Executive Summary / Key Takeaways

• Acadia Realty Trust is strategically focused on becoming a dominant owner-operator of high-growth street retail in key, supply-constrained urban corridors, complemented by an opportunistic Investment Management platform.
• The company is demonstrating strong internal growth, particularly within its street retail portfolio, with Q1 2025 Core Same-Property NOI increasing 4.1% and Street Same-Property NOI growing 6.8%, driven by tenant lease-up and positive rent spreads.
• A robust Signed Not-Yet-Open pipeline totaling approximately $9 million in Core ABR (company share) is expected to contribute significantly to future NOI, with $4 million projected for recognition in 2025 (skewed to H2) and $5 million in 2026.
• Recent and pending acquisitions, including over $370 million year-to-date through Q1 2025, are strategically adding scale in target markets like Georgetown, Williamsburg, SoHo, and Flatiron/Union Square, contributing to FFO accretion and long-term growth potential.
• Acadia maintains a strong balance sheet with ample liquidity, including $443.70 million available under its ATM program and a 5.7x Debt-to-EBITDA ratio (inclusive of IM debt), providing flexibility for continued accretive investments and resilience against market volatility.

The Urban Retail Renaissance and Acadia's Strategic Blueprint

Acadia Realty Trust operates as a fully-integrated equity REIT, strategically positioning itself within the dynamic retail real estate landscape. The company's core focus lies in the ownership, acquisition, development, and management of retail properties situated predominantly in high-barrier-to-entry, supply-constrained, densely populated metropolitan areas across the United States. This strategy is executed through a dual-platform approach: a high-quality Core Portfolio and an opportunistic Investment Management platform.

Within the competitive arena of retail REITs, Acadia distinguishes itself by its specialized emphasis on street and urban retail, a niche less crowded than the broader shopping center market dominated by peers like Kimco Realty (KIM) or Regency Centers (REG), or the large mall segment led by Simon Property Group (SPG). While larger, more diversified REITs may offer greater scale and potentially higher margins (e.g., KIM's TTM Net Margin of 20% vs. AKR's 5.19%, or SPG's 40%), Acadia aims to leverage its deep market expertise and agility to capture superior growth within its targeted urban corridors. The company's operational structure, while potentially incurring higher costs per unit compared to highly efficient grocery-anchored models like REG, is designed to support aggressive acquisition and management strategies necessary for its niche.

Acadia's strategic evolution has increasingly centered on building scale and concentration in specific "mission-critical corridors" where it can become a dominant owner-operator. This approach, validated by recent acquisition activity, allows the company to influence curation, enhance tenant mix, and drive performance across entire blocks or streets. The Investment Management platform, operating through various opportunity funds, complements the Core strategy by pursuing opportunistic and value-add investments, often partnering with institutional investors. This platform provides flexibility and access to a broader range of deal types, leveraging Acadia's operational expertise in open-air retail.

The retail environment itself is undergoing significant shifts, presenting both opportunities and challenges. Secular tailwinds like the increasing importance of physical stores in an omnichannel world and retailers' growing need for direct-to-consumer (DTC) locations are driving demand in high-traffic urban areas. The affluent consumer base targeted by many of Acadia's tenants has shown resilience, with double-digit sales growth reported in key street markets like SoHo, Georgetown's M Street (15% apparel sales growth in Q1 2025), and Armitage Avenue (12% sales growth in Q1 2025). This strong tenant performance, coupled with a lack of new high-quality supply in these dense urban markets, creates a favorable supply-demand dynamic for landlords.

Acadia leverages technology and data to capitalize on these trends. While not possessing a unique manufacturing technology like some industrial companies, the company utilizes data on tenant sales performance and market dynamics, along with sophisticated site selection informed by technology and potentially AI, to guide its leasing, curation, and acquisition strategies. This data-driven approach helps identify underperforming tenants for potential "pry-loose" opportunities and informs decisions on where to build scale for maximum impact. The "halo effect," where physical stores boost online sales, further underscores the value of the mission-critical locations Acadia targets, supporting healthy occupancy costs and tenant willingness to invest in these spaces.

Financial Performance and Operational Momentum

Acadia's financial performance in the first quarter of 2025 reflects the impact of its strategic initiatives and the underlying strength of its core markets. Total revenues reached $104.39 million for the three months ended March 31, 2025, compared to $91.36 million in the prior year period. This increase was significantly influenced by a $16.60 million rise in rental revenue, driven by new property acquisitions ($4.00 million), the consolidation of the Renaissance Portfolio ($2.80 million), and a notable $8.40 million in rental and termination income from a lease termination at City Center.

Operating income for the quarter was $15.32 million, up from $14.01 million year-over-year. However, net income attributable to Acadia shareholders saw a decrease to $1.61 million from $3.27 million, impacted by various factors including a $9.60 million loss on change in control related to the Renaissance Portfolio consolidation and a $6.50 million impairment charge on the 640 Broadway property. Despite these items, Funds from Operations (FFO) attributable to Common Shareholders and Common OP Unit holders increased significantly to $44.58 million in Q1 2025, up from $30.96 million in Q1 2024, reflecting the underlying operational performance and acquisition impact.

The Core Portfolio segment remains the primary driver of operating income, contributing $22.30 million in Q1 2025. The Investment Management segment, while contributing $4.70 million in operating income, is characterized by more variable earnings due to its opportunistic nature and includes asset management fees ($2.30 million in Q1 2025). The Structured Financing segment generated $6.10 million in interest income.

