Acadia Realty Trust

Good day and thank you for standing by. Welcome to the Q3 2026 Acadia Realty Trust earnings conference call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question and answer session. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. I would now like to hand the conference over to your speaker today, Bonnie Salisbury, Head of Investor Relations.

Good morning, and thank you for joining us for the third quarter 2026 Acadia Realty Trust earnings conference call. 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, November 2, 2026, 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, Bonnie. Welcome, everyone. As you can see in our press release, we had another strong quarter as the performance of our street retail portfolio continues to drive our results. The team will get into the details, but before they do, I want to take a step back and talk about the macroeconomic climate we are in and how we have positioned Acadia to continue our peer-leading growth. For most of this century, we operated in a low inflation, low interest rate, and lower for longer environment. that was then coupled with the additional headwinds from the so-called retail Armageddon as the supply of retail outpaced demand. This caused the industry to be more focused on achieving stability rather than capturing embedded growth. Landlords and lenders often favored duration in exchange for limited contractual growth and granted far too many fixed renewal options preventing leases from being marked to market in a reasonable time period. The thought being If there was no particular catalyst for growth in a disinflationary environment, the risk of agreeing to exceptionally long-term, lower growth leases seemed benign. In other words, weighted average lease term, or WALT, was far more important than compounded annual growth rate, or CAGR. Over the last few years, our economy has pivoted to a higher-for-longer inflationary environment, and thankfully for retail real estate, this is now coupled with very strong fundamentals. The challenge in this environment is this. Even when market rents grow, how do we as landlords actually capture that growth in a reasonable time period? Because recognizing a 30% lease spread after 30 years is hardly grounds for celebration. This is where our street retail portfolio is best positioned to capture this growth. along with stronger contractual growth and lower relative capex. Our street retail leases are structured with fair market value resets. This enables us to capture market rent growth much sooner than other open-air formats. Now, we are seeing strong market rent growth in almost every component of our portfolio. The lack of new development has created the strongest supply-demand dynamic we've seen in decades. But market rent growth especially on a net effective basis has been strongest in the street retail segment of our portfolio. Over the last three years, market rent growth in our street retail portfolio has averaged north of 12% annually. And there's no sign of this abating. Quite frankly, our team tells me it's accelerating. And just as important, occupancy costs are remaining healthy as tenant sales growth in our portfolio is keeping pace with that rent growth. Now there are several reasons for this increased demand, but the most important has been the continued drive of direct to consumer real estate, meaning brands reducing their reliance on department stores and increasing the necessity for their own stores. And this trend is most pronounced on our key streets. The store is also doing more work than it used to. driving online sales, lowering customer acquisition costs, and reducing return costs across the trade area. And as we have built scale in a given corridor, our curation is further increasing sales productivity and thus further driving our performance. When we combine this market rent growth with our ability to more frequently mark to market rents through our FMV resets, we are well positioned to capture that growth. In Soho, for example, over the past three years, market rents have grown at a compounded annual rate of 20% a year. During that same time period, our team has marked to market via pry loose and FMV resets 15 of the 19 storefronts in our same store pool, achieving average rent increases of over 30%. And even so, We estimate that our SOHO portfolio still remains about 30% below market. And with a weighted average lease term of approximately five years and FMV resets embedded in our leases, we have a clear path to capturing that additional growth in the relative near term. Then on the suburban side, we're also seeing market rent growth driven by a resilient consumer, strong tenant demand, lack of supply. The challenge in our suburban assets is our ability to get to market rent increases early enough due to the significant contractual options embedded in those leases. So what this all boils down to is that our historic expectation of street retail income growing 200 to 300 basis points faster than suburban NOI now feels conservative. In a hire for longer environment, we think we will be well rewarded. for positioning our portfolio with a major focus on our key streets, where tenant demand and waiting lists continue to be the norm. Now, keep in mind, while higher inflation and higher interest rates are certainly concerning and are creating headwinds in the capital markets, I fear we're losing sight of the fact that inflation at the levels of the past few years has been a net tailwind for retail real estate performance. The consumer is understandably grumpy about inflation. For some it means struggling to make ends meet. And for even affluent consumers, they are beginning to prematurely sound like their grandparents when they look at prices today compared to a few years ago. But given the strong job market, the strong stock market, the consumer is remaining resilient, especially at more elevated levels of this economy. and this explains why retailer demand and retailer performance in our portfolio has been strong. And with tenants top line sales increasing both due to inflation as well as strong consumer demand, the rental growth we are achieving is understandable. Now there's always the risk that we end up with a hard landing or some form of modern day stagflation and while this is always worth watching for, That is not the current economic backdrop we're seeing. And it's not what our retailers are telling us. Compared to prior cycles, retailers have much better data as to who their shopper is, how and where they shop, and are using this data to pick their locations on a disciplined and on a rational basis. And their performance is proving this out. Then on the transaction side. Reggie will walk through the specifics, including the approximately $150 million of street retail we added earlier this quarter. As a result of these acquisitions, we are now beginning to achieve the benefits of scale we have discussed over the past few years, and this growth is also bringing us that much closer to being the premier owner-operator of street retail in the U.S. Our goals have been clear and remain unchanged. We are only adding assets that check all of our boxes, that are accretive to net asset value, accretive to our earnings, and that move us forward in achieving our outsized growth goals. And nothing about the increased interest rate environment makes us inclined to lower our levered return requirements. And thankfully, as it relates to potential street retail acquisitions, as the dominant institutional player In those markets where we're most active, we have a unique position both as to deal flow and tenant demand. So in conclusion, the demand backdrop, the structure of our leases, and our focus and scale on key streets are driving our results today. Our strong top line growth is hitting the bottom line and setting us up for continued strong growth going forward. and while we do not need acquisitions to drive results, our liquidity and investment capacity positions us to accelerate that growth. With that, I'd like to thank the team for their continued hard work and I will hand the call over to AJ Levine.