INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Core Portfolio

The Company owns a 22.2% interest in an approximately one million square foot retail portfolio (the “Brandywine Portfolio”) located in Wilmington, Delaware and a 49% interest in a 311,000 square foot shopping center located in White Plains, New York (“Crossroads”). These investments are accounted for under the equity method.

During September 2011, the Company acquired a 50% equity interest in the Georgetown Portfolio (Note 4). The unaffiliated venture partner for the Georgetown Portfolio maintains control over this investment and, as such, the Company accounts for this investment under the equity method. Due to this acquisition, the Company reclassified an existing $8.0 million mezzanine loan collateralized by five properties within the Georgetown Portfolio from Notes Receivable to Investments in and Advances to Unconsolidated Affiliates.


5.	INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)

Opportunity Funds

RCP Venture

During 2004, the Company along with Klaff Realty, LP (“Klaff”) and Lubert-Adler Management, Inc. (“Lubert-Adler”) 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. Investments under the RCP Venture are structured as separate joint ventures as there may be other investors participating in certain investments in addition to Klaff, Lubert-Adler and Acadia. 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, 2011, Acadia Investors have made investments in Mervyns Department Stores (“Mervyns”) and Albertsons including additional investments in locations that are separate from these original investments (“Add-On Investments”). Additionally, Acadia Investors have invested in Shopko, Marsh and Rex Stores Corporation (collectively “Other RCP Investments”).

The Acadia Investors have non-controlling interests in the individual investee LLC’s as follows:



			Acadia Investors Ownership % in:
Investment	Investee LLC	Acadia Investors Entity	Investee LLC	Underlying entity(s)
Mervyns	KLA/Mervyn’s, LLC	Mervyns I and Mervyns II	10.5%	5.8%
Mervyns Add-On investments	KLA/Mervyn’s, LLC	Mervyns I and Mervyns II	10.5%	5.8%
Albertsons	KLA A Markets, LLC	Mervyns II	18.9%	5.7%
Albertsons 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 Albertsons 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. Other than the minority investor rights to which the Company is entitled pursuant to statute, it has no rights other than to receive its pro-rata share of cash distributions as declared by the managers of the Add-On Investments and Other RCP Investments. The Company has no rights with respect to the control and operation of these investment vehicles, nor with the formulation and execution of business and investment policies.

During the three months ended September 30, 2011, the Company received RCP Venture distributions totaling $4.5 million, and for the nine months ended September 30, 2011 received distributions of $6.9 million. The Operating Partnership's share of these distributions for the three and nine months ended September 30, 2011 totaled $0.9 million and $1.5 million, respectively.


5.	INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)

The following table summarizes activity related to the RCP Venture investments from inception through September 30, 2011:



(dollars in thousands)						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		3,558		1,046		819
Albertsons	2006	20,717		81,594		4,239		16,318
Albertsons Add-On investments	2006/2007	2,416		1,679		388		336
Shopko	2006	1,108		1,659		222		332
Marsh and Add-On investments	2006/2008	2,667		2,639		533		528
Rex Stores	2007	2,701		840		535		168
		$	62,184	$	137,935	$	11,864	$	29,752

Other Opportunity Fund Investments

Fund II Investments

Prior to June 30, 2010, 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 interest in the project from its unaffiliated partner and, as a result, now consolidates the CityPoint investment.

Fund III Investments

The unaffiliated venture partners for the Lincoln Road (Note 4), White Oak (Note 4) and the White City Shopping Center investments maintain control over these entities and, as such, the Company accounts for these investments under the equity method.

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. The 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.


5.	INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (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, 2011			December 31, 2010
Combined and Condensed Balance Sheets
Assets
Rental property, net	$	260,436		$	186,802
Investment in unconsolidated affiliates	162,240			192,002
Other assets	29,321			27,841
Total assets	$	451,997		$	406,645
Liabilities and partners’ equity
Mortgage note payable	$	298,065		$	267,565
Other liabilities	16,787			13,815
Partners’ equity	137,145			125,265
Total liabilities and partners’ equity	$	451,997		$	406,645
Company’s investment in and advances to unconsolidated affiliates	$	78,420		$	31,036
Company's share of distributions in excess of share of income and investments in unconsolidated affiliates	$	(21,401	)	$	(20,884	)



	Three Months Ended						Nine Months Ended
(dollars in thousands)	September 30, 2011			September 30, 2010			September 30, 2011			September 30, 2010
Combined and Condensed Statements of Operations
Total revenues	$	10,290		$	7,317		$	30,789		$	21,787
Operating and other expenses	3,699			2,550			10,993			7,158
Interest expense	4,274			3,392			12,532			10,107
Equity in earnings (losses) of unconsolidated affiliates	13,472			(681		)	13,060			2,083
Depreciation and amortization	2,222			1,057			6,467			3,745
Loss on sale of property, net	—			—			—			(2,957		)
Net income (loss)	$	13,567		$	(363	)	$	13,857		$	(97	)

Company’s share of net income	$	3,208		$	241		$	3,318		$	904
Amortization of excess investment	(98		)	(98		)	(293		)	(294		)
Company’s share of net income	$	3,110		$	143		$	3,025		$	610