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Article by DailyStocks_admin    (02-11-09 04:34 AM)

Acadia Realty Trust. CEO KENNETH F BERNSTEIN bought 16190 shares on 1-30-2009 at $12.58

BUSINESS OVERVIEW

GENERAL
Acadia Realty Trust (the “Trust”) was formed on March 4, 1993 as a Maryland real estate investment trust (“REIT”). All references to “Acadia,” “we,” “us,” ”our,” and “Company” refer to Acadia Realty Trust and its consolidated subsidiaries. We are a fully integrated, self-managed and self-administered equity REIT focused primarily on the ownership, acquisition, redevelopment and management of retail properties, including neighborhood and community shopping centers and mixed-use properties with retail components. We currently operate 76 properties, which we own or have an ownership interest in. These assets are located primarily in the Northeast, Mid-Atlantic and Midwestern regions of the United States, which, in total, comprise approximately eight million square feet. We also have private equity investments in other retail real estate related opportunities including investments for which we provide operational support to the operating ventures in which we have a minority equity interest.
All of our investments are held by, and all of our operations are conducted through, Acadia Realty Limited Partnership (the “Operating Partnership”) and entities in which the Operating Partnership owns a controlling interest. As of December 31, 2007, the Trust controlled 98% of the Operating Partnership as the sole general partner. As the general partner, the Trust is entitled to share, in proportion to its percentage interest, in the cash distributions and profits and losses of the Operating Partnership. The limited partners represent entities or individuals, which contributed their interests in certain properties or entities to the Operating Partnership in exchange for common or preferred units of limited partnership interest (“Common OP Units” or “Preferred OP Units”). Limited partners holding Common OP Units are generally entitled to exchange their units on a one-for-one basis for our common shares of beneficial interest (“Common Shares”). This structure is referred to as an umbrella partnership REIT or “UPREIT”.
BUSINESS OBJECTIVES AND STRATEGIES
Our primary business objective is to acquire, develop and manage commercial retail properties that will provide cash for distributions to shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective:
– Own and operate a portfolio of community and neighborhood shopping centers and mixed-use properties with a retail component located in markets with strong demographics

– Generate internal growth within the portfolio through aggressive redevelopment, re-anchoring and leasing activities

– Generate external growth through an opportunistic yet disciplined acquisition program. The emphasis is on targeting transactions with high inherent opportunity for the creation of additional value through redevelopment and leasing and/or transactions requiring creative capital structuring to facilitate the transactions

– Partner with private equity investors for the purpose of making investments in operating retailers with significant embedded value in their real estate assets

– Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth
Investment Strategy — External Growth through Opportunistic Acquisition Platforms
The requirements that acquisitions be accretive on a long-term basis based on our cost of capital, as well as increase the overall portfolio quality and value, are core to our acquisition program. As such, we constantly evaluate the blended cost of equity and debt and adjust the amount of acquisition activity to align the level of investment activity with capital flows. We may also engage in discussions with public and private entities regarding business combinations. In addition to our direct investments in real estate assets, we have also capitalized on our expertise in the acquisition, redevelopment, leasing and management of retail real estate by establishing discretionary opportunity fund joint ventures in which we earn, in addition to a return on our equity interest and carried interest (“Promote”), fees and priority distributions for our services. To date, we have launched three discretionary opportunity fund joint ventures, Acadia Strategic Opportunity Fund, LP (“Fund I”), Acadia Strategic Opportunity Fund II, LLC (“Fund II”) and Acadia Strategic Opportunity Fund III, LLC (“Fund III”). Due to our control, we consolidate these funds.
Fund I
During September of 2001, we and four of our institutional shareholders formed a joint venture, Fund I, and during August of 2004 formed a limited liability company, Acadia Mervyn Investors I, LLC (“Mervyns I”), whereby the investors committed $70.0 million for the purpose of acquiring real estate assets. The Operating Partnership committed an additional $20.0 million in the aggregate to Fund I and Mervyns I, as the general partner with a 22% interest. In addition to a pro-rata return on its invested equity, the Operating Partnership is entitled to a Promote based upon certain investment return thresholds. Cash flow is distributed pro-rata to the partners (including the Operating Partnership) until they have received a 9% cumulative return (“Preferred Return”) on, and a return of all capital contributions.

Thereafter, remaining cash flow is distributed 80% to the partners (including the Operating Partnership) and 20% to the Operating Partnership as a Promote. The Operating Partnership also earns fees and/or priority distributions for asset management services equal to 1.5% of the allocated invested equity, as well as for property management, leasing and construction services. All such fees and priority distributions are reflected as a reduction in the minority interest share in income from opportunity funds in the Consolidated Financial Statements beginning on page F-1 of this Form 10-K.
Our acquisition program was executed primarily through Fund I through June 2004. Fund I focused on targeting assets for acquisition that had superior in-fill locations, restricted competition due to high barriers of entry and in-place below-market anchor leases with the potential to create significant additional value through re-tenanting, timely capital improvements and property redevelopment.
On January 4, 2006, Fund I recapitalized a one million square foot retail portfolio located in Wilmington Delaware (“Brandywine Portfolio”) through a merger of interests with affiliates of GDC Properties (“GDC”). The Brandywine Portfolio was recapitalized through a “cash-out” merger of the 77.8% interest, which was previously held by the institutional investors in Fund I, to GDC at a valuation of $164.0 million. The Operating Partnership, through a subsidiary, retained its existing 22.2% interest and continues to operate the Brandywine Portfolio and earn fees for such services. At the closing of the merger, the Fund I investors received a return of all of their capital invested in Fund I and their unpaid preferred return, thus triggering the payment to the Operating Partnership of its additional 20% Promote in all future Fund I distributions. During June 2006, the Fund I investors received $36.0 million of additional proceeds from this transaction following the replacement of bridge financing which they provided, with permanent mortgage financing, triggering $7.2 million in additional Promote due the Operating Partnership, which was paid from the Fund I investor’s share of the remaining assets in Fund I.
As of December 31, 2007, there were 29 assets comprising approximately 1.5 million square feet remaining in Fund I in which the Operating Partnership’s interest in cash flow and income has increased from 22.2% to 37.8% as a result of the Promote.
Fund II
Following our success with Fund I, during June of 2004 we formed a second, larger acquisition joint venture, Fund II, and during August of 2004, formed Acadia Mervyn Investors II, LLC (“Mervyns II”), with the investors from Fund I as well as two additional institutional investors. With $300.0 million of committed discretionary capital, Fund II and Mervyns II, combined, expect to be able to acquire up to $900.0 million of real estate assets on a leveraged basis. The Operating Partnership is the managing member with a 20% interest in Fund II and Mervyns II. The terms and structure of Fund II and Mervyns II are substantially the same as Fund I and Mervyns I with the exception that the Preferred Return is 8%. As of December 31, 2007, $182.0 million of Fund II’s capital was invested and the balance of $118.0 million was committed to existing investments.
As the demand for retail real estate has significantly increased in recent years, there has been a commensurate increase in selling prices. In an effort to generate superior risk-adjusted returns for our shareholders and fund investors, we have channeled our acquisition efforts through Fund II in two opportunistic strategies described below – the Retailer Controlled Property Venture and the New York Urban Infill Redevelopment Initiative.
Retailer Controlled Property Venture (the “RCP Venture”)
On January 27, 2004, through Funds I and II, we entered into the RCP Venture with Klaff Realty, L.P. (“Klaff”) and Lubert-Adler Management, Inc. (“Lubert-Adler”) for the purpose of making investments in surplus or underutilized properties owned by retailers. The expected size of the RCP Venture is approximately $300 million in equity, of which our share is $60 million, based on anticipated investments of approximately $1 billion. Each participant in the RCP Venture has the right to opt out of any potential investment. Affiliates of Mervyns I and II and Fund II have invested $55.4 million in the RCP Venture to date on a non-recourse basis. While we are not required to invest any additional capital into any of these investments, should additional capital be required and we elect not to contribute our share, our proportionate share in the investment will be reduced. As Fund I is fully invested, Fund II and Fund III will provide the remaining portion of our original share of the equity in future RCP Venture investments. Cash flow from any RCP investment is to be distributed to the partners until they have received a 10% cumulative return and a full return of all contributions. Thereafter, remaining cash flow is to be distributed 20% to Klaff (“Klaff’s Promote”) and 80% to the participants (including Klaff). The Operating Partnership may also earn market-rate fees for property management, leasing and construction services on behalf of the RCP Venture. While we are primarily a passive partner in the investments made through the RCP Venture, historically we have provided our support on reviewing potential acquisitions and operating and redevelopment assistance in areas where we have both a presence and expertise. We seek to invest opportunistically with the RCP Venture primarily in the following four ways:
– Invest in operating retailers through private equity joint ventures

– Work with financially healthy retailers to create value from their surplus real estate

– Acquire properties, designation rights or other control of real estate or leases associated with retailers in bankruptcy

– Complete sale leasebacks with retailers in need of capital
During 2004, we made our first RCP Venture investment with our participation in the acquisition of Mervyns. During 2006 and 2007, we made additional investments as further discussed in “—PROPERTY ACQUISITIONS” below.

