Real Estate

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



	December 31, 2017			December 31, 2016

Land	$	658,835		$	693,252
Buildings and improvements	2,406,488			1,916,288
Tenant improvements	131,850			132,220
Construction in progress	18,642			19,789
Properties under capital lease	76,965			76,965
Total	3,292,780			2,838,514
Less: Accumulated depreciation	(339,862		)	(287,066		)
Operating real estate, net	2,952,918			2,551,448
Real estate under development, at cost	173,702			543,486
Net investments in real estate	$	3,126,620		$	3,094,934

Acquisitions and Conversions

During the years ended December 31, 2017 and December 31, 2016, the Company acquired the following consolidated retail properties (dollars in thousands):



Property and Location	Percent Acquired	Date of Acquisition	Purchase Price		Debt Assumed
2017 Acquisitions and Conversions
Core
Market Square Shopping Center - Wilmington, DE (Conversion) (Note 4)	100%	Nov 16, 2017	$	42,800	$	—
Subtotal Core			42,800		—

Fund IV
Lincoln Place - Fairview Heights, IL	100%	Mar 13, 2017	35,350		—
Shaw's Plaza - Windham, ME (Conversion) (Note 3)	100%	Jun 30, 2017	9,142		—
Subtotal Fund IV			44,492		—

Fund V
Plaza Santa Fe - Santa Fe, NM	100%	Jun 5, 2017	35,220		—
Hickory Ridge - Hickory, NC	100%	Jul 27, 2017	44,020		—
New Towne Plaza - Canton, MI	100%	Aug 4, 2017	26,000		—
Fairlane Green - Allen Park, MI	100%	Dec 20, 2017	62,000		—
Subtotal Fund V			167,240		—
Total 2017 Acquisitions and Conversions			$	254,532	$	—

2016 Acquisitions
Core Portfolio
991 Madison Avenue - New York, NY ^(a)	100%	Mar 26, 2016	$	76,628	$	—
165 Newbury Street - Boston, MA	100%	May 13, 2016	6,250		—
Concord & Milwaukee - Chicago, IL	100%	Jul 28, 2016	6,000		2,902
151 North State Street - Chicago, IL	100%	Aug 10, 2016	30,500		14,556
State & Washington - Chicago, IL	100%	Aug 22, 2016	70,250		25,650
North & Kingsbury - Chicago, IL	100%	Aug 29, 2016	34,000		13,409
Sullivan Center - Chicago, IL	100%	Aug 31, 2016	146,939		—
California & Armitage - Chicago, IL	100%	Sep 12, 2016	9,250		2,692
555 9th Street - San Francisco, CA	100%	Nov 2, 2016	139,775		60,000
Subtotal Core Portfolio			519,592		119,209

Fund IV
Restaurants at Fort Point - Boston, MA	100%	Jan 14, 2016	11,500		—
1964 Union Street - San Francisco, CA^(a)	90%	Jan 28, 2016	2,250		1,463
Wake Forest Crossing - Wake Forest, NC	100%	Sep 27, 2016	36,600		—
Airport Mall - Bangor, ME	100%	Oct 28, 2016	10,250		—
Colonie Plaza - Albany, NY	100%	Oct 28, 2016	15,000		—
Dauphin Plaza - Harrisburg, PA	100%	Oct 28, 2016	16,000		—
JFK Plaza - Waterville, ME	100%	Oct 28, 2016	6,500		—
Mayfair Shopping Center - Philadelphia, PA	100%	Oct 28, 2016	16,600		—
Shaw's Plaza - Waterville, ME	100%	Oct 28, 2016	13,800		—
Wells Plaza - Wells, ME	100%	Oct 28, 2016	5,250		—
717 N Michigan - Chicago, IL	100%	Dec 1, 2016	103,500		—
Subtotal Fund IV			237,250		1,463
Total 2016 Acquisitions			$	756,842	$	120,672

__________


(a)	These acquisitions were accounted for as asset acquisitions as the underlying properties did not meet the definition of a business.

All of the above acquisitions and conversions were deemed to be business combinations except 991 Madison Avenue and 1964 Union Street. The Company expensed $2.1 million of acquisition costs for the year ended December 31, 2017, of which $1.2 million related to the Core Portfolio and $0.9 million related to the Funds and $8.2 million of acquisition costs for the year ended December 31, 2016, of which $5.5 million related to the Core Portfolio and $2.7 million related to the Funds.

Revenues, net loss and loss per share from the Company’s consolidated 2017 acquisitions and conversions totaled $10.2 million, $3.5 million and $0.04, respectively for the year ended December 31, 2017. Revenues, net loss and loss per share from the Company’s consolidated 2016 acquisitions totaled $15.3 million, $4.7 million and $0.06, respectively for the year ended December 31, 2016.

