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EX-32.1 - EXHIBIT 32.1 - ACADIA REALTY TRUSTakrex321q22015.htm
EX-10.3 - EXHIBIT 10.3 - ACADIA REALTY TRUSTakrex103q22015.htm
EX-10.4 - EXHIBIT 10.4 - ACADIA REALTY TRUSTakrex104q22015.htm
EX-10.2 - EXHIBIT 10.2 - ACADIA REALTY TRUSTakrex102q22015.htm
EX-31.1 - EXHIBIT 31.1 - ACADIA REALTY TRUSTakrex311q22015.htm
EX-32.2 - EXHIBIT 32.2 - ACADIA REALTY TRUSTakrex322q22015.htm
EX-31.2 - EXHIBIT 31.2 - ACADIA REALTY TRUSTakrex312q22015.htm
EX-10.5 - EXHIBIT 10.5 - ACADIA REALTY TRUSTakrex105q22015.htm
EX-99.2 - EXHIBIT 99.2 - ACADIA REALTY TRUSTakrex992q22015.htm



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended June 30, 2015

or
 o 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 in its charter)
MARYLAND
 (State or other jurisdiction of
 incorporation or organization)
 
23-2715194
 (I.R.S. Employer
 Identification No.)
 
 
 
1311 MAMARONECK AVENUE, SUITE 260, WHITE PLAINS, NY
 (Address of principal executive offices)
 10605
 (Zip Code)
(914) 288-8100
(Registrant’s telephone number, including area code)
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 x
 
NO o
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 x
 
NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer  x
 
Accelerated Filer  o
 
 
 
Non-accelerated Filer  o
 
Smaller Reporting Company  o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o No x
As of July 31, 2015 there were 68,829,489 common shares of beneficial interest, par value $.001 per share, outstanding.





ACADIA REALTY TRUST AND SUBSIDIARIES

FORM 10-Q

INDEX

 
 
Page
 
 
 
Part I:
Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part II:
Other Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




Part I. Financial Information

Item 1. Financial Statements.
 
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30,
2015
 
December 31,
2014
ASSETS
(unaudited)
 
 
Operating real estate
 
 
 
Land
$
507,952

 
$
424,661

Buildings and improvements
1,522,127

 
1,329,080

Construction in progress
15,206

 
7,464

 
2,045,285

 
1,761,205

Less: accumulated depreciation
277,678

 
256,015

Net operating real estate
1,767,607

 
1,505,190

Real estate under development
533,295

 
447,390

Notes receivable and preferred equity investments, net
168,931

 
102,286

Investments in and advances to unconsolidated affiliates
166,632

 
184,352

Cash and cash equivalents
104,651

 
217,580

Cash in escrow
31,781

 
20,358

Restricted cash
29,192

 
30,604

Rents receivable, net
37,887

 
36,962

Deferred charges, net
32,984

 
30,679

Acquired lease intangibles, net
47,683

 
44,618

Prepaid expenses and other assets
53,056

 
56,508

Assets of properties held for sale

 
56,073

Total assets
$
2,973,699

 
$
2,732,600

 
 
 
 
LIABILITIES
 

 
 

Mortgage and other notes payable
$
1,326,667

 
$
1,130,481

Distributions in excess of income from, and investments in, unconsolidated affiliates
13,161

 
12,564

Accounts payable and accrued expenses
37,551

 
34,026

Dividends and distributions payable
17,697

 
39,339

Acquired lease intangibles, net
31,137

 
29,585

Other liabilities
27,616

 
25,148

Liabilities of properties held for sale

 
25,500

Total liabilities
1,453,829

 
1,296,643

 
 
 
 
EQUITY
 

 
 

Shareholders' Equity
 
 
 
Common shares, $.001 par value, authorized 100,000,000 shares; issued and outstanding 68,828,560 and 68,109,287 shares, respectively
69

 
68

Additional paid-in capital
1,050,385

 
1,027,861

Accumulated other comprehensive loss
(3,284
)
 
(4,005
)
Retained earnings
41,654

 
31,617

Total shareholders’ equity
1,088,824

 
1,055,541

Noncontrolling interests
431,046

 
380,416

Total equity
1,519,870

 
1,435,957

Total liabilities and equity
$
2,973,699

 
$
2,732,600

See accompanying notes

1


ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(dollars in thousands, except per share amounts)
2015
 
2014
 
2015
 
2014
Revenues
 
 
 
 
 
 
 
Rental income
$
39,784

 
$
36,112

 
$
77,971

 
69,930

Interest income
3,985

 
3,049

 
7,393

 
6,213

Expense reimbursements
7,825

 
7,832

 
17,891

 
16,622

Other
1,567

 
2,518

 
2,387

 
3,431

Total revenues
53,161


49,511


105,642


96,196

Operating Expenses
 
 
 
 
 
 
 
Property operating
6,196

 
5,737

 
13,927

 
12,861

Other operating
599

 
908

 
2,719

 
1,595

Real estate taxes
6,419

 
5,569

 
12,711

 
11,239

General and administrative
8,005

 
6,879

 
15,537

 
13,775

Depreciation and amortization
13,903

 
11,584

 
27,561

 
23,171

Impairment of asset
5,000

 

 
5,000

 

Total operating expenses
40,122


30,677


77,455


62,641

Operating income
13,039


18,834


28,187


33,555

Equity in earnings of unconsolidated affiliates
3,406

 
1,430

 
9,999

 
4,459

Gain on disposition of property of unconsolidated affiliates
17,105

 

 
17,105

 

Loss on debt extinguishment
(25
)
 
(66
)
 
(134
)
 
(269
)
Gain on disposition of properties
61,841

 
561

 
88,984

 
12,948

Interest and other finance expense
(9,964
)
 
(9,534
)
 
(18,785
)
 
(20,185
)
Income from continuing operations before income tax benefit (provision)
85,402


11,225


125,356


30,508

Income tax benefit (provision)
56

 
83

 
(1,361
)
 
(85
)
Income from continuing operations
85,458


11,308


123,995


30,423

Discontinued Operations
 
 
 
 
 
 
 
Gain on disposition of property

 
560

 

 
560

Income from discontinued operations


560




560

Net income
85,458


11,868


123,995


30,983

Noncontrolling interests
 
 
 
 
 
 
 
Continuing operations
(58,963
)
 
57

 
(80,953
)
 
2,537

Discontinued operations

 
(461
)
 

