10-Q 1 a6488986.htm ACADIA REALTY TRUST 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2010
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 1-12002
ACADIA REALTY TRUST
(Exact name of registrant in its charter)

MARYLAND (State or other jurisdiction of incorporation or organization) 1311 MAMARONECK AVENUE, SUITE 260 WHITE PLAINS, NY (Address of principal executive offices) |  | 23-2715194 (I.R.S. Employer Identification No.) 10605 (Zip Code)

(914) 288-8100
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES x NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES o NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

| Large Accelerated Filer o | Accelerated Filer x |
| Non-accelerated Filer o | Smaller Reporting Company o |

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o No x
As of November 8, 2010 there were 40,253,877 common shares of beneficial interest, par value $.001 per share, outstanding.

ACADIA REALTY TRUST AND SUBSIDIARIES
FORM 10-Q
INDEX

|  |  | Page
Part I: |  | Financial Information |
Item 1. |  | Financial Statements |
|  | Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009 | 1
|  | Consolidated Statements of Income for the three and nine months ended September 30, 2010 and 2009 (unaudited) | 2
|  | Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the nine months ended September 30, 2010 and 2009 (unaudited) | 3
|  | Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 (unaudited) | 4
|  | Notes to Consolidated Financial Statements | 6
Item 2. |  | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18
Item 3. |  | Quantitative and Qualitative Disclosure About Market Risk | 30
Item 4. |  | Controls and Procedures | 31
Part II: |  | Other Information |
Item 1. |  | Legal Proceedings | 31
Item 1A. |  | Risk Factors | 31
Item 2. |  | Unregistered Sales of Equity Securities and Use of Proceeds | 31
Item 3. |  | Defaults Upon Senior Securities | 31
Item 4. |  | (Removed and Reserved) | 31
Item 5. |  | Other Information | 31
Item 6. |  | Exhibits | 31
|  | Signatures | 32
|  | Exhibit Index | 33

Part I. Financial Information
Item 1. Financial Statements.
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(dollars in thousands) |  | September 30, |  |  | December 31, |
|  | 2010 |  |  | 2009 |
ASSETS |  | (unaudited) |  |  |  |
Operating real estate |  |  |  |  |  |
Land |  | $ | 200,354 |  |  | $ | 221,740 |
Building and improvements |  |  | 855,333 |  |  |  | 845,751 |
Construction in progress |  |  | 2,842 |  |  |  | 2,575 |
|  |  | 1,058,529 |  |  |  | 1,070,066 |
Less: accumulated depreciation |  |  | 214,909 |  |  |  | 193,745 |
Net operating real estate |  |  | 843,620 |  |  |  | 876,321 |
Real estate under development |  |  | 314,565 |  |  |  | 137,340 |
Notes receivable and preferred equity investment, net |  |  | 87,600 |  |  |  | 125,221 |
Investments in and advances to unconsolidated affiliates |  |  | 16,095 |  |  |  | 51,712 |
Cash and cash equivalents |  |  | 110,703 |  |  |  | 93,808 |
Cash in escrow |  |  | 29,559 |  |  |  | 8,582 |
Rents receivable, net |  |  | 17,956 |  |  |  | 16,782 |
Deferred charges, net of amortization |  |  | 28,098 |  |  |  | 28,311 |
Acquired lease intangibles, net of amortization |  |  | 19,527 |  |  |  | 22,382 |
Prepaid expenses and other assets |  |  | 23,025 |  |  |  | 22,005 |
Total assets |  | $ | 1,490,748 |  |  | $ | 1,382,464 |
LIABILITIES |  |  |  |  |  |  |  |
Mortgages payable |  | $ | 783,467 |  |  | $ | 732,287 |
Notes payable, net of unamortized discount of $1,331 and $2,105, respectively |  |  | 48,684 |  |  |  | 47,910 |
Distributions in excess of income from, and investments in, unconsolidated affiliates |  |  | 20,802 |  |  |  | 20,589 |
Accounts payable and accrued expenses |  |  | 31,102 |  |  |  | 17,548 |
Dividends and distributions payable |  |  | 7,427 |  |  |  | 7,377 |
Acquired lease and other intangibles, net of amortization |  |  | 5,992 |  |  |  | 6,753 |
Other liabilities |  |  | 19,434 |  |  |  | 17,523 |
Total liabilities |  |  | 916,908 |  |  |  | 849,987 |
SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |
Common shares, $.001 par value, authorized 100,000,000 shares; issued |  |  |  |  |  |  |  |
and outstanding 40,247,415 and 39,787,018 shares, respectively |  |  | 40 |  |  |  | 40 |
Additional paid-in capital |  |  | 303,192 |  |  |  | 299,014 |
Accumulated other comprehensive loss |  |  | (3,366 | ) |  |  | (2,994 | )
Retained earnings |  |  | 17,449 |  |  |  | 16,125 |
Total shareholders’ equity |  |  | 317,315 |  |  |  | 312,185 |
Noncontrolling interests |  |  | 256,525 |  |  |  | 220,292 |
Total equity |  |  | 573,840 |  |  |  | 532,477 |
Total liabilities and equity |  | $ | 1,490,748 |  |  | $ | 1,382,464 |

See accompanying notes
1

ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(unaudited)

|  | Three months ended September 30, |  |  | Nine months ended September 30, |
(dollars in thousands, except per share amounts) |  | 2010 |  |  | 2009 |  |  | 2010 |  |  | 2009 |
Revenues |  |  |  |  |  |  |  |  |  |  |  |
Rental income |  | $ | 28,041 |  |  | $ | 25,941 |  |  | $ | 79,734 |  |  | $ | 71,314 |
Mortgage interest income |  |  | 5,206 |  |  |  | 4,908 |  |  |  | 15,437 |  |  |  | 14,867 |
Expense reimbursements |  |  | 4,939 |  |  |  | 4,868 |  |  |  | 15,839 |  |  |  | 15,252 |
Lease termination income |  | ─ |  |  |  | 2,500 |  |  |  | 65 |  |  |  | 2,726 |
Management fee income |  |  | 346 |  |  |  | 316 |  |  |  | 1,182 |  |  |  | 1,517 |
Other |  |  | 729 |  |  |  | 362 |  |  |  | 1,663 |  |  |  | 3,250 |
Total revenues |  |  | 39,261 |  |  |  | 38,895 |  |  |  | 113,920 |  |  |  | 108,926 |
Operating Expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Property operating |  |  | 7,255 |  |  |  | 6,419 |  |  |  | 21,671 |  |  |  | 20,965 |
Real estate taxes |  |  | 4,771 |  |  |  | 4,552 |  |  |  | 13,644 |  |  |  | 12,305 |
General and administrative |  |  | 5,317 |  |  |  | 5,226 |  |  |  | 15,852 |  |  |  | 16,575 |
Depreciation and amortization |  |  | 10,341 |  |  |  | 10,377 |  |  |  | 28,546 |  |  |  | 27,412 |
Other expense |  | ─ |  |  |  | 53 |  |  |  | 3 |  |  |  | 4,218 |
Total operating expenses |  |  | 27,684 |  |  |  | 26,627 |  |  |  | 79,716 |  |  |  | 81,475 |
Operating income |  |  | 11,577 |  |  |  | 12,268 |  |  |  | 34,204 |  |  |  | 27,451 |
Other interest income |  |  | 175 |  |  |  | 161 |  |  |  | 462 |  |  |  | 373 |
Equity in earnings (losses) of unconsolidated affiliates |  |  | 143 |  |  |  | (193 | ) |  |  | 610 |  |  |  | (3,451 | )
Impairment of investment in unconsolidated affiliate |  | ─ |  |  |  | (3,655 | ) |  | ─ |  |  |  | (3,655 | )
Interest and other finance expense |  |  | (8,829 | ) |  |  | (8,329 | ) |  |  | (25,927 | ) |  |  | (23,782 | )
Gain on bargain purchase |  | ─ |  |  | ─ |  |  |  | 33,805 |  |  | ─ |
Gain on debt extinguishment |  | ─ |  |  |  | 11 |  |  | ─ |  |  |  | 7,057 |
Income from continuing operations before income taxes |  |  | 3,066 |  |  |  | 263 |  |  |  | 43,154 |  |  |  | 3,993 |
Income tax provision |  |  | (785 | ) |  |  | 273 |  |  |  | (1,869 | ) |  |  | (1,349 | )
Income from continuing operations |  |  | 2,281 |  |  |  | 536 |  |  |  | 41,285 |  |  |  | 2,644 |
Discontinued Operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating income from discontinued operations |  | ─ |  |  |  | 32 |  |  | ─ |  |  |  | 225 |
Gain on sale of property |  | ─ |  |  | ─ |  |  | ─ |  |  |  | 5,637 |
Income from discontinued operations |  | ─ |  |  |  | 32 |  |  | ─ |  |  |  | 5,862 |
Net income |  |  | 2,281 |  |  |  | 568 |  |  |  | 41,285 |  |  |  | 8,506 |
Loss (income) attributable to noncontrolling interests: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Continuing operations |  |  | 2,836 |  |  |  | 6,740 |  |  |  | (18,240 | ) |  |  | 21,101 |
Discontinued operations |  | ─ |  |  |  | (1 | ) |  | ─ |  |  |  | (4,866 | )
Net loss (income) attributable to noncontrolling interests |  |  | 2,836 |  |  |  | 6,739 |  |  |  | (18,240 | ) |  |  | 16,235 |
Net income attributable to Common Shareholders |  | $ | 5,117 |  |  | $ | 7,307 |  |  | $ | 23,045 |  |  | $ | 24,741 |
Basic Earnings per Share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations |  | $ | 0.13 |  |  | $ | 0.18 |  |  | $ | 0.57 |  |  | $ | 0.63 |
Income from discontinued operations |  | ─ |  |  | ─ |  |  | ─ |  |  |  | 0.03 |
Basic earnings per share |  | $ | 0.13 |  |  | $ | 0.18 |  |  | $ | 0.57 |  |  | $ | 0.66 |
Diluted Earnings per Share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations |  | $ | 0.13 |  |  | $ | 0.18 |  |  | $ | 0.57 |  |  | $ | 0.63 |
Income from discontinued operations |  | ─ |  |  | ─ |  |  | ─ |  |  |  | 0.03 |
Diluted earnings per share |  | $ | 0.13 |  |  | $ | 0.18 |  |  | $ | 0.57 |  |  | $ | 0.66 |

See accompanying notes
2

ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(unaudited)

|  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  | Additional |  |  | Other |  |  |  |  |  | Total |  |  |  |  |  |  |
|  | Common Shares |  |  | Paid-in |  |  | Comprehensive |  |  | Retained |  |  | Shareholders’ |  |  | Noncontrolling |  |  | Total |
(dollars in thousands, except per share amounts) |  | Shares |  |  | Amount |  |  | Capital |  |  | Loss |  |  | Earnings |  |  | Equity |  |  | Interests |  |  | Equity |
Balance at December 31, 2009 |  | 39,787 |  | $ | 40 |  | $ | 299,014 |  | $ | (2,994 | ) | $ | 16,125 |  | $ | 312,185 |  | $ | 220,292 |  | $ | 532,477 |
Conversion of 358,967 OP Units to Common |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Shares by limited partners of the Operating |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Partnership |  | 359 |  |  | - |  |  | 3,179 |  |  | - |  |  | - |  |  | 3,179 |  |  | (3,179 | ) |  | - |
Dividends declared ($0.54 per Common Share) |  | - |  |  | - |  |  | - |  |  | - |  |  | (21,721 | ) |  | (21,721 | ) |  | (553 | ) |  | (22,274 | )
Employee Restricted Share awards |  | 133 |  |  | - |  |  | 1,561 |  |  | - |  |  | - |  |  | 1,561 |  |  | 1,333 |  |  | 2,894 |
Common Shares issued under Employee Share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase Plan |  | 5 |  |  | - |  |  | 75 |  |  | - |  |  | - |  |  | 75 |  |  | - |  |  | 75 |
Issuance of Common Shares to Trustees |  | 13 |  |  | - |  |  | 228 |  |  | - |  |  | - |  |  | 228 |  |  | - |  |  | 228 |
Exercise of Trustees options |  | 7 |  |  | - |  |  | 101 |  |  | - |  |  | - |  |  | 101 |  |  | - |  |  | 101 |
Employee Restricted Shares cancelled |  | (57 | ) |  | - |  |  | (966 | ) |  | - |  |  | - |  |  | (966 | ) |  | - |  |  | (966 | )
Noncontrolling interest distributions |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (856 | ) |  | (856 | )
Noncontrolling interest contributions |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 21,076 |  |  | 21,076 |
|  | 40,247 |  |  | 40 |  |  | 303,192 |  |  | (2,994 | ) |  | (5,596 | ) |  | 294,642 |  |  | 238,113 |  |  | 532,755 |
Comprehensive income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | - |  |  | - |  |  | - |  |  | - |  |  | 23,045 |  |  | 23,045 |  |  | 18,240 |  |  | 41,285 |
Unrealized loss on valuation of swap agreements |  | - |  |  | - |  |  | - |  |  | (2,263 | ) |  | - |  |  | (2,263 | ) |  | (73 | ) |  | (2,336 | )
Reclassification of realized interest on swap agreements |  | - |  |  | - |  |  | - |  |  | 1,891 |  |  | - |  |  | 1,891 |  |  | 245 |  |  | 2,136 |
Total comprehensive income |  | - |  |  | - |  |  | - |  |  | (372 | ) |  | 23,045 |  |  | 22,673 |  |  | 18,412 |  |  | 41,085 |
Balance at September 30, 2010 |  | 40,247 |  | $ | 40 |  | $ | 303,192 |  | $ | (3,366 | ) | $ | 17,449 |  | $ | 317,315 |  | $ | 256,525 |  | $ | 573,840 |

