Good day, ladies and gentlemen and welcome to the Acadia Realty Trust First Quarter 2017 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. I would now like to introduce your host for today's program, Christian Compusano, Analyst and [indiscernible]. Please go ahead.

Good afternoon and thank you for joining us for the first quarter 2017 Acadia Realty Trust earnings conference call. Before we begin, please be aware that statements made during the call that are not historical maybe 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 15, 2017 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. President and Chief Executive Officer, Ken Bernstein, will kick off today's management remarks with a market overview and discussion of the company's portfolio followed by Amy Racanello, Senior Vice President, Capital Markets and Investments who will discuss the company's fund platform. Then Chief Financial Officer, John Gottfried, will conclude today's prepared remarks with the review of company's earnings, operating results and balance sheet. Once done, we can open the call 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 inserting yourself into the queue and we'll answer if time permits. Now, it is my pleasure to turn over the call to Ken.

Thank you, Christian, great job. Good afternoon. As is generally the case with first quarter calls, it's in in less than two months since our year-end earnings call so there's less to update than in the other quarters. That being said, there has been a flood of news about the – retailing and retail real estate and while there is reason for legitimate concern there is too much –going on. So before we dive into our first quarter result, I'd like to provide some thoughts as to what we're seeing and how we're positioning ourselves. We're currently experiencing a convergence of typical head-wins with the longer term secular shift as a result of technology. And I think it's important to separate these two different components; on the typical side and a strong tower, mild winter food deflation or changes in style are all contributors to a flood of negative results for our broad range of our retailers. Now some of these challenges are simply the result of once strong retailers losing their edge many over-extended that others just under-delivered. Others are being driven by short term financial issues. In some instances, the cyclical headwinds have been then accelerated further by continued growth of e-commerce but retailing has always been our winning and it always been cyclical and if we as landlords choose our locations wisely and structure our leases thoughtfully then we should be fairly well insulated from these cyclical shifts. In terms of the longer term secular trends there's no. I doubt that retailing and shopping patterns are evolving; technology is a critical factor driving these changes in my view in two important ways. First is the continued growth in e-commerce and then there's the increased price transparency as a result of technology. In terms of e-commerce, the convenience…

Thanks, Ken. Today I'll review the study and important progress that we continue to make on our fund platforms V VI VII and VIII. Beginning with acquisitions: we continue to employ a barbell approach to investing our fund commitment. On one hand, we continue to pursue opportunities to acquire well located assets in key markets where our team can add value reset and redevelopment. A recent example is 717, North Michigan Avenue in Chicago which fund for acquired at the end of last year. On the other hand we are selectively acquiring high yielding stable shopping centers in non-primary market where we can do so at attractive pricing On the high yield front during the first quarter, fund IV acquired Lincoln place for thirty five million. This 272,000 square foot shopping center anchored by Kohl's, Marshalls and Ross Dress for Less is located within the St Louis MSA. The current lease rate exceeds 90% and was minimal reset and national leverage. This investment should generate attractive mid-teens cash-on-cash returns throughout the fund's hold period. Given in retailer in headwinds and headlines our high yield investments are certainly a contrarian call. However, you should know that we are selecting needles from a haystack carefully reviewing a long list of items including rents, co-tenancies and tenant sales and our team has a proven track record acquiring, redeveloping, operating and selling these types of Shopping Centers. The acquisition of Lincoln place successfully closes our Fund IV and looking ahead given last year's successful fund raise we have approximately 1.5 billion of dry powder available on a leverage basis in Fund V to deploy into new opportunistic and value add investment. We like having this much discretionary capital on call because it enables us to remain highly opportunistic especially now given ongoing disruption in…

Thank you, Amy and good afternoon. I will first start-off by highlighting our quarterly operating metrics which performed solidly and in line with our expectations. Starting with our earnings; our portfolio continues to perform in-line with our expectations with FFO of $0.40 per share. The $0.40 included profits of approximately $0.03 from the anticipated monetization of one of our structured finance investments along with net promoting income that we earn from a profitable disposition in Fund III. We continue to reaffirm $10 million of remaining net promote income from Fund III which as previously discussed we expect to continue realizing in 2018 and beyond. Furthermore, as you just heard from Amy, we continue to recognize sizable gains in Fund IV which moves us closer to being in the promoted position within the next few years as we continue to profitably return capital to our Fund IV investors. Our earning guidance does not anticipate the recognition of any additional promoting come direct 2017. The impact to our quarterly earnings and annual guidance from the recently announced store closings and bankruptcies was nominal, at a few hundred thousand dollars which was in-line with our underlying assumptions and our quarterly and annual guidance. Our first quarter FFO reflected the full impact of our 2016 acquisitions. These acquisitions are continuing to perform in-line with the prior guidance of $0.06 of annual accretion which equates to roughly 5% of our in place core FFO. We continue to reaffirm our annual guidance of $1.44 to $1.54 for the full year 2017 which equates to $0.35 to $0.38 per quarter. This could vary based upon the timing and amount of acquisitions, dispositions and structured financing activities within our core and fund businesses. Lastly on earnings, as it relates to the balance of the year following the projected…

[Operator Instructions] Our first question comes from the line of Paul [ph] from BMO Capital. Your question please?