 
(461
)
Net (income) loss attributable to noncontrolling interests
(58,963
)

(404
)

(80,953
)

2,076

Net income attributable to Common Shareholders
$
26,495


$
11,464


$
43,042


$
33,059

 
 
 
 
 
 
 
 
Basic and diluted earnings per share
$
0.38


$
0.19


$
0.62


$
0.57

See accompanying notes

2


ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2015
 
2014
 
2015
 
2014
(dollars in thousands)
 
 
 
 
 
 
 
 
Net income
 
$
85,458

 
$
11,868

 
$
123,995

 
$
30,983

Other comprehensive income (loss)
 
 
 
 
 
 
 
 
Unrealized income (loss) on valuation of swap agreements
 
2,644

 
(2,782
)
 
(1,655
)
 
(5,112
)
Reclassification of realized interest on swap agreements
 
2,399

 
936

 
3,452

 
1,773

Other comprehensive income (loss)
 
5,043

 
(1,846
)
 
1,797

 
(3,339
)
Comprehensive income
 
90,501

 
10,022

 
125,792

 
27,644

Comprehensive income attributable to noncontrolling interests
 
(60,461
)
 
(4,640
)
 
(82,029
)
 
(2,207
)
Comprehensive income attributable to Common Shareholders
 
$
30,040

 
$
5,382

 
$
43,763

 
$
25,437

See accompanying notes


3




ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2015

(unaudited)
 
Common Shares
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
(Loss) Income
 
Retained
Earnings
 
Total
Shareholders’
Equity
 
Noncontrolling
Interests
 
Total
Equity
(amounts in thousands, except per share amounts)
Shares
 
Amount
 
 
 
 
 
 
Balance at December 31, 2014
68,109

 
$
68

 
$
1,027,861

 
$
(4,005
)
 
$
31,617

 
$
1,055,541

 
$
380,416

 
$
1,435,957

Conversion of OP Units to Common Shares by limited partners of the Operating Partnership
67

 

 
1,655

 

 

 
1,655

 
(1,655
)
 

Issuance of Common Shares, net of issuance costs
624

 
1

 
21,079

 

 

 
21,080

 

 
21,080

Dividends declared ($0.48 per Common Share)

 

 

 

 
(33,005
)
 
(33,005
)
 
(2,363
)
 
(35,368
)
Employee and trustee stock compensation, net
29

 

 
452

 

 

 
452

 
3,392

 
3,844

Acquisition of noncontrolling interests

 

 
(662
)
 

 

 
(662
)
 

 
(662
)
Noncontrolling interest distributions

 

 

 

 

 

 
(60,907
)
 
(60,907
)
Noncontrolling interest contributions

 

 

 

 

 

 
30,134

 
30,134

 
68,829

 
69

 
1,050,385

 
(4,005
)
 
(1,388
)
 
1,045,061

 
349,017

 
1,394,078

Comprehensive (loss) income:
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 

Net income

 

 

 

 
43,042

 
43,042

 
80,953

 
123,995

Unrealized loss on valuation of swap agreements

 

 

 
(1,097
)
 

 
(1,097
)
 
(558
)
 
(1,655
)
Reclassification of realized interest on swap agreements

 

 

 
1,818

 

 
1,818

 
1,634

 
3,452

Total comprehensive income

 

 

 
721

 
43,042

 
43,763

 
82,029

 
125,792

 Balance at June 30, 2015
68,829

 
$
69

 
$
1,050,385

 
$
(3,284
)
 
$
41,654

 
$
1,088,824

 
$
431,046

 
$
1,519,870


See accompanying notes


4




ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 
Six Months Ended
 
June 30,
(dollars in thousands)
2015
 
2014
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
123,995

 
$
30,983

Adjustments to reconcile net income to net cash provided by operating activities
 

 
 
Depreciation and amortization
27,561

 
23,171

Amortization of financing costs
1,546

 
1,468

Gain on disposition of properties
(88,984
)
 
(13,508
)
Impairment of asset
5,000

 

Share compensation expense
3,746

 
3,833

Equity in earnings of unconsolidated affiliates
(9,999
)
 
(4,459
)
Gain on disposition of property of unconsolidated affiliates
(17,105
)
 

Distributions of operating income from unconsolidated affiliates
10,035

 
5,550

Other, net
(2,645
)
 
(1,737
)
Changes in assets and liabilities
 

 
 
Cash in escrow
(11,505
)
 
(5,691
)
Rents receivable, net
(2,401
)
 
(834
)
Prepaid expenses and other assets
7,928

 
7,570

Accounts payable and accrued expenses
3,828

 
597

Other liabilities
2,751

 
(941
)
Net cash provided by operating activities
53,751

 
46,002

 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

Acquisition of real estate
(273,071
)
 
(107,600
)
Redevelopment and property improvement costs
(105,245
)

(68,311
)
Deferred leasing costs
(4,274
)
 
(1,224
)
Investments in and advances to unconsolidated affiliates
(6,505
)
 
(28,100
)
Return of capital from unconsolidated affiliates
5,660

 
24,326

Proceeds from disposition of property of unconsolidated affiliates
25,604

 

Proceeds from notes receivable

 
11,990

Issuance of notes receivable
(48,200
)
 
(19,362
)
Proceeds from sale of properties, net
197,882

 
19,158

Net cash used in investing activities
(208,149
)
 
(169,123
)

5




ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
 
(unaudited)

 
Six Months Ended
 
June 30,
(dollars in thousands)
2015
 
2014
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Principal payments on mortgage and other notes
(188,166
)
 
(132,452
)
Proceeds received from mortgage and other notes
268,761

 
189,700

Loan proceeds held as restricted cash
30,324

 
38,513

Deferred financing and other costs
(2,746
)
 
(2,033
)
Capital contributions from noncontrolling interests
30,134

 
31,046

Distributions to noncontrolling interests
(64,648
)
 
(56,730
)
Dividends paid to Common Shareholders
(53,270
)
 
(25,814
)
Proceeds from issuance of Common Shares, net of issuance costs of $522 and $1,495, respectively
21,080

 
88,499

Net cash provided by financing activities
41,469

 
130,729

(Decrease) increase in cash and cash equivalents
(112,929
)
 
7,608

Cash and cash equivalents, beginning of period
217,580

 
79,189

Cash and cash equivalents, end of period
$
104,651

 
$
86,797

 
 
 
 
Supplemental disclosure of cash flow information
 

 
 

