Thank you for standing by, and welcome to the Acadia Realty Trust Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, John Forster, Property Accountant. Please go ahead, sir.

Good afternoon, and thank you for joining us for the Second Quarter 2025 Acadia Realty Trust Earnings Conference Call. My name is John Forster, and I am a property accountant in our accounting department. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements. Due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call, July 30, 2025, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. [Operator Instructions]. Now it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

Thank you, John. Great job. Welcome, everyone. Notwithstanding continued noise and uncertainty around the broader economy last quarter, we saw continued momentum across all of the 3 key drivers of our business. The first driver is delivering superior internal growth through our highly differentiated core portfolio dominated by street retail. Last quarter's leasing activity puts us well on our way to a fourth year of delivering annual same-store growth in excess of 5%, and as A.J. Levine will discuss, we are making important progress on our 2026 and our 2027 goals as well. Then the second driver is adding to our internal growth with accretive and complementary external growth, both on balance sheet and through our investment management platform. Last quarter, we completed nearly $160 million of acquisitions and over the last 12 months, a total of $860 million in acquisitions, including nearly $0.5 billion of street retail. Reggie Livingston will walk through our transactions closed last quarter and the opportunities we are seeing going forward. Then the third driver is maintaining a solid balance sheet with the liquidity and the flexibility to drive both internal and external growth. John Gottfried will walk through our balance sheet metrics and successful refinancings last quarter and how this positions us for growth going forward. So taking a step back, as we look at the current operating environment, we seem to be in an ongoing tug of war with fear of tariff- induced stagflation on one side and then surprising resilience on part of the consumer and the overall economy on the other. So far, thankfully, team resilience seems to be winning. That is certainly what we are seeing as we look at our quarterly results. Resilience is showing up both in continued strong tenant demand for space as well as retailers' performance…

Thanks, Ken. Good afternoon, everyone. So first, let me start by echoing Ken's comments. Our shopper, especially the higher income street shopper, continues to show no signs of slowing down. For anybody wondering how street retail is holding up, I would encourage you to visit our tenant [ Doan ] on Bleecker Street in the West Village of Manhattan. What you'll see is a line that stretches out the door and down the street and a 20 minute wait to use a dressing room. So Doan on Bleecker is just one example, but a similar display can be seen at Brandy Melville on the Gold Coast of Chicago, Skims on M Street in D.C., Sephora in Williamsburg in Brooklyn or at any of the advanced contemporary tenants at our Green Street Collection in SoHo. This is a phenomenon that you will only see along our high-growth streets. And it's why our tenants remain in the game, off the sidelines and continue to compete for space. But this isn't just anecdotal. We hear it directly from our tenants, and we continue to see it reflected in reported sales. Across our mission-critical streets, our shoppers continue to show up in full force and reported comp sales have increased double digits, both quarter-over-quarter and year-over-year. Compared to what we're seeing in our suburbs, the sales growth we're seeing in our streets is staggering with year-over-year growth on the majority of our streets well north of 20%. And with strong sales and healthy occupancy ratios, our tenants remain focused on long- term growth. And as a result, we continue to see leasing momentum that's ahead of the pace we've seen over the past several quarters and year-to-date sits at 2x the volume we achieved at this time last year. So to give you a…

Thanks, A.J. Good afternoon, everyone. I'd like to share specifics around our Q2 acquisition activity and provide insight on how we're positioning the company for continued growth. As noted in our earnings release, we completed nearly $160 million of acquisitions in the quarter. And these acquisitions continue our focus on the core pillars of our external growth business, FFO and NAV accretion, strong CAGR and increasing our concentration in key markets. And Q2 was another quarter of delivering on that mix. So let's discuss those deals in more detail. We closed over $100 million of deals along the key retail corridor in Williamsburg, Brooklyn, North 6th Street. The buildings, including 70, 93, 95, 97 and 107 North 6th Street are on the most prime blocks along the corridor. And the tenants include great contemporary brands such as Lululemon, Abercrombie, [ MAJOURI, ] On Running, Birkenstock and Patagonia. And while this concentration of names in 3 blocks is great for our consumers, it also benefits our shareholders. In an 8 month time period, we have purchased 10 storefronts along North 6th, laying the foundation for the benefits of that scale to drop to the bottom line in the form of higher rents, as Ken and A.J. have discussed. Also, in the vibrant Flatiron and Union Square submarket in Manhattan, we acquired 85 5th Avenue for $47 million. This asset is on a key corner in the market and leased to a Fortune 100 company. It marks our fourth storefront in this market where we see a favorable supply-demand dynamic that should continue to drive rent growth. So where does this leave us through the first half of the year? We've acquired $420 million of assets, delivering accretion consistent with our $0.01 per $200 million target with an attractive going-in GAAP yield…

