Acadia Realty Trust

the Acadia Realty Trust Second Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 1-1 again. We ask that you please limit yourself to one question and one follow-up. You may get back in the queue as time allows. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, John Forster, property accountant. Please go ahead, sir.

Good afternoon, and thank you for joining us for the second quarter 2025 Acadia Realty Trust earnings conference call. My name is John Forster, and I am a property accountant in our accounting 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 30, 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 of two questions per caller to give everyone the opportunity to participate. You may ask further questions by resetting 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, John. Great job. Welcome, everyone. Notwithstanding continued noise and uncertainty around the broader economy last quarter, we saw continued momentum across all of the three key drivers of our business. The first driver is delivering superior internal growth through our highly differentiated core portfolio dominated by street retail. Last quarter's leasing activity puts us well on our way to a fourth year of delivering annual same-store growth in excess of 5%. And as AJ Levine will discuss, we are making important progress on our 2026 and our 2027 goals as well. Then the second driver is adding to our internal growth with accretive and complimentary external growth, both on balance sheet and through our investment management platform. Last quarter, we completed nearly $160 million of acquisitions And over the last 12 months, a total of $860 million in acquisitions, including nearly half a billion of street retail. Reggie Livingston will walk through our transactions closed last quarter and the opportunities we are seeing going forward. Then the third driver is maintaining a solid balance sheet with the liquidity and the flexibility to drive both internal and external growth. John Gottfried will walk through our balance sheet metrics and successful refinancing last quarter and how this positions us for growth going forward. So taking a step back, as we look at the current operating environment, we seem to be in an ongoing tug of war with fear of tariff-induced stagflation on one side and then surprising resilience on part of the consumer and the overall economy on the other. So far, thankfully, team resilience seems to be winning. That is certainly what we are seeing as we look at our quarterly results. Resilience is showing up both in continued strong tenant demand for space as well as retailers' performance in our portfolio. And this momentum is not just conceptual. It is reflected in many of our metrics, including $15 million of executed leases in our SNO pipeline that John Gottfried will elaborate on further. For a variety of important reasons, retailers are looking past short-term uncertainty and continuing with their leasing initiatives. In meeting with our retailers, I've been impressed with their ability to successfully navigate tariff uncertainty. Now, this is not to make light. of the headwinds that tariffs could play on retailers' profit margins. But unlike most of us who only began seriously focusing on tariffs on Liberation Day, most of our retailers have been refining their distribution channels for years. And this preparation by our retailers and then a resilient consumer is just part of the reason we are seeing continued momentum in our leasing. Other reasons? include a favorable supply-demand balance due to lack of new development, and then probably even more importantly as it relates to our portfolio and to street retail, there is the added tailwind of retailers continuing to place greater long-term value on establishing their own network of stores, often migrating sales out of department stores and into mission critical street locations. Additionally, our portfolio is concentrated in corridors that primarily serve highly affluent consumers. And while the broad consumer spending might be moderating some, the affluent consumer is continuing to maintain, and in many instances, increase spending. With a strong stock market, a stable job market, our retailers are still seeing their shoppers showing up, and we're seeing this play out in our portfolio. While certainly not a perfect analogy, in the airline industry's recent earnings reports, several airlines noted that while the industry is seeing some softening in the main cabin, premium seating demand continues at record levels. So in short, these strong tailwinds favorable supply-demand backdrop, long-term shift by brands to their own direct-to-consumer stores, the continued strength and demand by the affluent consumer. All these reasons help explain why, even though our street retail portfolio is discretionary retail, the continued momentum we are seeing is, in fact, stronger for our street retail than in our other more necessity and value-based open-air formats. These tailwinds also impact how we think about external growth as well. This strong retailer demand for street retail coupled with its favorable lease structure makes street retail screen attractively from an investment perspective. It provides further support for why we are focused on building Acadia into the premier owner-operator of street retail in the US. The combination of strong contractual growth of generally 3% coupled with more frequent accretive mark to market and lease up opportunities means we can deliver superior growth. In our case, we're shooting for above 5% compounded annual growth for the foreseeable future. Furthermore, what makes us most excited about this segment of retail is seeing the benefits of scale that we're achieving through both having a nationwide platform and more concentrated ownership in given corridors. Our focus is to not just own strong individual stores, but rather making sure we own multiple stores clustered together in the right corridors. We are seeing the benefits of this operating leverage in a majority of our street portfolio in markets ranging from M Street in Georgetown to North 6th Street in Brooklyn to Henderson Avenue in Dallas. The benefits of owning street retail at scale not only helps our leasing efforts in a given corridor, it helps our leasing efforts nationally. And just as important, it helps our acquisition efforts as well. We're seeing this operating leverage emerge in our street retail platform in ways that have remained more elusive in other open-air formats that we're active in. As we screen for specific investment opportunities, both on balance sheet and through our investment management platform, our philosophy of external growth is simple. For our on balance sheet acquisitions, we will continue to allocate capital in a disciplined manner that is accretive to earnings, accretive to net assets, accretive to long-term growth, with a differentiated focus on those street retail markets where we can derive benefits of scale. As John will highlight, we have the liquidity and the flexibility to continue our balance sheet investments. And then equally important, our investment management platform enables our team to create value in a broader range of opportunities within our core competencies. Finally, our third driver is the continued health of our balance sheet. John will discuss how we continued to expand our liquidity, reduce our borrowing costs, extend our maturities. And while we did not raise any equity last quarter, prior to that, we raised over $800 million, providing us with flexibility for growth going forward. My one observation here is while the real estate equity capital markets are evidencing certain levels of uncertainty and volatility, the debt markets are very strong, both secured and unsecured, both proceeds levels and spreads. And while a healthy debt market is only one leg of the stool, it's a critical one. So in conclusion, as we look forward, our multi-year strong internal growth looks like it has several years of tailwinds behind it. Coupled with continued external growth opportunities and a balance sheet with multiple avenues of access to capital, we are well positioned to continue to execute. And with that, I'd like to thank the team for their continued hard work, and I'll hand the call over to AJ Levine.