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» Acadia Realty Trust Inc. Q4 2008 Earnings Call Transcript
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Participating in today's call will be Kenneth Bernstein, President and Chief Executive Officer, Michael Nelsen, Chief Financial Officer and Jon Grisham, Chief Accounting Officer. Following management discussions, there will be an opportunity for all participants to ask a question.At this time, I would now like to turn call over to Mr. Bernstein. Please proceed. Kenneth Bernstein Thank you. Good afternoon. Today, I am going to start with a brief overview of the progress we made in the first quarter and the trends we’re seeing and then John will review our earnings, operating metrics, key drivers and then Mike, Jon and I will take questions. As a general overview, why we feel we’re still in the early stages of a recovery in the first quarter, we saw further strengthening of operating fundamental as the economy continue to stabilize. We also saw a surprisingly robust improvement in the capital markets with increased availability and stronger pricing for both debt and equity. So today, we will discuss how these improvements are impacting the key components of our business, most notably our core portfolio, our balance sheet and our external growth platform. In terms of portfolio performance in the first quarter, the improvements in the economy led to the portfolio performing at the higher end of our expectations while thanks to NOI and occupancy did decline, these declines were driven by the two previously discussed vacancies and excluding them would have produce another Y positive result. Furthermore, along with the leasing environment, the new space improving in the first quarter, we also saw improvements in the performance of our existing tenants in terms of default collections sales performance. As we discussed in our last call, we originally expected to see our portfolio occupancy decline in the first and the second quarters of the year and then recover ending the year at flat or higher rates. Now, one quarter into the year and borrowing any unforeseen setbacks, it looks as though we found about in the first quarter and the declines were milder than anticipated. And while NOI growth will still lag occupancy increases by a couple of quarters, we see declines bottoming out this year as well and likely reversing as we head into 2011.
Second, in terms of our balance sheet and liquidity, the improvements in the capital markets also benefited our already strong balance sheet. If you review the financial ratios and data set forth in our earnings release in on page 23 of our supplement, you will see that we continue to focus on maintaining a strong balance sheet with plenty of flexibility.Third, finally our external growth initiatives. In general, in the first quarter, we saw the continuation of the phenomena on that began at year end. The various reasons not withstanding inevitable multi-year de-leveraging process that our industry is going to have to go through. In the first quarter, there remained a shortage of quality assets to acquire. This shortage is causing the balance where albeit on a very limited volume, there are more buyers and sellers, especially for higher quality assets and that’s causing cap rates to compress significantly and in some instances actually return to almost pre-cash levels. While it’s hard to tell how and when this imbalance plays out. On one hand, we had a trillion dollar commercial real estate debt wall to climb over. And on the other hand, capital’s becoming more and more available to take down assets as they come to market, thus greatly reducing the risk of that commercial real estate is the so called next shoe to drop. Either way, the impacts of Acadia is likely to be both positive in terms of our existing core portfolio and even more so our redevelopment pipeline. And then perhaps negative in terms of easy deployment of our dry powder for distressed opportunities. But the reasons that I’ll outline we believe that we’re well positioned or hedged irrespective of precisely how these competing forces play out. Read the rest of this transcript for free on seekingalpha.com