Thanks, Reggie, and good afternoon. We had another strong quarter and are continuing to see stability along with positive momentum building across our street retail portfolio. And the aspects of our business that continue to excite us include the continuation of NOI growth in excess of 5% for the next several years, the strength and liquidity of our balance sheet; and lastly, our ability to add external growth, whether that be on balance sheet or through our investment management platform. In terms of growth, we remain on track to deliver 5% to 6% same-store NOI growth this year. And this growth is dropping to our bottom line with projected year-over-year NAREIT FFO growth of about 10% at the midpoint of our guidance. Secondly, our balance sheet is rock solid. We have over $0.5 billion of liquidity, along with the financial flexibility to accretively fund and grow our business. And lastly, external growth. As Reggie highlighted, our pipeline of actionable opportunities is full, and we have various avenues to fund it, whether it be with on-balance sheet dollars or with institutional capital through our investment management platform. And before diving into the quarter, I want to spend a moment to reiterate and put some data behind the continued leasing momentum that we are seeing, particularly within our street and urban markets. At our proportionate share, we executed approximately $7.5 million of new leases in the first half of 2025. And just to put that in context, this equates to approximately 3.5% of annualized minimum rents and is up nearly 100% over the $3.8 million of leases that we executed during the comparable period in 2024. And it's also worth highlighting that this momentum is coming from our street and urban portfolio, with approximately 85% of the executed leases in 2025 coming…

[Operator Instructions] Our first question comes from the line of Linda Tsai from Jefferies.

Could you speak to the disconnect between the performance in your stock price and the underlying health of your portfolio? It seems like a reason Acadia's stock has underperformed is due to tariff concerns and your tenants being more exposed to discretionary spending. What do you think the market is missing? And what's the catalyst that could spur better stock performance?

Yes. Well, Linda, certainly, when Liberation Day was announced and there were concerns of the impact of tariffs on the economy and the consumer. I'd say conventional wisdom was that we were more likely than not heading to a recession, more likely than not facing a period of stagflation. What we have seen now based on our leasing activities, based on conversations that we've had with our retailers, based, frankly, on the shifting views of the economist is that we look more likely than not we're going to avoid those serious headwinds. So point number one is that our leasing is holding up just fine. Point number two is, I think the market is underestimating the secular tailwinds that I discussed in the prepared remarks, but just to repeat them, the secular tailwinds that we are experiencing in street retail specifically. And that is the migration from wholesale, the migration out of department stores, and into DTC, meaning our retailers are recognizing it is mission-critical that they have these locations. It helps that the consumer is continuing to show up. It helps that these stores are very profitable, but they are also looking over the next 3, 5, 10 years and realizing they need to be on the corridors that A.J. was talking about, that Reggie was discussing. They need to have these mission-critical locations. And so yes, it has been a volatile 6 months due to all of that noise, but I think the proof is in our leasing fundamentals.

And then maybe related to that, my second question is, could you compare and contrast what landlord scale looks like in a suburban shopping center portfolio versus street retail? Like what's the tenant negotiating power for consumer drive dominating a suburban market within a gateway MSA versus, say, owning 10 storefronts in Williamsburg, Brooklyn.

Yes. And this has been one of the fascinating eye-opening experience that I've seen over the last year or 2 after having been in the open-air industry for decades. Traditional open-air suburban shopping centers finding the benefits of scale beyond simply just reducing G&A as a percentage of revenue as we got larger, finding those benefits vis-a-vis our retailers, the ability to drive more rents, drive more NOI, that has always been elusive. And when I compare notes with my peers, public or private, we just have not been able to see significant economies of scale, positive leverage, things like that. Conversely, what we're beginning to see in street retail is significant benefits. Within any given corridor, what A.J. estimates is where we own enough stores in a given corridor, given our relationships with the retailers, given our ability to curate, we're able to get approximately 10% more rent than if we owned just one building or if we were not national in scale. Then you add to that benefit, the national scale that we have with these retailers. And we are regularly in front of virtually all of our retailers and the C-suites of these retailers. And it's much more of a partnership than what we have experienced in the more traditional open-air side. Now it used to be that way in open-air if you were a preferred developer, but now that new development is really not a driving factor for our retailers, we're just not getting -- seeing that benefit. Conversely, for street retail, we're seeing it within the given quarters. We're seeing it nationally on the leasing side. And then we're also seeing it on the acquisition side. And by that, I mean we are the first call or a buyer of choice, bidder of choice for street retail because we have the proven track record, because we have the capital, because we have the know-how. You add that up, and it's a pretty exciting time to be focused on building out this platform, which is already well on its way, but we think we will see continued economies of scale, continued benefits of scale as that plays out.

