Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
Acadia Realty Trust (the “Trust”, collectively with its consolidated subsidiaries, the “Company”), a Maryland real estate investment trust (“REIT”), is a fully-integrated equity REIT focused on the ownership, acquisition, development, and management of retail properties located primarily in high-barrier-to-entry, supply-constrained, densely populated metropolitan areas in the United States. All of the Company’s assets are held by, and all of its operations are conducted through, Acadia Realty Limited Partnership (the “Operating Partnership”) and entities in which the Operating Partnership owns an interest. As of June 30, 2024 and December 31, 2023, the Trust controlled approximately 96% and 95%, respectively, of the Operating Partnership as the sole general partner and is entitled to share, in proportion to its percentage interest, in the cash distributions and profits and losses of the Operating Partnership.
We own and operate a high-quality core real estate portfolio ("Core" or "Core Portfolio") in the nation's most dynamic retail corridors, along with an investment management platform (“Investment Management”). As part of the Investment Management platform, we have active investments through the following opportunity funds, including: Acadia Strategic Opportunity Fund II, LLC (“Fund II”), Acadia Strategic Opportunity Fund III LLC (“Fund III”), Acadia Strategic Opportunity Fund IV LLC (“Fund IV”), and Acadia Strategic Opportunity Fund V LLC (“Fund V” and, collectively with Fund II, Fund III and Fund IV, “the Funds”).
Generally, we focus on the following strategies to enhance the value of our Company and provide long-term, profitable growth:
• maximize internal growth of the Core Portfolio through constant optimization of tenant mix, time-sensitive and cost-effective re-tenanting, and active management of our properties;
• pursue accretive acquisition opportunities for the Core Portfolio with a focus on high-growth, residentially-dense and destination urban retail shopping corridors;
• capitalize on accretive development/redevelopment opportunities and re-tenanting activities in order to maximize the value of Core properties;
• within Investment Management, pursue a wide range of investments in various co-investment vehicles while matching individual investments and return profiles with strategic institutional partners;
• maintain a strong and flexible balance sheet to support our business activities through conservative financial practices while ensuring access to sufficient capital to fund future growth.
As of June 30, 2024, we own or have an ownership interest in 199 properties held through our Core Portfolio and Investment Management platform. Our Core Portfolio consists of those properties either 100% owned, or partially owned through joint venture interests, by the Operating Partnership, or subsidiaries thereof, not including those properties owned through the Investment Management platform. These properties primarily consist of street and urban retail, and suburban shopping centers. The Investment Management platform consists of investment vehicles through which our Operating Partnership and outside institutional investors invest in primarily opportunistic and value-add retail real estate. The majority of our operating income is derived from rental revenues from operating properties, including expense recoveries from tenants, offset by operating and overhead expenses.
40
A summary of our wholly-owned and partially-owned retail properties and their physical occupancies as of June 30, 2024 is as follows:
Number of Properties
Operating Properties
Development or
Redevelopment
Operating
GLA
Occupancy
Core Portfolio:
Chicago Metro
3
36
576,799
84.3
%
New York Metro
1
28
294,729
90.9
%
Los Angeles Metro
—
2
23,757
100.0
%
San Francisco Metro
2
—
—
0.0
%
Dallas Metro
2
14
121,386
89.3
%
Washington DC Metro
—
32
357,842
83.8
%
Boston Metro
—
1
1,050
100.0
%
Suburban
3
25
3,906,516
93.2
%
Total Core Portfolio
11
138
5,282,079
91.4
%
Acadia Share of Total Core Portfolio
11
138
4,916,634
91.8
%
Investment Management:
Fund II
—
1
536,055
76.8
%
Fund III
1
1
4,637
77.6
%
Fund IV
1
22
526,390
85.8
%
Fund V
—
23
7,763,428
92.8
%
Other
—
1
99,837
100.0
%
Total Investment Management
2
48
8,930,347
91.5
%
Acadia Share of Total Investment Management
2
48
1,932,495
89.9
%
Total Core and Investment Management
13
186
14,212,426
91.5
%
Acadia Share of Total Core and Investment Management
13
186
6,849,129
91.3
%
SIGNIFICANT DEVELOPMENTS DURING THE SIX MONTHS ENDED JUNE 30, 2024 AND SUBSEQUENT EVENTS
Segment Reporting
We renamed our historical Funds segment as the Investment Management segment. No prior period information was recast and the designation change did not impact our condensed consolidated financial statements. Refer to Note 12 .
Investments
During the six months ended June 30, 2024, we deconsolidated one Core property, two consolidated Investment Management properties and one outparcel, and one unconsolidated investment, as follows:
• On April 3, 2024, Fund IV sold its consolidated 2207 and 2208-2216 Fillmore Street properties for a total sales price of $14.1 million and repaid the related $6.4 million of debt at closing. Fund IV recognized a gain of $2.4 million, of which the Company’s proportionate share was $0.5 million ( Note 2 ).
• On May 16, 2024, we sold a 95% interest in the Shops at Grand property for a total of $48.3 million and retained a 5% ownership interest through an investment in a newly formed joint venture which was fair valued at $2.4 million. As we now have a noncontrolling interest, we recognized a loss on deconsolidation of $2.2 million related to transaction costs ( Note 2 ).
• On June 28, 2024, Fund V sold an outparcel at Canton Marketplace for $2.2 million and recognized a gain of $0.6 million, of which the Company’s proportionate share was $0.1 million ( Note 2 ).
• On June 28, 2024, Fund IV sold its unconsolidated Paramus Plaza property for a total of $36.8 million and repaid the related debt of $27.9 million. Fund IV recognized a gain of $4.1 million, of which the Company’s proportionate share was $1.0 million ( Note 4 ).
41
In July 2024, the Company acquired a shopping center, the Walk at Highwoods Preserve, located in Tampa, Florida for $30.7 million, inclusive of transaction costs ( Note 16 ).