Same-Property NOI for the Core Portfolio demonstrated solid growth, increasing 4.1% in Q1 2025 compared to the prior year. This was propelled by a strong 6.8% growth in the street retail portion of the portfolio, significantly outpacing the suburban segment. This outperformance is a direct result of successful lease-up and mark-to-market gains in key street markets like SoHo and Chicago. Leasing activity remains robust, with new and renewal leases executed in Q1 2025 showing impressive spreads of 20.1% on a cash basis and 37.4% on a straight-line basis.

Physical occupancy in the Core Portfolio saw a sequential decline in Q1 2025, primarily due to the anticipated termination of a large suburban tenant at Maribo Plaza. However, this space has already been re-leased, expected to commence in Q3 2025, and management anticipates year-end core physical occupancy to rebound to the 94% to 95% range. The Signed Not-Yet-Open (SNO) pipeline stands at approximately $9 million in Core ABR (company share) as of March 31, 2025, representing a significant source of future revenue growth. An additional $6 million in ABR is expected from the redevelopment SNO pipeline.

Balance Sheet Strength and Strategic Investments

Acadia maintains a strong and flexible balance sheet, a critical enabler of its growth strategy. As of March 31, 2025, consolidated indebtedness aggregated $1,634.30 million. The company has proactively managed its debt profile, with 75.2% of its portfolio debt fixed or effectively fixed through interest rate swaps and caps, mitigating exposure to rising interest rates. The Debt-to-EBITDA ratio, inclusive of the share of debt from the investment management business, stood at 5.7 times in Q1 2025, within management's targeted range of 5.5 to 6 times when annualizing the impact of recent acquisitions and forward equity.

Liquidity is robust, with $32.00 million in cash on hand and $525.00 million of capacity under existing Core Portfolio debt facilities as of March 31, 2025. The company's active ATM program provides significant capital raising flexibility, with $443.70 million available for future issuance. The settlement of 11.17 million shares under the ATM forward in March 2025 generated $277.90 million in proceeds, further bolstering liquidity.

External growth has been a significant focus, with over $800 million in acquisitions closed over the last 12 months. Year-to-date through Q1 2025, acquisitions totaled over $370 million. These investments are strategically targeted to be accretive to FFO and NAV, while increasing concentration in key street retail corridors. Notable recent activity includes the consolidation of the Renaissance Portfolio in Georgetown, increasing ownership to 68%, and acquisitions in SoHo and Williamsburg. Subsequent to the quarter, the company continued this momentum with additional Core acquisitions in New York totaling approximately $107.5 million and contracts to purchase two more properties for $49.6 million.

The Investment Management platform also saw activity, including the acquisition of Pinewood Square, intended to be matched with an institutional partner. The platform benefits from unfunded capital commitments from noncontrolling interests, totaling $52.80 million across Funds III, IV, and V as of March 31, 2025, providing additional capital for opportunistic investments.

Outlook, Guidance, and Risk Considerations

Acadia has raised its full-year 2025 FFO guidance, reflecting the strong Q1 performance and the impact of incremental external investments. While specific full-year guidance figures were not reiterated in the Q1 2025 call, the company anticipates Q2 2025 FFO in the range of $0.32 to $0.34 per share, targeting $0.34 to $0.36 per share for the second half of the year. This expected ramp-up is driven by the accretion from recent acquisitions and the commencement of leases within the SNO pipeline.

The SNO pipeline is a key driver of future internal growth. Of the approximately $9 million in Core SNO ABR, about $4 million is expected to be recognized in 2025, with the majority hitting in the second half. This leaves an incremental $5 million for 2026. Including the redevelopment SNO pipeline, a combined $8 million to $9 million of incremental ABR is projected to contribute to results heading into 2026. Management is feeling confident about achieving 5%+ core internal NOI growth in 2026, supported by the SNO pipeline, a robust pipeline of deals in advanced negotiation (over $6 million in Core leases), and approximately 2.5% contractual growth embedded in existing leases.

Despite the positive outlook, several risks warrant investor attention. Macroeconomic conditions, including inflationary pressures, rising interest rates, and potential policy-driven disruptions like tariffs, could impact tenant performance and borrowing costs. While the company's affluent consumer base and focus on mission-critical locations offer some resilience, a prolonged economic slowdown could still pose challenges. The ability to refinance maturing debt, particularly the $471.80 million consolidated debt and $15.90 million unconsolidated debt maturing in the remainder of 2025, and $499.40 million consolidated debt and $15.80 million unconsolidated debt maturing by March 31, 2026, is subject to market conditions, although extension options are available for a significant portion. Development and redevelopment projects carry inherent risks in achieving expected returns and timelines. Furthermore, the Investment Management platform's performance is subject to the opportunistic nature of its investments and reliance on joint venture partners.

Conclusion

Acadia Realty Trust is executing a focused strategy to capitalize on the ongoing evolution of retail, particularly within high-demand urban street corridors. By leveraging its expertise, balance sheet strength, and data-informed operational approach, the company is actively building scale in key markets and driving robust internal growth. The significant acquisition activity in late 2024 and early 2025 underscores its ability to identify and close accretive opportunities, positioning the company for enhanced FFO and NOI growth in the coming years.

While macroeconomic uncertainties and financing risks persist, Acadia's hedged debt profile, ample liquidity, and strategic focus on resilient markets and tenants provide a degree of insulation. The substantial Signed Not-Yet-Open pipeline offers clear visibility into future revenue streams, supporting management's positive outlook for continued strong internal growth. For investors, Acadia represents a differentiated play in the retail REIT sector, offering exposure to the potential upside in dynamic urban retail markets, underpinned by a disciplined investment approach and a complementary opportunistic platform.