Unassociated Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, DC 20549
 
FORM 10-Q
 
 
         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2010
 
or
 
 
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from _______ to _______
 
Commission File Number 1-12002
 
ACADIA REALTY TRUST
 
(Exact name of registrant in its charter)
MARYLAND
 (State or other jurisdiction of
 incorporation or organization)
 
 1311 MAMARONECK AVENUE, SUITE 260 WHITE PLAINS, NY
 (Address of principal executive offices)
 
23-2715194
 (I.R.S. Employer
 Identification No.)
 
 10605
 (Zip Code)

(914) 288-8100
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
YESx               NO o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES o               NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
  Large Accelerated Filer  o Accelerated Filer  x  
       
  Non-accelerated Filer  o Smaller Reporting Company  o  
 
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes oNo x
 
As of November 8, 2010 there were 40,253,877 common shares of beneficial interest, par value $.001 per share, outstanding.
 
 
 

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
FORM 10-Q
 
INDEX
 
     
Page
       
Part I:
 
Financial Information
 
       
   
       
   
1
       
   
2
       
   
3
       
   
4
       
   
6
       
 
18
       
 
30
       
 
31
       
Part II:
 
Other Information
 
       
 
31
       
 
31
       
 
31
       
 
31
       
 
31
       
 
31
       
 
31
       
   
32
       
   
33
 
 
 
 

 

Part I. Financial Information
 
Item 1. Financial Statements.
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
(dollars in thousands)
 
September 30,
   
December 31,
 
   
2010
   
2009
 
ASSETS
 
(unaudited)
       
             
Operating real estate
           
Land
  $ 200,354     $ 221,740  
Building and improvements
    855,333       845,751  
Construction in progress
    2,842       2,575  
      1,058,529       1,070,066  
Less: accumulated depreciation
    214,909       193,745  
Net operating real estate
    843,620       876,321  
Real estate under development
    314,565       137,340  
Notes receivable and preferred equity investment, net
    87,600       125,221  
Investments in and advances to unconsolidated affiliates
    16,095       51,712  
Cash and cash equivalents
    110,703       93,808  
Cash in escrow
    29,559       8,582  
Rents receivable, net
    17,956       16,782  
Deferred charges, net of amortization
    28,098       28,311  
Acquired lease intangibles, net of amortization
    19,527       22,382  
Prepaid expenses and other assets
    23,025       22,005  
Total assets
  $ 1,490,748     $ 1,382,464  
                 
LIABILITIES
               
                 
Mortgages payable
  $ 783,467     $ 732,287  
Notes payable, net of unamortized discount of $1,331 and $2,105, respectively
    48,684       47,910  
Distributions in excess of income from, and investments in, unconsolidated affiliates
    20,802       20,589  
Accounts payable and accrued expenses
    31,102       17,548  
Dividends and distributions payable
    7,427       7,377  
Acquired lease and other intangibles, net of amortization
    5,992       6,753  
Other liabilities
    19,434       17,523  
Total liabilities
    916,908       849,987  
                 
SHAREHOLDERS’ EQUITY
               
                 
Common shares, $.001 par value, authorized 100,000,000 shares; issued
               
and outstanding 40,247,415 and 39,787,018 shares, respectively
    40       40  
Additional paid-in capital
    303,192       299,014  
Accumulated other comprehensive loss
    (3,366 )     (2,994 )
Retained earnings
    17,449       16,125  
Total shareholders’ equity
    317,315       312,185  
Noncontrolling interests
    256,525       220,292  
Total equity
    573,840       532,477  
Total liabilities and equity
  $ 1,490,748     $ 1,382,464  

See accompanying notes
 
1

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 
(unaudited)
   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(dollars in thousands, except per share amounts)
 
2010
   
2009
   
2010
   
2009
 
                         
Revenues
                       
Rental income
  $ 28,041     $ 25,941     $ 79,734     $ 71,314  
Mortgage interest income
    5,206       4,908       15,437       14,867  
Expense reimbursements
    4,939       4,868       15,839       15,252  
Lease termination income
 
      2,500       65       2,726  
Management fee income
    346       316       1,182       1,517  
Other
    729       362       1,663       3,250  
Total revenues
    39,261       38,895       113,920       108,926  
                                 
Operating Expenses
                               
Property operating
    7,255       6,419       21,671       20,965  
Real estate taxes
    4,771       4,552       13,644       12,305  
General and administrative
    5,317       5,226       15,852       16,575  
Depreciation and amortization
    10,341       10,377       28,546       27,412  
Other expense
 
      53       3       4,218  
Total operating expenses
    27,684       26,627       79,716       81,475  
                                 
Operating income
    11,577       12,268       34,204       27,451  
                                 
Other interest income
    175       161       462       373  
Equity in earnings (losses) of unconsolidated affiliates
    143       (193 )     610       (3,451 )
Impairment of investment in unconsolidated affiliate
 
      (3,655 )  
      (3,655 )
Interest and other finance expense
    (8,829 )     (8,329 )     (25,927 )     (23,782 )
Gain on bargain purchase
 
   
      33,805    
 
Gain on debt extinguishment
 
      11    
      7,057  
Income from continuing operations before income taxes
    3,066       263       43,154       3,993  
Income tax provision
    (785 )     273       (1,869 )     (1,349 )
Income from continuing operations
    2,281       536       41,285       2,644  
                                 
Discontinued Operations
                               
Operating income from discontinued operations
 
      32    
      225  
Gain on sale of property
 
   
   
      5,637  
Income from discontinued operations
 
      32    
      5,862  
                                 
Net income
    2,281       568       41,285       8,506  
                                 
Loss (income) attributable to noncontrolling interests:
                               
Continuing operations
    2,836       6,740       (18,240 )     21,101  
Discontinued operations
 
      (1 )  
      (4,866 )
Net loss (income) attributable to noncontrolling interests
    2,836       6,739       (18,240 )     16,235  
                                 
