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EX-23.1 - EXHIBIT 23.1 - ACADIA REALTY TRUSTv300632_ex23-1.htm

 UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): December 9, 2011

ACADIA REALTY TRUST
(Exact name of registrant as specified in its charter)

 

Maryland 1-12002 23-2715194
(State or other (Commission (I.R.S. Employer
jurisdiction of incorporation) File Number) Identification No.)

 

1311 Mamaroneck Avenue
Suite 260
White Plains, New York 10605
(Address of principal executive offices) (Zip Code)

(914) 288-8100
(Registrant's telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

p Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425 )

p Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

p Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

p Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 

 

Item 8.01 Other Events

 

Recent Developments

 

Property Acquisitions

 

During December 2011, Acadia Realty Trust (the “Company”), through Acadia Strategic Opportunity Fund III LLC (“Fund III”), acquired two properties, one located in Baltimore, Maryland and the other in metropolitan New York, for an aggregate purchase price of $34.7 million. These were previously disclosed as under contract as of September 30, 2011. In addition, the Company, also through Fund III, acquired a shopping center located in the metropolitan New York area for $11.3 million

 

During January 2012, the Company purchased a property located in Chicago, Illinois for $3.9 million.

 

Note Repurchase

 

During December 2011, pursuant to the terms of its outstanding 3.75% Convertible Notes due 2026 (the “Notes”), the Company repurchased $24.0 million of the Notes at face value plus accrued interest to the date of repurchase. Notes with a principal amount of $0.9 million remain outstanding after the repurchase.

 

The above acquisitions and repurchase of the Notes were funded with available Company working capital a portion of which came from the proceeds of the Company’s November 2011 follow-on public offering that raised $45.2 million in gross proceeds and contributions from non-controlling interests.

  

Item 9.01 Financial Statements and Exhibits.

 

Financial Statements.

 

During December 2011, the Company, through Fund III, and together with an unaffiliated joint venture partner, acquired Parkway Crossing (“Parkway”) for $21.5 million, of which $14.0 million was funded with new mortgage debt obtained at closing and the balance of $7.5 million funded with cash. Fund III’s share of cash required for the acquisition was $6.7 million. The following financial information with respect to Parkway together with the financial information filed with the Securities and Exchange Commission by the Company on Form 8-K on November 3, 2011, constitutes the required audited financial information and unaudited pro forma information with respect to a portion of the Company’s acquisition activity since January 1, 2011.

 

Index to Financial Information

 

Parkway Crossing: Page
Independent Auditors’ Report  2

Statements of Revenues and Certain Expenses for the Year Ended December 31, 2010

and the Nine Months Ended September 30, 2011 (unaudited)

3
Notes to Statements of Revenues and Certain Expenses 4

  

Unaudited Pro Forma Condensed Consolidated Financial Statements

 

As of, and For, the Nine Months Ended September 30, 2011

For the Year Ended December 31, 2010

Notes to Financial Statements

 

1
 

 

 

Parkway Crossing

 

Independent Auditors’ Report

 

To the Board of Directors and Management of

Acadia Realty Trust

White Plains, New York

 

We have audited the accompanying statement of revenues and certain expenses of Parkway Crossing (the “Company”) for the year ended December 31, 2010. The statement of revenues and certain expenses is the responsibility of Acadia Realty Trust’s management. Our responsibility is to express an opinion on the statement of revenues and certain expenses based on our audit.

 

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in a Form 8-K of Acadia Realty Trust. As described in Note 2, material amounts that would not be comparable to those resulting from the proposed future operations of Parkway Crossing are excluded from the statement of revenues and certain expenses and the statement of revenues and certain expenses is not intended to be a complete presentation of the Company’s revenues and expenses.

 

In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of Parkway Crossing for the year ended December 31, 2010, on the basis of accounting described in Note 2.

