Acadia Realty Trust

Thank you for standing by and welcome to Acadia Realty Trust first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. To remove yourself from the queue, you may press star 1-1 again. I would now like to hand the call over to Jose Vilchez. Please go ahead.

Good morning, and thank you for joining us for the first quarter 2024 Acadia Realty Trust Earnings Conference Call. My name is Jose Villegas, and I'm an analyst in our Capital Markets Department. Before we begin, please be aware that statements made during the call that are not historical may be 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 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 volumes of the SEC, Forward-looking statements speak only as of the date of this call, April 30th, 2024, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operation and at operating income. Policia Acadia's earnings press release posted on its website for reconciliation for these non-GAAP financial measures with the most directly comparable GAAP financial measures. Once the call becomes open for questions, we ask that you limit your first round to two questions per caller. to give everyone the opportunity to participate. You may ask further questions by answering yourself in the queue, and we will answer as time permits. Now, it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

Great job, Jose. Thank you. Welcome, everyone. I'm here with John and Stuart and AJ Levine, and I'll give a few comments, then hand the call over to AJ. Then John will discuss our earnings guidance and our balance sheet metrics, and after that, our team's here to take questions. As you can see in our earnings release, our first quarter performance was strong and continues a multi-year trend of peer leading, top line growth that is reflective of both the cyclical as well as the secular tailwinds that our portfolio is experiencing. I'll let AJ and John discuss the building blocks of our NOI growth going forward and the moving pieces of our earnings in detail, but in short, The strong rebound and continued acceleration of the street retail component of our portfolio continues to drive this performance. As AJ will discuss, the combination of strong contractual growth and favorable recurring mark-to-market opportunities is positioning us for continued strong internal growth going forward. And as John will discuss, the stability of our balance sheet further enhanced with our recent extension and expansion of our bank credit facility, positions us with limited maturities and limited floating rate exposure. All of this supports our goal of creating superior top line growth at the property level and then having that growth translate into bottom lines earnings growth. The positive trends we're seeing in both Supply-demand dynamics and retailer performance means that we are past this being just a cyclical COVID recovery story. Even once we get our portfolio to full economic occupancy, our internal growth still looks strong. And that's because our street retail component should provide long-term growth of a couple hundred basis points higher than our suburban assets. Our goal here is to continue to craft a portfolio driven by street retail that has the highest likelihood of producing superior annual net effective growth in excess of wherever the new normal lands for both inflation and GDP growth. So this brings us to external growth. While the bid-ask spread for transactions is still a bit wide, and the bond market volatility is elongating that reconciliation, the spread is narrowing, and we're beginning to see actionable opportunities for external growth. This is true both as it relates to additions to our core portfolio, as well as opportunities for our investment management platform. First, in terms of balance sheet additions, Here our primary focus will be adding street retail to our core portfolio, both due to what we view as compelling risk-adjusted returns and because we believe our shareholders will be rewarded by our continuing to grow this differentiated strategy in the public markets, where we are the only REIT with this as a major focus. We have several hundred million dollars of deals consistent with this focus in our pipeline, Some are further along than others, and the stars still have to align. So we'll see how many actually come to fruition, but I am more encouraged today than I have been in a long time. In terms of funding, we should be able to do this accretively and on a leverage neutral basis through a variety of different sources, including capital recycling from portions of our core portfolio that might not be as high growth or as mission critical. Along these lines, we have subsequent to quarter end finalized an agreement for the sale and recapitalization of one of our high quality but lower growth suburban assets currently in our core portfolio. Assuming it closes as anticipated this quarter, we will retain a 5% ownership stake plus customary fees for operating the asset with then additional promote potential upside on the eventual resale. The transaction is anticipated to set the table for future acquisition opportunities with this institution. And it will be modestly accretive at closing, but then create more growth as we redeploy the capital. Along with our focus of accretively growing our core portfolio, we're also seeing opportunities through our investment management platform where we can leverage our skills, leverage our deal flow, and match it with our institutional capital relationships. The benefits of this component are it's a profitable business. It enables us to punch above our weight. It makes us better investors. It also enables us to participate in special situations, whether it's transactions like Albertsons or Mervins or distressed debt, where being solely reliant on the public market may not be the right fit. We also have several deals in our pipeline in this category. After quarter end, we put one deal under contract and are in the process of completing our diligence. These deals will likely look similar in structure to our Fund 5 business. And similar to the capital recycling that we're doing in our core, we will fund this activity with the recycling of capital in this platform as well. Now keep in mind, Given our size, it doesn't take much volume to move the needle for us. Even a few acquisitions, whether on balance sheet or in our investment management platform, can have an important impact to earnings. So to conclude, it was another strong quarter for us on multiple fronts. And as we think about the three key drivers of our business, first, maintaining solid internal growth. AJ will walk you through our strong results and continued momentum. Second is maintaining a solid balance sheet, and John will walk through our progress here and the important recasting of our bank facility. And then finally, creating accretive external growth. I discussed that briefly, and I suspect I'll be spending more time discussing this on future calls as well. And so with that, I'd like to thank the team for their hard work. this last quarter and I'll turn the call over to AJ.