Balance at December 31, 2008 |  | 32,357 |  | $ | 32 |  | $ | 218,527 |  | $ | (4,508 | ) | $ | 13,671 |  | $ | 227,722 |  | $ | 214,506 |  | $ | 442,228 |
Dividends declared ($0.57 per Common Share) |  | - |  |  | - |  |  | - |  |  | - |  |  | (21,491 | ) |  | (21,491 | ) |  | (607 | ) |  | (22,098 | )
Issuance of Common Shares |  | 5,750 |  |  | 6 |  |  | 65,216 |  |  | - |  |  | - |  |  | 65,222 |  |  | - |  |  | 65,222 |
Issuance of Common Shares through special dividend |  | 1,287 |  |  | 2 |  |  | 16,190 |  |  | - |  |  | - |  |  | 16,192 |  |  | - |  |  | 16,192 |
Employee Restricted Share awards |  | 443 |  |  | - |  |  | 2,289 |  |  | - |  |  | - |  |  | 2,289 |  |  | 667 |  |  | 2,956 |
Common Shares issued under Employee Share |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Purchase Plan |  | 7 |  |  | - |  |  | 80 |  |  | - |  |  | - |  |  | 80 |  |  | - |  |  | 80 |
Issuance of Common Shares to Trustees |  | 25 |  |  | - |  |  | 603 |  |  | - |  |  | - |  |  | 603 |  |  | - |  |  | 603 |
Employee exercise of options to purchase common shares |  | 8 |  |  | - |  |  | 69 |  |  | - |  |  | - |  |  | 69 |  |  | - |  |  | 69 |
Employee Restricted Shares cancelled |  | (191 | ) |  |  |  |  | (2,715 | ) |  | - |  |  | - |  |  | (2,715 | ) |  | - |  |  | (2,715 | )
Conversion options on Convertible Notes purchased |  | - |  |  | - |  |  | (840 | ) |  | - |  |  | - |  |  | (840 | ) |  | - |  |  | (840 | )
Noncontrolling interest distributions |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | (915 | ) |  | (915 | )
Noncontrolling interest contributions |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 7,200 |  |  | 7,200 |
|  | 39,686 |  |  | 40 |  |  | 299,419 |  |  | (4,508 | ) |  | (7,820 | ) |  | 287,131 |  |  | 220,851 |  |  | 507,982 |
Comprehensive income (loss): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) |  | - |  |  | - |  |  | - |  |  | - |  |  | 24,741 |  |  | 24,741 |  |  | (16,235 | ) |  | 8,506 |
Unrealized loss on valuation of swap agreements |  | - |  |  | - |  |  | - |  |  | (815 | ) |  | - |  |  | (815 | ) |  | (108 | ) |  | (923 | )
Reclassification of realized interest on swap agreements |  | - |  |  | - |  |  | - |  |  | 1,905 |  |  | - |  |  | 1,905 |  |  | 222 |  |  | 2,127 |
Total comprehensive income (loss) |  | - |  |  | - |  |  | - |  |  | 1,090 |  |  | 24,741 |  |  | 25,831 |  |  | (16,121 | ) |  | 9,710 |
Balance at September 30, 2009 |  | 39,686 |  | $ | 40 |  | $ | 299,419 |  | $ | (3,418 | ) | $ | 16,921 |  | $ | 312,962 |  | $ | 204,730 |  | $ | 517,692 |

See accompanying notes
3

ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(unaudited)

(dollars in thousands) |  | Nine months ended September 30, |
|  | 2010 |  |  | 2009 |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |
Net income |  | $ | 41,285 |  |  | $ | 8,506 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 28,546 |  |  |  | 27,437 |
Gain on bargain purchase |  |  | (33,805 | ) |  |  | - |
Gain on sale of property |  |  | - |  |  |  | (5,637 | )
Gain on debt extinguishment |  |  | - |  |  |  | (7,057 | )
Non-cash accretion of notes receivable |  |  | (4,513 | ) |  |  | (3,914 | )
Share compensation expense |  |  | 3,121 |  |  |  | 3,045 |
Equity in (earnings) losses of unconsolidated affiliates |  |  | (610 | ) |  |  | 3,451 |
Impairment of investment in unconsolidated affiliate |  | - |  |  |  | 3,655 |
Other, net |  |  | 3,995 |  |  |  | 12,951 |
Changes in assets and liabilities |  |  |  |  |  |  |  |
Cash in escrow |  |  | (20,977 | ) |  |  | (2,103 | )
Rents receivable, net |  |  | (2,891 | ) |  |  | (5,818 | )
Prepaid expenses and other assets, net |  |  | 1,443 |  |  |  | 8,507 |
Accounts payable and accrued expenses |  |  | 5,285 |  |  |  | (4,971 | )
Other liabilities |  |  | 1,713 |  |  |  | 1,062 |
Net cash provided by operating activities |  |  | 22,592 |  |  |  | 39,114 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |  |  |  |
Investment in real estate |  |  | (60,552 | ) |  |  | (112,913 | )
Deferred acquisition and leasing costs |  |  | (2,442 | ) |  |  | (11,654 | )
Investments in and advances to unconsolidated affiliates |  |  | (2,915 | ) |  |  | (5,137 | )
Return of capital from unconsolidated affiliates |  |  | 753 |  |  |  | 1,798 |
Repayments of notes receivable |  |  | 42,011 |  |  |  | 8,831 |
Increase in notes receivable |  |  | - |  |  |  | (756 | )
Proceeds from sale of property |  |  | - |  |  |  | 9,481 |
Net cash used in investing activities |  |  | (23,145 | ) |  |  | (110,350 | )

4

ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
(unaudited)

(dollars in thousands) |  | Nine months ended September 30, |
|  | 2010 |  |  | 2009 |
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |  |
Principal payments on mortgage notes |  |  | (33,698 | ) |  |  | (150,357 | )
Proceeds received on mortgage notes |  |  | 58,914 |  |  |  | 255,065 |
Redemption of notes payable |  |  | - |  |  |  | (46,736 | )
Increase in deferred financing and other costs |  |  | (4,973 | ) |  |  | (480 | )
Capital contributions from noncontrolling interests |  |  | 21,076 |  |  |  | 7,200 |
Distributions to noncontrolling interests |  |  | (1,426 | ) |  |  | (1,979 | )
Dividends paid to Common Shareholders |  |  | (21,655 | ) |  |  | (22,993 | )
Proceeds from issuance of Common Shares, net of issuance costs |  |  | - |  |  |  | 65,222 |
Repurchase and cancellation of Common Shares |  |  | (966 | ) |  |  | (2,715 | )
Common Shares issued under Employee Share Purchase Plan |  |  | 75 |  |  |  | 80 |
Exercise of options to purchase Common Shares |  |  | 101 |  |  |  | 69 |
Net cash provided by financing activities |  |  | 17,448 |  |  |  | 102,376 |
Increase in cash and cash equivalents |  |  | 16,895 |  |  |  | 31,140 |
Cash and cash equivalents, beginning of period |  |  | 93,808 |  |  |  | 86,691 |
Cash and cash equivalents, end of period |  | $ | 110,703 |  |  | $ | 117,831 |
Supplemental disclosure of cash flow information |  |  |  |  |  |  |  |
Cash paid during the period for interest, including capitalized interest of $1,592 and $3,005, respectively |  | $ | 24,981 |  |  | $ | 24,597 |
Cash paid for income taxes |  | $ | 1,184 |  |  | $ | 496 |
Dividends paid through the issuance of Common Shares |  | $ | - |  |  | $ | 16,192 |
Acquisition of interest in unconsolidated affiliate: |  |  |  |  |  |  |  |
Real estate, net |  | $ | (108,000 | ) |  | $ | - |
Assumption of mortgage debt |  |  | 25,990 |  |  |  | - |
Gain on bargain purchase |  |  | 33,805 |  |  |  | - |
Other assets and liabilities |  |  | 7,532 |  |  |  | - |
Investment in unconsolidated affiliates |  |  | 37,824 |  |  |  | - |
Cash included in investment in real estate |  | $ | (2,849 | ) |  | $ | - |

See accompanying notes
5

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Business and Organization
Acadia Realty Trust (the “Trust”) and subsidiaries (collectively, the “Company”) is a fully-integrated, self-managed and self-administered equity real estate investment trust (“REIT”) focused primarily on the ownership, acquisition, redevelopment and management of retail properties, including neighborhood and community shopping centers and mixed-use properties with retail components.
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 a controlling interest. As of September 30, 2010, the Trust controlled approximately 99% of the Operating Partnership as the sole general partner. As the general partner, the Trust is entitled to share, in proportion to its percentage interest, in the cash distributions and profits and losses of the Operating Partnership. The limited partners 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 or Preferred OP Units”). Limited partners holding Common OP Units are generally entitled to exchange their units on a one-for-one basis for common shares of beneficial interest of the Trust (“Common Shares”).
As of September 30, 2010, the Company has ownership interests in 34 properties within its core portfolio (“Core Portfolio”) and 44 properties within its three opportunity funds, Acadia Strategic Opportunity Fund I, L.P. (“Fund I”), Acadia Strategic Opportunity Fund II, LLC (“Fund II”) and Acadia Strategic Opportunity Fund III, LLC (“Fund III” and together with Fund I and Fund II, the “Opportunity Funds”). The 78 properties consist of commercial properties, primarily neighborhood and community shopping centers, self-storage and mixed-use properties with a retail component. In addition, the Company also invests in operating companies through Acadia Mervyn Investors I, LLC (“Mervyns I”) and Acadia Mervyn Investors II, LLC (“Mervyns II”) or Fund II, all on a non-recourse basis. These investments comprise and are referred to as the Company’s Retailer Controlled Property initiative (“RCP Venture”). The Operating Partnership has the following equity interests in the Opportunity Funds, Mervyns I and Mervyns II:

| Entity | Equity Interest Held By Operating Partnership |
| Fund I and Mervyns I | 22.2% |
| Fund II and Mervyns II | 20.0% |
| Fund III | 19.9% |

In addition, with respect to each of the Opportunity Funds, Mervyns I and Mervyns II, the Operating Partnership is entitled to a profit participation in excess of its equity interest percentage based on certain investment return thresholds (“Promote”).
Basis of Presentation
The consolidated financial statements include the consolidated accounts of the Company and its investments in partnerships and limited liability companies in which the Company is presumed to have control in accordance with the consolidation guidance of the Financial Accounting Statements Board (“FASB”) Accounting Standards Codification (“ASC”). Investments in entities for which the Company has the ability to exercise significant influence but does not have financial or operating control, are accounted for under the equity method of accounting. Accordingly, the Company’s share of the net earnings (or losses) of these entities are included in consolidated net income under the caption, Equity in Earnings (Losses) of Unconsolidated Affiliates. Investments in entities for which the Company does not have the ability to exercise any influence are accounted for under the cost method.
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. The information furnished in the accompanying consolidated financial statements reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of the aforementioned consolidated financial statements for the interim periods. These consolidated financial statements should be read in conjunction with the Company’s 2009 Annual Report on Form 10-K, as filed with the SEC on March 1, 2010.
6

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION (continued)
Recent Accounting Pronouncements
In June 2009, the FASB issued a new accounting standard, which provided certain changes to the evaluation of a variable interest entity (“VIE”) including requiring a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE, continuous assessments of whether an enterprise is the primary beneficiary of a VIE and enhanced disclosures about an enterprise’s involvement with a VIE. Under the new standard, the primary beneficiary has both the power to direct the activities that most significantly impact economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The adoption of the standard on January 1, 2010 did not have a material impact on the Company’s consolidated financial statements.
In January 2010, the FASB issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about Fair Value Measurements,” which provides for new disclosures, as well as clarification of existing disclosures on fair value measurements. The adoption of the standard on January 1, 2010 did not have an impact on the Company’s financial position and results of operations.
In February 2010, the FASB issued ASU No. 2010-09 “Subsequent Events (ASC Topic 855) Amendments to Certain Recognition and Disclosure Requirements,” which requires an entity that is an SEC filer to evaluate subsequent events through the date that the financial statements are issued and removes the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated. The adoption did not have an impact on the Company’s financial position and results of operations.
2. EARNINGS PER COMMON SHARE
Basic earnings per Common Share is computed using net income attributable to common shareholders and the weighted average Common Shares outstanding. Diluted earnings per Common Share reflect the conversion of obligations and the assumed exercises of securities including the effects of awards issuable under the Company’s Share Incentive Plans. The computation of basic and diluted earnings per Common Share from continuing operations for the periods indicated are as follows:

|  | Three months ended September 30, |  |  | Nine months ended September 30, |
(dollars in thousands, except per share amounts) |  | 2010 |  |  | 2009 |  |  | 2010 |  |  | 2009 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Income from continuing operations attributable to Common Shareholders |  | $ | 5,117 |  |  | $ | 7,276 |  |  | $ | 23,045 |  |  | $ | 23,745 |
Effect of dilutive securities: |  | ─ |  |  | ─ |  |  | ─ |  |  | ─ |
Preferred OP Unit distributions |  | ─ |  |  |  | 5 |  |  |  | 14 |  |  |  | 14 |
Numerator for diluted earnings per Common Share |  | $ | 5,117 |  |  | $ | 7,281 |  |  | $ | 23,059 |  |  | $ | 23,759 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average shares for basic earnings per share |  |  | 40,169 |  |  |  | 39,686 |  |  |  | 40,096 |  |  |  | 37,415 |
Effect of dilutive securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Employee share options |  |  | 262 |  |  |  | 257 |  |  |  | 214 |  |  |  | 189 |
Convertible Preferred OP Units |  | ─ |  |  |  | 25 |  |  |  | 25 |  |  |  | 25 |
Dilutive potential Common Shares |  |  | 262 |  |  |  | 282 |  |  |  | 239 |  |  |  | 214 |
Denominator for diluted earnings per share |  |  | 40,431 |  |  |  | 39,968 |  |  |  | 40,335 |  |  |  | 37,629 |
Basic earnings per Common Share from continuing operations attributable to Common Shareholders |  | $ | 0.13 |  |  | $ | 0.18 |  |  | $ | 0.57 |  |  | $ | 0.63 |
Diluted earnings per Common Share from continuing operations attributable to Common Shareholders |  | $ | 0.13 |  |  | $ | 0.18 |  |  | $ | 0.57 |  |  | $ | 0.63 |

The weighted average shares used in the computation of diluted earnings per share include unvested restricted Common Shares (“Restricted Shares”) and restricted OP units (“LTIP Units”) (Note 13) that are entitled to receive dividend equivalent payments. The effect of the conversion of Common OP Units is not reflected in the above table, as they are exchangeable for Common Shares on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in subsidiaries 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. The conversion of the convertible notes payable (Note 9) is not reflected in the table above as such conversion, based on the current market price of the Common Shares, would be settled with cash.
7

