Acadia Realty Trust Reports Third Quarter 2009 Operating Results

October 27, 2009 5:00 PM EDT

NEW YORK--(BUSINESS WIRE)-- Acadia Realty Trust (NYSE: AKR), today reported operating results for the quarter ended September 30, 2009. All per share amounts are on a fully diluted basis. The information presented below for 2008 has been adjusted as described in footnote 5 to the Financial Highlights tables.

Third Quarter 2009 Highlights

Earnings - 2009 third quarter FFO of $0.33 and EPS of $0.18

    --  Funds from operations ("FFO") per share of $0.33 for the third quarter
        2009 compared to $0.26 for third quarter 2008 and FFO of $1.03 for the
        nine months ended September 30, 2009 compared to $0.99 for the nine
        months ended September 30, 2008
    --  Earnings per share ("EPS") from continuing operations for third quarter
        2009 of $0.18 compared to $0.13 for third quarter 2008 and EPS of $0.63
        for the nine months ended September 30, 2009 compared to $0.65 for the
        nine months ended September 30, 2008
    --  Earnings guidance increased for full-year 2009 for FFO to a range of
        $1.26 to $1.30 and EPS of $0.77 to $0.81

Balance Sheet Strength Maintained

    --  Cash on hand and availability under current facilities of approximately
        $139 million
    --  Fixed-charge coverage ratio of 3.2 to 1 for the third quarter and 3.3 to
        1 for the nine months ended September 30, 2009
    --  Core portfolio debt yield of 14% and a debt yield of 18% net of cash on
        hand
    --  Including extension options, no significant core portfolio debt
        maturities before December 2011 when $50 million of convertible notes
        are due

Core Portfolio

    --  Same store net operating income decreased 2.5% for the third quarter and
        2.3% for the nine months ended September 30, 2009 compared to the same
        periods in 2008
    --  September 30, 2009 occupancy at 92.5% versus 94.2% at June 30, 2009
    --  Entered into a $2.5 million lease termination agreement with Acme
        Markets at Marketplace of Absecon simultaneous with the execution of two
        replacement leases for 53% of this space
    --  Executed a 29,000 square foot lease with Best Buy to re-tenant the
        former Circuit City space at the Bloomfield Town Square

Third Quarter and Nine Months ended September 30, 2009 Operating Results

For the quarter ended September 30, 2009, FFO was $13.4 million, compared to $9.0 million for the quarter ended September 30, 2008. For the nine months ended September 30, 2009, FFO was $39.6 million compared to $34.8 million for the nine months ended September 30, 2008.

Earnings for the quarters and nine months ended September 30, 2009 and 2008 were as follows:

                     Quarter ended             Nine Months ended
                     September 30,             September 30,

                     2009    2008    Variance  2009    2008    Variance

FFO per share        $ 0.33  $ 0.26  $ 0.07    $ 1.03  $ 0.99  $ 0.04

EPS from continuing  $ 0.18  $ 0.13  $ 0.05    $ 0.63  $ 0.65  $ (0.02 )
operations

EPS                  $ 0.18  $ 0.13  $ 0.05    $ 0.66  $ 0.88  $ (0.22 )

The following are the primary factors which contributed to the $0.05 increase in EPS from continuing operations for the third quarter 2009 compared with the third quarter 2008:

Increases:

    --  $0.09 of lease termination income recorded in the third quarter 2009
        related to Acme Markets
    --  $0.05 as a result of 2009 reductions in general and administrative
        expenses

Decreases:

    --  $0.04, net of noncontrolling interests' share, impairment charge related
        to a Fund I unconsolidated investment
    --  $0.04 decrease in RCP Venture income from the third quarter 2008
    --  $0.03 as a result of dilution from additional outstanding Common Shares
        in 2009

In connection with its quarterly review of all of its core and Fund investments, the Company determined that Fund I's equity in an unconsolidated investment in a shopping center located in Sterling Heights, Michigan was impaired primarily due to local economic factors. Accordingly, it recorded a $1.4 million charge, net of noncontrolling interests' share, during the quarter ended September 30, 2009.