Net income attributable to Common Shareholders
  $ 5,117     $ 7,307     $ 23,045     $ 24,741  
                                 
Basic Earnings per Share
                               
Income from continuing operations
  $ 0.13     $ 0.18     $ 0.57     $ 0.63  
Income from discontinued operations
 
   
   
      0.03  
Basic earnings per share
  $ 0.13     $ 0.18     $ 0.57     $ 0.66  
                                 
Diluted Earnings per Share
                               
Income from continuing operations
  $ 0.13     $ 0.18     $ 0.57     $ 0.63  
Income from discontinued operations
 
   
   
      0.03  
Diluted earnings per share
  $ 0.13     $ 0.18     $ 0.57     $ 0.66  
 
See accompanying notes
 
2

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009

(unaudited)
 
                     
Accumulated
                         
               
Additional
   
Other
         
Total
             
    Common Shares    
Paid-in
   
Comprehensive
   
Retained
   
Shareholders’
   
Noncontrolling
   
Total
 
(dollars in thousands, except per share amounts)
 
Shares
   
Amount
   
Capital
   
Loss
   
Earnings
   
Equity
   
Interests
   
Equity
 
                                                 
Balance at December 31, 2009
  39,787   $ 40   $ 299,014   $ (2,994 ) $ 16,125   $ 312,185   $ 220,292   $ 532,477  
                                                 
Conversion of 358,967 OP Units to Common
                                               
Shares by limited partners of the Operating
                                               
Partnership
  359     -     3,179     -     -     3,179     (3,179 )   -  
Dividends declared ($0.54 per Common Share)
  -     -     -     -     (21,721 )   (21,721 )   (553 )   (22,274 )
Employee Restricted Share awards
  133     -     1,561     -     -     1,561     1,333     2,894  
Common Shares issued under Employee Share
                                               
Purchase Plan
  5     -     75     -     -     75     -     75  
Issuance of Common Shares to Trustees
  13     -     228     -     -     228     -     228  
Exercise of Trustees options
  7     -     101     -     -     101     -     101  
Employee Restricted Shares cancelled
  (57 )   -     (966 )   -     -     (966 )   -     (966 )
Noncontrolling interest distributions
  -     -     -     -     -     -     (856 )   (856 )
Noncontrolling interest contributions
  -     -     -     -     -     -     21,076     21,076  
 
  40,247     40     303,192     (2,994 )   (5,596 )   294,642     238,113     532,755  
Comprehensive income:
                                               
Net income
  -     -     -     -     23,045     23,045     18,240     41,285  
Unrealized loss on valuation of swap agreements
  -     -     -     (2,263 )   -     (2,263 )   (73 )   (2,336 )
Reclassification of realized interest on swap agreements
  -     -     -     1,891     -     1,891     245     2,136  
Total comprehensive income
  -     -     -     (372 )   23,045     22,673     18,412     41,085  
                                                 
Balance at September 30, 2010
  40,247   $ 40   $ 303,192   $ (3,366 ) $ 17,449   $ 317,315   $ 256,525   $ 573,840  
 
Balance at December 31, 2008
  32,357   $ 32   $ 218,527   $ (4,508 ) $ 13,671   $ 227,722   $ 214,506   $ 442,228  
                                                 
Dividends declared ($0.57 per Common Share)
  -     -     -     -     (21,491 )   (21,491 )   (607 )   (22,098 )
Issuance of Common Shares
  5,750     6     65,216     -     -     65,222     -     65,222  
Issuance of Common Shares through special dividend
  1,287     2     16,190     -     -     16,192     -     16,192  
Employee Restricted Share awards
  443     -     2,289     -     -     2,289     667     2,956  
Common Shares issued under Employee Share
                                               
Purchase Plan
  7     -     80     -     -     80     -     80  
Issuance of Common Shares to Trustees
  25     -     603     -     -     603     -     603  
Employee exercise of options to purchase common shares
  8     -     69     -     -     69     -     69  
Employee Restricted Shares cancelled
  (191 )         (2,715 )   -     -     (2,715 )   -     (2,715 )
Conversion options on Convertible Notes purchased
  -     -     (840 )   -     -     (840 )   -     (840 )
Noncontrolling interest distributions
  -     -     -     -     -     -     (915 )   (915 )
Noncontrolling interest contributions
  -     -     -     -     -     -     7,200     7,200  
 
  39,686     40     299,419     (4,508 )   (7,820 )   287,131     220,851     507,982  
Comprehensive income (loss):
                                               
Net income (loss)
  -     -     -     -     24,741     24,741     (16,235 )   8,506  
Unrealized loss on valuation of swap agreements
  -     -     -     (815 )   -     (815 )   (108 )   (923 )
Reclassification of realized interest on swap agreements
  -     -     -     1,905     -     1,905     222     2,127  
Total comprehensive income (loss)
  -     -     -     1,090     24,741     25,831     (16,121 )   9,710  
                                                 
Balance at September 30, 2009
  39,686   $ 40   $ 299,419   $ (3,418 ) $ 16,921   $ 312,962   $ 204,730   $ 517,692  

See accompanying notes
 
3

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 
(unaudited)
(dollars in thousands)
 
Nine months ended
September 30,
 
   
2010
   
2009
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net income
  $ 41,285     $ 8,506  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    28,546       27,437  
Gain on bargain purchase
    (33,805 )     -  
Gain on sale of property
    -       (5,637 )
Gain on debt extinguishment
    -       (7,057 )
Non-cash accretion of notes receivable
    (4,513 )     (3,914 )
Share compensation expense
    3,121       3,045  
Equity in (earnings) losses of unconsolidated affiliates
    (610 )     3,451  
Impairment of investment in unconsolidated affiliate
 
-
      3,655  
Other, net
    3,995       12,951  
Changes in assets and liabilities
               
Cash in escrow
    (20,977 )     (2,103 )
Rents receivable, net
    (2,891 )     (5,818 )
Prepaid expenses and other assets, net
    1,443       8,507  
Accounts payable and accrued expenses
    5,285       (4,971 )
Other liabilities
    1,713       1,062  
                 
