Kenneth Bernstein - President and Chief Executive Officer
Jonathan Grisham - Senior Vice President and Chief Financial Officer
Acadia Realty Trust (AKR) 2013 Annual Meeting of Shareholders Conference Call May 15, 2013 1:00 PM ET
Thank you, for joining us I am Kenneth F. Bernstein, President and Chief Executive Officer of Acadia Realty Trust. On behalf of the company, I want to welcome you. Thank you for joining us at this virtual meeting of shareholders of Acadia Realty Trust.
At this time, I call the meeting to order. As a preliminary matter, a virtual meeting is one that takes place via an electronic format, and audio feeds from this meeting is being webcast as we speak. This webcast incorporates shareholder validation capabilities, which means that any shareholder can vote in real time during the meeting, until the polls are closed. And any shareholder may submit question, while the meeting is in progress.
We believe that holding a virtual annual meeting will expand shareholders aspects. Our shareholders in any part of the country can attend this meeting and non-shareholders can listen to this webcast over the internet. I hope you entered this meeting by using your 12 digit control number. If you did not, you will be unable to vote your shares or submit questions during this meeting. The polls to vote online are now open.
If you've already given your proxy to management, you need not vote again, because the person's designated as proxies will vote for you. However, you may revoke your proxy by loading virtually at this meeting. If you so desire after the meeting has been adjourned, I will answer questions submitted on the website in the field provided for shareholders. We may not have enough time to answer all questions submitted by shareholders during the meeting, so if you would like a direct response after this meeting please provide your contact information along with your questions.
Jon Grisham, Chief Financial Officer of the company will act as an inspector of our elections. He had taken the customary oath of office, which will be filed with the permanent records of this meeting. Will the inspector please identify yourself, so that shareholders who are participating will know who you are?
Good afternoon, everyone I am Jon Grisham.
I'd like to take this opportunity to introduce some of the officers and trustees who are present at this meeting. Lee Wielansky, Lead Trustee; Douglas Crocker, Trustee; Lorrence Kellar, Trustee; Wendy Luscombe, Trustee; William Spitz, Trustee; Joel Braun, Executive Vice President and Chief Investment Officer; Chris Conlon, Executive Vice President and Chief Operating Officer; Jon Grisham, Senior Vice President and Chief Financial Officer; Mike Nelsen, Senior Vice President and Accounting and Financial Principal; Robert Masters, Senior Vice President, Secretary and General Counsel; Joseph Napolitano, Senior Vice President and Chief Administrative Officer; Richard Hartmann, Senior Vice President and Chief Accounting Officer; Dawn Portney, Vice President, Assistant Secretary and Associate General Counsel; David Craine, Director of Financial Reporting.
Also present is Mark Schonberger, from the law firm of Goodwin Procter, which firm advises the company on corporate and securities matters. Robert Masters will act as Secretary of this meeting. Will the secretary please report the number of shares outstanding and entitled to vote at this meeting.
The close of business on March 20, 2013, is the record date for determining shareholders entitled to vote at this meeting. The certified list of shareholders entitled to vote at the meeting is available at the offices of the company and maybe inspected by any shareholder. As of the record date 54,045,253 of the company's common shares were outstanding, each share being entitled to one vote on all matters properly brought before this meeting.
Also available for inspection by the shareholders in the office of the company are copies of the notice of meeting and proxy statement, proxy annual report to shareholders and an affidavit of mailing, certifying to the timely mailing on or about April 5, 2013, of the proxy materials to all shareholders of record as of the record date. Copies of the notice of meeting and proxy statement, the proxy and the annual report are also posted on the virtual meeting site.
The secretary is directed to file the list of shareholders with the records of the company and to file the notice of meeting and proxy statement, proxy annual reports and affidavit of mailing with the minutes of the meeting. Under the company's bylaws the presence in person or by proxy of shareholders entitled to cast a majority of all votes entitled to be cast at this meeting constitutes a quorum.
