ACADIA REALTY TRUST

1. Organization, Basis of Presentation and Summary of Significant Accounting Policies

Organization

Acadia Realty Trust, (the “Trust”, collectively with its consolidated subsidiaries, the “Company”), a Maryland real estate investment trust (“REIT”), is a fully-integrated equity REIT focused on the ownership, acquisition, development, and management of retail properties located primarily in high-barrier-to-entry, supply-constrained, densely populated metropolitan areas in the United States.

All of the Company’s assets are held by, and all of its operations are conducted through, Acadia Realty Limited Partnership (the “Operating Partnership”) and entities in which the Operating Partnership owns an interest. As of December 31, 2023 and 2022, the Trust controlled approximately 95% of the Operating Partnership as the sole general partner and is entitled to share, in proportion to its percentage interest, in the cash distributions and profits and losses of the Operating Partnership. The limited partners primarily represent entities or individuals that 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”) and employees who have been awarded restricted Common OP Units (“LTIP Units”) as long-term incentive compensation (Note 13). Limited partners holding Common OP and LTIP Units are generally entitled to exchange their units on aone-for-one basis for common shares of beneficial interest, par value $0.001 per share, of the Company (“Common Shares”). This structure is referred to as an umbrella partnership REIT or “UPREIT.”

As of December 31, 2023, the Company has ownership interests in 149 properties within its core portfolio, which consist of those properties either 100% owned, or partially owned through joint venture interests, by the Operating Partnership, or subsidiaries thereof, not including those properties owned through its funds (“Core Portfolio”). The Company also has ownership interests in 52 properties within its opportunity funds, Acadia Strategic Opportunity Fund II, LLC (“Fund II”), Acadia Strategic Opportunity Fund III LLC (“Fund III”), Acadia Strategic Opportunity Fund IV LLC (“Fund IV”), and Acadia Strategic Opportunity Fund V LLC (“Fund V” and, collectively with Fund II, Fund III, and Fund IV, the “Funds”). The investment period for our current fund was completed in August 2023. At December 31, we have closed on all new investments in our Funds, and any remaining obligations to our Funds are related to existing investments. The 201 Core Portfolio and Fund properties primarily consist of street and urban retail, and suburban shopping centers. In addition, the Company, together with the investors in the Funds, invested in operating companies through Acadia Mervyn Investors II, LLC (“Mervyns II”), all on a non-recourse basis. The Company consolidates the Funds as it has (i) the power to direct the activities that most significantly impact the Funds’ economic performance, (ii) is obligated to absorb the Funds’ losses and (iii) has the right to receive benefits from the Funds that could potentially be significant.

The Operating Partnership is the sole general partner or managing member of the Funds and Mervyns II and earns fees or priority distributions for asset management, property management, construction, development, leasing, and legal services. Cash flows from the Funds and Mervyns II are distributed pro-rata to their respective partners and members (including the Operating Partnership) until each receives a certain cumulative return (“Preferred Return”) and the return of all capital contributions. Thereafter, remaining cash flow is distributed 20% to the Operating Partnership (“Promote”) and 80% to the partners or members (including the Operating Partnership). All transactions between the Funds, Mervyns II, and the Operating Partnership have been eliminated in consolidation.

The following table summarizes the general terms and Operating Partnership’s equity interests in the Funds and Mervyns II (dollars in millions):

a)

Represents the total for the Funds, including the Operating Partnership and noncontrolling interests’ shares.

b)

Amount represents the current economic ownership at December 31, 2023, which could differ from the stated legal ownership based upon the cumulative preferred returns of the respective Fund.

c)

In January 2023, following the expiration of the lock-up period, Mervyns II distributed the 2.5 million shares of its investment in Albertsons to its partners; the Company received 1.6 million shares (Note 4, Note 8). The Company’s ownership in Mervyns II is 40.0%.

Basis of Presentation

Principles of Consolidation

The consolidated financial statements include the consolidated accounts of the Company and its investments in partnerships and limited liability companies in which the Company has control, including where the Company has been determined to be a primary beneficiary of a variable interest entity ("VIE"), in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810“Consolidation” (“ASC Topic 810”). The ownership interests of other investors in these entities are recorded as noncontrolling interests. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in entities for which the Company has the ability to exercise significant influence over, but does not have financial or operating control and does not consolidate, are accounted for using the equity method of accounting. Accordingly, the Company’s share of the earnings (or losses) of these entities are included in Equity in (losses) earnings of unconsolidated affiliates in the Consolidated Statement of Operations.

Use of Estimates

Generally accepted accounting principles (“GAAP”) requires the Company’s management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The most significant assumptions and estimates relate to the valuation of real estate, depreciable lives, revenue recognition and the collectability of notes receivable and rents receivable. Application of these estimates and assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.

Segments

We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. We define our reportable segments to be aligned with our method of internal reporting and the way our chief operating decision maker makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into three reportable operating segments: Core Portfolio, Funds and Structured Financing, based on the economic characteristics and nature of our assets and services.

Reclassifications

Certain prior year amounts with regard to general reserves for leases and rental revenue have been reclassified to conform to the current year presentation. These reclassifications had no effect on the reported results of operations. Financial Statement Schedule II was also removed to conform to the current year presentation in the footnotes to the consolidated financial statements.

Summary of Significant Accounting Policies

Real Estate

Land, buildings, and personal property are carried at cost less accumulated depreciation. Improvements and significant renovations that extend the useful life of the properties are capitalized, while replacements, maintenance, and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. Real estate under development includes costs for significant property expansion and development. Construction in progress pertains to construction activity at the Company’s operating properties that are in service and continue to operate during the construction period.

Depreciation is computed on the straight-line basis over estimated useful lives of the assets as follows:

If the Company funds tenant improvements and the improvements are deemed to be owned by the Company, revenue recognition will commence when the improvements are substantially completed, and possession or control of the space is turned over to the tenant. If the Company determines that the tenant allowances are lease incentives, the Company commences revenue recognition when possession or control of the space is turned over to the tenant for tenant work to begin. The lease incentive is recorded as a deferred expense and amortized as a reduction of revenue on a straight-line basis over the respective lease term.

Purchase Accounting – Upon acquisitions of real estate, the Company assesses the fair value of acquired assets and assumed liabilities (including land, buildings and improvements, and identified intangibles such as above- and below-market leases and acquired in-place leases) in accordance with ASC Topic 805, “Business Combinations”and ASC Topic 350“Intangibles – Goodwill and Other,” and allocates the acquisition price based on their relative fair values. When acquisitions of properties do not meet the criteria for business combinations, they are accounted for as asset acquisitions; therefore, no goodwill is recorded, and acquisition costs are capitalized.

The Company assesses the fair value of its tangible assets acquired and liabilities assumed based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information at the measurement period. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends, and market/economic conditions that may affect the property.

In determining the value of above- and below-market leases, the Company estimates the present value difference between contractual rent obligations and estimated market rate of leases at the time of the transaction. To the extent there were fixed-rate options at below-market rental rates, the Company included these periods along with the current term below-market rent in arriving at the fair value of the acquired leases. The discounted difference between contract and market rents is being amortized to rental revenue over the remaining applicable lease term, inclusive of any option periods.

In determining the value of acquired in-place leases, the Company considers market conditions at the time of the transaction and values the costs to execute similar leases during the expected lease-up period from vacancy to existing occupancy, including carrying costs. The value assigned to in-place leases and tenant relationships is amortized to depreciation and amortization expense over the estimated remaining term of the leases. If a lease were to be terminated prior to its scheduled expiration, all unamortized costs (e.g., lease intangibles) relating to that lease would be written off.

The Company estimates the value of any assumption of mortgage debt based on market conditions at the time of acquisitions including prevailing interest rates, terms, and ability to obtain financing for a similar asset. Mortgage debt discounts or premiums are included in the carrying value of the debt and amortized into interest expense over the remaining term of the related debt instrument.

Real Estate Under Development – The Company capitalizes certain costs related to the development of real estate. Interest and real estate taxes incurred during the period of the construction, expansion or development of real estate are capitalized and depreciated over the estimated useful life of the building. The Company will cease the capitalization of these costs when construction activities are substantially completed and the property is available for occupancy by tenants, but no later than one year from the completion of major construction activity, at which time the project is placed in service and depreciation commences. If the Company suspends substantially all activities related to the development of a qualifying asset, the Company will cease capitalization of interest and taxes until activities are resumed.

Real Estate Impairment – The Company reviews its real estate, real estate under development and right-of-use assets for impairment periodically or when there is an event or a change in circumstances that indicates that the carrying amount may not be recoverable. In cases where the Company does not expect to recover its carrying amounts on properties held for use, the Company reduces its carrying amounts to fair value. The determination of anticipated undiscounted cash flows considers the most likely expected course of action at the balance sheet date based on current plans, intended holding periods and available market information. If the Company is evaluating the potential sale of an asset, the undiscounted future cash flows analysis is probability-weighted based upon management’s best estimate of the likelihood of the alternative courses of action as of the balance sheet date. Such cash flow projections consider factors such as expected future operating income, trends, and prospects, as well as the effects of demand, competition, and other factors. If an impairment is indicated, an impairment loss is recognized based on the excess of the carrying amount of the asset over its estimated fair value based on third-party appraisals, broker selling estimates, sale agreements under negotiation, and/or final selling prices, when available. The determination of anticipated undiscounted cash flows is inherently subjective, requiring significant estimates to be made by management such as market rental rates and capitalization rates, and considers the most likely expected course of action at the balance sheet date based on current plans and available market information. See Note 8 for information about impairment charges recorded during the periods presented.

Dispositions of Real Estate – The Company recognizes property sales in accordance with ASC Topic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets. Sales of real estate include the sale of investments in real estate properties and real estate joint ventures. Gains on the sale of investment in real estate are recognized, and the related real estate derecognized, when the Company has satisfied its performance obligations by transferring control of the property. Typically, the timing of payment and satisfaction of performance obligations occur simultaneously on the disposition date.

Real Estate Held for Sale – The Company generally considers assets to be held for sale when certain criteria have been met, and management believes it is probable that the disposition will occur within one year. Properties are held for sale for a period longer than one year if events or circumstances out of the Company's control occur that delay the sale and while management continues to be committed to the plan of sale and is performing actions necessary to respond to the conditions causing the delay the properties held for sale remain salable in their current condition. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value, less cost to sell, and depreciation and amortization are no longer recognized. Held for sale properties are evaluated quarterly to ensure that properties continue to meet the held for sale criteria. If properties are required to be reclassified from held for sale to held for use due to changes to a plan of sale, they are recorded at the lower of fair value or the carrying amount before the property was classified as held for sale, adjusted for any depreciation and amortization expense that would have been recognized had the property been continuously classified as held and used. Properties that do not meet the held for sale criteria are accounted for as operating properties.

Notes Receivable

Notes receivable include certain loans that are held for investment and are collateralized by real estate-related investments and may be subordinate to other senior loans. Notes receivable are reported net of an allowance for current expected credit losses (“CECL”) and are recorded at stated principal amounts or at initial investment less accretive yield for loans purchased at a discount, which is accreted over the life of the note. The Company defers loan origination and commitment fees, net of origination costs, and amortizes them over the term of the related loan. Changes in cash flows from previous estimates are included in future interest income on a prospective basis and a new effective interest rate is computed based on the current cost basis of the instrument and remaining cash flows. Earnings from these notes and mortgages receivable are reported within the Company’s Structured Financing segment (Note 12). Interest receivable is included in Other assets (Note 5).

The Company monitors the credit quality of its notes receivable on an ongoing basis and considers indicators of credit quality such as loan payment activity, the estimated fair value of the underlying collateral, the seniority of the Company’s loan in relation to other debt secured by the collateral and the prospects of the borrower. Given the small number of notes outstanding, the Company believes the characteristics of its notes are not sufficiently similar to allow an evaluation as a group for CECL allowance. As such, all of the Company’s notes are evaluated individually for this purpose. The Company evaluates the collectability of both principal and interest based upon an assessment of the underlying collateral value to determine whether the note is impaired. Allowance for CECL represents management’s estimate of future losses based on national historical economic loss rates for similar obligations, management’s estimate of future economic impacts and factors specific to the borrower. Impairment charges may be required if and when such amounts are estimated to be nonrecoverable upon a realization event, which is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold; however, non-recoverability may also be concluded if it is reasonably certain that all amounts due will not be collected.