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. EARNINGS PER COMMON SHARE, continued
The effect of the assumed conversion of 188 Series A Preferred OP Units into 25,067 Series A Preferred OP Units to Common Shares would be anti-dilutive for the three months ended September 30, 2010 and they are not included in the table. The effect of the assumed conversion of 188 Series A Preferred OP Units into 25,067 Common Shares is dilutive for the three months ended September 30, 2009 and nine months ended September 30, 2010 and September 30, 2009 and, accordingly, they are included in the table.
3. NONCONTROLLING INTERESTS
Noncontrolling interests represent the portion of equity that the Company does not own in entities that it consolidates. Such noncontrolling interests are reported on the Consolidated Balance Sheets within equity, separately from the Company’s equity.
Noncontrolling interests include third party interests in the Company’s Opportunity Funds and other entities. It also include interests in the Operating Partnership which represent (i) the limited partners’ 281,942 and 626,606 Common OP Units at September 30, 2010 and December 31, 2009, respectively, (ii) 188 Series A Preferred OP Units at September 30, 2010 and December 31, 2009, respectively, and (iii) 646,534 and 393,909 LTIP Units at September 30, 2010 and December 31, 2009, respectively.
4. ACQUISITIONS AND DISPOSITION OF PROPERTIES AND DISCONTINUED OPERATIONS
Acquisitions
Prior to June 30, 2010, the Company, through Fund II, and an unaffiliated joint venture partner, California Urban Investment Partners, LLC (“CUIP”) owned a leasehold interest in CityPoint, a mixed-use, redevelopment project located in downtown Brooklyn, New York. Fund II owned a 75% interest in the retail component, a 50% interest in the office component and no interest in the residential component of CityPoint. CUIP owned the remaining interests in the retail and office components and 100% of the residential component of the project. Accordingly, Fund II’s investment represented 24.75% of the overall original acquisition cost and subsequent carry and pre-development costs and was accounted for using the equity method.
On June 30, 2010, Fund II acquired all of CUIP’s interest in CityPoint for $9.2 million (the “Transaction”), consisting of a current payment of $2.0 million and deferred payments, potentially through 2020, aggregating $7.2 million. Fund II also assumed CUIP’s share of the first mortgage debt, $19.6 million.
The Transaction was a business combination achieved in stages, and as a result, Fund II was required to report its entire investment in CityPoint at fair market value. A June 30, 2010 third-party appraisal valued CityPoint at $108 million which resulted in Fund II recording a non-cash gain on bargain purchase of approximately $33.8 million. The Operating Partnership’s share of this gain, net of the noncontrolling interests’ share, totaled $6.3 million.
As a result of the Transaction, the Company changed its method of accounting for CityPoint from the equity method and now consolidates CityPoint in its consolidated financial statements. As CityPoint is currently in the redevelopment stage, there are no revenues or earnings from CityPoint included in the Company’s Consolidated Statements of Income for the three and nine months ended September 30, 2010 and 2009.
Discontinued Operations
The Company reports properties held-for-sale and properties sold during the periods as discontinued operations. The results of operations and Statements of Operations of discontinued operations are reflected as a separate component within the accompanying Consolidated Financial Statements for all periods presented.
8

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. ACQUISITIONS AND DISPOSITION OF PROPERTIES AND DISCONTINUED OPERATIONS, continued
Discontinued Operations, continued
There were no properties sold during the nine months ended September 30, 2010. During 2009, the Company sold Blackman Plaza and six of the remaining Fund I investments in 24 Kroger and Safeway supermarket locations. The combined results of operations of the properties classified as discontinued operations are summarized as follows:

Statements Of Operations |  | Three months ended September 30, |  |  | Nine months ended September 30, |
(dollars in thousands) |  | 2009 |  |  | 2009 |
Total revenues |  | $ | 120 |  |  | $ | 494 |
Total expenses |  |  | 88 |  |  |  | 269 |
Operating income |  |  | 32 |  |  |  | 225 |
Gain on sale of property |  | ─ |  |  |  | 5,637 |
Income from discontinued operations |  |  | 32 |  |  |  | 5,862 |
Income from discontinued operations attributable to noncontrolling interests in subsidiaries |  |  | (1 | ) |  |  | (4,866 | )
Income from discontinued operations attributable to Common Shareholders |  | $ | 31 |  |  | $ | 996 |

5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES
Core Portfolio
Brandywine Portfolio
The Company owns a 22.2% interest in an approximately one million square foot retail portfolio (the “Brandywine Portfolio”) located in Wilmington, Delaware that is accounted for under the equity method.
Crossroads
The Company owns a 49% interest in the Crossroads Joint Venture and Crossroads II (collectively, “Crossroads”), which own a 311,000 square foot shopping center located in White Plains, New York that is accounted for under the equity method.
Opportunity Funds
RCP Venture
During January of 2004, the Company along with Klaff Realty, LP (“Klaff”) and Lubert-Adler Management, Inc., formed an investment group, the RCP Venture, for the purpose of making investments in surplus or underutilized properties owned by retailers. The RCP Venture is neither a single entity nor a specific investment. Any member of this group has the option of participating, or not, in any individual investment and each individual investment has been made on a stand-alone basis through a separate limited liability company (“LLC”). These investments have been made through different investment vehicles with different affiliated and unaffiliated investors and different economics to the Company. The Company has made these investments through its subsidiaries, Mervyns I, Mervyns II and Fund II, (together the “Acadia Investors”), all on a non-recourse basis. Through September 30, 2010, the Acadia Investors have made investments in Mervyns Department Stores (“Mervyns”) and Albertson’s including additional investments in locations that are separate from these original investments (“Add-On Investments”). Additionally, they have invested in Shopko, Marsh and Rex Stores Corporation (collectively “Other RCP Investments”).
9

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES, continued
RCP Venture, continued
The Acadia Investors have non-controlling interests in the individual investee LLC’s as follows:

|  |  | Acadia Investors
|  |  | Ownership % in:
|  | Acadia Investors | Investee | Underlying
Investment | Investee LLC | Entity | LLC | entity(s)
Mervyns | KLA/Mervyn’s, L.L.C. | Mervyns I and Mervyns II | 10.5% | 5.8%
Mervyns Add-On investments | KLA/Mervyn’s, L.L.C. | Mervyns I and Mervyns II | 10.5% | 5.8%
Albertson’s | KLA A Markets, LLC | Mervyns II | 18.9% | 5.7%
Albertson’s Add-On investments | KLA A Markets, LLC | Mervyns II | 20.0% | 6.0%
Shopko | KLA-Shopko, LLC | Fund II | 20.0% | 2.0%
Marsh and Add-On investments | KLA Marsh, LLC | Fund II | 20.0% | 3.3%
Rex stores | KLAC Rex Venture, LLC | Mervyns II | 13.3% | 13.3%

The Company accounts for the original investments in Mervyns and Albertson’s under the equity method of accounting as the Company has the ability to exercise significant influence, but does not have financial or operating control.
The Company accounts for the Add-On Investments and Other RCP Investments under the cost method. Due to its minor ownership interest based on the size of the investments as well as the terms of the underlying operating agreements, the Company has no influence over such entities operating and financial policies.
The following table summarizes activity related to the RCP Venture investments from inception through September 30, 2010:

|  |  |  |  |  |  |  |  |  |  | Operating Partnership Share |
Investment |  | Year Acquired |  |  | Invested Capital and Advances |  |  | Distributions |  |  | Invested Capital and Advances |  |  | Distributions |
Mervyns |  | 2004 |  |  | $ | 26,058 |  |  | $ | 45,966 |  |  | $ | 4,901 |  |  | $ | 11,251 |
Mervyns Add-On investments |  | 2005/2008 |  |  |  | 6,517 |  |  |  | 1,703 |  |  |  | 1,046 |  |  |  | 283 |
Albertson’s |  | 2006 |  |  |  | 20,717 |  |  |  | 65,969 |  |  |  | 4,239 |  |  |  | 13,193 |
Albertson’s Add-On investments |  | 2006/2007 |  |  |  | 2,412 |  |  |  | 1,215 |  |  |  | 387 |  |  |  | 243 |
Shopko |  | 2006 |  |  |  | 1,108 |  |  |  | 1,475 |  |  |  | 222 |  |  |  | 295 |
Marsh and Add-on investments |  | 2006/2008 |  |  |  | 2,667 |  |  |  | 2,639 |  |  |  | 533 |  |  |  | 528 |
Rex Stores |  | 2007 |  |  |  | 2,701 |  |  |  | 840 |  |  |  | 535 |  |  |  | 168 |
|  |  |  |  |  | $ | 62,180 |  |  | $ | 119,807 |  |  | $ | 11,863 |  |  | $ | 25,961 |

Other Opportunity Fund Investments
Fund I Investments
Fund I owned a 50% interest in the Sterling Heights Shopping Center, which was accounted for under the equity method of accounting. During the three months ended September 30, 2009, Fund I recorded an impairment reserve of $3.7 million related to this investment. On March 25, 2010, the Sterling Heights Shopping Center was sold for $2.3 million. The proceeds from this sale together with the balance of Fund I’s recourse obligation of $0.6 million were used to fully liquidate the outstanding mortgage loan obligation.
Fund II Investments
Fund II had a 24.75% interest in CityPoint, a redevelopment project located in downtown Brooklyn, NY, which was accounted for under the equity method. On June 30, 2010, Fund II acquired the remaining interests in the project from its unaffiliated partner, as discussed in Note 4 and, as a result, now consolidates the CityPoint investment.
Fund III Investments
During June 2010, Fund III, together with an unaffiliated partner, invested in an entity for the purpose of providing management services to owners of self-storage properties, including the 14 locations currently owned through Fund II and Fund III. This entity was determined to be a variable interest entity for which the Company was determined not to be the primary beneficiary. As such, the Company accounts for this investment under the equity method.
10

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)
Other Opportunity Fund Investments, continued
Summary of Investments in Unconsolidated Affiliates
The following combined/condensed Balance Sheets and Statements of Operations, in each period, summarize the financial information of the Company’s investments in unconsolidated affiliates.

(dollars in thousands) |  | September 30, 2010 |  |  | December 31, 2009 |
Combined/Condensed Balance Sheets |  |  |  |  |  |
Assets: |  |  |  |  |  |
Rental property, net |  | $ | 133,461 |  |  | $ | 142,690 |
Real estate under development |  | ─ |  |  |  | 100,346 |
Investment in unconsolidated affiliates |  |  | 193,421 |  |  |  | 209,407 |
Other assets |  |  | 17,385 |  |  |  | 20,951 |
Total assets |  | $ | 344,267 |  |  | $ | 473,394 |
Liabilities and partners’ equity |  |  |  |  |  |  |  |
Mortgage note payable |  | $ | 227,805 |  |  | $ | 258,685 |
Other liabilities |  |  | 8,215 |  |  |  | 12,085 |
Partners’ equity |  |  | 108,247 |  |  |  | 202,624 |
Total liabilities and partners’ equity |  | $ | 344,267 |  |  | $ | 473,394 |
Company’s investment in and advances to unconsolidated affiliates |  | $ | 16,095 |  |  | $ | 51,712 |
Share of distributions in excess of share of income and investments in unconsolidated affiliates |  | $ | 20,802 |  |  | $ | 20,589 |

|  | Three Months Ended |  |  | Nine Months Ended |
(dollars in thousands) |  | September 30, 2010 |  |  | September 30, 2009 |  |  | September 30, 2010 |  |  | September 30, 2009 |
Combined/Condensed Statements of Operations |  |  |  |  |  |  |  |  |  |  |  |
Total revenues |  | $ | 7,317 |  |  | $ | 7,130 |  |  | $ | 21,787 |  |  | $ | 22,075 |
Operating and other expenses |  |  | 2,550 |  |  |  | 2,019 |  |  |  | 7,158 |  |  |  | 6,883 |
Interest expense |  |  | 3,392 |  |  |  | 3,480 |  |  |  | 10,107 |  |  |  | 10,332 |
Equity in (losses) earnings of unconsolidated affiliates |  |  | (681 | ) |  |  | (2,263 | ) |  |  | 2,083 |  |  |  | (36,527 | )
Depreciation and amortization |  |  | 1,057 |  |  |  | 1,732 |  |  |  | 3,745 |  |  |  | 3,964 |
Loss on sale of property, net |  | ─ |  |  | ─ |  |  |  | (2,957 | ) |  |  | (390 | )
Net loss |  | $ | (363 | ) |  | $ | (2,364 | ) |  | $ | (97 | ) |  | $ | (36,021 | )
Company’s share of net income (loss) |  | $ | 241 |  |  | $ | (96 | ) |  | $ | 904 |  |  | $ | (3,160 | )
Impairment Reserve |  | ─ |  |  |  | (3,655 | ) |  |  | – |  |  |  | (3,655 | )
Amortization of excess investment |  |  | (98 | ) |  |  | (97 | ) |  |  | (294 | ) |  |  | (291 | )
Company’s share of net income (loss) |  | $ | 143 |  |  | $ | (3,848 | ) |  | $ | 610 |  |  | $ | (7,106 | )

11

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. NOTES RECEIVABLE
At September 30, 2010, the Company’s notes receivable, net, consisted of the following:

Description | Effective interest rate |  | Maturity date | First Priority liens |  | Net carrying amount of notes receivable |  | Extension options
(dollars in thousands) |  |  |  |  |  |  |  |
72nd Street |  | 20.9% |  |  | 7/2011 | $ | 185,000 |  | $ | 45,196 |  | 1 x 1 year
Georgetown |  | 10.2% |  |  | 11/2010 |  | 9,596 |  |  | 8,000 |  | 2 x 1 year
Mezzanine Loan |  | 14.5% |  |  | 12/2010 | ─ |  |  | 8,585 |  | 1 x 6 months
Zero coupon Loan |  | 24.0% |  |  | 1/2016 |  | 166,200 |  |  | 3,153 |  | ─
Mezzanine Loan |  | 13.0% |  |  | 9/2011 | ─ |  |  | 2,980 |  | ─
First Mortgage Loan |  | 10.8% |  |  | 9/2011 | ─ |  |  | 10,000 |  | ─
Individually less | 10% to |  | Demand note |  |  |  |  |  |  |
than 3% |  | 17.5% |  | to 1/2017 |  | 106,089 |  |  | 9,686 |  | ─
Total |  |  |  |  |  |  |  |  | $ | 87,600 |  |

During September 2010, one of the Company’s Georgetown, Washington D.C. mezzanine investments, which was secured by a portfolio of 18 properties, was fully liquidated. The Company received $40.0 million of principal along with $9.4 million of accrued interest.
7. DERIVATIVE FINANCIAL INSTRUMENTS
As of September 30, 2010, the Company’s derivative financial instruments consisted of seven interest rate swaps with an aggregate notional value of $77.3 million, which fix interest at rates ranging from 0.5% to 5.1% and mature between October 2010 and November 2012. The Company also has one derivative financial instrument with a notional value of $28.9 million which caps LIBOR at 6% and matures in April 2013. The fair value of the net derivative liability of these instruments, which is included in other liabilities in the Consolidated Balance Sheets, totals $3.4 million and $3.3 million at September 30, 2010 and December 31, 2009, respectively. The notional value does not represent exposure to credit, interest rate or market risks.
These derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on variable rate mortgage debt. Such instruments are reported at the fair value reflected above. As of September 30, 2010 and 2009, unrealized losses totaling $3.4 million, respectively, were reflected in accumulated other comprehensive loss.
As of September 30, 2010 and 2009, no derivatives were designated as fair value hedges, hedges of net investments in foreign operations or considered to be ineffective. Additionally, the Company does not use derivatives for trading or speculative purposes.
8. MORTGAGE LOANS
The Company completed the following transactions related to mortgage loans and credit facilities during the nine months ended September 30, 2010:
i) During January 2010, the Company closed on a $48.0 million construction loan that bears interest at the greater of (a) LIBOR plus 400 basis points or (b) an interest rate floor of 6.50% which matures on January 12, 2012. As of September 30, 2010, $19.9 million was drawn on this facility.
ii) Extended the Fund II subscription line of credit, which is collateralized by a pledge of investors’ unfunded capital commitments, which matured on March 1, 2010, to March 1, 2011 and adjusted the interest rate from LIBOR plus 250 basis points to LIBOR plus 325 basis points. In connection with the extension, the Company made an $8.2 million payment on the outstanding $48.2 million line of credit. The line of credit’s maximum capacity was reduced to $40.0 million.
iii) During February of 2010, the Company paid off an outstanding line of credit balance of $2.0 million, which was collateralized by a property and scheduled to mature on March 29, 2010 and terminated the line of credit.
iv) Also during February of 2010, the Company made a $15.0 million payment on an outstanding $30.0 million credit facility collateralized by six properties.
v) During May of 2010, the Company made a $17.0 million draw on the Fund III subscription line of credit. As of September 30, 2010, the total outstanding amount on this line of credit was $156.5 million.
12

