 100 basis
points. After giving effect to noncontrolling interests, our share of this increase would be $1.3 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, 2017, the fair value of our total consolidated outstanding debt would
decrease by approximately $15.9 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 $17.3 million.
As of December 31, 2017, and December 31, 2016, we had consolidated notes receivable of $153.8 million and $276.2 million,
respectively. We determined the estimated fair value of our notes receivable 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, 2017, the fair value of our total outstanding notes receivable
would decrease by approximately $1.9 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 $2.0 million.
Summarized Information as of December 31, 2016
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 interest
rate swaps, and $645.2 million, or 42.9%, was variable-rate based upon LIBOR plus certain spreads. As of December 31, 2016,
we were party to 18 interest rate swap and four interest rate cap agreements 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.
Interest expense on our variable-rate debt of $645.2 million as of December 31, 2016, would have increased $6.5 million if LIBOR
increased by 100 basis points. Based on our outstanding debt balances as of December 31, 2016, the fair value of our total
outstanding debt would have decreased by approximately $20.3 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 $22.8 million.
Changes in Market Risk Exposures from 2016 to 2017
Our interest rate risk exposure from December 31, 2016, to December 31, 2017, has decreased on an absolute basis, as the $645.2
million of variable-rate debt as of December 31, 2016, has decreased to $538.7 million as of December 31, 2017. As a percentage
of our overall debt, our interest rate risk exposure has decreased as our variable-rate debt accounted for 42.9% of our consolidated
debt as of December 31, 2016, and decreased to 37.5% as of December 31, 2017.
54
ITEM 8. FINANCIAL STATEMENTS.
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, 2017 and 2016
Consolidated Statements of Income for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
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
56
57
58
59
60
62
64
105
106
111
55
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Trustees of Acadia Realty Trust
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Acadia Realty Trust and subsidiaries (the “Company”) as of
December 31, 2017 and 2016, 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, 2017 and the related notes and financial statement
schedules listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion, the financial statements
present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of
its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting
principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 27, 2018, expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error
or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ BDO USA, LLP
We have served as the Company’s auditor since 2005.
New York, New York
February 27, 2018
56
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
ASSETS
Investments in real estate, at cost
Operating real estate, net
Real estate under development
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 obligation
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 200,000,000 and 100,000,000 shares,
issued and outstanding 83,708,140 and 83,597,741 shares, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Distributions in excess of accumulated earnings
Total Acadia shareholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
December 31,
2017
2016
$
$
$
$
2,952,918
173,702
3,126,620
153,829
302,070
214,959
74,823
51,738
10,846
25,362
3,960,247
909,174
473,735
41,500
210,052
70,611
24,244
15,292
1,744,608
84
1,596,514
2,614
(32,013)
1,567,199
648,440
2,215,639
3,960,247
$
$
$
$
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
1,055,728
432,990
—
208,672
70,129
36,625
13,691
1,817,835
84
1,594,926
(798)
(5,635)
1,588,577
589,548
2,178,125
3,995,960
The accompanying notes are an integral part of these consolidated financial statements
57
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(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 charges
Total operating expenses
Operating income
Equity in earnings and gains of unconsolidated affiliates inclusive of gains
on disposition of properties of $15,336, $35,950 and $24,043, respectively
Interest income
Interest expense
Gain on change in control and other
Income from continuing operations
before income taxes
Income tax (provision) benefit
Income from continuing operations before gain
on disposition of properties
Gain on disposition of properties, net of tax
Net income
Net income attributable to noncontrolling interests
Net income attributable to Acadia
Basic and diluted earnings per share
Year Ended December 31,
2017
2016
2015
$
$
$
198,941
44,907
6,414
250,262
104,934
33,756
35,946
41,668
2,184
14,455
232,943
17,319
23,371
29,143
(58,978)
5,571
16,426
(1,004)
15,422
48,886
64,308
(2,838)
61,470
0.73
$
$
$
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)
72,776
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
(37,297)
1,596
62,694
(1,787)
60,907
89,063
149,970
(84,262)
65,708
0.94
The accompanying notes are an integral part of these consolidated financial statements
58
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive income (loss):
Year Ended December 31,
2016
2015
2017
$
64,308
$
134,592
$
149,970
Unrealized income (loss) on valuation of swap agreements
634
(646)
(5,061)
Reclassification of realized interest on swap agreements
Other comprehensive income
Comprehensive income
3,317
3,951
68,259
4,576
3,930
5,524
463
138,522
150,433
Comprehensive income attributable to noncontrolling interests
Comprehensive income attributable to Acadia
(3,377)
64,882
$
(62,081)
76,441
$
(85,183)
65,250
$
The accompanying notes are an integral part of these consolidated financial statements.
59
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years Ended December 31, 2017, 2016 and 2015
(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
83,598
$
84
$ 1,594,926
$
(798) $
(5,635) $
1,588,577
$
589,548
$2,178,125
Balance at
January 1, 2017
Conversion of OP Units to
Common Shares by limited
partners of the Operating
Partnership
Dividends/distributions
declared ($1.05 per
Common Share/OP Unit)
Employee and trustee stock
compensation, net
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Reallocation of
noncontrolling interests
Comprehensive income
Balance at
December 31, 2017
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/distributions
declared ($1.16 per
Common Share/OP Unit)
Acquisition of
noncontrolling interests
Employee and trustee stock
compensation, net
Change in control of
previously unconsolidated
investment
Windfall tax benefit
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Comprehensive income
Reallocation of
noncontrolling interests
Balance at
December 31, 2016
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
87
—
23
—
—
—
—
—
—
—
—
—
—
—
1,541
—
698
—
—
(651)
—
—
1,541
(1,541)
—
(87,848)
(87,848)
(6,453)
(94,301)
698
—
—
10,457
11,155
(32,805)
(32,805)
85,206
85,206
(651)
64,882
651
3,377
—
68,259
3,412
61,470
83,708
$
84
$ 1,596,514
$
2,614
$
(32,013) $
1,567,199
$
648,440
$2,215,639
70,258
$
70
$ 1,092,239
$
(4,463) $
12,642
$
1,100,488
$
420,866
$1,521,354
351
12,961
—
—
—
28
—
—
—
—
—
—
1
13
—
—
—
—
—
—
—
—
—
—
7,891
450,117
—
—
7,546
926
—
555
—
—
—
—
—
—
7,892
(7,892)
—
450,130
—
450,130
—
31,429
31,429
(91,053)
(91,053)
(6,753)
(97,806)
7,546
(25,925)
(18,379)
926
—
555
—
—
76,441
35,652
12,768
13,694
(75,713)
(75,713)
—
555
(80,769)
(80,769)
295,108
62,081
295,108
138,522
(35,652)
—
3,665
72,776
35,652
—
—
83,598
$
84
$ 1,594,926
$
(798) $
(5,635) $
1,588,577
$
589,548
$2,178,125
60
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Years Ended December 31, 2017, 2016 and 2015
(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
(Continued)
Balance at
January 1, 2015
Conversion of OP Units to
Common Shares by limited
partners of the Operating
Partnership
Issuance of Common
Shares, net of issuance
costs
Acquisition of
noncontrolling interests
Dividends/distributions
declared ($1.22 per
Common Share/OP Unit)
Employee and trustee stock
compensation, net
Noncontrolling interest
distributions
Noncontrolling interest
contributions
Comprehensive (loss)
income
Balance at
December 31, 2015
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
(2,451)
—
64,417
—
64,417
(4,409)
(3,561)
(7,970)
(84,683)
(84,683)
(5,983)
(90,666)
—
—
—
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
The accompanying notes are an integral part of these consolidated financial statements.
61
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31,
2016
2015
2017
$
64,308
$
134,592
$
149,970
(48,886)
(5,571)
104,934
9,249
(23,371)
11,155
5,985
14,455
(10,610)
(4,285)
(6,498)
(11,274)
11,474
8,768
119,833
(200,429)
(108,142)
(10,600)
260,711
(6,535)
23,946
32,000
(2,000)
26,045
(5,202)
288
10,082
(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
1,424
24,586
(7,515)
(2,578)
(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
(5,776)
38,392
(8,207)
—
(354,503)
(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
Gain on change in control
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 charges
Other, net
Changes in assets and liabilities:
Other liabilities
Prepaid expenses and other assets
Rents receivable, net
Restricted cash
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 or advances on 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
Deposits for properties under contract
Proceeds from disposition of properties of unconsolidated affiliates
Payment of deferred leasing costs
Change in control of previously unconsolidated (consolidated) affiliate
Net cash provided by (used in) investing activities
62
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage and other notes
Principal payments on unsecured debt
Proceeds received on mortgage and other notes
Proceeds from unsecured debt
Proceeds from issuance of Common Shares, net of
issuance costs of $0, $9,238 and $1,150, 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 (used in) provided by financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year
Supplemental disclosure of cash flow information
Cash paid during the period for interest, net of
capitalized interest of $13,509, $21,109 and $16,447, respectively
Cash paid for income taxes, net of (refunds)
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 note receivable
Acquisition of undivided interest in a property
through conversion of notes receivable
Change in control of previously unconsolidated (consolidated) investment
(Increase) decrease in real estate, net
Gain on change in control
Decrease in notes receivable
Decrease (increase) in investments in
and advances to unconsolidated affiliates
Decrease in noncontrolling interest
Change in other assets and liabilities
Increase (decrease) in cash upon change of control
Year Ended December 31,
2017
2016
2015
(306,119)
(277,134)
156,344
359,625
—
85,206
(39,942)
(99,527)
(6,211)
861
—
(126,897)
3,018
71,805
74,823
49,942
875
$
$
$
— $
— $
— $
— $
2,173
—
—
9,000
60,695
$
$
$
$
(394,864)
(541,790)
222,071
666,716
450,130
295,108
(105,994)
(91,334)
(11,678)
9,874
—
498,239
(971)
72,776
71,805
42,279
2,036
120,672
29,336
76,461
63,900
3,587
$
$
$
$
$
$
$
$
2,226
$
$
$
— $
— $
(39,322) $
5,571
32,010
4,159
—
(2,130)
288
$
$
90,559
—
—
(21,421)
(75,713)
3,997
(2,578) $
(148,423)
(234,815)
90,234
417,425
63,234
35,489
(84,610)
(86,353)
(4,376)
48,676
(380)
96,101
(144,804)
217,580
72,776
47,960
2,038
91,885
—
—
—
—
—
(29,539)
(28,912)
13,386
—
—
—
—
—
—
—
—
$
$
$
$
$
$
$
$
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
63
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO 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, 2017 and
December 31, 2016, 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, 2017, the Company has ownership interests in 118 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
58 properties within its opportunity funds, 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”). Acadia Strategic Opportunity Fund I, LP (“Fund I,” together with Funds II, III, IV, and V, the “Funds”) was
liquidated in 2015. The 176 Core Portfolio and Fund properties primarily consist of street and urban retail, and 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 the Funds’ economic
performance, (ii) is obligated to absorb the Funds’ 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 II (dollars
in millions):
Operating
Partnership
Share of
Capital
Capital Called
as of
December 31,
2017
Unfunded
Commitment
Equity Interest
Held By
Operating
Partnership (a)
Preferred
Return
Total
Distributions
as of
December 31,
2017 (b)
28.33%
24.54%
23.12%
20.10%
$
347.1 $
411.5
412.7
45.8
—
38.5
117.3
474.2
28.33%
24.54%
23.12%
20.10%
$
8%
6%
6%
6%
131.6
551.9
131.5
—
Formation
Date
6/2004
5/2007
5/2012
8/2016
Entity
Fund II and Mervyns II
Fund III
Fund IV
Fund V
__________
(a) Amount represents the current economic ownership at December 31, 2017, which could differ from the stated legal ownership based upon
the cumulative preferred returns of the respective fund.