Pursuant to ASC 326, certain of the Company’s loans are considered “collateral dependent” in that settlement of the amount is likely to be achieved by obtaining access to the collateral (e.g., notes in default). The same valuation techniques are used to value the collateral for such collateral dependent instruments as those used to determine the fair value of real estate investments for impairment purposes.

Interest income on performing notes is accrued as earned. The Company assesses the probability of a borrower’s ability to repay the loan similar to the factors noted above. We consider a loan to be past due when amounts contractually due have not been paid. Loans are placed on a non-accrual status at the earlier of the date at which payments become 90 days past due or when, in the opinion of management, a full recovery of interest income becomes doubtful. Interest income recognition is resumed on any loan that is on non-accrual status when such loan becomes contractually current and performance is demonstrated to be resumed.

Allowance for Credit Losses

The Company’s estimated allowance for CECL related to its Structured Financing segment (including unfunded commitments and guarantees) has been computed for its amortized cost basis in the portfolio, including accrued interest (Note 5), factoring in the Company’s historical results and loss experience in the United States for similar loans, as adjusted for current conditions, as well as the Company’s expectations related to future economic conditions. If the Company has determined that a loan or a portion of a loan is uncollectible, it will write-off the loan through an adjustment to its CECL allowance based on the net present value of expected future cash flows or the fair value of the collateral less costs to sell, if repayment is expected from the sale of the collateral. The write-offs are recorded in the period in which the loan balance is deemed uncollectible based on management’s judgment. The Company records the CECL allowance related to its City Point Loan (Note 10) as a reduction to redeemable noncontrolling interest.

Investments in and Advances to Unconsolidated Joint Ventures

Some of the Company’s unconsolidated joint ventures obtain non-recourse third-party financing on their property investments, contractually limiting the Company’s exposure to losses. The Company recognizes income for distributions in excess of its investment where there is no recourse to the Company and no intention or obligation to contribute additional capital. For investments in which there is recourse to the Company or an obligation or intention to contribute additional capital exists, distributions in excess of the investment are recorded as a liability.

When characterizing distributions from unconsolidated investees within the Company's consolidated statements of cash flows, all distributions received are first applied as returns on investment to the extent there are cumulative earnings related to the respective investment and are classified as cash inflows from operating activities. If cumulative distributions are in excess of cumulative earnings, distributions are considered return of investment. In such cases, the distribution is classified as cash inflows from investing activities.

To the extent that the Company’s carrying basis in an unconsolidated affiliate is different from the basis reflected at the joint venture level, the basis difference is amortized over the life of the related assets and included in the Company’s share of equity in earnings (losses) of unconsolidated affiliates.

The Company periodically reviews its investments in unconsolidated joint ventures for other-than-temporary losses in investment value. A decline in the value of our other investments may require us to recognize an other-than-temporary impairment (“OTTI”) against such assets. When the fair value of an investment is determined to be less than its amortized cost at the balance sheet date, we assess whether the decline is temporary or other-than-temporary. If we intend to sell an impaired asset, or it is more likely than not that we will be required to sell the impaired asset before any anticipated recovery, then we must recognize an OTTI through charges to earnings equal to the entire difference between the asset’s amortized cost and its fair value at the balance sheet date. When an OTTI is recognized through earnings, a new cost basis is established for the asset, and the new cost basis may not be adjusted through earnings for subsequent recoveries in fair value.

Fair Value Measurements

The Company follows the guidance in the FASB ASC Topic 820, Fair Value Measurements and Disclosures("Topic 820"), to determine the fair value of financial and non-financial instruments. In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considering counterparty credit risk. The fair value of an asset is defined as the exit price, which is the amount that would either be received when an asset is sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a three-tier fair value hierarchy based on the inputs used in measuring fair value:

Level 1 - quoted market prices for identical instruments are available in active markets, such as money market funds, equity securities, and U.S. Treasury securities;

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the instrument, such as certain derivative instruments including interest rate caps and interest rate swaps;

Level 3 - Financial instruments or other assets/liabilities that do not fall into Level 1 or Level 2 and for which little or no market data exists, therefore requiring the Company to develop its own assumptions. For significant Level 3 items, the Company has also provided the unobservable inputs.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed the limits insured by the Federal Deposit Insurance Corporation.

Restricted Cash

Restricted cash consists principally of cash held for real estate taxes, construction costs, property maintenance, insurance, minimum occupancy, and property operating income requirements at specific properties as required by certain loan agreements.

Marketable Equity Securities

The Company classifies its marketable equity securities as available-for-sale in accordance with the FASB’s Investments-Debt and Equity Securities guidance. In accordance with ASC Topic 825 Financial Instruments: the Company recognizes changes in the fair value of equity investments with readily determinable fair values in Realized and unrealized holding gains on investments and other on the Company's Consolidated Statements of Operations.

Deferred Costs

External fees and costs paid in the successful negotiation of leases are deferred and amortized on a straight-line basis over the terms of the respective leases. External fees and costs incurred in connection with obtaining financing are deferred and amortized as a component of interest expense over the term of the related debt obligation on a straight-line basis, which approximates the effective interest method.

Derivative Instruments and Hedging Activities

The Company measures derivative instruments at fair value and records them as assets or liabilities, depending on its rights or obligations under the applicable derivative contract. Derivatives that are not designated as hedges must be adjusted to fair value through earnings. For a derivative designated and that qualified as a cash flow hedge, the effective portion of the change in fair value of the derivative is recognized in Accumulated other comprehensive income on the Consolidated Balance Sheets until the hedged item is recognized in earnings. The ineffective portion of a derivative’s change in fair value is immediately recognized in earnings. The Company accounts for its share of cash flow hedges from non-consolidated entities as part of Investment in and advances to unconsolidated affiliates and Accumulated other comprehensive income on the Consolidated Balance Sheets.

Although the Company's derivative contracts are subject to master netting arrangements, which serve as credit mitigants to both the Company and its counterparties under certain situations, the Company does not net its derivative fair values or any existing rights or obligations to cash collateral on the Consolidated Balance Sheets. The Company does not use derivatives for trading or speculative purposes. The Company will discontinue hedge accounting on a prospective basis with changes in the estimated fair value reflected in earnings when (i) it is determined that the derivative is no longer effective in offsetting cash flows of a hedged item (including forecasted transactions), (ii) it is no longer probable that the forecasted transaction will occur, or (iii) it is determined that designating the derivative as an interest rate swap is no longer appropriate. For the periods presented, all of the Company's derivatives qualified and were designated as cash flow hedges, and none of its derivatives were deemed ineffective.

Noncontrolling Interests

Noncontrolling interests represent the portion of equity that the Company does not own in those entities it consolidates. Noncontrolling interests also include amounts related to Common and Preferred OP Units issued to unrelated third parties in connection with certain property acquisitions. The Company identifies its noncontrolling interests separately within the equity section on the Company’s Consolidated Balance Sheets. Redeemable noncontrolling interests that are redeemable at the option of the holder are classified outside of shareholders' equity in accordance with Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equityon the Company’s Consolidated Balance Sheets as temporary equity under the caption, Redeemable noncontrolling interests, and are measured at their redemption values at the end of each period. If the redemption value is greater than the carrying value, an adjustment is recorded in Additional paid-in capital to record the noncontrolling at its redemption value. The amounts of consolidated net earnings attributable to the Company and to the noncontrolling interests are presented separately on the Company’s Consolidated Statements of Operations.

Variable Interest Entities

The Company consolidates a VIE in which it is considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. The Company assesses the accounting treatment and determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and reconsiders that conclusion on an ongoing basis when certain events occur. In determining whether the Company is the primary beneficiary, it evaluates its control rights as well as economic interests in the entity held either directly or indirectly by the Company. Each entity is assessed on an individual basis to determine the rights provided to each party and whether those rights are protective or participating. For all VIEs, the Company reviews such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity's economic performance.

For those entities evaluated under the voting interest model, the Company consolidates the entity if it has a controlling financial interest. The Company has a controlling financial interest in a voting interest entity (“VOE”) if it owns a majority voting interest in the entity. Investments in entities for which the Company has the ability to exercise significant influence over the entity, but does not have financial or operating control through its voting interest and entities which are VIEs but where the Company is not the primary beneficiary, are accounted for using the equity method of accounting.

Revenue Recognition

Rental Revenue - The Company recognizes rental revenue from fixed and variable lease payments, as designated within tenant operating leases in accordance with ASC Topic 842, Leases(“ASC 842”), as further described below, as Rental revenue on the Consolidated Statement of Operations. We evaluate the collectability of amounts due from tenants and disputed enforceable charges on a lease-by-lease basis, which result from the inability of tenants to make required payments under their operating lease agreements. We recognize changes in the collectability assessment of these operating leases as adjustments to rental revenue in accordance with ASC 842.

Other Revenue - The Company recognizes other categories of revenue such as parking and storage, as well as management, leasing, legal, development and construction fees charged to our unconsolidated affiliates.

Leases

Pursuant to ASC 842, the Company does not separate the non-lease components, such as common area maintenance, from its leases. In addition, the Company accounts for those taxes that it pays on behalf of the tenant as reimbursable costs and does not account for those taxes paid directly by the tenant. Minimum rents from tenants are recognized using the straight-line method over the non-cancelable lease term of the respective leases, unless another systematic and rational basis is more representative of the pattern in which benefit is expected to be derived from the use of the underlying asset. At December 31, 2023 and 2022, unbilled rents receivable relating to the straight-lining of rents of $49.3 million and $48.1 million, respectively, are included in Rents receivable, net on the accompanying Consolidated Balance Sheets. The Company manages the risk associated with the residual value of its leased properties by including contract clauses that make tenants responsible for surrendering the space in good condition upon lease termination, holding a diversified portfolio, and other activities. The Company does not have residual value guarantees on specific properties.

Contractual rent increases of renewal options are often fixed at the initial lease agreement. In addition to fixed base rents, variable rental revenue is derived from certain leases that are dependent on percentage rents based upon the level of sales achieved by the tenant. Percentage rent is recognized in the period when the tenants’ sales breakpoint is met. In addition, variable rental revenue is derived from leases through reimbursement to the Company by our tenants for real estate taxes, insurance, and other property operating expenses. These reimbursements are recognized as revenue in the period the related expenses are incurred.

Right-of-use ("ROU") assets are recorded for properties the Company leases from third parties, and represent our right to use an underlying asset for the lease term, and the corresponding lease liabilities represent our obligation to make lease payments arising from these leases. ROU assets and lease liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The initial measurement of a ROU asset may differ from the initial measurement of the lease liability due to initial direct costs, prepaid lease payments and lease incentives. Our leases often offer renewal options, which we assess against relevant economic factors to determine whether the Company is reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods, for which the Company has determined are reasonably certain of being exercised, are included in the measurement of the corresponding lease liability and the ROU asset.

For finance leases and operating leases, the discount rate applied to measure each ROU asset and lease liability is based on the incremental borrowing rate of the lease due to the rate implicit in the lease not being readily determinable. The Company initially considers the general economic environment and factors in various financing and asset specific secured borrowings so that the overall incremental borrowing rate is appropriate to the intended use of the lease. Certain expenses derived from these leases are variable and are not included in the measurement of the corresponding lease liability and ROU asset, but are recognized in the period in which the obligation for those payments is incurred. These variable lease payments consist of payments for real estate taxes and common area maintenance, which is dependent on projects and activities at each individual property under ground or building lease.

Right-of-use assets – finance leases are included in Operating real estate (Note 2) on the Consolidated Balance Sheets. Lease liabilities – finance leases are included in Accounts payable and other liabilities on the Consolidated Balance Sheets (Note 5). Operating lease cost comprises amortization of ROU assets for operating properties (related to ground rents) or amortization of ROU assets for office and corporate assets and is included in Property operating expense or General and administrative expense, respectively, on the Consolidated Statements of Operations.

Finance lease cost comprises amortization of ROU assets for certain ground leases, which is included in Property operating expense, as well as interest on lease liabilities, which is included in Interest expense on the Consolidated Statements of Operations.