Cash paid during the period for interest, net of capitalized interest of $7,465 and $6,095, respectively
$
22,735

 
$
23,486

Cash paid for income taxes
$
1,573

 
$
316

 
 
 
 
Supplemental disclosure of non-cash investing activities
 
 
 
Acquisition of real estate through assumption of debt
$
90,765

 
$

Disposition of real estate through cancellation of debt
$

 
$
(22,865
)
Acquisition of real estate through conversion of notes receivable
$
6,886

 
$
38,000

Acquisition of real estate through assumption of restricted cash
$
28,192

 
$

Disposition of air rights through issuance of notes receivable
$
(29,793
)
 
$


See accompanying notes


6

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)



1.
ORGANIZATION AND BASIS OF PRESENTATION

Business and Organization

Acadia Realty Trust (the "Trust") and subsidiaries (collectively, the "Company"), is a fully-integrated equity real estate investment trust ("REIT") focused on the ownership, acquisition, redevelopment and management of high-quality retail properties located primarily in high-barrier-to-entry, supply-constrained, densely-populated metropolitan areas in the United States.

All of the Company's assets are held by, and all of its operations are conducted through, Acadia Realty Limited Partnership (the "Operating Partnership") and entities in which the Operating Partnership owns an interest. As of June 30, 2015, the Trust controlled approximately 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") and employees who have been awarded restricted OP units ("LTIP Units") as long-term incentive compensation (Note 12). Limited partners holding Common OP Units are generally entitled to exchange their units on a one-for-one basis for common shares of beneficial interest of the Trust ("Common Shares").

As of June 30, 2015, the Company has ownership interests in 89 properties within its core portfolio, which consist of those properties either wholly owned, or partially owned through joint venture interests, by the Operating Partnership, or subsidiaries thereof, not including those properties owned through its opportunity funds (the "Core Portfolio"). The Company also has ownership interests in 56 properties within its four opportunity funds, Acadia Strategic Opportunity Fund, L.P. ("Fund I"), Acadia Strategic Opportunity Fund II, LLC ("Fund II"), Acadia Strategic Opportunity Fund III LLC ("Fund III") and Acadia Strategic Opportunity Fund IV LLC ("Fund IV" and together with Funds I, II and III, the "Funds"). The 145 Core Portfolio and Fund properties consist of commercial properties, which are primarily high-quality urban and/or street retail properties, community shopping centers and mixed-use properties with a retail component. Fund I and Fund II also include 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 Initiative ("RCP Venture").

The Operating Partnership is the sole general partner or managing member of the Funds, Mervyns I and Mervyns II and earns fees or priority distributions for asset management, property management, construction, redevelopment, leasing and legal services. Cash from the Funds and RCP Venture is distributed pro-rata to the 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).

Following is a table summarizing the general terms and the Operating Partnership's equity interests in the Funds and Mervyns I and II:

Entity
Formation Date
Operating Partnership Share of Capital
Fund Size
Capital Called as of June 30, 2015 (3)
Unfunded Commitment
Equity Interest Held By Operating Partnership
Preferred Return
Total Distributions as of June 30, 2015 (3)
Fund I and Mervyns I (1)
9/2001
22.22%
$90.0
$86.6
$—
37.78%
9%
$194.4
Fund II and Mervyns II (2)
6/2004
20.00%
300.0
300.0
47.1
20.00%
8%
131.6
Fund III
5/2007
19.90%
502.5
381.6
68.4
19.90%
6%
429.1
Fund IV
5/2012
23.12%
540.6
179.4
361.2
23.12%
6%
101.9








7

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.    ORGANIZATION AND BASIS OF PRESENTATION (continued)

Notes:

(1) Fund I and Mervyns I have returned all capital and preferred return. The Operating Partnership is now entitled to a Promote on all future cash distributions.
(2) During 2013, a distribution of $47.1 million was made to the Fund II investors, including the Operating Partnership. This amount is subject to recontribution to Fund II until December 2016, if needed to fund the on-going development and construction of existing projects.
(3) Represents the total for the Funds, including the Operating Partnership and noncontrolling interests' shares.


Basis of Presentation

The consolidated financial statements include the consolidated accounts of the Company and its investments in entities in which the Company is presumed to have control in accordance with the consolidation guidance of the Financial Accounting Standards Board ("FASB") 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 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.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. Operating results for the three and six months ended June 30, 2015 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2015. The information furnished in the accompanying consolidated financial statements reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of the aforementioned consolidated financial statements for the interim periods. Such adjustments consisted of normal recurring items. These consolidated financial statements should be read in conjunction with the Company's 2014 Annual Report on Form 10-K, as filed with the SEC on February 20, 2015.

Reclassifications

Certain reclassifications have been made to the 2014 financial statements to conform to the 2015 presentation.

Real Estate

The Company reviews its long-lived assets for impairment when there is an event or change in circumstances that indicates that the carrying amount may not be recoverable. The Company measures and records impairment losses and reduces 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 the Company does not expect to recover its carrying costs on properties held for use, the Company reduces its carrying cost to fair value, and for properties held-for-sale, the Company reduces its carrying value to the fair value less costs to dispose. During the quarter ended June 30, 2015, as a result of the loss of a key anchor tenant, one of the properties in the Company's Brandywine Portfolio, in which an unaffiliated third party has a 77.78% noncontrolling interest, did not generate sufficient cash flow to meet the full debt service requirements leading to a default on the mortgage loan. Management performed an analysis and determined that the carrying amount of this property was not recoverable. Accordingly, the Company recorded an impairment charge of $5.0 million, which is included in the statement of income for the six months ended June 30, 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 matures July 1, 2016. Management does not believe that the carrying values of any of its other properties are impaired as of June 30, 2015.


8

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1.    ORGANIZATION AND BASIS OF PRESENTATION (continued)

Recent Accounting Pronouncements

During April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2015-05, "Intangibles - Goodwill and Other - Internal-Use Software." ASU 2015-05 provides guidance to help an entity evaluate the accounting for fees paid in a cloud computing arrangement. ASU 2015-05 is effective for periods beginning after December 15, 2015, with early adoption permitted and may be applied either prospectively or retrospectively. ASU 2015-05 is not expected to have a material impact on the Company's consolidated financial statements.

During April 2015, the FASB issued ASU No. 2015-03, "Interest - Imputation of Interest - Simplifying the Presentation of Debt Issuance Costs." ASU 2015-03 modifies the treatment of debt issuance costs from a deferred charge to a deduction of the carrying value of the financial liability. ASU 2015-03 is effective for periods beginning after December 15, 2015, with early adoption permitted and retrospective application. ASU 2015-03 is not expected to have a material impact on the Company's consolidated financial statements.