The variance in EPS from continuing operations of $(0.02) for the nine months ended September 30, 2009 includes the above factors for the current quarter as well as the following primary drivers for the six months ended June 30, 2009:

Increases:

    --  $0.21 gain on the purchase of $56.8 million in principal amount of the
        Company's outstanding convertible debt in 2009
    --  $0.16 increase in interest income from additional 2008 mezzanine
        financing and preferred equity investments

Decreases:

    --  $0.14 decrease as a result of lease termination income recorded in 2008,
        net of noncontrolling interests' share
    --  $0.11 decrease in RCP Venture income from 2008 which included a gain
        associated with the sale of 43 Mervyns assets
    --  Various other net decreases aggregated $0.19 as previously detailed in
        the Company's earnings press release for the six months ended June 30,
        2009.

Discontinued operations decreased $0.20 for the nine months ended September 30, 2009 as compared to the same period in 2008 primarily as a result of a gain recognized on the sale of a core property in 2008.

Strong Balance Sheet with Available Capital

As of September 30, 2009, Acadia's solid balance sheet was evidenced by the following:

    --  Total liquidity of $139 million, including $80 million of cash and $59
        million available under existing lines of credit (excluding the
        Opportunity Funds' ("Fund") cash and credit facilities)
    --  Including extension options, no significant core portfolio debt
        maturities before December 2011 when $50 million of convertible notes
        are due
    --  Mortgage debt maturities at the Fund level through 2011 totaling $159
        million which are expected to be addressed though refinancings,
        extensions or investor capital calls
    --  Subscription line loan balance of $191 million at the Fund level
        maturing in 2011 is collateralized by unfunded investor capital
        commitments
    --  Debt yield of 14% (annualized net operating income divided by principal
        amount of debt) and net debt yield of 18% (debt reduced by cash on hand)
        on the core portfolio debt. Including the Company's pro-rata share of
        Fund debt, a debt yield of 13% and a net debt yield of 16%
    --  Fixed-charge coverage ratio of 3.2 to 1 for the third quarter and 3.3 to
        1 for the nine months ended September 30, 2009
    --  100% of the Company's core portfolio debt is fixed-rate at an average
        interest rate of 5.4%. Including the Company's pro-rata share of Fund
        debt, 85% of the Company's debt is fixed-rate at an average 4.9%
    --  Approximately $350 million of Fund III unallocated investor capital
        commitments available, including approximately $70 million committed by
        the Company

In addition, during the quarter, the Company closed on a $45 million, three year mortgage loan to finance the Cortlandt Towne Center which bears interest at LIBOR plus 400 basis points, has two one-year extension options, and provides for an additional $2 million to finance tenant improvement and leasing commission costs.

Retail Portfolio Performance

Through September 2009, the core portfolio, which includes the Company's pro-rata share of its joint venture properties, but excludes the Funds, performed consistently with the upper end of the Company's 2009 forecast. Same store NOI decreased 2.5% for the third quarter 2009 from the third quarter 2008. Key factors were the bankruptcy of Circuit City and the termination of Acme Markets which accounted for a decline in NOI of 1.3% and 0.6%, respectively, for the quarter ended September 30, 2009. During the third quarter, the Company executed a lease with Best Buy to re-tenant the former Circuit City space at the Bloomfield Town Square in Bloomfield Hills, Michigan. For the nine months ended September 30, 2009, same store NOI decreased 2.3% from the nine months ended September 30, 2008.

Acadia's core portfolio occupancy was 92.5% as of September 30, 2009. This represents a decrease of 170 basis points from 94.2% occupancy at June 30, 2009, and a decrease of 240 basis points from September 30, 2008 occupancy of 94.9%. Of these decreases, 110 basis points was the result of the termination of Acme Markets at the Marketplace of Absecon in New Jersey. During the third quarter of 2009, the Company elected to enter into a lease termination agreement with Acme Markets to re-tenant its 44,800 square foot anchor space in the core portfolio. Acadia received a $2.5 million lease termination payment in connection with this agreement and has signed two leases during the quarter to re-tenant over half of the former Acme Market space.