Financing Activity
In April 2024, the Operating Partnership entered into a Third Amended and Restated Credit Agreement, with Bank of America, N.A., as administrative agent, to amend its existing senior unsecured credit facility (the “Amended Credit Facility”). The Amended Credit Facility provides for an increase in the existing unsecured revolving credit facility from $300.0 million to $350.0 million, which includes the capacity to issue letters of credit in an amount up to $60.0 million, and the extension of the term from June 29, 2025 to April 15, 2028, with two additional six-month extension options. The Amended Credit Facility also provides for the extension of the term on the existing $400.0 million unsecured term loan from June 29, 2026 to April 15, 2028, with two additional six-month extension options. The Amended Credit Facility has an accordion feature to increase its capacity up to $900 million at the option of the Operating Partnership, subject to customary conditions. Borrowings under the revolving credit facility and the term loan will accrue interest at a floating rate based on SOFR with margins based on leverage or credit rating.
During the six months ended June 30, 2024, we ( Note 7 ):
• repaid a Core mortgage loan totaling $7.3 million at maturity;
• extended a Core mortgage loan of $60.0 million (excluding principal reductions of $2.5 million);
• repaid the Fund V subscription line totaling $80.6 million;
• entered into a new Investment Management mortgage loan of $43.4 million;
• repaid two consolidated Investment Management mortgage loans of $6.4 million upon disposition of the properties ( Note 2 );
• repaid a portion of one consolidated Investment Management mortgage loan of $1.5 million in connect with an outparcel disposition ( Note 2 );
• extended two Investment Management mortgage loans totaling $67.7 million;
• repaid one unconsolidated Investment Management mortgage loan of $27.9 million upon disposition of the property ( Note 4 ); and
• made scheduled principal payments totaling $6.1 million.
Structured Financing Investments
During the six months ended June 30, 2024, we originated one Core note receivable of $7.6 million to a related party, which is collateralized by the borrower’s equity interest in various partnerships, bears interest at 12% and matures on December 31, 2025.
Common Shares
During the six months ended June 30, 2024, we sold 1,739,288 Common Shares under our ATM Program generating $29.9 million of net proceeds after related issuance costs ( Note 10 ).
Economic and Other Considerations
In recent years, inflation levels were elevated resulting in increased costs for certain goods and services and cost of borrowing. Inflation began to decrease in the second quarter of 2023 but still remains at elevated levels compared to the years preceding 2021. Most of our leases include contractual rent escalations and require tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation. We believe we manage our properties in a cost-conscious manner to minimize recurring operational expenses and utilize multi-year contracts to alleviate the impact of inflation on our business and our tenants. We also continue to see rising consumer confidence and we expect to continue to add value to our portfolio by executing on our current leasing momentum, our active development and redevelopment projects, and leasing pipeline.
In response to the rising rate of inflation, the Federal Reserve raised benchmark interest rates, resulting in an increase in the cost of borrowing, which could remain at elevated levels in the near-term and long-term. The rate hikes enacted by the Federal Reserve have had a significant impact on interest rate indexes such as SOFR and the Prime Rate and cost of borrowing. We manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap and cap agreements, which qualify for, and are designated as, hedging instruments. Except for increased interest costs, we have not experienced any material negative impacts at this time, and we intend to actively manage our business to respond to the ongoing economic and social impact from such events.
42
RESULTS OF OPERATIONS
See Note 12 in the Notes to Condensed Consolidated Financial Statements for an overview of our three reportable segments: Core Portfolio (“Core”), Investment Management (“IM”) and Structured Financing (“SF”).
Comparison of Results for the Three Months Ended June 30, 2024 to the Three Months Ended June 30, 2023
The results of operations by reportable segment for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 are summarized in the table below (in millions, totals may not add due to rounding):
Three Months Ended
Three Months Ended
June 30, 2024
June 30, 2023
Increase (Decrease)
Core
IM
SF
Total
Core
IM
SF
Total
Core
IM
SF
Total
Revenues
$
48.9
$
38.4
$
—
$
87.3
$
56.4
$
33.6
$
—
$
89.9
$
(7.5
)
$
4.8
$
—
$
(2.6
)
Depreciation and amortization
(18.0
)
(16.3
)
—
(34.3
)
(20.0
)
(14.0
)
—
(34.1
)
(2.0
)
2.3
—
0.2
Property operating expenses and real estate taxes
(14.4
)
(11.4
)
—
(25.8
)
(15.1
)
(10.5
)
—
(25.6
)
(0.7
)
0.9
—
0.2
General and administrative expenses
—
—
—
(10.2
)
—
—
—
(10.6
)
—
—
—
(0.4
)
(Loss) gain on disposition of properties
(2.2
)
3.0
—
0.8
—
—
—
—
(2.2
)
3.0
—
0.8
Operating income
14.3
13.6
—
17.8
21.3
9.0
—
19.7
(7.0
)
4.6
—
(1.9
)
Equity in earnings (losses) of unconsolidated affiliates
0.6
3.8
—
4.5
0.9
(2.4
)
—
(1.4
)
(0.3
)
6.2
—
5.9
Interest income
—
—
5.4
5.4
—
—
5.0
5.0
—
—
0.4
0.4
Realized and unrealized holding (losses) gains on investments and other
(2.2
)
—
(0.2
)
(2.4
)
1.8
—
—
1.8
(4.0
)
—
(0.2
)
(4.2
)
Interest expense
(9.9
)
(13.6
)
—
(23.6
)
(11.0
)
(11.1
)
—
(22.1
)
(1.1
)
2.5
—
1.5
Income (loss) from continuing operations before income taxes
2.9
3.8
5.2
1.7
13.0
(4.4
)
5.0
2.9
10.1
(8.2
)
(0.2
)
1.2
Income tax provision
—
—
—
(0.2
)
—
—
—
(0.2
)
—
—
—
—
Net income (loss)
2.9
3.8
5.2
1.6
13.0
(4.4
)
5.0
2.8
(10.1
)
8.2
0.2
(1.2
)
Net loss attributable to redeemable noncontrolling interests
—
2.3
—
2.3
—
1.1
—
1.1
—
1.2
—
1.2
Net (income) loss attributable to noncontrolling interests
(0.2
)
(2.2
)
—
(2.4
)
(0.7
)
6.2
—
5.4
0.5
(8.4
)
—
(7.8
)
Net income attributable to Acadia
$
2.7
$
3.9
$
5.2
$
1.4
$
12.3
$
2.8
$
5.0
$
9.3
$
(9.6
)
$
1.1
$
0.2
$
(7.9
)
Core Portfolio
The results of operations for our Core Portfolio segment are depicted in the table above under the headings labeled “Core.” Segment net income attributable to Acadia for our Core Portfolio decreased $9.6 million for the three months ended June 30, 2024 compared to the prior year period as a result of the changes further described below.
