Acadia Realty Trust Q2 FY2025 earnings call

• Continued momentum across three drivers: internal growth via street retail with same-store growth >5%, external growth with $860 million acquisitions over 12 months (including $0.5B street retail), and a solid balance sheet with $0.5B liquidity.
• Leasing activity is strong: $15M of executed leases in the SNO pipeline, with street retail tenants showing robust demand (e.g., Doan on Bleecker Street, Brandy Melville, Skims) and comp sales up double digits.
• Mark-to-market opportunities exist in various markets like Armitage Avenue, SoHo, and Bleecker Street, with double-digit spreads expected.
• Acquisitions in key corridors such as Williamsburg, Brooklyn and Flatiron/Union Square, Manhattan, focus on street retail markets to leverage scale benefits.

The company's key segment is street retail, which dominates the core portfolio. Last quarter, street retail leasing activity is on track for a fourth year of annual same-store growth exceeding 5%. Over the last 12 months, the company completed $860 million in acquisitions, including nearly $0.5 billion in street retail. Revenue contribution from street retail is significant, with strong tenant demand and mark-to-market opportunities. Suburban assets are holding up due to lack of new development but have less growth than street retail. The investment management platform has over $2 billion in assets under management.

• Projected 5%-6% same-store NOI growth in 2025, with NAREIT FFO growth at the midpoint of ~10%.
• NOI growth over 10% expected in 2026, supported by $15M executed leases in the SNO pipeline.
• Liquidity exceeds $0.5 billion, with a fully hedged balance sheet and no meaningful maturities.
• The investment management platform projects net profits >$30 million from $2B+ assets under management.

• Broader economic uncertainty and tariff-induced stagflation concerns.
• Competition in the real estate market, especially for street retail assets.
• Potential dilution from City Point loan conversions, though ultimately accretive.
• Volatility in real estate equity capital markets.

Q: Could you speak to the disconnect between the performance in your stock price and the underlying health of your portfolio?

A: Linda, the market underestimates secular tailwinds in street retail. Our leasing is holding up fine, and retailers are continuing with leasing initiatives despite broader economic noise.

Q: Could you compare and contrast what landlord scale looks like in a suburban shopping center portfolio versus street retail?

A: Street retail has significant economies of scale, better tenant partnerships, and is a less crowded trade compared to suburban open-air formats.

Q: How would you characterize the pipeline for investment management deals similar to the LINQ Promenade?

A: We're underwriting large deals, as street retail is a less crowded trade, and there are many large deals on the market.

Q: How would you characterize the performance of suburban assets and vacate risks?

A: Suburban assets are holding up due to lack of new development, but growth isn't as strong as street. Watch list tenants' issues have been filled by strong tenant demand.

Q: What about the City Point loan dilution?

A: Potential short-term dilution if all partners convert, but ultimately accretive upon asset stabilization.

Q: What's the year-end occupancy target for the Street portfolio?

A: Street and urban are expected to reach the mid-90s by year-end.

Q: Are you worried about cap rates in street retail markets?

A: We can find attractive opportunities in street retail markets with mid-6s GAAP yields, leveraging our portfolio construction and scale benefits.