 

 

 

/s/ BDO USA, LLP

 

January 5, 2012

 

2
 

 

Parkway Crossing

Statements of Revenues and Certain Expenses

 

(in thousands)    Year ended
December 31, 2010
    Nine Months ended
September 30, 2011 (unaudited)
 
Revenues:          
  Rental revenue  $1,733   $1,177 
  Reimbursement revenue   577    537 
  Other revenue   5    3 
           Total Revenues   2,315    1,717 
Certain Expenses:          
Operating expenses   483    350 
Real estate taxes   216    160 
Insurance expense   30    23 
Total Certain Expenses   729    533 
Revenues in Excess of Certain Expenses  $1,586   $1,184 

 

See accompanying notes to the statements of revenues and certain expenses.

 

3
 

 

Notes to Statements of Revenues and Certain Expenses

  

1. Organization

 

Parkway Crossing (“Parkway”) is a 27-tenant shopping center located on Perring Parkway in Baltimore County, Maryland.

 

Acadia Realty Trust (the “Trust”) and subsidiaries (collectively, the “Company”) is a fully integrated equity real estate investment trust focused on the acquisition, ownership, management and redevelopment of high-quality retail properties and urban/infill mixed-use properties with a strong retail component located primarily in high-barrier-to-entry, densely-populated metropolitan areas along the East Coast and in Chicago, Illinois.

 

During December 2011, the Company, through Acadia Strategic Opportunity Fund III LLC (“Fund III”), and together with an unaffiliated joint venture partner, acquired Parkway Crossing (“Parkway”) for $21.5 million.

 

2. Basis of Presentation and Significant Accounting Policies

 

Presented herein are the statements of revenues and certain expenses of the Property.

 

The accompanying statements of revenues and certain expenses (the “Statements”) have been prepared for the purpose of complying with the applicable rules and regulations of the Securities and Exchange Commission, Regulation S-X, Rule 3-14 and for inclusion in a Current Report on Form 8-K of the Company. The Statements are not intended to be a complete presentation of the revenues and expenses of the Property. Accordingly, the Statements exclude depreciation and amortization of fixed assets, amortization of intangible assets and liabilities and asset management fees not directly related to the future operations.

 

Revenue Recognition

 

Minimum rental revenue is recognized on a straight-line basis over the term of the lease. Certain of the leases acquired provide for the reimbursement to the owner of Parkway of real estate taxes, insurance and other property operating expenses. These reimbursements are recognized as revenue in the period the expenses are incurred.

 

Income Taxes

 

Parkway was organized as a limited liability company and is not directly subject to federal, state, or city income taxes.

 

Use of Estimates

 

The preparation of the Statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the statement of revenues and certain expenses and accompanying notes. Actual results could differ from those estimates.

 

3. Rental Income

 

The Company is the lessor to tenants under operating leases with expiration dates ranging from 2011 to 2032. The minimum rental amounts due under the leases are generally either subject to scheduled fixed increases or adjustments. The leases generally also require that the tenants reimburse the Company for the tenants pro rata share of increases in certain operating costs and real estate taxes. Future minimum rents to be received over the next five years and thereafter for noncancelable operating leases in effect at December 31, 2010 are as follows:

 

(in thousands)

2011  $1,623 
2012   1,539 
2013   1,384 
2014   1,325 
2015   1,254 
Thereafter   2,872 
Total  $9,997 

 

4
 

 

ACADIA REALTY TRUST AND SUBSIDIARIES

 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

As of, and For, the Nine Months Ended September 30, 2011 and For the Year Ended December 31, 2010

 

During December 2011, the Company, through Fund III, and together with an unaffiliated joint venture partner, acquired Parkway Crossing (“Parkway”) for $21.5 million, of which $14.0 million was funded with new mortgage debt obtained at closing and the balance of $7.5 million funded with cash. Fund III’s share of cash required for the acquisition was $6.7 million.

 

The accompanying unaudited pro forma condensed consolidated balance sheet as of September 30, 2011 has been prepared as if the acquisition of Parkway occurred on September 30, 2011. The accompanying unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2011 and for the year ended December 31, 2010 have been prepared as if the acquisition of Parkway occurred as of January 1, 2010.