During February 2015, the FASB issued ASU No. 2015-02, "Consolidation - Amendments to the Consolidation Analysis." ASU 2015-02 (i) modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities ("VIE’s"), (ii) eliminates the presumption that a general partner should consolidate a limited partnership and (iii) affects the consolidation analysis of reporting entities that are involved with VIE’s, particularly those with fee arrangements and related party relationships. ASU 2015-02 is effective for periods beginning after December 15, 2015, with early adoption permitted. The Company is in the process of evaluating the impact the adoption of ASU 2015-02 will have on the consolidated financial statements.

During January 2015, the FASB issued ASU No. 2015-01, "Income Statement - Extraordinary and Unusual Items." ASU 2015-01 eliminates the concept of extraordinary items. However, the presentation and disclosure requirements for items that are either unusual in nature or infrequent in occurrence remain and will be expanded to include items that are both unusual in nature and infrequent in occurrence. ASU 2015-01 is effective for periods beginning after December 15, 2015. ASU 2015-01 is not expected to have a material impact on the Company's consolidated financial statements.

2.    EARNINGS PER COMMON SHARE

Basic earnings per Common Share is computed by dividing net income attributable to Common Shareholders by the weighted average Common Shares outstanding. At June 30, 2015, the Company has unvested LTIP Units (Note 12) which provide for non-forfeitable rights to dividend equivalent payments. Accordingly, these unvested LTIP Units are considered participating securities and are included in the computation of basic earnings per Common Share pursuant to the two-class method.

Diluted earnings per Common Share reflects the potential dilution of the conversion of obligations and the assumed exercises of securities including the effects of restricted share unit ("Restricted Share Units") and share option awards issued under the Company's Share Incentive Plans (Note 12). The effect of the assumed conversion of 188 Series A Preferred OP Units into 25,067 Common Shares would be dilutive and therefore are included in the computation of diluted earnings per share for the three months ended June 30, 2015 and for the six months ended June 30, 2015 and June 30, 2014. Conversely, the assumed conversion of these would be anti-dilutive and are therefore not included in the computation of diluted earnings per share for the three months ended June 30, 2014.

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.

The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the periods indicated:


9

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


2.    EARNINGS PER COMMON SHARE (continued)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(dollars in thousands, except per share amounts)
2015
 
2014
 
2015
 
2014
Numerator
 
 
 
 
 
 
 
Income from continuing operations
$
26,495

 
$
11,365

 
$
43,042

 
$
32,960

Less: net income attributable to participating securities
(238
)
 
(197
)
 
(478
)
 
(585
)
Income from continuing operations, net of income attributable to participating securities
26,257

 
11,168

 
42,564

 
32,375

 
 
 
 
 
 
 
 
Denominator
 

 
 

 
 
 
 
Weighted average shares for basic earnings per share
68,825

 
58,013

 
68,561

 
56,989

Effect of dilutive securities:
 

 
 

 


 
 

Employee Restricted Share Units and share options
19

 
19

 
30

 
28

 Convertible Preferred OP Units
25

 

 
25

 
25

Denominator for diluted earnings per share
68,869

 
58,032

 
68,616

 
57,042

 
 
 
 
 
 
 
 
Basic and diluted earnings per Common Share from continuing operations attributable to Common Shareholders
$
0.38

 
$
0.19

 
$
0.62

 
$
0.57



3.
SHAREHOLDERS' EQUITY AND NONCONTROLLING INTERESTS

For the six months ended June 30, 2015, the Company issued 0.6 million Common Shares under its at-the-market ("ATM") equity program, generating gross proceeds of $21.6 million and net proceeds of $21.1 million.

The net proceeds from the Company's ATM equity programs have been, and are anticipated to be, used by the Company primarily to fund Core Portfolio acquisitions, its capital contributions to the Funds and for general corporate purposes.

Noncontrolling interests represent the portion of equity in entities consolidated in the accompanying consolidated financial statements that the Company does not own. Such noncontrolling interests are reported on the Consolidated Balance Sheets within equity, separately from shareholders' equity, and include third party interests in the Company’s Funds and other entities. It also includes interests in the Operating Partnership which represent (i) the limited partners’ 2,961,517 and 2,988,277 Common OP Units at June 30, 2015 and December 31, 2014; (ii) 188 Series A Preferred OP Units at June 30, 2015 and December 31, 2014; and (iii) 929,169 and 675,367 LTIP Units at June 30, 2015 and December 31, 2014, respectively.



10

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


4.    ACQUISITION AND DISPOSITION OF REAL ESTATE AND PROPERTIES HELD FOR SALE

Acquisitions

During 2015, the Company acquired the following properties through its Core Portfolio, Fund II, and Fund IV:

(dollars in thousands)
 
 
 
 
 
 
 
Property
GLA

Percent Owned

Type
Month of Acquisition
Purchase Price

Location
Assumption of Debt

Core Portfolio:
 
 
 
 
 
 
 
City Center
205,000

100
%
Urban Retail Center
March
$
155,000

San Fransisco, CA
$

163 Highland Avenue
40,500

100
%
Suburban Shopping Center
March
24,000

Needham, MA
9,765

Route 202 Shopping Center (1)
20,000

100
%
Suburban Shopping Center
April
5,643

Wilmington, DE

Total Core Portfolio
265,500

 
 
 
$
184,643

 
$
9,765

 
 
 
 
 
 
 
 
Fund II:
 
 
 
 
 
 
 
City Point - Tower I (2)

95
%
Urban Development
May
$
100,800

Brooklyn, NY
$
81,000

Total Fund II

 
 
 
$
100,800

 
$
81,000

 
 
 
 
 
 
 
 
Fund IV:
 
 
 
 
 
 
 
1035 Third Avenue (3)
53,294

100
%
Street Retail
January
$
51,036

New York, NY
$

801 Madison Avenue
6,375

100
%
Street Retail
April
33,000

New York, NY

Total Fund IV
59,669

 
 
 
$
84,036

 
$

 
 
 
 
 
 
 
 
Total
325,169

 
 
 
$
369,479

 
$
90,765


Notes:

(1) Purchase price represents the 77.78% interest acquired from an unaffiliated third party.
(2) Fund II previously held a 52% interest in this unconsolidated affiliate. In connection with the disposition of Phase III of this project discussed below, Fund II acquired an additional 43% interest in Tower I of this development project. In total, Fund II now owns 95% of this investment, which is a residential project anticipated to include 250 residential units.
(3) GLA includes a portion of office space and a below-grade operator controlled parking garage.

