Acadia Realty Trust (AKR)

AKR 
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Acadia Realty Trust (AKR)

2Q 2013 Results - Earnings Call Transcript

July 30, 2013 02:00 PM ET

Executives

Amy Rancanello - VP, Capital Markets and Investments

Kenneth Bernstein - President and CEO

Jon Grisham - Chief Financial Officer

Analysts

Todd Thomas - KeyBanc Capital Markets

Craig Schmidt - Bank of America

Christy McElroy - UBS

Paul Adornato - BMO Capital Markets

Jason White - Green Street

Michael Mueller – JPMorgan

Quentin Velleley - Citigroup

Rich Moore - RBC Capital Markets

Michael Bilerman - Citigroup

Presentation

Operator

Welcome to the Second Quarter 2013 Acadia Realty Trust Earnings Conference Call. As a reminder, this conference is being recorded. At this time, all audience lines have been placed on mute. We will conduct a question-and-answer session following the formal presentation. (Operator Instructions)

I will now turn the call over to Amy Rancanello, Vice President of Capital Markets and Investments. Please proceed.

Amy Rancanello

Good afternoon and thank you for joining us for the second quarter 2013 Acadia Realty Trust earnings conference call. Participating in today's call will be Kenneth Bernstein, President and Chief Executive Officer; and Jon Grisham, Chief Financial Officer.

Before we begin, please be aware that statements made during the call that are not historical maybe deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934. And actual results may differ materially from those indicated by such forward-looking statements. Due to a variety of risks and uncertainties including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call July 30, 2013 and the Company undertakes no duty to update them.

During this call, management may refer to certain non-GAAP financial measures including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures.

With that, I will now turn the call over to Ken Bernstein.

Kenneth Bernstein

Thank you, Amy, good afternoon. Today I'll start with a brief overview of some of the trends and key drivers in our business and then Jon will review our operating metrics, our earnings and our forecast.

In the second quarter notwithstanding a great deal of noise in the capital markets, our business remained on track with our earnings coming in at the higher end of our forecast and our operating fundamentals showing solid growth. And as distracting as the volatility in the bond and the REIT markets can be, thankfully, given how our company is structured with high quality, high barrier to entry properties, strong [embedded] growth opportunities in our portfolio, conservative leverage as well as plenty of dry powder in both of our dual platforms. We feel we're well positioned for a wide range of future opportunities and investments. So with that in mind, let's look at the different component of our business first. First our core portfolio and our operating fundamentals.

Our second quarter same store results were solid and then Jon will discuss in more detail later. They were at the high end of our expectation. Even after stripping out the contributions from our previously discussed re-anchorings, our same store NOI growth for the quarter was still a very solid 5% and while the drivers this quarter were fairly broad across both our suburban and our and our street retail components of our business. We continue to see better long term growth opportunities in our street retail portion of our portfolio.

In terms of our core acquisition activity recently, we made two core investments as street retail properties totaling $34 million; one was in Georgetown, Washington D.C. and the other in the Gold Coast in Chicago. In Georgetown, the properties on the corner of M Street and Wisconsin, where we've added it to our existing collection of properties and this acquisition is arguably the best corner in Georgetown and is occupied by Banana Republic.

In Chicago, we added two building that are contiguous to our Lululemon on Rush Street, we now own six of the nine buildings on the intersection of (Inaudible) and Rush Streets with tenants ranging from (inaudible). Both of these acquisitions are consistent with our theme of adding to our existing street week, the portfolio in those markets that we're active in and these acquisitions along with being attractive on their own right are also strategic. We believe that as we continue to add these properties, whether they be contiguous or approximate to other street retail property that we own.

We're going to create a powerful collection of retail assets that will have strong long term growth potential. So far this year, we've added $120 million of these acquisitions and we seem to be on track to meet our goals for the year.

Turning now to our Fund platform, complementing our core growth initiative is the second major component of our business which is the value creation generated from our Fund Platform. We're currently making investments on behalf of Fund IV. In the second, quarter we close on two deals for $47 million, one was a high yielding opportunity in the Manassas, Virginia where we will restructure the anchor lease and then the other falls into our retailer category, where we acquired (Inaudible), a retail building that they're currently occupying in densely populated North Bergen, New Jersey, they'll leave that property at the end of the year and we intend to re-anchor it and we already have strong tenant interest.

Now along with adding new investments to our funds equally important is maximizing the value of our existing investments there, and from that perspective we also made strong climate last quarter, with respect to our fund asset they break out into four currently fairly equal components as follows.

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