(b) Represents the total for the Funds, including the Operating Partnership and noncontrolling interests’ shares.
64
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Basis of Presentation
Segments
At December 31, 2017, 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. 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.
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.
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.
Use of Estimates
GAAP requires 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
65
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
and assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these
estimates.
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 of 40 years for buildings and 15 years for improvements
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.
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
66
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
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. See Note 8 for information about impairment
charges incurred during the periods presented.
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
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 periods presented
there were no impairment charges related to the Company’s investments in unconsolidated joint ventures.
67
Cash and Cash Equivalents
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
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 records 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.
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, 2017 and 2016, unbilled rents receivable relating to the straight-lining of rents
of $37.3 million and $34.9 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
68
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
amount is ultimately deemed to be uncollectible, it is written off. Rents receivable at December 31, 2017 and 2016 are shown net
of an allowance for doubtful accounts of $5.9 million and $5.7 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.
The Tax Cuts and Jobs Act was enacted in December 2017 and is generally effective for tax years beginning in 2018. This new
legislation is not expected to have a material adverse effect on the Company’s business and contains several potentially favorable
provisions. However, the Company has recorded an reduction of $2.0 million to its deferred tax assets to reflect the lower Federal
corporate tax rate and other provisions effective in 2018.
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
69
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
option to elect certain practical expedients or a modified retrospective approach with the cumulative effect recognized at the date
of adoption. Substantially all of the Company’s revenue is derived from its leases and therefore falls outside of the scope of this
guidance. With respect to its fee-derived revenue, the Company does not anticipate any significant changes to the timing of the
Company’s revenue recognition; however, the recognition of gains on sales of properties may be impacted prospectively under
limited circumstances under which collectability may not be reasonably assured or if the Company has continuing involvement
with a sold property. The Company intends to implement the standard using the modified retrospective approach 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. As a lessee, the Company is party to various equipment, ground, and office leases with future payment obligations
aggregating $207.2 million at December 31, 2017 (Note 11) for which the Company expects to record right-of-use assets upon
adoption of ASU 2016-02. 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 also requires that internal leasing costs be expensed as
incurred, as opposed to capitalized and deferred. The Company expects that it will no longer capitalize a significant portion of
internal leasing costs that were previously capitalized. The Company capitalized $1.0 million, $1.1 million and $1.4 million of
internal leasing costs during the years ended December 31, 2017, 2016 and 2015, respectively. ASU 2016-02 will also require
extensive quantitative and qualitative disclosures and is effective beginning after December 15, 2018, but early adoption is
permitted.
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 ASU 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 Company expects to elect the “cumulative distribution approach”
whereby distributions received from equity method investments would be classified as cash flows from operations to the extent
of equity earnings and then as cash flows from investing activities thereafter. Upon the adoption of ASU 2016-15, the Company
expects to reclassify $6.3 million and $0 of its cash inflows from investing activities to cash flows from operating activities in its
historical presentation of cash flows related to its equity method investments for the years ended December 31, 2017 and 2016,
respectively.
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.
It is expected that the new standard will 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. The Company expensed $2.1 million
and $8.2 million of acquisition costs during the year ended December 31, 2017 and 2016, respectively.
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 Emerging Issues Task Force (“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 Staff Accounting Bulletin 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.
70
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
In February 2017, the FASB issued ASU 2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial
Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial
Assets, which amends the guidance on nonfinancial assets in ASC 610-20. The amendments clarify that (i) a financial asset is
within the scope of ASC 610-20 if it meets the definition of an in substance nonfinancial asset and may include nonfinancial assets
transferred within a legal entity to a counter-party, (ii) an entity should identify each distinct nonfinancial asset or in substance
nonfinancial asset promised to a counter-party and de-recognize each asset when a counter-party obtains control of it, and (iii) an
entity should allocate consideration to each distinct asset by applying the guidance in ASC 606 on allocating the transaction price
to performance obligations. Further, ASU 2017-05 provides guidance on accounting for partial sales of nonfinancial assets. The
amendments are effective at the same time as the amendments in ASU 2014-09. The adoption of ASU 2017-05 is not expected to
have a material impact on the Company's consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,
which clarifies the scope of modification accounting with respect to changes to the terms or conditions of a share-based payment
award. Modification accounting would not apply if a change to an award does not affect the total current fair value (or other
applicable measurement), vesting conditions, or the classification of the award. For all entities, ASU 2017-09 is effective
prospectively for awards modified in fiscal years beginning after December 15, 2017, and interim periods within those annual
periods and early adoption is permitted. The adoption of ASU 2017-09 is not expected to have a material impact on the Company's
consolidated financial statements because the Company has not historically had significant modifications of its awards.
In August 2017, the Financial Accounting Standards Board issued ASU 2017-12, Derivatives and Hedging: Targeted Improvements
to Accounting for Hedging Activities. The purpose of this updated guidance is to better align a company’s financial reporting for
hedging activities with the economic objectives of those activities. ASU 2017-12 is effective for fiscal years beginning after
December 15, 2018, with early adoption, including adoption in an interim period, permitted. The Company plans to adopt ASU
2017-12 effective January 1, 2018. ASU 2017-12 requires a modified retrospective transition method in which the Company will
recognize the cumulative effect of the change on the opening balance of each affected component of equity in the statement of
financial position as of the date of adoption. The adoption will not have a material impact on the Company’s consolidated financial
statements.
71
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO 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 investments in real estate
December 31,
2017
December 31,
2016
$
658,835
$
2,406,488
131,850
18,642
76,965
3,292,780
(339,862)
2,952,918
173,702
693,252
1,916,288
132,220
19,789
76,965
2,838,514
(287,066)
2,551,448
543,486
$
3,126,620
$
3,094,934
72
Acquisitions and Conversions
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
During the years ended December 31, 2017 and December 31, 2016, the Company acquired the following consolidated retail
properties (dollars in thousands):
Percent
Acquired
Date of
Acquisition
Purchase
Price
Debt
Assumed
Property and Location
2017 Acquisitions and Conversions
Core
Market Square Shopping Center - Wilmington, DE
(Conversion) (Note 4)
Subtotal Core
Fund IV
Lincoln Place - Fairview Heights, IL
Shaw's Plaza - Windham, ME (Conversion) (Note 3)
Subtotal Fund IV
Fund V
Plaza Santa Fe - Santa Fe, NM
Hickory Ridge - Hickory, NC
New Towne Plaza - Canton, MI
Fairlane Green - Allen Park, MI
Subtotal Fund V
100%
Nov 16, 2017
$
$
42,800
42,800
100%
100%
Mar 13, 2017
Jun 30, 2017
100%
100%
100%
100%
Jun 5, 2017
Jul 27, 2017
Aug 4, 2017
Dec 20, 2017
35,350
9,142
44,492
35,220
44,020
26,000
62,000
167,240
254,532
$
Mar 26, 2016
$
76,628
$
Total 2017 Acquisitions and Conversions
$
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 (a)
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
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
90%
100%
100%
100%
100%
100%
100%
100%
100%
100%
73
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
103,500
237,250
756,842
$
—
1,463
120,672
$
—
—
—
—
—
—
—
—
—
—
—
—
—
2,902
14,556
25,650
13,409
—
2,692
60,000
119,209
—
1,463
—
—
—
—
—
—
—
—
__________
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(a) These acquisitions were accounted for as asset acquisitions as the underlying properties did not meet the definition of
a business.
All of the above acquisitions and conversions were deemed to be business combinations except 991 Madison Avenue and 1964
Union Street. The Company expensed $2.1 million of acquisition costs for the year ended December 31, 2017, of which $1.2
million related to the Core Portfolio and $0.9 million related to the Funds and $8.2 million of acquisition costs for the year ended
December 31, 2016, of which $5.5 million related to the Core Portfolio and $2.7 million related to the Funds.
Revenues, net loss and loss per share from the Company’s consolidated 2017 acquisitions and conversions totaled $10.2 million,
$3.5 million and $0.04, respectively for the year ended December 31, 2017. Revenues, net loss and loss per share from the
Company’s consolidated 2016 acquisitions totaled $15.3 million, $4.7 million and $0.06, respectively for the year ended
December 31, 2016.
Purchase Price Allocations
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 following table summarizes the allocation of the purchase price of properties
acquired during the years ended December 31, 2017 and December 31, 2016 (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
Conversion of note receivable
Debt assumed
Liabilities assumed
Existing interest in previously unconsolidated investment
Change in control of previously unconsolidated investment
Total Consideration
$
$
$
$
Year Ended
December 31, 2017
Year Ended
December 31, 2016
48,138
$
173,576
84
44,269
(11,535)
—
254,532
$
200,429
$
41,010
—
3,363
4,159
5,571
225,729
458,525
3,481
63,606
(72,985)
(119,601)
558,755
439,546
—
119,209
—
—
—
254,532
$
558,755
74
Dispositions
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
During the years ended December 31, 2017 and December 31, 2016, the Company disposed of the following consolidated properties
(in thousands):
Owner
Date Sold
Sale Price
Gain/(Loss)
on Sale
Property and Location
2017 Dispositions
New Hyde Park Shopping Center - New Hyde Park, NY
216th Street - New York, NY
City Point Condominium Tower I - Brooklyn, NY
1151 Third Avenue - New York, NY
260 E 161st Street - Bronx, NY
Total 2017 Dispositions
2016 Dispositions
Fund III
Fund II
Fund II
Fund IV
Fund II
Jul 6, 2017
$
Sep 11, 2017
Oct 13, 2017
Nov 16, 2017
Dec 13, 2017
22,075
30,579
96,000
27,000
105,684
281,338
107,250
46,500
153,750
$
$
$
$
6,433
6,543
(810)
5,183
31,537
48,886
65,393
16,572
81,965
$
$
$
Cortlandt Town Center (65%) - Mohegan Lake, NY (Note 4)
Fund III
Jan 28, 2016
Heritage Shops - Chicago, IL
Total 2016 Dispositions
Fund III
Apr 26, 2016
The Company has recognized impairment charges during the periods presented related to certain properties classified as held for
sale and or sold (Note 8).
The aggregate rental revenue, expenses and pre-tax income reported within continuing operations for the aforementioned
consolidated properties that were sold during the years ended December 31, 2017, 2016 and 2015 were as follows (in thousands):
Rental revenues
Expenses
Loss on extinguishment of debt
(Loss) income from continuing operations of
disposed properties before gain on disposition of properties
Gain on disposition of properties, net of tax
Net income attributable to noncontrolling interests
Net income attributable to Acadia
Properties Held For Sale
Year Ended
December 31,
2017
2016
2015
13,021
(18,964)
(1,380)
(7,323)
48,886
(30,072)
11,491
$
$
16,946
(13,653)
(81)
3,212
81,965
(70,850)
14,327
$
$
31,935
(27,265)
(111)
4,559
89,063
(1,732)
91,890
$
$
At December 31, 2017, the Company had one property in Fund II classified as held-for-sale, Sherman Avenue, with total assets
of $25.4 million and recognized an impairment charge of $10.6 million inclusive of an amount attributable to a noncontrolling
interest of $7.6 million (Note 8). This property had a net loss of $12.0 million and $0.8 million and $0.0 for the years ended
December 31, 2017, 2016, and 2015, respectively. At December 31, 2015, the property was under development.