Accounts Receivable

In addition to the lease-specific collectability assessment, the Company also recognizes a general allowance based on the Company’s historical collection experience, for its portfolio of operating lease receivables which are not expected to be fully collectible. The Company estimates the collectability of its accrued rent and accounts receivable balances related to lease revenue. The Company estimates the collectability of the accounts receivable related to billed rents, straight-line rents, recoveries from tenants, and other revenue taking into consideration the Company's historical write-off experience, tenant creditworthiness, current economic trends, and remaining lease terms. Rents receivable at December 31, 2023 and 2022 are shown net of a general allowance of $4.1 million and $5.4 million, respectively. Rental income for the years ended December 31, 2023, 2022 and 2021 are reported net of adjustments of $(1.3) million, $1.5 million, and $1.9 million, respectively, to allowance for uncollectible accounts.

Stock-Based Compensation

Stock-based compensation expense for all equity-classified stock-based compensation awards is based on the grant date fair value estimated in accordance with current accounting guidance for share-based payments. The Company recognizes these compensation costs for only those shares or units expected to vest on a straight-line or graded-vesting basis, as appropriate, over the requisite service period of the award. The Company records forfeitures during the period in which they occur by reversing all previously recorded stock compensation expense associated with the forfeited shares. Dividends declared on awards issued are recorded as cumulative distributions in excess of retained earnings on the Consolidated Balance Sheets. Accumulated dividends related to forfeited awards are reversed through compensation expense in the period the forfeiture occurs. The Company includes stock-based compensation within general and administrative expense on the Consolidated Statements of Operations.

Income Taxes

The Company has made an election to be taxed, and believes it qualifies, as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). To maintain REIT status for federal income tax purposes, the Company is generally required to distribute at least 90% of its REIT taxable income to its shareholders as well as comply with certain other income, asset and organizational requirements as defined in the Code. Accordingly, the Company is generally not subject to federal corporate income tax to the extent that it distributes 100% of its REIT taxable income each year.

The Company is permitted to participate in certain activities and still maintain its qualification as a REIT, so long as these activities are conducted in entities that elect to be treated as taxable subsidiaries under the Code. As such, the Company is subject to federal and state income taxes on the income from these activities.

Although it may qualify for REIT status for federal income tax purposes, the Company is subject to state or local income or franchise taxes in certain jurisdictions in which some of its properties are located. In addition, taxable income from non-REIT activities managed through the Company’s Taxable REIT Subsidiary (“TRS”) is fully subject to federal, state and local income taxes.

The Company accounts for TRS income taxes under the liability method as required by ASC Topic 740, “Income Taxes.” Under the liability method, deferred income taxes are recognized for the temporary differences between the GAAP basis and tax basis of the TRS income, assets, and liabilities.

The Company records net deferred tax assets to the extent it believes it is more likely than not that these assets will be realized. In 2023 and 2022, the Company recorded valuation allowances to reduce deferred tax assets when it determined that an uncertainty existed regarding their realization, which increased the provision for income taxes. In making such determination, the Company considered all available positive and negative evidence, including forecasts of future taxable income, the reversal of other existing temporary differences, available net operating loss carryforwards, tax planning strategies and recent results of operations. Several of these considerations require assumptions and significant judgment about the forecasts of future taxable income and are consistent with the plans and estimates that the Company is utilizing to manage its business. To the extent facts and circumstances change in the future, further adjustments to the valuation allowances may be required.

Recent Accounting Pronouncements

In January 2021, the FASB issued Accounting Standards Update (“ASU”) 2021-01, “Reference Rate Reform (Topic 848): Scope”, which modifies ASC 848, Reference Rate Reform(“ASC 848”), which was intended to provide relief related to “contracts and transactions that reference LIBOR or a reference rate was discontinued effective June 30, 2023 as a result of reference rate reform.” ASU 2021-01 expands the scope of ASC 848 to include all affected derivatives and give reporting entities the ability to apply certain aspects of the contract modification and hedge accounting expedients to derivative contracts affected by the discounting transition. ASU 2020-04, “Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”, also adds implementation guidance to clarify which optional expedients in ASC 848 may be applied to derivative instruments that do not reference LIBOR or a reference rate that is expected to be discontinued, but that are being modified as a result of the discounting transition. The Company has elected the optional practical expedients under ASU 2020-04 and 2021-01, which allows entities to account for the modification as if the modification was not substantial, and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of hedge accounting expedients preserved the presentation of derivatives consistent with past presentation. As a result, the implementation of this guidance did not have an effect on the Company’s consolidated financial statements.

In December 2022, the FASB issued ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The guidance in this update defers the sunset date of ASC 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The amendments are effective for all entities in scope upon issuance of the ASU. The Company transitioned all variable rate loans to SOFR or another applicable benchmark index and will apply the relief based Topic 848 in line with the sunset date.

In August 2023, the FASB issued ASU 2023-05, ”Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement”(“ASU 2023-05”). ASU 2023-05 addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements. Prior to the amendment, the FASB did not provide specific authoritative guidance on the initial measurement of assets and liabilities assumed by a joint venture upon its formation. ASU 2023-05 requires a joint venture to recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). ASU 2023-05 is effective for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. The Company has elected not to early adopt ASU 2023-05 and does not expect the adoption will have a significant impact on our consolidated financial statements.

Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they are not relevant to the Company, or they are not expected to have a material impact on the consolidated financial statements.

2. Real Estate

The Company’s real estate is comprised of the following for the periods presented (in thousands):

Acquisitions and Foreclosure

During the years ended December 31, 2023 and 2022, the Company acquired (through purchase, investment, or foreclosure) the following retail properties and other real estate investments (dollars in thousands):

a)

The Company invested $2.8 million in its 49.99% equity interest and, through a separate lending subsidiary, provided a $64.1 million first mortgage loan and a $30.9 million mezzanine loan to subsidiaries of the venture (such equity and loans have been eliminated in consolidation). Pursuant to the entity’s operating agreement, the venture partner has a one-time right to put its 50.01% interest in the entity (the "Williamsburg NCI", which is further described in Note 10) to the Company for fair value at a future date. Given the preferred rate of return embedded in its equity interests and the accruing debt senior to the equity, the Company did not attribute any initial redemption value to the Williamsburg NCI and recognized a bargain purchase gain of $1.2 million, which is included in Realized and unrealized holding (losses) gains on investments and other on the Consolidated Statements of Operations.

b)

The Henderson Avenue Portfolio comprises 14 operating retail assets, one residential building and two development and redevelopment sites. One of the development sites was sold in October 2022.

c)

The entity was previously accounted for as an equity method investment until an affiliate of Fund III acquired the venture partner's interest in a foreclosure action. Fund III now indirectly owns 100% of the entity and consolidates it.

For the years ended December 31, 2023 and 2022, the Company capitalized $1.0 million and $1.2 million of acquisition costs in connection with the Fund V 2023 Acquisitions and the 2022 Acquisitions and Foreclosure, respectively. In addition, during the year ended December 31, 2022, the Company expensed $2.0 million of acquisition costs (including a $1.5 million acquisition fee paid to an affiliate of a joint venture partner). Acquisition costs that were expensed are included in General and administrative expenses on the Consolidated Statements of Operations.

Purchase Price Allocations

The purchase prices for the 2023 Acquisitions and 2022 Acquisitions and Foreclosure were allocated to the acquired assets and assumed liabilities based on their estimated relative fair values at the dates of acquisition. The following table summarizes the allocation of the purchase price of properties acquired during the years ended December 31, 2023 and 2022 (in thousands):

a)

The Company assumed a $36.0 million mortgage with the consolidation of 640 Broadway during the year ended December 31, 2022 (Note 7).

The Company determines the fair value of the individual components of real estate asset acquisitions primarily through calculating the "as-if vacant" value of a building, using an income approach, which relies significantly upon internally determined assumptions. The Company has determined that these estimates primarily rely on Level 3 inputs, which are unobservable inputs based on our own assumptions. The most significant assumptions used in calculating the "as-if vacant" value for acquisition activity during 2023 and 2022, respectively, are as follows:

The estimate of the portion of the "as-if vacant" value that is allocated to the land underlying the acquired real estate relies on Level 3 inputs and is primarily determined by reference to recent comparable transactions.

Dispositions

During the years ended December 31, 2023 and 2022, the Company disposed of the following properties and other real estate investments (in thousands):

a)

Does not include the 146 Geary Street property, which had a carrying value of $19.4 million, and was transferred to the Company’s lender through deed-in-lieu of foreclosure, extinguishing the obligations under the $20.1 million mortgage loan and accrued interest in default (Note 7).

Properties Held for Sale

At December 31, 2023 and 2022, the Company had one Core property under contract for sale with assets totaling $11.1 million, which was probable of disposition within one-year. This property was classified as "held for sale" on the Company's Consolidated Balance Sheets. Assets of property held for sale consisted of the following:

Real Estate Under Development

Real estate under development represents the Company’s properties that have not yet been placed into service while undergoing substantial development or construction.

Development activity for the Company’s properties comprised the following during the periods presented (dollars in thousands):

(a)

Transfers out include $1.6 million related to a portion of one Fund II property that was transferred out of development.

(b)

Transfers out include $13.4 million related to a portion of one Fund IV property that was transferred out of development and an impairment charge totaling $18.7 million on one Fund IV development property (Note 8).

The number of properties in the tables above refers to projects comprising the entire property under development; however, certain projects represent a portion of a property. At December 31, 2023, development projects included: portions of the Henderson 1 & 2 Portfolio, in Core, and Broad Hollow Commons in Fund III. During the year ended December 31, 2023, the Company:

•

placed the remainder of the building and improvements of one Fund II property, City Point, into service in the third quarter; and

•

placed the remainder of the building and improvements of one Fund IV property, 717 N. Michigan Avenue, into service in the first quarter.

At December 31, 2022, development projects included: portions of the Henderson 1 & 2 Portfolio in Core, Broad Hollow Commons in Fund III and a portion of 717 N. Michigan Avenue at Fund IV. During the year ended December 31, 2022, the Company:

•

placed the building and improvements of two Core properties in the Henderson Portfolio into development in the second quarter;

•

placed a portion of the building and improvements of one Fund II property, City Point, into service in the fourth quarter; and

•

placed a portion of the building and improvements of one Fund IV property, 717 N. Michigan Avenue, into service in the first quarter.

3. Notes Receivable, Net

The Company’s notes receivable, net are generally collateralized either by the underlying properties or the borrowers’ ownership interests in the entities that own the properties, and were as follows (dollars in thousands):

(a)

Includes one note receivable from an OP Unit holder, with a balance of $6.0 million at December 31, 2023 and 2022.

Changes in the Company’s CECL allowance were as follows (dollars in thousands):

Due to the lack of comparability across the Structured Financing portfolio, each note was evaluated separately. As a result, the Company did not elect the collateral-dependent practical expedient for four of its notes with a total amortized cost of $121.1 million, inclusive of accrued interest of $18.6 million, for which an allowance for CECL has been recorded aggregating $1.3 million at December 31, 2023. For two notes in this portfolio, aggregating $27.9 million, inclusive of accrued interest of $4.1 million at December 31, 2023, the Company has elected to apply the practical expedient in accordance with ASC 326 and didnot establish an allowance for CECL because (i) these notes are collateral-dependent notes, which due to their settlement terms are not expected to be settled in cash but rather by the Company’s possession of the real estate collateral; and (ii) at December 31, 2023, the Company determined that the estimated fair value of the collateral at the expected realization date for these notes was sufficient to cover the carrying value of its investments in these notes receivable.

Default

One Core Portfolio note aggregating $21.6 million including accrued interest (exclusive of default interest and other amounts due on the note that have not been recognized) was in default at December 31, 2023 and December 31, 2022. On April 1, 2020, the note matured and was not repaid. The Company expects to take appropriate actions to recover the amounts due under the note and has issued a reservation of rights letter to the borrowers and guarantor, reserving all of its rights and remedies under the applicable note documents and otherwise. The Company has determined that the collateral for this note was sufficient to cover the loan’s carrying value at December 31, 2023 and December 31, 2022.