New York Urban/Infill Redevelopment Initiative
During September of 2004, through Fund II, we launched our New York Urban Infill Redevelopment initiative. As retailers continue to recognize that many of the nation’s urban markets are underserved from a retail standpoint, we are poised to capitalize on this trend by investing in redevelopment projects in dense urban areas where retail tenant demand has effectively surpassed the supply of available sites. During 2004, Fund II, together with an unaffiliated partner, P/A Associates, LLC (“P/A”), formed Acadia-P/A Holding Company, LLC (“Acadia-P/A”) for the purpose of acquiring, constructing, developing, owning, operating, leasing and managing certain retail or mixed-use real estate properties in the New York City metropolitan area. P/A agreed to invest 10% of required capital up to a maximum of $2.2 million and Fund II, the managing member, agreed to invest the balance to acquire assets in which Acadia-P/A agrees to invest. See Item 7 of this Form 10K for further information on the Acadia P/A Joint Venture as detailed in “Liquidity and Capital Resources”. To date, Fund II has invested in nine projects, eight of which are in conjunction with P/A, as discussed further in “—PROPERTY ACQUISITIONS” below.
Fund III
Following the success of Fund I and the full investment of Fund II, we formed a third discretionary opportunity fund, Acadia Strategic Opportunity Fund III, LLC (“Fund III”) during 2007, with fourteen institutional investors, including a majority of the investors from Fund I and Fund II. With $503.0 million of committed discretionary capital, Fund III expects to be able to acquire or develop approximately $1.5 billion of assets on a leveraged basis. The Operating Partnership’s share of the committed capital is $100.0 million and it is the sole managing member with a 19.9% interest in Fund III. The terms and structure of Fund III are substantially the same as the previous Funds, including the Promote structure, with the exception that the Preferred Return is 6%. To date, Fund III has invested in two projects, one of which is under our New York Urban Infill Redevelopment Program, as discussed further in “PROPERTY ACQUISITIONS” in this Item 1 of this Form 10-K.
Other Investments
We may also invest in preferred equity investments, mortgage loans, other real estate interests and other investments. The mortgage loans in which we invest may be either first or second mortgages, where we believe the underlying value of the real estate collateral is in excess of its loan balance. As of December 31, 2007 our investments in first mortgages and mezzanine debt aggregated $57.7 million.
Capital Strategy — Balance Sheet Focus and Access to Capital
Our primary capital objective is to maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth. We intend to continue financing acquisitions and property redevelopment with sources of capital determined by management to be the most appropriate based on, among other factors, availability, pricing and other commercial and financial terms. The sources of capital may include the issuance of public equity, unsecured debt, mortgage and construction loans, and other capital alternatives including the issuance of Operating Partnership Units. We manage our interest rate risk primarily through the use of fixed rate-debt and, where we use variable rate debt, we use certain derivative instruments, including LIBOR swap agreements and interest rate caps as discussed further in Item 7A of this Form 10-K.
During December of 2006 and January of 2007, we issued $115.0 million of 3.75% unsecured Convertible Notes (the “Notes”). Interest on the Notes is payable semi-annually. The Notes have an initial conversion rate of 32.4002 of our Common Shares for each $1,000 principal amount, representing a conversion price of approximately $30.86 per Common Share, or a conversion premium of approximately 20.0% based upon our Common Share price on the date of the issuance of the Notes. The Notes are redeemable for cash up to their principal amount plus accrued interest and, at our option, cash, our Common Shares, or a combination thereof with respect to the remainder, if any, of the conversion value in excess of the principal amount. The Notes mature December 15, 2026, although the holders of the Notes may require the Company to repurchase their Notes, in whole or in part, on December 20, 2011, December 15, 2016, and December 15, 2021. After December 20, 2011, we have the right to redeem the Notes in whole or in part at any time. The $112.1 million in proceeds, net of related costs, were used to retire variable rate debt, provide for future Fund capital commitments and for general working capital purposes.
During January 2007, we filed a shelf registration on Form S-3 providing for offerings of up to a total of $300.0 million of Common Shares, Preferred Shares and debt securities. To date, we have not issued any securities pursuant to this shelf registration.
Common and Preferred OP Unit Transactions
On January 27, 2004, we issued 4,000 Series B Preferred OP Units to Klaff in connection with the acquisition from Klaff of its rights to provide asset management, leasing, disposition, development and construction services for an existing portfolio of retail properties. These units have a stated value of $1,000 each and are entitled to a quarterly preferred distribution of the greater of (i) $13.00 (5.2% annually) per Preferred OP Unit or (ii) the quarterly distribution attributable to a Preferred OP Unit if such unit were converted into a Common OP Unit. The Preferred OP Units are convertible into Common OP Units based on the stated value of $1,000 divided by 12.82 at any time. Klaff may redeem them at par for either cash or Common OP Units (at our option). In 2007, Klaff converted all 4,000 Series B Preferred OP Units into 312,013 Common OP Units and ultimately into Common Shares.

Effective February 15, 2005, we acquired the balance of Klaff’s rights to provide the above services as well as certain potential future revenue streams. The consideration for this acquisition was $4.0 million in the form of 250,000 restricted Common OP Units, valued at $16 per unit, which are convertible into our Common Shares on a one-for-one basis after a five-year lock-up period. As part of this transaction we also assumed all operational and redevelopment responsibility for the Klaff Properties a year earlier than was contemplated in the January 2004 transaction.
Operating Strategy — Experienced Management Team with Proven Track Record
Our senior management team has decades of experience in the real estate industry. We believe our management team has demonstrated the ability to create value internally through anchor recycling, property redevelopment and strategic non-core dispositions. Our team has built several successful acquisition platforms including our New York Urban Infill Redevelopment Initiative and RCP Venture. We have also capitalized on our expertise in the acquisition, redevelopment, leasing and management of retail real estate by establishing joint ventures, such as Funds I, II and III, in which we earn, in addition to a return on our equity interest and Promote, fees and priority distributions.
Operating functions such as leasing, property management, construction, finance and legal (collectively, the “Operating Departments”) are provided by our personnel, providing for fully integrated property management and development. By incorporating the Operating Departments in the acquisition process, acquisitions are appropriately priced giving effect to each asset’s specific risks and returns. Also, because of the Operating Departments involvement with, and corresponding understanding of, the acquisition process, transition time is minimized and management can immediately execute on its strategic plan for each asset.
We typically hold our core properties for long-term investment. As such, we continuously review the existing portfolio and implement programs to renovate and modernize targeted centers to enhance the property’s market position. This in turn strengthens the competitive position of the leasing program to attract and retain quality tenants, increasing cash flow and consequently property value. We also periodically identify certain properties for disposition and redeploy the capital to existing centers or acquisitions with greater potential for capital appreciation. Our core portfolio consists primarily of neighborhood and community shopping centers, which are generally dominant centers in high barrier-to-entry markets. The anchors at these centers typically pay market or below-market rents. Furthermore, supermarket and necessity-based retailers anchor the majority of our core portfolio. These attributes enable our properties to better withstand a weakening economy while also creating opportunities to increase rental income.
During 2007, 2006 and 2005 we sold seven non-core properties and redeployed the capital to acquire seven retail properties as further discussed in “—ASSET SALES AND CAPITAL/ASSET RECYCLING” below.
PROPERTY ACQUISITIONS
RCP Venture
Albertson’s
In June 2006, the RCP Venture made its second major investment with its participation in the acquisition of 699 stores from Albertson’s, the nation’s 2 nd largest grocery and drug chain and 26 Cub Food stores. The total price paid by the investment consortium, which included Cerberus, Schottenstein and Kimco Realty, to Albertson’s for the portfolio was $1.9 billion, which was funded with $0.3 billion of equity and $1.6 billion of financing. Mervyns II’s share of equity invested totaled $20.7 million. The Operating Partnership’s share was $4.2 million. As with the Mervyns investment (see below), we anticipate investing in Albertsons add-on real estate opportunities.
During February of 2007, Mervyns II received cash distributions totaling approximately $44.4 million from its ownership position in Albertsons. The Operating Partnership’s share of this distribution amounted to approximately $8.9 million. The distributions primarily resulted from proceeds received by Albertsons in connection with its disposition of certain stores, refinancing of the remaining assets held in the entity and excess cash from operations. Mervyns II received additional distributions from this investment totaling $8.8 million during the balance of the year ended December 31, 2007. The Operating Partnership’s share of these distributions was $1.0 million.
For the years ended December 31, 2007 and 2006, Mervyns II made additional add-on investments in Albertson’s totaling $2.8 million and received distributions totaling $0.8 million in the aggregate from these add-on investments. The Operating Partnership’s share of such amounts was $0.4 million and $0.1 million, respectively.

Mervyns Department Stores
In September 2004, we made our first RCP Venture investment with our participation in the acquisition of Mervyns. Through Mervyns I and Mervyns II, we invested in the acquisition of Mervyns as part of an investment consortium of Sun Capital and Cerberus that acquired Mervyns from Target Corporation. As of the date of acquisition, Mervyns was a 257-store discount retailer with a very strong West Coast concentration. The total acquisition price was approximately $1.2 billion which was financed with $800 million of debt and $400 million of equity. Mervyns I and Mervyns II share of equity invested aggregated $23.9 million on a non-recourse basis and was divided equally between them. The Operating Partnership’s share was $4.9 million. During November 2007, Mervyns II made an additional investment of $2.2 million in Mervyns.
For the year ended December 31, 2005, Mervyns I and Mervyns II made add-on investments in Mervyns properties totaling $1.3 million. The Operating Partnerships share of this amount was $0.3 million.
During 2005, Mervyns made a distribution to the investors from the proceeds from the sale of a portion of the portfolio and the refinancing of existing debt, of which a total of $42.7 million was distributed to Mervyns I and Mervyns II. The Operating Partnership’s share of this distribution amounted to $10.2 million. In addition, during 2006, Mervyns distributed additional cash totaling $4.6 million. The Operating Partnership’s share of this distribution totaled $1.4 million.