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. MORTGAGE LOANS, continued
vi) Also during May of 2010, the Company borrowed an additional $2.0 million on an existing mortgage loan collateralized by a property.
vii) During July 2010, the Company amended and extended a $30.0 million loan, collateralized by a Fund II property located on 161st Street in the Bronx, NY. The agreement required a $1.1 million payment on the outstanding principal balance and extended the maturity date to April 1, 2013. The interest rate has been adjusted retroactively to LIBOR plus 400 basis points for the period April 1, 2010 through March 31, 2011, LIBOR plus 550 basis points for the period April 1, 2011 through March 31, 2012, and LIBOR plus 600 basis points for the period April 1, 2012 through March 31, 2013.
viii) During July of 2010, the Company closed on a $20.0 million bond financing that bears interest at a fixed rate of 7.25% that is due November 1, 2042 and has a mandatory put date of November 1, 2014.
ix) During August of 2010, the Company amended and extended the maturity date of a $25.9 million loan that was scheduled to mature during August of 2010. In connection with the release of a portion of the collateral for this loan, the Company was required to pay down the principal by $5.3 million. The amendment provided for a three year extension of the loan maturity date to August 12, 2013 with two one-year extension options.
x) Also during August of 2010, the Company completed an amendment of a $31.7 million construction loan. The servicer of this loan had previously alleged that non-monetary defaults had occurred. The amendment provides for premium-free pre-payment of the loan to the extent that the lender is not in the process of selling the loan. The servicer on behalf of the lender has agreed to dismiss all allegations of default. The loan continues to bear interest at 7.38% and has a maturity date of January 1, 2020.
xi) During September of 2010, the Company amended and extended the maturity date of a $10.5 million loan that was scheduled to mature during September 2010. The amendment required a $0.5 million principal pay down and provided for a one year extension of the loan maturity date to September 1, 2011 with one twelve month extension option and bears interest at LIBOR plus 325 basis points.
xii) During June 2009, the servicer of one of the Company’s loans alleged that a non-monetary default had occurred on a construction loan for $11.5 million collateralized by Atlantic Avenue. The servicer contends that the Company did not substantially complete the improvements in accordance with the required completion date as defined in the loan agreement and, accordingly, did not meet the requirements for the final draw. Subsequent to September 30, 2010, the Company and the servicer on behalf of the lender have reached an agreement to amend the loan. As part of the agreement, the servicer on behalf of the lender has agreed to waive all alleged events of default. The loan continues to bear interest at 7.34% and has a maturity date of January 1, 2020.
9. CONVERTIBLE NOTES PAYABLE
In December 2006 and January 2007, the Company issued $115.0 million of convertible notes with a fixed interest rate of 3.75% due 2026 (the “Convertible Notes”). The Convertible Notes were issued at par and require interest payments semi-annually in arrears on June 15th and December 15th of each year. The Convertible Notes are unsecured obligations and rank equally with all other unsecured and unsubordinated indebtedness. The Convertible Notes have an effective interest rate of 6.03% giving effect to the accounting treatment required by ASC Topic 470-20 “Debt with Conversion and Other Options”. Holders of the Convertible Notes may require the Company to repurchase the Convertible Notes at par on December 20, 2011, December 15, 2016 and December 15, 2021. The Company deems that the Convertible Notes will mature on December 20, 2011.
The carrying amount of the equity component included in additional paid-in capital totaled $1.3 million at September 30, 2010 and $2.1 million at December 31, 2009. The additional non-cash interest expense recognized in the Consolidated Statements of Income was $0.3 million and $0.2 million for the three months ended September 30, 2010 and 2009, respectively and $0.8 million and $1.0 million for the nine months ended September 30, 2010 and 2009, respectively. The Convertible Notes if-converted value does not exceed its principal amount as of September 30, 2010 and there are no derivative transactions that were entered into in connection with the issuance of the Convertible Notes.
Through September 30, 2010, the Company has purchased $65.0 million in face amount of its Convertible Notes at an average discount of approximately 19%. The outstanding Convertible Notes face amount as of September 30, 2010 was $50.0 million.
13

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. FAIR VALUE MEASUREMENTS
The FASB’s fair value measurements and disclosure guidance requires the valuation of certain of the Company’s financial assets and liabilities, based on a three-level fair value hierarchy. Market participant assumptions obtained from sources independent of the Company are observable inputs that are classified within Levels 1 and 2 of the hierarchy, and the Company’s own assumptions about market participant assumptions are unobservable inputs classified within Level 3 of the hierarchy.
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of September 30, 2010:

(dollars in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
Liabilities |  |  |  |  |  |  |  |  |
Derivative financial instruments (Note 7) |  | $ | — |  |  | $ | 3,427 |  |  | $ | — |

Financial Instruments
Certain of the Company’s assets and liabilities meet the definition of financial instruments. Except as disclosed below, the carrying amounts of these financial instruments approximates their fair value.
The Company has determined the estimated fair values of the following financial instruments by discounting future cash flows utilizing a discount rate equivalent to the rate at which similar financial instruments would be originated at the reporting date:

|  | September 30, 2010 |  |  | December 31, 2009 |
|  |  |  |  | Estimated |  |  |  |  |  | Estimated |
|  | Carrying |  |  | Fair |  |  | Carrying |  |  | Fair |
(dollars in thousands) |  | Amount |  |  | Value |  |  | Amount |  |  | Value |
Notes Receivable and Preferred Equity Investments |  | $ | 87,600 |  |  | $ | 87,592 |  |  | $ | 125,221 |  |  | $ | 126,403 |
Mortgage Notes Payable and Convertible Notes Payable |  | $ | 832,151 |  |  | $ | 844,718 |  |  | $ | 780,197 |  |  | $ | 751,043 |

11. RELATED PARTY TRANSACTIONS
During February 2010, Klaff converted all 250,000 of its Restricted Common OP Units into 250,000 Common Shares.
The Company earns asset management, leasing, disposition, development and construction fees for providing services to an existing portfolio of retail properties and/or leasehold interests in which Klaff has an interest. Fees earned by the Company in connection with this portfolio were $0.1 million and $0.04 million for the three months ended September 30, 2010 and 2009, respectively, and $0.2 million and $0.3 million for the nine months ended September 30, 2010 and 2009, respectively.
The Company earned property management fees, legal and leasing fees from the Brandywine portfolio totaling $0.2 million and $0.1 million for the three months ended September 30, 2010 and September 30, 2009, respectively, and $0.6 million and $0.5 million for the nine months ended September 30, 2010 and 2009, respectively.
Lee Wielansky, the Lead Trustee of the Company, was paid a consulting fee of $25,000 for each of the three months ended September 30, 2010 and 2009, and $75,000 for each of the nine months ended September 30, 2010 and 2009.
12. SEGMENT REPORTING
The Company has five reportable segments: Core Portfolio, Opportunity Funds, Self-Storage Portfolio, Notes Receivable and Other. “Notes Receivable” consists of the Company’s notes receivable and preferred equity investment and related interest income. “Other” consists primarily of management fees and interest income. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates property performance primarily based on net operating income before depreciation, amortization and certain nonrecurring items. Investments in the Core Portfolio are typically held long-term. Given the contemplated finite life of the Opportunity Funds, these investments are typically held for shorter terms. Fees earned by the Company as the general partner/member of the Opportunity Funds are eliminated in the Company’s consolidated financial statements. The following tables set forth certain segment information for the Company, reclassified for discontinued operations, as of and for the three and nine months ended September 30, 2010 and 2009 (does not include unconsolidated affiliates):
14

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. SEGMENT REPORTING (continued)
Three Months Ended September 30, 2010

(dollars in thousands) |  | Core Portfolio |  |  | Opportunity Funds |  |  | Self- Storage Portfolio |  |  | Notes Receivable |  |  | Other |  |  | Amounts Eliminated in Consolidation |  |  | Total |
Revenues |  | $ | 15,243 |  |  | $ | 11,782 |  |  | $ | 6,703 |  |  | $ | 5,206 |  |  | $ | 5,441 |  |  | $ | (5,114 | ) |  | $ | 39,261 |
Property operating expenses and real estate taxes |  |  | 4,617 |  |  |  | 3,841 |  |  |  | 3,942 |  |  |  | ─ |  |  |  | ─ |  |  |  | (374 | ) |  |  | 12,026 |
Other expenses |  |  | 5,910 |  |  |  | 3,266 |  |  |  | 19 |  |  |  | ─ |  |  |  | ─ |  |  |  | (3,878 | ) |  |  | 5,317 |
Income before depreciation and amortization |  | $ | 4,716 |  |  | $ | 4,675 |  |  | $ | 2,742 |  |  | $ | 5,206 |  |  | $ | 5,441 |  |  | $ | (862 | ) |  | $ | 21,918 |
Depreciation and amortization |  | $ | 4,342 |  |  | $ | 4,547 |  |  | $ | 1,591 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (139 | ) |  | $ | 10,341 |
Interest and other finance expense |  | $ | 4,307 |  |  | $ | 3,381 |  |  | $ | 1,141 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | 8,829 |
Real estate at cost |  | $ | 480,137 |  |  | $ | 695,870 |  |  | $ | 209,956 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (12,869 | ) |  | $ | 1,373,094 |
Total assets |  | $ | 593,151 |  |  | $ | 736,523 |  |  | $ | 195,044 |  |  | $ | 87,600 |  |  | $ | ─ |  |  | $ | (121,570 | ) |  | $ | 1,490,748 |
Investment in real estate |  | $ | 1,194 |  |  | $ | 23,090 |  |  | $ | 187 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (853 | ) |  | $ | 23,618 |
Reconciliation to net income and net income attributable to Common Shareholders |  |  |  |  |  |  |  |  |  |  |  |  |
Net property income before depreciation and amortization |  |  | $ | 21,918 |
Other interest income |  |  |  | 175 |
Depreciation and amortization |  |  |  | (10,341 | )
Equity in earnings of unconsolidated affiliates |  |  |  | 143 |
Interest and other finance expense |  |  |  | (8,829 | )
Income tax provision |  |  |  | (785 | )
Net income |  |  |  | 2,281 |
Net loss attributable to noncontrolling interests |  |  |  | 2,836 |
Net income attributable to Common Shareholders |  |  | $ | 5,117 |

Three Months Ended September 30, 2009

(dollars in thousands) |  | Core Portfolio |  |  | Opportunity Funds |  |  | Self- Storage Portfolio |  |  | Notes Receivable |  |  | Other |  |  | Amounts Eliminated in Consolidation |  |  | Total |
Revenues |  | $ | 19,449 |  |  | $ | 11,697 |  |  | $ | 2,581 |  |  | $ | 4,908 |  |  | $ | 5,218 |  |  | $ | (4,958 | ) |  | $ | 38,895 |
Property operating expenses and real estate taxes |  |  | 4,640 |  |  |  | 4,047 |  |  |  | 2,585 |  |  | ─ |  |  | ─ |  |  |  | (301 | ) |  |  | 10,971 |
Other expenses |  |  | 5,875 |  |  |  | 2,551 |  |  | ─ |  |  | ─ |  |  | ─ |  |  |  | (3,147 | ) |  |  | 5,279 |
Income (loss) before depreciation and amortization |  | $ | 8,934 |  |  | $ | 5,099 |  |  | $ | (4 | ) |  | $ | 4,908 |  |  | $ | 5,218 |  |  | $ | (1,510 | ) |  | $ | 22,645 |
Depreciation and amortization |  | $ | 4,975 |  |  | $ | 4,509 |  |  | $ | 1,110 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (217 | ) |  | $ | 10,377 |
Interest and other finance expense |  | $ | 4,505 |  |  | $ | 2,022 |  |  | $ | 1,802 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | 8,329 |
Real estate at cost |  | $ | 473,667 |  |  | $ | 521,380 |  |  | $ | 208,219 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (10,760 | ) |  | $ | 1,192,506 |
Total assets |  | $ | 566,669 |  |  | $ | 612,775 |  |  | $ | 199,194 |  |  | $ | 120,001 |  |  | $ | ─ |  |  | $ | (101,272 | ) |  | $ | 1,397,367 |
Investment in real estate |  | $ | 1,101 |  |  | $ | 5,393 |  |  | $ | 1,566 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (2,951 | ) |  | $ | 5,109 |

Reconciliation to net income and net income attributable to Common Shareholders |
Net property income before depreciation and amortization |  | $ | 22,645 |
Other interest income |  |  | 161 |
Depreciation and amortization |  |  | (10,377 | )
Equity in (losses) of unconsolidated affiliates |  |  | (193 | )
Impairment of investment in unconsolidated affiliate |  |  | (3,655 | )
Interest and other finance expense |  |  | (8,329 | )
Gain on debt extinguishment |  |  | 11 |
Income tax provision |  |  | 273 |
Income from discontinued operations |  |  | 32 |
Net income |  |  | 568 |
Net loss attributable to noncontrolling interests |  |  | 6,739 |
Net income attributable to Common Shareholders |  | $ | 7,307 |

15

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. SEGMENT REPORTING (continued)
Nine Months Ended September 30, 2010

(dollars in thousands) |  | Core Portfolio |  |  | Opportunity Funds |  |  | Self- Storage Portfolio |  |  | Notes Receivable |  |  | Other |  |  | Amounts Eliminated in Consolidation |  |  | Total |
Revenues |  | $ | 46,038 |  |  | $ | 35,266 |  |  | $ | 16,016 |  |  | $ | 15,437 |  |  | $ | 15,431 |  |  | $ | (14,268 | ) |  | $ | 113,920 |
Property operating expenses and real estate taxes |  |  | 13,890 |  |  |  | 12,412 |  |  |  | 10,101 |  |  | ─ |  |  | ─ |  |  |  | (1,088 | ) |  |  | 35,315 |
Other expenses |  |  | 16,972 |  |  |  | 10,159 |  |  |  | 53 |  |  | ─ |  |  | ─ |  |  |  | (11,329 | ) |  |  | 15,855 |
Income before depreciation and amortization |  | $ | 15,176 |  |  | $ | 12,695 |  |  | $ | 5,862 |  |  | $ | 15,437 |  |  | $ | 15,431 |  |  | $ | (1,851 | ) |  | $ | 62,750 |
Depreciation and amortization |  | $ | 12,217 |  |  | $ | 12,808 |  |  | $ | 3,904 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (383 | ) |  | $ | 28,546 |
Interest and other finance expense |  | $ | 12,900 |  |  | $ | 9,770 |  |  | $ | 3,257 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | 25,927 |
Real estate at cost |  | $ | 480,137 |  |  | $ | 695,870 |  |  | $ | 209,956 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (12,869 | ) |  | $ | 1,373,094 |
Total assets |  | $ | 593,151 |  |  | $ | 736,523 |  |  | $ | 195,044 |  |  | $ | 87,600 |  |  | $ | ─ |  |  | $ | (121,570 | ) |  | $ | 1,490,748 |
Investment in real estate |  | $ | 2,756 |  |  | $ | 58,318 |  |  | $ | 1,300 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (1,822 | ) |  | $ | 60,552 |