Revenues for our Core Portfolio decreased $7.5 million for the three months ended June 30, 2024 compared to the prior year period primarily due to the accelerated amortization of a below market lease for a bankrupt tenant in 2023.
Depreciation and amortization for our Core Portfolio decreased $2.0 million for the three months ended June 30, 2024 compared to the prior year period primarily due to the acceleration of in-place lease intangible assets for a bankrupt tenant in 2023.
Loss on disposition of property for our Core Portfolio relates to the deconsolidation of the Shops at Grand property in 2024 ( Note 2 ).
Realized and unrealized holding (losses) gains on investments and other for our Core Portfolio decreased $4.0 million for the three months ended June 30, 2024 compared to the prior year period primarily due to a change in the mark-to-market adjustment on the Investment in Albertsons ( Note 8 ).
Interest expense for our Core Portfolio decreased $1.1 million for the three months ended June 30, 2024 compared to the prior year period primarily due to lower average outstanding borrowings in 2024.
Investment Management (all amounts below are consolidated amounts and are not representative of our proportionate share)
The results of operations for our Investment Management segment are depicted in the table above under the headings labeled “IM.” Segment net income attributable to Acadia for Investment Management increased $1.1 million for the three months ended June 30, 2024 compared to the prior year period as a result of the changes described below.
Revenues for Investment Management increased $4.8 million for the three months ended June 30, 2024 compared to the prior year period primarily due to property acquisitions in the second half of 2023.
43
Depreciation and amortization for Investment Management increased $2.3 million for the three months ended June 30, 2024 compared to the prior year period primarily due to property acquisitions in the second half of 2023.
Gain on disposition of properties for Investment Management increased $3.0 million for the three months ended June 30, 2024 compared to the prior year period due to the sale of two properties at Fund IV and an outparcel at Fund V ( Note 2 ).
Equity in earnings (losses) of unconsolidated affiliates for Investment Management increased $6.2 million for the three months ended June 30, 2024 compared to the prior year period primarily due to the gain on sale of Paramus Plaza in 2024 ( Note 4 ).
Interest expense for Investment Management increased $2.5 million for the three months ended June 30, 2024 compared to the prior year period primarily due to higher average interest rates in 2024.
Net (income) loss attributable to noncontrolling interests for Investment Management decreased $8.4 million for the three months ended June 30, 2024 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above. Net income attributable to noncontrolling interests in Investment Management includes asset management fees earned by the Company of $2.4 million and $2.3 million for the three months ended June 30, 2024 and 2023, respectively.
Unallocated
The Company does not allocate general and administrative expenses and income taxes to its reportable segments. These unallocated amounts are depicted in the table above under the headings labeled “Total.”
Comparison of Results for the Six Months Ended June 30, 2024 to the Six Months Ended June 30, 2023
The results of operations by reportable segment for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 are summarized in the table below (in millions, totals may not add due to rounding):
Six Months Ended
Six Months Ended
June 30, 2024
June 30, 2023
Increase (Decrease)
Core
IM
SF
Total
Core
IM
SF
Total
Core
IM
SF
Total
Revenues
$
102.4
$
76.2
$
—
$
178.6
$
106.2
$
65.6
$
—
$
171.8
$
(3.8
)
$
10.6
$
—
$
6.8
Depreciation and amortization
(36.2
)
(33.0
)
—
(69.2
)
(38.7
)
(28.5
)
—
(67.2
)
(2.5
)
4.5
—
2.0
Property operating expenses and real estate taxes
(32.3
)
(24.9
)
—
(57.2
)
(31.2
)
(21.0
)
—
(52.2
)
1.1
3.9
—
5.0
General and administrative expenses
—
—
—
(19.9
)
—
—
—
(20.6
)
—
—
—
(0.7
)
(Loss) gain on disposition of properties
(2.2
)
1.8
—
(0.4
)
—
—
—
—
(2.2
)
1.8
—
(0.4
)
Operating income (loss)
31.7
20.1
—
31.8
36.3
16.0
—
31.8
(4.6
)
4.1
—
—
Equity in earnings (losses) of unconsolidated affiliates
2.7
1.4
—
4.2
2.7
(4.1
)
—
(1.4
)
—
5.5
—
5.6
Interest income
—
—
10.7
10.7
—
—
9.8
9.8
—
—
0.9
0.9
Realized and unrealized holding (losses) gains on investments and other
(4.0
)
—
(0.4
)
(4.4
)
3.4
25.0
0.2
28.6
(7.4
)
(25.0
)
(0.6
)
(33.0
)
Interest expense
(20.0
)
(27.3
)
—
(47.3
)
(21.7
)
(22.0
)
—
(43.7
)
(1.7
)
5.3
—
3.6
Income (loss) from continuing operations before income taxes
10.4
(5.8
)
10.3
(5.1
)
20.8
14.9
10.0
25.0
10.4
20.7
(0.3
)
30.1
Income tax provision
—
—
—
(0.2
)
—
—
—
(0.3
)
—
—
—
0.1
Net income (loss)
10.4
(5.8
)
10.3
(5.3
)
20.8
14.9
10.0
24.8
(10.4
)
(20.7
)
0.3
(30.1
)
Net loss attributable to redeemable noncontrolling interests
—
4.8
—
4.8
—
3.2
—
3.2
—
1.6
—
1.6
Net income attributable to noncontrolling interests
(0.6
)
5.7
—
5.1
(1.6
)
(3.6
)
—
(5.3
)
1.0
9.3
—
10.4
Net income (loss) attributable to Acadia
$
9.9
$
4.7
$
10.3
$
4.7
$
19.1
$
14.4
$
10.0
$
22.6
$
(9.2
)
$
(9.7
)
$
0.3
$
(17.9
)
Core Portfolio
The results of operations for our Core Portfolio segment are depicted in the table above under the headings labeled “Core.” Segment net income attributable to Acadia for our Core Portfolio decreased $9.2 million for the six months ended June 30, 2024 compared to the prior year period as a result of the changes further described below.