Acadia's combined portfolio occupancy, including its pro-rata share of its joint venture properties and its Funds, was 91.7% as of September 30, 2009. This represents a decrease of 160 basis points from 93.3% occupancy at June 30, 2009 and a decrease of 290 basis points from September 30, 2008 occupancy of 94.6%.

During the third quarter of 2009, the Company realized an average rent increase of 11.2% in its core portfolio on new and renewal leases totaling 26,000 square feet. Including the effect of the straight-lining of rents, the Company realized average rent increases of 18.3% on new and renewal leases with respect to its core portfolio.

Outlook - Earnings Guidance for 2009

Primarily as a result of lease termination income, core portfolio performance and Acadia's initiative to reduce general and administrative expenses, the Company has increased its 2009 earnings guidance. Full year 2009 EPS guidance has been increased by $0.19 at the low end and $0.14 at the high end resulting in an updated EPS guidance range of $0.77 to $0.81. Full year 2009 FFO guidance has also been increased by $0.19 at the low end and $0.14 at the high end resulting in an updated FFO guidance range of $1.26 to $1.30. The following is a reconciliation of the calculation of the Company's current guidance for 2009 EPS and FFO per share:

  Guidance Range for 2009

                                                                  Low     High

  Diluted earnings per share                                      $ 0.77  $ 0.81

  Depreciation of real estate and amortization of leasing costs:

  Wholly owned and consolidated partnerships                        0.44    0.44

  Unconsolidated partnerships                                       0.04    0.04

  Minority interest in Operating Partnership                        0.01    0.01

  Diluted FFO per share                                           $ 1.26  $ 1.30

Management Comments

"We are pleased with our third quarter results" stated Kenneth F. Bernstein, President and CEO of Acadia Realty Trust. "While we are beginning to see some initial signs of stability in the shopping center sector, both with respect to the capital markets and tenant fundamentals, it is too early to predict with clarity how this trend will play out. Accordingly, we remain focused on maintaining the stability of our portfolio, which is dominated by necessity and value-focused retail in dense, high barrier-to-entry locations as well as the strength of our balance sheet. Our liquidity, coupled with a significant portion of our Fund III capital still available for new investments, positions us to capitalize on potential opportunities that we are confident will begin to arise."

Investor Conference Call

Management will conduct a conference call on Wednesday, October 28, 2009 at 12:00 PM ET to review the Company's earnings and operating results. The live conference call can be accessed by dialing 1-866-515-2910 (internationally 617-399-5124). The pass code is "Acadia". The call will also be webcast and can be accessed in a listen-only mode at Acadia's web site at www.acadiarealty.com. If you are unable to participate during the live webcast, the call will be archived and available on Acadia's website. Alternatively, to access the replay by phone, dial 888-286-8010 (internationally 617-801-6888), and the passcode will be 27735655. The phone replay will be available through Tuesday, November 3, 2009.

Acadia Realty Trust, headquartered in White Plains, NY, is a fully integrated, self-managed and self-administered equity REIT focused primarily on the ownership, acquisition, redevelopment and management of retail and mixed-use properties including neighborhood and community shopping centers located in dense urban and suburban markets in major metropolitan areas.