Reconciliation to net income and net income attributable to Common Shareholders |  |  |
Net property income before depreciation and amortization |  | $ | 62,750 |
Other interest income |  |  | 462 |
Depreciation and amortization |  |  | (28,546 | )
Equity in earnings of unconsolidated affiliates |  |  | 610 |
Interest and other finance expense |  |  | (25,927 | )
Income tax provision |  |  | (1,869 | )
Gain on bargain purchase |  |  | 33,805 |
Net income |  |  | 41,285 |
Net (income) attributable to noncontrolling interests |  |  | (18,240 | )
Net income attributable to Common Shareholders |  | $ | 23,045 |

Nine Months Ended September 30, 2009

(dollars in thousands) |  | Core Portfolio |  |  | Opportunity Funds |  |  | Self- Storage Portfolio |  |  | Notes Receivable |  |  | Other |  |  | Amounts Eliminated in Consolidation |  |  | Total |
Revenues |  | $ | 53,863 |  |  | $ | 31,986 |  |  | $ | 6,696 |  |  | $ | 14,867 |  |  | $ | 18,651 |  |  | $ | (17,137 | ) |  | $ | 108,926 |
Property operating expenses and real estate taxes |  |  | 15,526 |  |  |  | 11,191 |  |  |  | 7,342 |  |  | ─ |  |  | ─ |  |  |  | (789 | ) |  |  | 33,270 |
Other expenses |  |  | 18,327 |  |  |  | 12,609 |  |  | ─ |  |  |  | 1,734 |  |  | ─ |  |  |  | (11,877 | ) |  |  | 20,793 |
Income (loss) before depreciation and amortization |  | $ | 20,010 |  |  | $ | 8,186 |  |  | $ | (646 | ) |  | $ | 13,133 |  |  | $ | 18,651 |  |  | $ | (4,471 | ) |  | $ | 54,863 |
Depreciation and amortization |  | $ | 13,191 |  |  | $ | 12,202 |  |  | $ | 3,257 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (1,238 | ) |  | $ | 27,412 |
Interest and other finance expense |  | $ | 14,387 |  |  | $ | 5,304 |  |  | $ | 4,091 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | 23,782 |
Real estate at cost |  | $ | 473,667 |  |  | $ | 521,380 |  |  | $ | 208,219 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (10,760 | ) |  | $ | 1,192,506 |
Total assets |  | $ | 566,669 |  |  | $ | 612,775 |  |  | $ | 199,194 |  |  | $ | 120,001 |  |  | $ | ─ |  |  | $ | (101,272 | ) |  | $ | 1,397,367 |
Investment in real estate |  | $ | 2,303 |  |  | $ | 103,435 |  |  | $ | 10,457 |  |  | $ | ─ |  |  | $ | ─ |  |  | $ | (3,282 | ) |  | $ | 112,913 |

Reconciliation to net income and net income attributable to Common Shareholders |  |  |
Net property income before depreciation and amortization |  | $ | 54,863 |
Other interest income |  |  | 373 |
Depreciation and amortization |  |  | (27,412 | )
Equity in (losses) of unconsolidated affiliates |  |  | (3,451 | )
Impairment of investment in unconsolidated affiliate |  |  | (3,655 | )
Interest and other finance expense |  |  | (23,782 | )
Gain on debt extinguishment |  |  | 7,057 |
Income tax provision |  |  | (1,349 | )
Gain on sale of property |  |  | 5,637 |
Income from discontinued operations |  |  | 225 |
Net income |  |  | 8,506 |
Net loss attributable to noncontrolling interests |  |  | 16,235 |
Net income attributable to Common Shareholders |  | $ | 24,741 |

16

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. LONG-TERM INCENTIVE COMPENSATION
LONG-TERM INCENTIVE COMPENSATION
The Company maintains two share incentive plans, the 2003 Share Incentive Plan and the 2006 Share Incentive Plan (collectively the “Share Incentive Plans”).
On March 1, 2010 and March 10, 2010, the Company issued 265,517 LTIP Units and 1,462 Restricted Shares to officers of the Company and 15,011 Restricted Shares and 1,411 LTIP Units to employees of the Company. Vesting with respect to these awards is recognized ratably over the five annual anniversaries following the issuance date. Vesting on 23% of the awards issued to officers are also generally subject to achieving certain Company performance measures.
These awards were measured at their fair value as if they were vested on the grant date. Fair value was established as the market price of the Company’s Common Shares as of the close of trading on the day preceding the grant date.
The total value of the above Restricted Shares and LTIP Units as of the grant date was $4.7 million. Compensation expense of $0.2 million and $0.7 million has been recognized in the accompanying financial statements related to these awards for the three month and nine months ended September 30, 2010, respectively.
Total long-term incentive compensation expense, including the expense related to the above-mentioned plans, was $0.9 million and $0.8 million for the three months ended September 30, 2010 and 2009, respectively and $2.9 million for each nine month period ended September 30, 2010 and 2009.
On May 10, 2010, the Company issued 4,180 unrestricted Common Shares to Trustees of the Company in connection with Trustee fees. The Company also issued 8,000 Restricted Shares to Trustees, which vest over three years with 33% vesting on each of the three anniversaries following the issuance date. 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 vesting. Trustee fee expense of $0.1 million has been recognized for the nine months ended September 30, 2010 related to these unrestricted Common Shares and Restricted Shares.
In 2009, the Company adopted the Long Term Investment Alignment Program (the “Program”) pursuant to which the Company may award units primarily to senior executives which would entitle them to receive up to 25% of any future Fund III Promote when and if such Promote is ultimately realized. As of September 30, 2010, the Company has awarded units representing 61% of the Program, which were determined to have no value at issuance or as of September 30, 2010. In accordance with ASC Topic 718, “Compensation - Stock Compensation,” compensation relating to these awards will be recorded based on the change in the estimated fair value at each reporting period.
14. SUBSEQUENT EVENTS
During October 2010, the Company paid down $14.0 million on an outstanding line of credit secured by six Core Portfolio properties. The outstanding balance after the payment is $1.0 million.
During October 2010, the Company closed on a $50.0 million loan collateralized by the Cortlandt Town Center. The loan bears interest at LIBOR plus 190 basis points and matures on October 26, 2015. There is an additional $25.0 million available on this loan which bears interest at LIBOR plus 230 basis points. The proceeds were used to repay the existing $46.6 million mortgage note payable.
17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion is based on the consolidated financial statements of the Company as of September 30, 2010 and 2009 and for the three and nine months then ended. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results performance or achievements expressed or implied by such forward-looking statements. Such factors are set forth under the heading “Item 1A. Risk Factors” in our Form 10-K for the year ended December 31, 2009 (our “2009 Form 10-K”) and include, among others, the following: general economic and business conditions, including the current post-recessionary period, which will, among other things, affect demand for rental space, the availability and creditworthiness of prospective tenants, lease rents and the availability of financing; adverse changes in our real estate markets, including, among other things, competition with other companies; risks of real estate development, acquisition and investment; risks related to our use of leverage; demands placed on our resources due to the growth of our business; risks related to operating through a partnership structure; our limited control over joint venture investments; the risk of loss of key members of management; uninsured losses; REIT distribution requirements and ownership limitations; concentration of ownership by certain institutional investors; governmental actions and initiatives; and environmental/safety requirements. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this Form 10-Q.
OVERVIEW
As of September 30, 2010, we operated 78 properties, which we own or have an ownership interest in, within our Core Portfolio or within our three Opportunity Funds. These 78 properties consist of commercial properties, primarily neighborhood and community shopping centers, self-storage and mixed-use properties with a retail component. The properties we operate are located primarily in the Northeast, Mid-Atlantic and Midwestern regions of the United States. Our Core Portfolio consists of 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 our Opportunity Funds. Excluding two properties under redevelopment, there are 32 properties in our Core Portfolio totaling approximately 4.8 million square feet. Fund I has 20 properties comprising approximately 0.9 million square feet. Fund II has 10 properties, seven of which (representing 1.2 million square feet) are currently operating, one is under construction, and two are in the design phase. Three of the properties also include self-storage facilities. We expect the Fund II portfolio will have approximately 2.0 million square feet upon completion of all current construction and anticipated redevelopment activities. Fund III has 14 properties totaling approximately 1.8 million square feet, of which 11 locations representing 0.9 million net rentable square feet are self-storage facilities. The majority of our operating income is derived from rental revenues from these 78 properties, including recoveries from tenants, offset by operating and overhead expenses. As our RCP Venture invests in operating companies, we consider these investments to be private-equity style, as opposed to real estate, investments. Since these are not generally traditional investments in operating rental real estate but investments in operating businesses, the Operating Partnership principally invests in these through a taxable REIT subsidiary (“TRS”).
Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective:

– | Own and operate a Core Portfolio of community and neighborhood shopping centers and main street retail located in markets with strong demographics and generate internal growth within the Core Portfolio through aggressive redevelopment, re-anchoring and/or leasing activities

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

– | Generate external growth through an opportunistic yet disciplined acquisition program. We target transactions with high inherent opportunity for the creation of additional value through redevelopment and leasing and/or transactions requiring creative capital structuring to facilitate the transactions. These transactions may include other types of commercial real estate besides those which we invest in through our Core Portfolio. These may also include joint ventures with private equity investors for the purpose of making investments in operating retailers with significant embedded value in their real estate assets

CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no material changes to the items that we disclosed as our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2009 Form 10-K.
18

RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 2010 (“2010”) to the three months ended September 30, 2009 (“2009”)

Revenues |  | 2010 |  |  | 2009 |
(dollars in millions) |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |  |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |
Rental income |  | $ | 12.2 |  |  | $ | 9.7 |  |  | $ | 6.2 |  |  | $ | — |  |  | $ | 13.8 |  |  | $ | 9.9 |  |  | $ | 2.2 |  |  | $ | — |
Mortgage interest income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5.2 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4.9 |
Expense reimbursements |  |  | 3.0 |  |  |  | 1.9 |  |  |  | — |  |  |  | — |  |  |  | 3.1 |  |  |  | 1.8 |  |  |  | — |  |  |  | — |
Lease termination income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2.5 |  |  |  | — |  |  |  | — |  |  |  | — |
Management fee income (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 0.4 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 0.3 |
Other |  |  | 0.1 |  |  |  | — |  |  |  | 0.6 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 0.3 |  |  |  | — |
Total revenues |  | $ | 15.3 |  |  | $ | 11.6 |  |  | $ | 6.8 |  |  | $ | 5.6 |  |  | $ | 19.4 |  |  | $ | 11.7 |  |  | $ | 2.5 |  |  | $ | 5.2 |

| (1) Includes fees earned by us as general partner/managing member of the Opportunity Funds that are eliminated in consolidation and adjusts the loss (income) attributable to noncontrolling interests. The balance reflected in the table represents third party fees that are not eliminated in consolidation. Reference is made to Note 12 to the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q for an overview of our five reportable segments.

The decrease in rental income in the Core Portfolio is primarily attributable to the write-off of a lease intangible liability in connection with a lease terminated during 2009 at 3rd Avenue. The increase in rental income in the Storage Portfolio relates to the full amortization of acquired lease intangible costs during 2009, increased occupancy in the Storage Portfolio as well as the Company’s discontinued practice of reporting the Storage Portfolio one month in arrears which was based on the historical unavailability of timely financial information. Based on improvements in the Storage Portfolio accounting systems, the Company reports this activity on a current basis. Accordingly, the three months ended September 30, 2010 reflects four months of storage activity while the three months ended September 30, 2009 reflects three months of storage activity (“Storage Portfolio Activity”).
Lease termination income of $2.5 million in the Core Portfolio for 2009 related to termination fee income received from a former tenant at Absecon Marketplace.

Operating Expenses |  | 2010 |  |  | 2009 |
(dollars in millions) |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |  |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |
Property operating |  | $ | 2.3 |  |  | $ | 2.3 |  |  | $ | 3.0 |  |  | $ | (0.4 | ) |  | $ | 2.1 |  |  | $ | 2.5 |  |  | $ | 2.1 |  |  | $ | (0.3 | )
Real estate taxes |  |  | 2.4 |  |  |  | 1.5 |  |  |  | 0.9 |  |  |  | — |  |  |  | 2.5 |  |  |  | 1.5 |  |  |  | 0.6 |  |  |  | — |
General and administrative |  |  | 5.9 |  |  |  | 3.3 |  |  |  | — |  |  |  | (3.9 | ) |  |  | 5.9 |  |  |  | 2.5 |  |  |  | — |  |  |  | (3.2 | )
Depreciation and amortization |  |  | 4.3 |  |  |  | 4.4 |  |  |  | 1.6 |  |  |  | — |  |  |  | 5.0 |  |  |  | 4.3 |  |  |  | 1.1 |  |  |  | — |
Other expense |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 0.1 |  |  |  | — |  |  |  | — |
Total operating expenses |  | $ | 14.9 |  |  | $ | 11.5 |  |  | $ | 5.5 |  |  | $ | (4.3 | ) |  | $ | 15.5 |  |  | $ | 10.9 |  |  | $ | 3.8 |  |  | $ | (3.5 | )

The increase in operating expenses in the Storage Portfolio primarily related to the Storage Portfolio Activity.
The increase in general and administrative expense in the Opportunity Funds related to a 2010 increase in Promote expense for Fund I and Mervyns I. The decrease in general and administrative expense in Other related to the elimination of this Promote expense for consolidated financial statement presentation purposes.
Depreciation and amortization expense in the Core Portfolio decreased as a result of the write-off of lease intangible costs in connection with a terminated lease.
19

Other |  | 2010 |  |  | 2009 |
(dollars in millions) |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |  |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |
Other interest income |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 0.2 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 0.2 |
Equity in earnings (losses) of unconsolidated affiliates |  |  | 0.2 |  |  |  | 0.4 |  |  |  | (0.4 | ) |  |  | — |  |  |  | — |  |  |  | (0.2 | ) |  |  | — |  |  |  | — |
Impairment of investment in unconsolidated affiliate |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3.7 | ) |  |  | — |  |  |  | — |
Interest and other finance expense |  |  | (4.3 | ) |  |  | (3.4 | ) |  |  | (1.1 | ) |  |  | — |  |  |  | (4.5 | ) |  |  | (2.0 | ) |  |  | (1.8 | ) |  |  | — |
Income tax provision |  |  | (0.9 | ) |  |  | — |  |  |  | 0.2 |  |  |  | — |  |  |  | 0.3 |  |  |  | — |  |  |  | — |  |  |  | — |
(Income) loss attributable to noncontrolling interests in subsidiaries - Continuing operations |  |  | (0.1 | ) |  |  | 2.3 |  |  |  | — |  |  |  | 0.6 |  |  |  | (0.1 | ) |  |  | 6.2 |  |  |  | 0.2 |  |  |  | 0.4 |