New York Urban/Infill Redevelopment Initiative
Sheepshead Bay - During November of 2007, Fund III acquired a property in Sheepshead Bay, Brooklyn for approximately $20.0 million. Our redevelopment plan includes the demolition of the existing structures and the construction of a 240,000 square foot shopping center on the site. The total cost of the redevelopment, including acquisition costs, is expected to be approximately $109.0 million.
Canarsie — During October of 2007, Acadia P/A acquired a 530,000 square foot warehouse building in Canarsie, Brooklyn for approximately $21.0 million. The development plan for this property includes the demolition of a portion of the warehouse and the construction of a 320,000 square foot mixed-use project consisting of retail, office, cold-storage and self-storage. The total cost of the redevelopment, including acquisition costs, is expected to be approximately $70.0 million.

CityPoint – During February of 2007, Acadia-P/A entered into an agreement for the purchase of the leasehold interest in The Gallery at Fulton Street in downtown Brooklyn. The fee position in the property is owned by the City of New York and the agreement includes an option to purchase this fee position at a later date. Acadia P/A has partnered with MacFarlane Partners (“MacFarlane”) to co-develop the project. On June 13, 2007, Acadia P/A and MacFarlane acquired the leasehold interest for approximately $115.0 million. Redevelopment plans for the property, renamed as CityPoint, include the demolition of the existing structure and the development of a 1.6 million square foot mixed-use complex. The proposed development calls for the construction of a combination of retail, office and residential components, all of which are currently allowed as of right. Acadia P/A, together with MacFarlane, will develop and operate the retail component, which is anticipated to total 475,000 square feet of retail space. Acadia P/A will also participate in the development of the office component with MacFarlane, which is expected to include at least 125,000 square feet of office space. MacFarlane plans to develop and operate up to 1,000 residential units with underground parking. Acadia P/A does not plan on participating in the development of, or have an ownership interest in, the residential component of the project.
Atlantic Avenue – During May 2007, we, through Fund II and in partnership with a self-storage partner at several of the other New York urban projects, acquired a property on Atlantic Avenue in Brooklyn, New York for $5.0 million. Redevelopment plans for the property call for the demolition of the existing structure and the construction of a modern climate controlled self-storage facility consisting of approximately 110,000 square feet.
Liberty Avenue — On December 20, 2005, Acadia-P/A acquired the remaining 40-year term of a leasehold interest in land located at Liberty Avenue and 98 th Street in Queens (Ozone Park). Development of this project is complete and includes approximately 30,000 square feet of retail anchored by a CVS drug store, which is open and operating. The project also includes a 95,000 square foot self-storage facility, which is open and currently operated by Storage Post. Storage Post is a partner in the self-storage complex, and is anticipated to be a partner in future retail projects in New York City where self-storage will be a potential component of the redevelopment. The total cost to Acadia P/A of the redevelopment was approximately $15 million.
216 th Street — On December 1, 2005, Acadia-P/A acquired a 65,000 square foot parking garage located at 10 th Avenue and 216 th Street in the Inwood section of Manhattan for $7.0 million. During 2007, construction of the 60,000 square foot office building was completed and we relocated an agency of the City of New York, which was a tenant at another of our Urban/Infill Redevelopment projects. Inclusive of acquisition costs, total costs to Acadia P/A for the project, which also includes a 100-space rooftop parking deck, was approximately $27 million.
161 st Street — On August 5, 2005, Acadia-P/A purchased 244-268 161 st Street located in the Bronx for $49.3 million, inclusive of closing costs. The ultimate redevelopment plan for the property, a 100% occupied, 10-story office building, is to reconfigure the property so that approximately 50% of the income from the building will eventually be derived from retail tenants. Additional redevelopment costs to Acadia P/A are anticipated to be approximately $16 million.
4650 Broadway — On April 6, 2005, Acadia-P/A acquired 4650 Broadway located in the Washington Heights/Inwood section of Manhattan. The property, a 140,000 square foot building, which was occupied by an agency of the City of New York and a commercial parking garage, was acquired for a purchase price of $25.0 million. During 2007 we relocated the office tenant to Acadia P/A’s 216 th St. redevelopment as discussed above. We are currently reviewing various alternatives to redevelop the site to include retail and office components totaling over 216,000 square feet. Expected costs for Acadia P/A to complete the redevelopment are estimated at $30.0 million.
Pelham Manor — On October 1, 2004, Acadia-P/A entered into a 95-year, inclusive of extension options, ground lease to redevelop a 16-acre site in Pelham Manor, Westchester County, New York. We have demolished the existing industrial and warehouse buildings, and are constructing a multi-anchor community retail center at a total estimated cost of $45.0 million.
Fordham Road — On September 29, 2004, Acadia-P/A purchased 400 East Fordham Road, Bronx, New York. Sears, a former tenant that operated on four levels at this property, has signed a new lease to occupy only the concourse level after redevelopment. We have commenced redevelopment at this site, which is expected to include four levels of retail and office space totaling 285,000 square feet when completed. The total cost of the project to Acadia P/A, including the acquisition cost of $30 million, is expected to be $120.0 million.
Other investments
In addition to the New York Urban/Infill projects discussed above, through Fund II and Fund III, we also acquired the following:
During November 2007, Fund III acquired 125 Main Street, Westport, Connecticut for approximately $17.0 million. Our plan is to redevelop the existing building into 30,000 square feet of retail, office and residential use.
During November 2005, Fund II acquired a ground lease interest in a 112,000 square foot building occupied by Neiman Marcus. The property is located at Oakbrook Center, a super-regional Class A mall located in the Chicago Metro area. The ground lease was acquired for $6.9 million, including closing and other acquisition costs.
During July 2005, Fund II acquired for $1.0 million, a 50% equity interest in an entity which has a leasehold interest in a former Levitz Furniture store located in Rockville, Maryland.

CEO BACKGROUND

Kenneth F. Bernstein, age 46, has been Chief Executive Officer of the Company since January of 2001. He has been President and Trustee of the Company since August 1998, when the Company acquired substantially all of the assets of RD Capital, Inc. (“RDC”) and affiliates. Mr. Bernstein is responsible for strategic planning as well as overseeing the day-to-day activities of the Company including operations, acquisitions and capital markets. From 1990 to August 1998, Mr. Bernstein was the Chief Operating Officer of RDC. In such capacity, he was responsible for overseeing the day-to-day operations of RDC, its management companies, and its affiliated partnerships. Prior to joining RDC, Mr. Bernstein was an associate at the New York law firm of Battle Fowler, LLP, from 1986 to 1990. Mr. Bernstein received his Bachelor of Arts Degree from the University of Vermont and his Juris Doctorate from Boston University School of Law. Mr. Bernstein also serves on the Board of Directors for BRT Realty Trust. Mr. Bernstein is also a member of the National Association of Corporate Directors (“NACD”), International Council of Shopping Centers (“ICSC”), National Association of Real Estate Investment Trusts (“NAREIT”), for which he serves on the Board of Governors, Urban Land Institute (“ULI”), and the Real Estate Roundtable. Mr. Bernstein is also a member of the Young President’s Organization (“YPO”), where he is the chairman of the Real Estate Network.

Douglas Crocker II, age 68, has been a Trustee of the Company since November 2003. Mr. Crocker was most recently the Chief Executive Officer of Equity Residential, a multi-family residential real estate investment trust (“REIT”), from December 1992 until his retirement in December of 2002. During Mr. Crocker’s tenure, Equity Residential grew from 21,000 apartments with a total market capitalization of $700 million to a $17 billion company with over 225,000 apartments. Mr. Crocker was also a former Managing Director of Prudential Securities, and from 1982 to 1992 served as Chief Executive Officer of McKinley Finance Group, a privately held company involved with real estate, banking and corporate finance. From 1979 to 1982 Mr. Crocker was President of American Invesco, the nation’s largest condominium conversion company, and from 1969 to 1979 served as Vice President of Arlen Realty and Development Company. He currently sits on the boards of real estate companies Ventas, REIS, Inc., Post Properties and also serves on the board NMHC. Mr. Crocker has been a five-time recipient of Commercial Property News’ Multifamily Executive of the Year Award, a three-time winner of their REIT Executive of the Year Award and three-time winner of Realty Stock Review’s Outstanding CEO Award. He has over forty years of real estate experience. Mr. Crocker is also a member of the NACD.