Certain matters in this press release may constitute forward-looking statements within the meaning of federal securities law and as such may involve known and unknown risk, uncertainties and other factors that may cause the actual results, performances or achievements of Acadia to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. These forward-looking statements include statements regarding Acadia's future financial results and its ability to capitalize on potential opportunities arising from the current economic turmoil. Factors that could cause the Company's forward-looking statements to differ from its future results include, but are not limited to, those discussed under the headings "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's most recent annual report on Form 10-K filed with the SEC on February 27, 2009 ("Form 10-K") and other periodic reports filed with the SEC, including risks related to: (i) the current global financial crisis and its effect on retail tenants, including several recent bankruptcies of major retailers; (ii) the Company's reliance on revenues derived from major tenants; (iii) the Company's limited control over joint venture investments; (iv) the Company's partnership structure; (v) real estate and the geographic concentration of our properties; (vi) market interest rates; (vii) leverage; (viii) liability for environmental matters;(ix) the Company's growth strategy; (x) the Company's status as a REIT (xi) uninsured losses and (xii) the loss of key executives. Copies of the Form 10-K and the other periodic reports Acadia files with the SEC are available on the Company's website at www.acadiarealty.com. Any forward-looking statements in this press release speak only as of the date hereof. Acadia expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Acadia's expectations with regard thereto or change in events, conditions or circumstances on which any such statement is based.

ACADIA REALTY TRUST AND SUBSIDIARIES

Financial Highlights 1

For the Quarters and Nine Months ended September 30, 2009 and 2008

(dollars in thousands, except per share data)

                           For the Quarters ended     For the Nine Months ended

                           September 30,              September 30,

Revenues                   2009        20085          2009         20085

                                       (as adjusted)               (as adjusted)

Minimum rents              $ 25,877    $ 18,751       $ 70,922     $ 58,075

Percentage rents             64          116            392          353

Expense reimbursements       4,868       4,172          15,252       12,088

Lease termination income     2,500       (523   )       2,726        23,977

Other property income        362         393            1,550        791

Management fee income        316         496            1,517        2,902

Interest income              5,069       4,684          15,240       9,380

Other                        --          --             1,700        --

Total revenues               39,056      28,089         109,299      107,566

Operating expenses

Property operating           6,419       5,290          20,965       15,718

Real estate taxes            4,552       3,244          12,305       9,080

General and                  5,226       6,822          16,575       19,132
administrative

Depreciation and             10,377      7,986          27,412       21,262
amortization

Abandonment of project       53          --             2,484        --
costs

Reserve for notes            --          --             1,734        --
receivable

Total operating expenses     26,627      23,342         81,475       65,192

Operating income             12,429      4,747          27,824       42,374

Equity in (losses)
earnings of                  (3,848 )    6,664          (7,106  )    24,368
unconsolidated affiliates

Interest expense and         (8,329 )    (8,189 )       (23,782 )    (22,163 )
other finance costs

Gain on extinguishment of    11          --             7,057        --
debt

Gain on sale of land         --          --             --           763

Income from continuing
operations before income     263         3,222          3,993        45,342
taxes

Income taxes                 273         (191   )       (1,349  )    (2,391  )

Income from continuing       536         3,031          2,644        42,951
operations

ACADIA REALTY TRUST AND SUBSIDIARIES

Financial Highlights 1

For the Quarters and Nine Months ended September 30, 2009 and 2008

(dollars in thousands, except per share data)

                            For the Quarters ended     For the Nine Months ended

                            September 30,              September 30,

                            2009        20085          2009        20085

                                        (as adjusted)              (as adjusted)

Discontinued operations:

Operating income from         32          181            225         1,234
discontinued operations

Gain on sale of property      --          --             5,637       7,182

Income from discontinued      32          181            5,862       8,416
operations

Net income                    568         3,212          8,506       51,367

Loss (income) attributable
to noncontrolling
interests in subsidiaries:

Continuing operations         6,740       1,386          21,101      (20,660 )

Discontinued operations       (1     )    (132   )       (4,866 )    (605    )

Net loss (income)
attributable to               6,739       1,254          16,235      (21,265 )
noncontrolling interests
in subsidiaries

Net income attributable to  $ 7,307     $ 4,466        $ 24,741    $ 30,102
Common Shareholders

Supplemental Information

Income from continuing
operations attributable to  $ 7,276     $ 4,417        $ 23,745    $ 22,291
Common Shareholders

Income from discontinued
operations attributable to    31          49             996         7,811
Common Shareholders

Net income attributable to  $ 7,307     $ 4,466        $ 24,741    $ 30,102
Common Shareholders