At December 31, 2016, the Company had one property in Fund II classified as held-for-sale with total assets of $21.5 million and
subject to a mortgage of $25.5 million.
75
Pro Forma Financial Information (Unaudited)
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The following unaudited pro forma consolidated operating data is presented for the year ended December 31, 2017, as if the
acquisitions of the properties acquired during that period were completed on January 1, 2016 and as if the acquisition of the
properties acquired during the year ended December 31, 2016 were completed on January 1, 2015. The related acquisition expenses
of $2.1 million and $8.2 million reported during the years ended December 31, 2017 and 2016, respectively have been reflected
as pro forma charges at January 1, 2016 and January 1, 2015, 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,
2017
2016
2015
$
266,485
$
247,843
$
243,237
21,878
64,107
0.77
63,681
82,485
1.02
52,442
58,232
0.79
Real estate under development represents the Company’s consolidated properties that have not yet been placed into service while
undergoing substantial development or construction.
Depreciation and amortization expense for the year ended December 31, 2017 includes $2.0 million of accelerated depreciation
related to a building under development that was demolished.
Development activity for the Company’s consolidated properties comprised the following during the periods presented (dollars
in thousands):
December 31, 2016
Number of
Properties
Carrying
Value
Year Ended December 31, 2017
Capitalized
Costs
Transfers
Out
Transfers In
December 31, 2017
Number of
Properties
Carrying
Value
Core
Fund II
Fund III
Fund IV
Total
1
2
3
4
$
3,499
$
22,422
$
819
$
443,012
50,452
46,523
—
—
80,508
6,851
22,572
2,158
4,843
444,955
9,085
46,231
10
$
543,486
$
102,930
$
32,400
$
505,114
2
—
2
1
5
$
21,897
4,908
63,939
82,958
$
173,702
During the year ended December 31, 2017, the Company placed substantially all of Fund II’s City Point project into service as
well as three Fund IV properties, reclassified Fund II’s Sherman Avenue property as held for sale and placed one Core property
into development. In addition to the consolidated projects noted above, the Company had one unconsolidated project remaining
in development after placing three of its four unconsolidated Fund IV development properties into service during the year ended
December 31, 2017.
Construction in progress pertains to construction activity at the Company’s operating properties which are in service and continue
to operate during the construction period.
76
3. Notes Receivable, Net
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The Company’s notes receivable, net were collateralized either by the underlying properties or the borrower’s ownership interest
in the entities that own the properties, and were as follows (dollars in thousands):
Description
2017
2016
Number
Maturity Date
Interest Rate
December 31,
December 31,
December 31, 2017
Core Portfolio
$
101,695
$
216,400
Fund II
Fund III
Fund IV
31,778
5,106
15,250
$
153,829
$
31,007
4,506
24,250
276,163
During the year ended December 31, 2017, the Company:
June 2018 -
April 2019
6.0% - 8.1%
May 2020
2.5%
July 2020
18.0%
February 2021
15.3%
3
1
1
1
6
•
•
•
•
•
•
•
recovered the full value of a $12.0 million Core note receivable, which was previously in default, plus accrued interest
and fees aggregating $16.8 million as further described below;
exchanged $92.7 million of Core notes receivable plus accrued interest thereon of $1.8 million for additional undivided
interests in the Market Square and Town Center properties (Note 4);
funded an additional $10.0 million on an existing Core note receivable, which had a total commitment of $20.0 million,
and was subsequently repaid in full during the fourth quarter;
entered into an agreement to extend the maturity of a $15.0 million Core note receivable to June 1, 2018;
increased the balance of a Fund II note receivable by the interest accrued of $0.8 million;
advanced an additional $0.6 million on a Fund III note receivable; and
exchanged a $9.0 million Fund IV note receivable plus accrued interest of $0.1 million thereon for an investment in a
shopping center in Windham, Maine (Note 2).
During the year ended December 31, 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 loan bears interest at 8.1%
(Note 4).
At December 31, 2016, one of the Core notes receivable in the amount of $12.0 million was in default. As discussed above, the
Company recovered its full carrying value of principal and interest and recognized additional interest income and expense
reimbursements of $2.2 million in the first quarter of 2017 and $1.4 million in the second quarter of 2017 upon settlement of this
transaction.
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).
77
4. Investments In and Advances to Unconsolidated Affiliates
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The Company accounts for its investments in and advances to unconsolidated affiliates primarily 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
Nominal Ownership Interest
December 31, 2017
December 31,
2017
December 31,
2016
$
69,846
$
840 N. Michigan (a)
Renaissance Portfolio
Gotham Plaza
Market Square (a, b)
Town Center (a, b)
Georgetown Portfolio
Mervyns I & II:
KLA/Mervyn's, LLC (c)
Fund III:
Fund IV:
Fund III Other Portfolio
Self Storage Management (d)
Broughton Street Portfolio (e)
Fund IV Other Portfolio
650 Bald Hill Road
88.43%
20%
49%
100%
61.11%
50%
10.5%
90%
95%
50%
90%
90%
Various Funds:
Due from Related Parties (f)
Other (g)
Investments in and advances to unconsolidated affiliates
Core:
__________
Crossroads (h)
Distributions in excess of income from,
and investments in, unconsolidated affiliates
49%
$
$
$
(a) Represents a tenancy-in-common interest.
(b) During May and November 2017, as discussed below, the Company increased its ownership in Market Square and Town
Center, which was formerly included under the caption “Brandywine Portfolio.”
(c) Distributions have exceeded the Company’s non-recourse investment, therefore the carrying value is zero.
(d) Represents a variable interest entity.
(e) The Company is entitled to a 15% return on its cumulative capital contribution which was $15.4 million and $14.5 million
at December 31, 2017 and December 31, 2016, respectively. In addition, the Company is entitled to a 9% preferred return
on a portion of its equity, which was $36.8 million and $45.4 million at December 31, 2017 and December 31, 2016,
respectively.
(f) Represents deferred fees.
(g) Includes a cost-method investment in Albertson’s (Note 8) and other investments.
78
35,041
29,416
—
78,801
3,479
216,583
—
167
206
373
48,335
20,199
13,609
82,143
2,415
556
302,070
15,292
15,292
$
$
$
74,131
36,437
29,421
5,469
15,286
4,287
165,031
—
8,108
241
8,349
54,839
21,817
18,842
95,498
2,193
957
272,028
13,691
13,691
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(h) Distributions have exceeded the Company’s investment; however, the Company recognizes a liability balance as it may
be required to fund future obligations of the entity.
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”), an
88.43% tenancy-in-common interest in an 87,000 square foot retail property located in Chicago, Illinois (“840 N. Michigan”),
and a 49% interest in an approximately 123,000 square foot retail property located in Manhattan, New York (“Gotham Plaza”).
Acquisition of Unconsolidated Investment
On January 4, 2017, an entity in which the Company owns a 20% noncontrolling interest (the “Renaissance Portfolio”), acquired
a 6,200 square foot property in Alexandria, Virginia referred to as (“907 King Street”) for $3.0 million. The Renaissance Portfolio
is now a 213,000 square-foot portfolio of 18 mixed-use properties, 16 of which are located in Georgetown, Washington D.C. and
two of which are located in Alexandria, Virginia.
Brandywine Portfolio, Market Square and Town Center
The Company owns an interest in an approximately one million square foot retail portfolio (the “Brandywine Portfolio” joint
venture) located in Wilmington, Delaware, which includes two properties referred to as “Market Square” and “Town Center.”
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 accounted 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
were unchanged, the Company reflected the change from consolidation to equity method based upon its historical cost. The
Brandywine Portfolio and Market Square ventures do not include the property held by Brandywine Holdings, an entity consolidated
by the Company.
Additionally, in April 2016, the Company repaid the outstanding balance of $140.0 million of non-recourse debt collateralized by
the Brandywine Portfolio and provided a note receivable collateralized by the partners’ tenancy-in-common interest in the
Brandywine Portfolio for their proportionate share of the repayment. On May 1, 2017, the Company exchanged $16.0 million of
the $153.4 million notes receivable (the “Brandywine Notes Receivable”) (Note 3) plus accrued interest of $0.3 million for one
of the partner’s 38.89% tenancy-in-common interests in Market Square. The Company already had a 22.22% interest in Market
Square and continued to apply the equity method of accounting for its aggregate 61.11% noncontrolling interest in Market Square
and its 22.22% interest in Town Center through November 16, 2017. The incremental investment in Market Square was recorded
at $16.3 million and the excess of this amount over the venture’s book value associated with this interest, or $9.8 million, was
being amortized over the remaining depreciable lives of the venture’s assets through November 16, 2017. On November 16, 2017,
the Company exchanged an additional $16.0 million of Brandywine Notes Receivable plus accrued interest of $0.6 million for
the remaining 38.89% interest in Market Square, thereby obtaining a 100% controlling interest in the property. The exchange was
deemed to be a business combination and as a result, the property was consolidated and a gain on change of control of $5.6 million
was recorded (Note 2).
On November 16, 2017, the Company exchanged $60.7 million of the Brandywine Notes Receivable plus accrued interest of $0.9
million for one of the partner’s 38.89% tenancy-in-common interests in Town Center. The incremental investment in Town Center
was recorded at $61.6 million and the excess of this amount over the venture’s book value associated with this interest, or $34.5
million, will be amortized over the remaining depreciable lives of the venture’s assets. The Company already had a 22.22% interest
in Town Center and continues to apply the equity method of accounting for its aggregate 61.11% noncontrolling interest in Town
Center.
At December 31, 2017, a $60.7 million of Brandywine Note Receivable remains (Note 3), which is collateralized by the remaining
38.89% undivided interest in Town Center.
79
Fund Investments
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Fund III Other Portfolio includes the Company’s investment in Arundel Plaza (through its date of sale). Fund IV Other Portfolio
includes the Company’s investment in Promenade at Manassas, Eden Square, 2819 Kennedy Boulevard (through its date of sale)
and 1701 Belmont Avenue (through its date of sale). 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.
Mervyn’s I & II
In 2017, Mervyn’s I and Mervyn’s II received a total of $1.1 million in distributions from certain investments. The Company had
already reduced the carrying amount of its investments in Mervyn’s I and Mervyn’s II to zero, and consequently the entire amount
received has been reflected as equity in earnings and gains of unconsolidated affiliates in the consolidated statements of income.
Albertson’s
“Other” includes Fund II’s cost method investment in Albertson’s supermarkets among other investments. In 2017, the Company
received $2.4 million in distributions from Albertson’s. The Company reduced the carrying amount of the investment to zero and
reflected the remaining $2.0 million as equity in earnings and gains of unconsolidated affiliates in the consolidated statements of
income.
Dispositions of Unconsolidated Investments
On January 31, 2017, Fund IV completed the disposition of 2819 Kennedy Boulevard, for $19.0 million less $8.4 million debt
repayment for net proceeds of $10.6 million, resulting in a gain on disposition of $6.3 million at the property level, of which the
Fund’s share was $6.2 million, which is included in equity in earnings and gains from unconsolidated affiliates in the consolidated
statements of income. The Operating Partnership’s proportionate share of the gain was $1.4 million, net of noncontrolling interests.
