Acadia Realty Trust

Acadia1Founded in 1998, Acadia Realty Trust is a real estate investment trust (REIT) that specializes in acquiring, re-developing and operating retail and urban mixed-use properties. The company’s focus is on finding properties in high-barrier-to-entry markets, such as dense urban and major metropolitan markets. Its current portfolio totals more than 10 million square feet across the United States. 

“We used to be more focused on suburban markets, but coming out of the recession we developed a new strategic plan,” says Christopher Conlon, executive vice president and chief operating officer. “Our focus has been much more on urban and street retail in the last few years, although we still own an important suburban portfolio and continue to invest there.”

Going Urban

The company has become one of the leading shopping center REITs during the past decade. This is thanks to its commitment to maintaining core retail properties in high-quality locations, a flexible balance sheet and strong access to capital, an ambitious external investment program and the strength of its management team. 

In addition to staying focused on those four key aspects of its business, Acadia Realty takes a forward-thinking approach to finding the right opportunities. This helps it to sustain growth over the long term. In addition, Acadia Realty strives to create and deliver value to consumers, retailers, shareholders, business partners and employees.

Most of the company’s footprint can be found from Boston to Miami and extending west to Chicago. The company generally looks for assets in high density, supply constrained suburban markets, as well as street and urban retail in gateway cities.

“We’re involved with industry organizations and attend conferences around the world to help with networking and staying up on industry developments,” Conlon says. “Constant meetings with retailers and the analyst community help us understand the markets.”

Various forces have helped push Acadia Realty toward more urban markets. For example, the company believes there is more potential for rent growth in urban and street environments, while rent growth in most suburban markets has been relatively flat.

“Over the last five to 10 years, suburban rent growth has been flat to 1 percent,” Conlon says. “In urban markets, we see 3 percent contractual increases annually. We also see general market rent growth that far exceeds that in certain markets. Miami has gone up by about 40 percent in the last three years. Out of the recession, the markets that bounced back quickly with new lease activity were urban and street markets. They seem to be more resilient and have lower vacancy rates.” 

When Acadia Realty pursues acquisitions, it looks for retail properties, retailer-controlled properties and mixed-use properties that have a strong retail concentration. It considers single-property and portfolio transactions, and it is focused on both value-add and stabilized asset acquisitions. 

“We go where the retailers want to be,” Conlon says. “We keep close tabs on retailers and listen to them about how they are performing and where they think they have the chance for higher sales and more success, which means they will have a chance to pay higher rent. They tell us where they are having the greatest experiences.” 

The company sees properties in need of redevelopment or re-tenanting as a strategic fit because it has in-house property management, leasing, construction and legal skills. “We are 100 percent vertically integrated and have strong teams in all disciplines,” Conlon says.

Acadia Realty has also gotten involved with restructuring debt and partnership positions, including assets that had been subject to foreclosure. Acadia Realty can act on new opportunities quickly thanks to the structure of its investment platform and its access to capital.

“A distinguishing factor for us is our dual platform with two sources of capital,” Conlon says. “We have the public company capital, and we also have private capital through our opportunity fund for ground-up development, lease-ups and distressed retail. That makes us different than many retail REITs.” 

Close Watch

Acadia Realty will keep a watchful eye on industry trends in the next few years. One area where it expects to see a great deal of movement is in the grocery space. The company sees that corner of the market as being in a massive transitional phase because its participants are facing pressure from Walmart and Costco, which have essentially evolved into large grocers and are taking business away from traditional grocery stores. 

In addition, specialty players like Whole Foods Market and Trader Joe’s are also impacting the traditional grocery stores. As the business changes, Acadia Realty will see how grocers respond and who is meeting the challenges. 

Another changing space that Acadia Realty is watching is the drugstore market in urban and suburban settings. This business is changing due in large part to more consumers filling prescriptions online. Overall, the company plans to keep an eye on retailers that are embracing a dual strategy of brick-and-mortar retail with e-commerce so it partners with those who are providing a highly engaged omnichannel experience.

Undoubtedly, Acadia Realty will continue to invest in high-quality locations at responsible prices. It will seek to be creative and understand the changing retail climate, as well as the changing consumer. 

“We will continue to be measured and conservative, because that is the new norm,” Conlon says. “We have to be aware of the pressures on retailers and consumers. That is another reason we are investing more in urban locations. High density will give us a better shot for success over time. With more eyeballs and feet in front of stores, we will be in a better position.”

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