Revenues for our Core Portfolio decreased $3.8 million for the six months ended June 30, 2024 compared to the prior year period primarily due to $7.8 million accelerated amortization of a below market lease for a bankrupt tenant in 2023, offset by $3.5 million for the recognition of a forfeited deposit within Other revenues in the Condensed Consolidated Statements of Operations for a property previously under contract for sale in 2024.
44
Depreciation and amortization for our Core Portfolio decreased $2.5 million for the six months ended June 30, 2024 compared to the prior year period primarily due to the write-off of in-place lease intangible assets for a bankrupt tenant in 2023.
Property operating expenses and real estate taxes for our Core Portfolio increased $1.1 million for the six months ended June 30, 2024 compared to the prior year period primarily due to increased legal expense reserves in the current year.
Loss on disposition of property for our Core Portfolio relates to the deconsolidation of the Shops at Grand property in 2024 ( Note 2 ).
Realized and unrealized holding (losses) gains on investments and other for our Core Portfolio decreased $7.4 million for the six months ended June 30, 2024 compared to the prior year period primarily due to a change in the mark-to-market adjustment on the Investment in Albertsons ( Note 8 ).
Interest expense for our Core Portfolio decreased $1.7 million for the six months ended June 30, 2024 compared to the prior year period due to lower average outstanding borrowings in 2024.
Net income attributable to noncontrolling interests for our Core Portfolio increased $1.0 million for the six months ended June 30, 2024 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above.
Investment Management (all amounts below are consolidated amounts and are not representative of our proportionate share)
The results of operations for our Investment Management segment are depicted in the table above under the headings labeled “IM.” Segment net income attributable to Acadia for Investment Management decreased $9.7 million for the six months ended June 30, 2024 compared to the prior year period as a result of the changes described below.
Revenues for Investment Management increased $10.6 million for the six months ended June 30, 2024 compared to the prior year period primarily due to (i) $9.6 million from acquisitions in 2023, and (ii) $1.7 million from new tenant lease-up within Investment Management in 2023 and 2024.
Depreciation and amortization for Investment Management increased $4.5 million for the six months ended June 30, 2024 compared to the prior year period primarily due to property acquisitions in 2023.
Property operating expenses and real estate taxes for Investment Management increased $3.9 million for the six months ended June 30, 2024 compared to the prior year period primarily due to property acquisitions in 2023 and non-recurring property operating expenses within Investment Management.
(Loss) gain on disposition of property for Investment Management increased $1.8 million for the six months ended June 30, 2024 compared to the prior year period due to the $3.0 million gain on disposition of two properties at Fund IV and an outparcel at Fund V, offset by a $1.2 million loss related to a previously disposed property ( Note 2 ).
Equity in earnings (losses) of unconsolidated affiliates for Investment Management increased $5.5 million for the six months ended June 30, 2024 compared to the prior year period primarily due to the gain on disposition of Paramus Plaza in 2024 ( Note 4 ).
Realized and unrealized holding (losses) gains on investments and other for the Investment Management decreased $25.0 million for the six months ended June 30, 2024 compared to the prior year period primarily due to a $28.2 million increase in dividend income from Albertsons in 2023 offset by a $2.0 million mark-to-market loss in 2023 ( Note 8 ).
Interest expense for Investment Management increased $5.3 million for the six months ended June 30, 2024 compared to the prior year period primarily due to higher average interest rates in 2024.
Net loss attributable to redeemable noncontrolling interests for Investment Management increased $1.6 million for the six months ended June 30, 2024 compared to the prior year period due to the receipt of past due rents for a tenant in 2023.
Segment net income attributable to Acadia for Investment Management decreased $9.7 million for the six months ended June 30, 2024 compared to the prior year period as a result of the changes described below. Net loss attributable to noncontrolling interests in Investment Management includes asset management fees earned by the Company of $4.7 million and $4.8 million for the six months ended June 30, 2024 and 2023, respectively.
Unallocated
45
The Company does not allocate general and administrative expenses and income taxes to its reportable segments. These unallocated amounts are depicted in the table above under the headings labeled “Total.”
NON-GAAP FINANCIAL MEASURES
Net Property Operating Income
The following discussion of net property operating income (“NOI”) and rent spreads on new and renewal leases includes the activity from both our consolidated and our pro-rata share of unconsolidated properties within our Core Portfolio. Investment Management invests primarily in properties that typically require significant leasing and development. Given that Investment Management is primarily comprised of finite-life investment vehicles, these properties are sold following stabilization. For these reasons, we believe NOI and rent spreads are not meaningful measures for our Investment Management investments.
NOI represents property revenues less property expenses. We consider NOI and rent spreads on new and renewal leases for our Core Portfolio to be appropriate supplemental disclosures of portfolio operating performance due to their widespread acceptance and use within the REIT investor and analyst communities. NOI and rent spreads on new and renewal leases are presented to assist investors in analyzing our property performance, however, our method of calculating these may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
A reconciliation of consolidated operating income to net operating income - Core Portfolio follows (in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Consolidated operating income
$
17,789
$
19,658
$
31,797
$
31,766
Add back:
General and administrative
10,179
10,643
19,947
20,589
Depreciation and amortization
34,281
34,056
69,221
67,229
Gain (loss) on disposition of properties
(757
)
—
441
—
Less:
Above/below-market rent, straight-line rent and other adjustments (a)
(2,869
)
(13,088
)
(7,477
)
(15,330
)
Consolidated NOI
58,623
51,269
113,929
104,254
Redeemable noncontrolling interest in consolidated NOI
(1,381
)
(1,182
)
(2,422
)
(2,399
)
Noncontrolling interest in consolidated NOI
(18,322
)
(13,730
)
(35,253
)
(28,205
)
Less: Operating Partnership's interest in Investment Management NOI included above
(6,132
)
(4,765
)
(11,473
)
(9,802
)
Add: Operating Partnership's share of unconsolidated joint ventures NOI (b)
2,251
4,141
6,212
8,100
Core Portfolio NOI
$
35,039
$
35,733
$
70,993
$
71,948
a) Includes straight-line rent reserves. See Note 11 for additional information about straight-line rent reserves and adjustments for the periods presented.
b) Does not include the Operating Partnership’s share of NOI from unconsolidated joint ventures within Investment Management.
