8-K: Acadia Realty Trust Announces $500 Million ATM Equity Offering

Acadia Realty Trust has entered into an agreement for an at-the-market equity offering program to sell up to $500 million of its common shares.

Summary

• Acadia Realty Trust and Acadia Realty Limited Partnership have entered into an ATM Equity Offering Sales Agreement to sell common shares of beneficial interest with an aggregate sale price of up to $500 million.
• The shares will be offered through BofA Securities, Inc., Barclays Capital Inc., Goldman Sachs & Co. LLC, Jefferies LLC, J.P. Morgan Securities LLC, TD Securities (USA) LLC, Truist Securities, Inc. and Wells Fargo Securities, LLC, as sales agents and forward sellers.
• Bank of America, N.A., Goldman Sachs & Co. LLC, Jefferies LLC, JPMorgan Chase Bank, National Association, The Toronto-Dominion Bank, Truist Bank and Wells Fargo Bank, National Association, or one of their respective affiliates, will act as forward purchasers.
• Sales may be made through ordinary brokers' transactions on the New York Stock Exchange or other national securities exchange, negotiated transactions, or as otherwise agreed with the sales agent or forward seller.
• The company may also enter into forward sale agreements with forward purchasers, who may borrow and sell common shares equal to the number of shares underlying the agreement.
• Sales agents will be entitled to compensation of up to 2.0% of the gross sales price of shares sold through them.
• Forward sellers will be entitled to commissions at a mutually agreed rate that will not exceed 2.0% of the gross sales price of all borrowed common shares sold during the applicable forward hedge selling period.
• The company has no obligation to sell any shares and may suspend solicitation and offers at any time.
• The operating partnership intends to use the net proceeds for general corporate purposes, including funding future acquisitions, repaying outstanding indebtedness, working capital, and other general corporate purposes.
• Pending such usage, the operating partnership expects to invest the net proceeds in short-term instruments.
• The company expects to physically settle any forward sale agreement, but may also elect to cash settle or net share settle all or a portion of its obligations.
• Some or all of the sales agents, forward purchasers, and/or their respective affiliates have engaged in, and/or may in the future engage in, investment banking, commercial banking, financial advisory and/or other commercial dealings in the ordinary course of business with the company and/or the company's subsidiaries.

Sentiment

Score: 7

Explanation: The announcement is neutral to positive. It provides Acadia Realty Trust with financial flexibility, but also carries potential risks for existing shareholders. The involvement of multiple reputable financial institutions suggests confidence in the company's prospects.

Positives

• The ATM offering provides Acadia Realty Trust with flexibility in raising capital as needed.
• The involvement of multiple sales agents and forward purchasers increases the potential for successful share sales.
• The company has discretion over the timing and amount of shares sold, allowing it to respond to market conditions.
• Proceeds can be used for various corporate purposes, enhancing financial flexibility.

Negatives

• The company may not receive any proceeds if it elects to cash settle or net share settle forward sale agreements.
• Existing shareholders may experience dilution due to the issuance of new shares.
• The company may owe cash or shares to the relevant Forward Purchaser in certain circumstances.
• There is no guarantee that the company will be able to sell all $500 million of shares.

Risks

• Market conditions may impact the company's ability to sell shares at favorable prices.
• The company's stock price could be negatively affected by the announcement of the offering.
• The use of forward sale agreements introduces complexity and potential risks related to settlement options.
• The company's reliance on short-term instruments for investing net proceeds may limit potential returns.

Future Outlook

The Operating Partnership intends to use the net proceeds from the offering for general corporate purposes, which may include funding future acquisitions, the repayment of outstanding indebtedness, working capital and other general corporate purposes. Such decisions will depend upon various factors, including market conditions and strategic considerations. Pending such usage, the Operating Partnership expects to invest the net proceeds in short-term instruments.

Industry Context

ATM offerings are a common method for REITs to raise capital, providing flexibility and access to funds as needed. The involvement of multiple large financial institutions as sales agents and forward purchasers is typical for offerings of this size.

Comparison to Industry Standards

• Comparable REITs, such as Simon Property Group (SPG) and Public Storage (PSA), have utilized ATM offerings to manage capital and fund acquisitions.
• The commission rates of up to 2.0% are within the typical range for ATM offerings in the REIT sector.
• The intended use of proceeds for general corporate purposes, including acquisitions and debt repayment, aligns with industry practices.
• The option for cash or net share settlement in forward sale agreements is a feature seen in similar transactions by other REITs.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares.
• Employees may benefit from increased financial stability and potential for future growth.
• Customers and suppliers are unlikely to be directly impacted by the offering.
• Creditors may benefit from the potential repayment of outstanding indebtedness.

Next Steps

• Acadia Realty Trust will sell shares through the sales agents and forward sellers as market conditions warrant.
• The Operating Partnership will allocate the net proceeds to general corporate purposes, including potential acquisitions and debt repayment.
• The company will monitor market conditions and strategic considerations to determine the timing and amount of share sales.

Key Dates