Suzanne M. Hopgood, age 58, from 1979 through 1985 was responsible for overseeing a $1 billion equity real estate investment portfolio for Aetna Realty Investors prior to founding The Hopgood Group, LLC, a provider of consulting and interim management services. Since 2008, she has also been the Director of Board Advisory Services of the NACD, providing Institutional Shareholder Services (“ISS”) approved in-boardroom courses to about 100 public companies per year. She is currently developing residential property in Hartford, Connecticut and has over 25 years of real estate experience. She currently serves on the board of PointBlank Industries Inc., a manufacturer of protective gear for the military and law enforcement agencies and Newport Harbor Corporation, both since 2007. She has served as Chairman of the Board of two public companies: Del Global Technologies (DGTC) (2003 through 2005) and Furr’s Restaurant Group, Inc. (NYSE: FRG) (1998 through 2000). She has served as Chairman of an audit committee and she is an audit committee financial expert as that term is defined by the Securities and Exchange Commission (“SEC”). She has also served as the Chief Executive Officer of both public and private companies. Ms. Hopgood has extensive experience in workouts, turnarounds and restructurings. She is an NACD Certified Director and co-authored the award-winning, “Board Leadership for the Company in Crisis”. She is on the faculty of NACD and teaches ISS approved courses for NACD.

Lorrence T. Kellar, age 70, has been a Trustee of the Company since November 2003 and is an audit committee financial expert under rules promulgated by the SEC. Mr. Kellar is currently Vice President, Retail Development for Continental Properties and is a director of Multi-Color Corporation (Chairman), Frisch’s Restaurants and Spar Group, Inc. Prior to joining Continental Properties in November of 2002, Mr. Kellar served as Vice President of Real Estate with Kmart Corporation from 1996 to 2002. From 1965 to 1996, Mr. Kellar served with The Kroger Co., the country’s largest supermarket company, where his final position was Group Vice President of Finance and Real Estate. Mr. Kellar is also a member of the NACD.

Wendy Luscombe, age 56, has been a Trustee of the Company since 2004. She is Principal of WKL Associates, Inc., a real estate investment manager and consultant founded in 1994. Ms. Luscombe has managed investment portfolios totaling $5 billion over the last 25 years and has represented foreign investors including UK Prudential and British Coal Pension Funds in their United States real estate investment initiatives. For 10 years she was Chief Executive Officer of Pan American Properties, Inc., a REIT sponsored by British Coal Pension Funds. She was also a member of the Board of Governors of the NAREIT. Ms. Luscombe has served on various boards of public companies in both the United States and United Kingdom for nearly 25 years and is an audit committee financial expert. She was formerly a Board Member, Chairman of the Investment Committee and member of the audit committee for PXRE Group Ltd., a New York Stock Exchange listed reinsurance company. She resigned from her positions with PXRE Group Ltd. in August 2007 when the company merged with Argonaut Group, but was appointed an outside director of PXRE Reinsurance Company, the United States subsidiary of PXRE Group Ltd. She also serves as Co-Lead Director, Executive Committee Member and Audit Committee member for the Zweig Fund and Zweig Total Return Fund, public closed-end mutual funds. Additionally, she serves as Chairman of the Management Oversight Committee for the Deutsche Bank International Real Estate Opportunities Fund and as Board Member for Endeavour Real Estate Securities and Amadeus Real Estate Securities (Ireland) both private REIT mutual funds. She was also a Board Member for the Commission of New Towns in the United Kingdom. She was previously a Board Member for Endeavour Real Estate Securities a private REIT mutual fund. Ms. Luscombe is also a member of the NACD and an NACD Certified Director and a member of NACD’s teaching faculty, a member of the International Corporate Governance Network, a Fellow of the Royal Institution of Chartered Surveyors and a Member of the Chartered Institute of Arbitrators.

William T. Spitz, age 56, has been a Trustee of the Company since August 2007. He was Vice Chancellor for Investments and Treasurer of Vanderbilt University, Nashville, Tennessee from 1985 to July 2007. As Vice Chancellor for Investments at Vanderbilt Mr. Spitz was responsible for managing the University’s $3.5 billion endowment. He was also a member of the Senior Management Group of the University, which is responsible for the day-to-day operations of the institution. During his tenure, the Vanderbilt endowment earned returns in the top 5% of a broad universe of endowments for multiple time frames. While at Vanderbilt, Mr. Spitz: conducted asset allocation studies and implemented detailed investment objectives and guidelines, developed a comprehensive risk management plan, invested in approximately two hundred limited partnerships in five illiquid assets classes, selected new custodians for both the endowment fund and the University’s charitable remainder trusts and implemented a more aggressive approach to working capital management which increased returns by 2% per annum. In addition, Mr. Spitz was also on the faculty of Vanderbilt University as Clinical Professor of Management-Owen Graduate School of Management. He has also held various high-level positions with successful asset management companies and has served on the Board of several companies, including Cambium Global Timber Fund, The Common Fund, Diversified Trust Company and the Bradford Fund. He has also served on multiple advisory committees, including Acadia’s Opportunity Fund Advisory Boards, on which he served from 2001 to July 2007. Mr. Spitz is a published author and frequent speaker at industry conferences and seminars.

Lee S. Wielansky, age 56, has been a Trustee of the Company since May 2000. Mr. Wielansky has been Chairman and Chief Executive Officer of Midland Development Group, Inc., which focuses on the development of retail properties in the mid-west and southeast, since May 2003. From November 2000 to March 2003, Mr. Wielansky served as Chief Executive Officer and President of JDN Development Company, Inc. and a director of JDN Realty Corporation through its merger with Developers Diversified Realty Corporation in 2003. He was also a founding partner and Chief Executive Officer of Midland Development Group, Inc. from 1983 through 1998 when the company was sold to Regency Centers Corporation. Mr. Wielansky serves as the Chairman of the Board of Directors of Pulaski Bank and is a Director for Isle of Capri Casinos, Inc. Mr. Wielansky is also a member of the NACD.

MANAGEMENT DISCUSSION FROM LATEST 10K

OVERVIEW
As of December 31, 2007, we operated 76 properties, which we own or have an ownership interest in, within our Core Portfolio or within our Opportunity Funds I, II and III. These properties consist of 75 commercial properties, primarily neighborhood and community shopping centers and mixed-use developments, which are located primarily in the Northeast, Mid-Atlantic and Midwestern regions of the United States and one multi-family property located in Southeast region of the United States. Our Core Portfolio consists of 34 properties comprising approximately 5.5 million square feet. Fund I has 29 properties comprising approximately 1.5 million square feet. Fund II has ten properties, the majority of which are undergoing redevelopment and will have approximately two million square feet upon completion of redevelopment activities. The newly created Fund III has two properties, which are undergoing redevelopment and will have approximately 0.3 million square feet upon completion of redevelopment activities. The majority of our operating income derives from the rental revenues from these properties, including recoveries from tenants, offset by operating and overhead expenses. As our RCP Venture invests in operating companies, we consider these investments to be private-equity, as opposed to real estate investments. Since these are not traditional investments in operating rental real estate, the Operating Partnership invests in these through a taxable REIT subsidiary (“TRS”).
Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective:
– Own and operate a portfolio of community and neighborhood shopping centers and mixed-use properties with a retail component located in markets with strong demographics.

– Generate internal growth within the portfolio through aggressive redevelopment, re-anchoring and leasing activities.

– Generate external growth through an opportunistic yet disciplined acquisition program. The emphasis is on targeting transactions with high inherent opportunity for the creation of additional value through redevelopment and leasing and/or transactions requiring creative capital structuring to facilitate the transactions.

– Partner with private equity investors for the purpose of making investments in operating retailers with significant embedded value in their real estate assets.

– Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth.

East Service Road, 2914 Third Avenue and Chestnut Hill (“2006/2007 Acquisitions”) as well as Liberty Avenue and 216 th Street being placed in service January 1, 2007 and October 1, 2007, respectively. In addition, minimum rents increased as a result of re-tenanting activities across our portfolio.
Percentage rents decreased primarily as a result of the temporary closing of an anchor tenant at Fordham Place during the construction period in 2007.
Expense reimbursements for common area maintenance (“CAM”) decreased $0.2 million. During 2007, we completed our multi-year review of CAM billings and resolved the majority of all outstanding CAM billing issues with our tenants. As a result, 2007 was adversely impacted by charges related to settlements and related adjustments totaling $1.0 million. This was partially offset by higher CAM recovery resulting from increased snow removal costs in 2007. Real estate tax reimbursements decreased $1.0 million, primarily as a result of lower real estate tax expense in 2007 and a $0.4 million real estate tax charge to an anchor tenant for previous years billed during 2006.
Management fee income decreased $1.5 million primarily as a result of lower fees earned in connection with Klaff management contracts following the disposition of certain assets in 2006 and 2007 and lower management fees from our investments in unconsolidated affiliates.
The increase in interest income was attributable to interest income on notes and other advances receivable originated in the second half of 2006 and 2007 as well as higher balances in interest earning assets in 2007.
The decrease in other income was primarily attributable to a $1.1 million reimbursement of certain fees by the institutional investors of Fund I for the Brandywine Portfolio in 2006 as well as $0.5 million of additional income related to termination of interest rate swap agreements.

The increase in property operating expenses was primarily the result of the 2006/2007 Acquisitions, Liberty Avenue being placed in service January 1, 2007 and higher snow removal costs of $1.0 million in 2007.
The decrease in real estate taxes was due to tax refunds and adjustments of estimates of $0.6 million recorded in 2007 and $0.6 million related to the capitalization of construction period real estate taxes at a property that was operating in 2006. These decreases were offset by increased real estate tax expense of $0.8 million following the 2006/2007 Acquisitions as well as general increases across the portfolio.
The variance in general and administrative expense was attributable to increased compensation expense, including share based compensation of $4.7 million for additional personnel hired in the second half of 2006 and in 2007 as well as increases in existing employee salaries. In addition, there was an increase of $0.7 million for other overhead expenses following the expansion of our infrastructure related to increased fund investments and asset management services. These factors were partially offset by an increase in capitalized construction salaries due to higher redevelopment activities in 2007.