In addition, during the second quarter, the Company acquired the remaining 10% interest in a property from an unaffiliated joint venture partner in exchange for $4.2 million, including the conversion of a $1.9 million note receivable (Note 6).

The Company expensed $0.7 million of acquisition costs for the six months ended June 30, 2015, related to the Core Portfolio and $2.0 million of acquisition costs for the six months ended June 30, 2015, related to Fund IV.

Purchase Price Allocations

With the exception of the acquisition of City Point - Tower I, which was an asset acquisition, the above acquisitions have been accounted for as business combinations. The purchase prices were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition. The preliminary measurements of fair value reflected below are subject to change. The Company expects to finalize the valuations and complete the purchase price allocations within one year from the dates of acquisition.


11

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


4.    ACQUISITION AND DISPOSITION OF REAL ESTATE AND PROPERTIES HELD FOR SALE(continued)

Acquisitions (continued)

The following table summarizes the Company's preliminary allocations of the purchase prices of assets acquired and liabilities assumed during 2015 which have yet to be finalized:


(dollars in thousands)
Preliminary Purchase Price Allocations
Land
$
65,759

Buildings and improvements
204,532

Above-below market debt assumed (included in Mortgage and other notes payable)
(9,765
)
Total consideration
$
260,526


During 2014, the Company acquired properties and recorded the preliminary allocations of the purchase prices to the assets acquired and liabilities assumed based on provisional measurements of fair value. During 2015, the Company finalized the allocations of the purchase prices and made certain measurement period adjustments. The following table summarizes the preliminary allocations of the purchase prices of these properties as recorded as of December 31, 2014, and the finalized allocations as adjusted as of June 30, 2015:

(dollars in thousands)
Purchase Price Allocations as Originally Reported
Adjustments
Finalized Purchase Price Allocations
Land
$
43,820

$
16,751

$
60,571

Buildings and improvements
126,955

(21,578
)
105,377

Acquisition-related intangible assets (in Acquired lease intangibles, net)

9,836

9,836

Acquisition-related intangible liabilities (in Acquired lease intangibles, net)

(5,009
)
(5,009
)
Total consideration
$
170,775

$

$
170,775


Dispositions

During 2015, the Company disposed of the following properties:
(dollars in thousands)
 
 
 
 
 
Dispositions
GLA
Sale Price
Gain on Sale
Month Sold
Owner
Lincoln Park Centre
61,761

$
64,000

$
27,143

January
Fund III
White City Shopping Center (1)
249,549

96,750

17,105

April
Fund III
City Point - Air Rights (2)

115,600

49,884

May
Fund II
Liberty Avenue
26,117

24,000

11,957

May
Fund II
Total
337,427

$
300,350

$
106,089

 
 

Note:

(1) Fund III's White City Shopping Center was unconsolidated and as such, the Company's share of gains related to this sale is included in gain on disposition of property of unconsolidated affiliates in the 2015 Consolidated Statement of Income.

(2) Represents the disposition of air rights at Phase III of Fund II's City Point project.

12

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


4.    ACQUISITION AND DISPOSITION OF REAL ESTATE AND PROPERTIES HELD FOR SALE (continued)

Properties Held For Sale

At June 30, 2015, no assets were held for sale. At December 31, 2014, The Company had two properties classified as held-for-sale.


5.    INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

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 an approximately 28,000 square foot retail portfolio located in Georgetown, Washington D.C. (the "Georgetown Portfolio") and a 88.43% tenancy-in-common interest in an 87,000 square foot retail property located in Chicago, Illinois. Due to the level of operating control maintained by the unaffiliated partners in these investments, they are accounted for under the equity method.

During the quarter, the Company acquired the remaining 77.78% outstanding interest of an approximately 20,000 square foot retail property located in Wilmington, Delaware ("Route 202 Shopping Center") that was previously accounted for under the equity method from an unaffiliated partner. As a result of the transaction, the Company now consolidates this investment.

Funds

RCP Venture

The Funds, together with two unaffiliated partners formed an investment group, the RCP Venture, for the purpose of making investments in surplus or underutilized properties owned by retailers and, in some instances, the retailers' operating company. The RCP Venture is neither a single entity nor a specific investment and the Company has no control or rights with respect to the formation and operation of these investments. The Company has made these investments through its subsidiaries, Mervyns I, Mervyns II and Fund II, (together the "Acadia Investors"), all on a non-recourse basis. Through June 30, 2015, the Acadia Investors have made investments in Mervyns Department Stores ("Mervyns") and Albertsons including additional investments in locations that are separate from these original investments ("Add-On Investments"). Additionally, they have invested in Shopko, Marsh and Rex Stores Corporation (collectively "Other RCP Investments"). The Company accounts for its investments in Mervyns and Albertsons on the equity method as it has the ability to exercise significant influence, but does not have any rights with respect to financial or operating control. The Company accounts for its investments in its Add-On Investments and Other RCP Investments on the cost method as it does not have any influence over such entities' operating and financial policies nor any rights with respect to the control and operation of these entities. During the six months ended June 30, 2015, the Company received distributions from its RCP Venture of $5.7 million, of which the Operating Partnership's aggregate share was $1.2 million.

The following table summarizes activity related to the RCP Venture investments from inception through June 30, 2015:

13

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


5.    INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)

(dollars in thousands)
 
Investment Group Share
 
Operating Partnership Share
Investment
Year Acquired
Invested
Capital
and Advances
 
 
Distributions
 
Invested
Capital
and Advances
 
 
Distributions
Mervyns
2004
$
26,058

 
$
48,547

 
$
4,901

 
$
11,801

Mervyns Add-On investments
2005/2008
7,547

 
9,272

 
1,252

 
2,017

Albertsons
2006
20,717

 
81,594

 
4,239

 
16,318

Albertsons Add-On investments
2006/2007
2,416

 
4,864

 
388

 
972

Shopko
2006
1,110

 
3,358

 
222

 
672

Marsh and Add-On investments
2006/2008
2,667

 
2,941

 
533

 
588

Rex Stores
2007
2,701

 
4,727

 
535

 
946

 
 
$
63,216

 
$
155,303

 
$
12,070

 
$
33,314


Other Fund Investments

During April 2015, Fund III's White City Shopping Center was sold for $96.8 million. Fund III's $17.3 million share of the gain was recognized in gain on disposition of property of unaffiliated affiliates within the Consolidated Statements of Income.