And our next question comes from the line of Craig Mailman from Citi.

This is Sydney McEntee on for Craig. So there were a couple of acquisitions on North 6th Street in Williamsburg during the quarter, and Acadia now controls about $110 million in that submarket. Could you just talk a little bit more about the mark-to-market opportunities for those acquisitions in the market as a whole?

Sure. Reg, do you want to start and then A.J. chime in?

Sure. So one of the things that we focus on when we think from a GAAP deal perspective is, are there mark-to-market opportunities. And so when we talk to our tenants, and we do this in conjunction with A.J. from an acquisition standpoint and find out when the actual leases were signed, how the tenants are performed, we think there's running room ahead of us from a mark-to-market standpoint. Specifics, I won't get into, but A.J., you can add to some of that generally speaking.

Yes. Look, Reggie, your team has done a great job identifying under market leases. The challenge for my team, of course, is now we got to get to work prying them loose. But I can tell you, in a market like Williamsburg, similar to what we've seen on Armitage, we're seeing 20-plus percent mark-to-market opportunities in the majority of our streets. But that's not unique to Williamsburg. That's true for Bleecker and West Village, Armitage, like I said, SoHo, Melrose Place, Henderson Avenue, each of those because of the performance over the last year, because of the strength of tenant demand easily has double-digit upwards of 20%, 25% mark-to- market.

And then I'll just to finish on that, where we can control a meaningful portion of a given street, and it doesn't mean a majority. It generally means about 30%, which we are now on North 6th, where we can have that meaningful impact, we then find we can benefit and drive rents and performance for our retailers even higher because of curation, putting in the right retailers, we can increase sales because of being able to move faster if a tenant wants to be larger or smaller. If they have a new concept, we're in front of them, so we know what we can do. And I think what you'll see play out on North 6th, as you've seen in Armitage, as you've seen on M Street is that kind of benefits of scale.

And then one more maybe along that vein. Have you seen any meaningful changes in the transaction market in terms of either the competitive landscape for these street retail assets or in terms of sellers coming to the market?

Yes. I think for April 2, Liberation Day, there was a bit of a pullback. I think Ken alluded to that, a bit of a pullback on the street retail side from sellers. But the fundamentals that Ken and A.J. have talked about aren't a secret. So we're starting to see more and more sellers saying, okay, the water is fine. Let me tip my toe back out there. And we're having these conversations every day. As I said, the vast majority of our street retail acquisitions are off market. So we have to be constantly in dialogue with a lot of these sellers. So I do think they're coming to the market more and more. We'll continue to see that over the balance of the year. From a competition standpoint, a lot of the institutional investors are a little more focused on the other segments of open-air. So we really like the opportunity in street retail because we do think it's a less crowded trade, as I mentioned before.

And our next question comes from the line of Andrew Reale from Bank of America.

How would you characterize the pipeline for investment management deals similar to the LINQ Promenade? Could we see a similar large-scale investment management deal in the near-term?

Reg, do you want to

Sure. I think you do because I think the large deals are out there. A lot of them are on the market. Obviously, we're going to be disciplined. We're only going to do the deals that make sense. But I think what you're seeing is a bunch of sellers and even of larger deals 2, 3 years ago when the retail market wasn't as mature or retail wasn't as in favor. Now that, that retail market and the retail generally is in favor, you're starting to see a lot of those large deals either through direct conversations or marketing where people saying, "Hey, maybe we can get the opportunity to execute on large deals." So we're underwriting several of those large deals as we speak.

Okay. And then a lot of talk on the street portfolio today, but it would be helpful if you could just discuss how your suburban assets are performing and if there have been any changes to that watch list or near-term vacate risks in that portfolio.

Yes. And I think you're seeing this amongst our peer reports, and A.J., I'll let you chime in as well. Due to the lack of new development, high-quality suburban retail is holding up just fine. There were some tenants on the watch list, but I think what we've seen both in terms of our leasing and then just in terms of overall tenant demand seems to be very strong, filling in any of those watch list items. A.J., what would...

