Financial Instruments and Fair Value Measurements

6 Months Ended

Jun. 30, 2025

Financial Instruments and Fair Value Measurements

8. Financial Instruments and Fair Value Measurements

The Company measures certain financial assets and liabilities at fair value on a recurring and nonrecurring basis in accordance with ASC Topic: 820, Fair Value Measurement. The following disclosure summarizes the valuation methodologies and classification within the fair value hierarchy for these instruments.

Items Measured at Fair Value on a Recurring Basis

The Company’s recurring fair value measurements include marketable equity securities and derivative financial instruments. The valuation techniques and classifications are as follows:

Marketable Equity Securities — The Company holds an investment in Albertsons common stock, which is traded on an active exchange and is classified as a Level 1 asset. This investment is included in Marketable securities on the Condensed Consolidated Balance Sheets at June 30, 2025 and December 31, 2024, respectively.

Derivative Financial Instruments — The Company utilizes interest rate swaps and caps to manage interest rate risk on variable-rate debt. These derivatives are over-the-counter instruments valued using observable market inputs, such as interest rate curves, and are classified as Level 2. Derivative assets are included in Other assets, net, and derivative liabilities are included in Accounts payable and other liabilities on the Condensed Consolidated Balance Sheets. See “Derivative Financial Instruments,” below.

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


	June 30, 2025							December 31, 2024
	Level 1		Level 2			Level 3		Level 1		Level 2			Level 3
Assets
Marketable equity securities	$	10,908	$	—		$	—	$	14,771	$	—		$	—
Derivative financial instruments		—		12,605			—		—		31,145			—
Liabilities
Derivative financial instruments		—		(2,836	)		—		—		(1,598	)		—

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the fair value hierarchy classification is based on the lowest level input that is significant to the valuation. Assessing the significance of a particular input requires judgment and takes into account factors specific to the asset or liability being measured.

The Company did not have any transfers into or out of Level 1, Level 2, and Level 3 measurements during the six months ended June 30, 2025, and 2024.

Marketable Equity Securities

During the six months ended June 30, 2025, the Company sold 0.2 million shares of Albertsons, generating net proceeds of $5.4 million. As of June 30, 2025, the Company held 0.5 million shares of Albertsons with a fair value of $10.9 million.

Dividend income from marketable securities totaled $0.1 million and $0.2 million for the three months ended June 30, 2025 and 2024, respectively, and $0.2 million and $0.3 million for the six months ended June 30, 2025 and 2024, respectively. These amounts are included in Realized and unrealized holding gains (losses) on investments and other on the Company’s Condensed Consolidated Statements of Operations.

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
Realized gain on marketable securities, net	$	5,406		$	3,586		$	5,406		$	7,580
Less: previously recognized unrealized gains on marketable securities sold during the period		(5,406	)		(3,586	)		(5,406	)		(7,580	)
Unrealized (losses) gains on marketable securities still held as of the end of the period and through the disposition date on marketable securities sold during the period		(225	)		(2,020	)		1,543			(4,035	)
Realized and unrealized (losses) gains on marketable securities, net	$	(225	)	$	(2,020	)	$	1,543		$	(4,035	)

Items Measured at Fair Value on a Nonrecurring Basis

Refer to Note 2 for fair value adjustments related to the acquisition of an additional 48% economic ownership interest in the Renaissance Portfolio.

Impairment Charges

Impairment charges for the six months ended June 30, 2025 are as follows (in thousands):

          
         Impairment Charge (a)

         Property Location

         Owner

         Triggering Event

         Effective Date

         Total

         Acadia's Share

New York, NY

Fund III

Reduced holding period

June 30, 2025

7,240

1,777

New York, NY

Fund IV

Reduced holding period

June 30, 2025

17,400

3,991

Total 2025 Impairment Charges (b)

24,640

5,768

(a)

The fair value of the Fund III property, which was classified as held for sale, was based on the purchase and sale agreement, excluding selling costs. The fair value of the Fund IV property was estimated using a discounted cash flow model with a discount rate of 9.25% and a capitalization rate of 8.25%, resulting in a Level 3 fair value of $28.6 million as of the June 30, 2025 measurement date.

(b)

An additional $0.4 million impairment related to the Company’s investment in Fifth Wall (Note 4) is included in Realized and unrealized holding gains (losses) on investments and other, in the Company’s Condensed Consolidated Statement of Operations.

Redeemable Noncontrolling Interests

The Company has redeemable noncontrolling interests related to certain properties. The Company periodically evaluates redeemable noncontrolling interests to determine whether the maximum redemption value exceeds the carrying value. As of June 30, 2025, no adjustment was required. Refer to Note 10 for further discussion regarding these interests.