Net cash provided by operating activities
    22,592       39,114  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Investment in real estate
    (60,552 )     (112,913 )
Deferred acquisition and leasing costs
    (2,442 )     (11,654 )
Investments in and advances to unconsolidated affiliates
    (2,915 )     (5,137 )
Return of capital from unconsolidated affiliates
    753       1,798  
Repayments of notes receivable
    42,011       8,831  
Increase in notes receivable
    -       (756 )
Proceeds from sale of property
    -       9,481  
                 
Net cash used in investing activities
    (23,145 )     (110,350 )
 
 
4

 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 
(unaudited)
(dollars in thousands)
 
Nine months ended
September 30,
 
   
2010
   
2009
 
             
CASH FLOWS FROM FINANCING ACTIVITIES:
           
Principal payments on mortgage notes
    (33,698 )     (150,357 )
Proceeds received on mortgage notes
    58,914       255,065  
Redemption of notes payable
    -       (46,736 )
Increase in deferred financing and other costs
    (4,973 )     (480 )
Capital contributions from noncontrolling interests
    21,076       7,200  
Distributions to noncontrolling interests
    (1,426 )     (1,979 )
Dividends paid to Common Shareholders
    (21,655 )     (22,993 )
Proceeds from issuance of Common Shares, net of issuance costs
    -       65,222  
Repurchase and cancellation of Common Shares
    (966 )     (2,715 )
Common Shares issued under Employee Share Purchase Plan
    75       80  
Exercise of options to purchase Common Shares
    101       69  
                 
Net cash provided by financing activities
    17,448       102,376  
                 
Increase in cash and cash equivalents
    16,895       31,140  
Cash and cash equivalents, beginning of period
    93,808       86,691  
                 
Cash and cash equivalents, end of period
  $ 110,703     $ 117,831  
                 
Supplemental disclosure of cash flow information
               
Cash paid during the period for interest, including capitalized interest of $1,592 and $3,005, respectively
  $ 24,981     $ 24,597  
                 
Cash paid for income taxes
  $ 1,184     $ 496  
                 
Dividends paid through the issuance of Common Shares
  $ -     $ 16,192  
                 
Acquisition of interest in unconsolidated affiliate:
               
                 
Real estate, net
  $ (108,000 )   $ -  
Assumption of mortgage debt
    25,990       -  
Gain on bargain purchase
    33,805       -  
Other assets and liabilities
    7,532       -  
Investment in unconsolidated affiliates
    37,824       -  
Cash included in investment in real estate
  $ (2,849 )   $ -  
 
See accompanying notes
 
5

 

ACADIA REALTY TRUST AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.         ORGANIZATION AND BASIS OF PRESENTATION

Business and Organization

Acadia Realty Trust (the “Trust”) and subsidiaries (collectively, the “Company”) is a fully-integrated, self-managed and self-administered equity real estate investment trust (“REIT”) focused primarily on the ownership, acquisition, redevelopment and management of retail properties, including neighborhood and community shopping centers and mixed-use properties with retail components.

All of the Company’s assets are held by, and all of its operations are conducted through, Acadia Realty Limited Partnership (the “Operating Partnership”) and entities in which the Operating Partnership owns a controlling interest. As of September 30, 2010, the Trust controlled approximately 99% of the Operating Partnership as the sole general partner. As the general partner, the Trust is entitled to share, in proportion to its percentage interest, in the cash distributions and profits and losses of the Operating Partnership. The limited partners primarily represent entities or individuals that contributed their interests in certain properties or entities to the Operating Partnership in exchange for common or preferred units of limited partnership interest (“Common or Preferred OP Units”). Limited partners holding Common OP Units are generally entitled to exchange their units on a one-for-one basis for common shares of beneficial interest of the Trust (“Common Shares”).

As of September 30, 2010, the Company has ownership interests in 34 properties within its core portfolio (“Core Portfolio”) and 44 properties within its three opportunity funds, Acadia Strategic Opportunity Fund I, L.P. (“Fund I”), Acadia Strategic Opportunity Fund II, LLC (“Fund II”) and Acadia Strategic Opportunity Fund III, LLC (“Fund III” and together with Fund I and Fund II, the “Opportunity Funds”). The 78 properties consist of commercial properties, primarily neighborhood and community shopping centers, self-storage and mixed-use properties with a retail component. In addition, the Company also invests in operating companies through Acadia Mervyn Investors I, LLC (“Mervyns I”) and Acadia Mervyn Investors II, LLC (“Mervyns II”) or Fund II, all on a non-recourse basis. These investments comprise and are referred to as the Company’s Retailer Controlled Property initiative (“RCP Venture”). The Operating Partnership has the following equity interests in the Opportunity Funds, Mervyns I and Mervyns II:

 
Entity
Equity Interest Held By Operating Partnership
 
 
Fund I and Mervyns I
22.2%
 
 
Fund II and Mervyns II
20.0%
 
 
Fund III
19.9%
 

In addition, with respect to each of the Opportunity Funds, Mervyns I and Mervyns II, the Operating Partnership is entitled to a profit participation in excess of its equity interest percentage based on certain investment return thresholds (“Promote”).
 

Basis of Presentation

The consolidated financial statements include the consolidated accounts of the Company and its investments in partnerships and limited liability companies in which the Company is presumed to have control in accordance with the consolidation guidance of the Financial Accounting Statements Board (“FASB”) Accounting Standards Codification (“ASC”). Investments in entities for which the Company has the ability to exercise significant influence but does not have financial or operating control, are accounted for under the equity method of accounting. Accordingly, the Company’s share of the net earnings (or losses) of these entities are included in consolidated net income under the caption, Equity in Earnings (Losses) of Unconsolidated Affiliates. Investments in entities for which the Company does not have the ability to exercise any influence are accounted for under the cost method.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. The information furnished in the accompanying consolidated financial statements reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of the aforementioned consolidated financial statements for the interim periods. These consolidated financial statements should be read in conjunction with the Company’s 2009 Annual Report on Form 10-K, as filed with the SEC on March 1, 2010.