On February 15, 2017, Fund III completed the disposition of Arundel Plaza, for $28.8 million less $10.0 million debt repayments
for net proceeds of $18.8 million, resulting in a gain on disposition of $8.2 million at the property level, of which the Fund’s share
was $5.3 million, which is included in equity in earnings and gains from unconsolidated affiliates in the consolidated statements
of income. The Operating Partnership’s proportionate share of the gain was $1.3 million, net of noncontrolling interests.
On June 30, 2017, Fund IV completed the disposition of 1701 Belmont Avenue, for $5.6 million less $2.9 million debt repayments
for net proceeds of $2.7 million, resulting in a gain on disposition of $3.3 million at the property level, of which the Fund’s share
was $3.3 million, which is included in equity in earnings and gains from unconsolidated affiliates in the consolidated statements
of income. The Operating Partnership’s proportionate share of the gain was $0.8 million, net of noncontrolling interests.
On October 3 and December 21, 2017, Fund IV’s Broughton Street Portfolio venture sold a total of five properties for aggregate
proceeds of $11.0 million resulting in a net gain of $1.2 million at the property level, of which the Fund’s share was $0.6 million,
which is included in equity in earnings and gains from unconsolidated affiliates in the consolidated financial statements. The
Operating Partnership’s proportionate share of the gain was $0.1 million, net of noncontrolling interests. At December 31, 2017,
the Broughton Street portfolio had 18 remaining properties; however, during January 2018, two additional Broughton Street
Portfolio properties were sold (Note 17).
On January 28, 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). On December 21, 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 in earnings and gains from unconsolidated affiliates in the consolidated financial statements.
Fees from Unconsolidated Affiliates
The Company earned property management, construction, development, legal and leasing fees from its investments in
unconsolidated partnerships totaling $1.3 million, $1.2 million, and $0.3 million for the year ended December 31, 2017, 2016,
and 2015 respectively, which is included in other revenues in the consolidated financial statements.
80
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
In addition, the Company paid to certain unaffiliated partners of its joint ventures, $2.0 million, $2.4 million and $2.5 million
during the year ended December 31, 2017, 2016, and 2015 respectively, for leasing commissions, development, management,
construction and overhead fees.
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 from and investments in unconsolidated affiliates
December 31,
2017
2016
$
$
$
$
$
$
$
$
$
$
518,900
26,681
6,853
100,901
653,335
405,652
61,932
185,751
653,335
185,533
95,358
3,472
2,415
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
$
286,778
$
258,337
Combined and Condensed Statements of Income
Total revenues
Operating and other expenses
Interest expense
Equity in earnings of unconsolidated affiliates
Depreciation and amortization
Loss on debt extinguishment
Gain (loss) on disposition of properties
Net income attributable to unconsolidated affiliates
Company’s share of equity in
net income of unconsolidated affiliates
Basis differential amortization
Company’s equity in earnings of unconsolidated affiliates
Year Ended December 31,
2016
2015
2017
$
$
$
$
83,222
(24,711)
(18,733)
—
(24,192)
(154)
18,957
34,389
26,039
(2,668)
23,371
$
$
$
$
84,218
(25,724)
(16,300)
—
(35,432)
—
(1,340)
5,422
40,538
(1,089)
39,449
$
$
$
$
43,990
(13,721)
(9,178)
66,655
(12,154)
—
32,623
108,215
37,722
(392)
37,330
81
5. Other Assets, Net and Accounts Payable and Other Liabilities
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Other assets, net and accounts payable and other liabilities are comprised of the following for the periods presented:
December 31,
2017
2016
$
127,571
$
24,589
16,838
11,356
11,668
6,296
4,300
2,096
4,402
1,479
2,369
1,995
114,584
25,221
14,351
9,514
9,354
4,412
4,300
3,733
2,921
1,655
1,241
1,500
$
$
$
$
214,959
$
192,786
41,020
7,786
48,806
(24,217)
24,589
$
$
40,728
5,915
46,643
(21,422)
25,221
104,478
$
105,028
61,420
31,306
10,029
1,467
176
1,176
48,290
35,267
14,975
3,590
1,287
235
$
210,052
$
208,672
(in thousands)
Other assets, net:
Lease intangibles, net (Note 6)
Deferred charges, net (a)
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
(a) 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
Other
82
6. Lease Intangibles
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Upon acquisitions of real estate, the Company assesses the fair value of acquired assets (including land, buildings and improvements,
and identified intangibles such as above- and below-market leases, including below- market options and acquired in-place leases)
and assumed liabilities. 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, 2017
December 31, 2016
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
Above-market ground
lease
$
$
$
$
193,821
16,786
210,607
$
$
(72,749) $
121,072
(10,287)
6,499
(83,036) $
127,571
$
$
156,420
16,649
173,069
$
$
(47,827) $
(10,658)
(58,485) $
108,593
5,991
114,584
(147,232) $
43,391
$
(103,841) $
(137,032) $
32,004
$
(105,028)
(671)
34
(147,903) $
43,425
$
(637)
(104,478) $
—
(137,032) $
—
32,004
$
—
(105,028)
During the year ended December 31, 2017, the Company acquired in-place lease intangible assets of $41.6 million, above-market
rents of $2.7 million, below-market rents of $10.9 million, and an above-market ground lease of $0.7 million with weighted-
average useful lives of 4.1, 4.8, 12.1, and 11.5 years, respectively. Amortization of in-place lease intangible assets is recorded in
depreciation and amortization expense and amortization of above-market rent and below-market rent is recorded as a reduction
to and increase to rental income, respectively, in the consolidated statements of income. Amortization of above-market ground
leases are recorded as a reduction to rent expense in the consolidated statements of income.
The scheduled amortization of acquired lease intangible assets and assumed liabilities as of December 31, 2017 is as follows (in
thousands):
$
Increase to
Amortization
(29,005)
(21,678)
(16,797)
(12,524)
(8,778)
(32,290)
(121,072)
$
Reduction of
Rent Expense
Net Income
(Expense)
$
$
58
58
58
58
58
347
637
$
$
(18,942)
(11,978)
(8,084)
(4,963)
(1,535)
22,409
(23,093)
Years Ending December 31,
Net Increase in
Lease Revenues
2018
2019
2020
2021
2022
Thereafter
Total
$
$
10,005
9,642
8,655
7,503
7,185
54,352
97,342
83
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
7. Debt
A summary of the Company’s consolidated indebtedness is as follows (dollars in thousands):
Interest Rate at December 31,
Maturity Date at
Carrying Value at December 31,
2017
2016
December 31, 2017
2017
2016
Mortgages Payable
Core Fixed Rate
3.88%-5.89%
3.88%-6.65%
Core Variable Rate - Swapped (a)
1.71%-3.77%
1.71%-3.77%
Total Core Mortgages Payable
Fund II Fixed Rate
1.00%-4.75%
1.00%-5.80%
February 2024 -
April 2035
July 2018 - July
2027
August 2019 - May
2020
Fund II Variable Rate
LIBOR+1.39%
LIBOR+0.62%-
LIBOR+2.50%
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%
May 2018 -
December 2021
Fund IV Fixed Rate
3.4%-4.50%
3.4%-4.50%
October 2025-June
2026
Fund IV Variable Rate
LIBOR+1.70%-
LIBOR+3.95%
LIBOR+1.70%-
LIBOR+3.95%
January 2018 - April
2022
Fund IV Variable Rate - Swapped (a)
1.78%
1.78%
Total Fund IV Mortgages Payable
May 2019 - April
2022
Fund V Variable Rate
LIBOR+2.25%
—
October 2020
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%
1.24%-3.77%
1.24%-3.77%
Fund II Unsecured Notes Payable
LIBOR+1.40%
—
Fund IV Term Loan/Subscription
Facility
Fund V Subscription Facility
LIBOR+1.65%-
LIBOR+2.75%
LIBOR+1.60%
LIBOR+1.65%-
LIBOR+2.75%
—
Net unamortized debt issuance costs
Total Unsecured Notes Payable
Unsecured Line of Credit
July 2020 -
December 2022
July 2018 - March
2025
September 2020
December 2018 -
October 2019
May 2020
Core Unsecured Line of Credit
LIBOR+1.40%
LIBOR+1.40%
June 2020
1.24%-3.77%
—
July 2018 - March
2025
Core Unsecured Line of Credit -
Swapped (a)
Total Unsecured Line of Credit
Total Debt - Fixed Rate (b)
Total Debt - Variable Rate (c)
Total Debt
Net unamortized debt issuance costs
Unamortized premium
Total Indebtedness
__________
$
179,870
$
234,875
74,152
254,022
205,262
—
19,560
224,822
65,866
10,503
250,584
86,851
347,938
28,613
(12,943)
856
82,250
317,125
249,762
142,750
19,779
412,291
83,467
10,503
233,139
14,509
258,151
—
(16,642)
1,336
$
$
$
$
$
$
909,174
$
1,055,728
— $
51,194
300,000
300,000
31,500
40,825
103,300
(1,890)
473,735
18,048
23,452
41,500
899,650
538,736
1,438,386
(14,833)
856
$
$
$
$
248,806
300,000
—
134,636
—
(1,646)
432,990
—
—
—
860,486
645,185
1,505,671
(18,289)
1,336
$
1,424,409
$
1,488,718
84
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(a) At December 31, 2017, the stated rates ranged from LIBOR + 1.65% to LIBOR +1.90% for Core variable-rate debt; LIBOR + 1.39% for Fund II variable-
rate debt; PRIME + 0.50% to LIBOR +4.65% for Fund III variable-rate debt; LIBOR + 1.70% to LIBOR +3.95% for Fund IV variable-rate debt, LIBOR +
2.25% for Fund V and LIBOR + 1.30% to LIBOR +1.60% for Core variable-rate unsecured notes.
Includes $504,018 and $365,343, respectively, of variable-rate debt that has been fixed with interest rate swap agreements as of the periods presented.
Includes $141.1 million and $186.6 million, respectively, of variable-rate debt that is subject to interest cap agreements.
(b)
(c)
Mortgages Payable
During the year ended December 31, 2017, the Company obtained eleven new non-recourse mortgages totaling $162.9 million
with a weighted-average interest rate of LIBOR + 3.47% collateralized by eleven properties, which mature between February 14,
2020 and December 1, 2022. The Company entered into interest rate swap contracts to effectively fix the variable portion of the
interest rates of eight of these obligations with a notional value of $73.3 million at a weighted-average rate of 2.11%. During 2017,
the Company repaid thirteen mortgages in full, which had a total balance of $280.8 million and a weighted-average interest rate
of 3.90%, and made scheduled principal payments of $1.0 million. At December 31, 2017 and December 31, 2016, the Company’s
mortgages were collateralized by 42 and 39 properties, respectively, 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).
The mortgage loan related to Brandywine Holdings in the Company’s Core Portfolio amounted to $26.3 million and was in default
at December 31, 2017 and December 31, 2016. This loan bears interest at 5.99%, excluding default interest of 5%, and is
collateralized by a property, in which the Company holds a 22% controlling interest. During the year ended December 31, 2015,
the Company recognized an impairment charge on this property (Note 8). In April 2017, the lender on this mortgage initiated a
lawsuit against the Company for the full balance of the principal, accrued interest as well as penalties and fees aggregating
approximately $32.1 million. The Company’s management believes that the mortgage is not recourse to the Company and that
the suit is without merit.