 

Our pro forma condensed consolidated financial statements are presented for informational purposes only and should be read in conjunction with the historical financial statements and related notes thereto filed with the U.S. Securities and Exchange Commission. In the opinion of the Company’s management, the pro forma condensed consolidated financial statements include all significant necessary adjustments that can be factually supported to reflect the effect of the Acquisitions. The unaudited pro forma condensed consolidated financial statements are based on assumptions and estimates considered appropriate by the Company’s management; however, they are not necessarily, and should not be assumed to be, an indication of the Company’s financial position or results of operations that would have been achieved had the acquisition of Parkway been completed as of the date indicated or that may be achieved in the future.

 

5
 

 

ACADIA REALTY TRUST AND SUBSIDIARIES 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of September 30, 2011

 

(Amount in thousands, except share and per share data)  Company Historical  Previous
Acquisitions
  Acquisition of Parkway  Company Pro Forma
    (a)    (b)           
ASSETS                    
                     
Operating real estate                    
Land  $268,077   $28,544   $—     $296,621 
Building and improvements   958,549    66,603         1,025,152 
Construction in progress   3,983              3,983 
    1,230,609    95,147         1,325,756 
Less: accumulated depreciation   200,840              200,840 
Net operating real estate   1,029,769    95,147         1,124,916 
Real estate under development   229,223              229,223 
Notes receivable, net   41,304              41,304 
Investments in and advances to unconsolidated affiliates   78,420         6,728    85,148 
Cash and cash equivalents   98,027    (34,514)   (6,728)   56,785 
Cash in escrow   27,553              27,553 
Rents receivable, net   23,179              23,179 
Deferred charges, net   25,696              25,696 
Acquired lease intangibles, net   22,975              22,975 
Prepaid expenses and other assets   27,637              27,637 
Assets of discontinued operations   2,684              2,684 
Total assets  $1,606,467   $60,633   $—     $1,667,100 
                     
LIABILITIES                    
                     
Mortgage notes payable  $846,399   $47,133   $—     $893,532 
 Convertible notes payable, net   24,824              24,824 
 Distributions in excess of income from, and investments in, unconsolidated affiliates   21,401              21,401 
 Accounts payable and accrued expenses   31,992              31,992 
 Dividends and distributions payable   7,507              7,507 
Acquired lease and other intangibles, net   5,592              5,592 
 Other liabilities   18,914              18,914 
Liabilities of discontinued operations   289              289 
Total liabilities   956,918    47,133    —      1,004,051 
                     
EQUITY                    
                     
Shareholders’ equity
                    
Common shares, $.001 par value, authorized 100,000,000 shares; issued and outstanding 40,331,366 and 40,254,525 shares, respectively   40              40 
Additional paid-in capital   303,783              303,783 
Accumulated other comprehensive loss   (4,231)             (4,231)
Retained earnings   39,098              39,098 
Total shareholders’ equity   338,690              338,690 
Noncontrolling interests   310,859    13,500         324,359 
Total equity   649,549    13,500         663,049 
Total liabilities and equity  $1,606,467   $60,633   $—     $1,667,100 

 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

6
 

 

ACADIA REALTY TRUST AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Nine Months Ended September 30, 2011

 

(dollars in thousands, except per share amounts)  Company
Historical
(aa)
  Previous
Acquisitions
(bb)
  Acquisition of
Parkway
(cc)
  Company
Pro Forma
Revenues                    
Rental income  $85,564   $5,522        $91,086 
Interest income   9,493              9,493 
Expense reimbursements   16,213    1,633         17,846 
Management fee income   1,169              1,169 
Other   1,849              1,849 
 Total revenues   114,288    7,155         121,443 
                     
Operating Expenses                    
Property operating   22,565    543         23,108 
Real estate taxes   13,792    1,220         15,012 
General and administrative   17,147              17,147 
Depreciation and amortization   24,626    1,560         26,186 
 Total operating expenses   78,130    3,323         81,453 
                     