46
Same-Property NOI includes Core Portfolio properties that we owned for both the current and prior periods presented, but excludes those properties that we acquired, sold or expected to sell, redeveloped and developed during these periods. The following table summarizes Same-Property NOI for our Core Portfolio (dollars in thousands):
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Core Portfolio NOI
$
35,039
$
35,733
$
70,993
$
71,948
Less properties excluded from Same-Property NOI
(2,961
)
(5,335
)
(6,887
)
(11,235
)
Same-Property NOI
$
32,078
$
30,398
$
64,106
$
60,713
Percent change from prior year period
5.5
%
5.6
%
Components of Same-Property NOI:
Same-Property Revenues
$
45,613
$
43,275
$
91,756
$
87,057
Same-Property Operating Expenses
(13,535
)
(12,877
)
(27,650
)
(26,344
)
Same-Property NOI
$
32,078
$
30,398
$
64,106
$
60,713
Rent Spreads on Core Portfolio New and Renewal Leases
The following table summarizes rent spreads on both a cash basis and straight-line basis for new and renewal leases based on leases executed within our Core Portfolio for the periods presented. Cash basis represents a comparison of rent most recently paid on the previous lease as compared to the initial rent paid on the new lease. Straight-line basis represents a comparison of rents as adjusted for contractual escalations, abated rent, and lease incentives for the same comparable leases. The table below includes embedded option renewals for which the renewed rent was equal to or approximated existing base rent.
Three Months Ended June 30, 2024
Six Months Ended June 30, 2024
Core Portfolio New and Renewal Leases
Cash Basis
Straight-
Line Basis
Cash Basis
Straight-
Line Basis
Number of new and renewal leases executed
18
18
40
40
GLA commencing
78,816
78,816
266,667
266,667
New base rent
$
73.06
$
77.31
$
37.44
$
38.94
Expiring base rent
$
66.67
$
62.84
$
34.76
$
33.11
Percent growth in base rent
9.6
%
23.0
%
7.7
%
17.6
%
Average cost per square foot (a)
$
12.23
$
12.23
$
4.57
$
4.57
Weighted average lease term (years)
6.1
6.1
5.1
5.1
(a) The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances.
47
Funds from Operations
We consider funds from operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be an appropriate supplemental disclosure of operating performance due to its widespread acceptance and use within the REIT investor and analyst communities. FFO is presented to assist investors in analyzing our performance. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such as gains (losses) from sales of depreciated property, depreciation and amortization, and impairment of real estate. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity. Consistent with the NAREIT definition, we define FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated property and impairment of depreciable real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Also consistent with NAREIT’s definition of FFO, the Company has elected to include gains and losses incidental to its main business (including those related to its RCP investments, such as Albertsons) in FFO. A reconciliation of net income (loss) attributable to Acadia to FFO follows (dollars in thousands, except per share data):
Three Months Ended June 30,
Six Months Ended June 30,
2024
2023
2024
2023
Net income attributable to Acadia
$
1,443
$
9,276
$
4,712
$
22,636
Depreciation of real estate and amortization of leasing costs (net of
noncontrolling interests' share)
26,291
28,248
53,378
54,692
Loss on disposition of property (net of noncontrolling interests' share)
568
—
843
—
Income attributable to Common OP Unit holders
103
574
306
1,368
Distributions - Preferred OP Units
84
123
207
246
Funds from operations attributable to Common Shareholders and
Common OP Unit holders - Basic and Diluted
$
28,489
$
38,221
$
59,446
$
78,942
Funds From Operations per Share - Diluted
Basic weighted-average shares outstanding, GAAP earnings
103,592,238
95,259,924
102,859,977
95,224,901
Weighted-average OP Units outstanding
7,226,475
6,918,443
7,525,197
6,835,840
Basic weighted-average shares and OP Units outstanding, FFO
110,818,713
102,178,367
110,385,174
102,060,741
Assumed conversion of Preferred OP Units to Common Shares
319,457
463,898
25,067
463,898
Assumed conversion of LTIP units and Restricted Share Units to
Common Shares
698,490
—
686,088
—
Diluted weighted-average number of Common Shares and Common
OP Units outstanding, FFO
111,836,660
102,642,265
111,096,329
102,524,639
Diluted Funds from operations, per Common Share and Common OP Unit
$
0.25
$
0.37
$
0.54
$
0.77
48
LIQUIDITY AND CAPITAL RESOURCES
Uses of Liquidity and Cash Requirements
Generally, our principal uses of liquidity are (i) distributions to our shareholders and OP unit holders, (ii) investments, which include the funding of our capital committed to the Funds in our Investment Management platform and property acquisitions and development/re-tenanting activities within our Core Portfolio, (iii) distributions to our Fund investors, (iv) debt service and loan repayments and (v) share repurchases.
Distributions
In order to qualify as a REIT for federal income tax purposes, we must distribute at least 90% of our taxable income to our shareholders. During the six months ended June 30, 2024, we paid dividends and distributions on our Common Shares and Preferred OP Units totaling $37.5 million.
Investments
In July 2024, through Investment Management, we acquired a shopping center, the Walk at Highwoods Preserve, located in Tampa, Florida for $30.7 million, inclusive of transaction costs ( Note 16 ).
Structured Financing Investments
During the six months ended June 30, 2024, we originated one Core note receivable of $7.6 million to a related party, which is secured by the borrower’s equity interest in the Renaissance Portfolio, 1238 Wisconsin Avenue, and another Georgetown property, bears interest at 12% and matures on December 31, 2025 ( Note 3 ).
Capital Commitments
During the six months ended June 30, 2024, we made capital contributions aggregating $11.1 million to our Funds.
As of June 30, 2024, our share of the remaining capital commitments to our Funds aggregated $18.1 million as follows:
• $0.5 million to Fund III – Fund III was launched in May 2007 with total committed capital of $450.0 million, of which our original share was $89.6 million. During 2015, we acquired an additional interest, which had an original capital commitment of $20.9 million.
• $5.5 million to Fund IV – Fund IV was launched in May 2012 with total committed capital of $530.0 million, of which our original share was $122.5 million.