•

originated a Core Portfolio note for $1.4 million with a stated interest rate of 6.5% and a maturity date of September 30, 2024, collateralized by the venture partner’s interest in 840 N. Michigan Avenue (Note 4).

•

through Fund III obtained the remaining venture partner's interest in an entity that held a property, which was collateral for a note with a balance of $5.3 million, accrued interest of $4.7 million, less a CECL reserve of $4.6 million (exclusive of default interest and other amounts due on the loan that have not been recognized), via a foreclosure auction in January 2022. The entity was previously accounted for as an equity method investment until Fund III acquired the venture partner's interest. Fund III now owns 100% of the entity and consolidates it;

•

received full payment on a $16.0 million Core Portfolio note during the second quarter, and full payment on a $13.5 million Core Portfolio note and partial payment of $5.7 million of accrued interest on a Core Portfolio note during the third quarter;

•

extended the maturity date of one Core Portfolio note of $54.0 million from January 13, 2023 to January 9, 2024; and

•

decreased its allowance for CECL by $4.9 million, of which approximately $4.6 million was attributable to the aforementioned Fund III foreclosure.

4. Investments in and Advances to Unconsolidated Affiliates

The Company’s investments in and advances to unconsolidated affiliates consist of the following (dollars in thousands):

a)

Represents a VIE for which the Company is not the primary beneficiary (Note 16).

b)

Includes the amounts advanced against a $12.8 million construction commitment from the Company to the venture that holds an investment in 1238 Wisconsin. As of December 31, 2023 and 2022 the note receivable from a related party had a balance of $12.8 million and $7.5 million, respectively, net of an allowance for CECL of $0.1 million, and $0.1 million, respectively. The loan is collateralized by the venture members'equity interest in the entity that holds the 1238 Wisconsin development property, bears interest at Prime + 1.0% subject to a 4.5% floor, and matures on December 28, 2024. The Company recognized Interest income of $0.2 million for the year ended December 31, 2023, related to this note receivable. The note originated in 2022 and the Company recognized less than $0.1 million of Interest income for the year ended December 31, 2022.

c)

At December 31, 2022, Mervyns II had an effective indirect ownership of approximately 4.1 million shares (approximately 1% interest) through its Investment in Albertsons Companies Inc. ("Albertsons"), which is accounted for at fair value (Note 8). Mervyns II distributed its shares to its investors upon expiration of the lock-up agreement in January 2023, as further described below.

d)

Represents a tenancy-in-common interest.

e)

Includes a $31.7 million bridge loan at December 31, 2022, from the Company to the venture that holds the property in its investment in Shoppes at South Hills. During the first quarter of 2023 the bridge loan was repaid, as further described below.

f)

Includes cost-method investment in Fifth Wall and other investments.

g)

Distributions have exceeded the Company’s investment; however, the Company recognizes a liability balance as it may elect to contribute capital to the entity.

•

funded $5.3 million of a $12.8 million construction loan commitment to the 1238 Wisconsin venture. The total outstanding balance of the loan was $12.8 million;

•

modified a property mortgage with an outstanding balance of $160.0 million with a new loan of $152.0 million and extended the maturity date at Georgetown Renaissance. The Company contributed an additional $1.4 million in equity to cover the venture partner’s share of the required paydown;

•

through Fund IV, modified a property mortgage with an outstanding balance of $21.9 million with a new loan of $24.1 million at Eden Square;

•

through Fund V, modified a property mortgage with an outstanding balance of $33.5 million to extend the maturity date at Wood Ridge Plaza;

•

through Fund V, acquired a 90% interest in a venture for $20.2 million, which purchased Mohawk Commons, a shopping center located in Schenectady, New York for $62.1 million, inclusive of transaction costs. In addition, the Mohawk Commons venture entered into a $39.7 million mortgage loan;

•

through Fund V, received payment on a bridge loan from the Shoppes at South Hills venture for $31.7 million which matured in February 2023. Upon maturity of the bridge loan, the venture entered into a $36.0 million mortgage loan, of which $31.8 million was funded at closing; and

•

through Mervyns II, received cash dividends from its investment in Albertsons totaling $28.5 million on January 20, 2023, of which the Company's share was $11.4 million. Additionally, the lock-up period, which restricted the transfer or sale of shares, expired on January 24, 2023, and 4.1 million shares of Albertsons were distributed to the individual investors as a non-cash distribution, of which the Company received 1.6 million shares. The shares are classified as Marketable securities on the Company's Consolidated Balance Sheets (Note 8).

In December 2023, an unconsolidated venture that holds an interest in a property on North Michigan Avenue modified its $73.5 million nonrecourse mortgage loan. As part of the modification, the principal balance was reduced by $18.5 million and required a principal paydown of $17.5 million, the interest rate increased from 4.4% to 6.5%, and the maturity date was extended from February 2025 to December 2026. In addition, the venture, upon a sale or secured refinancing prior to maturity (or early prepayment) at an amount that exceeds $55.0 million (as adjusted pursuant to the modification agreement), may be subject to additional contingent payments of up to $17.5 million (“Contingent Payment”), which amortizes on a straight-line basis over the remaining term of the loan. The modification was accounted for as a troubled debt restructuring pursuant to ASC 470, resulting in an initial gain of approximately $0.4 million, which was recognized within Equity in (losses) earnings of unconsolidated affiliates on the Company’s Consolidated Statements of Operations, and represented the excess of the original principal balance of the mortgage (prior to modification), over the maximum total future cash payments under the new terms. Thus, all future cash payments under the terms of the payable, including the Contingent Payment, shall be accounted for as a reduction of the carrying amount of the mortgage, and no interest expense shall be recognized for any period between the modification and the revised maturity of the mortgage. As the Contingent Payment amortizes (and no transaction arises that requires a payment as described above) the additional gain will be recognized within equity in earnings in the Company’s consolidated financial statements. No amortization of the Contingent Payment occurred in 2023. As part of the modification, the Operating Partnership provided a recourse guarantee equivalent to 50% of the unpaid outstanding principal balance of the mortgage.

In December 2023, the Company acquired an additional 3.42% interest in the North Michigan Avenue venture, increasing its ownership from 88.43% to 91.85% and provided a loan of $1.4 million to the remaining venture partners for their share of the required paydown (Note 3).

•

funded $7.5 million of a $12.8 million construction loan commitment to the 1238 Wisconsin venture. The total outstanding balance of the loan was $7.5 million;

•

recorded our proportionate share of an impairment charge of $50.8 million in the 840 N. Michigan Avenue venture during the third quarter, which is included in Equity in (losses) earnings of unconsolidated affiliates in the Consolidated Statements of Operations;

•

through Fund III, sold its investment in Self Storage Management for $6.0 million and recognized its proportionate gain of $1.5 million during the first quarter, which is included in Realized and unrealized holding (losses) gains on investments and other in the Consolidated Statements of Operations;

•

through Fund IV, recognized its proportionate gain from the venture’s sale of Promenade at Manassas for $46.0 million and repayment of $27.3 million of mortgage debt. Fund IV recognized a gain of $12.8 million, of which the Company's share was $3.0 million;

•

through Fund V, acquired a 90% interest in a venture for $15.9 million, which acquired Shoppes at South Hills, a shopping center located in Poughkeepsie, New York for $47.6 million. In addition, Fund V made a bridge loan to the venture for$31.7 million during the third quarter;

•

through Fund V, acquired a 90% interest in a venture for $26.5 million, which acquired La Frontera Village, a shopping center located in Round Rock, Texas for $81.4 million. In addition, Fund V made a bridge loan to the venture for $52.0 million during the first quarter, which was repaid during the second quarter. During the second quarter, the venture entered into a $57.0 million mortgage loan, of which $55.5 million was funded at closing;

•

through Fund V, acquired a 90% interest in a venture for $15.3 million, which acquired Wood Ridge Plaza, a shopping center located in Houston, Texas for $49.3 million during the first quarter. In addition, on March 21, 2022 the Wood Ridge Plaza venture entered into a $36.6 million mortgage loan, of which $32.3 million was funded at closing;

•

funded $0.2 million of its capital commitment to its Fifth Wall investment during the second and third quarter; and

•

received cash dividends totaling $1.9 million at Mervyns II related to distributions from its Investment in Albertsons and recorded a net unrealized holding loss of $38.9 million reflecting the change in fair value of its Investment in Albertsons (Note 8).

Fees from Unconsolidated Affiliates

The Company earned property management, construction, development, legal and leasing fees from its investments in unconsolidated partnerships totaling $0.4 million and $0.4 million and $0.6 million for the years ended December 31, 2023, 2022 and 2021, respectively, which is included in other revenues in the Consolidated Statements of Operations.

In addition, the Company’s joint ventures paid certain unaffiliated partners of its joint ventures, $4.5 million and $2.7 million and $2.2 million for the years ended December 31, 2023, 2022 and 2021, respectively, for leasing commissions, development, management, construction, and overhead fees.

Summarized Financial Information of Unconsolidated Affiliates

The following combined and condensed Balance Sheets and Statements of Operations, in each period, summarized the financial information of the Company’s investments in unconsolidated affiliates that were held as of December 31, 2023, and accordingly exclude the results of any investments disposed of or consolidated prior to that date (in thousands):

a)

Includes the gain on debt extinguishment related to the restructuring at 840 N. Michigan Avenue for the year ended December 31, 2023.

b)

Includes the impairment charge related to 840 N. Michigan Avenue for the year ended December 31, 2022.

c)

Includes the gain on the sale of Promenade at Manassas on October 13, 2022, andtwo land parcels by the Family Center at Riverdale on January 4, 2021.

5. Other Assets, Net and Accounts Payable and Other Liabilities

Other assets, net and accounts payable and other liabilities are comprised of the following for the periods presented:

(a)

Effective January 1, 2023, the Company implemented compensation plans for its internal leasing representatives to adopt a commission structure paid in connection with new, renewal, and modified leases. At December 31, 2023, deferred leasing and other costs include direct and incremental capitalized internal leasing commissions incurred in connection with executed lease agreements of $2.2 million, which are amortized on a straight-line basis over the terms of the related leases.

6. Lease Intangibles

Intangible assets and liabilities are included in Other assets and Accounts payable and other liabilities (Note 5) on the Consolidated Balance Sheets and summarized as follows (in thousands):

•

acquired in-place lease intangibles of $25.9 million, above-market rent of $3.2 million, and below-market rent of $11.8 million with weighted-average useful lives of 5.7,7.1, and 21.1 years, respectively (Note 2);

•

recorded accelerated amortization related to in-place lease intangible assets of $3.2 million and below-market rent of $8.8 million, of which the Company's share was $2.8 million and $8.4 million, respectively, related to notification of tenant non-renewals and early tenant lease terminations.

•

acquired in-place lease intangible assets of $28.2 million, above-market rent of $0.8 million, and below-market rent of $14.1 million with weighted-average useful lives of 6.4,6.9, and 11.4 years, respectively (Note 2);

•

derecognized in-place lease intangible assets of $1.5 million and below-market rent of $2.1 million, of which the Company'sshare was $0.5 million and $0.5 million, respectively, related to disposed properties (Note 2); and

•

recorded accelerated amortization related to in-place lease intangible assets of $0.2 million and below-market rent of $5.5 million, of which the Company's share was $0.1 million and $5.4 million, respectively, related to notification of tenant non-renewals and early tenant lease terminations.

Amortization of in-place lease intangible assets is recorded in depreciation and amortization expense and amortization of above-market rent and below-market rent is recorded as a reduction to and increase to rental income, respectively, on the Consolidated Statements of Operations. Amortization of above-market ground leases are recorded as a reduction to rent expense on the Consolidated Statements of Operations.