See Note 17 for information about additional financing obtained after December 31, 2017.
Unsecured Notes Payable
Unsecured notes payable for which total availability was $70.3 million and $9.9 million at December 31, 2017 and December 31,
2016, respectively, are comprised of the following:
•
In the Core portfolio there are outstanding at both December 31, 2017 and December 31, 2016 $300.0 million of unsecured
term loans including a $150.0 million term loan and three $50.0 million term loans. All of the Core term loans are swapped
to fixed rates. The Core unsecured term loans were refinanced in February 2018 (Note 17).
• During 2017, Fund II obtained a $40.0 million term loan secured by the real estate assets of City Point Phase II with an
interest rate of LIBOR plus 140 basis points and maturing in September 2020. The Fund II loan is also guaranteed by the
Company and the Operating Partnership. The outstanding balance and total available credit of the Fund II term loan was
$31.5 million and $8.5 million, respectively, at December 31, 2017.
• At Fund IV there are a $41.8 million bridge facility and a $21.5 million subscription line. The outstanding balance of the
Fund IV bridge facility was $40.8 million and $40.1 million at December 31, 2017 and December 31, 2016, respectively.
Total availability was $1.0 million and $0 at December 31, 2017 and December 31, 2016. The outstanding balance of the
Fund IV subscription line was $0.0 million and $94.5 million and total available credit was $14.1 million and $5.5 million
at December 31, 2017 and December 31, 2016, reflecting letters of credit of $7.4 million and $0, respectively.
• During 2017, Fund V obtained a $150.0 million subscription line collateralized by Fund V’s unfunded capital commitments
with an interest rate of LIBOR plus 160 basis points and maturing in May 2020. The Fund V subscription line is also
guaranteed by the Operating Partnership. The outstanding balance and total available credit of the Fund V subscription
line was $103.3 million and $46.7 million, respectively, at December 31, 2017.
Unsecured Line of Credit
The Company had a total of $96.2 million and $138.7 million available under its $150.0 million Core unsecured revolving line of
credit reflecting borrowings of $41.5 million and $0 and letters of credit of $12.3 million and $11.3 million at December 31, 2017
and December 31, 2016, respectively. At December 31, 2017 a portion of the Core unsecured revolving line of credit was swapped
to a fixed rate. The Core unsecured revolving line of credit was refinanced in February 2018 (Note 17).
85
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Scheduled Debt Principal Payments
The scheduled principal repayments of the Company’s consolidated indebtedness, as of December 31, 2017 are as follows (in
thousands):
Year Ending December 31,
2018
2019
2020
2021
2022
Thereafter
Unamortized fair market value of assumed debt
Net unamortized debt issuance costs
Total indebtedness
$
$
94,400
213,573
576,379
255,027
98,840
200,167
1,438,386
856
(14,833)
1,424,409
See Note 4 for information about liabilities of the Company’s unconsolidated affiliates.
8. Financial Instruments and Fair Value Measurements
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
the Company to develop its 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, the Company has 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 — The Company has derivative assets, which are included in Other assets, net in the consolidated financial
statements, are comprised of interest rate swaps and caps. The derivative instruments 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 — The Company has derivative liabilities, which are included in Accounts payable and other liabilities in
the consolidated financial statements, are comprised of interest rate swaps and caps. 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.
The Company did not have any transfers into or out of Level 1, Level 2, and Level 3 measurements during the years
ended December 31, 2017, 2016 or 2015.
86
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO 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, 2017
December 31, 2016
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Assets
Money Market Funds
$
Derivative financial instruments
Liabilities
Derivative financial instruments
3
—
—
$
— $
— $
20,001
$
— $
4,402
1,467
—
—
—
—
2,921
3,590
—
—
—
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.
Items Measured at Fair Value on a Nonrecurring Basis (Including Impairment Charges)
During the year ended December 31, 2017, the Company recognized an impairment charge of $3.8 million, inclusive of an amount
attributable to a noncontrolling interest of $2.7 million, on Fund II’s City Point Condominium Tower I property, which was
classified as held for sale at September 30, 2017, in order to reduce the carrying value of the property to its estimated fair value.
In addition, the Company recognized an impairment charge of $10.6 million, inclusive of an amount attributable to a noncontrolling
interest of $7.6 million, on a property classified as held for sale at December 31, 2017 (Note 2), in order to reduce the carrying
value of the property to its estimated fair value. These fair value measurements approximated the estimated selling prices less
estimated costs to sell.
The Company did not record any impairment charges during the year ended December 31, 2016. 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 on its Brandywine Holdings property, which is included in the consolidated 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 (Note 7).
87
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Derivative Financial Instruments
The Company had the following interest rate swaps for the periods presented (dollars in thousands):
Aggregate
Notional
Amount
Strike Rate
Effective
Date
Maturity
Date
Low
High
Balance
Sheet
Location
Fair Value
December 31,
2017
December 31,
2016
Derivative Instrument
Core
Interest Rate Swaps
$ 149,036
Interest Rate Swaps
248,571
$ 397,607
Oct 2011 -
March
2015
Sep 2012 -
July 2017
July 2018 -
Mar 2025
July 2020 -
July 2027
1.38% — 3.77%
Other
Liabilities
1.24% — 3.77% Other Assets
Fund II
Interest Rate Swap
Interest Rate Cap
Fund III
$
$
19,560
October
2014
November
2021
2.88% — 2.88%
Other
Liabilities
29,500 April 2013 April 2018
4.00% — 4.00% Other Assets
49,060
$
$
$
$
(1,438) $
(3,218)
4,076
2,638
$
2,609
(609)
(29) $
—
(29) $
(228)
—
(228)
Interest Rate Cap
$
58,000 Dec 2016
Jan 2020
3.00% — 3.00% Other Assets
$
14
$
127
Fund IV
Interest Rate Swaps
$
86,851
Interest Rate Swaps
—
Interest Rate Caps
108,900
$ 195,751
Total asset derivatives
Total liability derivatives
May 2014 -
March
2017
May 2014 -
March
2017
July 2016 -
November
2016
May 2019 -
April 2022
May 2019 -
April 2022
August
2019 -
December
2019
1.78% — 2.11% Other Assets
$
295
$
—
1.78% — 2.11%
Other
Liabilities
— $
(144)
3.00% — 3.00% Other Assets
17
312
4,402
$
$
(1,467) $
185
41
2,921
(3,590)
$
$
$
All of the Company’s derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on
variable-rate debt (Note 7). It is estimated that approximately $0.6 million included in accumulated other comprehensive (loss)
income related to derivatives will be reclassified to interest expense in the 2018 results of operation. As of December 31, 2017
and 2016, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally,
the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not
designated hedges.
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.
88
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
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 income (losses) recognized related to the Company’s
cash flow hedges (in thousands):
Amount of (loss) income related to the effective portion recognized in
other comprehensive income
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,
2017
2016
2015
$
634
$
(646) $
(5,061)
—
—
—
—
—
—
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
The Company’s other financial instruments had the following carrying values and fair values as of the dates shown (dollars in
thousands):
December 31, 2017
December 31, 2016
Level
Carrying
Amount
Estimated
Fair
Value
Carrying
Amount
Estimated
Fair
Value
Notes Receivable (a)
Mortgage and Other Notes Payable, net (a)
Investment in non-traded equity securities (b)
Unsecured notes payable and Unsecured line
of credit, net (c)
__________
3
3
3
2
$
153,829
$
909,174
411
151,712
921,891
22,824
$
276,163
$
272,052
1,055,728
1,077,926
802
25,194
515,235
515,330
434,636
435,779
(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) Represents Fund II’s cost-method investment in Albertson’s supermarkets (Note 4).
(c) The Company determined the estimated fair value of the unsecured notes payable and unsecured line of credit 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.
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, 2017.
89
9. Commitments and Contingencies
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
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.
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 $92.2 million and $85.4 million as of
December 31, 2017 and December 31, 2016, respectively.
At each of December 31, 2017 and December 31, 2016, the Company had letters of credit outstanding of $19.7 million and $11.3
million, respectively. 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.
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, 2017:
• The Company withheld 4,314 Restricted Shares to pay the employees’ statutory minimum income taxes due on the value
of the portion of their Restricted Shares that vested.
• The Company recognized Common Share and Common OP Unit-based compensation totaling $8.4 million in connection
with Restricted Shares and Units (Note 13).
• At the May 10 Shareholder Meeting, Shareholders approved an amendment to the Company’s Declaration of Trust to
increase the authorized share capital of the Company from 100 million shares of beneficial interest to 200 million shares
which became effective on July 24, 2017.
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 and
December 31, 2017, 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 gross proceeds of $126.8
million and net proceeds of $124.5 million. As of December 31, 2016, these shares have been physically settled.
• 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.
• 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).
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 year ended December 31, 2017 or the year ended December 31, 2016. Under this program
the Company has repurchased 2.1 million Common Shares, none of which were repurchased after December 2001. As of
December 31, 2017, management may repurchase up to approximately $7.5 million of the Company’s outstanding Common Shares
under this program. During 2018, the Company revised its share repurchase program (Note 17).
90
Dividends and Distributions
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
On November 8, 2017, the Board of Trustees declared an increase of $0.01 to the $0.27 per Common Share regular quarterly cash
dividend, which was paid on January 13, 2018 to holders of record as of December 29, 2017.
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.
Accumulated Other Comprehensive Income
The following table sets forth the activity in accumulated other comprehensive (loss) income for the year ended December 31,
2017 and 2016 (in thousands):
Balance at January 1, 2017
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, 2017
Balance at January 1, 2016
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, 2016
Gains or
Losses on
Derivative
Instruments
$
$
$
$
(798)
634
3,317
3,951
(539)
2,614
(4,463)
(646)
4,576
3,930
(265)
(798)
91
Noncontrolling Interests
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The following table summarizes the change in the noncontrolling interests for the year ended December 31, 2017 and 2016
(dollars in thousands):
Noncontrolling
Interests in
Operating
Partnership (a)
Noncontrolling
Interests in
Partially-
Owned
Affiliates (b)
$
494,126
$
—
Total
589,548
(6,453)
Balance at January 1, 2017
Distributions declared of $1.05 per Common OP Unit
Net income (loss) for the period January 1 through December 31,
2017
Conversion of 5,000 Preferred and 81,453 Common OP Units to
Common Shares by limited partners of the Operating Partnership
Other comprehensive income - unrealized loss
on valuation of swap agreements
Reclassification of realized interest expense on swap agreements
Noncontrolling interest contributions
Noncontrolling interest distributions
Employee Long-term Incentive Plan Unit Awards
Rebalancing adjustment (d)
Balance at December 31, 2017
Balance at January 1, 2016
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
Issuance of Common and Preferred OP Units to acquire real estate
Acquisition of noncontrolling interests (c)
Other comprehensive income - unrealized loss
on valuation of swap agreements
Change in control of previously unconsolidated investment
Reclassification of realized interest expense on swap agreements
Noncontrolling interest contributions
Noncontrolling interest distributions
Employee Long-term Incentive Plan Unit Awards
Rebalancing adjustment (d)
Balance at December 31, 2016
__________
$
$
$
$
95,422
(6,453)
4,159
(1,541)
85
141
—
—
10,457
651
102,921
96,340
(6,753)
5,002
(7,892)
31,429
—
(43)
—
223
—
—
$
$
12,768
(35,652)
95,422
$
(1,321)
2,838
—
(232)
545
85,206
(32,805)
—
—
545,519
324,526
—
56,814
—
—
(25,925)
(289)
(75,713)
374
295,108
(80,769)
—
—
494,126
$
$
$
(1,541)
(147)
686
85,206
(32,805)
10,457
651
648,440
420,866
(6,753)
61,816
(7,892)
31,429
(25,925)
(332)
(75,713)
597
295,108
(80,769)
12,768
(35,652)
589,548
(a) Noncontrolling interests in the Operating Partnership are comprised of (i) the limited partners’ 3,328,873 and 3,308,875
Common OP Units at December 31, 2017 and 2016, respectively; (ii) 188 Series A Preferred OP Units at December 31,
2017 and 2016; (iii) 136,593 and 141,593 Series C Preferred OP Units at December 31, 2017 and 2016, respectively;
and (iv) 2,274,147 and 1,997,099 LTIP units as of December 31, 2017 and 2016, 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 Funds II, III, IV and V, and Mervyns
I and II, and six other subsidiaries.