Thanks. Ken you touched on very briefly on supermarkets and some of the challenges facing them. I was wondering if you could drilldown a little -- do you like supermarkets over the intermediate or longer term in terms of investment by AKR?

I fall like most of our investments, it's going be very location specific. I do not believe or more importantly when I talk to our supermarket, operators, as well as co-tenants. I don't think they believe that there is any specific safe haven that they are somehow immune to some of the challenges that other retailers are facing; the good news is many of them are very focused on how that's going to play out. So the bottom-line is if you have the right supermarket in the right location that is probably good real estate and your co-tenants things probably do well. If you have a diverse shopping center where supermarket is one of many tenants and we have several of those; especially in the fun. Those are probably fine but you know the 20 century thought that somehow every supermarket anchored shopping head center is safe. That's not what our retailers are telling us

And secondly I was wondering if you could give us some idea of how we should think about the urban street portfolio overtime in terms of market exposure, with the opportunistic cores or their you know kind of goals in terms of exposure to certain markets?

Well, for the near-term I think we should stick with the markets that we know well. There is as I said over the years a dump pack to enter any new market; that doesn't mean that you can't blow it around the corner five where in D.C., New York, Boston, Chicago, San Francisco and I think that we could easily double the size of our portfolio without adding a new market. If there are opportunities or changes in circumstances; then I would certainly welcome a handful of other opportunities but what you should expect just as we've doubled and tripled the size of our portfolio over the last five six years and you should expect if you look forward five six years from now you will see similar growth and similar profile with the focus that as retailing evolves. You're going to see retailers gravitating toward these critical markets and we should onus.

Okay, great. Thanks very much.

Thank you. Our next question comes from the line of Craig Schmidt from Bank of America. Your question please.

Good afternoon. Are you seeing growing vacancy surrounding your urban high street retail assets and how do you make sure that you give people trade enough your assets and that you use your assets to trade up into others?

And by the way everyone thinks their assets are perfect but there is always I suppose a slightly better corner etcetera. One of the keys Craig, counted diverse portfolio and that is in general high quality and if we do that we are more likely to be net winners than losers. But there are certainly examples where retailers has said to us, not that they're weaving necessarily us but you know what there's another corner or there's another spot that we would prefer to be in and I think we need to recognize that, and need to recognize as good as our portfolio is there may be those instances, but when you look at our portfolio, when you look at its concentration on key streets like Russia and Walton, we could not get past our neighbors did, that's okay, we expanded. When you look at what we're doing on quark [ph] in diversity in Chicago, we didn't get Nordstrom Rack that's okay, we've got TJ Maxx. So as long as we're winning more and as long as we continue to Curate a portfolio and that is position to win more of the discount there's more of the traditional successful retailers, as well as the screens to stores, as long as we have that kind of space that Warby Parker wants, that Bonobos wants, that the whole next generation of those type of retailers want, then we will win, and so far that's how it feels like it's playing out.

Okay, great. And then just is there any advantage here in waiting to acquire some of the more options to cash just given the retail head winds and the retail headline, is there might be -- maybe advantage in holding off when there's a little bit more blood in the water.

Maybe, even use as Amy reiterated, we recognize this is contrary and she also mentioned that we have yet to put any of fun sides to work, contrary and by definition means lonely. And we are catching falling knives, so we need to be careful about that, however, we also are small enough that we can pick up by asset and get this right I think what you will see is we're being cautious, we're being careful. But there are dislocations in the market right now that have nothing to do with the underlying fundamentals at the asset level, where you can buy profitable stores in good locations, where at best we can tell in our conversations with our retailers these stores are slated to be profitable for them years to come. And you have the opportunity to buy those because of that headline that you're reading or because none traded rethink yet to reload, or because the market issues. Then it's incumbent on us to do that, be a little early, our stakeholders understand that, be a little patient as long as we're disciplined, as long as we're talking about our underwriting, we've been at this for a couple decades and we will get it right.

Okay, thank you.

Thank you. Our next question comes from the line of Christine McElroy with Citi; your question please.

Hi. Good afternoon. I'm just a follow up on Craig's last questions, just for that higher yield opportunistic staff that you're buying in the funds, there's been a lot of talk about how much power center [indiscernible] diversion versus centers for the grocery component, the center you bought in March is more of a power center that you have another contract on it for earlier but are you seeing more opportunity in that category and do you think that maybe power centers are maybe being mispriced in an environment, or you don't -- you don't necessarily see grocers as a safe haven.