The scheduled amortization of acquired lease intangible assets and assumed liabilities as of December 31, 2023 is as follows (in thousands):

7. Debt

A summary of the Company’s consolidated indebtedness is as follows (dollars in thousands):

a)

The Company has a total commitment of $198.0 million on the Fund II mortgage.

b)

Includes the outstanding balance on the Fund IV secured bridge facility of$36.2 million at December 31, 2023 and $39.2 million at December 31, 2022. The Operating Partnership has guaranteed up to $22.5 million of the Fund IV secured bridge facility (Note 9).

c)

The Company has entered into various swap agreements to effectively fix its interest costs on a portion of its Revolver and term loans at December 31, 2023 and 2022 (Note 8).

d)

Includes $1,249.8 million and$1,264.0 million, respectively, of variable-rate debt that has been fixed with interest rate swap agreements as of the periods presented. The effective fixed rates ranged from 1.14% to 4.54%.

e)

Includes $151.4 million and $103.8 million, respectively, of variable-rate debt that is subject to interest cap agreements as of the periods presented. The effective fixed rates ranged from 3.0% to 5.50%.

Unsecured Debt

Credit Facility

The Operating Partnership has a $700.0 million senior unsecured credit facility, as amended (the “Credit Facility”), with Bank of America, N.A. as administrative agent, comprised of a $300.0 million senior unsecured revolving credit facility (the “Revolver”) which bears interest at a floating rate based on SOFR with margins based on leverage or credit rating, and a $400.0 million senior unsecured term loan (the “Term Loan”) which bears interest at a floating rate based on SOFR with margins based on leverage or credit rating. The Credit Facility provides for an accordion feature, which allows for one or more increases in the revolving credit facility or term loan facility, for a maximum aggregate principal amount not to exceed $900.0 million. The Credit Facility is guaranteed by the Trust and certain subsidiaries of the Trust (Note 9).

Revolving Credit Facility

At December 31, 2023, The Revolver bears interest at SOFR +1.45% and matures on June 29, 2025, subject to two six-month extension options. The outstanding balance and total available credit of the Revolver was $213.3 million and $86.7 million, respectively, at December 31, 2023, reflecting no letters of credit outstanding. The outstanding balance and total available credit of the Revolver was $168.3 million and $131.7 million, respectively, at December 31, 2022, reflectingno letters of credit outstanding.

Core Term Loans

At December 31, 2023, the Term Loan bears interest at SOFR +1.60% and matures on June 29, 2026. The outstanding balance of the Term Loan was $400.0 million at each of December 31, 2023 and December 31, 2022.

On April 6, 2022, the Operating Partnership entered into a $175.0 million term loan facility (the “$175.0 Million Term Loan”), with Bank of America, N.A. as administrative agent, which bears interest at a floating rate based on SOFR with margins based on leverage or credit rating, matures on April 6, 2027, and is guaranteed by the Trust and certain subsidiaries of the Trust (Note 9). The proceeds of the $175.0 Million Term Loan were used to pay down the Revolver. At December 31, 2023, the $175.0 Million Term Loan bears interest at SOFR +1.60%. The outstanding balance of the $175.0 Million Term Loan was $175.0 million at each of December 31, 2023 and 2022.

On July 29, 2022, the Operating Partnership entered into the $75.0 million term loan (the “$75.0 Million Term Loan”), with TD Bank, N.A. as administrative agent, which bears interest at a floating rate based on SOFR with margins based on leverage or credit rating, matures on July 29, 2029, and is guaranteed by the Trust and certain subsidiaries of the Trust. At December 31, 2023, the $75.0 Million Term Loan bears interest at SOFR +2.05%. The proceeds of the $75.0 Million Term Loan were used to pay down the Revolver. The outstanding balance of the $75.0 Million Term Loan was $75.0 million at each of December 31, 2023 and 2022.

Fund V Subscription Facility

Fund V has a $100.0 million subscription line collateralized by Fund V’s unfunded capital commitments, and, to the extent of the Company’s capital commitments, is guaranteed by the Operating Partnership. In January 2024, Fund V modified its subscription line and extended the maturity date to February 28, 2024. The outstanding balance and total available credit of the Fund V subscription line was $80.6 million and $19.4 million, respectively at December 31, 2023, reflecting outstanding letters of credit of $2.0 million. The outstanding balance and total available credit were $51.2 million and $41.8 million at December 31, 2022 respectively, reflecting outstanding letters of credit of $7.0 million.

Mortgages and Other Notes Payable

During the year ended December 31, 2023, the Company (amounts represent balances at the time of transactions):

•

entered into a new Fund mortgage for $32.2 million;

•

modified and extended five Fund mortgages totaling $150.8 million (excluding principal reductions of $2.7 million);

•

refinanced four Fund mortgages totaling $111.4 million;

•

repaid a Fund mortgage totaling $5.8 million at maturity;

•

modified the Fund IV bridge loan with an outstanding balance of $36.2 million (excluding principal reductions of $3.0 million) and extended the maturity date to March 31, 2025; and

•

made scheduled principal payments totaling $7.7 million.

During the year ended December 31, 2022, the Company (amounts represent balances at the time of transactions):

•

entered into a new Fund mortgage for $42.4 million;

•

refinanced a Core loan in the third quarter with an outstanding balance of $25.4 million with a new loan of $26.0 million at an interest rate of 4.0% maturing July 10, 2027;

•

modified and extendedten Fund mortgages totaling $280.6 million (excluding principal reductions and an interest reserve of $4.6 million and $4.2 million, respectively);

•

refinanced Fund II mortgage debt and unsecured note of City Point Phase II in the third quarter with an aggregate outstanding balance of $257.9 million and $40.0 million, respectively, with a single $198.0 million mortgage loan, with initial proceeds of approximately $132.3 million and a loan from the Company to other Fund II Investors (Note 10). The mortgage has athree-year initial term and bears interest at SOFR +2.61%. The mortgage is collateralized by the real estate assets of City Point, of which $50.0 million is guaranteed by the Operating Partnership;

•

modified the Fund IV bridge loan with an outstanding balance of $42.2 million (excluding principal reductions of $8.6 million) and changed the rate to SOFR plus 2.56% and extended the maturity date to December 29, 2023;

•

repaid one Core mortgage of $12.3 million;

•

repaid six Fund mortgages in the aggregate amount of $97.6 million in connection with the sale of properties (Note 2); repaid one Fund mortgage in the amount of $22.7 million; and

•

made principal payments of $7.5 millionand repaid $17.0 million on the Fund IV secured bridge facility.

A portion of the Company’s variable-rate mortgage debt has been effectively fixed through certain cash flow hedge transactions (Note 8).

At December 31, 2023 and 2022, the Company’s mortgages were collateralized by 33 and 31 properties each period, respectively, as well as the related tenant leases. Certain loans are cross-collateralized and contain cross-default provisions. The loan agreements contain customary representations, covenants, and events of default. Certain loan agreements require the Company to comply with affirmative and negative covenants, including the maintenance of debt service coverage and leverage ratios. At December 31, 2023, a Fund V mortgage of $29.2 million, or $5.9 million at the Company’s share, had not met its debt service coverage ratio requirements. As this is not an event of default, the debt maturity was not accelerated. The Company made a principal payment of $3.9 million in January 2024, to cure this event. Also at December 31, 2023, three Fund V mortgages totaling $127.1 million, or $25.5 million at the Company’s share, did not meet their liquidity requirement. In February 2024, Fund V obtained a new mortgage loan and paid down the Fund V subscription line to cure this event.

On July 15, 2023, the 146 Geary Street, Fund IV non-recourse mortgage loan with an outstanding balance of $19.3 million, or $4.5 million at the Company’s share, matured withno further extension options and was in default. The property securing the mortgage was a vacant building located in San Francisco, California. The loan accrued default interest at a rate of 4.00% per annum in excess of the interest rate of SOFR +3.65%. On October 27, 2023, the Company completed the transfer of the property to its lender through a deed-in-lieu of foreclosure, extinguishing the obligation under the mortgage loan. The Company reduced interest expense by $0.7 million upon derecognition of the loan for the additional interest expense previously recorded. The Company had previously impaired the asset, and recorded an impairment charge of $3.7 million, or $0.9 million at the Company’s share, related to the change in estimated value and holding period of the asset for the year ended December 31, 2023 (Note 8).

Scheduled Debt Principal Payments

The scheduled principal repayments, without regard to available extension options (described further below), of the Company’s consolidated indebtedness, as of December 31, 2023 are as follows (in thousands):

The table above does not reflect available extension options (subject to customary conditions) on debt balances as of December 31, 2023. The Company has debt balances of $535.4 million contractually due in 2025 and $25.1 million contractually due in 2027, all for which the Company has available options to extend by up to 12 months, and for some an additional 12 months thereafter. However, there can be no assurance that the Company will be able to successfully execute any or all of its available extension options.

8. Financial Instrumentsand Fair Value Measurements

Items Measured at Fair Value on a Recurring Basis

The methods and assumptions described below were used to estimate the fair value of each class of financial instrument.

Marketable Equity Securities — The Company has an investment in marketable equity securities of Albertsons, which has a readily determinable market value (traded on an exchange) and is being accounted for as a Level 1 investment. This investment was included in Marketable securities and Investments in and advances to unconsolidated affiliates on the Consolidated Balance Sheets at December 31, 2023 and 2022, respectively.

Derivative Financial Instruments— The Company has derivative assets, which are included in Other assets, net on the Consolidated Balance Sheets, and are comprised of interest rate swaps and caps. The Company has derivative liabilities, which are included in Accounts payable and other liabilities on the Consolidated Balance Sheets and are comprised of interest rate swaps. The derivative instruments were measured at fair value using readily observable market inputs, such as quotations on interest rates, and were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market. See “Derivative Financial Instruments,” below.

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (in thousands):

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

The Company did not have any transfers into or out of Level 1, Level 2, and Level 3 measurements during the year ended December 31, 2023 or 2022.

Marketable Equity Securities

During the year ended December 31, 2023, the Company sold 200,000 shares of Albertsons, generating net proceeds of $4.6 million. As of December 31, 2023, the Company still held 1.4 million shares of Albertsons which had a fair valueof $33.3 million. In January 2024, the Company sold an additional 175,000 shares of Albertsons, generating net proceeds of $4.0 million (Note 17). At December 31, 2022, the shares of Albertsons were held by Mervyns II (Note 4).

During the year ended December 31, 2023 and 2022, the Company recognized dividend income from marketable securities of $29.1 million and $1.8 million, of which the Company's share was $12.0 million and $0.6 million, respectively, and is included in Realized and unrealized holding gains on investments and other on the Company's Consolidated Statements of Operations.

The following table represents the realized and unrealized gain (loss) on marketable securities included in Realized and unrealized holding gains on investments and other on the Company's Consolidated Statements of Operations (in thousands):

Items Measured at Fair Value on a Nonrecurring Basis

Impairment Charges

Impairment charges for the periods presented are as follows (in thousands):

(a)

The fair value of 717 N. Michigan Avenue was based on an observable contract to sell the asset, less estimated costs to sell. The Company estimated the fair value of 146 Geary Street based on a discounted cash flow analysis using a range of discount rates from 5.00% to 7.75% and a range of capitalization rates from 4.25% to 5.75%. As significant inputs to the models are unobservable, the Company determined that the value determined for these properties falls within Level 3 of the fair value reporting hierarchy.

Redeemable Noncontrolling Interests

The Company has redeemable noncontrolling interests related to certain properties. The Company is required to periodically review these redeemable noncontrolling interests to in order to compare the redemption value to the carrying value. See Note 10 for further discussion regarding these interests.

Derivative Financial Instruments

The Company had the following interest rate swaps and caps for the periods presented (dollars in thousands):

All of the Company’s derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on variable-rate debt (Note 7). It is estimated that approximately $23.2 million included in Accumulated other comprehensive income related to derivatives will be reclassified as a reduction to interest expense within the next twelve months.

During the year ended December 31, 2023, the Company terminatedsix interest rate swaps with forward effective dates with an aggregate notional value of $175.0 million for cash proceeds of $16.0 million. The net derivative gain associated with the discontinued cash flow hedge continues to be reporting in Accumulated other comprehensive income as the forecasted transaction is expected to occur within the originally specified time period. Such amounts will be reclassified from Accumulated other comprehensive income into earnings as an increase in interest income over the period during which the hedged forecasted transaction affects earnings.

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its debt funding and, from time to time, through the use of derivative financial instruments. The Company enters into derivative financial instruments to manage exposures that result in the receipt or payment of future known and uncertain cash amounts, the values of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.