• $12.1 million to Fund V – Fund V was launched in August 2016 with total committed capital of $520.0 million, of which our original share was $104.5 million.
Development Activities
During the six months ended June 30, 2024, capitalized costs associated with development activities totaled $7 million ( Note 2 ). As of June 30, 2024, we had a total of 13 consolidated projects under development or redevelopment, for which the estimated total cost to complete these projects through 2025 was $35.0 million to $61.2 million, and our estimated share was approximately $18.9 million to $33.7 million. Substantially all remaining development and redevelopment costs are discretionary, and could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023.
49
Debt
A summary of our consolidated debt, which includes the full amount of Fund related obligations and excludes our pro rata share of debt at our unconsolidated subsidiaries, is as follows (in thousands):
June 30,
December 31,
2024
2023
Total Debt - Fixed and Effectively Fixed Rate
$
1,379,807
$
1,454,707
Total Debt - Variable Rate
327,851
426,380
1,707,658
1,881,087
Net unamortized debt issuance costs
(12,053
)
(11,186
)
Unamortized premium
223
240
Total Indebtedness
$
1,695,828
$
1,870,141
As of June 30, 2024, our consolidated indebtedness aggregated $1,707.7 million, excluding unamortized premium of $0.2 million and net unamortized loan costs of $12.1 million, and was collateralized by 31 properties and related tenant leases. Stated interest rates on our outstanding indebtedness ranged from 3.99% to SOFR + 3.75% with maturities that ranged from July 8, 2024 to April 15, 2035, without regard to available extension options. With respect to the debt maturing in 2024, we are actively pursuing refinancing the remaining obligations, though there can be no assurance that we can refinance such obligations on favorable terms or at all. Taking into consideration $1,188.3 million of notional principal under variable to fixed-rate swap agreements currently in effect, $1,379.8 million of the portfolio debt, or 80.8%, was fixed at a 4.74% weighted average interest rate and $327.9 million, or 19.2%%, was floating at a 8.10% weighted average interest rate as of June 30, 2024. Our variable-rate debt includes $151.2 million of debt subject to interest rate caps.
Without regard to available extension options, as of June 30, 2024, we had $211.8 million of debt maturing in 2024 at a weighted-average interest rate of 4.18%; $2.8 million of scheduled principal amortization due in the remainder of 2024; and our share of scheduled remaining 2024 principal payments and maturities on our unconsolidated debt was $59.6 million. In addition, $373.6 million of our total consolidated debt and $57.7 million of our pro-rata share of unconsolidated debt will come due by June 30, 2025. With respect to the debt maturing in 2024 and 2025, we have options to extend consolidated debt aggregating $40.0 million and $327.3 million as of June 30, 2024 and; however, there can be no assurance that the Company will be able to successfully execute any or all of its available extension options. For the remaining indebtedness, we may not have sufficient cash on hand to repay such indebtedness, and, therefore, we expect to refinance at least a portion of this indebtedness or select other alternatives based on market conditions as these loans mature; however, there can be no assurance that we will be able to obtain financing on acceptable terms or at all. Our ability to obtain financing could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023.
Share Repurchase Program
We maintain a share repurchase program under which $122.5 million remains available as of June 30, 2024 ( Note 10 ). We did not repurchase any shares under this program during the six months ended June 30, 2024.
Sources of Liquidity
Our primary sources of capital for funding our short-term (less than 12 months) and long-term (12 months and longer) liquidity needs include (i) the issuance of both public equity and OP Units, (ii) the issuance of both secured and unsecured debt, (iii) unfunded capital commitments from noncontrolling interests within Investment Management, (iv) future sales of existing properties, (v) repayments of structured financing investments, (vi) liquidation of marketable securities, and (vii) cash on hand and future cash flow from operating activities. Our cash on hand in our consolidated subsidiaries as of June 30, 2024 totaled $31.9 million. Our remaining sources of liquidity are described further below.
Issuance of Common Shares
In January 2024, the Company completed an underwritten offering of 6,900,000 Common Shares (inclusive of the underwriters’ option to purchase 900,000 additional shares) for net proceeds of $113.0 million.
ATM Program
We have an ATM Program ( Note 10 ) that provides us with an efficient and low-cost vehicle for raising capital through public equity issuances on an as-we-go basis to fund our capital needs. Through this program, we have been able to effectively “match-fund” the required capital for our Core Portfolio and our share of Investment Management acquisitions through the issuance of Common Shares over extended periods employing
50
a price averaging strategy. In addition, from time to time, we have issued and may issue, equity in follow-on offerings separate from our ATM Program. Net proceeds raised through our ATM Program and follow-on offerings are primarily used for acquisitions, both for our Core Portfolio and our pro-rata share of Investment Management acquisitions, and for general corporate purposes. The Company sold 1,739,288 Common Shares under its ATM Program during the six months ended June 30, 2024 generating $29.9 million of net proceeds after related issuance costs.
Investment Management Capital
During the six months ended June 30, 2024, Fund V called for capital contributions of $52.2 million, of which our aggregate share was $11.1 million. As of June 30, 2024, unfunded capital commitments from noncontrolling interests within Funds II, III, IV and V were $0, $1.4 million, $18.5 million and $48.3 million, respectively.
Asset Sales and Other Transactions
During the six months ended June 30, 2024, we deconsolidated one Core property, two consolidated Investment Management properties and one outparcel, and one unconsolidated investment, as follows:
• On April 3, 2024, Fund IV sold its consolidated 2207 and 2208-2216 Fillmore Street properties for a total sales price of $14.1 million and repaid the related $6.4 million of debt at closing. Fund IV recognized a gain of $2.4 million, of which the Company’s proportionate share was $0.5 million ( Note 2 ).
• On May 16, 2024, we sold a 95% interest in the Shops at Grand for a total of $48.3 million and retained a 5% ownership interest through an investment in a newly formed joint venture which was fair valued at $2.4 million. As we now have a noncontrolling interest, we recognized a loss on deconsolidation of $2.2 million related to transaction costs ( Note 2 ).
• On June 28, 2024, Fund V sold an outparcel at Canton Marketplace for $2.2 million and recognized a gain of $0.6 million, of which the Company’s proportionate share was $0.1 million ( Note 2 ).