Equity in earnings of unconsolidated affiliates increased as a result of our distributions in excess of our invested capital from both our Albertson’s investment of $2.4 million and our investment in Hitchcock Plaza of $2.4 million. These increases were offset by a decrease in our pro rata share of earnings from our Mervyns investment of $1.3 million.
Interest expense increased $2.4 million in 2007. This was the result of a $4.9 million increase attributable to higher average outstanding borrowings in 2007 and $0.4 million of costs associated with a loan payoff in 2007. These increases were offset by a $2.9 million decrease resulting from a lower average interest rate on the portfolio mortgage debt in 2007.
The variance in minority interest is primarily attributable to the minority partners’ share of increased fund level fees partially offset by $2.6 million representing the minority partners’ share of the income reported from the equity in earnings of unconsolidated affiliates.
The variance in income tax expense primarily relates to income tax on our share of income and losses from Albertson’s and Mervyns.
Income from discontinued operations represents activity related to properties sold in 2007 and 2006.
The extraordinary gain in 2007 relates to our share of the extraordinary gain, net of income taxes and minority interest, from our Albertson’s investment. This gain was characterized as extraordinary consistent with the accounting treatment by Albertson’s which reflected the excess of fair value of net assets acquired over the purchase price as an extraordinary gain.

LIQUIDITY AND CAPITAL RESOURCES
Uses of Liquidity
Our principal uses of liquidity are expected to be for (i) distributions to our shareholders and OP unit holders, (ii) investments which include the funding of our capital committed to our opportunity funds, property acquisitions and redevelopment/re-tenantin g activities within our existing portfolio and (iii) debt service and loan repayments.
Distributions
In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. For the first three quarters during 2007, we paid a quarterly dividend of $0.20 per Common Share and Common OP Unit. In December of 2007, our Board of Trustees approved and declared an 5.0% increase in our quarterly dividend to $0.21 per Common Share and Common OP Unit for the fourth quarter of 2007, which was paid January 15, 2008. In addition, in December of 2007, our Board of Trustees approved a special dividend of $0.2225 per Common Share in connection with taxable gains arising from property dispositions that was paid on January 15, 2008 to the shareholders of record as of December 31, 2007.
Fund I and Mervyns I
In September 2001, the Operating Partnership committed $20.0 million to a newly formed opportunity fund with four of our institutional shareholders, who committed $70.0 million, for the purpose of acquiring a total of approximately $300.0 million of community and neighborhood shopping centers on a leveraged basis.
On January 4, 2006, we recapitalized a one million square foot retail portfolio located in Wilmington, Delaware (“Brandywine Portfolio”) through a merger of interests with affiliates of GDC Properties (“GDC”). The Brandywine Portfolio was recapitalized through a “cash out” merger of the 77.8% interest, which was previously held by the institutional investors in Fund I (the “Investors”) to affiliates of GDC at a valuation of $164.0 million. The Operating Partnership, through a subsidiary, retained our existing 22.2%

interest and continues to operate the Brandywine Portfolio and earn fees for such services. At the closing, the Investors, excluding the Operating Partnership, received a return of all their capital invested in Fund I and preferred return, thus triggering the Operating Partnership’s Promote distribution in all future Fund I distributions and increasing the Operating Partnership’s interest in cash flow and income from 22.2% to 37.8% as a result of the Promote. In June 2006, the Investors received $36.0 million of additional proceeds from this transaction following the replacement of bridge financing provided by them with permanent mortgage financing.
As of December 31, 2007, Fund I has a total of 29 properties totaling 1.5 million square feet as further discussed in “PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K.
Fund II and Mervyns II
On June 15, 2004, we closed our second opportunity fund, Fund II, and during August 2004, formed Mervyns II with the investors from Fund I as well as two additional institutional investors. With $300.0 million of committed discretionary capital, Fund II and Mervyns II combined expect to be able to acquire up to $900.0 million of real estate assets on a leveraged basis. The Operating Partnership is the managing member with a 20% interest in the joint venture. The terms and structure of Fund II are substantially the same as Fund I with the exceptions that the preferred return is 8%. As of December 31, 2007, $182.0 million had been contributed to Fund II, of which the Operating Partnership’s share is $36.4 million.
Fund II has invested in the RCP Venture and the New York Urban/Infill Redevelopment initiatives and other investments as further discussed in “PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K .

MANAGEMENT DISCUSSION FOR LATEST QUARTER

The following discussion is based on the consolidated financial statements of the Company as of September 30, 2008 and 2007 and for the three and nine months then ended. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results performance or achievements expressed or implied by such forward-looking statements. Such factors are set forth under the heading “Item 1A. Risk Factors” in our Form 10-K for the year ended December 31, 2007 and Item 1A of Part II of this Form 10-Q and include, among others, the following: general economic and business conditions, which will, among other things, affect demand for rental space, the availability and creditworthiness of prospective tenants, lease rents and the availability of financing; adverse changes in our real estate markets, including, among other things, competition with other companies; risks of real estate development and acquisition; governmental actions and initiatives; and environmental/safety requirements. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this Form 10-Q.
OVERVIEW
We currently operate 85 properties, which we own or have an ownership interest in, within our Core Portfolio or within our three opportunity funds (the “Opportunity Funds”). These properties consist of commercial properties, primarily neighborhood and community shopping centers, self-storage and mixed-use properties with a retail component. The properties we operate are located primarily in the Northeast, Mid-Atlantic and Midwestern regions of the United States. Our Core Portfolio consists of 35 properties comprising approximately 5.5 million square feet. Fund I has 27 properties comprising approximately 1.3 million square feet. Fund II has ten properties, the majority of which are currently under redevelopment and is expected to have approximately 2.3 million square feet upon completion of redevelopment activities. Fund III has 13 properties totaling approximately 1.2 million square feet. The majority of our operating income derives from the rental revenues from these properties, including recoveries from tenants, offset by operating and overhead expenses. As our RCP Venture invests in operating companies, we consider these investments to be private-equity style, as opposed to real estate, investments. Since these are not traditional investments in operating rental real estate, the Operating Partnership invests in these through a taxable REIT subsidiary (“TRS”).
Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective:
- Own and/or operate a portfolio of community and neighborhood shopping centers, self-storage and mixed-use properties, located in high barrier-to-entry markets with strong demographic features.

- Generate internal growth within the Core Portfolio through aggressive redevelopment, re-anchoring and leasing activities.

- Generate external growth through an opportunistic yet disciplined acquisition program. The emphasis is on targeting transactions with high inherent opportunity for the creation of additional value through redevelopment and leasing and/or transactions requiring creative capital structuring to facilitate the transactions.

- Partner with private equity investors for the purpose of making investments in operating retailers with significant embedded value in their real estate assets.

- Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth.
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its 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 Annual Report on Form 10-K for the year ended December 31, 2007.

Funds from Operations
Consistent with the National Association of Real Estate Investment Trusts (“NAREIT”) definition, we define funds from operations (“FFO”) as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
In addition to presenting FFO in accordance with the NAREIT definition, we also disclose FFO for the nine months ended September 30, 2007 as adjusted to include the extraordinary gain from our RCP investment in Albertson’s. This gain was a result of distributions we received in excess of our invested capital of which the Operating Partnership’s share, net of minority interests and income taxes, amounted to $2.9 million. This gain was characterized as extraordinary in our GAAP financial statements as a result of the nature of the income passed through from Albertson’s. As previously discussed under “Overview” in Item 2 in this Form 10-Q, we believe that income or gains derived from our RCP Venture investments, including our investment in Albertson’s, are private-equity investments and, as such, should be treated as operating income and therefore FFO. The character of this income in our underlying accounting does not impact this conclusion. Accordingly, we believe that this supplemental adjustment to FFO provides useful information to investors because we believe it more appropriately reflects the results of our operations.
We consider FFO to be an appropriate supplemental disclosure of operating performance for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. FFO and FFO, as adjusted, are presented to assist investors in analyzing our performance. They are helpful as they exclude various items included in net income that are not indicative of the operating performance, such as gains (or losses) from sales of property and depreciation and amortization. However, our method of calculating FFO and FFO, as adjusted, may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO and FFO, as adjusted, do not represent cash generated from operations as defined by GAAP and are not indicative of cash available to fund all cash needs, including distributions. They should not be considered as an alternative to net income for the purpose of evaluating our performance or to cash flows as measures of liquidity.

USES OF LIQUIDITY

Our principal uses of liquidity are expected to be for (i) distributions to our shareholders and OP unit holders, (ii) investments which include the funding of our joint venture commitments, property acquisitions and redevelopment/re-tenantin g activities within our existing portfolio, (iii) preferred equity investments and mezzanine loans and (iv) debt service and loan repayments.
Distributions
In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. For the three and nine months ended September 30, 2008, we paid dividends and distributions on our Common Shares and Common OP Units totaling $7.1 million and $28.5 million, respectively.

Acadia Strategic Opportunity Fund III, LLC (“Fund III”)
Reference is made to Note 1 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for an overview of Fund III. With $503 million of committed discretionary capital, Fund III expects to be able to acquire or develop approximately $1.5 billion of real estate assets on a leveraged basis. As of September 30, 2008, $96.5 million has been invested in Fund III, of which the Operating Partnership contributed $19.2 million.