 
6

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.         ORGANIZATION AND BASIS OF PRESENTATION (continued)

Recent Accounting Pronouncements

In June 2009, the FASB issued a new accounting standard, which provided certain changes to the evaluation of a variable interest entity (“VIE”) including requiring a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE, continuous assessments of whether an enterprise is the primary beneficiary of a VIE and enhanced disclosures about an enterprise’s involvement with a VIE. Under the new standard, the primary beneficiary has both the power to direct the activities that most significantly impact economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.  The adoption of the standard on January 1, 2010 did not have a material impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about Fair Value Measurements,” which provides for new disclosures, as well as clarification of existing disclosures on fair value measurements.  The adoption of the standard on January 1, 2010 did not have an impact on the Company’s financial position and results of operations.

In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) Amendments to Certain Recognition and Disclosure Requirements,” which requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated. The adoption did not have an impact on the Company’s financial position and results of operations.

2.           EARNINGS PER COMMON SHARE

Basic earnings per Common Share is computed using net income attributable to common shareholders and the weighted average Common Shares outstanding. Diluted earnings per Common Share reflect the conversion of obligations and the assumed exercises of securities including the effects of awards issuable under the Company’s Share Incentive Plans. The computation of basic and diluted earnings per Common Share from continuing operations for the periods indicated are as follows:

   
Three months ended
September 30,
   
Nine months ended
September 30,
 
(dollars in thousands, except per share amounts)
 
2010
   
2009
   
2010
   
2009
 
Numerator:
                       
Income from continuing operations  attributable to
Common Shareholders
  $ 5,117     $ 7,276     $ 23,045     $ 23,745  
Effect of dilutive securities:
 
   
   
   
 
Preferred OP Unit distributions
 
      5       14       14  
Numerator for diluted earnings per Common Share
  $ 5,117     $ 7,281     $ 23,059     $ 23,759  
                                 
Denominator:
                               
Weighted average shares for basic earnings per share
    40,169       39,686       40,096       37,415  
Effect of dilutive securities:
                               
Employee share options
    262       257       214       189  
Convertible Preferred OP Units
 
      25       25       25  
Dilutive potential Common Shares
    262       282       239       214  
Denominator for diluted earnings per share
    40,431       39,968       40,335       37,629  
Basic earnings per Common Share from continuing
operations attributable to Common Shareholders
  $ 0.13     $ 0.18     $ 0.57     $ 0.63  
Diluted earnings per Common Share from continuing
operations attributable to Common Shareholders
  $ 0.13     $ 0.18     $ 0.57     $ 0.63  

The weighted average shares used in the computation of diluted earnings per share include unvested restricted Common Shares (“Restricted Shares”) and restricted OP units (“LTIP Units”) (Note 13) that are entitled to receive dividend equivalent payments. The effect of the conversion of Common OP Units is not reflected in the above table, as they are exchangeable for Common Shares on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in subsidiaries in the accompanying consolidated financial statements. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings per share. The conversion of the convertible notes payable (Note 9) is not reflected in the table above as such conversion, based on the current market price of the Common Shares, would be settled with cash.

 
7

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.           EARNINGS PER COMMON SHARE, continued

The effect of the assumed conversion of 188 Series A Preferred OP Units into 25,067 Series A Preferred OP Units to Common Shares would be anti-dilutive for the three months ended September 30, 2010 and they are not included in the table. The effect of the assumed conversion of 188 Series A Preferred OP Units into 25,067 Common Shares is dilutive for the three months ended September 30, 2009 and nine months ended September 30, 2010 and September 30, 2009 and, accordingly, they are included in the table.

3.         NONCONTROLLING INTERESTS

Noncontrolling interests represent the portion of equity that the Company does not own in entities that it consolidates. Such noncontrolling interests are reported on the Consolidated Balance Sheets within equity, separately from the Company’s equity.

Noncontrolling interests include third party interests in the Company’s Opportunity Funds and other entities. It also include interests in the Operating Partnership which represent (i) the limited partners’ 281,942 and 626,606 Common OP Units at September 30, 2010 and December 31, 2009, respectively, (ii) 188 Series A Preferred OP Units at September 30, 2010 and December 31, 2009, respectively, and (iii) 646,534 and 393,909 LTIP Units at September 30, 2010 and December 31, 2009, respectively.

4.         ACQUISITIONS AND DISPOSITION OF PROPERTIES AND DISCONTINUED OPERATIONS

Acquisitions

Prior to June 30, 2010, the Company, through Fund II, and an unaffiliated joint venture partner, California Urban Investment Partners, LLC (“CUIP”) owned a leasehold interest in CityPoint, a mixed-use, redevelopment project located in downtown Brooklyn, New York. Fund II owned a 75% interest in the retail component, a 50% interest in the office component and no interest in the residential component of CityPoint. CUIP owned the remaining interests in the retail and office components and 100% of the residential component of the project.  Accordingly, Fund II’s investment represented 24.75% of the overall original acquisition cost and subsequent carry and pre-development costs and was accounted for using the equity method.

On June 30, 2010, Fund II acquired all of CUIP’s interest in CityPoint for $9.2 million (the “Transaction”), consisting of a current payment of $2.0 million and deferred payments, potentially through 2020, aggregating $7.2 million. Fund II also assumed CUIP’s share of the first mortgage debt, $19.6 million.

The Transaction was a business combination achieved in stages, and as a result, Fund II was required to report its entire investment in CityPoint at fair market value. A June 30, 2010 third-party appraisal valued CityPoint at $108 million which resulted in Fund II recording a non-cash gain on bargain purchase of approximately $33.8 million. The Operating Partnership’s share of this gain, net of the noncontrolling interests’ share, totaled $6.3 million.