A preliminary tally by the inspector indicate that a quorum is present. The presence of a quorum will be confirmed by the inspector, when he completes the tally of the proxies and ballots. This meeting has been called to consider and vote upon the following matters each of which is described in detail in the proxy statement.
First, to consider and vote on a proposal to elect six trustees to the company's Board of Trustees to serve until their respective terms expire and their successors are duly elected and qualified. Second, to consider and vote on a proposal to ratify the appointment of appointment of BBO USA, LLP as the independent auditors of the company for it's fiscal year ending December 31, 2013.
Third, the approval on an advisory basis of the compensation of named executive officers as disclosed in the company's 2013 proxy statement in accordance with compensation rules of the Securities and Exchange Commission. And fourth, to consider and vote on such other business as it may properly come before the annual meeting.
We will now proceed to the items of business before the meeting today because each of these items was listed in the notice of meeting. I will not ask for a motion or a second to approve any of these items.
The first item of business is the election of six trustees to serve until the annual meeting in 2014 or until their successors are duly elected and qualified. As indicated in the proxy statement, all six individuals have been nominated by the Board of Trustees for election as trustees.
The second item of business is the ratification of the appointment of BDO USA, LLP as independent auditors of the company for its fiscal year ending December 31, 2013.
The third item of business is to approve on an advisory basis the compensation of named executive officers as disclosed in the company's 2013 proxy statement in accordance with the compensation rules of the Securities and Exchange Commission.
The fourth item of business is such other business as may properly come before the annual meeting.
Please vote your shares now with respect to these matters if you have not already voted by proxy before this meeting. If you wish to resend your proxy and vote on your own behalf, you may submit a ballot now.
The polls are now officially closed. This concludes the voting portion of the meeting.
Inspector, please tell us the preliminary results for the election of the nominees to the Board of Trustees.
Mr. President, as inspector of the elections, I have reviewed the proxy's received prior to the meeting and the ballots collected during the meeting. Based on the preliminary count of proxy's and ballots, each nominee has been elected to the Board of Trustees by the vote of at least a majority of all votes cast at this meeting in person or by proxy.
Inspector, please tell us the preliminary results for the ratification of the appointment of BDO USA, LLP as independent auditors of the company for its fiscal year ending December 31, 2013.
Based on the preliminary count of all proxy's and ballots, the appointment of BDO USA, LLP as independent auditors of the company for its fiscal year ending December 31, 2013, has been ratified by a vote of the holders with at least a majority of the shares with common stock present at this meeting in person or by proxy.
Inspector, please tell us the preliminary results for approval on advisory basis of the compensation of named executive officers as disclosed in the company's 2013 proxy statement in accordance with compensation rules of the Securities and Exchange Commission.
Based on the preliminary count of all proxies and ballots the approval on an advisory basis of the compensation of named executive officers as disclosed in the company's 2013 proxy statement in accordance with compensation rules of the Securities and Exchange Commission has been ratified by vote of the holders of at least the majority of the shares of common stock present at this meeting in person or by proxy.
That concludes the formal business for this meeting. I'd like to adjourn the formal portion of the meeting and ask for a motion for adjournment.
Unidentified Company Representative
I move that the meeting be adjourned.
May I have a second?
Unidentified Company Representative
All in favor?
Unidentified Company Representative
I declare the 2013 Annual Meeting of Shareholders of Acadia Realty Trust to be adjourned. At this point, I'll pause to answer questions that may have been submitted by our shareholders. We've allotted 10 minutes to answer questions and then the members of the board and I will be excusing ourselves for a board meeting.
What does Acadia envision as the next big market?
Our focus as many of you are familiar with is primarily retail and then within the retail segment, it's open-air retail primarily in high-barrier-to-entry markets and by that we mean those markets that it is as not easy for new developments to compete with our locations. As such the majority of our properties are in the Washington D.C. through Boston corridor as well as in downtown Chicago. We also have significant investments in Miami Beach, Florida and in various other markets that we think that we have some level of competitive advantage. Terms of the next big market, we are very comfortable throughout the eastern half of the United States in the high-barrier-to-entry market that exists there and we are in most of those markets already.