Net income attributable to
Common Shareholders per
Common Share - Basic

Net income per Common
Share - Continuing          $ 0.18      $ 0.13         $ 0.63      $ 0.66
operations

Net income per Common
Share - Discontinued          --          --             0.03        0.23
operations

Net income per Common       $ 0.18      $ 0.13         $ 0.66      $ 0.89
Share

Weighted average Common       39,686      33,845         37,415      33,800
Shares

Net income attributable to
Common Shareholders per
Common Share - Diluted2

Net income per Common
Share - Continuing          $ 0.18      $ 0.13         $ 0.63      $ 0.65
operations

Net income per Common
Share - Discontinued          --          --             0.03        0.23
operations

Net income per Common       $ 0.18      $ 0.13         $ 0.66      $ 0.88
Share

Weighted average Common       39,968      34,366         37,629      34,338
Shares

ACADIA REALTY TRUST AND SUBSIDIARIES

Financial Highlights 1

For the Quarters and Nine Months ended September 30, 2009 and 2008

(dollars in thousands, except per share data)

RECONCILIATION OF NET INCOME TO FUNDS FROM OPERATIONS3

                              For the Quarters ended   For the Nine Months ended

                              September 30,            September 30,

                              2009      20085          2009        20085

                                        (as adjusted)              (as adjusted)

Net income attributable to    $ 7,307   $ 4,466        $ 24,741    $ 30,102
Common Shareholders

Depreciation of real estate
and amortization of leasing
costs

(net of noncontrolling
interests' share):

Consolidated affiliates         5,441     3,996          14,239      10,533

Unconsolidated affiliates       494       439            1,231       1,322

Gain on sale (net of
noncontrolling interests'
share):

Consolidated affiliates         --        --             (929   )    (7,182 )

Unconsolidated affiliates       --        23             --          (565   )

Income attributable to
noncontrolling interests' in    133       104            344         546
Operating Partnership

Distributions - Preferred OP    5         5              14          16
Units

Funds from operations         $ 13,380  $ 9,033        $ 39,640    $ 34,772

Funds from operations per
share - Diluted

Weighted average Common         40,641    35,039         38,301      34,985
Shares and OP Units 4

Funds from operations, per    $ 0.33    $ 0.26         $ 1.03      $ 0.99
share

ACADIA REALTY TRUST AND SUBSIDIARIES

Financial Highlights 1

For the Quarters and Nine Months ended September 30, 2009 and 2008

(dollars in thousands)

RECONCILIATION OF OPERATING INCOME TO NET PROPERTY

OPERATING INCOME ("NOI")

                               For the Quarters ended  For the Nine Months ended

                               September 30,           September 30,

                               2009        20085       2009         20085

Operating income               $ 12,429    $ 4,747     $ 27,824     $ 42,374

Add back:

General and administrative       5,226       6,822       16,575       19,132

Depreciation and amortization    10,377      7,986       27,412       21,262

Abandonment of project costs     53          --          2,484        --

Reserve for notes receivable     --          --          1,734        --

Less:

Management fee income            (316   )    (496   )    (1,517  )    (2,902  )

Interest income                  (5,069 )    (4,684 )    (15,240 )    (9,380  )

Other income                     --          --          (1,700  )    --

Lease termination income         (2,500 )    523         (2,726  )    (23,977 )

Straight line rent and other     (2,120 )    (2,136 )    (1,673  )    (3,333  )
adjustments

Consolidated NOI                 18,080      12,762      53,173       43,176

Noncontrolling interest in       (3,291 )    1,108       (9,485  )    (726    )
NOI

Pro-rata share of NOI          $ 14,789    $ 13,870    $ 43,688     $ 42,450

SELECTED BALANCE SHEET INFORMATION

                             As of

                             September 30,  December 31,

                             2009           20085

                                            (as adjusted)

Cash and cash equivalents    $ 117,831      $ 86,691

Rental property, at cost       1,014,619      857,226

Total assets                   1,397,367      1,291,383

Notes payable                  807,098        753,946

Total liabilities              879,675        849,155

ACADIA REALTY TRUST AND SUBSIDIARIES

Financial Highlights

For the Quarters and Nine Months ended September 30, 2009 and 2008

(dollars in thousands, except per share data)

Notes:

1 For additional information and analysis concerning the Company's results of operations, reference is made to the Company's Quarterly Supplemental Disclosure furnished on Form 8-K to the SEC and included on the Company's website at www.acadiarealty.com.