As a result of the Transaction, the Company changed its method of accounting for CityPoint from the equity method and now consolidates CityPoint in its consolidated financial statements. As CityPoint is currently in the redevelopment stage, there are no revenues or earnings from CityPoint included in the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2010 and 2009.

Discontinued Operations

The Company reports properties held-for-sale and properties sold during the periods as discontinued operations. The results of operations and Statements of Operations of discontinued operations are reflected as a separate component within the accompanying Consolidated Financial Statements for all periods presented.
 
 
8

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4.           ACQUISITIONS AND DISPOSITION OF PROPERTIES AND DISCONTINUED OPERATIONS, continued

Discontinued Operations, continued

There were no properties sold during the nine months ended September 30, 2010. During 2009, the Company sold Blackman Plaza and six of the remaining Fund I investments in 24 Kroger and Safeway supermarket locations. The combined results of operations of the properties classified as discontinued operations are summarized as follows:

Statements Of Operations
 
Three
months
ended
September 30,
   
Nine
months
ended
September 30,
 
(dollars in thousands) 
 
2009
   
2009
 
             
Total revenues
  $ 120     $ 494  
Total expenses
    88       269  
Operating income
    32       225  
Gain on sale of property
 
      5,637  
Income from discontinued operations
    32       5,862  
Income from discontinued operations attributable to noncontrolling interests in subsidiaries
    (1 )     (4,866 )
Income from discontinued operations attributable to Common Shareholders
  $ 31     $ 996  


5.           INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Core Portfolio

Brandywine Portfolio

The Company owns a 22.2% interest in an approximately one million square foot retail portfolio (the “Brandywine Portfolio”) located in Wilmington, Delaware that is accounted for under the equity method.

Crossroads

The Company owns a 49% interest in the Crossroads Joint Venture and Crossroads II (collectively, “Crossroads”), which own a 311,000 square foot shopping center located in White Plains, New York that is accounted for under the equity method.

Opportunity Funds

RCP Venture

During January of 2004, the Company along with Klaff Realty, LP (“Klaff”) and Lubert-Adler Management, Inc., formed an investment group, the RCP Venture, for the purpose of making investments in surplus or underutilized properties owned by retailers. The RCP Venture is neither a single entity nor a specific investment. Any member of this group has the option of participating, or not, in any individual investment and each individual investment has been made on a stand-alone basis through a separate limited liability company (“LLC”). These investments have been made through different investment vehicles with different affiliated and unaffiliated investors and different economics to the Company. The Company has made these investments through its subsidiaries, Mervyns I, Mervyns II and Fund II, (together the “Acadia Investors”), all on a non-recourse basis. Through September 30, 2010, the Acadia Investors have made investments in Mervyns Department Stores (“Mervyns”) and Albertson’s including additional investments in locations that are separate from these original investments (“Add-On Investments”). Additionally, they have invested in Shopko, Marsh and Rex Stores Corporation (collectively “Other RCP Investments”).
 
 
9

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.           INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES, continued

RCP Venture, continued

The Acadia Investors have non-controlling interests in the individual investee LLC’s as follows:

     
Acadia Investors
     
Ownership % in:
   
Acadia Investors
Investee
Underlying
Investment
Investee LLC
Entity
LLC
entity(s)
Mervyns
KLA/Mervyn’s, L.L.C.
Mervyns I and Mervyns II
10.5%
5.8%
Mervyns Add-On investments
KLA/Mervyn’s, L.L.C.
Mervyns I and Mervyns II
10.5%
5.8%
Albertson’s
KLA A Markets, LLC
Mervyns II
18.9%
5.7%
Albertson’s Add-On investments
KLA A Markets, LLC
Mervyns II
20.0%
6.0%
Shopko
KLA-Shopko, LLC
Fund II
20.0%
2.0%
Marsh and Add-On investments
KLA Marsh, LLC
Fund II
20.0%
3.3%
Rex stores
KLAC Rex Venture, LLC
Mervyns II
13.3%
13.3%

The Company accounts for the original investments in Mervyns and Albertson’s under the equity method of accounting as the Company has the ability to exercise significant influence, but does not have financial or operating control.

The Company accounts for the Add-On Investments and Other RCP Investments under the cost method. Due to its minor ownership interest based on the size of the investments as well as the terms of the underlying operating agreements, the Company has no influence over such entities operating and financial policies.

The following table summarizes activity related to the RCP Venture investments from inception through September 30, 2010:

                     
Operating Partnership Share
 
Investment
 
Year Acquired
   
Invested
Capital
and Advances
   
 
Distributions
   
Invested
Capital
and Advances
   
 
Distributions
 
Mervyns
 
2004
    $ 26,058     $ 45,966     $ 4,901     $ 11,251  
Mervyns Add-On investments
  2005/2008       6,517       1,703       1,046       283  
Albertson’s
  2006       20,717       65,969       4,239       13,193  
Albertson’s Add-On investments
  2006/2007       2,412       1,215       387       243  
Shopko
  2006       1,108       1,475       222       295  
Marsh and Add-on investments
  2006/2008       2,667       2,639       533       528  
Rex Stores
  2007       2,701       840       535       168  
            $ 62,180     $ 119,807     $ 11,863     $ 25,961  

Other Opportunity Fund Investments

Fund I Investments

Fund I owned a 50% interest in the Sterling Heights Shopping Center, which was accounted for under the equity method of accounting. During the three months ended September 30, 2009, Fund I recorded an impairment reserve of $3.7 million related to this investment. On March 25, 2010, the Sterling Heights Shopping Center was sold for $2.3 million.  The proceeds from this sale together with the balance of Fund I’s recourse obligation of $0.6 million were used to fully liquidate the outstanding mortgage loan obligation.

Fund II Investments

Fund II had a 24.75% interest in CityPoint, a redevelopment project located in downtown Brooklyn, NY, which was accounted for under the equity method. On June 30, 2010, Fund II acquired the remaining interests in the project from its unaffiliated partner, as discussed in Note 4 and, as a result, now consolidates the CityPoint investment.