• On June 28, 2024, Fund IV sold its unconsolidated Paramus Plaza property for a total of $36.8 million and repaid the related debt of $27.9 million. Fund IV recognized a gain of $4.1 million, of which the Company’s proportionate share was $1.0 million ( Note 4 ).
During the six months ended June 30, 2024, we sold 350,000 shares of Albertsons, generating net proceeds of $7.6 million. As of June 30, 2024, we held 1.1 million shares with a fair value of $21.7 million ( Note 8 ). In addition, during the six months ended June 30, 2024, we recognized dividend income of $0.3 million ( Note 8 ).
Structured Financing Repayments
During the six months ended June 30, 2024, the Company received full payment on a $6.0 million Core Portfolio note.
Financing and Debt
As of June 30, 2024, we had $253.6 million of capacity under existing Core Portfolio debt facilities. In addition, as of that date within our Core Portfolio and Investment Management, we had 91 unleveraged consolidated properties with an aggregate carrying value of approximately $1.8 billion, although there can be no assurance that we would be able to obtain financing for these properties at favorable terms, if at all.
HISTORICAL CASH FLOW
The following table compares the historical cash flow for the six months ended June 30, 2024 with the cash flow for the six months ended June 30, 2023 (in millions, totals may not add due to rounding):
Six Months Ended June 30,
2024
2023
Variance
Net cash provided by operating activities
$
58.0
$
89.5
$
(31.5
)
Net cash provided by (used in) investing activities
20.0
(26.7
)
46.7
Net cash used in financing activities
(48.2
)
(65.5
)
17.3
Increase (decrease) in cash and cash equivalents and restricted cash
$
29.8
$
(2.7
)
$
32.5
51
Operating Activities
Net cash provided by operating activities primarily consists of cash inflows from rental revenue, and cash outflows for property operating expenses, general and administrative expenses and interest and debt expense.
Our operating activities provided $31.5 million less cash for the six months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to the $28.2 million dividend received from our investment in Albertsons in 2023.
Investing Activities
Net cash used in investing activities is impacted by our investments in and advances to unconsolidated affiliates, the timing and extent of our real estate development, capital improvements, and acquisition and disposition activities during the period.
Our investing activities provided $46.7 million more cash for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to (i) $58.7 million more cash received form the disposition of properties in 2024, (ii) $22.8 million less cash used in our investments in and advances to unconsolidated affiliates, (iii) $7.6 million more cash received from the sale of marketable securities, and (iv) $6.0 million more received from the payment of a note receivable. These sources of cash were offset by (i) $33.4 million less cash received from return of capital of unconsolidated affiliates, (ii) $7.9 million more cash used to originate a note receivable, and (iii) $6.8 million more cash used for development, construction and property improvement costs.
Financing Activities
Net cash used in financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders and unitholders of the Operating Partnership, as well as principal and other payments associated with our outstanding indebtedness.
Our financing activities used $17.3 million less cash during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily from (i) $142.1 million more cash provided by the sale of Common Shares, (ii) $13.7 million less cash distributed to noncontrolling interests, and (iii) $12.5 million more cash provided by contributions from noncontrolling interests. These increases were offset by (i) $142.6 million more cash used to repay debt, (ii) $6.8 million more used for payment of deferred financing fees, and (iii) $1.5 million more used to pay dividends.
52
OFF-BALANCE SHEET ARRANGEMENTS
We have the following investments made through joint ventures (that may include, among others, tenancy-in common and other similar investments) for the purpose of investing in operating properties. We account for these investments using the equity method of accounting. As such, our financial statements reflect our investment and our share of income and loss from, but not the individual assets and liabilities, of these joint ventures.
See Note 4 in the Notes to Condensed Consolidated Financial Statements, for a discussion of our unconsolidated investments. The Operating Partnership’s pro-rata share of unconsolidated non-recourse debt related to those investments is as follows (dollars in millions):
Operating Partnership
June 30, 2024
Investment
Ownership
Percentage
Pro-rata Share of
Mortgage Debt
Effective Interest Rate (a)
Maturity Date
Eden Square
20.8
%
$
4.9
7.60
%
Sep 2024
Gotham Plaza
49.0
%
8.4
9.33
%
Sep 2024
Crossroads Shopping Center
49.0
%
28.7
3.94
%
Oct 2024
Tri-City Plaza (b)
18.1
%
6.9
3.04
%
Oct 2024
Frederick Crossing (b)
18.1
%
4.2
3.27
%
Dec 2024
Frederick County Square (b)
18.1
%
4.5
5.67
%
Jan 2025
650 Bald Hill Rd
20.8
%
3.2
3.75
%
Jun 2026
Renaissance Portfolio (c)
20.0
%
30.4
7.15
%
Nov 2026
840 N. Michigan
91.9
%
44.7
6.50
%
Dec 2026
3104 M Street (c)
20.0
%
0.8
8.50
%
Jan 2027
Wood Ridge Plaza
18.1
%
6.5
7.27
%
Mar 2027
La Frontera
18.1
%
10.0
6.11
%
Jun 2027
Riverdale FC
18.0
%
6.9
7.27
%
Nov 2027
Georgetown Portfolio
50.0
%
7.1
4.72
%
Dec 2027
Shoppes at South Hills (b)
18.1
%
5.8
5.95
%
Mar 2028
Mohawk Commons
18.1
%
7.2
5.80
%
Mar 2028
Total
$
180.2
(a) Effective interest rates incorporate the effect of interest rate swaps and caps that were in effect as of June 30, 2024, where applicable.
(b) The debt has one available 12-month extension option.
(c) The debt has two available 12-month extension options.
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no material changes to the items that we disclosed as our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2023 Annual Report on Form 10-K.
Recently Issued and Adopted Accounting Pronouncements
Reference is made to Note 1 in the Notes to Condensed Consolidated Financial Statements for information about recently issued accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK.
Information as of June 30, 2024
Our primary market risk exposure is to changes in interest rates related to our mortgage and other debt. See Note 7 in the Notes to Condensed Consolidated Financial Statements, for certain quantitative details related to our mortgage and other debt.
