Acadia Realty Trust

Good day, and thank you for standing by. Welcome to the Acadia Realty Trust second quarter 2024 earnings conference call. At this time, all participants on a listen-only mode. After the speaker's 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. You will then hear an automatic message advising your hand is raised. Please note that today's conference may be recorded. I will now hand the conference over to speaker host, Ethan Gomez, please go ahead.

Good morning, and thank you for joining us for the second quarter of 2024 Acadia Realty Trust earnings conference call. My name is Ethan Gomez, and I'm an intern in our acquisitions 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 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 31, 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 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. 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 inserting yourself into 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, Ethan. Thank you to you and the rest of the summer interns for bringing some great energy here this summer. Welcome, everyone. I'm here with John Gottfried and A.J. Levine. I'll give a few comments before handing the remarks over to A.J. Then John will discuss our earnings guidance, our balance sheet metrics, and after that, we'll take some questions. As you can see from our earnings release, our strong second quarter performance is reflective of both the operational tailwinds that our sector is experiencing, as well as the successful execution by our team of several important initiatives. In light of this strong performance, we've increased our full-year earnings guidance and increased our quarterly dividend. More importantly, We see this momentum continuing. While there's always multiple drivers of our growth, there are effectively three critical areas of focus for our business. The first is driving strong internal growth most significantly coming from our street retail portfolio. The second is maintaining a solid balance sheet. And then third is the incremental earnings growth beginning to hit the bottom line from our highly differentiated investment activity. So first, with respect to internal growth, our same-store NOI growth has averaged over 6% for the last two years, and we see this multi-year growth trajectory continuing. AJ will walk through the details of this progress, but all of this activity supports our goal of generating superior top line growth and then having that growth hit the bottom line. Our second key area of focus comes from maintaining a strong and flexible balance sheet. John will elaborate on our balance sheet metrics further. But in short, we are now positioned with a well-hedged balance sheet, strong liquidity to fuel growth, limited maturity exposure, and solid access to attractive debt. Our third and increasingly important driver comes from contributions from external growth. This includes both our on-balance sheet acquisitions for our core portfolio, as well as growth through our investment management platform. Our focus for our on-balance sheet investment activity is to grow the street retail segment of our core portfolio. It's our view that this segment will produce the highest risk-adjusted returns in the open-air sector. We are focusing our street retail acquisition efforts on properties in key corridors that are accretive to earnings, accretive to NAV, as well as accretive to our long-term internal growth trajectory. We believe that there is still a capital market dislocation with respect to the pricing of street retail investment opportunities, and this dislocation is providing going-in yields that do not account for the superior growth rate when compared to other open-air formats. As the capital markets begin to normalize, sellers are beginning to emerge and opportunities are beginning to pencil out. Along these lines, last quarter we made progress on several transactions. We are finalizing our diligence for high quality street retail assets in key shopping corridors, both in Manhattan and Brooklyn, for approximately $75 million. And in addition to that, we have funded what positions us to add an additional 11% interest in the Georgetown Renaissance Collection, a portfolio in M Street, Georgetown, where we already own a 20% stake, and where we hope to add even further to this position. For those of you less familiar with the recovery we're experiencing in Georgetown, over the last several years, this iconic corridor has seen a meaningful improvement in merchandising, in tenant demand, in tenant performance. The addition of new tenants, including Aritzia, Alo Yoga, Faraday, Veronica Beards and Skins, just to name a few, has triggered strong growth on the street that had previously suffered from outdated merchandising and underperforming tenants. We have seen many of our retailers post sales growth of over 40% since 2019 and tenant sales growth is a great indicator of future rent growth. Then behind these acquisitions I just mentioned, we have a growing pipeline of properties that also meet our acquisition criteria for our core portfolio. Now, deals are not done until they're done, and we're going to remain disciplined, but it feels as though the stars are beginning to align. In complementing our on-balance sheet investments, we're continuing to see opportunities to grow our investment management platform, where we are generally focused on open-air suburban shopping centers, where we are going to leverage our institutional capital relationships. There are a few initiatives in progress here. First, as we had previously announced, we formed a strategic partnership for our property, the Shops at Grand, with J.P. Morgan, where we retained a 5% interest in the investment, plus retained the management as well as potential upside. This transaction is an example of our intention to migrate some of our stable but lower growth assets out of our core portfolio and into the investment management platform. Last quarter, we also completed a new acquisition in Tampa, Florida of an open-air community center for $31 million designated for our investment management platform. Given the strong demographics of the walks at Highwood Preserve and the value-add upside, we have strong institutional interest from investors in this asset. But most importantly, as it relates to external growth, keep in mind that for a company of our size, it doesn't take much volume to move the needle. While every transaction is going to differ in terms of long-term accretion, we are currently targeting about 1% earnings accretion for every $200 million of gross investment. And keep in mind, we are historically used to doing multiples of that in volume. So looking ahead, we remain very bullish on our ability to continue to add value by driving internal growth, by maintaining a strong and flexible balance sheet, and by adding additional growth through our strategic new investments. And with that, I'd like to thank the team. their hard work last quarter and I'll turn the call over to AJ.