Fund III Investments

During June 2010, Fund III, together with an unaffiliated partner, invested in an entity for the purpose of providing management services to owners of self-storage properties, including the 14 locations currently owned through Fund II and Fund III.  This entity was determined to be a variable interest entity for which the Company was determined not to be the primary beneficiary.  As such, the Company accounts for this investment under the equity method.
 
 
10

 

ACADIA REALTY TRUST AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
5.           INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)

Other Opportunity Fund Investments, continued

Summary of Investments in Unconsolidated Affiliates

The following combined/condensed Balance Sheets and Statements of Operations, in each period, summarize the financial information of the Company’s investments in unconsolidated affiliates.

             
(dollars in thousands)
 
September 30,
 2010
   
December 31,
2009
 
Combined/Condensed Balance Sheets
           
Assets:
           
Rental property, net
  $ 133,461     $ 142,690  
Real estate under development
 
      100,346  
Investment in unconsolidated affiliates
    193,421       209,407  
Other assets
    17,385       20,951  
                 
Total assets
  $ 344,267     $ 473,394  
                 
Liabilities and partners’ equity
               
Mortgage note payable
  $ 227,805     $ 258,685  
Other liabilities
    8,215       12,085  
Partners’ equity
    108,247       202,624  
                 
Total liabilities and partners’ equity
  $ 344,267     $ 473,394  
Company’s investment in and advances to
unconsolidated affiliates
  $ 16,095     $ 51,712  
Share of distributions in excess of share of income and investments in unconsolidated
affiliates
  $ 20,802     $ 20,589  
                 

   
Three Months Ended
   
Nine Months Ended
 
(dollars in thousands)
 
September
30,
2010
   
September
30, 2009
   
September
30, 2010
   
September
30, 2009
 
Combined/Condensed Statements of Operations
                       
Total revenues
  $ 7,317     $ 7,130     $ 21,787     $ 22,075  
Operating and other expenses
    2,550       2,019       7,158       6,883  
Interest expense
    3,392       3,480       10,107       10,332  
Equity in (losses) earnings of unconsolidated affiliates
    (681 )     (2,263 )     2,083       (36,527 )
Depreciation and amortization
    1,057       1,732       3,745       3,964  
Loss on sale of property, net
 
   
      (2,957 )     (390 )
Net loss
  $ (363 )   $ (2,364 )   $ (97 )   $ (36,021 )
                                 
Company’s share of net income (loss)
  $ 241     $ (96 )   $ 904     $ (3,160 )
Impairment Reserve
 
      (3,655 )           (3,655 )
Amortization of excess investment
    (98 )     (97 )     (294 )     (291 )
Company’s share of net income (loss)
  $ 143     $ (3,848 )   $ 610     $ (7,106 )
 
 
11

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.           NOTES RECEIVABLE

At September 30, 2010, the Company’s notes receivable, net, consisted of the following:

Description
Effective
interest
rate
 
Maturity date
First
Priority
liens
 
Net carrying
amount
of notes
receivable
 
Extension
options
(dollars in thousands)
               
72nd Street
  20.9%     7/2011 $ 185,000   $ 45,196  
1 x 1 year
Georgetown
  10.2%     11/2010   9,596     8,000  
2 x 1 year
Mezzanine Loan
  14.5%     12/2010
    8,585  
1 x 6 months
Zero coupon Loan
  24.0%     1/2016   166,200     3,153  
Mezzanine Loan
  13.0%     9/2011
    2,980  
First Mortgage Loan
  10.8%     9/2011
    10,000  
Individually less
10% to
 
Demand note
             
  than 3%
  17.5%  
to 1/2017
  106,089     9,686  
Total
                $ 87,600    
 
During September 2010, one of the Company’s Georgetown, Washington D.C. mezzanine investments, which was secured by a portfolio of 18 properties, was fully liquidated. The Company received $40.0 million of principal along with $9.4 million of accrued interest.

7.         DERIVATIVE FINANCIAL INSTRUMENTS

As of September 30, 2010, the Company’s derivative financial instruments consisted of seven interest rate swaps with an aggregate notional value of $77.3 million, which fix interest at rates ranging from 0.5% to 5.1% and mature between October 2010 and November 2012. The Company also has one derivative financial instrument with a notional value of $28.9 million which caps LIBOR at 6% and matures in April 2013. The fair value of the net derivative liability of these instruments, which is included in other liabilities in the Consolidated Balance Sheets, totals $3.4 million and $3.3 million at September 30, 2010 and December 31, 2009, respectively. The notional value does not represent exposure to credit, interest rate or market risks.

These derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on variable rate mortgage debt. Such instruments are reported at the fair value reflected above. As of September 30, 2010 and 2009, unrealized losses totaling $3.4 million, respectively, were reflected in accumulated other comprehensive loss.

As of September 30, 2010 and 2009, no derivatives were designated as fair value hedges, hedges of net investments in foreign operations or considered to be ineffective. Additionally, the Company does not use derivatives for trading or speculative purposes.

8.         MORTGAGE LOANS

The Company completed the following transactions related to mortgage loans and credit facilities during the nine months ended September 30, 2010:

i) During January 2010, the Company closed on a $48.0 million construction loan that bears interest at the greater of (a) LIBOR plus 400 basis points or (b) an interest rate floor of 6.50% which matures on January 12, 2012. As of September 30, 2010, $19.9 million was drawn on this facility.

ii) Extended the Fund II subscription line of credit, which is collateralized by a pledge of investors’ unfunded capital commitments, which matured on March 1, 2010, to March 1, 2011 and adjusted the interest rate from LIBOR plus 250 basis points to LIBOR plus 325 basis points.  In connection with the extension, the Company made an $8.2 million payment on the outstanding $48.2 million line of credit. The line of credit’s maximum capacity was reduced to $40.0 million.

iii) During February of 2010, the Company paid off an outstanding line of credit balance of $2.0 million, which was collateralized by a property and scheduled to mature on March 29, 2010 and terminated the line of credit.

iv) Also during February of 2010, the Company made a $15.0 million payment on an outstanding $30.0 million credit facility collateralized by six properties.

v) During May of 2010, the Company made a $17.0 million draw on the Fund III subscription line of credit. As of September 30, 2010, the total outstanding amount on this line of credit was $156.5 million.
 