Purchase Price Allocations

The purchase prices for the business combinations were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition. The following table summarizes the allocation of the purchase price of properties acquired during the years ended December 31, 2017 and December 31, 2016 (in thousands):



	Year Ended December 31, 2017			Year Ended December 31, 2016
	Year Ended December 31, 2017			Year Ended December 31, 2016
Net Assets Acquired
Land	$	48,138		$	225,729
Buildings and improvements	173,576			458,525
Other assets	84			3,481
Acquisition-related intangible assets (in Acquired lease intangibles, net)	44,269			63,606
Acquisition-related intangible liabilities (in Acquired lease intangibles, net)	(11,535		)	(72,985		)
Above and below market debt assumed (included in Mortgages and other notes payable, net)	—			(119,601		)
Net assets acquired	$	254,532		$	558,755



Consideration
Cash	$	200,429	$	439,546
Conversion of note receivable	41,010		—
Debt assumed	—		119,209
Liabilities assumed	3,363		—
Existing interest in previously unconsolidated investment	4,159		—
Change in control of previously unconsolidated investment	5,571		—
Total Consideration	$	254,532	$	558,755

Dispositions

During the years ended December 31, 2017 and December 31, 2016, the Company disposed of the following consolidated properties (in thousands):



Property and Location	Owner	Date Sold	Sale Price		Gain/(Loss) on Sale
2017 Dispositions
New Hyde Park Shopping Center - New Hyde Park, NY	Fund III	Jul 6, 2017	$	22,075	$	6,433
216th Street - New York, NY	Fund II	Sep 11, 2017	30,579		6,543
City Point Condominium Tower I - Brooklyn, NY	Fund II	Oct 13, 2017	96,000		(810		)
1151 Third Avenue - New York, NY	Fund IV	Nov 16, 2017	27,000		5,183
260 E 161st Street - Bronx, NY	Fund II	Dec 13, 2017	105,684		31,537
Total 2017 Dispositions			$	281,338	$	48,886

2016 Dispositions
Cortlandt Town Center (65%) - Mohegan Lake, NY (Note 4)	Fund III	Jan 28, 2016	$	107,250	$	65,393
Heritage Shops - Chicago, IL	Fund III	Apr 26, 2016	46,500		16,572
Total 2016 Dispositions			$	153,750	$	81,965

The Company has recognized impairment charges during the periods presented related to certain properties classified as held for sale and or sold (Note 8).

The aggregate rental revenue, expenses and pre-tax income reported within continuing operations for the aforementioned consolidated properties that were sold during the years ended December 31, 2017, 2016 and 2015 were as follows (in thousands):



	Year Ended December 31,
	2017			2016			2015
Rental revenues	$	13,021		$	16,946		$	31,935
Expenses	(18,964		)	(13,653		)	(27,265		)
Loss on extinguishment of debt	(1,380		)	(81		)	(111		)
(Loss) income from continuing operations of disposed properties before gain on disposition of properties	(7,323		)	3,212			4,559
Gain on disposition of properties, net of tax	48,886			81,965			89,063
Net income attributable to noncontrolling interests	(30,072		)	(70,850		)	(1,732		)
Net income attributable to Acadia	$	11,491		$	14,327		$	91,890

Properties Held For Sale

At December 31, 2017, the Company had one property in Fund II classified as held-for-sale, Sherman Avenue, with total assets of $25.4 million and recognized an impairment charge of $10.6 million inclusive of an amount attributable to a noncontrolling interest of $7.6 million (Note 8). This property had a net loss of $12.0 million and $0.8 million and $0.0 for the years ended December 31, 2017, 2016, and 2015, respectively. At December 31, 2015, the property was under development.

At December 31, 2016, the Company had one property in Fund II classified as held-for-sale with total assets of $21.5 million and subject to a mortgage of $25.5 million.

Pro Forma Financial Information (Unaudited)

The following unaudited pro forma consolidated operating data is presented for the year ended December 31, 2017, as if the acquisitions of the properties acquired during that period were completed on January 1, 2016 and as if the acquisition of the properties acquired during the year ended December 31, 2016 were completed on January 1, 2015. The related acquisition expenses of $2.1 million and $8.2 million reported during the years ended December 31, 2017 and 2016, respectively have been reflected as pro forma charges at January 1, 2016 and January 1, 2015, respectively. The unaudited supplemental pro forma operating data is not necessarily indicative of what the actual results of operations of the Company would have been, assuming the transactions had been completed as set forth above, nor do they purport to represent the Company’s results of operations for future periods.



	Year Ended December 31,
	2017		2016		2015
Pro forma revenues	$	266,485	$	247,843	$	243,237
Pro forma income from continuing operations	21,878		63,681		52,442
Pro forma net income attributable to Acadia	64,107		82,485		58,232
Pro forma basic and diluted earnings per share	0.77		1.02		0.79

Real Estate Under Development and Construction in Progress

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

Depreciation and amortization expense for the year ended December 31, 2017 includes $2.0 million of accelerated depreciation related to a building under development that was demolished.

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



	December 31, 2016			Year Ended December 31, 2017						December 31, 2017
	Number of Properties	Carrying Value		Transfers In		Capitalized Costs		Transfers Out		Number of Properties	Carrying Value
Core	1	$	3,499	$	22,422	$	819	$	4,843	2	$	21,897
Fund II	2	443,012		—		6,851		444,955		—	4,908
Fund III	3	50,452		—		22,572		9,085		2	63,939
Fund IV	4	46,523		80,508		2,158		46,231		1	82,958
Total	10	$	543,486	$	102,930	$	32,400	$	505,114	5	$	173,702

During the year ended December 31, 2017, the Company placed substantially all of Fund II’s City Point project into service as well as three Fund IV properties, reclassified Fund II’s Sherman Avenue property as held for sale and placed one Core property into development. In addition to the consolidated projects noted above, the Company had one unconsolidated project remaining in development after placing three of its four unconsolidated Fund IV development properties into service during the year ended December 31, 2017.

Construction in progress pertains to construction activity at the Company’s operating properties which are in service and continue to operate during the construction period.