Acadia Takes A Bite From The Big Apple
Joining forces with P/A Associates, the REIT is in the process of creating great retail for New York.
Randall Shearin

Acadia and P/A Associates plan to develop a 200,000-square-foot community center in Pelham Manor, New York, near Westchester County’s border with the Bronx.

With its first fund now fully invested, Acadia has launched its second opportunistic fund, Acadia Strategic Opportunity Fund II. While Fund II has the flexibility to do a broad range of investments, so far it has emphasized two exciting areas: first was the launching of Acadia’s Retailer Controlled Property (RCP) Venture with The Klaff Organization and its long-term partner Lubert Adler. Recently, Acadia announced that its RCP Venture was a participant in the acquisition of the 254-store Mervyn’s department store chain from the Target Corporation.

 “This is the first of what we hope will be many transactions of this nature,” says Kenneth Bernstein, president and chief executive officer of Acadia Realty Trust, based in White Plains, New York.

Acadia’s second growth strategy: an exciting urban/infill acquisition and redevelopment program, in conjunction with Aaron Malinsky and Paul Slayton of P/A Associates. In September 2004, the partnership purchased 400 East Fordham Road in the Bronx. The six-story property, a multi-level retail and commercial building, is located at the intersection of East Fordham Road and Webster Avenue, near Fordham University, in the strongest retail area of the Bronx. The market boasts over 650,000 people in a 2-mile radius and retail sales in excess of $500 million. The property is currently anchored with a multi-level Sears.

“Fordham Road is the retailing heart and soul of the growing Bronx communities. Population, income and home ownership are growing rapidly in this ethnically diverse county, creating wonderful retail sales opportunities,” says Aaron Malinsky. The partnership intends to redevelop the property in conjunction with the expiration of the Sears lease in 2007.

In September 2004, Acadia and P/A Associates purchased 400 East Fordham Road in the Bronx. The six-story property, a multi-level retail and commercial building, is currently anchored by a multi-level Sears. The partnership intends to redevelop the property in conjunction with the expiration of the Sears lease in 2007. Plans call for showcase windows on every floor, multiple street level entrances and a main atrium glass entrance.

Last month Acadia, also in conjunction with P/A Associates, entered into a 95-year ground lease to redevelop a 16-acre site currently improved with 320,000 square feet of warehouse space. The property is located in an urban, dense (400,000 people in a 3-mile radius), high-income market on Pelham Parkway in Pelham Manor, New York, on the border of the Bronx and Westchester County and is located approximately 10 miles from Manhattan. The redevelopment contemplates demolition of the existing warehouse buildings, which will be replaced by an approximately 200,000-square-foot multi-anchor community retail center.

Acadia anticipates the two redevelopments will cost between $60 million to $70 million, with construction projected to commence within the next 12 to 24 months.

“We believe that the anticipated long-term yields on this type of redevelopment activity will be well in excess of what can be achieved by acquiring shopping centers in the current highly competitive market,” says Joel Braun, senior vice president and chief investment officer of Acadia.

“Tenant demand in both of these counties is very strong. The retail community recognizes the needs of the urban consumer and this has fueled their expansion program,” says Joseph Povinelli, Acadia’s senior vice president of leasing. “It has been a difficult task for the retailers to find quality sites in the New York City boroughs as well as Westchester County. The sites have been challenging from an operational standpoint due to the lack of parking and multi-level buildings. However, most retailers are now showing flexibility and are willing and able to adapt in order to secure good sites.”

Wall Street has been listening to Acadia’s strategy. Acadia’s stock has been on a tear, and is now trading at an all-time high with total returns up over 40 percent in the past 12 months and almost 200 percent in the past 5 years. But it is clear that Bernstein and his team are not resting on their past accomplishments.

“We believe that the redevelopment of under-served, high-barrier to entry, urban markets provides our investors and shareholders with a much more attractive investment opportunity on a risk adjusted basis,” says Bernstein. “And our shareholders and investors are not paying us to either follow the herd or sit back and let exciting opportunities pass us by.”

©2004 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.