Acadia Realty Trust Q3 FY2025 earnings call

Key Points

• Ken Bernstein noted that resilience in tenant performance and street retail momentum is accelerating, with positive momentum at an inflection point for the portfolio's operating performance.
• A.J. Levine discussed strong leasing activity, with $3.7 million in new leases signed during the quarter and a year-to-date total of $11.4 million in signed leases. Leasing velocity is increasing with a $8 million lease negotiation pipeline.
• Reggie Livingston highlighted year-to-date acquisition volume over $480 million and a pipeline targeting doubling that amount by year-end, driven by street retail opportunities and a reputation for underwriting and closing deals.
• John Gottfried emphasized same-store NOI growth of 8.2% in Q3, with $6.7 million in ABR commencing rents contributing to occupancy increases and setting up for outsized growth in 2026 and beyond.

The street retail portfolio was a key driver in the third quarter. Same-store NOI growth was 13%, with $6.7 million in ABR commencing rents during the quarter, contributing to occupancy increases. The investment management platform acquired Avenue at West Cobb for $63 million, a 250,000 square foot lifestyle center in an affluent Atlanta suburb. The street retail segment's revenue contribution is significant, with continued growth in same-store NOI and occupancy trends.

Forward-Looking Statements

• Maintained FFO prior to realized gains from investment management business. Revised FFO inclusive of investment management gains driven by Albertsons share price decline.
• 2026 guidance to use simplified FFO as adjusted, excluding investment management gains and material noncomparable items. Projected same-store growth range of 5%-9% excluding redevelopments, with NOI growth approximating $12 million to $14 million incremental NOI over 2025 projected results.
• Balance sheet has dry powder to fund acquisition pipeline, with confidence in accretive funding despite increased cost of capital.

Risks Discussed

• Economic uncertainty and market volatility affecting tenant performance and acquisition activity.
• Dilution from partial conversion of the City Point Loan, though setting up for future NOI and earnings growth.
• Competition in the acquisition market and potential impact of government shutdowns on tenant performance in certain markets.

Q: About the pipeline of acquisitions and the difference between cash yields versus GAAP yields A: Reggie Livingston discussed that they are finding street retail deals with a cash yield potentially moving from 5% to mid-6s GAAP yield, targeting deals with favorable lease duration and mark-to-market attributes.

Q: Same-store growth range in 2026 and what influences the range A: John Gottfried explained that factors like commencements (e.g., $6.7 million in ABR commencing this quarter) and leasing activity influence the 5%-9% range, with confidence in achieving the lower end and potential for the upper end based on leasing progress.

Q: Demand for the investment management platform from institutional capital A: Reggie Livingston noted broad institutional investor demand for retail opportunities, but they seek best-in-class operators, and there is no shortage of interest in recapitalizing assets like Avenue at West Cobb and Pinewood Square.

Q: Pricing of suburban asset disposition and portfolio reshaping A: Reggie Livingston mentioned considering accretive dispositions of non-core suburban assets, with the majority of growth expected from street and urban retail, but suburban retail still having tailwinds and being part of the investment management platform strategy.

Q: Rents from street openings in markets like Chicago and D.C.

A: John Gottfried and A.J. Levine discussed rents, with examples like Walton Street in Chicago having ground floor space leasing for $350-$400 per square foot, and other markets like Armitage and M Street seeing significant rent increases.

Q: City Point loan conversions and timing A: John Gottfried stated that about half of the City Point Loan partners converted during Q3, with expected conversion of the remaining 20% in 2026, though no specific guidance on timing beyond that.

Q: Stock performance vs underlying fundamentals A: Kenneth Bernstein attributed the stock pullback to Liberation Day impact but expected the market to reflect strong fundamentals over time, emphasizing that focusing on day-to-day business of leasing and acquisitions would lead the stock to align with performance eventually