The Company is exposed to credit risk in the event of non-performance by the counterparties to the swaps if the derivative position has a positive balance. The Company believes it mitigates its credit risk by entering into swaps with major financial institutions. The Company continually monitors and actively manages interest costs on its variable-rate debt portfolio and may enter into additional interest rate swap positions or other derivative interest rate instruments based on market conditions.

Credit Risk-Related Contingent Features

The Company has agreements with each of its swap counterparties that contain a provision whereby if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its swaps, resulting in an acceleration of payment under the swaps.

Other Financial Instruments

The Company’s other financial instruments had the following carrying values and fair values as of the dates shown (dollars in thousands, inclusive of amounts attributable to noncontrolling interests where applicable):

a)

The Company determined the estimated fair value of these financial instruments using a discounted cash flow model with rates that take into account the credit of the borrower or tenant, where applicable, and changes in interest rates. The Company also considered the value of the underlying collateral, taking into account the quality of the collateral, the credit quality of the borrower, the time until maturity and the current market interest rate environment. Amounts exclude discounts and loan costs. The estimated market rates are between 4.90% to 14.25% for the Company's notes receivable and City Point Loan, and 5.83% to 9.27% for the Company's mortgage and other notes payable, depending on the attributes of the specific loans.

b)

Represents the Operating Partnership’s cost-method investment in Fifth Wall (Note 4).

c)

The Company determined the estimated fair value of the unsecured notes payable and unsecured line of credit using quoted market prices in an open market with limited trading volume where available. In cases where there was no trading volume, the Company determined the estimated fair value using a discounted cash flow model using a rate that reflects the average yield of similar market participants.

The Company’s cash and cash equivalents, restricted cash, rents receivable, accounts payable and certain financial instruments (classified as Level 1) included in other assets and other liabilities had fair values that approximated their carrying values due to their short maturity profiles at December 31, 2023 and 2022.

9. Commitmentsand Contingencies

The Company is involved in various matters of litigation arising out of, or incidental to, its business. While the Company is unable to predict with certainty the outcome of any particular matter, management does not expect, when such litigation is resolved, that the Company’s resulting exposure to loss contingencies, if any, will have a material adverse effect on its consolidated financial position or results of operations.

Commitments and Guaranties

From time to time, the Company (or ventures in which the Company has an ownership interest) has agreed, and may in the future agree, to guarantee portions of the principal, interest and other amounts in connection with their borrowings, provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with their borrowings and provide guarantees to lenders, tenants and other third parties for the completion of development projects.

With respect to borrowings of our consolidated entities, the Company has guaranteed $72.5 million of principal payment guarantees on various property mortgage loans and the Fund IV secured bridge facility (Note 7, Note 15). At December 31, 2023 and 2022, the Company had Core and Fund letters of credit outstanding of $2.0 million and $7.0 million, respectively (Note 7). The Company has not recorded any obligation associated with these letters of credit. The majority of the letters of credit are collateral for existing indebtedness and other obligations of the Company.

Additionally, in connection with the refinancing of the La Frontera Village mortgage loan of $57.0 million, which is collateralized by the investment property, Fund V guaranteed the joint venture’s obligation under the loan. Fund V earned a fee from the joint venture for providing the guarantee. As of December 31, 2023, $0.2 million related to the guarantee was recorded as a liability in the Company’s condensed consolidated financial statements (Note 4).

In conjunction with the development and expansion of various properties, the Company has entered into agreements with general contractors for the construction or development of properties aggregating approximately $15.8 million and $39.1 million, of which the Company’s share is $12.5 million and $37.5 millionas of December 31, 2023 and December 31, 2022, respectively. The Company has committed client-related obligations for tenant improvements based on executed leases aggregating approximately $25.7 million and $30.4 million, of which the Company’s share is $14.6 million and $15.8 million, as of December 31, 2023 and 2022, respectively. The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions.

Gain Contingency

The Company entered into a purchase and sale agreement (together with subsequent amendments thereto) to sell its West Shore Expressway property in the Core Portfolio. At the request of the former potential buyer, the Company extended the closing date numerous times in exchange for additional non-refundable deposits and contributions towards the carrying costs of the property. The agreement terminated and expired by its terms on August 2, 2023, and the $3.3 million deposit was forfeited to an affiliate of the Company, when, among other things, the former potential buyer failed to close on the property pursuant to the terms of the agreement. During the third quarter of 2023, the former potential buyer filed for Chapter 11 bankruptcy, which bankruptcy was dismissed during the fourth quarter, though this dismissal remained subject to appeal through January 2024. The Company has not recorded any amount in its consolidated financial statements related to this gain contingency as of December 31, 2023.

Insurance Coverage

We carry insurance coverage on our properties of different types and in amounts with deductibles that we believe are in line with coverage customarily obtained by owners of similar properties.

10. Shareholders’ Equity, Noncontrolling Interests and Other Comprehensive Loss

Common Shares and Units

In addition to the ATM Program and share repurchase activity discussed below, the Company completed the following transactions during the year ended December 31, 2023:

•

The Company withheld 3,251 shares of its restricted Common Shares ("Restricted Shares") to pay the employees’ statutory minimum income taxes due on the value of the portion of their Restricted Shares that vested.

•

The Company recognized Common Share and Common OP Unit-based compensation expense totaling $9.2 million in connection with Restricted Shares and restricted Common OP Units (“Restricted Units”) (Note 13).

In addition to the ATM Program and share repurchase activity discussed below, the Company completed the following transactions during the year ended December 31, 2022:

•

The Company withheld 3,235 Restricted Shares to pay the employees’ statutory minimum income taxes due on the value of the portion of their Restricted Shares that vested.

•

The Company recognized Common Share and Common OP Unit-based compensation expense totaling $7.4 million in connection with Restricted Shares and Units (Note 13).

In January 2024, the Company completed an underwritten offering of 6,900,000 Common Shares (inclusive of the underwriters’ option to purchase 900,000 additional shares) for net proceeds of $113.0 million (Note 17).

ATM Program

The Company has an at-the-market equity issuance program (“ATM Program”) that provides the Company an efficient vehicle for raising public equity capital to fund its needs. The Company entered into its current $250.0 million ATM Program, which includes an optional “forward sale” component, in the first quarter of 2022. The Company had approximately $222.3 million of availability under the ATM program at December 31, 2023 .The Company hasnot issued any shares on a forward basis during the years ended December 31, 2023 and 2022. During the year ended December 31, 2023 the Company didnot sell any Common Shares under its ATM program. During the year ended December 31, 2022, the Company sold 5,525,419 Common Shares under its ATM Program for gross proceeds of $123.9 million, or $119.5 million net of issuance costs, at a weighted-average gross price per share of $22.43, of which 4,281,576 shares were sold under the previous ATM Program for gross proceeds of $96.3 million, or $92.5 million net of issuance costs. During the year ended December 31, 2021, the Company sold 2,889,371 Common Shares under its previous ATM Program for gross proceeds of $64.9 million, or $63.9 million net of issuance costs, at a weighted-average gross price per share of $22.46.

Share Repurchase Program

During 2018, the Company’s board of trustees (the “Board”) approved a new share repurchase program, which authorizes management, at its discretion, to repurchase up to $200.0 million of its outstanding Common Shares. The program does not obligate the Company to repurchase any specific number of Common Shares and may be discontinued or extended at any time. The Company didnot repurchase any shares during the years ended December 31, 2023, 2022 and 2021. Under the share repurchase program $122.5 million remains available at December 31, 2023.

Dividends and Distributions

The following table sets forth the distributions declared and/or paid during the periods presented:

Noncontrolling Interests

The following tables summarize the change in the noncontrolling interests for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands):

(a)

Noncontrolling interests in the Operating Partnership are comprised of (i) the limited partners’2,855,574,3,062,108, and 3,076,849 Common OP Units at December 31, 2023, 2022 and 2021, respectively; (ii)188 Series A Preferred OP Units at December 31, 2023, 2022 and 2021; (iii)126,384 Series C Preferred OP Units at December 31, 2023 and 2022, and 126,593 at December 31,2021; and (iv)4,247,054,3,512,414, and 3,371,296 LTIP units at December 31, 2023, 2022 and 2021, respectively, as discussed in the Amended and Restated 2020 Plan (Note 13). Distributions declared for Preferred OP Units are reflected in net income (loss) in the table above.

(b)

Noncontrolling interests in partially-owned affiliates comprise third-party interests in Funds II, III, IV and V, and Mervyns II, and seven other subsidiaries.

(c)

Redeemable noncontrolling interests comprise third-party interests that have been granted put rights, as further described below.

(d)

Adjustment reflects the difference between the fair value of the consideration received or paid and the book value of the Common Shares, Common OP Units, Preferred OP Units, and LTIP Units involving changes in ownership.

(e)

Represents the acquisition of the 11.67% noncontrolling interest in Fund II and Mervyns II acquired on June 27, 2022 for $18.5 million and of a 21.67% interest in Fund II on August 1, 2022 for $5.8 million (Note 1).

(f)

Represents the reclassification of redeemable noncontrolling interests related to the City Point Loan in the third quarter of 2022.

(g)

The Company exchanged 21,109 OP Units in settlement of a note receivable in the amount of $0.5 million on July 12, 2021.

Redeemable Noncontrolling Interests

Williamsburg Portfolio

In connection with the Williamsburg Portfolio acquisition in February 2022 (Note 2), the Company evaluated the Williamsburg Noncontrolling Interest ("Williamsburg NCI"), which represents the venture partner's one-time right to put its 50.01% interest in the property to the Company for redemption at fair value at a future date. As it was unlikely as of the acquisition date that the venture partner would receive any consideration on redemption due to the Company’s preferential returns, the initial fair value of the Williamsburg NCI was determined to be zero. The Company is required to periodically evaluate the NCI and adjust it to redemption value. At December 31, 2023 and 2022, the Company determined that the fair value of the Williamsburg NCI waszero. The Company determined that its valuation was classified within Level 3 of the fair value hierarchy. The estimated fair market value of this noncontrolling interest was based upon a discounted cash flow model, for which a capitalization rate of 5.25% and discount rate of 7.25% were utilized in the model based upon unobservable rates that the Company believes to be within a reasonable range of current market rates.

City Point Loan

In August 2022, the Company provided a loan, through a separate lending subsidiary, toother Fund II investors in City Point, through a separate borrower subsidiary, to fund the investors' pro-rata contribution necessary to complete the refinancing of the City Point debt, of which $65.9 million was funded at closing ("City Point Loan"). The City Point Loan has afive-year term which matures on August 1, 2027 and is collateralized by the investors' equity in City Point ("City Point NCI"). Because the City Point Loan was granted in return for a capital contribution from the investors, and is collateralized by the City Point NCI, the City Point Loan and accrued interest, net of a $0.7 million and $0.5 million allowance for CECL as of December 31, 2023 and 2022, respectively, are presented as a reduction of the City Point NCI balance. The borrower subsidiary of the City Point Loan was determined to be a VIE for which the Company is not the primary beneficiary. The maximum loss in the VIE is limited to the amount of the City Point Loan and any accrued interest.

In connection with the City Point Loan, each partner has a one-time right to put its City Point NCI to the Company for redemption in exchange for the settlement of its proportion of the City Point Loan amount plus either (i) a fixed cash amount or (ii) a cash amount equal to the value of fixed number of Common Shares of the Company on the trading day prior to the election, which began in August 2023 ("Redemption Value"). As a result of granting these redemption rights, the City Point NCI, net of the City Point Loan, has been reclassified and presented as Redeemable noncontrolling interests on the Company's Consolidated Balance Sheets. Given the carrying value of the City Point NCI at the time of the transaction exceeded the maximum Redemption Value, the Company did not recognize any initial adjustment to accrete the City Point NCI to the Redemption Value. The Company is required to periodically evaluate the maximum redemption amount of the City Point NCI interest and recognize an increase in the carrying value if the redemption value exceeds the then current carrying value. At December 31, 2023, the Company determined that the carrying value exceeded the maximum Redemption Value and no adjustment was required. The Company determined that its valuation was classified within Level 3 of the fair value hierarchy. The estimated fair market value of this noncontrolling interest was based upon a discounted cash flow model, for which a capitalization rate of 5.25% and discount rate of 6.25% were utilized in the model based upon unobservable rates that the Company believes to be within a reasonable range of current market rates.