Yes. I mean definitely, there was a flurry of watch list tenants filing bankruptcy. We saw it from Party City, the majority, again, of which were in our suburban portfolio. Luckily, we didn't have a tremendous amount of exposure there. I'd say the growth is there. It's not the same growth that we're seeing on our streets. And just I think it's an important distinction to make and just to touch on the conversation of curation earlier, one of the differences between suburbs and the streets is obviously the length of term, right? And our ability to continuously identify those under market, I mean, and underperforming tenants and pry them loose. The other big distinction is, of course, CapEx, right? When we take back space proactively or otherwise on our streets, the amount of money we have to spend backfilling that space in relation to the rent is relatively small in relation to the CapEx we have to spend in the suburbs. So it's a much more impactful event to take back space in suburbs in relation to what we're seeing on our streets, where typically the payback is less than a year as opposed to upwards of 5 years or so to replace a box in the suburbs.

And our next question comes from the line of Ki Bin Kim from Truist.

So a lot of positive commentary on your street and urban assets. Just maybe for Ken, where do you think occupancy ends up at the end of '25 versus that 90.8% today and in 2026?

Ki Bin, you're referring specifically to the street?

Yes, street and urban retail occupancy.

Yes. So I think, again, we -- I care more about what spaces we lease than the actual percentage just given just a wide variation of spaces. But I think in terms of absolute occupancy, I think we're trending in the 92% by the end of the year for street and urban.

Okay. And John, you provided a lot of color on the financials. I think you mentioned, you think NOI can increase 10% next year. I'm not sure if I heard that correct. But if I did, what portion of that 10% increase is same-store?

Yes. So that you did hear that correctly. And the portion that is same-store, one second here. So in '26 we are expecting total incremental -- this is just from our pipeline. But from the SNO pipeline, we're expecting total NOI of $8.5 million showing up in '26, of which $5.3 million of that will be in the same-store pool. Keep it -- also keep in mind that 3% contractual we get with our street goes on top of that, plus A.J. talked about his pipeline of stuff. So again, not giving 2026 guidance, but just given where we are in the year and that 10% that we're targeting, we feel pretty good about.

[Operator Instructions] Our next question comes from the line of Michael Mueller from JPMorgan.

I guess, first, John, maybe a couple of things on City Point. First, I just want to confirm, the City Point loan you're talking about, that's not in the supplemental Page 16 structured investment schedule. That's separate from that, right? And then was the $0.03 dilutive that you referred to if everybody converts, was that a 2025 number, annualized number? Can you just give us a little more specifics there?

Yes. So Mike, I think in terms of the dilution, that would be every single one of them converted in the third quarter. So that is certainly not our expectation, and that would be on '25.

So that's a '25. Okay. That's a '25

All of them were to convert, which is certainly not our base case. So that was just the ultimate magnitude of it. And then that the City Point loan is included in that supplemental in the loan balance.

Got it. Okay. I forget if you could have a follow-up here or not, but I'll throw it out anyway. Following up on the prior question in terms of the occupancy level, just drilling down to the Street, where you were at 85% at June 30 or so. I remember in prior calls, you pointed toward closer to 90% by year-end, high-80s. Does that still seem on track at this point during the year for the Street component?

It does. Yes.

And our next question comes from the line of Todd Thomas from KeyBanc Capital Markets.

First question, John, so I just wanted to clarify on that year-end occupancy target that you mentioned, 92% for the Street portfolio. Is that comparable to specifically that 85.2% in-place occupancy for Street? Or is that more comparable to the leased occupancy, which is at 90.8% as of June 30?

Todd, just maybe take a step back. So I think what total core operating occupancy, we think that's at our pro rata share is in the 94% to 95%. The street and urban, I think we are -- and again, Todd, we look at what ABR and what spaces so as a percentage, I'm not quite as focused on, but I think we get to street alone, just following on Mike's question. We get to about 90%. And when you factor in urban, it could be a little bit higher given the nature of those are bigger spaces. So overall, 94% to 95%, and we think that we get to around 90%, the low 90s for the street and urban piece.

Okay. And then I just wanted to follow-up a little bit further on leasing and some of the conversations around the mark-to-markets. We talked about Armitage and then Williamsburg. If we step back and look at the entire core portfolio where you have about 17% or 18% of ABR scheduled to expire through the end of '26. Any early thoughts on the outlook for tenant retention through that time period? And do you have any general idea on mark-to-market or what kind of leasing spreads you might anticipate based on current demand and where market rents are today?

Yes. Look, demand is very strong. The only sort of role that I anticipate, frankly, is space that we are proactively taking back, and we have a track record of doing that. So we'll take back underperformers. You're going to have a period of time where you're going to see occupancy dip and then it returns at a higher total ABR. So we're not really seeing and I'm not really forecasting any significant move- outs other than ones where I'm going to take it back proactively and replace them accretively.