The $3.7 million impairment of investment in unconsolidated affiliate in 2009 related to a Fund I unconsolidated investment.
Interest expense in the Opportunity Funds increased $1.4 million in 2010. This was the result of an increase of $0.7 million due to higher average interest rates in 2010, $0.3 million increase attributable to higher outstanding borrowings in 2010 and $0.4 million of lower capitalized interest in 2010. Interest expense in the Storage Portfolio decreased $0.7 million in 2010 as a result of lower average interest rates in 2010.
The variance in the income tax provision in the Core Portfolio primarily related to income taxes at the TRS level.
(Income) loss attributable to noncontrolling interests in subsidiaries – Continuing operations primarily represents the noncontrolling interests’ share of all the Opportunity Funds variances discussed above.
20

Comparison of the nine months ended September 30, 2010 (“2010”) to the nine months ended September 30, 2009 (“2009”)

Revenues |  | 2010 |  |  | 2009 |
(dollars in millions) |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |  |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |
Rental income |  | $ | 36.3 |  |  | $ | 28.7 |  |  | $ | 14.7 |  |  | $ | — |  |  | $ | 39.0 |  |  | $ | 26.5 |  |  | $ | 5.8 |  |  | $ | — |
Mortgage interest income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 15.4 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 14.9 |
Expense reimbursements |  |  | 9.5 |  |  |  | 6.3 |  |  |  | — |  |  |  | — |  |  |  | 10.3 |  |  |  | 5.0 |  |  |  | — |  |  |  | — |
Lease termination income |  |  | 0.1 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2.7 |  |  |  | — |  |  |  | — |  |  |  | — |
Management fee income (1) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1.2 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1.5 |
Other |  |  | 0.2 |  |  |  | 0.2 |  |  |  | 1.3 |  |  |  | — |  |  |  | 1.8 |  |  |  | 0.5 |  |  |  | 0.9 |  |  |  | — |
Total revenues |  | $ | 46.1 |  |  | $ | 35.2 |  |  | $ | 16.0 |  |  | $ | 16.6 |  |  | $ | 53.8 |  |  | $ | 32.0 |  |  | $ | 6.7 |  |  | $ | 16.4 |

(1) | Includes fees earned by us as general partner/managing member of the Opportunity Funds that are eliminated in consolidation and adjusts the loss (income) attributable to noncontrolling interests. The balance reflected in the table represents third party fees that are not eliminated in consolidation. Reference is made to Note 12 to the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q for an overview of our five reportable segments.

The decrease in rental income in the Core Portfolio was primarily attributable to tenant vacancies and the write-off of a lease intangible liability in connection with a lease terminated during 2009 at Third Avenue. The increase in rental income in the Opportunity Funds primarily related to additional rents following the acquisition of Cortlandt Towne Center (“2009 Fund Acquisition”) of $0.9 million and additional rents at Fordham Place and Pelham Manor for leases that commenced in 2009 (“Fordham and Pelham”). The increase in rental income in the Storage Portfolio relates to the full amortization of acquired lease intangible costs during 2009, increased occupancy in the Storage Portfolio as well as the Storage Portfolio Activity.
Expense reimbursements in the Opportunity Funds increased for both real estate taxes and common area maintenance as a result of the 2009 Fund Acquisition and Fordham and Pelham.
Lease termination income in the Core Portfolio for 2009 related to a termination fee income received from a former tenant at Absecon Marketplace.
Other in the Core Portfolio in 2009 included $1.7 million resulting from a forfeited sales contract deposit in 2009.

Operating Expenses |  | 2010 |  |  | 2009 |
(dollars in millions) |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |  |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |
Property operating |  | $ | 7.1 |  |  | $ | 7.7 |  |  | $ | 8.0 |  |  | $ | (1.1 | ) |  | $ | 8.5 |  |  | $ | 7.4 |  |  | $ | 5.9 |  |  | $ | (0.8 | )
Real estate taxes |  |  | 6.8 |  |  |  | 4.6 |  |  |  | 2.2 |  |  |  | — |  |  |  | 7.0 |  |  |  | 3.8 |  |  |  | 1.5 |  |  |  | — |
General and administrative |  |  | 17.0 |  |  |  | 10.2 |  |  |  | — |  |  |  | (11.3 | ) |  |  | 18.3 |  |  |  | 10.1 |  |  |  | — |  |  |  | (11.9 | )
Depreciation and amortization |  |  | 12.2 |  |  |  | 12.4 |  |  |  | 3.9 |  |  |  | — |  |  |  | 13.2 |  |  |  | 11.0 |  |  |  | 3.2 |  |  |  | — |
Other expense |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2.5 |  |  |  | — |  |  |  | 1.7 |
Total operating expenses |  | $ | 43.1 |  |  | $ | 34.9 |  |  | $ | 14.1 |  |  | $ | (12.4 | ) |  | $ | 47.0 |  |  | $ | 34.8 |  |  | $ | 10.6 |  |  | $ | (11.0 | )

The decrease in property operating expenses in the Core Portfolio was primarily attributable to a decrease in tenant receivable reserves in 2010. The increase in property operating expenses in the Storage Portfolio primarily related to higher operating costs in 2010 following increased occupancy, additional tenant receivable reserves in 2010 and the Storage Portfolio Activity.
The increase in real estate taxes in the Opportunity Funds was primarily attributable to the 2009 Fund Acquisition as well as Fordham and Pelham. The increase in real estate taxes in the Storage Portfolio was attributable to the Storage Portfolio Activity.
21

The decrease in general and administrative expense in the Core Portfolio was primarily attributable to reduced compensation expense following staff reductions in 2009.
Depreciation and amortization expense in the Core Portfolio decreased as a result of the write-off of lease intangible costs in connection with a terminated lease. Depreciation expense and amortization expense increased $1.4 million in the Opportunity Funds due to the 2009 Fund Acquisition. Depreciation and amortization expense in the Storage Portfolio increased $0.7 million as a result of two self storage properties placed in service during the second quarter 2009.
The $2.5 million in Other expense related to the abandonment of project costs in 2009 based on our determination that we most likely would not participate in a specific future development project. In addition, Other expense included a reserve for notes receivable of $1.7 million in 2009 due to the loss of an anchor tenant at the underlying collateral property.

Other |  | 2010 |  |  | 2009 |
(dollars in millions) |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |  |  | Core Portfolio |  |  | Opportunity Funds |  |  | Storage Portfolio |  |  | Notes Receivable and Other |
Other interest income |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 0.5 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 0.4 |
Equity in earnings (losses) of unconsolidated affiliates |  |  | 0.5 |  |  |  | 0.6 |  |  |  | (0.5 | ) |  |  | — |  |  |  | 0.4 |  |  |  | (3.8 | ) |  |  | — |  |  |  | — |
Impairment of investment in unconsolidated affiliates |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3.7 | ) |  |  | — |  |  |  | — |
Interest and other finance expense |  |  | (12.9 | ) |  |  | (9.8 | ) |  |  | (3.3 | ) |  |  | — |  |  |  | (14.4 | ) |  |  | (5.3 | ) |  |  | (4.1 | ) |  |  | — |
Gain on bargain purchase |  |  | — |  |  |  | 33.8 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Gain on debt extinguishment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 7.1 |  |  |  | — |  |  |  | — |  |  |  | — |
Income tax provision |  |  | (2.0 | ) |  |  | (0.1 | ) |  |  | 0.2 |  |  |  | — |  |  |  | (1.3 | ) |  |  | (0.1 | ) |  |  | — |  |  |  | — |
Income from discontinued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5.8 |
(Income) loss attributable to noncontrolling interests in subsidiaries - Continuing operations |  |  | (0.3 | ) |  |  | (19.2 | ) |  |  | 0.1 |  |  |  | 1.2 |  |  |  | (0.4 | ) |  |  | 19.1 |  |  |  | 0.4 |  |  |  | 2.0 |
(Income) loss attributable to noncontrolling interests in subsidiaries - Discontinued operations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (4.9 | )

Equity in earnings (losses) of unconsolidated affiliates in the Opportunity Funds increased primarily as a result of our pro-rata share of losses from Mervyns in 2009.
The $3.7 million impairment of investment in unconsolidated affiliate in 2009 related to a Fund I unconsolidated investment.
Total interest expense in the Core Portfolio decreased $1.5 million in 2010. This was the result of a $2.0 million decrease attributable to lower average outstanding borrowings in 2010 offset by a $0.5 million increase attributable to higher average interest rates in 2010. Interest expense in the Opportunity Funds increased $4.5 million in 2010. This was the result of an increase of $2.3 million due to higher average interest rates in 2010, $1.3 million of lower capitalized interest in 2010 and an increase of $0.9 million due to higher average outstanding borrowings in 2010. Interest expense in the Storage Portfolio decreased $0.8 million in 2010. This was primarily attributable to a $1.3 million decrease due to lower average interest rates in 2010 offset by an increase of $0.2 million due to higher average outstanding borrowings in 2010 and $0.3 million of lower capitalized interest in 2010.
The $33.8 million gain on bargain purchase was attributable to Fund II’s purchase of CUIP’s membership interest in CityPoint in 2010. Reference is made to Note 4 to the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q for an overview of the CityPoint acquisition.
The gain on extinguishment of debt of $7.1 million was attributable to the purchase of our convertible debt at a discount in 2009.
Income from discontinued operations represents activity related to property sales in 2009.
22

(Income) loss attributable to noncontrolling interests in subsidiaries – Continuing operations and Discontinued operations primarily represents the noncontrolling interests’ share of all the Opportunity Funds variances discussed above.
FUNDS FROM OPERATIONS
Consistent with the National Association of Real Estate Investment Trusts (“NAREIT”) definition, we define funds from operations (“FFO”) as net income attributable to common shareholders (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
We consider FFO to be an appropriate supplemental disclosure of operating performance for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. FFO is presented to assist investors in analyzing our performance. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such as gains (or losses) from sales of operating property and depreciation and amortization. However, our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. FFO should not be considered as an alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity.
The reconciliation of net income to FFO for the three and nine months ended September 30, 2010 and 2009 is as follows:

|  | Three months ended September 30, |  |  | Nine months ended September 30, |
(dollars in millions, except per share amounts) |  | 2010 |  |  | 2009 |  |  | 2010 |  |  | 2009 |
Funds From Operations |  |  |  |  |  |  |  |  |  |  |  |
Net income attributable to Common Shareholders |  | $ | 5.1 |  |  | $ | 7.3 |  |  | $ | 23.0 |  |  | $ | 24.7 |
Depreciation of real estate and amortization of leasing costs (net of noncontrolling interests’ share) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated affiliates |  |  | 5.0 |  |  |  | 5.5 |  |  |  | 13.8 |  |  |  | 14.3 |
Unconsolidated affiliates |  |  | 0.3 |  |  |  | 0.5 |  |  |  | 1.2 |  |  |  | 1.2 |
Gain on sale (net of noncontrolling interests’ share) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated affiliates |  | ─ |  |  | ─ |  |  | ─ |  |  |  | (0.9 | )
Unconsolidated affiliates |  | ─ |  |  | ─ |  |  | ─ |  |  | ─ |
Income attributable to noncontrolling interests’ in Operating Partnership |  |  | 0.1 |  |  |  | 0.1 |  |  |  | 0.3 |  |  |  | 0.3 |
Funds from operations |  | $ | 10.5 |  |  | $ | 13.4 |  |  | $ | 38.3 |  |  | $ | 39.6 |
Funds From Operations per Share - Diluted |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average number of Common Shares and OP Units |  |  | 40.9 |  |  |  | 40.6 |  |  |  | 40.8 |  |  |  | 38.3 |
Diluted funds from operations, per share |  | $ | 0.26 |  |  | $ | 0.33 |  |  | $ | 0.94 |  |  | $ | 1.03 |

23

USES OF LIQUIDITY
Our principal uses of liquidity are (i) distributions to our shareholders and OP unit holders, (ii) investments which include the funding of our capital committed to the Opportunity Funds and property acquisitions and redevelopment/re-tenanting activities within our Core Portfolio, and (iii) debt service and loan repayments, including the repurchase of our Convertible Notes.
Distributions
In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. For the three and nine months ended September 30, 2010, we paid dividends and distributions on our Common Shares and Common OP Units totaling $7.4 million and $22.2 million, respectively.
Investments
Fund I and Mervyns I
During 2001, we formed a partnership, Fund I, and in 2004 formed a limited liability company, Mervyns I, with four institutional investors with $90.0 million, in the aggregate, of committed discretionary capital. Fund I and Mervyns I have returned all invested capital and accumulated preferred return thus triggering our Promote in all future Fund I and Mervyns I earnings and distributions. As of September 30, 2010, $86.6 million has been invested in Fund I and Mervyns I, of which the Operating Partnership contributed $19.2 million.
As of September 30, 2010, Fund I currently owned, or had ownership interests in, 20 assets comprising approximately 0.9 million square feet as follows:

Shopping Center |  | Location |  | Year acquired |  | GLA
New York Region |  |  |  |  |  |
New York |  |  |  |  |  |
Tarrytown Shopping Center |  | Tarrytown |  | 2004 |  | 35,291
Mid-Atlantic Region |  |  |  |  |  |
Ohio |  |  |  |  |  |
Granville Centre |  | Columbus |  | 2002 |  | 134,997
Various Regions |  |  |  |  |  |
Kroger/Safeway Portfolio |  | Various |  | 2003 |  | 709,400
Total |  |  |  |  |  | 879,688

Reference is made to Note 5 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for a discussion of RCP investments made by Mervyns I to date.
Fund II and Mervyns II
During 2004, we, along with the investors from Fund I as well as two additional institutional investors, formed Fund II, and Mervyns II with $300.0 million, in the aggregate, of committed discretionary capital. To date, Fund II’s primary investment focus has been in the New York Urban/Infill Redevelopment Initiative and the Retailer Controlled Property Venture. As of September 30, 2010, $249.6 million has been invested in Fund II, of which the Operating Partnership contributed $49.9 million.
New York Urban Infill Redevelopment Initiative
In September 2004, we, through Fund II, launched our New York Urban Infill Redevelopment initiative. During 2004, Fund II, together with an unaffiliated partner, P/A Associates, LLC (“P/A”), formed Acadia P/A Holding Company, LLC (“Acadia P/A”) for the purpose of acquiring, constructing, developing, owning, operating, leasing and managing certain mixed-use real estate properties in the New York City metropolitan area which include a retail component. To date P/A has invested $2.2 million and Fund II, the managing member, has agreed to invest the balance.
24