Yet so just because you don't want something doesn't mean you like something else more, but if and when can but what we have articulated is roughly a 400 basis points bred from our borrowing costs, and remember the benefit of the fund structure high risk, high return, more leverage about two-thirds leverage to achieve that return. Where we can borrow at 3.5 to 4 and by 7.5 to 8 and if you're borrowing at 4.5 then we need to raise it up and where that cash flow is clean meaning dividend-able. If we can get a mid-teens return because of a widening of the spread of power versus supermarket, we're frankly power versus other alternative debt instruments that mid-teens return strikes me as pretty compelling, the devil's in the detail though, so one bankruptcy takes a lot of fun out of that dividend. And we do struggle with where might this all settle out. If we believe that the underlying real estate and the retailers are fundamentally sound, and are not going to get this into mediated in their entirety and if the cash flow can hold, doesn't have to grow a lot, if we can hold then it's thesis consistent. What I would caution you is and we've mention needle in a haystack I have been disappointed with how many asset don't withstand that general scrutiny, so we're not going to do assets just because we have some forecast of volume, will buy them when they make sense, we recognize that there's been this dislocation. It's been more of a private market dislocation that strikes me than public, but if it's there will do it and if it's not will find other things.

Okay. And you've talked about a lot of sort of overgeneralization, have you seen a material change in how retailers are approaching leasing flagship given the balance of attention and costs and just that added pressure from shareholders to improve margins, there's been a lot of noise around sort of the total lease avenue which is an extreme example but its what's generating headlines around.

Yes, so there are a host of issues going on and I think we will only have a clear understanding of what made sense and what was silly, a year or two from now some of it is public shareholders, other instances it's private equity, and there are accounting reasons that in some instances it makes sense to close a store to get it out of your ongoing forward looking EBITDA. Even if it makes no economic sense so that's just silly. But in general retailers and when we say retailers it's a wide variety of occupants, more often than not what we're finding is that those who are the most aggressive today control their brand, they control their pricing, they control how they interact with their customer and they understand and know that having an exciting physical presence in certain key markets, not everywhere in the country, in certain key markets is critical if you look at Apple's most recent or what they're going to be announcing in doing, it's very exciting and it's absolutely about great physical presence. So we're seeing more and more of those and we are going to catch a fair share of them.

Thank you.

Thanks you, our next question comes from the line of Todd Thomas from KeyBanc Capital; your question please.

Hi, thanks. Ken, you mentioned that you know retailers are using some of the vacancy to make relocation upgrades and you use SoHo as an example, sounds like some shuffling around so does the vacancy market wide linger for a period of time before being absorbed, is that the expectation or are you starting to see a stabilization and some of sort of absorption taking place and then what is your read on rants as you know look ahead to next 6 to 12 months in some of these markets.

So if you opt out of Asians and the team we walk the whole last week. First observation is there's no lack of foot traffic and so we can blame it on the dollar and the weather but you can't blame it on foot traffic. The other observation is that secondary streets not Prince not Spring [ph] that aspired to get to primary ramp they're going to struggle for a while. But the key streets where it appears visually there's a lot of vacancy as we walk with the team we kept hearing someone say was moving from down the block there over here and there seems to be enough momentum, that while when you walk around it feels like there's plenty of stores closed, most of them are either spoken for, or secondary locations, or there is a subset of ownership that paid peak prices underwrote Peak-Peak [ph] grants can have very little near term motivation to do anything and so those may sit for a while. So let's see over the next 12 months how it shakes out but I think with confidence you're going to see a host of retailers reemerge either from existing locations or coming in, because this is creating an interesting opportunity in a market that today now is much more interesting for the retailers and then 2015 when rents across the board were just growing too fast.

Okay. And then today, as you think about today as the -- as a number of potential tenants that you're talking to about a specific store or space in the street in urban retail portfolio has that decreased constant or even increased, and then how does that demand in the street in urban retail for folio compare to the suburban portfolio. What's happened to the suburban portfolio I guess in the same manner.

So in two somewhat different conversations where in either case Sports [ph] Authority doesn't seem to be returning our phone calls for urban or suburban. And there are a bunch of retailers who are for a wide variety of reasons are sidelined. On That's suburban side thankfully, TJ Maxx is continuing to be disciplined but open new stores, and there's five or six other retailers behind them that also are doing a solid job on that front, we're getting our share of that. And then TJ showing up on the urban side I think is really important as well. The [46:57] space is going through some very difficult times and so there are fewer apparel retailers showing up from Acadia perspective I'm frankly fine with that, we have been more about live work play, we have been as much about Trader Joe's as we have been about any given apparel, but there are clearly fewer apparel. And let's -- let that shakeout occur over the next year or two and will be some exciting new concepts coming in at the right time. And then on the flagship front; I actually think we're starting to see some more new interesting ideas that are going to make 2017 probably if not 2018 a net positive.