Our next big investments will be determined by where we see opportunities and those opportunities can be driven by exciting investment opportunities or by changes and desires by our tenants to expand into certain markets. So it's hard to predict a specific geography as much as it would be to be responsive to the opportunities as we see them primarily in those markets that we are currently involved in.
Next question. What is Acadia doing to take advantage of this very low interest rate environment? Further what is the company doing to protect against the dramatic increase in interest rates in the future?
We clearly have no ability to drive interest rates in one direction or another. So we need to respond to both the very low interest environment that we're in right now, by making sure that that debt that we have on our balance sheet is longer-term fixed rate, close to 90% of our debt is of long duration and fixed rate, so that if short-term interest rate fluctuates, we should be relatively well protected by that.
Yes, interest rates are low, and yes, we can borrow at low costs, but the company has historically maintained a very conservative use of debt and our expectation is that we would continue to do that, so while interest rates are at low and we will continue to utilize the low interest environment. I don't expect us to take on materially more debt as part of our growth strategy rather to continue to use the match-funding of both equity and debt that we have been doing historically.
We note that in 2012, Acadia sold its storage business. Do you envision Acadia reentering that business?
Self-storage business is a fascinating business. We had made a relatively large investment as part of a strategy for our urban mixed-use here in the New York area especially, where we could put self-storage on top of and as part of several of our urban mixed-use developments. As the development business slow down some, our need to have a captive self-storage company became slightly less compelling. The business itself was a solid business and we have brought in a management team than has done a terrific job of really turning that business around and maximizing its revenues.
So last year, we sold it as part of our recapitalization. Acadia through its Opportunity Fund III is still a small partner in the remaining business, but it was our conclusion that given our focus and strength is in retail, it was better to have self-storage in its own separate operating company. That transition has occurred very smoothly. We expect Storage Post, which is our self-storage vehicle to continue to grow, but primarily with outside capital and not with Acadia capital going forward.
Next question. Jon Grisham, why don't you answer this.
Given that income from discontinued operations is about seven times greater than income from continued operations, where substantial assets sold to fund future development and expand upon the company's growth plans?
Related to the discontinued operation activity for 2012 that income was almost entirely gained from sale of the assets, and not from operating income from those assets, as such we did not sell a substantial portion of the portfolio, rather it was a small percentage of the portfolio primarily our self-storage assets and three other fund assets.
In terms of our future growth plans, we have dual platforms that we execute our growth with. The first is through our core acquisition and those are what we term infinite life acquisitions properties that are wholly-owned by of the company and theoretically we could own them for an infinite period of time.
We have tended to focus those acquisitions on urban and street retail in those key markets that I articulated before. Last year, we acquired $225 million of core assets and our goal for this year and going forward is probably similar levels of growth, which given the size of our core portfolio today is a nice and steady growth profile for our core portfolio.
The other dual platform is through our fund business. Last year, we successfully completed the raising of just over $500 million of discretionary equity in our Acadia Fund IV, which will give us about $1.5 billion of buying power on levered basis. And the goal is to invest those dollars opportunistically over the next three or four years. So as we think about our growth profile on the Opportunity Fund side of our business, our expectation, our hope, would be if we see good investments that we'll use that dry powder that we currently have to acquire about $1.5 billion of additional assets.
Over the past 12 months, we've started to make some of those investments. The investment market is a challenging market where we need to be very careful, very disciplined because that we're making large investments. And so we will see when and exactly what the timing will be for those kind of investments, but our goal will be to utilize that money very profitably as we see the opportunities.
Are there any other questions?
Well, we've allocated the time. So I'd like to conclude by thanking everyone for participating in this year's Annual Meeting of the Shareholders of Acadia Realty Trust. Thank you for your time. Good bye.
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