To date, Fund II has invested in nine New York Urban Infill Redevelopment construction projects, eight of which were made through Acadia P/A, as follows:

|  |  | Redevelopment (dollars in millions) |
|  |  | Anticipated |  | Estimated |  | Square |
|  |  |  | Year |  |  | Costs |  |  | additional |  | construction |  | feet upon |
Property |  | Location |  | acquired |  |  | to date |  |  | costs |  | completion |  | completion |
Liberty Avenue | (1) | Queens |  |  | 2005 |  |  | $ | 15.4 |  |  | $ | — |  | Completed |  |  | 125,000 |
216th Street |  | Manhattan |  |  | 2005 |  |  |  | 27.7 |  |  |  | — |  | Completed |  |  | 60,000 |
Fordham Place |  | Bronx |  |  | 2004 |  |  |  | 123.6 |  |  |  | 9.8 |  | Completed |  |  | 276,000 |
Pelham Manor Shopping Center | (1) | Westchester |  |  | 2004 |  |  |  | 59.1 |  |  |  | 4.9 |  | Completed |  |  | 320,000 |
161st Street | (2),(3) | Bronx |  |  | 2005 |  |  |  | 61.1 |  |  |  | 4.5 |  | — |  |  | 230,000 |
Atlantic Avenue | (4) | Brooklyn |  |  | 2007 |  |  |  | 21.8 |  |  |  | 0.3 |  | Completed |  |  | 110,000 |
Canarsie Plaza |  | Brooklyn |  |  | 2007 |  |  |  | 67.6 |  |  |  | 20.0 |  | 1st half 2011 |  |  | 275,000 |
CityPoint | (1),(2) | Brooklyn |  |  | 2007 |  |  |  | 78.4 |  |  |  | 121.6 |  | — |  |  | 550,000 |
Sherman Plaza | (2) | Manhattan |  |  | 2005 |  |  |  | 33.1 |  |  |  | — |  | — |  |  | — |
Total |  |  |  |  |  |  |  | $ | 487.8 |  |  | $ | 161.1 |  |  |  |  | 1,946,000 |

Notes:
(1) Acadia P/A acquired a ground lease interest at this property.
(2) To be determined
(3) Currently operating but redevelopment activities have commenced.
(4) P/A is not a partner in this project.
On June 30, 2010, Fund II acquired all of CUIP’s 75.25% interests in CityPoint for $9.2 million, consisting of a current cash payment of $2.0 million and deferred payments, potentially through 2020, aggregating $7.2 million, as well as the assumption of CUIP’s share of the first mortgage debt representing $19.6 million. Reference is made to Note 4 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for a further discussion of this transaction.
Retailer Controlled Property Venture
Reference is made to Note 5 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for a discussion of RCP investments made by Fund II and Mervyns II to date.
Fund III
During 2007, we formed Fund III with 14 institutional investors, including all of the investors from Fund I and a majority of the investors from Fund II with $502.5 million of committed discretionary capital. As of September 30, 2010, $96.5 million has been invested in Fund III, of which the Operating Partnership contributed $19.2 million.
New York Urban Infill Redevelopment Initiative
Fund III has invested in one New York Urban/Infill Redevelopment and one Urban/Infill Redevelopment in Westport, Connecticut as follows:

|  |  | Anticipated |  | Estimated |  |  | Square |
|  |  |  |  | Year |  |  | Costs |  |  | additional |  | construction |  |  | feet upon |
Property |  | Location |  |  | acquired |  |  | to date |  |  | costs |  | completion |  |  | completion |
Sheepshead Bay | (1) | Brooklyn, NY |  |  | 2007 |  |  | $ | 22.8 |  |  | $ | — |  | — |  |  | - |
125 Main Street |  | Westport, CT |  |  | 2007 |  |  |  | 18.7 |  |  |  | 6.7 |  | 2nd half 2011 |  |  | 26,000 |
Total |  |  |  |  |  |  |  | $ | 41.5 |  |  | $ | 6.7 |  |  |  |  | 26,000 |

Notes:

(1) | To be determined

Other Fund III Investments
During February 2008, Acadia, through Fund III, and in conjunction with an unaffiliated partner, Storage Post, acquired a portfolio of eleven self-storage properties from Storage Post’s institutional investors for approximately $174.0 million. The properties are located throughout New York and New Jersey.
During January 2009, Fund III purchased Cortlandt Towne Center for $78.0 million. The property is a 642,000 square foot shopping center located in Westchester County, NY, a trade area with high barriers to entry for regional and national retailers.
25

Core Portfolio Property Redevelopment and Expansion
Our Core Portfolio redevelopment program focuses on selecting well-located neighborhood and community shopping centers and creating significant value through re-tenanting and property redevelopment. We currently have two properties in the early stages of redevelopment, Ledgewood Mall and Third Avenue.
Share Repurchase
We have an existing share repurchase program that authorizes management, at its discretion, to repurchase up to $20.0 million of our outstanding Common Shares. The program may be discontinued or extended at any time and there is no assurance that we will purchase the full amount authorized. Under this program we have repurchased 2.1 million Common Shares, none of which were repurchased after December 2001. As of September 30, 2010, management may cause the Company to repurchase up to approximately $7.5 million of our outstanding Common Shares under this program.
SOURCES OF LIQUIDITY
We intend on using Fund III, as well as new funds that we may establish in the future, as the primary vehicles for our future acquisitions, including investments in the RCP Venture and New York Urban/Infill Redevelopment Initiative. Additional sources of capital for funding property acquisitions, redevelopment, expansion, re-tenanting and RCP Venture investments, are expected to be obtained primarily from (i) the issuance of public equity or debt instruments, (ii) cash on hand and cash flow from operating activities, (iii) additional property debt financings, (iv) noncontrolling interests’ unfunded capital commitments of $325.2 million for Fund III, and (v) future sales of existing properties.
During 2010, Fund II received capital contributions of $26.3 million to fund redevelopment projects and pay down the line of credit of Fund II.
As of September 30, 2010, we had approximately $104.9 million of additional capacity under existing debt facilities and cash and cash equivalents on hand of $110.7 million.
Shelf Registration Statements and Issuance of Equity
During April 2009, we filed a shelf registration on Form S-3 providing for offerings of up to a total of $500.0 million of Common Shares, Preferred Shares and debt securities. During April 2009, we issued 5.75 million Common Shares and generated net proceeds of approximately $65.0 million. The proceeds were primarily used to purchase a portion of our outstanding convertible notes payable and pay down existing lines of credit. Following this issuance, we have remaining capacity under this registration statement to issue up to approximately $430.0 million of these securities.
Asset Sales
Asset sales are an additional source of liquidity for us. In March 2010, the Sterling Heights Shopping Center was sold for $2.3 million. During November 2009, we sold Blackman Plaza for $2.5 million. During February 2009, The Kroger Co. purchased the fee at six locations in Fund I’s Kroger/Safeway Portfolio for $14.6 million of which Fund I’s share of the sales proceeds amounted to $8.1 million after the repayment of the mortgage debt on these properties.
Notes Receivable and Preferred Equity Investment
Reference is made to Note 6 to the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for an overview of our notes receivable and preferred equity investment. During 2010, the following payments were received on these investements:
During April 2010, we received a $2.1 million first mortgage loan payment.
During September 2010, one of our Georgetown, Washington D.C. mezzanine investments, which was secured by a portfolio of 18 properties, was fully liquidated. We received $40.0 million of principal along with $9.4 million of accrued interest.
26

Financing and Debt
At September 30, 2010, mortgage and convertible notes payable aggregated $832.2 million, net of unamortized premium of $0.1 million and unamortized discount of $1.3 million, and were collateralized by 29 properties and related tenant leases. Interest rates on our outstanding mortgage indebtedness and convertible notes payable ranged from 0.74% to 7.38% with maturities that ranged from October 2010 to November 2032. Taking into consideration $77.3 million of notional principal under variable to fixed-rate swap agreements currently in effect, $452.8 million of the portfolio, or 54.4%, was fixed at a 5.66% weighted average interest rate and $379.4 million, or 45.6% was floating at a 3.44% weighted average interest rate. There is $25.5 million of debt maturing in 2010 at weighted average interest rates of 1.66%. Of this amount, $0.7 million represents scheduled annual amortization. The loans relating to $24.8 million of the 2010 maturities provide for extension options, which we believe we will be able to exercise. If we are unable to extend these loans, we believe we will be able to repay this debt with existing liquidity. As it relates to maturities after 2010, we may not have sufficient cash on hand to repay such indebtedness, we may have to refinance this indebtedness or select other alternatives based on market conditions at that time.
Reference is made to Note 8 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for an overview of transactions related to mortgage loans, bond financing and credit facilities during the nine months ended September 30, 2010.
The following table sets forth certain information pertaining to our secured credit facilities:

(dollars in millions) Borrower |  | Total amount of credit facility |  |  | Amount borrowed as of December 31, 2009 |  |  | Net borrowings (repayments) during the nine months ended September 30, 2010 |  |  | Amount borrowed as of September 30, 2010 |  |  | Letters of credit outstanding as of September 30, 2010 |  |  | Amount available under credit facilities as of September 30, 2010 |
Acadia Realty, LP | (1) | $ | 64.5 |  |  | $ | 30.0 |  |  | $ | (15.0 | ) |  | $ | 15.0 |  |  | $ | 8.6 |  |  | $ | 40.9 |
Acadia Realty, LP |  |  | — |  |  |  | 2.0 |  |  |  | (2.0 | ) |  |  | — |  |  |  | — |  |  |  | — |
Fund II | (2) |  | 40.0 |  |  |  | 48.2 |  |  |  | (8.2 | ) |  |  | 40.0 |  |  |  | — |  |  |  | — |
Fund III |  |  | 221.0 |  |  |  | 139.5 |  |  |  | 17.0 |  |  |  | 156.5 |  |  |  | 0.5 |  |  |  | 64.0 |
Total |  | $ | 325.5 |  |  | $ | 219.7 |  |  | $ | (8.2 | ) |  | $ | 211.5 |  |  | $ | 9.1 |  |  | $ | 104.9 |

Notes:
(1) During October 2010, we paid down $14.0 million on an outstanding line of credit secured by six Core Portfolio properties. The outstanding balance after the payment is $1.0 million.
(2) During March of 2010, this facility’s maturity date was extended from March 1, 2010 to March 1, 2011 and the interest rate was adjusted from LIBOR plus 250 basis points to LIBOR plus 325 basis points. In connection with the extension, we made an $8.2 million payment on the outstanding $48.2 million line of credit.
27

The following table summarizes the Company’s mortgage and other secured indebtedness as of September 30, 2010 and December 31, 2009:

(dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |
Description of Debt and Collateral |  | September 30, 2010 |  |  | December 31, 2009 |  |  | Interest Rate at September 30, 2010 |  | Maturity |  | Payment Terms
Mortgage notes payable – variable-rate |  |  |  |  |  |  |  |  |  |  |  |
161st Street |  | $ | 28.9 |  |  | $ | 30.0 |  |  | 4.26% (LIBOR +4.00%) |  | 4/1/2013 |  | Interest only monthly.
Liberty Avenue |  |  | 10.0 |  |  |  | 10.4 |  |  | 3.51% (LIBOR +3.25%) |  | 9/1/2011 |  | Interest only monthly.
Tarrytown Shopping Center |  |  | 9.8 |  |  |  | 9.8 |  |  | 1.91% (LIBOR +1.65%) |  | 10/30/2010 |  | Interest only monthly.
Fordham Place |  |  | 86.0 |  |  |  | 86.0 |  |  | Greater of 1.5%+3.5% or 5.00% (LIBOR +3.5%) |  | 10/4/2011 |  | Interest only monthly.
Branch Shopping Plaza |  |  | 14.0 |  |  |  | 14.2 |  |  | 1.56% (LIBOR +1.30%) |  | 12/1/2011 |  | Monthly principal and interest.
Village Commons Shopping Center |  |  | 9.3 |  |  |  | 9.5 |  |  | 1.66% (LIBOR +1.40%) |  | 6/29/2012 |  | Monthly principal and interest.
Cortlandt Towne Center |  |  | 46.6 |  |  |  | 44.9 |  |  | 4.26% (LIBOR +4.00%) |  | 7/29/2012 |  | Monthly principal and interest.
Canarsie Plaza |  |  | 19.9 |  |  | ─ |  |  | Greater of 6.50% or 4.26% (LIBOR +4.00%) |  | 1/12/2012 |  | Interest only monthly.
CityPoint |  |  | 20.7 |  |  | ─ |  |  | 2.76% (LIBOR +2.50%) |  | 8/12/2013 |  | Interest only monthly.
Sub-total mortgage notes payable |  |  | 245.2 |  |  |  | 204.8 |  |  |  |  |  |  |
Secured credit facilities – variable-rate: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Six Core Portfolio properties |  |  | 15.0 |  |  |  | 30.0 |  |  | 1.51% (LIBOR +1.25%) |  | 12/1/2010 |  | Annual principal and monthly interest.
Fund II unfunded investor capital commitments |  |  | 40.0 |  |  |  | 48.3 |  |  | 3.51% (LIBOR +3.25%) |  | 3/1/2011 |  | Interest only monthly.
Fund III unfunded investor capital commitments |  |  | 156.5 |  |  |  | 139.4 |  |  | 0.74% (Commercial Paper +0.50%) |  | 10/9/2011 |  | Interest only monthly.
Ledgewood Mall |  | ─ |  |  |  | 2.0 |  |  | 1.51% (LIBOR +1.25%) |  | ─ |  | ─
Sub-total secured credit facilities |  |  | 211.5 |  |  |  | 219.7 |  |  |  |  |  |  |
Interest rate swaps (1) |  |  | (77.3 | ) |  |  | (83.4 | ) |  |  |  |  |  |
Total variable-rate debt |  |  | 379.4 |  |  |  | 341.1 |  |  |  |  |  |  |
Mortgage notes payable – fixed-rate |  |  |  |  |  |  |  |  |  |  |  |  |  |
Five Self-Storage properties |  |  | 41.5 |  |  |  | 41.5 |  |  |  | 5.30% |  | 3/16/2011 |  | Interest only monthly.
Chestnut Hill |  |  | 9.3 |  |  |  | 9.5 |  |  |  | 5.45% |  | 6/11/2013 |  | Monthly principal and interest.
Clark Diversey |  |  | 4.7 |  |  |  | 4.8 |  |  |  | 6.35% |  | 7/1/2014 |  | Monthly principal and interest.
New Loudon Center |  |  | 14.2 |  |  |  | 14.3 |  |  |  | 5.64% |  | 9/6/2014 |  | Monthly principal and interest.
Crescent Plaza |  |  | 17.6 |  |  |  | 17.6 |  |  |  | 4.98% |  | 9/6/2015 |  | Monthly principal and interest.
Pacesetter Park Shopping Center |  |  | 12.2 |  |  |  | 12.3 |  |  |  | 5.12% |  | 11/6/2015 |  | Monthly principal and interest.
Elmwood Park Shopping Center |  |  | 34.3 |  |  |  | 34.6 |  |  |  | 5.53% |  | 1/1/2016 |  | Monthly principal and interest.
The Gateway Shopping Center |  |  | 20.5 |  |  |  | 20.5 |  |  |  | 5.44% |  | 3/1/2016 |  | Interest only monthly.
Walnut Hill Plaza |  |  | 23.5 |  |  |  | 23.5 |  |  |  | 6.06% |  | 10/1/2016 |  | Interest only monthly until 10/11; monthly principal and interest thereafter.
239 Greenwich Avenue |  |  | 26.0 |  |  |  | 26.0 |  |  |  | 5.42% |  | 2/11/2017 |  | Interest only monthly.
Merrillville Plaza |  |  | 26.2 |  |  |  | 26.2 |  |  |  | 5.88% |  | 8/1/2017 |  | Interest only monthly until 7/12 monthly principal and interest thereafter.
216th Street |  |  | 25.5 |  |  |  | 25.5 |  |  |  | 5.80% |  | 10/1/2017 |  | Interest only monthly.
CityPoint |  |  | 20.0 |  |  | ─ |  |  |  | 7.25% |  | 11/1/2014 |  | Interest only quarterly.
Pelham Manor Shopping Plaza |  |  | 31.6 |  |  |  | 31.7 |  |  |  | 7.38% |  | 1/1/2020 |  | Monthly principal and interest.
Atlantic Avenue |  |  | 11.5 |  |  |  | 11.5 |  |  |  | 7.34% |  | 1/1/2020 |  | Interest only upon drawdown on construction loan until 1/15 monthly principal and interest thereafter.
A&P Shopping Plaza |  |  | 8.1 |  |  |  | 8.2 |  |  |  | 6.40% |  | 11/1/2032 |  | Monthly principal and interest.
Interest rate swaps (1) |  |  | 77.3 |  |  |  | 83.4 |  |  |  | 5.77% |  |  |  |
Total fixed-rate debt |  |  | 404.0 |  |  |  | 391.1 |  |  |  |  |  |  |  |
Unamortized premium |  |  | 0.1 |  |  |  | 0.1 |  |  |  |  |  |  |  |
Total |  | $ | 783.5 |  |  | $ | 732.3 |  |  |  |  |  |  |  |