 
12

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.         MORTGAGE LOANS, continued

vi) Also during May of 2010, the Company borrowed an additional $2.0 million on an existing mortgage loan collateralized by a property.

vii) During July 2010, the Company amended and extended a $30.0 million loan, collateralized by a Fund II property located on 161st Street in the Bronx, NY. The agreement required a $1.1 million payment on the outstanding principal balance and extended the maturity date to April 1, 2013. The interest rate has been adjusted retroactively to LIBOR plus 400 basis points for the period April 1, 2010 through March 31, 2011, LIBOR plus 550 basis points for the period April 1, 2011 through March 31, 2012, and LIBOR plus 600 basis points for the period April 1, 2012 through March 31, 2013.

viii) During July of 2010, the Company closed on a $20.0 million bond financing that bears interest at a fixed rate of 7.25% that is due November 1, 2042 and has a mandatory put date of November 1, 2014.

ix) During August of 2010, the Company amended and extended the maturity date of a $25.9 million loan that was scheduled to mature during August of 2010. In connection with the release of a portion of the collateral for this loan, the Company was required to pay down the principal by $5.3 million. The amendment provided for a three year extension of the loan maturity date to August 12, 2013 with two one-year extension options.

x) Also during August of 2010, the Company completed an amendment of a $31.7 million construction loan. The servicer of this loan had previously alleged that non-monetary defaults had occurred. The amendment provides for premium-free pre-payment of the loan to the extent that the lender is not in the process of selling the loan. The servicer on behalf of the lender has agreed to dismiss all allegations of default. The loan continues to bear interest at 7.38% and has a maturity date of January 1, 2020.

xi) During September of 2010, the Company amended and extended the maturity date of a $10.5 million loan that was scheduled to mature during September 2010. The amendment required a $0.5 million principal pay down and provided for a one year extension of the loan maturity date to September 1, 2011 with one twelve month extension option and bears interest at LIBOR plus 325 basis points.

xii) During June 2009, the servicer of one of the Company’s loans alleged that a non-monetary default had occurred on a construction loan for $11.5 million collateralized by Atlantic Avenue. The servicer contends that the Company did not substantially complete the improvements in accordance with the required completion date as defined in the loan agreement and, accordingly, did not meet the requirements for the final draw. Subsequent to September 30, 2010, the Company and the servicer on behalf of the lender have reached an agreement to amend the loan. As part of the agreement, the servicer on behalf of the lender has agreed to waive all alleged events of default. The loan continues to bear interest at 7.34% and has a maturity date of January 1, 2020.


9.         CONVERTIBLE NOTES PAYABLE

In December 2006 and January 2007, the Company issued $115.0 million of convertible notes with a fixed interest rate of 3.75% due 2026 (the “Convertible Notes”). The Convertible Notes were issued at par and require interest payments semi-annually in arrears on June 15th and December 15th of each year. The Convertible Notes are unsecured obligations and rank equally with all other unsecured and unsubordinated indebtedness. The Convertible Notes have an effective interest rate of 6.03% giving effect to the accounting treatment required by ASC Topic 470-20 “Debt with Conversion and Other Options”. Holders of the Convertible Notes may require the Company to repurchase the Convertible Notes at par on December 20, 2011, December 15, 2016 and December 15, 2021. The Company deems that the Convertible Notes will mature on December 20, 2011.

The carrying amount of the equity component included in additional paid-in capital totaled $1.3 million at September 30, 2010 and $2.1 million at December 31, 2009. The additional non-cash interest expense recognized in the Consolidated Statements of Income was $0.3 million and $0.2 million for the three months ended September 30, 2010 and 2009, respectively and $0.8 million and $1.0 million for the nine months ended September 30, 2010 and 2009, respectively. The Convertible Notes if-converted value does not exceed its principal amount as of September 30, 2010 and there are no derivative transactions that were entered into in connection with the issuance of the Convertible Notes.

Through September 30, 2010, the Company has purchased $65.0 million in face amount of its Convertible Notes at an average discount of approximately 19%. The outstanding Convertible Notes face amount as of September 30, 2010 was $50.0 million.
 
 
13

 

ACADIA REALTY TRUST AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.         FAIR VALUE MEASUREMENTS

The FASB’s fair value measurements and disclosure guidance requires the valuation of certain of the Company’s financial assets and liabilities, based on a three-level fair value hierarchy. Market participant assumptions obtained from sources independent of the Company are observable inputs that are classified within Levels 1 and 2 of the hierarchy, and the Company’s own assumptions about market participant assumptions are unobservable inputs classified within Level 3 of the hierarchy.

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of September 30, 2010:

(dollars in thousands)
 
Level 1
   
Level 2
   
Level 3
 
Liabilities
                 
Derivative financial instruments (Note 7)
  $     $ 3,427     $  

Financial Instruments

Certain of the Company’s assets and liabilities meet the definition of financial instruments. Except as disclosed below, the carrying amounts of these financial instruments approximates their fair value.

The Company has determined the estimated fair values of the following financial instruments by discounting future cash flows utilizing a discount rate equivalent to the rate at which similar financial instruments would be originated at the reporting date:


   
September 30, 2010
   
December 31, 2009
 
         
Estimated
         
Estimated
 
   
Carrying
   
Fair
   
Carrying
   
Fair
 
(dollars in thousands)
 
Amount
   
Value
   
Amount
   
Value
 
                         
Notes Receivable and Preferred Equity Investments
  $ 87,600     $ 87,592     $ 125,221     $ 126,403  
                                 
Mortgage Notes Payable and Convertible Notes Payable
  $ 832,151     $ 844,718     $ 780,197     $ 751,043  

11.         RELATED PARTY TRANSACTIONS

During February 2010, Klaff converted all 250,000 of its Restricted Common OP Units into 250,000 Common Shares.