Operating income   36,158    3,832         39,990 
                     
Equity in earnings of unconsolidated affiliates   3,025         562    3,587 
Other interest income   219              219 
Gain on debt extinguishment   1,268              1,268 
Interest and other finance expense   (27,598)   (2,105)        (29,703)
Income from continuing operations before income taxes   13,072    1,727    562    15,361 
Income tax provision   (7)             (7)
Income from continuing operations   13,065    1,727    562    15,354 
                     
Discontinued Operations                    
Operating income from discontinued operations   702              702 
Impairment of asset   (6,925)             (6,925)
Gain on sale of property   32,498              32,498 
Income from discontinued operations   26,275              26,275 
                     
Net income   39,340    1,727    562    41,629 
                     
Noncontrolling interests                    
Continuing operations   3,597    (391)   (451)   2,755 
Discontinued operations   731              731 
Net loss (income) attributable to noncontrolling interests   4,328    (391)   (451)   3,486 
                     
 Net income attributable to Common Shareholders  $43,668   $1,336   $111   $45,115 
                     
Basic Earnings per Share                    
Income from continuing operations  $0.41   $0.03   $0.00   $0.45 
Income from discontinued operations   0.67    —      —      0.67 
Basic earnings per share  $1.08   $0.03   $0.00   $1.12 
                     
Diluted Earnings per Share                    
Income from continuing operations  $0.41   $0.03   $0.00   $0.45 
Income from discontinued operations   0.67    —      —      0.67 
Diluted earnings per share  $1.08   $0.03   $0.00   $1.12 

 

 The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

7
 

 

ACADIA REALTY TRUST AND SUBSIDIARIES 

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Year Ended December 31, 2010

 

(dollars in thousands, except per share amounts)  Company
Historical
(aa)
  Previous
Acqusitions
(bb)
  Acquisition of
Parkway
(cc)
  Company
Pro Forma
Revenues                    
Rental income  $106,913   $9,276        $116,189 
Mortgage interest income   19,161              19,161 
Expense reimbursements   22,030    2,848         24,878 
Lease termination income   290              290 
Management fee income   1,424              1,424 
Other   2,140              2,140 
 Total revenues   151,958    12,124         164,082 
                     
Operating Expenses                    
Property operating   30,914    831         31,745 
Real estate taxes   18,245    2,171         20,416 
General and administrative   20,220              20,220 
Depreciation and amortization   40,115    2,486         42,601 
 Total operating expenses   109,494    5,488         114,982 
                     
Operating income   42,464    6,636         49,100 
                     
Equity in earnings of unconsolidated affiliates   10,971         749    11,720 
Other interest income   408              408 
Gain from bargain purchase   33,805              33,805 
Interest and other finance expense   (34,471)   (2,993)        (37,464)
Income from continuing operations before income taxes   53,177    3,643    749    57,569 
Income tax provision   (2,890)             (2,890)
Income from continuing operations   50,287    3,643    749    54,679 
                     
Discontinued Operations                    
Operating income from discontinued operations   380              380 
Income from discontinued operations   380              380 
                     
Net income   50,667    3,643    749    55,059 
                     
Noncontrolling interests                    
Continuing operations   (20,307)   (1,926)   (602)   (22,835)
Discontinued operations   (303)             (303)
Net income attributable to noncontrolling interests   (20,610)   (1,926)   (602)   (23,138)
                     
 Net income attributable to Common Shareholders  $30,057   $1,717   $147   $31,921 
                     
Basic Earnings per Share                    
Income from continuing operations  $0.75   $0.04   $0.00   $0.80 
Income from discontinued operations   —      —      —      —   
Basic earnings per share  $0.75   $0.04   $0.00   $0.80 
                     
Diluted Earnings per Share                    
Income from continuing operations  $0.74   $0.04   $0.00   $0.80 
Income from discontinued operations   —      —      —      —   
Diluted earnings per share  $0.74   $0.04   $0.00   $0.80 

 

The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

 

8
 

 

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

 

Note 1 — Basis of Pro Forma Presentation

 

Acadia Realty Trust and subsidiaries (collectively, the “Company”), is a fully-integrated equity real estate investment trust focused on the ownership, management and redevelopment of retail properties and urban/infill mixed-use properties with a retail component concentration located primarily in high-barrier-to-entry, densely-populated metropolitan areas in the United States along the East Coast and in Chicago.