2 Reflects the potential dilution that could occur if securities or other contracts to issue Common Shares were exercised or converted into Common Shares. The effect of the conversion of Common OP Units is not reflected in the above table 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 minority interest in the consolidated financial statements. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings per share.

3 The Company considers funds from operations ("FFO") as defined by the National Association of Real Estate Investment Trusts ("NAREIT") and net operating income ("NOI") to be appropriate supplemental disclosures of operating performance for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. FFO and NOI are presented to assist investors in analyzing the performance of the Company. They are helpful as they exclude various items included in net income that are not indicative of the operating performance, such as gains (losses) from sales of depreciated property and depreciation and amortization. In addition, NOI excludes interest expense. The Company's method of calculating FFO and NOI may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash generated from operations as defined by generally accepted accounting principles ("GAAP") and is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the purpose of evaluating the Company's performance or to cash flows as a measure of liquidity. Consistent with the NAREIT definition, the Company defines FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

4 In addition to the weighted average Common Shares outstanding, basic and diluted FFO also assumes full conversion of a weighted average 673 and 648 OP Units into Common Shares for the quarters ended September 30, 2009 and 2008, respectively, and 673 and 647 OP Units into Common Shares for the nine months ended September 30, 2009 and 2008, respectively. Diluted FFO also includes the assumed conversion of Preferred OP Units into 25 Common Shares for each of the quarters ended September 30, 2009 and 2008, and for each of the nine months ended September 30, 2009 and 2008. In addition, diluted FFO also includes the effect of employee share options of 257 and 521 Common Shares for the quarters ended September 30, 2009 and 2008, respectively, and 189 and 512 Common Shares for the nine months ended September 30, 2009 and 2008, respectively.

5 Effective January 1, 2009, the Company adopted the following Financial Accounting Standards Board ("FASB") accounting pronouncements which require it to retrospectively restate previously disclosed consolidated financial statements. As such, certain prior period amounts have been reclassified in the unaudited consolidated financial statements to conform to the current period presentations.

The Company adopted Statement of Financial Accounting Standard No. 160, "Noncontrolling Interests in Consolidated Financial Statements," ("SFAS 160") which, among other things, provides guidance and amends the accounting and reporting for noncontrolling interests in a consolidated subsidiary and the deconsolidation of a subsidiary. Under SFAS No. 160, the Company now reports noncontrolling interests in subsidiaries as a separate component of equity in the consolidated balance sheet and reflects both net income attributable to the noncontrolling interests and net income attributable to Common Shareholders on the face of the consolidated income statement.

The Company adopted FASB Staff Position No. 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)", ("FSP 14-1"). FSP 14-1 requires the proceeds from the issuance of convertible debt be allocated between a debt component and an equity component. The debt component is measured based on the fair value of similar debt without an equity conversion feature, and the equity component is determined as the residual of the fair value of the debt deducted from the original proceeds received. The resulting discount on the debt component is amortized over the period the convertible debt is expected to be outstanding as additional non-cash interest expense. The equity component, recorded as additional paid-in capital, amounted to $11.3 million, which represents the difference between the proceeds from the issuance of the convertible notes payable and the fair value of the liability at the time of issuance. The Company adopted FSP 14-1 effective January 1, 2009 with a retrospective restatement to prior periods. The additional non cash interest expense recognized in the consolidated income statements was $0.2 million and $0.5 million for the quarters ended September 30, 2009 and 2008, respectively, and $1.0 million and $1.5 million for the nine months ended September 30, 2009 and 2008, respectively.

    Source: Acadia Realty Trust

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