Mark-to-market on Barry Street?

Yes. Mark-to-market, like I said, blending across our street portfolio is double-digits, and we don't really drill into individual markets, but the majority of them are seeing upwards of 20% mark-to-market opportunity embedded in those leases.

And just let me chime in from a pleasantly surprising position compared to, let's say, November, December, if we were talking and where we are relative today in terms of tenant interest, in terms of tenant performance, in terms of tenant renewals, in terms of rents, everything is holding up, notwithstanding a lot of noise and nonsense that we've gone through in the last 6 months. And so far, we haven't seen, especially for street retail, any meaningful deterioration whatsoever. We haven't -- we had one retailer early on after Liberation Day put a couple of leases on hold and then they quickly signed thereafter. And I can't think of another instance where a retailer has said, we are slowing down, we can't afford the rent. We no longer need to be here. So whatever we were guiding to in November, December, A.J., you sure you have, you better deliver it.

Just to clarify, that one retailer, the deals they were putting on hold were what they call non-mission-critical markets, suburban markets, frankly. They were still moving forward with mission-critical street leases. Frankly, we signed one with that retailer. So it's an important distinction.

And our next question comes from the line of Floris Van Dijkum from Ladenburg.

So are you worried about the movement of cap rates? I think, Reggie, you indicated that there's still very strong investor demand. And Ken, you were talking about spreads being pretty tight right now. What does that mean for cap rates in the markets that you want to expand in, presumably SoHo, Williamsburg, maybe on Rush and other key corridors. Can you buy as attractively as what you've been able to achieve so far? And I guess the follow-up on that is you do have a little bit of liquidity. Would you consider selling some more suburban, where cap rates are also pretty tight to be able to fund some of the growth in your street portfolios?

Reggie, let me first talk about some of the different ways that we can continue to drive growth, and then why don't you chime in on what you're seeing. And yes, Floris, you're absolutely correct. We do think we can sell assets in the suburban side or migrate them as we have done into our investment management platform without any material impact to earnings and use that capital, along with additional dry powder that we have, along with other avenues of capital. So we can continue to be active as we see opportunities. Reggie touched on before, sellers are starting to show up again. What I would caution is cap rates are much trickier in street retail going in yields because of all of the moving pieces. And we -- our team is able to underwrite through that and understand what the long-term IRRs, the long-term yields. And I am confident that we'll be able to find deals, find the right way to capitalize on them and proceed. Sure, there's some competition. Blackstone has showed up periodically. There's other legitimate bidders out there. But for the most part, there is so much less competition. that I'll leave it to Reggie and his team to make sure that we're continuing to see our fair share of attractive investments. Reg?

Yes. And I think we're seeing those attractive investments. And I think big picture from a cap rate standpoint, obviously, as Ken said, particularly on the street, is dependent on 1 building to the next, 2 buildings next to each other with different mark-to-market opportunities, different lease expirations are going to trade differently. But big picture, in the markets that we're really focused on, it could easily be low-5s in a SoHo and mid-5s plus elsewhere, but also 6 plus elsewhere, right, in other markets around the country. So that's why we're really focused on is our portfolio construction. We think we can find the right level of assets and 5% to 6% cash yields, GAAP yields in the mid-6s with that outperforming CAGR because of the mark-to-market that really, to Ken's earlier point, really screens very well from an IRR standpoint. So I think we're finding those attractive opportunities and aren't deterred.

And I guess maybe the follow-up question, which is somewhat related is, today, if you think about it, your ABR, it's about $100 million from Street, $60 million from suburban. What is that going to look like in 3 years' time, if you had a crystal ball, Ken? And ideally, what would you like it to look like?

Yes. If I had -- ever had a crystal ball, I threw it out during COVID. I believe that our shareholders will benefit from our dual platform, meaning having in our core portfolio, the vast, vast majority of our assets being street and urban retail, where we will be the premier owner-operator of street retail in the United States. And whether that means migrating assets off balance sheet on the suburban side or otherwise, it really needs to be growth at appropriate prices, appropriate time of street retail. I see no reason why based on the deal flow we're seeing, if the stars aligned, there's no reason we couldn't double the size of our street retail portfolio accretively, accretive to net asset value, accretive to earnings, and that will be the main focus on balance sheet. At the same time, our investment management platform activities is where you will see any and all of our suburban activity, our opportunistic activity, deals like the LINQ that we touched on earlier today. And so if I had a crystal ball, Floris, that's what I would predict.

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.

All right. Well, thank you all. I hope you all enjoy the summer. We look forward to speaking with you again next quarter.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.