8833 Beverly Boulevard

In July 2023, the Company entered into a limited partnership agreement to own and operate the 8833 Beverly Boulevard property. Following the formation of the partnership, the Company retained a 97.0% controlling interest. At a future point in time, subject to certain criteria, either party may elect a buy-out right, where either the Company may purchase its partner’s interest or its partner may sell its 3.0% interest in the partnership (the "8833 Beverly NCI") to the Company for fair value. As a result of these redemption rights, the 8833 Beverly NCI was initially recorded at fair value and presented as Redeemable noncontrolling interests on the Company’s Consolidated Balance Sheets. On a quarterly basis, the Company will recognize changes in the redemption value as an adjustment to the carrying amount of the redeemable 8833 Beverly NCI. At December 31, 2023, the Company determined that the carrying value exceeded the maximum redemption value and no adjustment was required. The Company determined that its valuation was classified within Level 3 of the fair value hierarchy. The estimated fair market value of this noncontrolling interest was based upon a discounted cash flow model, for which a capitalization rate of 6.0% and discount rate of 9.0% were utilized in the model based upon unobservable rates that the Company believes to be within a reasonable range of current market rates.

Preferred OP Units

In 2016, the Operating Partnership issued 442,478 Common OP Units and 141,593 Series C Preferred OP Units to a third party to acquire Gotham Plaza (Note 4). The Series C Preferred OP Units have a value of $100.00 per unit and are entitled to a preferred quarterly distribution of $0.9375 per unit and are convertible into Common OP Units at a rate based on the share price at the time of conversion. Through December 31, 2023,15,209 Series C Preferred OP Units were converted into 52,613 Common OP Units and then into Common Shares. If the share price is below $28.80 on the conversion date, each Series C Preferred OP Unit will be convertible into 3.4722 Common OP Units. If the share price is between $28.80 and $35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into a number of Common OP Units equal to $100.00 divided by the closing share price. If the share price is above $35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into 2.8409 Common OP Units. The Series C Preferred OP Units have a mandatory conversion date of December 31, 2025, at which time all units that have not been converted will automatically be converted into Common OP Units based on the same calculations.

In 1999, the Operating Partnership issued 1,580 Series A Preferred OP Units in connection with the acquisition of a property, which have a stated value of $1,000 per unit, and are entitled to a preferred quarterly distribution of the greater of (i) $22.50 (9.00% annually) per Series A Preferred OP Unit or (ii) the quarterly distribution attributable to a Series A Preferred OP Unit if such unit was converted into a Common OP Unit. Through December 31, 2023,1,392 Series A Preferred OP Units were converted into 185,600 Common OP Units and then into Common Shares. The 188 remaining Series A Preferred OP Units are currently convertible into Common OP Units based on the stated value divided by $7.50. Either the Company or the holders can currently call for the conversion of the Series A Preferred OP Units at the lesser of $7.50 or the market price of the Common Shares as of the conversion date.

11. Leases

As Lessor

The Company has approximately 1,000 leases in the leasing of shopping centers and other retail properties that are either owned or, with respect to certain shopping centers, leased under long-term ground leases (see below) that expire at various dates through December 31, 2121, with renewal options. Certain leases may allow for the tenants to terminate the leases before the expiration of the lease term. Space in the properties is leased to tenants pursuant to agreements that generally provide for terms ranging fromone month tosixty years and for additional rents based on certain operating expenses as well as tenants’ sales volumes.

The components of rental revenue are as follows (in thousands):

The scheduled future minimum rental revenues from rental properties under the terms of non-cancelable tenant leases greater than one year (assuming no new or renegotiated leases or option extensions for such premises) as of December 31, 2023, are summarized as follows (in thousands):

(a)

Amount represents contractual lease maturities at December 31, 2023, including any extension options that management determined were reasonably certain of exercise, and excluding any amounts related to reimbursements of operating expenses.

During the years ended December 31, 2023, 2022 and 2021, no single tenant or property collectively comprised more than 10% of the Company’s Total revenues.

During the year ended December 31, 2023, Fund II received $2.0 million, or $1.1 million at the Company’s share, of proceeds from the Century 21 Department Stores LLC bankruptcy claim. The proceeds are recorded in Rental revenue on the Consolidated Statements of Operations.

As Lessee

The Company has properties in its portfolio that are currently owned by third parties. We also lease real estate for equipment and office space. We lease these properties pursuant to ground leases that provide us the right to operate each such property, and generally provide form terms ranging from eight months to 98 years.

The scheduled future minimum rental payments under the terms of all non-cancelable operating and finance leases in which the Company is the lessee, principally for office space, land, and equipment, as of December 31, 2023, are summarized as follows (in thousands):

(a)

Minimum rental payments include $8.8 million of interest related to operating leases and $130.8 million related to finance leases and exclude options or renewals not reasonably certain of exercise.

Additional disclosures regarding the Company’s leases as lessee are as follows (dollars in thousands):

•

modified its master lease at 565 Broadway within the Core Portfolio and extended the lease term for 43 years until December 31, 2121, for an additional payment of $4.0 million to be paid over the lease term. As a result, the transaction was accounted for as a lease modification which resulted in a change in lease classification per ASC 842 from Right-of-use-asset – operating lease to a right-of-use-asset – finance lease. The Company recorded an additional right-of-use asset – finance lease and corresponding lease liability-finance lease of $3.8 million.

•

acquired four ground leases as part of the Fund V acquisition of Cypress Creek in July 2023 (Note 2), and recorded a right-of-use-asset – finance lease of $25.3 million and a lease liability – finance lease of $22.1 million as the present value of the sum of the lease payments exceeded substantially all of the fair value of the underlying assets.

During the year ended December 31, 2022, there were no new leases entered or modified where the Company acted as lessee.

12. Segment Reporting

The Company hasthree reportable segments: Core Portfolio, Funds and Structured Financing. The Company’s Core Portfolio segment consists primarily of high-quality retail properties located primarily in high-barrier-to-entry, densely populated metropolitan areas with a long-term investment horizon. The Company’s Funds segment hold primarily retail real estate in which the Company co-invests with high-quality institutional investors. The Company’s Structured Financing segment consists of earnings and expenses related to notes and mortgages receivable (Note 3) which are held within the Core Portfolio or the Funds. Fees earned by the Company as the general partner or managing member of the Funds are eliminated in the Company’s consolidated financial statements and are not presented in the Company’s segments.

The following tables set forth certain segment information for the Company (in thousands):

a)

Total assets for the Funds segment include $555.8 million, $569.1 million, and $583.4 million related to Fund II’s City Point property at December 31, 2023, 2022,and 2021, respectively.

13. Share Incentive and Other Compensation

Share Incentive Plan

In March and May of 2020, respectively, the Board and the Company’s shareholders, approved the 2020 Share Incentive Plan (the “2020 Plan”), which increased the number of Common Shares authorized for issuance by 2,650,000 shares to an aggregate of 2,829,953 shares. On March 22, 2023 and May 4, 2023, respectively, the Board and the Company’s shareholders approved the Amended and Restated 2020 Share Incentive Plan (the "Amended and Restated 2020 Plan") which further increased the number of Common Shares authorized for issuance by 3,100,000 to an aggregate of 3,883,564 shares. In this report, references to issuances, compensation arrangements and expenses under the Amended and Restated 2020 Plan include issuances, compensation arrangements and expenses under the originally adopted 2020 Plan, as applicable. The 2020 Plan and the Amended and Restated 2020 Plan authorize the Company to issue options, Restricted Shares, LTIP Units and other securities (collectively “Awards”) to, among others, the Company’s officers, trustees, and employees. At December 31, 2023 a total of 3,804,345 shares remained available to be issued under the Amended and Restated 2020 Plan.

A summary of the status of the Company’s unvested Restricted Shares and LTIP Units is presented below:

The weighted-average grant date fair value for Restricted Shares and LTIP Units granted for the years ended December 31, 2023, 2022 and 2021 were$14.93,$21.04 and $19.51, respectively. As of December 31, 2023, there was $16.7 millionof total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Amended and Restated 2020 Plan. That cost is expected to be recognized over a weighted-average period of 1.5 years. The total fair value of Restricted Shares that vested for each of the years ended December 31, 2023, 2022 and 2021, was $0.8 million. The total fair value of LTIP Units that vested (LTIP units vest primarily during the first quarter) during the years ended December 31, 2023, 2022 and 2021, was$7.2 million, $7.1 million and $7.5 million, respectively.

Restricted Shares and LTIP Units - Employees

During the year ended December 31, 2023, the Company issued 22,314 Restricted Share Units and 739,734 LTIP Units to employees of the Company pursuant to the Amended and Restated 2020 Plan. Certain of these equity awards were granted in performance-based Restricted Share Units or LTIP Units with market conditions as described below (“Performance Shares”). These awards were measured at their fair value on the grant date, incorporating the following factors:

•

A portion of these annual equity awards is granted in performance-based Restricted Share Units or LTIP Units that may be earned based on the Company’s attainment of specified relative total shareholder returns (“Relative TSR”) hurdles or specified same-property net operating income growth (“Absolute SSNOI Growth”).

•

In the event the Relative TSR percentile falls between the 25th percentile and the 50th percentile, the Relative TSR vesting percentage is determined using a straight-line linear interpolation between 50% and 100%, and in the event that the Relative TSR percentile falls between the 50th percentile and 75th percentile, the Relative TSR vesting percentage is determined using a straight-line linear interpolation between 100% and 200%.

•

Fifty percent (50%) of the performance-based LTIP Units will vest based on the Company’s total shareholder return (“TSR”) for thethree-year forward-looking performance period relative to the constituents of the National Association of Real Estate Investment Trusts ("NAREIT") Shopping Center Property Subsector and twenty five percent (25%) on the Company’s TSR for thethree-year forward-looking performance period as compared to the constituents of the NAREIT Retail Property Sector (both on a non-weighted basis).

•

Twenty-five percent (25%) of the performance-based LTIP Units will vest based on the Company's same-property net operating income ("SSNOI") growth for the three-year forward-looking performance period. If the Company achieves annualized SSNOI growth between 2% and 3%, the Absolute SSNOI Growth vesting percentage is determined using a straight-line linear interpolation between 50% and 100%, and in the event that the Company achieves annualized SSNOI growth between 3% and 4%, the Absolute SSNOI Growth vesting percentage is determined using a straight-line linear interpolation between 100% and 200%.

•

If the Company’s performance fails to achieve the aforementioned hurdles at the culmination of thethree-year performance period, all performance-based shares will be forfeited. Any earned performance-based shares vest 60% at the end of the performance period, with the remaining 40% of shares vesting ratably over the nexttwo years.

For valuation of the 2023, 2022 and 2021 Performance Shares, a Monte Carlo simulation was used to estimate the fair values of the relative TSR portion based on probability of satisfying the market conditions and the projected share prices at the time of payments, discounted to the valuation dates over thethree-year performance periods. The assumptions include volatility (48.0%,49.0% and 48.0%) and risk-free interest rates of (4.3%,1.7% and 0.2%) for 2023, 2022 and 2021, respectively. The total value of the 2023, 2022 and 2021 Performance Shares will be expensed over the vesting period.

The total fair value of the above Restricted Share Units and LTIP Units as of the grant date was$11.5 million, $13.1 million and $12.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. Total long-term incentive compensation expense, including the expense related to the Amended and Restated 2020 Plan, was $9.2 million, $7.4 million, and $9.4 million for the years ended December 31, 2023, 2022, and 2021, respectively and is recorded in General and administrative on the Consolidated Statements of Operations.