Derivative Financial Instruments

The Company had the following interest rate swaps and caps for the periods presented (information is as of June 30, 2025, unless otherwise noted, and dollars in thousands):


					Strike Rate					Fair Value
Derivative Instrument	Aggregate Notional Amount		Effective Date	Maturity Date	Low			High	Balance Sheet Location	June 30, 2025			December 31, 2024
Core
Interest Rate Swaps	$	581,000	May 2022—Apr 2025	Apr 2026—Jul 2030	1.98%	—		3.35%	Other Assets	$	12,237		$	28,173
Interest Rate Swaps		252,000	Dec 2022—Jun 2025	Nov 2026—Apr 2030	3.41%	—		4.50%	Accounts payable and other liabilities		(1,997	)		(1,316	)
	$	833,000								$	10,240		$	26,857

Fund II
Interest Rate Swap	$	50,000	Jan 2023	Dec 2029	3.23%	—		3.23%	Other Assets	$	273		$	1,615

Fund III
Interest Rate Cap	$	33,000	Sep 2023	Oct 2025	5.50%		—	5.50%	Other Assets	$	—		$	1

Fund IV
Interest Rate Cap	$	54,500	Dec 2023	Dec 2025	6.00%		—	6.00%	Other Assets	$	—		$	2

Fund V
Interest Rate Swaps	$	65,885	Jan 2023—May 2023	May 2026—Dec 2027	3.36%	—		3.47%	Other Assets	$	95		$	1,352
Interest Rate Swaps		151,466	Mar 2024—Jun 2025	Mar 2026—Feb 2028	3.43%	—		4.49%	Accounts payable and other liabilities		(839	)		(282	)
Interest Rate Cap		32,200	Aug 2023	Sep 2025	5.00%	—		5.00%	Other Assets		—			2
	$	249,551								$	(744	)	$	1,072

Total asset derivatives										$	12,605		$	31,145
Total liability derivatives										$	(2,836	)	$	(1,598	)

All of the Company’s derivative instruments are designated as cash flow hedges and hedge the future cash outflows on variable-rate debt (Note 7). As of June 30, 2025, it is estimated that approximately $10.9 million included in Accumulated other comprehensive income related to derivatives will be reclassified as a reduction to interest expense within the next twelve months. As of June 30, 2025 and December 31, 2024, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. The Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated hedges.

During the six months ended June 30, 2025, the Company terminated three forward-starting interest rate swaps with an aggregate notional value of $100.0 million. The associated loss remains in Accumulated other comprehensive income and will be reclassified from Accumulated other comprehensive income into earnings as interest expense over the period during which the hedged forecasted transaction affects earnings.

Risk Management Objective of Using Derivatives

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

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

Credit Risk-Related Contingent Features

The Company’s agreements with its swap counterparties include provisions that could require immediate settlement of outstanding swap obligations in the event of a default. Specifically, if the Company defaults on certain unsecured debt obligations, such default may trigger a cross-default under the swap agreements, allowing the counterparties to declare an event of default and accelerate payment obligations under the swaps.

Other Financial Instruments

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


			June 30, 2025				December 31, 2024
	Level		Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value

Notes Receivable (a)		3	$	154,682	$	156,695	$	126,584	$	127,485
City Point Loan (a)		3		66,741		67,722		66,741		68,204
Mortgage and Other Notes Payable (a)		3		1,010,972		1,005,986		958,947		954,276
Investment in non-traded equity securities (b)		3		3,512		3,512		4,073		4,073
Unsecured notes payable and Unsecured line of credit (c)		2		803,500		807,503		589,000		589,018

(a)

The Company estimates the fair value of financial instruments using a discounted cash flow model. This model incorporates assumptions such as current market rates and, where applicable, the credit quality of the borrower or tenant. In addition, the Company evaluates the value of the underlying collateral, considering factors such as collateral quality, borrower creditworthiness, time to maturity, and prevailing market conditions. These fair value estimates exclude unamortized discounts and deferred loan costs. As of the reporting date, the estimated market interest rates used in the valuation ranged from 3.93% to 13.11% for the Company’s notes receivable and City Point Loan, and from 5.27% to 7.70% for the Company’s property mortgage loans and other notes payable, depending on the specific characteristics of each loan.

(b)

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

(c)

The Company estimates the fair value of its unsecured notes payable and unsecured line of credit using quoted market prices in active or brokered markets, when available. In instances where observable market prices are not available due to limited or no trading activity, the Company estimates fair value using a discounted cash flow model. This model incorporates a rate that reflects the average yield of comparable instruments issued by market participants with similar credit risk profiles.

As of June 30, 2025 and December 31, 2024, the carrying amounts of the Company’s cash and cash equivalents, restricted cash, rents receivable, accounts payable, and certain financial instruments classified as Level 1 within other assets and other liabilities approximated their fair values. This approximation is due to the short-term nature and high liquidity of these instruments.