The unaffiliated partners in Fund III's investments in Parkway Crossing and Arundel Plaza as well as Fund IV's investments in 1701 Belmont Avenue, 2819 Kennedy Boulevard, Promenade at Manassas, Eden Square and the Broughton Street Portfolio, maintain control over these entities. The Company accounts for these investments under the equity method as it has the ability to exercise significant influence, but does not have any rights with respect to financial or operating control.

Self-Storage Management, a Fund III investment, was determined to be a variable interest entity. Management has evaluated the applicability of ASC 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. The Company accounts for this investment using the equity method of accounting.

Summary of Investments in Unconsolidated Affiliates

The following Combined and Condensed Balance Sheets and Statements of Income summarize the financial information of the Company’s investments in unconsolidated affiliates:
(dollars in thousands)
June 30,
2015
 
December 31,
2014
Combined and Condensed Balance Sheets
 
 
 
Assets
 
 
 
Rental property, net
$
322,352

 
$
387,739

Real estate under development

 
60,476

Investment in unconsolidated affiliates
7,548

 
11,154

Other assets
59,917

 
62,862

Total assets
$
389,817

 
$
522,231

Liabilities and partners’ equity
 

 
 

Mortgage notes payable
$
266,109

 
$
315,897

Other liabilities
17,714

 
66,116

Partners’ equity
105,994

 
140,218

Total liabilities and partners’ equity
$
389,817

 
$
522,231

Company’s investment in and advances to unconsolidated affiliates
$
166,632

 
$
184,352

Company's share of distributions in excess of income from, and investments in, unconsolidated affiliates
$
(13,161
)
 
$
(12,564
)


14

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


5.    INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
(dollars in thousands)
2015
 
2014
 
2015
 
2014
Combined and Condensed Statements of Income
 
 
 
 
 
 
 
Total revenues
$
10,342

 
$
12,247

 
$
22,015

 
$
24,352

Operating and other expenses
(3,102
)
 
(5,503
)
 
(6,833
)
 
(9,318
)
Interest and other finance expense
(2,259
)
 
(2,975
)
 
(4,897
)
 
(5,500
)
Equity in earnings (losses) of unconsolidated affiliates

 

 
66,655

 
(328
)
Depreciation and amortization
(2,787
)
 
(3,475
)
 
(5,037
)
 
(6,181
)
Loss on debt extinguishment

 

 

 
(187
)
Gain on disposition of property
25,208

 
239

 
25,208

 
239

Net income
$
27,402

 
$
533

 
$
97,111

 
$
3,077

 

 

 
 
 

Company’s share of net income
$
20,609

 
$
1,528

 
$
27,300

 
$
4,655

Amortization of excess investment
(98
)
 
(98
)
 
(196
)
 
(196
)
Company’s equity in earnings of unconsolidated affiliates
$
20,511

 
$
1,430

 
$
27,104

 
$
4,459




15

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


6.    STRUCTURED FINANCINGS, NET

As of June 30, 2015, the Company’s structured financing portfolio, net consisted of notes receivable and preferred equity investments, aggregating $168.9 million. These investments were collateralized either by underlying properties, the borrowers' ownership interests in the entities that own properties and/or by the borrowers' personal guarantee subject, as applicable, to senior liens, as follows:
(dollars in thousands)
 
 
 
 
 
 
Description
 
Notes
 
Effective interest rate (1)
 
First Priority liens
 
Net Carrying Amounts of Structured Financing Investments as of June 30, 2015
 
Net Carrying Amounts of Structured Financing Investments as of December 31, 2014
 
Maturity date
 
Extension Options
First Mortgage Loan
 
 
 
7.7%
 
 
 
$
12,000

 
$
12,000

 
7/15/2015
 
 
Mezzanine Loan
 
 
 
12.7%
 
18,900

 
8,000

 
8,000

 
10/3/2015
 
 
First Mortgage Loan
 
 
 
8.8%
 
 
 
7,500

 
7,500

 
10/31/2015
 
1 x 12 Months
Zero Coupon Loan
 
(2) (3)
 
24.0%
 
166,200

 

 
4,986

 
1/3/2016
 
 
First Mortgage Loan
 
 
 
5.5%
 
 
 
4,000

 
4,000

 
4/1/2016
 
1 x 6 Months
First Mortgage Loan
 
(4)
 
6.0%
 
 
 
15,000

 

 
5/1/2016
 
1 x 12 Months
Preferred Equity
 
 
 
13.5%
 
 
 
4,000

 
4,000

 
5/9/2016
 
 
Other
 
(5)
 
17.0%
 
 
 
6,500

 

 
6/1/2016
 
 
Other
 
 
 
18.0%
 
 
 
3,607

 
3,307

 
7/1/2017
 
 
Preferred Equity
 
 
 
8.1%
 
20,855

 
13,000

 
13,000

 
9/1/2017
 
 
First Mortgage Loan
 
(6)
 
LIBOR + 7.1%
 
 
 
26,000

 

 
6/25/2018
 
1 x 12 Months
Zero Coupon Loan
 
(2) (7)
 
2.5%
 
 
 
29,793

 

 
5/31/2020
 
 
Mezzanine Loan
 
 
 
15.0%
 
 
 
30,879

 
30,879

 
11/9/2020
 
 
Other
 
 
 
LIBOR + 2.5%
 
 
 

 
4,000

 
12/30/2020
 
 
Mezzanine Loan
 
(8)
 
10.0%
 
87,477

 
7,983

 
7,983

 
Demand
 
 
Individually less than 3%
 
(9) (10) (11)
 
11.6%
 
 
 
669

 
2,631

 
12/31/2015
 
 
Total
 
 
 
 
 
 
 
$
168,931

 
$
102,286

 
 

 
Notes:

(1) Includes origination and exit fees
(2) The principal balance for this accrual-only loan is increased by the interest accrued.
(3) During April 2015, the Company converted a $5.6 million loan into an equity interest in a shopping center (Note 4).
(4) During May 2015, the Company made a $15.0 million loan, which is collateralized by a property, bears interest at 6.0% and matures May 1, 2016.
(5) During June 2015, the Company made a $6.5 million loan, which bears interest at 17.0% and matures June 1, 2016.
(6) During June 2015, the Company made a $26.0 million loan, which is collateralized by a property, bears interest at LIBOR + 7.1% and matures June 25, 2018.