53
Currently, we manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap and cap agreements. As of June 30, 2024, we had total mortgage and other notes payable of $1,707.7 million, excluding the unamortized premium of $0.2 million and net unamortized debt issuance costs of $12.1 million, of which $1,379.8 million, or 80.8% was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $327.9 million, or 19.2%, was variable-rate based upon LIBOR, SOFR or Prime rates plus certain spreads. As of June 30, 2024, we were party to 36 interest rate swaps and four interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $1,188.3 million and $151.2 million of variable-rate debt, respectively. For a discussion of the risks associated with the discontinuation of LIBOR, see Item 1A. “Risk Factors—Risks Related to Our Liquidity and Indebtedness on our Annual Report on Form 10-K for the year ended December 31, 2023 — If we decided to employ higher leverage levels, we would be subject to increased debt service requirements and a higher risk of default on our debt obligations, which could adversely affect our financial conditions, cash flows and ability to make distributions to our shareholders. In addition, increases or changes in interest rates could cause our borrowing costs to rise and may limit our ability to refinance debt.”
The following table sets forth information as of June 30, 2024 concerning our long-term debt obligations, including principal cash flows by scheduled maturity (without regard to available extension options) and weighted average effective interest rates of maturing amounts (dollars in millions):
Core Consolidated Mortgage and Other Debt
Year
Scheduled
Amortization
Maturities
Total
Weighted Average
Interest Rate
2024 (Remainder)
$
0.9
$
—
$
0.9
—
%
2025
2.0
—
2.0
—
%
2026
4.9
—
4.9
—
%
2027
4.8
200.1
204.9
4.6
%
2028
1.8
616.8
618.6
4.4
%
Thereafter
2.5
93.7
96.2
5.5
%
$
16.9
$
910.6
$
927.5
Fund Consolidated Mortgage and Other Debt
Year
Scheduled
Amortization
Maturities
Total
Weighted Average
Interest Rate
2024 (Remainder)
$
1.9
$
211.8
$
213.7
4.2
%
2025
1.2
409.7
410.9
7.3
%
2026
0.4
51.7
52.1
6.5
%
2027
0.5
43.4
43.9
8.2
%
2028
0.2
59.4
59.6
6.0
%
Thereafter
—
—
—
—
%
$
4.2
$
776.0
$
780.2
Mortgage Debt in Unconsolidated Partnerships (at our Pro-Rata Share)
Year
Scheduled
Amortization
Maturities
Total
Weighted Average
Interest Rate
2024 (Remainder)
$
6.7
$
52.9
$
59.6
5.0
%
2025
6.0
4.5
10.5
5.7
%
2026
6.1
60.9
67.0
6.7
%
2027
0.7
30.0
30.7
6.4
%
2028
—
12.4
12.4
5.9
%
Thereafter
—
—
—
—
%
$
19.5
$
160.7
$
180.2
Without regard to available extension options, in the remainder of 2024, $214.6 million of our total consolidated debt and $59.6 million of our pro-rata share of unconsolidated outstanding debt will become due. In addition, $412.9 million of our total consolidated debt and $10.5 million of our pro-rata share of unconsolidated debt will become due in 2025. As it relates to the aforementioned maturing debt in 2024 and 2025, we
54
have options to extend consolidated debt aggregating $40.0 million and $327.3 million, respectively; however, there can be no assurance that the Company will be able successfully execute any or all of its available extension options. As we intend on refinancing some or all of such debt at the then-existing market interest rates, which may be greater than the current interest rates, our interest expense would increase by approximately $6.9 million annually if the interest rate on the refinanced debt increased by 100 basis points. After giving effect to noncontrolling interests, our share of this increase would be $2.4 million. Interest expense on our variable-rate debt of $327.9 million, net of variable to fixed-rate swap agreements currently in effect, as of June 30, 2024, would increase $3.3 million if corresponding rate indices increased by 100 basis points. After giving effect to noncontrolling interests, our share of this increase would be $1.0 million. We may seek additional variable-rate financing if and when pricing and other commercial and financial terms warrant. As such, we would consider hedging against the interest rate risk related to such additional variable-rate debt through interest rate swaps and protection agreements, or other means.
Based on our outstanding debt balances as of June 30, 2024, the fair value of our total consolidated outstanding debt would decrease by approximately $7.1 million if interest rates increased by 1%. Conversely, if interest rates decreased by 1%, the fair value of our total outstanding debt would increase by approximately $6.6 million.
As of June 30, 2024, and December 31, 2023, we had consolidated notes receivable of $126.7 million and $124.9 million, respectively. We determined the estimated fair value of our notes receivable by discounting future cash receipts utilizing a discount rate equivalent to the rate at which similar notes receivable would be originated under conditions then existing.
Based on our outstanding notes receivable balances as of June 30, 2024, the fair value of our total outstanding notes receivable would decrease by approximately $0.7 million if interest rates increased by 1%. Conversely, if interest rates decreased by 1%, the fair value of our total outstanding notes receivable would increase by approximately $0.7 million.
Summarized Information as of December 31, 2023
As of December 31, 2023, we had total mortgage and other notes payable of $1,881.1 million, excluding the unamortized premium of $0.2 million and unamortized debt issuance costs of $11.2 million, of which $1,454.7 million, or 77.3%, was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $426.4 million, or 22.7%, was variable-rate based upon LIBOR rates plus certain spreads. As of December 31, 2023, we were party to 36 interest rate swap and three interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $1,249.8 million and $151.4 million of LIBOR or SOFR-based variable-rate debt, respectively.
Interest expense on our variable-rate debt of $426.4 million as of December 31, 2023, would have increased $4.3 million if corresponding rate indices increased by 100 basis points. Based on our outstanding debt balances as of December 31, 2023, the fair value of our total outstanding debt would have decreased by approximately $6.9 million if interest rates increased by 1%. Conversely, if interest rates decreased by 1%, the fair value of our total outstanding debt would have increased by approximately $6.6 million.
Changes in Market Risk Exposures from December 31, 2023 to June 30, 2024
Our interest rate risk exposure from December 31, 2023, to June 30, 2024, has decreased on an absolute basis, as the $426.4 million of variable-rate debt as of December 31, 2023 has decreased to $327.9 million as of June 30, 2024. As a percentage of our overall debt, our interest rate exposure has decreased as our variable-rate debt accounted for 22.7% of our consolidated debt as of December 31, 2023 compared to 19.2% as of June 30, 2024.
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