Acadia Realty Trust

Thank you for standing by and welcome to Acadia Realty Trust fourth 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 Devon Russell, Manager, Accounts Receivable Lease Administration. Please go ahead.

Good morning, and thank you for joining us for the fourth quarter 2024 Acadia Realty Trust Earnings Conference Call. My name is Devon Russell, and I'm the Accounts Receivable Manager in our Lease Administration 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, February 12, 2025, 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 reinserting 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.

Thank you, Devon. Great job. Welcome, everyone. I'll give a few comments before handing the remarks over to AJ. And then since we have been highly active on the acquisition front and expect to continue To continue to do so, I have asked our CIO, Reggie Livingston, to discuss our investment activity. And then finally, John will tie it all together in connection with our earnings guidance, our balance sheet metrics, and our outlook for the year. And after that, we're here to take questions. As you can see from our earnings release, we had a busy and productive quarter, both with respect to the performance of our existing portfolio, as well as a ramp up of our investment activity. In light of the progress we made throughout the year, we are setting up for a strong 2025. Now, we are not ignoring the impact on valuations from a higher yielding bond market, nor the increasing likelihood of a higher for longer interest rate and inflationary environment. But to the extent that these headwinds are due at least in part to a stronger than forecasted economy, This growth sooner or later should result in stronger tenant top line growth, which then translates sooner or later into rental growth. And our goal has been to make sure we own the kind of retail portfolio that is best positioned to capture this corresponding growth sooner rather than later. As we have seen over the last few years, the street retail portion of our portfolio, which now represents the majority of our core portfolio, has proven to be the best segment to capture this growth. I'll let AJ discuss the specifics of our portfolio performance, but the bottom line is that we have delivered over 5%, same story on a wide growth, for each of the last three years, most significantly driven by our street retail performance. And then looking forward, it's our view that this segment will continue to produce the highest net effective growth and the highest risk-adjusted returns in the open-air sector. The drivers of this outperformance come from a combination of factors that I'm happy to discuss in detail. But in short, they include strong contractual growth, lower capex, fair market value resets, a shift in retailing away from wholesale and into individual stores, the halo benefits from these stores in an omnichannel world, and then ultimately increasing retailer demand, increasing retailer performance with limited supply. With these trends in mind, our focus has been to position Acadia to be the dominant owner-operator of street retail in the United States with both appropriate scale and appropriate concentration to enable us to continue to drive the growth we have delivered over the past few years well into the balance of the decade. For reasons that AJ and Reggie will expand on, the portfolio we have assembled and will continue to add to is beginning to give us that scale and that concentration that will enable us both to enhance the performance of our existing assets as well as position us as the buyer of choice for continued strong external growth. You've seen us use this scale and synergies to drive outsized growth in existing markets, such as Armitage Avenue in Chicago, and now with our most recent acquisitions, we are building similar powerful scale and concentrations in Georgetown in Washington, D.C., Soho, Williamsburg, and Bleecker Street in New York, Henderson Avenue and the Knox Henderson Corridor in Dallas. Along with the benefits of scale, it's becoming clear that for all open-air retail, but especially for street retail, this continued retailer demand is not just a cyclical recovery. There are longer-term positive trends at play, and we are capturing more than our fair share of these trends. That is not to say that retail is immune to gravity. There are certainly some segments of the consumer that are stretched thin, and we are seeing the reemergence of some retailer weakness and bankruptcies. For the most part, this is concentrated with certain junior anchor retailers in the suburban shopping center portion of our portfolio. But even here, tenant demand seems to exceed this new shadow supply. And at least from our perspective, The tailwinds still far exceed the headwinds. Then complementing our strong internal growth, our acquisitions last year, both on balance sheet, street retail acquisitions, as well as investments through our highly complementary investment management platform, are playing an increasingly important role in our long-term growth. Reggie will discuss the details of our acquisition activity and John will discuss our successful match funding for this activity. But in short, last year and to date, we have completed over $600 million of acquisitions with about half of our core portfolio, the other half being investments for our investment management platform. The investments for our core portfolio were all strategic additions of street retail, in key must-have markets where we are already active and where we can now add, scale, and further connect the dots in those corridors. We're focusing our street retail acquisition efforts on properties in key corridors that are accretive to earnings, accretive to net asset value, as well as acquisitions where we can extend and further fortify our long-term internal growth trajectory. As we stated in the past, we are committed to match funding our acquisitions on a disciplined basis. Last year, we not only fully funded our core investments, but also funded our anticipated redevelopment activity while leaving a decent amount of dry powder for our current pipeline. Then complementing our on-balance sheet investments, we're continuing to see opportunities to grow our investment management platform. where we are leveraging our institutional capital relationships for opportunistic investments best suited for this buy-fix-sell model. Reggie will walk through the positive earnings impact of our external growth activity, but as we have said in the past, for a company of our size, doesn't take much volume to move the needle. So in summary, as we think about 2025 and beyond, we remain very bullish in 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 strategic new investments. With that, I will thank the team for their hard work last quarter and last year and their success. And now I'll turn the call over to AJ.