16

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)


6.
STRUCTURED FINANCINGS, NET (continued)

(7) During June 2015, the Company made a $29.8 million loan in connection with the disposition of City Point's Phase III (Note 4), which is collateralized by the purchaser's interest of the property. The loan bears interest at 2.5% and matures May 31, 2020.
(8) Comprised of three cross-collateralized loans from one borrower, which are non-performing. Subsequent to June 30, 2015, these notes were repaid in full (Note 13).
(9) Consists of one loan as of June 30, 2015.
(10) During February 2015, the Company advanced an additional $0.4 million on this loan collateralized by a property.
(11) During June 2015, the Company converted a $1.9 million loan into an equity interest in the remaining 10% of 152-154 Spring Street (Note 4).

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. As of June 30, 2015, the Company held three non-performing notes.


7.
DERIVATIVE FINANCIAL INSTRUMENTS

As of June 30, 2015, the Company's derivative financial instruments consisted of 14 interest rate swaps with an aggregate notional value of $207.9 million, which effectively fix the London Inter-Bank Offer Rate ("LIBOR") at rates ranging from 1.4% to 3.8% and mature between July 2018 and March 2025. The Company also has four derivative financial instruments with an aggregate notional value of $139.0 million which cap LIBOR at rates ranging from 3.0% to 4.3% and mature between July 2015 and April 2018. The fair value of these derivative instruments that represent liabilities are included in other liabilities in the Consolidated Balance Sheets and totaled $4.0 million and $4.6 million at June 30, 2015 and December 31, 2014, respectively. The fair value of these derivative instruments representing assets are included in prepaid expenses and other assets in the Consolidated Balance Sheets and totaled $0.3 million and $0.2 million at June 30, 2015 and December 31, 2014. The notional value does not represent exposure to credit, interest rate, or market risks.

These derivative instruments have been designated as cash flow hedges and hedge the future cash outflows of variable-rate interest payments on mortgage and other debt. Such instruments are reported at their fair values as stated above. As of June 30, 2015 and December 31, 2014, unrealized losses totaling $(3.3) million and $(4.0) million, respectively, were reflected in accumulated other comprehensive loss on the Consolidated Balance Sheets.

As of June 30, 2015 and December 31, 2014, no derivatives were designated as fair value hedges, hedges of net investments in foreign operations or considered to be ineffective. Additionally, the Company does not use derivatives for trading or speculative purposes.


17

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

8.
MORTGAGE AND OTHER NOTES PAYABLE

The Company completed the following transactions related to mortgage and other notes payable and credit facilities during the six months ended June 30, 2015:

Secured Debt:
(dollars in thousands)
 
 
Borrowings
 
Repayments
Property
Date
Description
Amount
Interest Rate
Maturity Date
Amount
Interest Rate
1035 Third Avenue
January
New Borrowing
$
42,000

LIBOR+2.35%
1/28/2021
$

 
Lincoln Park Centre
January
Repayment
 
 

28,000

LIBOR+1.45%
163 Highland Avenue
March
Assumption
9,765

4.66%
3/1/2024
 
 
Broughton Street Portfolio (1)
May
New Borrowing
20,000

LIBOR+3.00%
5/5/2016
 
 
City Point
June
Assumption
19,000

1.25%
12/1/2016
 
 
City Point
June
Assumption
62,000

SIFMA+1.60%
12/1/2016
 
 
City Point
June
Repayment
 
 
 
20,650

LIBOR+4.00%
17 E. 71st Street
June
New Borrowing
19,000

LIBOR+1.90%
6/9/2020
 
 
Crescent Plaza
June
Repayment
 
 
 
16,326

4.98%
Total
 
 
$
171,765

 
 
$
64,976

 

Notes:

(1) This loan is collateralized by properties in an unconsolidated joint venture. Fund IV has fully indemnified the unaffiliated joint venture partner and as such, this loan is included as consolidated debt.

Unsecured Debt:

During the six months ended June 30, 2015, the Company redeemed the remaining $0.4 million of its outstanding convertible notes at par value.

During the six months ended June 30, 2015, the Company borrowed $83.5 million on its unsecured credit facility. The outstanding balance under this facility is $83.5 million as of June 30, 2015.

During the six months ended June 30, 2015, the Company repaid $54.7 million on its Fund IV subscription line. The outstanding balance under this facility is $22.4 million as of June 30, 2015.

During May 2015, Fund II closed on a $25.0 million unsecured credit facility. At closing, Fund II drew $12.5 million. The facility bears interest at LIBOR plus 275 basis points, bears an unused fee of 275 basis points if the amount drawn is less than $12.5 million. The loan matures October 19, 2016. Along with a guarantee with respect to customary non-recourse carve outs, the Operating Partnership, as the managing member of Fund II, has provided a guarantee of principal, interest and fees upon a default as a result of Fund II’s breach of certain specified financial covenants.

During March 2015, Fund IV closed on a $50.0 million unsecured credit facility. The current balance outstanding at June 30, 2015 is $34.5 million. The facility bears interest at LIBOR plus 275 basis points, bears an unused fee of 100 basis points if the unused amount is greater than $20.0 million and an unused fee of 275 basis points if the unused amount is less than $20.0 million. The loan matures February 9, 2017 with one 6-month extension option. Along with a guarantee with respect to customary non-recourse carve outs, the Operating Partnership, as the managing member of Fund IV, has provided a guarantee of principal, interest and fees upon a default as a result of Fund IV’s breach of certain specified financial covenants.

18

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

9.    FAIR VALUE MEASUREMENTS

The FASB's fair value measurements and disclosure guidance requires the valuation of certain of the Company's financial assets and liabilities, based on a three-level fair value hierarchy. Market value assumptions obtained from sources independent of the Company are observable inputs that are classified within Levels 1 and 2 of the hierarchy, and the Company's own assumptions about market value assumptions are unobservable inputs classified within Level 3 of the hierarchy.