The Company earns asset management, leasing, disposition, development and construction fees for providing services to an existing portfolio of retail properties and/or leasehold interests in which Klaff has an interest. Fees earned by the Company in connection with this portfolio were $0.1 million and $0.04 million for the three months ended September 30, 2010 and 2009, respectively, and $0.2 million and $0.3 million for the nine months ended September 30, 2010 and 2009, respectively.

The Company earned property management fees, legal and leasing fees from the Brandywine portfolio totaling $0.2 million and $0.1 million for the three months ended September 30, 2010 and September 30, 2009, respectively, and $0.6 million and $0.5 million for the nine months ended September 30, 2010 and 2009, respectively.

Lee Wielansky, the Lead Trustee of the Company, was paid a consulting fee of $25,000 for each of the three months ended September 30, 2010 and 2009, and $75,000 for each of the nine months ended September 30, 2010 and 2009.

12.         SEGMENT REPORTING

The Company has five reportable segments: Core Portfolio, Opportunity Funds, Self-Storage Portfolio, Notes Receivable and Other.  “Notes Receivable” consists of the Company’s notes receivable and preferred equity investment and related interest income.  “Other” consists primarily of management fees and interest income. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates property performance primarily based on net operating income before depreciation, amortization and certain nonrecurring items. Investments in the Core Portfolio are typically held long-term. Given the contemplated finite life of the Opportunity Funds, these investments are typically held for shorter terms. Fees earned by the Company as the general partner/member of the Opportunity Funds are eliminated in the Company’s consolidated financial statements. The following tables set forth certain segment information for the Company, reclassified for discontinued operations, as of and for the three and nine months ended September 30, 2010 and 2009 (does not include unconsolidated affiliates):
 
 
14

 
 
ACADIA REALTY TRUST AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
12.         SEGMENT REPORTING (continued)
Three Months Ended September 30, 2010
(dollars in thousands)
 
Core
Portfolio
   
Opportunity
Funds
   
Self-
Storage
Portfolio
   
Notes
Receivable
   
Other
   
Amounts
Eliminated
in
Consolidation
   
Total
 
Revenues
  $ 15,243     $ 11,782     $ 6,703     $ 5,206     $ 5,441     $ (5,114 )   $ 39,261  
Property operating expenses
and real estate taxes
    4,617       3,841       3,942      
     
      (374 )     12,026  
Other expenses
    5,910       3,266       19      
     
      (3,878 )     5,317  
Income before depreciation
and amortization
  $ 4,716     $ 4,675     $ 2,742     $ 5,206     $ 5,441     $ (862 )   $ 21,918  
Depreciation and amortization
  $ 4,342     $ 4,547     $ 1,591    
    $
    $ (139 )   $ 10,341  
Interest and other finance expense
  $ 4,307     $ 3,381     $ 1,141     $
    $
   
    $ 8,829  
Real estate at cost
  $ 480,137     $ 695,870     $ 209,956     $
    $
    $ (12,869 )   $ 1,373,094  
Total assets
  $ 593,151     $ 736,523     $ 195,044     $ 87,600     $
    $ (121,570 )   $ 1,490,748  
Investment in real estate
  $ 1,194     $ 23,090     $ 187     $
    $
    $ (853 )   $ 23,618  
Reconciliation to net income and net income attributable to Common Shareholders
                         
Net property income before depreciation and amortization
    $ 21,918  
Other interest income
      175  
Depreciation and amortization
      (10,341 )
Equity in earnings of unconsolidated affiliates
      143  
Interest and other finance expense
      (8,829 )
Income tax provision
      (785 )
Net income
      2,281  
Net loss attributable to noncontrolling interests
      2,836  
Net income attributable to Common Shareholders
    $ 5,117  

Three Months Ended September 30, 2009
(dollars in thousands)
 
Core
Portfolio
   
Opportunity
Funds
   
Self-
Storage
Portfolio
   
Notes
Receivable
   
Other
   
Amounts
Eliminated
in
Consolidation
   
Total
 
Revenues
  $ 19,449     $ 11,697     $ 2,581     $ 4,908     $ 5,218     $ (4,958 )   $ 38,895  
Property operating expenses
and real estate taxes
    4,640       4,047       2,585    
   
      (301 )     10,971  
Other expenses
    5,875       2,551    
   
   
      (3,147 )     5,279  
Income (loss) before depreciation
and amortization
  $ 8,934     $ 5,099     $ (4 )   $ 4,908     $ 5,218     $ (1,510 )   $ 22,645  
Depreciation and amortization
  $ 4,975     $ 4,509     $ 1,110     $
    $
    $ (217 )   $ 10,377  
Interest and other finance expense
  $ 4,505     $ 2,022     $ 1,802     $
    $
   
    $ 8,329  
Real estate at cost
  $ 473,667     $ 521,380     $ 208,219     $
    $
    $ (10,760 )   $ 1,192,506  
Total assets
  $ 566,669     $ 612,775     $ 199,194     $ 120,001     $
    $ (101,272 )   $ 1,397,367  
Investment in real estate
  $ 1,101     $ 5,393     $ 1,566     $
    $
    $ (2,951 )   $ 5,109  
Reconciliation to net income and net income attributable to Common Shareholders
 
Net property income before depreciation and amortization
  $ 22,645  
Other interest income
    161  
Depreciation and amortization
    (10,377 )
Equity in (losses) of unconsolidated affiliates
    (193 )
Impairment of investment in unconsolidated affiliate
    (3,655 )
Interest and other finance expense
    (8,329 )
Gain on debt extinguishment
    11  
Income tax provision
    273