(1) Represents the amount of the Company's variable-rate debt that has been fixed through certain cash flow hedge transactions. (Note 7).
28

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
At September 30, 2010, maturities on our mortgage notes ranged from October 2010 to November 2032. In addition, we have non-cancelable ground leases at six of our shopping centers. We also lease space for our corporate headquarters for a term expiring in 2015. The following table summarizes our debt maturities and obligations under non-cancelable operating leases as of September 30, 2010:

(dollars in millions) | Payments due by period |
Contractual obligation | Total |  | Less than 1 year |  | 1 to 3 years |  | 3 to 5 years |  | More than 5 years |
Future debt maturities | $ | 833.4 |  | $ | 119.2 |  | $ | 445.0 |  | $ | 58.9 |  | $ | 210.3 |
Interest obligations on debt |  | 136.1 |  |  | 34.6 |  |  | 42.9 |  |  | 30.3 |  |  | 28.3 |
Operating lease obligations |  | 108.0 |  |  | 4.5 |  |  | 11.5 |  |  | 9.5 |  |  | 82.5 |
Construction commitments(1) |  | 26.9 |  |  | 26.9 |  | ─ |  | ─ |  | ─ |
Total | $ | 1,104.4 |  | $ | 185.2 |  | $ | 499.4 |  | $ | 98.7 |  | $ | 321.1 |

Notes:
(1) In conjunction with the redevelopment of our Core Portfolio and Opportunity Fund properties, we have entered into construction commitments with general contractors. We intend to fund these requirements with existing liquidity.
OFF BALANCE SHEET ARRANGEMENTS
We have investments in the following joint ventures for the purpose of investing in operating properties. We account for these investments using the equity method of accounting as we have a noncontrolling interest. As such, our financial statements reflect our share of income and loss from but not the assets and liabilities of these joint ventures.
Reference is made to Note 5 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for a discussion of our unconsolidated investments. Our pro-rata share of unconsolidated debt related to these investments is as follows:
(dollars in millions)

Investment |  | Pro-rata share of mortgage debt Operating Partnership |  |  | Interest rate at September 30, 2010 |  | Maturity Date
Crossroads |  | $ | 30.2 |  |  |  | 5.37 | % | December 2014
Brandywine |  |  | 36.9 |  |  |  | 5.99 | % | July 2016
Total |  | $ | 67.1 |  |  |  |  |  |

In addition, we have arranged for the provision of three separate letters of credit in connection with certain leases and investments. As of September 30, 2010, there were no outstanding balances under any of the letters of credit. If the letters of credit were fully drawn, the combined maximum amount of our exposure would be $9.1 million.
29

HISTORICAL CASH FLOW
The following table compares the historical cash flow for the nine months ended September 30, 2010 (“2010”) with the cash flow for the nine months ended September 30, 2009 (“2009”)

| Nine months ended September 30, |
(dollars in millions) | 2010 |  | 2009 |  | Change |
Net cash provided by operating activities | $ | 22.6 |  | $ | 39.1 |  | $ | (16.5 | )
Net cash used in investing activities |  | (23.1 | ) |  | (110.4 | ) |  | 87.3 |
Net cash provided by financing activities |  | 17.4 |  |  | 102.4 |  |  | (85.0 | )
Total | $ | 16.9 |  | $ | 31.1 |  | $ | (14.2 | )

A discussion of the significant changes in cash flow for 2010 versus 2009 is as follows:
The $16.5 million decrease in net cash provided by operating activities was primarily attributable to cash used during 2010 to fund an escrow account with the proceeds from the CityPoint bond financing and less cash provided from redemptions of auction rate securities during 2010 as all remaining auction rate securities were fully redeemed in 2009. These decreases were partially offset by an increase in 2010 accounts payable and accrued expenses.
The decrease of $87.3 million in net cash used in investing activities resulted primarily from a $61.6 million reduction in expenditures for real estate, development and tenant installations in 2010 and an additional $33.2 million in collections of notes receivable during 2010. These decreases in 2010 cash used were partially offset by $9.5 million of proceeds from property sales received during 2009.
The $85.0 million decrease in net cash provided by financing activities was attributable to $196.2 million of additional cash provided by borrowings during 2009 and proceeds from the 2009 stock offering of $65.2 million, net of costs. These 2010 cash decreases were offset by the following: (i) $116.7 million of additional cash used for the repayments of mortgage notes during 2009, (ii) $46.7 million of cash used for the purchase of convertible notes during 2009, and (iii) $13.9 million of additional contributions from noncontrolling interests during 2010.
INFLATION
Our long-term leases contain provisions designed to mitigate the adverse impact of inflation on our net income. Such provisions include clauses enabling us to receive percentage rents based on tenants’ gross sales, which generally increase as prices rise, and/or, in certain cases, escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses are often related to increases in the consumer price index or similar inflation indexes. In addition, many of our leases are for terms of less than ten years, which permits us to seek to increase rents upon re-rental at market rates if current rents are below the then existing market rates. Most of our leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Our primary market risk exposure is to changes in interest rates related to our mortgage debt. See the discussion under Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations for certain quantitative details related to our mortgage debt.
Currently, we manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap agreements. As of September 30, 2010, we had total mortgage debt and convertible notes payable of $832.2 million, net of unamortized premium of $0.1 million and unamortized discount of $1.3 million, of which $452.8 million or 54.4% was fixed-rate, inclusive of interest rate swaps, and $379.4 million, or 45.6% was variable-rate based upon LIBOR or commercial paper rates plus certain spreads. As of September 30, 2010, we were a party to seven interest rate swap transactions and one interest rate cap to hedge our exposure to changes in interest rates with respect to $77.3 million of LIBOR-based variable-rate debt.
Of our total consolidated outstanding debt, $25.5 million and $400.6 million will become due in 2010 and 2011, respectively. As we intend on refinancing some or all of such debt at the then-existing market interest rates, which may be greater than the current interest rate, our interest expense would increase by approximately $4.3 million annually if the interest rate on the refinanced debt increased by 100 basis points. After giving effect to noncontrolling interests, the Company’s share of this increase would be $1.5 million.
Interest expense on our consolidated variable-rate debt, net of variable to fixed-rate swap agreements currently in effect, as of September 30, 2010 would increase by $3.8 million annually if LIBOR increased by 100 basis points. After giving effect to noncontrolling interests, the Company’s share of this increase would be $0.6 million. We may seek additional variable-rate financing if and when pricing and other commercial and financial terms warrant. As such, we would consider hedging against the interest rate risk related to such additional variable-rate debt through interest rate swaps and protection agreements, or other means.
30

Item 4. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures. In accordance with paragraph (b) of Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective.
(b) Internal Control over Financial Reporting. There has not been any change in the Company’s internal control over financial reporting during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings.
There have been no material legal proceedings beyond those previously disclosed in our 2009 Form 10-K.
Item 1A. Risk Factors.
The most significant risk factors applicable to the Company are described in Item 1A of our 2009 Form 10-K. There have been no material changes to those previously-disclosed risk factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. (Removed and Reserved).
Item 5. Other Information.
None
Item 6. Exhibits.
The information under the heading “Exhibit Index” below is incorporated herein by reference.
31

SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has fully caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ACADIA REALTY TRUST

November 8, 2010 | /s/ Kenneth F. Bernstein Kenneth F. Bernstein President and Chief Executive Officer (Principal Executive Officer)
November 8, 2010 | /s/ Michael Nelsen Michael Nelsen Senior Vice President and Chief Financial Officer (Principal Financial Officer)

32

Exhibit Index
Exhibit No. | Description
3.1 | Declaration of Trust of the Company, as amended (1)
3.2 | Fourth Amendment to Declaration of Trust (2)
3.3 | Amended and Restated By-Laws of the Company (3)
3.4 | Fifth Amendment to Declaration of Trust (9)
3.5 | First Amendment the Amended and Restated Bylaws of the Company (9)
4.1 | Voting Trust Agreement between the Company and Yale University dated February 27, 2002 (4)
10.18 | Consolidated, Amended and Restated Term Loan Agreement among Acadia-PA East Fordham Acquisitions, LLC, and Fordham Place Office LLC as borrower and The lenders Party Hereto as lenders and Eurohypo AG, New York Branch as Administrative Agent; Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing made by Acadia-PA East Fordham Acquisitions, LLC, and Fordham Place Office LLC in favor of Eurohypo AG, New York Branch as Administrative Agent; Replacement Note between Acadia-PA East Fordham Acquisitions, LLC, and Fordham Place Office LLC and Amalgamated Bank; Replacement Note between Acadia-PA East Fordham Acquisitions, LLC, and Fordham Place Office LLC and Deutsche Genossenschafts – Hypothekenbank AG; Replacement Note between Acadia-PA East Fordham Acquisitions, LLC, and Fordham Place Office LLC and Eurohypo AG, New York Branch; and Replacement Note between Acadia-PA East Fordham Acquisitions, LLC, and Fordham Place Office LLC and TD Bank. All dated November 4, 2009. (5)
10.29 | Loan Agreement between New York City Capital Resource Corporation (the “Issuer”) and Albee Retail Development LLC (the “Company”), Copy of the Promissory Note from the Company to the Issuer and The Bank of New York Mellon, as trustee (the “Trustee”), Indenture of Trust (the “Indenture”) between the Issuer and the Trustee, Mortgage and Security Agreement and Assignment of Leases and Rents (Acquisition Loan) from the Company to the Trustee, Mortgage and Security Agreement and Assignment of Leases and Rents (Building Loan) from the Company to the Trustee, Mortgage and Security Agreement and Assignment of Leases and Rents (Indirect Loan) from the Company to the Trustee, Building Loan Agreement among the Issuer, the Trustee and the Company, Pledge and Security Agreement from the Company to the Trustee, Bond Guarantee Agreement from the Company and Acadia Strategic Opportunity Fund II LLC (the “Parent”) to the Trustee, Project Completion Guarantee Agreement from the Company and the Parent to the Trustee, all dated as of July 1, 2010 (5)
10.30 | Amended and Restated Note Agreement made by Albee Development LLC in favor of Bank of America, N.A., dated August 19, 2010 (5)
10.31 | Third Loan Extension and Modification Agreement by and among Acadia-P/A 161ST Street, LLC (Borrower), Acadia-P/A Holdings Company, LLC (Guarantor) and Bank of America, N.A., dated July 9, 2010 (5)
10.32 | Fourth Amendment to Project Loan Agreement and Amendment of Certain Other Loan Documents by and between P/A-Acadia Pelham Manor, LLC and U.S. Bank National Association, Not Individually but Solely as Trustee for the Maiden Lane Commercial Mortgage-Backed Securities Trust 2008-1 dated August 26, 2010 (5)
10.35 | Second Mortgage Modification Agreement by and between Acadia-P/A Liberty LLC and PNC Bank, National Association dated September 17, 2010 (5)
10.53 | Loan Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance Mortgage, Inc. dated December 9, 2005 (5)
10.61 | Loan Agreement between 239 Greenwich Associates Limited Partnership and Wachovia Bank, National Association dated January 25, 2007. (5)
10.63 | Loan Agreement between Acadia Merrillville Realty, L.P. and Bear Stearns Commercial Mortgage, Inc dated July 2, 2007. (5)
10.67 | Acquisition and Project Loan agreement between Acadia – PA East Fordham Acquisitions, LLC and Eurohypo AG, New York Branch dated October 5, 2007 (5)
10.69 | Revolving credit agreement between Acadia Strategic Opportunity Fund III, LLC. and Bank of America, N.A. dated October 10, 2007 (5)
10.70 | Mortgage Consolidation and Modification Agreement between Acadia Tarrytown LLC and Anglo Irish Bank Corporation, PLC dated October 30, 2007 (5)
10.71 | Project Loan Agreement between P/A – Acadia Pelham Manor, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 10, 2007 (5)
10.72 | Building Loan Agreement P/A – Acadia Pelham Manor, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 10, 2007 (5)
10.73 | Project Loan Agreement between Acadia Atlantic Avenue, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 26, 2007 (5)
10.74 | Building Loan Agreement between Acadia Atlantic Avenue, LLC and Bear Stearns Commercial Mortgage, Inc. dated December 26, 2007 (5)
31.1 | Certification of Chief Executive Officer pursuant to rule 13a–14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (5)
31.2 | Certification of Chief Financial Officer pursuant to rule 13a–14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (5)
32.1 | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (5)
32.2 | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (5)
99.1 | Amended and Restated Agreement of Limited Partnership of the Operating Partnership (6)
99.2 | First and Second Amendments to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (6)
99.3 | Third Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (7)
99.4 | Fourth Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (7)
99.5 | Certificate of Designation of Series A Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty Limited Partnership (8)
99.6 | Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty Limited Partnership (7)

Notes: |
(1) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal Year ended December 31, 1994
(2) | Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended September 30, 1998
(3) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2005.
(4) | Incorporated by reference to the copy thereof filed as an Exhibit to Yale University’s Schedule 13D filed on September 25, 2002
(5) | Filed herewith.
(6) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Registration Statement on Form S-3 filed on March 3, 2000
(7) | Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2003
(8) | Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended June 30, 1997
(9) | Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended March 31, 2009

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