Okay. Thank you.

Thank you, our next question comes from the line of Michael Mueller from J.P. Morgan. Your question please.

Hi, I guess Ken, given your comments at the beginning about seem less buyers and less product on the market most buyers out there, curious as to where you think the clearing cap rates are today for the types of properties that you buy for your core portfolio relative to six months ago, do you think they've moved significantly.

It's always been an interesting dynamic when you turn to the sellers of their brokers, and you say but my stock price has moved downwards and they say well, we don't care. So if there are other bidders showing up by the Sabran [ph] etcetera then the market clears. There has been enough of a slowdown and Acadia is not alone in the repricing on the public side, there's been enough of a slowdown and that sellers are saying don't run away so fast. Sellers are saying certainty execution matters and we'll be patient. Let's see how this plays out, I said in the past that the read market has correctly predicted nine of the last five real estate correction, I don't know how this shakes out I would keep your eye on the 10 year treasury, which compared to last July may feel high, and yet still below 2.5% for a lot of debt oriented buyers buying high quality iconic real estate at 100 to 200 basis points north of the 10 year or whatever other debt instruments they're choosing to think about especially on a global basis, there's still a fair amount of capital there from that perspective. Want some of the noise around where our cash flows going settle we'll see where this settles out.

And just one other one. For 9,000 square feet of recapture space you talked about for 2017, you said a third is done. So for the for the remaining two-thirds that it sounds like it's happening soon, can put a color on what sort of space that is and where.

This is John. So they're going to talk about the balance of that is going to happen in Q2. And it's -- it's kind of spread throughout our portfolio, but we're getting probably I'd say that it's on a [indiscernible] basis so it's exact numbers, but split pretty evenly between suburban and end street and urban obviously that street urbans are higher, but probably split in between those two.

Got it, okay that's helpful, thank you.

Thank you. Our next question comes a line of Floris van Dijkum from Boenning; your question please.

Great, thank you guys. In the seven projects you guys cited in your last call any sort of updates you can give people at this point or is it still too early in terms of your projections and your -- and who you might be getting for example in D.C or at the [indiscernible] space and Walton Street.

It is still just slightly early on some of those at the risk of repeating what we talked about on the last call the lululemon expansion is well underway, John mentioned the densification in San Francisco that's further out, that would be kind of a year away in terms of detail, in street I think on the next call we'll give you absolute clarity on lease assigned so it's just we want the tenants to get their ducks in a row. And then there's a handful of others John, I don't know if there are any others but we try to get as much color on the last call that was only a couple months ago so.

That's right, I think that's where we're at on progression, Floris.

Okay. And in terms of the -- I guess the CapEx you mentioned something about a $60 million outlay is that -- can you relate back to how that relates to these seven projects and maybe where most of the book of capital we expect to see there.

Yes, absolutely Floris, so I think it's going to be a bit of bulk of that is going to be really between two projects which have been going to be city center as well Clarke & Diversey which is a complete -- in Chicago. So I would say they're comprised of all those folks at the dollars.

And it's worth noting Floris, that when we talk about the kind of growth we're going to be able to drive, we do not have to come to you guys for more money to need less than $100 million to execute this kind of growth, speaks to both the asset, but also to our fund structure where most of our heavy lifting, most of our capital intensive investments, we are leveraging off of our institutional capital so that we're not overly beholden to the public markets given the fluctuations that can occur there.

Thanks.

Our next question is a follow-up from the line a Paul [ph] from BMO Capital. Your question, please.

Thanks. Just briefly you mentioned a little bit about the City Point, I was wondering when we might hear a little bit more on the ground floor, a small shop of leasing and it's now a good time to be hitting the market given there is kind of had been slow of local market conditions.

Sure. The anchors are doing well, Alamo [ph] Jack House has become a great addition to this city's entertainment option. As we talked about we're real excited that [indiscernible] market will be opening shortly; that as you recall is about 40 vendors ranging from [indiscernible]. And then right now we have the high cost problem of lots of construction on Gold Street; so Gold Street we think will be a key frontage for our project right now including the third tower at City Point which is being developed by Estelle [ph], there is three residential buildings under construction and office building is planned and the upcoming will be at Square Park. So long-term, great; shorter term a little disruption on our key frontage but we do think this is a good time to be curating the right collection of retailers on Prince Street and you should expect to be hearing additional information on the next few calls.

Okay, great. Thank you.

Thank you. This does conclude the question-and-answer session of today's program. I'd like to hand the program back to Ken Bernstein for any further remarks.

I'd like to thank everyone for taking the time and we will speak to you next quarter.