(c) During the first quarter of 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.
92
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(d) Adjustment reflects 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 changes in ownership (the
“Rebalancing”).
Preferred OP Units
There were no issuances of Preferred OP Units and 5,000 Series C Preferred OP Units were exchanged for common shares of the
Company during the year ended December 31, 2017.
In 1999 the Operating Partnership issued 1,580 Series A Preferred OP Units in connection with the acquisition of a property, which
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 the first quarter of 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 Unit will be convertible into 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 Unit 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.
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 seven of its shopping centers, which are accounted for as operating leases and generally provide the
Company with renewal options. Ground rent expense was $1.4 million, $1.2 million and $1.7 million (including capitalized ground
rent at a property under development of $0.1 million, $0.6 million and $0.9 million) for the years ended December 31, 2017, 2016
and 2015, 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 $1.0 million, $1.0 million and $1.4 million for the years ended December 31, 2017, 2016
and 2015, respectively.
Capital Lease
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 years ended December 31, 2017 and 2016, payments for this lease totaled $2.5 million and $1.3 million respectively.
The lease was initially valued at $76.6 million, which represents the total discounted payments to be made under the lease. The
property under the capital lease is included in Note 2.
93
Lease Obligations
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The scheduled future minimum (i) 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 (ii) 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, 2017, are summarized as follows (in thousands):
Year Ending December 31,
2018
2019
2020
2021
2022
Thereafter
Total
Minimum
Rental
Revenues
Minimum
Rental
Payments
$
$
165,893
163,576
149,453
130,834
111,958
514,271
$
1,235,985
$
4,540
4,560
4,356
4,302
4,395
185,014
207,167
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, 2017, 2016 and 2015, no single tenant collectively comprised more than 10% of the
Company’s consolidated 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.
94
The following tables set forth certain segment information for the Company (in thousands):
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Revenues
Depreciation and amortization
Property operating expenses, other operating and real estate taxes
Impairment charges
General and administrative expenses
Operating income
Gain on disposition of properties
Interest income
Equity in earnings of unconsolidated affiliates inclusive of gains on
disposition of properties
Interest expense
Gain on change in control
Income tax provision
Net income
As of or for the Year Ended December 31, 2017
Core
Portfolio
Funds
Structured
Financing
Unallocated
Total
$
169,975
$
80,287
$
— $
— $
250,262
(61,705)
(45,349)
—
—
62,921
—
—
3,735
(28,618)
5,571
—
43,609
(1,107)
42,502
2,032,485
2,305,663
(43,229)
(34,449)
(14,455)
—
(11,846)
48,886
—
—
—
—
—
—
—
29,143
—
—
—
—
29,143
—
19,636
(30,360)
—
—
26,316
(1,731)
24,585
1,433,997
1,500,755
$
$
$
—
—
—
(33,756)
(33,756)
—
—
—
—
—
(1,004)
(34,760)
—
(104,934)
(79,798)
(14,455)
(33,756)
17,319
48,886
29,143
23,371
(58,978)
5,571
(1,004)
64,308
(2,838)
61,470
Net income attributable to noncontrolling interests
Net income attributable to Acadia
Real estate at cost
Total assets
Cash paid for acquisition of real estate
Cash paid for development and property improvement costs
$
$
$
$
$
$
$
$
$
$
29,143
$
(34,760) $
— $
— $
3,466,482
153,829
$
— $
3,960,247
— $
— $
— $
— $
200,429
115,455
— $
200,429
49,339
$
66,116
Revenues
Depreciation and amortization
Property operating expenses, other operating and real estate taxes
General and administrative expenses
Operating income
Gain on disposition of properties
Interest income
Equity in earnings of unconsolidated affiliates inclusive of gains on
disposition of properties
Interest expense
Income tax benefit
Net income
Net income attributable to noncontrolling interests
Net income attributable to Acadia
Real estate at cost
Total assets
Cash paid for acquisition of real estate
Cash paid for development and property improvement costs
As of or for the Year Ended December 31, 2016
Core
Portfolio
Funds
Structured
Financing
Unallocated
Total
$
150,211
$
39,728
$
— $
— $
189,939
(54,582)
(39,598)
—
56,031
—
—
3,774
(27,435)
—
32,370
(3,411)
28,959
1,982,763
2,271,620
323,880
13,434
$
$
$
$
$
(15,429)
(17,793)
—
6,506
81,965
—
35,675
(7,210)
—
116,936
(58,405)
58,531
1,399,237
1,448,177
171,764
136,000
$
$
$
$
$
—
—
—
—
—
25,829
—
—
—
—
—
(40,648)
(40,648)
—
—
—
—
105
(70,011)
(57,391)
(40,648)
21,889
81,965
25,829
39,449
(34,645)
105
25,829
(40,543)
134,592
—
—
(61,816)
25,829
$
(40,543) $
72,776
— $
— $
3,382,000
276,163
$
— $
3,995,960
— $
— $
— $
— $
495,644
149,434
$
$
$
$
$
95
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Revenues
Depreciation and amortization
Property operating expenses, other operating and real estate taxes
Impairment charges
General and administrative expenses
Operating income
Gain on disposition of properties
Interest income
Equity in earnings of unconsolidated affiliates inclusive of gains on
disposition of properties
Other
Interest expense
Income tax provision
Net income
Net income attributable to noncontrolling interests
Net income attributable to Acadia
Real estate at cost
Total assets
Cash paid for acquisition of real estate
Cash paid for development and property improvement costs
As of or for the Year Ended December 31, 2015
Core
Portfolio
Funds
Structured
Financing
Unallocated
Total
$
150,015
$
49,048
$
— $
— $
199,063
(46,223)
(37,259)
(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)
(21,223)
—
—
13,297
89,063
—
36,161
—
(9,352)
—
129,169
(84,122)
45,047
1,163,602
1,223,039
156,816
147,810
$
$
$
$
$
—
—
—
—
—
—
16,603
—
1,596
—
—
18,199
—
—
—
—
(30,368)
(30,368)
—
—
—
—
—
(1,787)
(32,155)
—
(60,751)
(58,482)
(5,000)
(30,368)
44,462
89,063
16,603
37,330
1,596
(37,297)
(1,787)
149,970
(84,262)
$
$
$
$
$
18,199
$
(32,155) $
65,708
— $
— $
2,736,283
147,188
$
— $
3,032,319
— $
— $
— $
338,700
— $
164,315
96
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
13. Share Incentive and Other Compensation
Share Incentive Plan
The Second Amended and Restated 2006 Incentive Plan (the “Share Incentive Plan”) authorizes the Company to issue options,
Restricted Shares, LTIP Units and other securities (collectively “Awards”) to, among others, the Company’s officers, trustees and
employees. At December 31, 2017 a total of 1,756,317 shares remained available to be issued under the Share Incentive Plan.
Restricted Shares and LTIP Units
During the year ended December 31, 2017, the Company issued 306,635 LTIP Units and 7,628 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 $9.5 million, of which $2.2
million was recognized as compensation expense in 2016, and $7.3 million will be recognized as compensation expense over the
remaining vesting period. Total long-term incentive compensation expense, including the expense related to the Share Incentive
Plan, was $8.4 million and $10.9 million for the year ended December 31, 2017 and 2016, 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 shares and units under the Share Incentive Plan.
During 2017, the Company issued 11,814 Restricted Shares and 11,105 LTIP Units to Trustees of the Company in connection with
Trustee fees. Vesting with respect to 3,864 of the Restricted Shares and 5,805 of the LTIP Units will be on the first anniversary of
the date of issuance and 7,950 of the Restricted Shares and 5,300 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 applicable vesting date of such Restricted Shares. Total trustee fee expense, including the expense related to the Share Incentive
Plan, was $1.2 million and $1.1 million for the year ended December 31, 2017 and 2016, 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 granted such awards to employees representing 25% of the potential Promote
payments from Fund III to the Operating Partnership and 14.4% 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.
The awards in connection with Fund IV were determined to have no intrinsic value as of December 31, 2017.
Compensation expense of $0.6 million and $5 million was recognized for the year ended December 31, 2017 and 2016, respectively,
related to the Program in connection with Fund III.
97
A summary of the status of the Company’s unvested Restricted Shares and LTIP Units is presented below:
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Unvested Restricted Shares
and LTIP Units
Unvested at January 1, 2016
Granted
Vested
Forfeited
Unvested at December 31, 2016
Granted
Vested
Forfeited
Unvested at December 31, 2017
Common
Restricted
Shares
Weighted
Grant-
Date
Fair Value LTIP Units
Weighted
Grant-
Date
Fair Value
49,899
$
21,675
(24,886)
(189)
46,499
19,442
(23,430)
(1,184)
41,327
$
25.90
33.35
29.17
35.37
27.58
29.85
30.47
32.65
26.92
1,020,121
$
359,484
(522,680)
(48)
856,877
310,551
(257,124)
(205)
910,099
$
23.92
34.40
26.08
35.37
26.99
31.80
28.27
32.49
28.28
The weighted-average grant date fair value for Restricted Shares and LTIP Units granted for the year ended December 31, 2017
and the year ended December 31, 2016 were $31.69 and $34.34, respectively. As of December 31, 2017, there was $14.3 million
of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Share
Incentive Plan. That cost is expected to be recognized over a weighted-average period of 2.2 years. The total fair value of Restricted
Shares that vested for each of the year ended December 31, 2017 and the year ended December 31, 2016, was $0.7 million. The
total fair value of LTIP Units that vested during the year ended December 31, 2017 and the year ended December 31, 2016, was
$7.3 million and $13.6 million, respectively.
Other Plans
On a combined basis, the Company incurred a total of $0.2 million related to the following employee benefit plans for each of the
years ended December 31, 2017 and 2016, respectively:
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, 2017 and 2016, a total of 4,514 and 4,016 Common Shares,
respectively, were purchased by employees under the Purchase Plan.
Deferred Share Plan
During May of 2006, the Company adopted a Trustee Deferral and Distribution Election, under which the participating Trustees
earn deferred compensation.
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, 2017.