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2015:
(dollars in thousands)
Level 1
 
Level 2
 
Level 3
Assets
 
 
 
 
 
Derivative financial instruments (Note 7)
$

 
$
289

 
$

Liabilities
 
 
 
 
 
Derivative financial instruments (Note 7)
$

 
$
3,997

 
$


In addition to items that are measured at fair value on a recurring basis, the Company also has assets and liabilities on its consolidated balance sheets that are measured at fair value on a nonrecurring basis. As these assets and liabilities are not measured at fair value on a recurring basis, they are not included in the table above. Assets and liabilities that are measured at fair value on a nonrecurring basis include assets acquired and liabilities assumed in business combinations (Note 4).

During the quarter ended June 30, 2015, the Company determined that the value of one of the properties in its Brandywine Portfolio was impaired and recorded an impairment loss of $5.0 million (Note 1), of which the Operating Partnership's pro-rata share was $1.1 million. The Company estimated the fair value by using projected future cash flows, which it determined were not sufficient to recover the property's net book value. The inputs used to determine this fair value are classified within Level 3 of the hierarchy.

Financial Instruments

Certain of the Company’s assets and liabilities meet the definition of financial instruments. Except as disclosed below, the carrying amounts of these financial instruments approximate their fair values.

The Company has determined the estimated fair values of the following financial instruments within Level 2 of the hierarchy by discounting future cash flows utilizing a discount rate equivalent to the rate at which similar financial instruments would be originated at the reporting date:
(dollars in thousands)
June 30, 2015
 
December 31, 2014
 
Carrying
Amount
 
Estimated Fair Value
 
Carrying
Amount
 
Estimated Fair Value
Notes receivable and preferred equity investments, net
$
168,931

 
$
168,931

 
$
102,286

 
$
102,286

Mortgage and other notes payable
$
1,326,667

 
$
1,345,446

 
$
1,130,481

 
$
1,141,371


10.    RELATED PARTY TRANSACTIONS

The Company earned property management fees, construction, legal and leasing fees from its investments in unconsolidated affiliates totaling $0.07 million and $0.06 million for the three months ended June 30, 2015 and 2014, respectively, and $0.18 million and $0.04 million for the six months ended June 30, 2015 and 2014, respectively.




19

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

11.    SEGMENT REPORTING

The Company has three reportable segments: Core Portfolio, Funds and Structured Financing. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates property performance primarily based on net operating income before depreciation, amortization and certain nonrecurring items. Investments in the Core Portfolio are typically held long-term. Given the contemplated finite life of the Funds, these investments are typically held for shorter terms. Fees earned by the Company as the general partner/managing member of the Funds are eliminated in the Company's consolidated financial statements. Structured Financing represents the Company's investments in notes receivable and preferred equity. The following tables set forth certain segment information for the Company, as of and for the three and six months ended June 30, 2015 and 2014, and does not include unconsolidated affiliates:

Three Months Ended June 30, 2015

(dollars in thousands)
 
Core Portfolio
 
Funds
 
Structured Financing
 
Total
Revenues
 
$
37,593

 
$
11,583

 
$
3,985

 
$
53,161

Property operating expenses, other operating and real estate taxes
 
(8,235
)
 
(4,979
)
 

 
(13,214
)
General and administrative expenses
 
(7,397
)
 
(608
)
 

 
(8,005
)
Depreciation and amortization
 
(10,568
)
 
(3,335
)
 

 
(13,903
)
Impairment of asset
 
(5,000
)
 

 

 
(5,000
)
Operating income
 
6,393

 
2,661

 
3,985

 
13,039

Equity in earnings of unconsolidated affiliates
 
699

 
2,707

 

 
3,406

Gain on disposition of property of unconsolidated affiliates
 

 
17,105

 

 
17,105

Loss on debt extinguishment
 

 
(25
)
 

 
(25
)
Gain on disposition of properties
 

 
61,841

 

 
61,841

Interest and other finance expense
 
(7,329
)
 
(2,635
)
 

 
(9,964
)
Income tax benefit (provision)
 
75

 
(19
)
 

 
56

Net (loss) income
 
$
(162
)
 
$
81,635

 
$
3,985

 
$
85,458

Noncontrolling interests
 
 
 
 
 
 
 
 
Net loss (income) attributable to noncontrolling interests
 
$
2,205

 
$
(61,168
)
 
$

 
$
(58,963
)
Net income attributable to Common Shareholders
 
$
2,043

 
$
20,467

 
$
3,985

 
$
26,495

 
 
 
 
 
 
 
 
 
Real Estate at Cost
 
$
1,553,174

 
$
1,025,406

 
$

 
$
2,578,580

Total Assets
 
$
1,650,555

 
$
1,154,213

 
$
168,931

 
$
2,973,699

Acquisition of Real Estate
 
$

 
$
52,800

 
$

 
$
52,800

Investment in Redevelopment and Improvements
 
$
3,271

 
$
61,480

 
$

 
$
64,751



20

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

11.    SEGMENT REPORTING (continued)

Three Months Ended June 30, 2014

(dollars in thousands)
 
Core Portfolio
 
Funds
 
Structured Financing
 
Total
Revenues
 
$
30,535

 
$
13,934

 
$
5,042

 
$
49,511

Property operating expenses, other operating and real estate taxes
 
(7,587
)
 
(4,627
)
 

 
(12,214
)
General and administrative expenses
 
(6,238
)
 
(641
)
 

 
(6,879
)
Depreciation and amortization
 
(8,300
)
 
(3,284
)
 

 
(11,584
)
Operating income
 
8,410

 
5,382

 
5,042

 
18,834

Equity in earnings of unconsolidated affiliates
 
227

 
1,203

 

 
1,430

Loss on debt extinguishment
 
(3
)
 
(63
)
 

 
(66
)
Gain on disposition of property
 

 
561

 

 
561

Interest and other finance expense
 
(6,627
)
 
(2,907
)
 

 
(9,534
)
Income tax benefit (provision)
 
91

 
(8
)
 

 
83

Income from continuing operations
 
2,098

 
4,168

 
5,042

 
11,308

Discontinued operations
 
 
 
 
 
 
 
 
Gain on disposition of property
 

 
560

 

 
560

Net income
 
$
2,098

 
$
4,728

 
$
5,042

 
$
11,868

Noncontrolling interests
 
 
 
 
 
 
 
 
Continuing operations
 
$
(1,036
)
 
$
1,093

 
$

 
$
57

Discontinued operations
 
(4
)
 
(457
)
 

 
(461
)
Net (income) loss attributable to noncontrolling interests
 
$
(1,040
)
 
$
636

 
$

 
$
(404
)
Net income attributable to Common Shareholders
 
$
1,058

 
$
5,364

 
$
5,042

 
$
11,464