During February 2008, Acadia, through Fund III, and in conjunction with an unaffiliated partner, Storage Post (“Storage Post”), acquired a portfolio of eleven self-storage properties from Storage Post’s existing institutional investors for approximately $174.0 million. The portfolio totals approximately 920,000 net rentable square feet, of which ten properties are operating at various stages of stabilization. The remaining property is currently under construction. The properties are located throughout New York and New Jersey. The portfolio continues to be operated by Storage Post, which is a 5% equity partner.
During September 2008, Fund III made a $10 million first mortgage loan, which is collateralized by land located on Long Island, New York. The term of the loan is for a period of two years, and provides an effective annual return of approximately 14%.
Preferred Equity Investment, Mezzanine Loan Investments and Notes Receivable
At September 30, 2008, our preferred equity investment, mezzanine loan investments and notes receivable aggregated $127.5 million, and were collateralized by the underlying properties, the borrower’s ownership interest in the properties and/or by the borrower’s personal guarantee. Interest rates on our preferred equity investment, mezzanine loan investments and notes receivable ranged from 9.75% to in excess of 20% with maturities that range from demand notes to January 2017. We review all of our preferred equity investment, mezzanine loan investments and notes receivable on a quarterly basis to determine collectability.
In 2004, we provided a $3.0 million mezzanine loan to an investor to help fund a redevelopment project of seven Oases public rest stations along the toll roads in and around Chicago, Illinois. Recently the investor has experienced several tenant defaults and subsequently failed to make interest payments on the loan. It is our belief that while the properties have underperformed, their unique highway locations, high passenger volumes and relatively new structures and design make them attractive assets. Consequently, in 2008, we have commenced taking a more active role in the operations along with the investor and are in discussions with the first mortgage lender to restructure the debt and convert some portion of the outstanding principal to a back-end equity interest. Other actions include plans to negotiate the operational and financial terms of the existing ground lease with the Illinois State Toll Highway Authority, enhancing the leasing infrastructure to accelerate the stabilization of the properties and investing in the build-out of several outdoor billboards at each property to generate advertising revenues. While there can be no assurance of the outcome; we believe we will be able to revitalize this project and improve the investor’s ability to fulfill its contractual debt obligations.
During June 2008, we made a $40.0 million preferred equity investment in a portfolio of 18 properties located primarily in Georgetown, Washington D.C. The portfolio consists of 306,000 square feet of principally retail space. The term of this investment is for two years, with two one-year extensions, and provides a 13% preferred return.
During July 2008, we made a $34.0 million mezzanine loan, which is collateralized by a mixed-use retail and residential development at 72 nd Street and Broadway on the Upper West Side of Manhattan. Upon completion, this project is expected to include approximately 50,000 square feet of retail on three levels and 196 luxury residential rental apartments. The term of the loan is for a period of three years, with a one year extension, and is expected to yield in excess of 20%.
Other Investments
During April 2008, we acquired a single-tenant retail property located in midtown Manhattan for $9.2 million. The 20,000 square foot property is located on 17 th Street near 5 th Avenue. This addition to our Core Portfolio successfully completed a tax deferred exchange in connection with the fourth quarter 2007 sale of a residential complex located in Columbia, Missouri.
Share Repurchase
We have an existing share repurchase program that authorizes management, at its discretion, to repurchase up to $20.0 million of our outstanding Common Shares. The program may be discontinued or extended at any time and there is no assurance that we will purchase the full amount authorized. The repurchase of our Common Shares was not a use of our liquidity during 2007 and there were no Common Shares repurchased by us during the nine months ended September 30, 2008.
SOURCES OF LIQUIDITY
We intend on using Fund III, as well as new funds that we may establish in the future, as the primary vehicles for our future acquisitions, including investments in the RCP Venture and New York Urban/Infill Redevelopment initiative. Additional sources of capital for funding property acquisitions, redevelopment, expansion and re-tenanting and RCP Venture investments, are expected to be obtained primarily from (i) the issuance of public equity or debt instruments, (ii) cash on hand and cash flow from operating activities, (iii) additional debt financings, (iv) unrelated member capital contributions and (v) future sales of existing properties.
During June 2008, we entered into an agreement with Home Depot to terminate its lease at Fund II’s redevelopment property located in Canarsie, Brooklyn in exchange for a payment by Home Depot of $24.5 million. Proceeds, net of minority interests’ share, of $20.6 million were received during July 2008.
As of September 30, 2008, we had approximately $138.9 million of additional capacity under existing debt facilities and cash and cash equivalents on hand of $61.5 million.
Financing and Debt
At September 30, 2008, mortgage and convertible notes payable aggregated $744.5 million, net of unamortized premium of $0.2 million, and were collateralized by 58 properties and related tenant leases. Interest rates on our outstanding mortgage indebtedness and convertible notes payable ranged from 3.75% to 7.18% with maturities that ranged from October 2008 to November 2032. Taking into consideration $33.5 million of notional principal under variable to fixed-rate swap agreements currently in effect, $495.0 million of the portfolio, or 66.5%, was fixed at a 5.29% weighted average interest rate and $249.5 million, or 33.5% was floating at a 5.20% weighted average interest rate. There is $21.7 million and $176.1 million of debt scheduled to mature in 2008 and 2009, respectively, at weighted average interest rates of 5.84% for 2008 and 5.49% for 2009. As we may not have sufficient cash on hand to repay such indebtedness, we may have to refinance this indebtedness or select other alternatives based on market conditions at that time.

The following summarizes our financing and refinancing transactions since December 31, 2007:
During the nine months ended September 30, 2008, the Company borrowed $55.8 million on four existing construction loans.
During February 2008, in conjunction with the purchase of a portfolio of self-storage properties, the Company assumed a loan of $34.9 million, which bears interest at a fixed rate of 5.9% and matures on June 11, 2009, and a loan of $5.1 million, which bears interest at a fixed rate of 5.4% and matures on December 1, 2009.
During the first quarter of 2008, the Company closed on a $41.5 million mortgage loan secured by five properties, which bears interest at a fixed rate of 5.3% and matures on March 16, 2011.
During the third quarter of 2008, the Company paid off $3.7 million of mortgage debt which was secured by a property.

CONF CALL

Kenneth Bernstein

Thank you. Good afternoon. Thank you for joining our third quarter call. Before we discuss our quarterly results, I'd like to comment briefly on the current market conditions, the impact on our sector and how we have positioned Acadia so that we're able to respond to the current and anticipated environment.

While many of us have over the past few years been preparing for some level of correction, even perhaps, wishing for it so as to enable more attractive entry points for new investments, it would have been hard to imagine a meltdown in the capital markets as severe and as widespread as we're now experiencing. Not only does this caution us to be careful about what we wish for in the future, but even those of us who are well-positioned need to make sure that we're not exposed to risks that until recently, were not front center on our radar screen.

The credit crisis is now over a year old and has spilled over into full blown economic crisis and while our industry is clearly being impacted both in terms of operating fundamentals, debt availability and asset values, we're still in the early stages of trying to determine what the ultimate impact will be both in terms of the recessionary impact on rents and the impact of the credit crisis on cost of debt and ultimately asset values.

While we don't think that we are in any way uniquely qualified to forecast precisely how this crisis is going to play out, it's worth discussing what we're seeing right now and how we have positioned ourselves to address the current environment. As a general overview, the key themes that we'll address today during the call are first, operating fundamentals, second, balance sheet exposure and assets to capital, third, our development pipeline, and finally, the status of new investment opportunities.

First, in terms of fundamentals, whether looking at our third quarter operating results or our current collections data, we're not yet seeing a material softening in our fundamentals commensurate with the newspaper headlines. We expect that several factors are at work here.

First of all, our core portfolio consists primarily high-barrier-to-entry assets in supply constrained markets. Over the past several years we've aggressively called our portfolio by selling off the bottom half of it and rotating into high-barrier-to-entry, supply constrained properties in strong markets. Today, the vast majority of our properties are well located and anchored by either necessity based grocery and drug tenants or value oriented discounters.

Even in a softening economy, these types of tenants, especially the super markets and discounters, often experience positive same-store results and gain market share. Even for those tenants who are slowing their expansion or shrinking elsewhere in the country, because of the tight supply of real estate in our markets, they seem to retain their locations more often than not.

That being said, for many retailers, this has been one of the most difficult years in a long time, and we doubt that 2009 will be any easier for those tenants. We remain very caution as to retailer performance in general and don't expect any portfolios to be immune to what could be a longer-term and severe consumer slow down.

Finally, as relates to fundamentals, we need to recognize that to some extent, we're looking at lagging indicators. While our experience tells us that higher quality locations tend to out perform both in terms of operating performance as well as value retention, only time will tell just how resilient any one's portfolio will be.

The second component, balance sheet and access to capital. It's clear that debt is very scarce and expensive right now, especially for larger transactions. Balance sheet metric, strong access to debt and equity and limited debt maturity are going to continue to be of increased importance.

As Mike will walk through, we have no on balance sheet debt maturities for over three year and as I will discuss later in the call we have limited exposure with respect to our fund level development transactions as well.