98
14. Federal Income Taxes
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
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, 2017, 2016 and 2015, 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, 2017, the Company recognized no material adjustments regarding its tax accounting treatment for uncertain
tax provisions. As of December 31, 2017, the tax years that remain subject to examination by the major tax jurisdictions under
applicable statutes of limitations are generally the year 2014 and forward.
Reconciliation of Net Income to Taxable Income
Reconciliation of GAAP net income attributable to Acadia to taxable income is as follows:
(in thousands)
Year Ended December 31,
2017
2016
2015
Net income attributable to Acadia
$
61,470
$
72,776
$
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
(934)
21,334
(10,559)
5,325
9,114
—
1,135
(5,181)
930
84,684
87,848
$
$
2,050
1,610
15,189
(7,882)
10,307
(2,011)
769
5,116
—
(4,924)
93,000
91,053
$
$
$
$
65,708
2,050
82
9,983
(8,041)
5,833
5,776
(714)
1,190
(760)
2,573
83,680
84,683
(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."
99
Characterization of Distributions
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The Company has determined that the cash distributed to the shareholders for the periods presented is characterized as follows
for Federal income tax purposes:
2017
Year Ended December 31,
2016
2015
Per Share
%
Per Share
%
Per Share
%
$
$
0.82
—
0.23
1.05
78% $
—%
22%
0.77
—
0.39
66% $
—%
34%
0.83
—
0.39
68%
—%
32%
100% $
1.16
100% $
1.22
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 income (loss) before income taxes
(Provision) benefit for income taxes:
Federal
State and local
TRS net income (loss) before noncontrolling interests
Noncontrolling interests
TRS net income (loss)
Year Ended December 31,
2016
2017
2015
$
(3,604)
$
(1,583)
$
1,008
(982)
423
(4,163)
8
(4,155)
$
378
97
(1,108)
(9)
(1,117)
$
$
(526)
(134)
348
(208)
140
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 (in thousands):
Federal tax provision (benefit) at statutory tax rate
TRS state and local taxes, net of Federal benefit
Tax effect of:
Permanent differences, net
Prior year (over) under-accrual, net
Effect of Tax Cuts and Jobs Act
Other
REIT state and local income and franchise taxes
Total provision (benefit) for income taxes
Year Ended December 31,
2016
2015
2017
$
$
(1,225)
(190)
$
$
(538)
(84)
1,131
(1,541)
1,982
404
443
1,004
$
1,663
—
—
(1,516)
370
(105)
$
343
53
396
938
—
(131)
188
1,787
As of December 31, 2017, and 2016, the Company’s deferred tax assets (net of applicable reserves) in its taxable REIT subsidiaries
consisted of the following: additional tax basis in RCP investments of $1.0 million and $1.7 million, deferred interest of $0 and
$0.8 million and net operating loss carryovers of $1.1 million and $1.3 million, respectively.
100
15. Earnings Per Common Share
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Basic earnings per Common Share is computed by dividing net income attributable to Common Shareholders by the weighted
average Common Shares outstanding. During the periods presented, the Company had 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 units (“Restricted Share Units”) and share option awards issued under the
Company’s Share Incentive Plans (Note 13). The effect of such shares is excluded from the calculation of earnings per share when
anti-dilutive as indicated in the table below.
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.
(dollars in thousands)
Numerator:
Net income attributable to Acadia
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 unvested restricted shares
Denominator for diluted earnings per share
Basic and diluted earnings per Common Share from
continuing operations attributable to Acadia
Anti-Dilutive Shares Excluded from Denominator:
Series A Preferred OP Units
Year Ended December 31,
2017
2016
2015
$
$
$
61,470
(642)
$
72,776
(793)
65,708
(927)
60,828
$
71,983
$
64,781
83,682,789
76,231,000
68,851,083
2,682
83,685,471
12,550
76,243,550
18,556
68,869,639
$
0.73
$
0.94
$
0.94
188
188
188
Series A Preferred OP Units - Common share equivalent
25,067
25,067
25,067
Series C Preferred OP Units
136,593
141,593
Series C Preferred OP Units - Common share equivalent
479,978
410,207
—
—
101
16. Summary of Quarterly Financial Information (Unaudited)
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
The quarterly results of operations of the Company for the years ended December 31, 2017 and 2016 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,
2017
Three Months Ended (a,b,c,d)
June 30,
2017
September 30,
2017
December 31,
2017
$
61,999
19,971
$
59,504
6,108
$
62,678
13,285
(4,340)
15,631
5,952
12,060
(418)
12,867
66,081
24,944
(4,032)
20,912
$
0.18
0.18
$
0.14
0.14
$
0.15
0.15
0.25
0.25
83,635
83,646
83,662
83,662
83,700
83,700
83,733
83,733
Cash dividends declared per Common Share
$
0.26
$
0.26
$
0.26
$
0.27
__________
(a) The three months ended March 31, 2017 includes the Company’s $2.7 million proportionate share of aggregate gains of
$14.5 million on the sales of two unconsolidated properties (Note 4).
(b) The three months ended June 30, 2017 includes the Company’s $0.8 million proportionate share of a $3.3 million gain
on sale of an unconsolidated property (Note 4).
(c) The three months ended September 30, 2017 includes an aggregate $13.0 million gain on the sales of two consolidated
properties (Note 2), of which $10.7 million was attributable to noncontrolling interests as well as an impairment charge
of $3.8 million, inclusive of an amount attributable to a noncontrolling interest of $2.7 million (Note 8).
(d) The three months ended December 31, 2017 includes a $5.6 million gain on change in control of interests (Note 4), an
aggregate $35.9 million gain on the sales of three consolidated properties (Note 2), of which $26.7 million was attributable
to noncontrolling interests; and an impairment charge of $10.6 million, of which $7.6 million was attributable to
noncontrolling interests (Note 8).
102
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
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
$
43,918
$
43,855
$
73,875
26,155
(44,950)
28,925
(8,237)
17,918
326
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).
17. Subsequent Events
Acquisition
On February 21, 2018, Fund V acquired a shopping center located in Trussville, Alabama for $45.2 million. It is not practicable
to disclose the preliminary purchase price allocation or consolidated pro forma financial information for this transaction given the
short period of time between the acquisition date and the filing of this Report.
Financings
On January 24, 2018, Fund V obtained mortgage financing of $22.9 million for its recently acquired Plaza Santa Fe property (Note
2).
On January 29, 2018, Fund V obtained mortgage financing of $16.9 million for its recently acquired New Towne Plaza property
(Note 2).
On February 20, 2018, the Company completed a $500.0 million senior unsecured credit facility (the “Credit Facility”), comprised
of a $150.0 million senior unsecured revolving credit facility (the “Revolver”), and a $350.0 million senior unsecured term loan
(the “Term Loan”). The Credit Facility refinanced the Company’s existing $300.0 million credit facility (comprised of the $150.0
million Core unsecured revolving line of credit and the $150.0 million term loan), $150.0 million in Core unsecured term loans
(Note 7) and repaid a $40.4 million mortgage secured by its 664 North Michigan Property. The Revolver and Term Loans mature
on March 31, 2022 and March 31, 2023, respectively.
103
Dispositions
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
On January 18, 2018, Fund IV’s Broughton Street Portfolio venture (Note 4) sold its 108 W. Broughton and 110 W. Broughton
Street properties for a total of $8.0 million.
Structured Financing
On January 24, 2018, the Company received full settlement of one of its Core notes receivable with a principal amount of $26.0
million (Note 3).
Other
On February 20, 2018, the Company’s Board of Trustees elected to terminate the existing repurchase program and authorized a
new Common Share repurchase program under which the Company may repurchase, from time to time, up to a maximum of
$200.0 million of its common shares. The shares may be repurchased in the open market or in privately negotiated transactions.
The common share repurchase program does not obligate the Company to repurchase any specific number of shares and may be
suspended or terminated at any time at the Company’s discretion without prior notice.
104
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
Year ended December 31, 2017:
Allowance for deferred tax asset
$
859
$
— $
671
$
— $
1,530
Allowance for uncollectible
accounts
Allowance for notes receivable
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
5,720
—
—
7,451
—
—
5,952
—
200
—
—
—
—
—
1,499
—
—
—
859
—
—
—
—
—
—
—
—
(1,731)
—
—
—
—
5,920
—
859
5,720
—
—
7,451
—
105
ACADIA REALTY TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2017
Initial Cost
to Company
Amount at Which
Carried at December 31, 2017
Description and
Location
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
The 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
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
651-671 W Diversey
Chicago, IL
15 Mercer Street
New York, NY
4401 White Plains
Bronx, NY
Chicago Street Retail
Portfolio
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,194
1,147
10,619
11,766
7,749
1993
(a)
40 years
1,147
505
—
190
7,425
4,161
3,396
3,004
14,118
—
2,765
505
—
190
18,279
18,784
14,486
1993
(a)
40 years
3,396
5,769
3,396
5,959
2,934
5,192
9,234
1993
(c)
40 years
1993
(c)
40 years
1994
(c)
40 years
1,664
—
12,446
1,664
12,446
14,110
799
3,197
2,870
799
6,067
6,866
3,890
1998
(a)
40 years
3,207
13,774
23,557
3,207
37,331
40,538
21,396
1998
(a)
40 years
3,248
4,288
12,992
15,857
3,798
28,299
32,097
19,237
1998
(a)
40 years
17,152
5,661
4,288
22,813
27,101
12,260
1998
(a)
40 years
2,573
10,294
4,900
2,577
15,190
17,767
27,000
1,817
15,846
1,032
1,817
16,878
18,695
1,793
7,172
1,983
1,793
9,155
10,948
3,229
878
12,917
4,265
3,229
17,182
20,411
3,510
7,736
907
11,217
12,124
8,107
7,830
5,095
9,389
9,062
1998
(a)
40 years
1998
(a)
40 years
1998
(a)
40 years
1998
(a)
40 years
1998
(a)
40 years
3,156
12,545
15,935
3,401
28,235
31,636
11,247
1998
(a)
40 years
956
3,826
1,260
961
5,081
6,042
2,518
1998
(a)
40 years
1,273
2,350
5,091
9,404
12,262
1,273
17,353
18,626
2,102
2,350
11,506
13,856
9,521
5,597
1999
(a)
40 years
1999
(a)
40 years
1,475
5,899
3,602
1,475
9,501
10,976
4,976
1999
(a)
40 years
26,250
5,063
15,252
2,495
5,201
17,609
22,810
1,691
5,803
1,184
1,691
6,987
8,678
—
11,909
2,483
—
14,392
14,392
8,289
11,108
5,691
8,038
4,509
8,289
10,200
18,489
4,768
11,855
12,059
23,914
6,796
2,958
6,564
3,877
2,757
2003
(a)
40 years
2005
(c)
40 years
2005
(a)
40 years
2006
(a)
40 years
2006
(a)
40 years
3,380
13,499
—
3,380
13,499
16,879
4,114
2007
(a)
40 years
16,699
18,704
1,236
16,699
19,940
36,639
3,048
8,576
1,887
1,581
7,281
5,183
3,048
12,464
15,512
17,256
2,483
5,054
8
—
—
8,576
1,887
1,581
17,264
25,840
2,483
5,054
4,370
6,635
5,480
2,426
2,841
404
800
2007
(a)
40 years
2008
(a)
40 years
2011
(a)
40 years
2011
(a)
40 years
2011
(a)
40 years
17,527
49,501
5,544
17,565
55,007
72,572
11,383
2012
(a)
40 years
106
ACADIA REALTY TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Initial Cost
to Company
Amount at Which
Carried at December 31, 2017
Description and
Location
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
1520 Milwaukee
Avenue Chicago, IL
330-340 River St
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 St.