Restricted Shares and LTIP Units - Board of Trustees

In addition, members of the Board have been issued shares and units under the Amended and Restated 2020 Plan. During 2023, the Company issued 45,882 Restricted Shares and 40,459 LTIP Unitsto Trustees of the Company in connection with Trustee fees. Vesting with respect to 15,850 of the Restricted Shares and 10,427 of the LTIP Units will be on the first anniversary of the date of issuance, and 30,032 of the Restricted Shares and 30,032 of the LTIP Units vest over three years with 33% vesting on each of the next three anniversaries of the issuance date. Additionally, during the year ended December 31, 2023, the Company issued 2,433 Restricted Shares as compensation to a new Trustee of the Company. These Restricted Shares vest over three years with 33% vesting May 9, 2023, and the remaining amount vesting ratably on May 9, 2024 and May 9, 2025. The Restricted Shares do not carry voting rights or other rights of Common Shares until vesting and may not be transferred, assigned, or pledged until the recipients have a vested non-forfeitable right to such shares. Dividends are not paid currently on unvested Restricted Shares but are paid cumulatively from the issuance date through the applicable vesting date of such Restricted Shares. Total trustee fee expense, including the expense related to the Amended and Restated 2020 Plan, was $1.9 million, $1.7 million and $1.6 million for the years ended December 31, 2023, 2022 and 2021, respectively, and is recorded in General and administrative on the Consolidated Statements of Operations.

Long-Term Investment Alignment Program

In 2009, the Company adopted the Long-Term Investment Alignment Program (the “Program”) pursuant to which the Company may grant awards to employees, entitling them to receive up to 25% of any potential future payments of Promote to the Operating Partnership from Funds III, IV and V. The Company has granted such awards to employees representing 25% of the potential Promote payments from Fund III to the Operating Partnership,23.1% of the potential Promote payments from Fund IV to the Operating Partnership and 18.0% of the potential Promote payments from Fund V to the Operating Partnership. Payments to senior executives under the Program require further Board approval at the time any potential payments are due pursuant to these grants. Compensation relating to these awards will be recognized in each reporting period in which Board approval is granted.

As payments to other employees are not subject to further Board approval, compensation relating to these awards will be recorded based on the estimated fair value at each reporting period in accordance with ASC Topic 718, Compensation – Stock Compensation. The awards in connection with Fund IV were determined to haveno intrinsic value at December 31, 2023 or 2022.

The Company recognized $0.2 million and $0.4 million compensation expense related to the Program for the years ended December 31, 2023 and 2022, related to Funds III and V. No compensation expense was recognized for the year ended 2021 related to the Program.

Other Plans

On a combined basis, the Company incurred a total of $0.5 million, $0.4 million, and $0.4 million of compe nsation expense related to the following employee benefit plans for the years ended December 31, 2023, 2022 and 2021, respectively:

Employee Share Purchase Plan

The Acadia Realty Trust Employee Share Purchase Plan (the “Purchase Plan”) allows eligible employees of the Company to purchase Common Shares through payroll deductions for a maximum aggregate issuance of 200,000 Common Shares. The Purchase Plan provides for employees to purchase Common Shares on a quarterly basis at a 15% discount to the closing price of the Company’s Common Shares on either the first day or the last day of the quarter, whichever is lower. A participant may not purchase more than $25,000 in Common Shares per year. Compensation expense will be recognized by the Company to the extent of the above discount to the closing price of the Common Shares with respect to theapplicable quarter. A total of 13,177 and 9,747 Common Shares were purchased by employees under the Purchase Plan for the years ended December 31, 2023 and 2022, respectively.

Deferred Share Plan

The Company maintains a Trustee Deferral and Distribution Election program, under which the participating Trustees earn deferred compensation.

Employee 401(k) Plan

The Company maintains a 401(k) plan for employees under which the Company currently matches 50% of a plan participant’s contribution up to 6% of the employee’s annual salary. A plan participant may contribute up to a maximum of 15% of their compen sation, up to $22,500, for the year ended December 31, 2023.

14. Federal Income Taxes

The Company has elected to qualify as a REIT in accordance with Sections 856 through 860 of the Code and intends at all times to qualify as a REIT under the Code. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its annual REIT taxable income to its shareholders. As a REIT, the Company generally will not be subject to corporate federal income tax, provided that distributions to its shareholders equal at least the amount of its REIT taxable income as defined under the Code. As the Company distributed sufficient taxable income for the years ended December 31, 2023, 2022 and 2021, no U.S. federal income or excise taxes were incurred. If the Company fails to qualify as a REIT in any taxable year, it will be subject to federal income taxes at the regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable years. Even though the Company qualifies for taxation as a REIT, the Company is subject to certain state and local taxes on its income and property and federal income and excise taxes on any undistributed taxable income. In addition, taxable income from non-REIT activities managed through the Company’s TRS’s is subject to federal, state and local income taxes. No more than 20% of the value of our total assets may consist of the securities of one or more TRS.

In the normal course of business, the Company or one or more of its subsidiaries is subject to examination by federal, state and local jurisdictions, in which it operates, where applicable. The Company expects to recognize interest and penalties related to uncertain tax positions, if any, as income tax expense. For the three years ended December 31, 2023, the Company recognized no material adjustments regarding its tax accounting treatment for uncertain tax provisions. As of December 31, 2023, the tax years that remain subject to examination by the major tax jurisdictions under applicable statutes of limitations are generally the year 2020 and forward.

Reconciliation of Net Income to Taxable Income

Reconciliation of GAAP net income attributable to Acadia to taxable income (loss) is as follows:

a)

Adjustments from certain subsidiaries and affiliates, which are consolidated for financial reporting but not for tax reporting, are included in the reconciliation item “Joint venture equity in earnings, net.”

b)

The entire fourth quarter 2023 dividend of $17.2 million (paid in January 2024) was attributed to 2024. Any additional distributions required for REIT qualification may be made through October 15, 2024. The entire fourth quarter 2022 dividend of $17.1 million (paid in January 2023) was attributed to 2023. The entire fourth quarter 2021 dividend of $14.4 million (paid in January 2022) was attributed to 2021 (Note 10).

Characterization of Distributions

The Company has determined that the cash distributed to the shareholders for the periods presented is characterized as follows for federal income tax purposes:

a)

The fourth quarter 2023 regular dividend was $0.18 per Common Share, all of which is allocable to 2024. The fourth quarter 2022 regular dividend was $0.18 per Common Share, all of which is allocable to 2023. The fourth quarter 2021 regular dividend was $0.15 per Common Share, all of which is allocable to 2021.

Taxable REIT Subsidiaries

Income taxes have been provided for using the liability method as required by ASC Topic 740,“Income Taxes.” The Company’s TRS income (loss) and provision for income taxes associated with the TRS for the periods presented are summarized as follows (in thousands):

The income tax provision for the Company differs from the amount computed by applying the statutory Federal income tax rate to income (loss) before income taxes as follows. Amounts are not adjusted for temporary book/tax differences (in thousands):

As of December 31, 2023, and 2022, the Company’s deferred tax assets were $0.0 million net of applicable reserves of$4.3 million and were comprised of capital loss carryovers of$0.0 million and $0.1 million and net operating loss carryovers of $3.1 million and $4.2 million, respectively.

Under GAAP a reduction of the carrying amounts of deferred tax assets by a valuation allowance is required, if, based on the evidence available, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. For the years ended December 31, 2023, 2022, and 2021, the Company determined that the realization of its deferred tax assets was not likely and as such, the Company recorded a valuation allowance against its deferred tax assets of $0.0 million, $0.7 million, and $1.1 million, respectively.

15. Earnings (Loss) Per Common Share

Basic earnings (loss) per Common Share is computed by dividing net income (loss) attributable to Common Shareholders by the weighted average Common Shares outstanding (Note 10). During the periods presented, the Company had unvested LTIP Units which provide for non-forfeitable rights to dividend equivalent payments. Accordingly, these unvested LTIP Units are considered participating securities and are included in the computation of basic earnings per Common Share pursuant to the two-class method.

Diluted earnings (loss) per Common Share reflects the potential dilution of the conversion of obligations and the assumed exercises of securities including the effects of Restricted Share Units issued under the Company’s Amended and Restated 2020 Plan (Note 13). The effect of such shares is excluded from the calculation of earnings per share when anti-dilutive as indicated in the table below.

The effect of the conversion of Common OP Units is not reflected in the computation of basic and diluted earnings per share, as they are exchangeable for Common Shares on aone-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in the accompanying consolidated financial statements. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings per share.

a)

The impact of the assumed conversion of dilutive convertible securities is related to the assumed conversion of potential common shares of the Company that could be subsequently issued in connection with the City Point Loan (Note 10) for the stub-period until the put rights were modified for a cash-only settlement option in the third quarter of 2022.

16. Variable Interest Entities

Pursuant to GAAP consolidation guidance, the Company consolidates certain VIEs for which the Company is the primary beneficiary. As of December 31, 2023 and 2022, the Company had seven and eight consolidated VIEs, respectively, including the Operating Partnership and the Funds. Excluding the Operating Partnership and the Funds at December 31, 2023, the VIEs consisted of three in-service Core properties: the Williamsburg Portfolio, 239 Greenwich Avenue, and 8833 Beverly Boulevard. The Operating Partnership is considered a VIE in which the Company is the primary beneficiary because the limited partners do not have substantive kick-out or participating rights. The Company consolidated these VIEs because it is the primary beneficiary as it has (i) the power to direct the activities of the entity that most significantly impact the entity's economic performance, and (ii) the obligation to absorb the entity's losses or receive benefits from the entity that could potentially be significant to the entity. The third parties’ interests in these consolidated entities are reflected as noncontrolling interests in the accompanying consolidated financial statements and in Note 10.

The majority of the operations of these VIEs are funded with fees earned from investment opportunities or cash flows generated from the properties. The Company has not provided financial support to any of these VIEs that it was not previously contractually required to provide, which consists primarily of funding any capital commitments and capital expenditures, which are deemed necessary to continue to operate the entity and any operating cash shortfalls the entity may experience.

Since the Company conducts its business through and substantially all of its interests are held by the Operating Partnership, substantially all of the assets and liabilities on the Consolidated Balance Sheets represent the assets and liabilities of the Operating Partnership. As of December 31, 2023 and December 31, 2022, the Consolidated Balance Sheets included the following assets and liabilities of the consolidated VIEs of the Operating Partnership:

(a)

At December 31, 2023 and December 31, 2022, totals included VIE assets of $721.2 million and 678.1 million, respectively, and VIE liabilities of $234.7 million and $200.4 million, respectively, related to third-party mortgages that are collateralized by the real estate assets of City Point, a Fund II property, and 27 East 61st Street, 801 Madison Avenue, and 1035 Third Avenue, all Fund IV properties, of which $72.5 million is guaranteed by the Operating Partnership (Note 9). The remaining VIE assets are generally encumbered by third-party non-recourse mortgage debt and are collateral under the respective mortgages and are therefore restricted and can only be used to settle the corresponding liabilities of the VIE. The remaining VIE assets may only be used to settle obligations of these consolidated VIEs and the remaining VIE liabilities are only the obligations of these consolidated VIEs and they do not have recourse to the Operating Partnership or the Company.

Unconsolidated VIEs

The Company holds variable interests in certain VIEs which are not consolidated. While the Company may be responsible for managing the day-to-day operations of these investees, it is not the primary beneficiary of these VIEs, as the Company does not hold unilateral power over activities that, when taken together, most significantly impact the respective VIE's economic performance. The Company accounts for investments in these entities under the equity method (Note 4). As of December 31, 2023 and 2022, the Company has determined that the following entities are VIEs: 1238 Wisconsin Avenue and the Georgetown Portfolio. The Company's involvement with these entities is in the form of direct and indirect equity interests and fee arrangements. The maximum exposure to loss in these entities is limited to: (i) the amount of the Company's equity investment and (ii) debt guarantees (Note 9). The Company's aggregate investment in the unconsolidated VIEs assets was $45.8 million and $41.5 million at December 31, 2023 and 2022, respectively. The Company's aggregate investment in unconsolidated VIEs liabilities was $40.1 million and $49.2 million at December 31, 2023 and 2022, respectively.

17. Subsequent Events

On January 8, 2024, the Company sold 175,000 shares of Albertsons, generating net proceeds of $4.0 million.

On January 8, 2024, the Company completed an underwritten offering of 6,900,000 Common Shares (inclusive of the underwriters’ option to purchase 900,000 additional shares) for net proceeds of $113.0 million.

The Company had the following financing activity:

•

repaid a Core mortgage totaling $7.3 million at maturity; and

•

entered into a new Fund V mortgage for $43.4 million and repaid the outstanding balance of the Fund V subscription line with the proceeds.