In short, while no one wants to contemplate a multi-year continuation of capital illiquidity. If need be, we have enough capital to internally fund both our existing equity requirements, and our future equity growth initiatives for the next several years. Most importantly, our discretionary investment fund has plenty of dry powder to take advantage of the opportunities as they emerge.

Third, in terms of our existing development pipeline, while all development pipelines are coming under some level of pressure, New York City still remains a highly supply constrained market with strong tenant demand. Even though New York City is at the center of the credit crisis, our properties are generally in the dense outer burroughs, which are significantly under represented by the national retailers.

Most of our anchor tenants for these urban developments are necessity and discounter tenants such as our recently executed last month with BJ's Wholesale Club in Pelham Manor. Tenants like BJ's tend to outperform their more discretionary peers in a slowing economy and seem to be gaining market share in New York City. But even non-necessity based market leading tenants such as T.J. Max and BestBuy continue to look at market share in New York.

For example, BestBuy will open next month at our Fordham Road redevelopment in the Bronx. The Bronx has a population of 1.3 million people and our Fordham Road location will be the first BestBuy store to open in the Bronx. They have a second store at the related company's Bronx development that's slated to open next year, but these two stores are still significantly fewer stores for such a large population and contrast very favorably with other markets of similar size and it's not just the Bronx. BestBuy, T.J. MaX, BJ's and many other strong tenants are equally under represented in the outer burroughs as well.

We recognize that this strength is counter balanced to some extent by the fact that there are several tenants on a national level that are clearly struggling. And we don't believe that New York will in any way be immune to the impact of national retailer bankruptcies or similar retrenchment.

Our experience so far is that the high demand of our locations is enabling us to successfully and profitably navigate through those re-anchoring that inevitably arise at times like these, such as, in our two former Home Depot redevelopment, one in Carnarise, Brooklyn and the other in Pelham Manor where we have been available to very profitably address the departure of Home Depot.

In terms of the financing of developments, even where tenant demand is strong, the ability to attract affordable financing, especially, for larger projects is a real obstacle to commencing new developments. All projects now are requiring more equity, more pre-leasing and strong sponsorship before the financing will be obtained. Additionally, those borrowers facing significant refinancing exposure over the next 12 months are having a difficult time given that the large loan market is frozen.

Fortunately for us, as I'll discuss in further detail later, other than the largest of our contemplated projects, the balance are either already successfully financed or small enough so that we should be able to obtain what limited financing might be needed. Equally important, we don't have any short-term debt maturities in the development pipeline that we're not in a position to address.

In terms of transaction activity and new investment opportunities for Fund III, we continue to stay substantially on the sidelines in the third quarter. While we completed one relatively small transaction and we continue to hold approximately 80% of our discretionary investment fund capital commitments, we believe that we are getting closer to a period, where our stakeholders will be very well rewarded for our patience and our discretionary capital.

And with respect to transactional activity from an earnings perspective, as Jon is going to discuss, most of our transactional harvesting for this year has been completed, furthermore looking toward 2009, next year was fortunately never intended to be a significant fund disposition or capital raising year either.

So while there are always a host of moving pieces in our earnings bucket, short-term capital markets weakness over the next year or two, as painful as the volatility can be to ride through should provide us more of a new investment benefit than an existing pipeline negative.

So to conclude while we're extremely focused on the challenges of the capital markets and the weakening economy, we feel our portfolio, our balance sheet and our investment platform are all well-positioned to absorb the impact of the challenges we're facing and ultimately capitalize on the opportunities that will arise from them.

With this perspective in mind today, we'll review our third quarter results, and the status of our core portfolio, our balance sheet, and liquidity, and on the external growth side, both our existing projects as well as new investment.

With that I'll turn the call over to Jon

Jonathan Grisham

Good afternoon. As detailed in our press release, our third quarter results are in line with our expectations and there is not much additional color to, to be added to those results. All of our business lines are contributing to earnings as anticipated. There is one item I'd like to point out from the third quarter, which relates to our promote and RCP income. During the quarter we've recognized approximately $1 million after-tax income from our Albertson's investment which brings our total RCP and promote income for the year to $4.5 million, which for this earnings line item, completes our projected activity for the year and it comes in at the high end of our original expectations.

As it relates to significant moving pieces for the fourth quarter, our guidance does include some transactional fee income, primarily leasing commissions, from tenants who are scheduled to open before year-end. So in terms of our various earning buckets, including income from the core, our pro rata share of JV income, asset base fee and transactional fee income, everything is on track for the year. And as a result, we are re-affirming our guidance range of $1.30 to $1.35.

Now, I'll turn the call over to Mike.

Michael Nelson

Good afternoon. As a result of the current economic condition, it has become abundantly clear as we've said in the past that balance sheet strength and liquidity are of paramount importance. That being said, Acadia has always been focused on and has been able to maintain a solid financial position. Our debt to total market cap at September 30th was 38%. And even after the effect of the market meltdown, we're still currently under 50%.

Our year-to-date FFO payout ratio is at 58%. And our fixed charge coverage is 3.3 times. As a result of the current shutdown in the debt markets, managing debt maturities is critical. Over the last three years, we've taken advantage of a strong credit market to extend maturities and limit our exposure to interest rate fluctuations. In the core portfolio, including extension options, we have no debt maturing for three years or until December of 2011.

Turning to our funds, Fund I has total debt of only $23 million. Approximately, $8 million of this debt matures in 2008 and 2009. Of which, $3 million was pay-off at maturity in October of this year and the balance represents Kroger Safeway debt, which self-amortizes in the first quarter of 2009 from operating cash flow. Of the remaining $15 million of debt, $10 million matures in 2012, including extension options, and $5 million in the third quarter of 2010.

Ken will discuss the Fund II debt in connection with our urban infield development projects later in the call.

As it relates to Fund III, the self-storage portfolio has $81 million of debt, half of which matures in 2013. The other half matures in 2009 and given that the current debt represents approximately 50% loan-to-cost we will either refinance it or replace it with advances from our funds subscription line. Additionally, all of our fund level subscription lines are fully collateralized by the investors unfunded capital commitments.

We have limited our exposure to interest rate volatility in the core portfolio by fixing 91% of our mortgage debt at an all in rate of 5.1% at September 30th. Subsequently, we executed $30 million of swaps at an all-in rate of 4.86% through 2012 bringing the portfolio to 95% fixed rate.

Turning to our liquidity levels, at September 30th, we had cash of $41 million and availability on our lines of $53 million, excluding the funds. Subsequent to September 30th, $23 million was returned from our 1031 escrow from the sale of the Village Apartments earlier this year, bringing our total liquidity from $94 million to $117 million.

This covers our remaining Fund II and III capital obligations of $102 million over the next 2 years to 3 years. Additionally, we anticipate retaining operating cash of approximately $10 million annually as working capital.

As I mentioned, we received $23 million from our 1031 escrow account. As has been clearly validated by the recent shifts in the capital markets, we didn't believe that it was in our best, in our shareholders best interest to acquire a replacement property, which had to be identified in the first half of 2008, solely to defer the gains recognized from the sale of the Village Apartments. We are currently reviewing our income tax position for 2008 and I will keep you apprised as to how the recognition of this gain will impact Acadia and its shareholders.

In summary, should the market and economic turmoil continue for an extended period of time, we, as well as all businesses, will not be immune from the effects. Given that the condition of the capital markets, balance sheet strength, high levels of liquidity, and low exposure to refinancing risk as a result of longer-term maturities are more important than ever. We believe that Acadia's balance sheet strength positioned it favorably to be able to continue to execute on our business plan.

I'll now turn the call back to Ken.

Kenneth Bernstein

Thanks, Mike. First, I'd like to review briefly our core portfolio performance. With respect to our same-store NOI growth, our occupancy, our lease spreads, all our solid metrics given the difficulty economic environment we're operating in.

In terms of potential tenant exposure in our core portfolio, to-date we've avoided most of the significant bankruptcy, looking forward we have two Circuit City locations, which if vacated would impact us by approximately $0.03 of FFO per year until they were then replaced.

Finally, while current core results remain solid, ultimately, the depth of the economic slow down will determine whether the defensive profile of our value necessity anchor centers enable to us to withstand this clearly weakening economy.

In terms of external growth, first of all, the key driver of our external growth is our discretionary investment fund business. In 2007, we launched Fund III with $500 million of equity, which enabled us to acquire or redevelop approximately $1.5 billion of assets on a leveraged basis over the next several years. In the third quarter we remained substantially on the sidelines making only one small fund investment.

In fact, to-date we've only put approximately 20% or $100 million of Fund III equity to work. This 20% is less than half of the pace that we would normally deploy over that 1.5 year period and reflects our view that we're still little early for opportunistic investments in that our shareholders will be well rewarded for our patience and discipline.

With respect to existing fund investments, they break out into two broad categories. First is opportunistic, which includes the purchase of distressed debt, distressed assets, our RCP investments and then second is our value add platform which includes our New York Urban Infill Redevelopment.

On the opportunistic side in connection with our Retailer Control Property or RCP venture, we participated in several profitable transaction. First with respect to Mervyn's, we walked through the status of this investment on the previous earnings call, but in short in 2004, as part of our RCP venture and in connection with an investment consortium we participate in the acquisition of Mervyn's, which consisted of 262 stores for a total price of $1.2 billion.

We invested $23.2 million and had ownership interest in both REALCO and to a lesser extent OPCO. Through a series of transactions to-date, about 80% of REALCO real estate portfolio was disposed of. Additionally, we sold our interest in OPCO.

With respect to the remaining 20% balance of the REALCO real estate, we have successfully re-tenanted the majority of that portfolio to tenants other than Mervyn and with respect to that portion of the remaining REALCO real estate, where Mervyn is our tenant, except for one property in Utah, the balance are in California, and our high quality locations with strong tenant interests.

To-date, we have already received approximately two times our original equity investment and as to the amount of additional residual value in REALCO, it's premature and inappropriate to try to quantify it at this time, but we'll certainly keep you posted.

With respect to a second RCP investment Albertson's, as Jon mentioned, during the third quarter, our other significant RCP investment Albertson's close on the sale of 49 assets throughout Florida to public.

Overall, we invested $20.7 million of equity and to-date have received $61.6 million or three times our equity investment for this Fund II investment.

Turning now to our New York Urban Infill development pipeline, notwithstanding the pressures on retail development in general, we still see strong tenant demand for New York City. The density, supply constraints and high level of mass transportation all make New York one of the top urban markets for retailer growth.

In general, our projects are proceeding according to plan, but we are proceeding very cautiously. Those projects in our pipeline had have commenced or in fact completed. Our retail is 90% leased. And for our projects that we have yet to commence, we're going to be very focused on pre-leasing and other risk mitigation before we start.

On Page 44 of our supplement, we describe our current estimation of timing and cost for the projects. And on Page 25 of the supplement, we layout the detail of our financings, including our redevelopment project financings.

Given the concerns in general regarding the financing environment I'd like to discuss the financing status and then update the progress of these projects as well. First is an overview of our development pipeline financings. We currently have total debt of $212 million, $48 million of it is long-term debt with maturities averaging in excess of ten years, and attractive locked in fixed rates. $110 million is construction financing, with no maturities until 2011 after taking into account extension options. Only $54 million of it is short-term bridge debt, which we anticipate will be replaced by our fund equity.

As I mentioned earlier on the call, the debt markets for construction financing are highly illiquid, especially for loans over $50 million or so. In our pipeline, the one development that clearly falls into this category is City Point in Downtown Brooklyn and even in this case there maybe counterbalancing benefits with potential reductions in cost of construction, offsetting the cost of delay or increased capital costs. In fact, a 5% decline in construction costs should fully offset a one-year delay in the project assuming our current carrying costs.

Furthermore, it's very possible; in fact, it's likely that costs savings could be well in excess of 5%. But this might be offset by increased debt cost or potentially weakening fundamentals, nevertheless given the unique location, the fact that we have Target as our retail anchor and strong interest from other retailers, we wouldn't be surprised that our patience and persistence could be well rewarded in City Point.

Turning now to Fordham Road in the Bronx, the construction of this project is substantially complete. The retail is fully preleased. Sears is open. BestBuy will open in about two weeks and the balance should follow over the next few months. The office component is nearing completion of construction and its lease up is also moving ahead according to plan. The existing financing for that project is in place with extension options taking us to April of 2011.

Our Liberty project in Ozone Park, Queens is fully lease and has debt that can be extended until May 2011. 161st Street is substantially leased to the existing tenants pending the commencement of our redevelopment there and has debt with options that extend until April of 2011 as well. 216th Street is fully leased and occupied and we have long-term fixed rate debt with a maturity of 2017 on that project.

Pelham Manor, this project has long-term debt maturing in 2020. With respect to Home Depot on the previous call, we discussed that we entered into an agreement to buy back our anchor space from Home Depot at Pelham for $10 million or about half of Home Depot's $20 million investment in our project.

In the third quarter, we successfully completed the replacement lease with BJ's Wholesale Club at a rent that's going to provide us with mid-teens, incremental return on those costs, and about 100 basis points increase in our unleveraged development yield.

And more importantly, it anchors Pelham Manor with a healthy tenant, well-positioned to gain market share in this economic cycle. We also signed Michaels Arts & Crafts in the third quarter, the center is now fully anchored and 83% pre-leased. These tenants will open in the first half of next year.

Also exciting is the fact that Fairway Foods, a well respected regional supermarket chain will be re-anchoring the former K-Mart space in the center adjacent to our property, adding another highly complimentary anchor tenant for our shoppers.

In terms of our second Home Depot site in Carnarise, Brooklyn. Home Depot paid us $24.5 million out of our $26 million total land purchase price to terminate its obligation to anchor that redevelopment. Due to this buyout, Home Depot was going to represent about 40% of the redevelopment, with other already identified tenants representing an additional 40%, and the remaining 20% was opened to be leased.

We have strong interest from replacement anchors for the Home Depot space and we expect to finalize a development plan in the first half of next year, that will bring us back to the 80% pre-leased, albeit with a lower land cost. And as I mentioned before, this project will likely also be the beneficiary of lower construction cost, which should further enhance the yield. When we are ready to begin construction on this project, we should be able to get the relatively small amount of financing needed for that construction.

In term of Broadway and Sherman in northern Manhattan, we have a $19 million bridge loan that we anticipate replacing with Fund II equity until we can commence the development of this project.

We're working with three commercial tenants to finalize their leases, which would substantially pre-lease the commercial portion and have entered into a preliminary agreement to sell the residential air rights to an affordable housing developer. Provided we can successfully achieve this, we're planning to commence construction in the second half of 2009.

In terms of Sheepshead Bay, Brooklyn, we have no debt on that project and we expect to be able to obtain third-party financing or self-finance whatever debt we need when this project's ready to go.

So, in short as it relates to our New York development pipeline, while we are neither in a mood to over promise or count our chickens before they hatch, we do believe that we have adequately protected ourselves from significant financing exposure. And that our original thesis with respect to tenant demand and cash flow quality remain intact.

In terms of Fund III, we currently have four acquisitions in our Fund III. West Port Connecticut, Sheepshead Bay, our storage post portfolio and our third quarter acquisition in – or investment in Farmingdale, Long Island. West Port and Sheepshead Bay are progressing through the design phase. With respect to the storage post portfolio, it continues to operate consistent with our expectations both with respect to the four stabilized assets and the repositioning as well.

And then in the third quarter, we closed on a small investment for Fund III in Farmingdale, Long Island. While we expect the investment to potentially convert at our option into full ownership of a well located retail development on Long Island, for now it's simply a high-yielding 14% first mortgage, with two year maturity, that with even modest leverage should throw off very attractive yield.

In terms of our mezzanine investment activity, as we discussed in detail on our last call, we made two on balance sheet mezzanine investments this year. The first and the second quarter was a $40 million preferred equity loan on a portfolio of 18 high quality retail properties located in the Georgetown section of Washington DC.

And last quarter, we made a $34 million mezzanine financing on the development property located at Broadway, and 72nd Street in Manhattan. As it relates to both of these investments, these are properties in irreplaceable locations that we would welcome owning at our basis in the unlikely event that, that occur. As for future mezzanine investment it's unlikely that we would do additional mezzanine investments on our balance sheet until liquidity returns to the marketplace.

In terms of future transactions in our pipeline, first, I'd like to touch briefly on the George Washington Bridge development, it's been reported in the newspapers that the Port Authority has preliminarily approved our plans for redevelopment for the Broadway Marketplace at George Washington Bridge in northern Manhattan.

While we are continuing to work with the Port Authority to finalize these plans and documentation, our redevelopment plans include renovating the bus terminal and developing approximately 110,000 square feet of retail.

Tenant interest remains strong and we're making steady progress, but we will not proceed with this project until we are fully comfortable with the confirmation of a cost associated with the redevelopment. We'll continue to keep you apprised and updated as to our progress over the next several months.

As it relates to future activity, while we've remained patient over the past quarter and the past year or two, we expect that we will be moving off of the sidelines in the next several months. There is now too much disruption in the capital markets for it not to translate into attractive investment opportunities.

As always, we remain agnostic as to whether the best opportunities utilize our value added redevelopment skills or our opportunistic acquisition skills. All we're focused on is that the investments provide our stakeholders with the appropriate risk adjusted returns.

So today, to conclude, we're facing what may turn out to be the most difficult capital market environment of our generation and heading into a clearly softening economy. Any CEO who does not appreciate these risks and issues does so at his and his stakeholders' peril.

But without minimizing the severity of the situation, we feel strongly that we are well-positioned not just to respond to these difficulties, but capitalize on them as well. Our core portfolio is stable, our balance sheet is solid with plenty of dry powder, and third, our acquisition platform continues to position us to take advantage of any opportunities as they arise.

I'd like to thank the members of Acadia for their hard work this quarter and more importantly, in the third quarter, we celebrated being a public company for ten years. On August 12th of 1998, we went public through the reverse merger takeover of Mark Centers Trust.

We did it just in time to participate in the REIT melt down of 1998 and 1999 and while now in retrospect that crisis looks like a minor correction compared to this past month, at the time it was quite painful. The REIT market dropped precipitously and many people questioned the future viability of REITs in general and Acadia specifically.

Our team worked through a host of serious obstacles and over those ten years we provided very strong absolute and relative returns for our stakeholders. It wasn't a straight line, it wasn't easy and we had our fair share of luck. But I would remiss if I didn't take a moment to thank and congratulate our team and our board for their hard work, dedication and success in reaching this important milestone.

And as we look forward, notwithstanding the challenges in front of us with respect to our economy and capital markets, we're committed to building on the successful platform that we created over a decade ago.


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