Westport, CT
865 W. North Avenue
Chicago, IL
152-154 Spring St.
Manhattan, NY
2520 Flatbush Ave
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 St.
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
165 Newbury Street
Boston, MA
Concord & Milwaukee
Chicago, IL
State & Washington
Chicago, IL
14,587
24,416
12,158
9,200
65,331
15,601
4,249
9,247
5,516
—
2,110
1,306
2
2,110
1,308
3,418
193
2012
(a)
40 years
11,644
8,404
14,235
—
8,404
14,235
22,639
2,179
2012
(a)
40 years
7,458
15,968
1,708
7,458
17,676
25,134
2,709
2012
(a)
40 years
4,933
14,402
6,220
—
—
1,908
1,754
7,522
3,609
10,790
—
—
4,933
6,220
14,587
19,520
24,416
30,636
333
1,908
12,491
14,399
—
—
1,754
3,609
9,200
10,954
10,790
14,399
2,097
3,575
1,612
1,265
1,562
2012
(a)
40 years
2012
(a)
40 years
2012
(a)
40 years
2012
(a)
40 years
2012
(a)
40 years
11,690
10,135
802
11,690
10,937
22,627
1,522
2012
(a)
40 years
4,429
6,102
779
4,429
6,881
11,310
40,584
15,240
—
15,240
65,331
80,571
5,398
6,899
3,519
—
—
939
168
5
—
5,398
6,899
3,519
—
—
16,540
21,938
4,417
9,252
5,516
11,316
12,771
5,516
33,935
33,935
32,819
1,116
16,744
28,346
192
16,744
28,538
45,282
4,578
1,893
8,544
6,613
10,175
2,645
182
4,578
2,827
7,405
11,594
27,001
10,419
12,641
23
—
193
119
1,893
8,544
6,613
11,617
13,510
27,001
35,545
10,612
17,225
10,175
12,760
22,935
12,425
32,730
1,929
12,425
34,659
47,084
—
20,264
4,550
57,536
33,131
4,459
135
312
105
—
57,671
57,671
20,264
33,443
53,707
4,550
4,564
9,114
1,069
7,973
1,879
547
942
893
2,192
2,923
307
1,105
2,509
1,026
1,300
3,228
8,969
2,746
419
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
2014
(a)
40 years
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
109,098
2,604
36,063
111,702
147,765
7,731
2015
(a)
40 years
9,112
12,679
—
—
—
—
4,838
—
—
1,918
2,802
2,739
11,213
14,574
6,346
—
—
13
76,965
175
3,980
2,746
—
—
—
24,974
3,907
70,943
12,679
11,213
23,892
4,838
14,574
19,412
6,359
6,359
911
856
467
2015
(a)
40 years
2015
(a)
40 years
2015
(a)
40 years
77,140
77,140
2,749
2016
(a)
40 years
3,980
2,746
5,898
5,485
166
103
2016
(a)
40 years
2016
(a)
40 years
70,943
74,850
2,365
2016
(a)
40 years
—
—
1,918
2,739
3,907
107
ACADIA REALTY TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Initial Cost
to Company
Amount at Which
Carried at December 31, 2017
Description and
Location
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
151 N. State Street
Chicago, IL
North & Kingsbury
Chicago, IL
Sullivan Center
Chicago, IL
California & Armitage
Chicago, IL
14,179
1,941
12,931
18,731
25,529
16,292
—
13,443
137,327
2,622
6,770
555 9th Street
San Francisco, CA
60,000
75,591
Market Square
Wilmington, DE
Undeveloped Land
—
—
8,100
100
2,292
73,268
31,221
—
—
—
54
2
—
157
—
1,941
25,529
27,470
18,731
16,292
35,023
904
564
2016
(a)
40 years
2016
(a)
40 years
13,443
137,381
150,824
4,578
2016
(a)
40 years
6,770
2,294
9,064
84
2016
(a)
40 years
75,591
73,268
148,859
2,154
2016
(a)
40 years
8,100
100
31,379
—
39,479
100
75
—
2017
(a)
40 years
Fund II:
City Point
Brooklyn, NY
Fund III:
654 Broadway
Manhattan, NY
640 Broadway
Manhattan, NY
3104 M St.
Washington, DC
3780-3858 Nostrand
Avenue
Brooklyn, NY
Fund IV:
210 Bowery
Manhattan, NY
Paramus Plaza
Paramus, NJ
Lake Montclair Center
Dumfries, VA
938 W. North Avenue
Chicago, IL
27 E. 61st Street
Manhattan, NY
17 E. 71st Street
Manhattan, NY
Broughton St. Portfolio
Savannah, GA
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
224,820
—
100,316
455,125
—
555,441
555,441
13,628
2007
(c)
40 years
—
9,040
3,654
2,883
9,040
6,537
15,577
921
2011
(a)
40 years
49,470
12,503
19,960
12,921
12,503
32,881
45,384
4,694
2012
(a)
40 years
4,419
750
2,115
5,139
750
7,254
8,004
283
2013
(c)
40 years
10,617
6,229
11,216
6,229
17,355
6,139
—
23,584
—
2,157
2013
(a)
40 years
10,919
1,875
18,454
11,052
5,625
7,037
17,104
1,875
22,729
24,604
11,560
11,052
18,597
29,649
14,098
7,077
12,028
702
7,077
12,730
19,807
14,100
2,314
17,067
2,044
2,314
19,111
21,425
—
4,813
14,438
6,693
4,813
21,131
25,944
142
1,739
1,482
1,733
131
2012
(c)
40 years
2013
(a)
40 years
2013
(a)
40 years
2013
(a)
40 years
2014
(c)
40 years
19,000
7,391
20,176
24,699
—
—
266
—
7,391
20,442
27,833
1,680
2014
(a)
40 years
—
—
—
—
2014
(c)
40 years
41,387
12,759
37,431
4,648
14,099
40,739
54,838
2,992
2015
(a)
40 years
—
4,178
28,470
4,474
4,178
32,945
37,123
5,606
3,027
6,376
27,700
9,500
28,500
28,507
38,007
1,544
2015
(a)
40 years
26
7
3,027
9,500
119
1,498
8
2,188
6,402
9,429
1,854
1,301
3,352
3,489
—
1,041
10,905
11,946
196
7,570
25,025
32,595
74
4
2,294
2,852
317
5,290
751
7
32
—
7,141
9,623
9,781
5,998
9,435
12,475
15,071
6,749
6,178
9,298
15,476
828
11,814
12,642
108
206
348
2015
(c)
40 years
2015
(a)
40 years
93
67
44
545
989
278
338
351
222
294
388
2015
(a)
40 years
2015
(a)
40 years
2016
(c)
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
1,463
563
1,688
2,577
563
4,265
4,828
1861 Union St.
San Francisco, CA
2,315
2,188
1,120
1,498
1964 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
6,425
1,041
24,000
7,570
5,613
2,294
11,890
2,852
10,270
5,290
1,735
1,293
10,905
24,829
7,067
9,619
9,464
5,991
JFK Plaza
Waterville, ME
4,490
751
Mayfair Shopping
Center Philadelphia,
PA
Shaw's Plaza
Waterville, ME
—
6,178
9,266
8,035
828
11,814
ACADIA REALTY TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
Initial Cost
to Company
Amount at Which
Carried at December 31, 2017
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
Description and
Location
Encumbrances
Land
Buildings &
Improvements
Wells Plaza
Wells, ME
717 N. Michigan
Chicago, IL
3,368
1,892
2,585
18,199
20,674
10,093
Shaw's Plaza
North Windham, ME
5,988
1,876
6,696
Lincoln Place
Fairview Heights, IL
23,100
7,149
22,201
Fund V:
Plaza Santa Fe
Santa Fe, NM
Hickory Ridge
Hickory, NC
New Towne Plaza
Canton, MI
Fairlane Green
Allen Park, MI
—
—
28,613
7,852
—
—
5,040
18,121
28,214
29,998
17,391
37,626
—
—
—
55
—
—
1
—
1,892
2,585
4,477
20,674
10,093
30,767
1,876
7,149
6,696
8,572
22,256
29,405
—
28,214
28,214
7,852
5,040
29,998
37,850
17,392
22,432
18,121
37,626
55,747
Real Estate Under
Development
Debt of Assets Held for
Sale
Unamortized Loan
Costs
Unamortized Premium
47,061
88,108
31,473
54,122
88,108
85,594
173,702
—
(12,943)
856
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2016
(a)
40 years
2016
(c)
40 years
2017
(a)
40 years
2017
(a)
40 years
2017
(a)
40 years
2017
(a)
40 years
2017
(a)
40 years
2017
(a)
40 years
124
270
94
545
452
312
208
—
—
—
—
—
Total
$
909,174
$ 743,847
$
1,960,389
$
762,245
$ 746,943
$
2,719,539
$
3,466,482
$
339,862
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 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 approximately $3.4 billion as of
December 31, 2017.
The following table reconciles the activity for real estate properties from January 1, 2015 to December 31, 2017 (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
Balance at end of year
Year Ended December 31,
$
2017
$ 3,382,000
55,763
179,292
(189,895)
—
—
39,322
2016
$ 2,736,283
152,129
761,400
(134,332)
(9,844)
(123,636)
—
2015
2,208,595
162,760
418,396
(66,359)
—
—
12,891
$ 3,466,482
$ 3,382,000
$
2,736,283
109
ACADIA REALTY TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
The following table reconciles accumulated depreciation from January 1, 2015 to December 31, 2017 (in thousands):
$
2017
287,066
73,268
(20,472)
—
Year Ended December 31,
2016
298,703
49,269
(27,829)
(33,077)
287,066
339,862
$
$
$
2015
256,015
49,775
(7,087)
—
298,703
Balance at beginning of year
Depreciation related to real estate
Property dispositions
Deconsolidation of previously consolidated investments
Balance at end of year
$
$
110
ACADIA REALTY TRUST
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 2017
(in thousands)
Description
First Mortgage Loan
First Mortgage Loan
First Mortgage Loan
Zero Coupon Loan
Mezzanine Loan
Preferred Equity
Total
Effective
Interest Rate
6.0%
LIBOR + 7.1%
8.1%
2.5%
18.0%
15.3%
Final Maturity
Date
Face Amount of Notes
Receivable
Net Carrying Amount
of Notes Receivable as
of December 31, 2017
6/1/2018
6/25/2018
4/30/2019
5/31/2020
7/1/2020
2/3/2021
$
$
15,000
$
26,000
153,400
29,793
3,007
14,000
15,000
26,000
60,695
31,778
5,106
15,250
241,200
$
153,829
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.
The following table reconciles the activity for loans on real estate from January 1, 2015 to December 31, 2017 (in thousands):
Balance at beginning of year
Additions
Disposition of air rights through issuance of notes
Repayments
Conversion to real estate through receipt of deed or through foreclosure
Other
Balance at end of year
Reconciliation of Loans on Real Estate
Year Ended December 31,
2017
2016
2015
$
276,163
$
147,188
$
11,371
—
(32,000)
(101,705)
—
171,794
—
(42,819)
—
—
$
153,829
$
276,163
$
102,286
48,500
29,539
(15,984)
(13,386)
(3,767)
147,188
111