AKR - Acadia Realty Trust (AKR) Q4 2023 Earnings Call Transcript

2024-02-14 16:24:02 ET

Acadia Realty Trust (AKR)

Q4 2023 Results Conference Call

February 14, 2024 11:00 AM ET

Company Participants

Jeff Winston - Senior Associate in Asset Management

Ken Bernstein - President and CEO

John Gottfried - Executive Vice President, Chief Financial Officer

Stuart Seeley - Senior Managing Director of Strategy and Public Markets

A.J. Levine - Senior Vice President, Leasing and Development

Conference Call Participants

Linda Tsai - Jefferies

Craig Mailman - Citi

Todd Thomas - KeyBanc Capital Markets

Floris van Dijkum - Compass Point LLC

Ki Bin Kim - Truist

Paulina Rojas - Green Street

Michael Mueller - JP Morgan

Lizzy Doykan - Bank of America Securities

Presentation

Operator

Thank you for standing by, and welcome to Acadia Realty Trust Fourth Quarter 2023 Earnings Conference Call [Operator Instructions]. I would now like to hand the call over to Jeff Winston. Please go ahead.

Jeff Winston

Good morning. And thank you for joining us for the fourth quarter 2023 Acadia Realty Trust earnings conference call. My name is Jeff Winston, and I am a senior associate in our Asset Management 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 uncertainty, 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 14, 2024, 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 Web site for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. Once the call becomes 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 reinserting yourself into the queue and we will answer as time permits. Now it is my pleasure to turn the call over to Ken Bernstein, President and CEO, who will begin today's management remarks.

Ken Bernstein

Great job, Jeff. Thank you. Welcome, everyone. Happy Valentine's Day. I'm here with John Gottfried, Stuart Seeley and A.J. Levine. I'll give a few comments, then hand the call over to A.J. Then John will discuss our earnings, our balance sheet metrics and our guidance. And after that, we're here to take questions. As you can see in our earnings release, our 2023 performance was very strong. Same property NOI growth was nearly 6% and new lease spreads were over 40%. And this same property NOI growth is comping off prior year's growth of over 6% as well. Fourth quarter results also showed continued strength, driven by the Street retail portion of our portfolio, delivering 10% same store NOI growth and strong leasing spreads. I'll let John discuss the moving pieces of our earnings in detail. But in short, our goal of creating superior top line growth at the property level and having that growth translate into bottom line's earnings growth remains on track. As we look to 2024 and beyond, the leasing momentum we saw last year is continuing. This is evidenced by both our significant signed not open activity and the leasing pipeline behind it. And while in some respects, last quarter might be viewed as just another solid quarter from an internal growth perspective, I think there is a more meaningful shift going on.

We are now past retail simply experiencing a COVID list or a COVID recovery. The shift in retailer sentiment and retailer activity feels more secular than cyclical and thus more long lasting than just a rebound. While we first saw this as a lift in the suburban and necessity portions of our portfolio, and we're still seeing strong solid performance there. The longer term growth is now having its most material impact within the Street retail component of our portfolio, and it is looking more likely that, that growth rate in Street retail has real staying power. A.J. Levine will discuss the drivers of this trend in further detail. But as it relates to internal growth, these secular tailwinds should add further support to the multiyear growth goals that we have been discussing and delivering on for the last couple of years. Then along with continued momentum on internal growth after several relatively quiet years, actionable external growth opportunities are starting to emerge. We are seeing a narrowing of the bid-ask spread and increased likelihood that accretive growth will start to pencil out. And since retail has not been an area of focus by institutional investors over the last several years, there are just fewer well positioned capable buyers. Now granted, the inverted yield curve and elevated interest rates are still a headwind for improving deal flow, but this is beginning to shift....

For further details see: