AKR - NYSE

Ladies and gentlemen, thank you for standing by. Welcome to the Third Quarter 2025 Acadia Realty Trust Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to Gabriella Vitiello, Junior Lease Admin Analyst, please go ahead.

Good afternoon, and thank you for joining us for the Third Quarter 2025 Acadia Realty Trust Earnings Conference Call. My name is Gabriella Vitiello, and I'm a Junior Lease Administration Analyst in our Lease Administration department. Before we begin, please be aware that the statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities and Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements. Due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call, October 29, 2025, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income. Please see Acadia's earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. [Operator Instructions] Now it's my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.

Thank you, Gabriella, great job. Welcome, everyone. Last quarter, I commented that in the ongoing tug of war between economic uncertainty and resilience, resilience seems to be winning. Well, looking at our third quarter results, this continues to be the case. Notwithstanding, continued noise and uncertainty around the broader economy, tenant performance and tenant demand at our properties, especially the street retail component, is continuing, and if anything, this positive momentum is accelerating. In fact, we are probably at an inflection point for our portfolio's operating performance. As John Gottfried will explain, as we look at our forecast for 2026, we see both total NOI growth and same-store growth accelerating, keeping us well above our long-term goal of 5% growth. And we remain focused on making sure that this top line growth hits the bottom line with respect to our earnings. As A.J. Levine will discuss, we see enough internal growth opportunities beginning to take shape to enable us to maintain this 5% plus annual growth well into the foreseeable future. A.J. will walk through in detail our continued progress in the third quarter. But in short, we were busy both harvesting current opportunities as well as planting seeds for longer-term internal growth. This includes realizing a 45% lease spread in SoHo, a 70% mark-to-market on Bleecker Street while successfully opening new stores, representing nearly $7 million from our SNO Pipeline and then positioning us for future growth. We also added nearly $4 million in new leases into our SNO Pipeline. I discussed in detail on previous calls, the tailwinds for open-air retail demand. They're still continuing and remain encouraging, both for our suburban and our street retail portfolio, but the tailwinds for our street retail portfolio seem to have even more momentum for a few reasons. First, is the longer-term secular trend of retailers recognizing the critical need to establish their own network of stores, what we refer to as or DTC or direct-to-consumer stores. This trend is increasing the demand from mission-critical locations, especially in the key markets where we are most active. Second, is the continued resilience and increasing importance of the affluent consumer who are the majority of the shoppers at our street locations. And then third and perhaps most encouraging is the noticeable resurgence of foot traffic and energy on these streets. This energy and excitement was on full display earlier this month at Kith's grand opening at our Walton Street property in the Gold Coast of Chicago. Hundreds of eager customers waited online for hours to shop this exciting 10,000 square foot flagship store. If you've recently shopped at Gold Coast of Chicago and were impressed by what you saw, you're not alone. Our team consistently hears from investors after touring [indiscernible] a given city, how they did not appreciate the vibrancy that is occurring until they saw firsthand. And if you've not toured some of these markets, and are simply relying on your new speed, especially depending on what cable channel you watch, you are missing out on the power of these retail markets. Thankfully, our retailers get this. This is why Melrose Place in L.A. or Green Street in SoHo are experiencing the continued tailwinds well in excess of our expectations. And it is expanding beyond a few major markets and in ways that might surprise you. For instance, in Georgetown in D.C. Notwithstanding all of the attention and concern around Washington, D.C. and surrounding markets due to DOGE or government shutdowns for the majority of our retailers on M Street, foot traffic and sales are up year-over-year and tenant demand has not been this strong in a decade. New York experienced this rebound earlier than most markets. But now we are seeing this play out across all of our urban markets. San Francisco is the most recent example of this momentum, driven by the growth in artificial intelligence, accelerating a return to office and a new mayor, who is making important progress on quality of life issues, that had burdened the city coming out of COVID. And what we are seeing on the ground is that the live, work, play vibrancy that San Francisco has historically enjoyed is coming back and so are our retailers. That resurgence is coming at the right time for our 2 significant San Francisco redevelopment projects. At City Center, we have our new T&T supermarkets slated to open in late 2026, and at our 555 9th Street redevelopment, we recently expanded our Trader Joe's and have a new lease with LA Fitness' high-end club studio, slated to open next year. On a combined basis, these 2 projects have close to 100,000 square feet of additional space for us to lease and are slated to add roughly 5% to our REIT NOI. And if the positive momentum continues, we'll have even more growth. Along with continuing to drive our internal growth, a key additional driver of our business is adding accretive and complementary external growth, both on balance sheet and then through our investment management platform. While we saw a bit of a pause in investment activity around Liberation Day concerns, based on the current status of our pipeline, we are now confident that our 2025 investment activity will match the strength of 2024, which was also a great year for us in terms of external growth. Reggie will walk through our transactions closed last quarter and the opportunities we see going forward, but to reiterate our goals and outlook, given our size, we see our acquisition activity continuing to enable us to move the needle. And while our cost of capital increased some last quarter, we are confident that we can still invest accretively and we will. For our on-balance sheet street retail investments, this confidence is due to a few factors. First, Acadia is in somewhat of a unique position of being a buyer of choice. There are certainly private market participants that are active competitors, but we have carved out a niche and a reputation that gives us a competitive advantage in the street retail space, an advantage that does not exist in other segments of open-air retail where there are too many well-capitalized private participants for any one public or a private player to have a unique advantage. Second, along with being a buyer of choice, many retailers view us as a landlord of choice, and they are steering acquisition opportunities our way as well. And then finally, as we discussed on the last call, the scale that we continue to build, both in terms of ownership concentration in a given corridor as well as tenant relationships nationwide, is giving us increased visibility into the accretion potential we can achieve in any given investment and providing us a competitive advantage over other bidders. All of this makes us uniquely well positioned to continue to attractively add street retail to our portfolio, and it provides further support for why we are focused on building Acadia into the premier owner operator of street retail in the U.S. Then for our Investment Management platform. The volatility in the REIT market is less of an issue. Perhaps, it's even a tailwind, since we rely on our institutional partners for the majority of the capital and are generally recycling our equity in this complementary and profitable by fixed sell arm of our business. So in conclusion, as we look forward, our peer-leading internal growth looks like it has several years of tailwinds behind it. Coupled with continued strong external growth and a balance sheet with multiple avenues of access to capital, we are well positioned to absorb any speed bumps and more importantly, capitalize on the exciting opportunities in front of us. I'd like to thank the team for their continued hard work. And with that, I will hand the call over to A.J. Levine.

Thanks, Ken. Hi, everybody. Good afternoon. So jumping right in, I'm happy to report another successful and productive quarter of leasing, with the team executing on another $3.7 million in ABR and bringing total signed leases year-to-date to $11.4 million, keeping us well ahead of last year's record-setting pace. To put that into some context, for every $1.4 million of new revenue we add, that equates to about $0.01 of FFO. And overall GAAP spreads for new and renewal leases on our streets were 32%. Looking forward, we've seen no signs of a slowdown in tenant demand. And in addition to the leases we signed during the quarter, we've increased the size of our lease negotiation pipeline to $8 million, which is $1 million ahead of where we were at the end of Q2. In short, that translates to an increase in leasing velocity, fueled by pending new leases on North 6th Street in Williamsburg, Newbury Street in Boston and on Melrose Place in Los Angeles, all markets where we will see the highest level of contractual growth at 3% per annum. The pipeline also includes another impactful deal in San Francisco, where so far this year, we've executed on over 90,000 square feet, including new leases with T&T Supermarkets, LA Fitness Club Studio and a long-term renewal and expansion of Trader Joe's. John will get into the details of our SNO pipeline, but in Q3, we converted approximately $7 million of ABR from SNO to open and paying tenants. Impactful openings from the quarter included the Richemont brand Watchfinder, John Varvatos and Alex Moss, all in SoHo; Kith on the Gold Coast of Chicago; Moscot on Armitage Avenue; and J.Crew on M Street in D.C. But this is not just leasing and delivering space. In addition to filling vacancies, we are prying loose and profitably backfilling space while improving the curation and merchandising along our high-growth streets. In the third quarter, we pried loose and replaced 4 tenants in high-growth markets, including M Street, Williamsburg, Bleecker Street and SoHo at an average GAAP spread of 36%. Each of those leases is subject to 3% contractual increases and the opportunity to once again mark-to-market in the relative near term through FMV resets. During the quarter, we added, expanded or renewed some highly coveted brands, including Veronica Beard, Faherty, Theory and Frame Denim, again, all in SoHo. Sezane on M Street, Doen on Bleecker Street, Tecovas on Henderson and Practice Room in Williamsburg, just to name a few. I'm also happy to report that momentum on Henderson Avenue in Dallas continues to build, and the redevelopment is ahead of pro forma. Over 60% of the retail is spoken for with some of today's most recognizable and coveted brands, several of which you will find elsewhere in our portfolio on Armitage Avenue, the Gold Coast of Chicago, in SoHo and on Melrose Place. Which become clear over the last several quarters is that our strategy of building scale in must-have street markets means that our team is getting the first call, the early call and the urgent calls. Our recent lease with Sezane in M Street is a perfect example of our first call advantage. Like many recent negotiations, this one started with the simple question, where can you put me? As the largest owner of retail on M Street, Sezane knew that we were the right landlord to help them find a long-term home in Georgetown. And true to form, we were able to pry loose an under-market tenant, increase the rent by double digits and upgrade the overall curation of the street. Historically, tight supply means that tenant calls are coming in early, sometimes 12 to 15 months before a space will become available. We are currently in active negotiations with tenants on Melrose, in SoHo and on North 6th Street for space with expirations that are all more than 12 months out. And finally, the strong sales performance we continue to see on our streets is creating a sense of urgency amongst our tenants. There is a very real fear among tenants of missing out on the incredible sales growth that our highest earning consumers are continuing to drive on our streets. From reporting tenants on our streets, year-to-date comparable soft goods and apparel sales continue to outperform. In SoHO, sales are up 15%; on Bleecker Street, north of 30%; and on the Gold Coast of Chicago, driven largely by an accelerated recovery on North Michigan Avenue, sales are up over 40%. Even on State Street in Downtown Chicago, which has certainly felt the effects of hybrid work over the last several years, we are seeing the early signs of a strong recovery with sales in our portfolio up over 10% year-to-date with one flagship tenant in particular, up over 20%. And on M Street, despite all of the headlines in D.C. this year, sales are up 16% year-over-year and show no signs of slowing. To be fair, we are seeing positive sales growth in our suburbs as well, but nothing resembling the double-digit growth on our streets. So when we consider the overall landscape, accelerating sales growth on our streets, strong tenant demand and the scale we've built to capture that demand, it's full steam ahead. With that, I'll echo Ken on thanking and congratulating the team for their hard work this quarter, and I will turn things over to Reggie.

Thanks, A.J. Good afternoon, everyone. As noted in our earnings release, our Q3 activity brings our year-to-date acquisition volume to over $480 million. And based on our current pipeline, we're looking to double that amount by year-end. It's important to note for a company of our size, that's extraordinary growth unmatched within our sector, but it's not simply growth for growth's sake. These deals are poised to deliver the earnings and NAV accretion consistent with our goals, not to mention strong CAGR to complement our internal growth. Our year-to-date activity and our pipeline are being driven by a few factors we're noticing. As Ken said, while street retail opportunities slowed down midyear, caused in part by Liberation Day hangover, we're starting to see more of those sellers come off the sidelines. And just as A.J.'s leasing team gets that first call from tenants, we're getting that first call from sellers of street retail as our reputation as a group that knows how to underwrite and close these transactions is well known throughout our target markets. Recall, the vast majority of our street retail transactions this year have been off market, and we expect that competitive advantage to continue. It's also worth noting the improved debt environment is causing sellers to test the sales market more in open-air retail across the board. And as that environment continues, we're confident we'll get more than our fair share. Turning to specific activity in Q3. Within our investment management platform, we acquired Avenue at West Cobb for $63 million. This asset is a 250,000 square foot lifestyle center in an affluent Atlanta suburb, where we will deliver value-add returns through a combination of significant lease-up, upgrading tenancy and harvesting mark-to-market opportunities. As we've done previously for assets slated for the investment management platform, we closed the asset on balance sheet and we'll recapitalize with an institutional investor. And speaking of that capability, we're close to selecting a top-tier investor to recapitalize Pinewood Square, the Florida Power Center we purchased back in Q2, and we expect that transaction to close in due course. So to summarize, through 3 quarters, we've acquired approximately $0.5 billion of assets, and we're looking to double that amount in the fourth quarter. And with respect to our metrics, that nearly $1 billion in deals will yield an attractive going-in GAAP yield in the mid-6s and 5-year CAGR in excess of 5%. And most importantly, these deals will deliver accretion consistent with our $0.01 per $200 million target, a target we could achieve, frankly, with either our balance sheet transactions or our investment management deals. Bottom line, we're achieving our growth goals, and we're excited about a Q4 pipeline that will be keeping our team very busy across street acquisitions in our target corridors and value-add deals for our IMP. I want to thank the team for their hard work this quarter. And with that, I'll turn it over to John.

Thanks, Reggie, and good afternoon. I'm going to dive straight into the quarter, and my remarks today will focus on 3 key themes. First, our differentiated street retail business hit an inflection point this quarter, delivering same-store growth of 13%, and we expect to have this above-trend growth continuing into 2026 and beyond. Secondly, as you just heard from our team, we are on offense, and we have the balance sheet flexibility and liquidity to fund it with our debt-to-EBITDA at 5x and over $800 million available under our revolver and forward equity contracts. And lastly, simplification. We recognize that our guidance methodology of including investment management gains and other items is unduly complicated and results in a level of volatility that is not at all indicative of our underlying NOI growth. And as discussed on our last call, we will be refining our 2026 FFO definition to provide investors with a single metric that directly links to the growth of our real estate business to bottom line earnings, driven by our highly differentiated street retail portfolio. Now diving into our results. The third quarter was an inflection point for us, and I want to discuss a few key data points that's driving our confidence of above-average NOI and earnings growth for the next several years. Starting with NOI. Same-store NOI came in ahead of our expectations at 8.2% with our street retail portfolio delivering 13% growth during the quarter. And with expected same-store growth of 6% to 7% in Q4, we are on track to come in at the upper end of our 5% to 6% projection for the year. And now for those modeling on the call, here come some numbers. Our growth was driven by approximately 5% of our ABR comprised of $6.7 million in pro rata rents commencing during the third quarter, with virtually all of it representing leases in the same-store pool. In terms of the earnings impact, approximately $1 million was recognized in Q3 earnings. The full $1.7 million impact will show up in Q4, leaving us with an incremental $4 million in 2026. Additionally, the $6.7 million of commencing rents increased our occupancy by 140 basis points this quarter, keeping us on track to achieve 94% to 95% by year-end. It's also worth highlighting that our street and urban occupancy sequentially increased 280 basis points this quarter, with several hundred basis points of future growth in front of us with just 89.5% of our street and urban portfolio occupied as of September 30. And our leasing team continues to set us up for future growth. We signed $3.7 million in new leases or approximately 2% of ABR during the third quarter, resulting in an $11.9 million signed not yet open pipeline as of September 30. Over 80% of the $11.9 million pipeline resides in our street and urban portfolio and is comprised of $4.4 million in our REIT operating portfolio, which, as a reminder, means our same-store pool, $6.5 million from our REIT redevelopment projects and $1 million from our share from the investment management platform. And in terms of the estimated timing and earnings impact of the $11.9 million signed not yet open pipeline, approximately $5.5 million of ABRs are projected to commence in Q4 with the remaining $6.4 million in 2026. And when factoring in the expected rent commencement dates, this results in anticipated earnings of approximately $700,000 in Q4 2025, of which roughly $200,000 is same-store, $7.4 million in 2026 with about $3.5 million of it being in same-store, leaving us with $3.8 million in 2027. Additionally, consistent with our discussion last quarter, approximately $9 million of the $11 million will hit our bottom line earnings after adjusting for interest and other carry costs that we are capitalizing, primarily for REIT assets and redevelopment, with the vast majority of these capital costs attributable to our City Center redevelopment project in San Francisco and our new grocer TNT, which we are targeting a late 2026 rent commencement date. I recognize that I just dropped a lot of numbers on you. But when stepping back, it's these data points that are driving our confidence in Q3 being an inflection point and setting us up for outsized growth in 2026 and beyond. And more specifically, our increased conviction of achieving the 10% REIT portfolio NOI growth target in 2026 that we discussed on the second quarter call. Based on our current model, we are projecting total same-store growth inclusive of redevelopments between 8% to 12% and between 5% to 9% same-store growth, excluding redevelopments, with our street and urban portfolio projected to contribute growth in excess of 10%. In terms of dollars, the projected 8% to 12% NOI growth approximates $12 million to $14 million of incremental NOI over our 2025 projected results or roughly $0.09 a share of FFO at our current share count. And while we're still finalizing our budgets and have some more leases to sign, we are well on our way of hitting our targets. Now moving on to earnings. The NOI growth from our street retail portfolio is dropping to the bottom line and the simplified method of reporting FFO that we discussed on our last call will provide even greater visibility. Driven by the 8.2% same-store NOI growth, we sequentially increased our quarterly FFO by $0.01, to $0.29 as compared to the $0.28 we reported last quarter after adjusting for the gains from our investment management business. And this growth was achieved despite the short-term dilution from the partial conversion of the City Point Loan. In terms of City Point, as mentioned on the last call and disclosed in the second quarter Form 10-Q, about half of our partners converted their interest during the third quarter. As a reminder, had all the loans converted at the beginning of the year, it would have been approximately $0.06 dilutive on an annualized basis against 2025 FFO. So as we've previously discussed, while the loss of interest income will be short-term dilutive for the balance of 2025 and into 2026, this sets us up for meaningful future NOI and earnings growth over the next several years as we continue to stabilize the asset. Moving on to guidance. As highlighted in our release, even with the dilution from City Point, we maintained our FFO prior to the realized gains we earned from our investment management business. Additionally, we have revised and tightened FFO inclusive of gains of our investment management business, driven primarily by the decline in share price of Albertsons. In terms of 2026 guidance, as we discussed last call, we will be moving to a simplified reporting metric. Our new metric will be FFO as adjusted and will exclude the gains from our investment management business, along with material noncomparable items that we believe are not reflective of our core operating results. Please take a look at our investor deck on our website, which further discusses the reporting change and what this revised metric would have looked like for our 2025 earnings. And for those on the sell side that have not yet done so, please update your 2026 earnings estimates based upon our revised definition. Additionally, while an important and highly profitable part of what we do, we are no longer going to include investment management gains and promotes in any of our earnings guidance metrics going forward. So we would ask that you please also exclude these from your metrics to avoid any inconsistencies amongst the analyst community. Thus, NAREIT FFO and our new metric, FFO as adjusted, should be identical when we provide our 2026 guidance in February. And when we earn a promote in any given quarter, it will be included in NAREIT FFO and excluded from FFO as adjusted. And please keep in mind, while we won't be including investment management gains and promotes as part of our guidance, this profitable part of our strategy will continue to be an important part of our business with approximately $30 million of near-term gains anticipated. And finally, I'll close with an update on our balance sheet. With our pro rata debt EBITDA at 5x and meaningful liquidity, our balance sheet has a dry powder to play offense. We raised approximately $212 million of equity at the quarter at just under $20 a share to accretively fund our acquisition pipeline and the Henderson Redevelopment project in Dallas. As A.J. mentioned, Henderson is on track, and we are in advanced stages of lease negotiations on a significant portion of the project, giving us increased confidence of achieving our targeted 8% to 10% development yield and $0.02 to $0.04 of projected incremental FFO growth commencing in 2027 and into 2028. I also want to point out that over the past few quarters, we have acquired 5 additional properties on Henderson Avenue, which we've set aside for future development. And combined with our existing holdings, this brings our ownership to well over 50% of this premier retail corridor. So in summary, with strong embedded internal growth and meaningful dry powder on hand to accretively fuel our large and growing pipeline of external opportunities, we are incredibly excited as we look forward over the next several years. And with that, I will turn the call over to the operator for questions.

[Operator Instructions] And our first question will come from Floris Van Dijkum with Ladenburg.

Obviously, underlying results appear to be really solid here and you did raise some equity. Maybe my first question is, can you lift the veil a little bit on your -- the pipeline of acquisitions you're looking at? You did talk -- I think, Reggie, you indicated that about a chunk of the doubling of investments or ballpark figure, $500 million of investments is Henderson, which I believe the total cost is around $190 million, $200 million. Maybe talk about some of the other potential investments you're looking at and maybe talk about the difference between cash yields versus GAAP yields.

Before I turn it over to Reggie, just to clarify, the acquisitions Reggie is mentioning are separate and beyond what we're talking about for Henderson. So those are incremental to Henderson. So Reggie, do you want to take the...

Yes. Let me start with the bottom of GAAP yield and cash yield. As I said before, we feel really confident that we're finding the right opportunities in street retail that may take a 5% cash yield into the mid-6s, which is our target for GAAP yield. So trying to find those deals with the right attributes of lease duration and mark-to-market. We found those. We're continuing to find those in the pipeline as well. So we feel good about not only getting deals done, but getting deals done at our metrics. What was the first part, Floris?

Are they in existing markets in particular? I'm curious what percentage would you say is New York versus other areas?

They are in existing markets. We still like New York and still doing a lot of activity there. But they go kind of up and down the East Coast, but I would say most of it is focused on New York, just looking at our pipeline today.

Floris, again expect our geographies, though, to expand, and it's a fluid situation. So we'll be in other spots as well.

Great. And then maybe the momentum in the street appears to be really strong. You guys are seeing no signs of slowing down in terms of tenant demand? And are retailers focused on their occupancy cost, i.e., are they able to generate the sales to be able to pay the rents to be in your street locations?

Yes. I think a few things are at work in terms of that. Some of the economic recovery that we're going through that some refer to as a K recovery. Certainly, the affluent consumer is driving more of this recovery, more of the spending than was historically the case, and that seems to be continuing. Couple that with the fact that the affluent consumer is who drives street retail and from our retailers' perspective, the shift from wholesale to stores, the shift to DTC, as I touched in my remarks, means that these retailers in order to capture that customer have to be on these key streets, means that they need these stores. And to your point, the sales are showing up, the profitability is showing up. The other thing, as I reflected on the last 6 months, we, as investors, perhaps were fighting the last war. And so immediately, when Liberation Day hit, we were all focused on, oh my gosh, the consumer is going to focus only on necessity items. Well, for some segments of the consumer, that may have been the case, those living paycheck to paycheck. But in general, the affluent consumer has continued full speed ahead and thus, our retailers has followed. And I guess my takeaway was we thought with Liberation Day, it was what you are selling, i.e., necessities versus discretionary. And it's really more about who are you selling to and how are you selling? Who, meaning to the customers who are shopping on our streets and then how our retailers recognize that the physical channel in an omnichannel world is by far the most profitable. All of that's leading to this much longer-term trend, what I refer to as a secular trend of the street locations being must-have for a wider and wider variety of important retailers, and that's why you're seeing the kind of results that A.J. discussed.

And our next question will come from Linda Tsai with Jefferies.

A question for John. The 5% to 9% same-store growth ex redevs in '26 is impressive considering the tough comp in '25. But could you go into some of the considerations of what would make you hit the 5% versus the 9% since it's a wide range?

Yes. Linda why don't we first start with -- and I know I throw a lot of numbers out there. When you look at the transcript, you could digest them. But a couple of data points that gives us confidence in doing that. If you look at the commencements, this quarter alone, right, with the $6.7 million that commenced, our incremental pickup from that is $4 million plus of what we have in our SNO that will commence. So this is all same-store, another $3.5 million. So when you apply both of those numbers together, you're above 5% already in that number. You then have contractual growth that's going to go on top of that. And not to accept there's going to be move-outs as there's always in that portfolio. But in terms of our level of conviction, we feel really good about the 5%. And to get us to the 9%, it's -- as I mentioned, we have some leasing in the normal course to do. So it's how quickly do we get some of those spaces leased and open, gets us to the 9%. But that factors in as we sit here today, rollover credit, et cetera. But we'll update that as we get closer, but feel pretty confident of that range for sure.

And I have a follow-up for Ken. If you could snap your fingers and vastly increase your street retail concentration in 1 or 2 specific markets, which would they be?

Oh, no. Thank goodness. I don't get to snap my fingers. So of our existing markets, there are some that are up and coming and intriguing. San Francisco certainly would fall into that category. Their new mayor is doing a fantastic job, and we're enjoying the tailwinds in our 2 redevelopments. I'd be happy to see more there. Dallas, certainly of one of our existing markets, strong demographic trends, and we're capturing the right retailers at the right time. So those will be 2 that would add good balance, good diversity overall. But open order from, frankly, most of our markets. M Street, there's no reason we shouldn't continue to add there. New York selectively, no reason we shouldn't add there as well.

And our next question will come from Craig Mailman with Citi.

Just to go back to the acquisitions, just to clarify. So Reggie, should we take away from it that there could be up to $500 million of potential deals in 4Q? And is that like a gross number and maybe your net would be lower as you partner with people? Can you just kind of put some goalposts around it?

Yes, that's a gross number. And just to be clear, when I talk about this pipeline, this is the product of exclusive negotiations, right? So it's not just, "Oh, there's an OM on the street and I'm just included in the pipeline." These are specific conversations we're having, but that is a gross number that we could achieve in the fourth quarter.

And keep in mind, Craig, somewhat coincidentally, but conveniently, the earnings accretion, whether it's on the investment management platform side or on the street retail from an earnings perspective only, they're both about equally accretive on a gross-to-gross basis and our effective input. So from an earnings perspective, the same. That being said, we certainly appreciate the importance of us adding the street retail piece, the long-term permanent ownership.

Right. And so it could be $0.025 accretive on an annual basis is what you're saying, given the magnitude in your historic $200 million or $0.01 for every $200 million.

Exactly. And that's still playing out at...

Okay. Then...

Go ahead.

Okay. So I was just going to say from the financing perspective, right, you guys have -- you did the forward equity. You potentially have some capital coming back in from the recap of the 2Q acquisition. And then you guys have -- clearly, the debt market is wide open here. So from a -- as we think about kind of sources to fund this and maybe timing with taking down some of that forward ATM and some dispo proceeds, like how should we think about that whole mix given maybe what you guys have in the fourth quarter plus Henderson Ave financing to continue, right? And that's a higher return, so maybe you earmark more equity for that versus more debt for acquisitions? I mean could you just talk about the puts and takes on how you guys are thinking about that to maximize accretion?

Yes. Why don't I start and then, Ken, if you want to jump in. But I think, Craig, the way we want to -- the way that we're going to manage the balance sheet is that we're going to stay on a pro rata basis debt-to-EBITDA, inclusive of whatever share we do in Investment management, sub-6 and sub-5 where we just look at rebalance sheet debt to EBITDA. So that's just sort of our goalpost as to where we're looking for. And we look at -- you mentioned the liquidity in the debt market, and it is outstanding in terms of both primarily on the secured side, we're seeing incredible tightening of spreads and availability of capital. But on the unsecured side, we are borrowing at 120 over. So we look at on a 5-year swap that we borrow on an unsecured basis, we'll be able to do in the mid-4s. So when we look at the mix of what we do -- so think of those goalposts as to where we're going to keep our debt-to-EBITDA targets. We have plenty of liquidity available. Our revolver is virtually completely untapped. And you mentioned we have the proceeds coming back from the recap of the asset we did during the second quarter. So plenty of liquidity that are going to be able to manage the acquisition pipeline that's coming on, and we're going to do that in the most efficient way possible.

Yes. And just to clarify or just so that there's no doubt, we are in a position now to fully fund all of those opportunities as well as play offense going forward. And what John is articulating is the wide variety of choices we have in terms of how we fund this, both in the secured debt market for our investment management platform and then the unsecured market.

And our next question comes from Andrew Reale with Bank of America.

I guess first on the investment management platform. First, on West Cobb, Reggie, I think you said you're close to closing with an institutional partner there. So I'd just be curious to kind of hear how the level of demand from potential partners was after you closed on that asset? And maybe just more broadly, are you seeing increased partnership interest from institutional capital? And how might that be shaping your investment management strategy overall?

Yes. We're seeing broad demand. There's a lot of institutional investor demand. All of the fundamentals that A.J. and Ken have discussed are not a secret anymore. I feel like they were a secret for some time with institutional investors. But now the note is out, everyone gets it and everyone is looking to do retail. What they're finding at the same time is retail can be very idiosyncratic. And so you have to have best-in-class operators in order to do it. So we're certainly on inbounds of a lot of groups saying, "Hey, we want retail, but we need a best-in-class operator to do it." So whether it be Pinewood or Cobb, we have no shortage of opportunities to recap those 2. And as far as on a go-forward basis, we feel really good that we'll be able to do all the deals that we want to do from the investment management platform and find the capital as needed.

Okay. And maybe one for A.J. Specifically at the core properties you've acquired this year, I'd just be curious what proportion of that mark-to-market and pry loose opportunity kind of has already been addressed or is going to be addressed by year-end versus how much is still left to be realized in '26 and beyond?

Yes. Well, we're not going to get into specific numbers, but I'll tell you a few things, right? I mean we look to number one, the incredible growth we've seen in these markets, right? 15% sales growth in SoHo, 30% Bleecker, 40% in Chicago. We look at tenant health, right, which is stable and only improving as those sales outpace contractual growth, demand at the highest level it's been in a decade. And then, of course, the scale that we've built in these markets to capture that. Couple that with what we've already accomplished this year through our pry loose strategy, right, taking back 9 spaces, re-leasing them at an average spread of about 32%. That should give you an indication of where our markets stand and the opportunity that we think is ahead of us in each one of those markets.

And our next question will come from Todd Thomas with KeyBanc.

First, I wanted to follow up on the funding questions around investments. Any sense what the split might look like on that $500 million pipeline between core and investment management deals? I'm trying to just get a sense what the net number might sort of look like as you're looking at that today? And then, John, it doesn't sound like the accretion math changes right now for the current pipeline with the capital that's been raised. But does the current stock price and your current cost of equity capital change how you would think about funding future investments or the returns that you might require going forward?

Yes. Let me start with that and then kind of Reggie can take the second piece. So Todd, at the current, and we highlighted where we raised the equity just under $20 a share, which is lower than we had done previously in the past year or so. But what has counterbalanced that where we look at our funded cost of capital is the debt market. So if we do and what we're going to do is on a leverage-neutral basis. So with the mix between the debt portion and the equity portion, we're in the mid-5s when we look at the -- when we put in -- using the FFO yield on the equity raising at the price that we did it at, plus the mid-4s on the debt piece. So that's where our all-in funding cost, and I'll let Reggie and Ken talk about where we can deploy that and grow accretively at that $0.01 per 200. But that's how we're looking to fund it, and we can do it accretively and it's stuff we want to buy with the current capital markets.

Let me take a stab then at the first part of the question where Todd asked, how much is the breakout between the investment management platform or on balance sheet. Let me take a stab at not answering that, Todd. And I apologize, but I've always struggled with providing too much information about deals that are in our pipeline because I don't think it creates shareholder value. I think it actually hurts to provide too much information and sellers hear about it and this or that. We have a robust pipeline. Otherwise, we wouldn't mention it. It is earnings equivalent either way. And as John just said, we are in a current position where we can fund all of it if it were all street retail or all investment management platform. So no one should have any funding concerns. And then I will be that, and we're going to be that vague until we see which ones get done by year-end, how much of those then fall into the next quarter. But I'm confident that there are investment management platform deals that are going to be very accretive, very exciting, very profitable. And I'm even more confident over the next quarter, but more importantly, over the next year or 2 that we're going to continue to grow that street retail accretively, notwithstanding a volatile REIT market, accretively and profitably as we continue to drive Acadia to be the premier owner-operator of street retail in the U.S. Quarter-to-quarter, I just don't want Reggie to answer that question, even though he knows the answer.

Okay. Understood. My other question, A.J., you mentioned that the suburban portfolio is performing well, but noted the growing delta in growth rates between the street and suburban portfolios, which we've seen now for quite some time. The company sold one asset in Dayton from that suburban portfolio. Can you just comment on pricing for that disposition and whether or not you'd consider selling more suburban strips to improve portfolio growth and sort of further reshape the complexion of the portfolio overall or accelerate that?

I'm happy to take a guess, but I'll pass it off to Reggie. I think he's probably better equipped to answer that one.

Yes. Look, if we can accretively dispose of assets that are no longer core, Dayton, that's a legacy Acadia asset. If they're no longer core and the business plan is finished, and we can sell those assets and accretively redeploy, we'll always look at those opportunities to do so.

Todd, the devil's in the details of transaction costs, friction costs, tax issues and all of that. So it's not as easy as snapping my fingers as someone said earlier. But you should expect the majority -- vast majority of our growth to be street and urban and over time, whether we cycle assets into our investment management platform, which you have seen us do or just outright sell them, that's how we will be dealing with the suburban side. That being said, and it's important to note, suburban retail has real tailwinds as well. There's nothing about us focusing our long-term REIT ownership on street retail that in any way negates us being opportunistic on acquiring shopping centers in our investment management platform. That's where they belong, utilizing more leverage and being leveraging off of our institutional equity partners as well.

And the next question will come from Michael Mueller with JPMorgan.

First, I guess, what was the ballpark range of rents that you achieved on the 300 to 400 basis points of street openings that occurred during the quarter?

Yes. So A.J., maybe give some color on the biggest markets where of the openings were in Chicago and D.C. So maybe just talk about those 2 markets that -- on Walton and M Street. So maybe to see what -- just talk through the range on that.

Yes. Specific to the properties that we rolled online. I mean those are -- especially in those markets, those are multilevel space. There's a lot of nuance within those markets. So it's really hard to peg a per foot number. I can talk to you about growth in each of those markets...

[ Footage ] on the ground. What would you say the ground would be on...

Armitage. Yes. Ground on Armitage is, let's call it, between $120 to $130 a square foot. And Wisconsin Avenue seeing real increase in rents there. I mean, rents are up to the $150 a foot range.

And then on Walton Street.

On Walton Street, ground floor space at this point is leasing for, call it, $350 to $400 a square foot, which again is pretty remarkable when we look at where we were even just a few years ago.

Got it. Okay. So if we think of those numbers and try to do some blending, that's probably representative of the blended rent for the 360 basis points that came on?

Probably is, Mike. And then here's the challenge that I know you and I have had multiple conversations on. A, just a wide range that A.J. gave would give one challenge. Secondly, if you just look at square feet, and if you look at the one building that came on in Chicago, it's 2 floors, right? So it's 2 floors. So the second floor is going to get a different attribute. So I would -- as we've talked about in the past, I would love to just say you could just use a single dollar mark, $137.5 per square foot, but it really, really depends on the building that's going in because it really can move the needle dramatically.

Got it. Okay. And then the second question, for the City Point conversions, are there any more expected over the near term?

I would say at this point, we don't have new information as to -- we now own 80%, so there's another 20%. Look, I would say that -- and we're not putting out guidance, but I was putting out -- if I was forced to put out guidance at this point, I would assume that, that comes out in '26, Mike. But we don't have new information. But I think for modeling, you should assume that, that does come out in '26.

And our next question will come from Paulina Rojas with Green Street.

I only have one question. The strong underground fundamentals you have described extensively in this call, I don't think they have been reflected in the year-to-date performance of the stock. So what do you see as the main drivers behind that share pullback? And what would be your contra arguments to the market's reaction?

I wish I could control our stock performance, I can't. We are doing as good a job as we can is providing additional clarity, and I think this will be important of top line growth hitting the bottom line. But what we have seen, and I've been through more than a few cycles, is if we take care of our day-to-day business, meaning leasing and acquisitions, sooner or later, the market follows. I always prefer if it's sooner. And I'd say over the last 6 months, it's been a little frustrating that it's taking longer for us than I think is deserved. But Liberation Day was very disconcerting for a lot of different folks. And the immediate conclusion that discretionary retail was going to somehow be significantly impacted and high rent street retail even more so turned out to be dead wrong. Our retailers have done a fantastic job of navigating around supply chain and the consumer has hung in there. Now whether it takes us 3 months, 6 months or 9 months, sooner or later, what we have found is shareholders get it. And when we're posting the kind of results that we are at the real estate level, well, I'm going to rely on you, Paulina, to get the story out of what you saw in Chicago, what is going on in San Francisco, what is happening certainly in M Street and things like that because when people see it with their own eyes, then sooner or later, it shows up. And if we continue to deliver at the property levels, both in terms of internal growth, external growth, we've seen time and again the stock recovers, not fast enough for my impatience, but overall, it tends to work. And so I believe it will. That being said, I'd rather it be sooner than later.

Okay. Hopefully, you're right and things go your way.

We're counting on Green Street to help us. Did you have a follow-up?

My apologies.

No, I'm going to add one other thing to help Green Street and everyone else, and John maybe chime in. One area that continues to frustrate me is leasing spreads. We have said in the past, not all spreads are created equal. John, why don't you chime in just quickly because we have a minute or 2.

Yes. And I think where we look at that calculation, there's lots of metrics out there. I think the one that Ken mentioned, not created equal, and we have a -- anyone interested, we have a page in our deck, but the simplest form that if we look at, and we have both of them, a suburban lease and a street retail lease that we would need to accomplish the same growth rate that from the time the lease started to the time we get to mark that to market, we would need probably more than double the spread that we get from suburban than we would on the street because of the 3% contractual growth as part of the street piece. So that's one metric that I think that we want to keep reminding folks that we have the 3% contractual growth. And when you look at a spread, that sort of ignores what you have done historically.

So Paulina, you can add that to your thoughtful pieces. And operator, I think that concludes all of the questions. So I'd like to thank everybody for taking the time to meet with us. Thank you to the team for producing some extraordinary results.