 

The consolidated financial statements include the consolidated accounts of the Company and its investments in partnerships and limited liability companies in which the Company is presumed to have control in accordance with the consolidation guidance of the Financial Accounting Standards Board Accounting Standards Codification (“ASC”). Investments in entities for which the Company has the ability to exercise significant influence but does not have financial or operating control, are accounted for under the equity method of accounting. Accordingly, the Company’s share of the net earnings (or losses) of entities accounted for under the equity method are included in consolidated net income under the caption, Equity in Earnings (Losses) of Unconsolidated Affiliates. Investments in entities for which the Company does not have the ability to exercise any influence are accounted for under the cost method of accounting.

 

During December 2011, the Company, through Acadia Strategic Opportunity III LLC (“Fund III”), and together with an unaffiliated joint venture partner, acquired Parkway Crossing (“Parkway”) for $21.5 million, of which $14.0 million was funded with new mortgage debt obtained at closing and the balance of $7.5 million funded with cash. Fund III’s share of cash required for the acquisition was $6.7 million.

  

Note 2 — Adjustments to Unaudited Pro Forma Condensed Consolidated Balance Sheet

 

(a) Represents the historical consolidated balance sheet of the Company as of September 30, 2011.

 

(b)  Reflects those acquisitions as previously disclosed in the Company’s Form 8-K as filed with the Securities and Exchange Commission on November 3, 2011.

 

9
 

  

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 

 

Note 3 — Adjustments to Unaudited Pro Forma Condensed Consolidated Statements of Income

 

(aa) Represents the unaudited historical consolidated statements of income for the Company for the nine months ended September 30, 2011 and year ended December 31, 2010.

 

(bb) Represents the unaudited historical combined statements of revenues and certain operating expenses for those acquisitions as previously disclosed in the Company’s Form 8-K as filed with the Securities and Exchange Commission on November 3, 2011.

 

(cc) Represents the unaudited historical statement of revenues and certain operating expenses for Parkway for the nine months ended September 30, 2011 and the year ended December 31, 2010.

  

Funds from Operations

 

Consistent with the National Association of Real Estate Investment Trusts (“NAREIT”) definition, we define funds from operations (“FFO”) as net income attributable to common shareholders (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

 

We consider FFO and pro forma FFO 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. Pro forma 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 (or losses) from sales of operating property and depreciation and amortization. However, our method of calculating Pro forma FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. Pro forma FFO does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. Pro forma FFO 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.

 

10
 

 

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Funds from Operations (continued)

 

The reconciliation of net income to Pro forma FFO for the year ended 2010 is as follows: 

 

(amounts in thousands except per share amounts)  Company Historical  Previous
Acqusitions
(i)
  Acquisition of Parkway  Company
Pro Forma
             
Funds From Operations            

Net income attributable to Common

Shareholders 

  $30,057   $1,716   $147   $31,920 

Depreciation of real estate and

amortization of leasing costs
(net of noncontrolling interests’ share)

                    
Consolidated affiliates   18,445    2,486         20,931 
Unconsolidated affiliates   1,561    —      72    1,633 

Income attributable to noncontrolling

interests’ in Operating Partnership 

   377    21    2    400 
Funds from operations  $50,440   $4,223   $221   $54,884 
                     
Funds From Operations per Share - Diluted                    

Weighted average number of Common

Shares and OP Units 

   40,876    40,876    40,876    40,876 
Diluted funds from operations, per share  $1.23   $0.10   $0.01   $1.34 

 

(i) Represents those acquisitions as previously disclosed in the Company’s Form 8-K as filed with the Securities and Exchange Commission on November 3, 2011.

11
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  ACADIA REALTY TRUST
  (Registrant)
   
Date: January 27, 2012 By:  /s/ Jonathan Grisham
  Name: Jonathan Grisham
Title: Sr. Vice President
and Chief Financial Officer

  

EXHIBIT INDEX

     
Exhibit No.   Description
23.1   Consent of BDO