Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2019 Acadia Realty Trust earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the call over to your host, Brandon Clark. Sir, please go ahead.
Good afternoon, and thank you for joining us for the fourth quarter 2019 Acadia Realty Trust earnings conference call. My name is Brandon Clark, and I am an analyst in our Acquisitions department. Before we begin, please be aware that statements made during the call that are not historical may be deemed forward-looking statements within the meaning of the Securities Exchange Act of 1934, and actual results may differ materially from those indicated by such forward-looking statements. Due to a variety of risks and uncertainties, including those disclosed in the company's most recent Form 10-K and other periodic filings with the SEC, forward-looking statements speak only as of the date of this call, February 13th, 2020, and the company undertakes no duty to update them. During this call, management may refer to certain non-GAAP financial measures, including funds from operations and net operating income.
Please see Acadia's earnings press release posted on its website for reconciliations of these non-GAAP financial measures with the most directly comparable GAAP financial measures. Now it is my pleasure to turn the call over to Ken Bernstein, President and Chief Executive Officer, who will begin today's management remarks.
Thanks, Brandon. Good afternoon. We had another solid quarter, but before we drill into last quarter's results, I'd like to start with a review of some of the trends that we are seeing and how we have been positioning Acadia to capitalize on them. After that, Amy will discuss our fund platform and our progress on that front. Finally, John will discuss our quarterly results, our balance sheet metrics, and our forecasts for 2020. First, in looking back on 2019, the year played out consistently with what we previously described as a bumpy bottom for retail real estate, meaning that while not ignoring the continued headwinds, by most measures, leasing demand and tenant performance were better in 2019 than it was in the prior two years. So far this year, we see that trend continuing.
We call it bumpy because we are still working through a slower than desirable separation of the haves and have-nots amongst both retailers as well as retail real estate. Fortunately, as we begin to cut through the fog of the last few years, we can see with increased clarity how the recovery from this highly disruptive period is playing out. This does not ignore the impact of e-commerce or other headwinds, but it is becoming increasingly clear that almost all types of retailers are recognizing the importance of the physical store. Last year, we saw the following positive drivers begin to take form. First of all, there is still no simple one-size-fits-all answer for what the formula is for a successful 21st-century retailer. Thankfully, there are a variety of formats that are succeeding.
On one end of the spectrum, retailers ranging from TJX to Trader Joe's, both of which are significant tenants in our portfolio, they continue to drive very profitable businesses, primarily, if not exclusively , from their stores, with limited investment or distraction from the rise of e-commerce or the cost of free delivery. One driver of store demand is simply coming from this group of traditional retailers that continue to expand and do solid in-store business. These retailers are being selective, and they're generally using their clout to locate in the best , as opposed to the least expensive locations. Thus, our portfolio benefits from this migration and quality. On the other end of the spectrum, a second driver of new store demand is coming from several dominant retailers who are successfully using technology combined with the benefits of their stores to drive their omni-channel execution.
Both Target and Walmart are great examples of retailers investing both in their stores and their online initiatives. For instance, Target, which is the largest tenant in our portfolio, is differentiating itself by adding stores closer to its shoppers. Their focus on key gateway markets throughout the country, including here in New York, is consistent with Acadia's portfolio, where , amongst our Target's locations , is Sullivan Center in Chicago, our City Center redevelopment in San Francisco, and our City Point development in Brooklyn.
A third driver of increased demand for stores is coming from the growth of DTC or direct-to-consumer, where retailers who formerly focused on online-only sales or wholesale distribution through department stores are now recognizing the importance of having their own stores. In the case of the online digitally native retailers, while e-commerce retailing is going to continue to grow, it is becoming clearer that investor-subsidized growth without a clear pathway to profitability is becoming an increasingly difficult challenge for all but the best capitalized e-commerce companies. Most importantly, many of these retailers are now recognizing that the store is the best pathway to profitability for them. Retailers are increasingly telling us that when they open a successful store where they previously only had an online presence, their online sales go up in that market as opposed to being cannibalized.
While we're seeing this trend play out on several of our key retail corridors, one of the more compelling examples is Armitage Avenue in Lincoln Park, Chicago. Over the past two years, our team has successfully converted Armitage from more traditional apparel retailing to some of the more exciting, younger, and digitally native brands. Through a series of acquisitions, we control enough of Armitage to have been able to replace tired retailers with exciting tenants, beginning with Warby Parker and Bonobos, but now including Allbirds, Serena and Lily, Outdoor Voices, and several others. Now that the vacancies on the street have been filled, now that these new retailers are showing successful results, we now have enough incremental demand and enough supply constraint to enable us to see attractive rental growth. In fact, we have seen market rents grow over the past two years by approximately 20%.
We are also seeing increased DTC demand from brands that previously relied more heavily on department stores and other wholesale channels, and are now focused on opening mission-critical stores in key streets and key markets. We are seeing this have a positive impact throughout our street and urban portfolio. Certainly, it was part of the rationale of our recent acquisition in Melrose Place in Los Angeles, where , in the fourth quarter, we acquired a portfolio of five contiguous buildings. For many retailers on that street who might have previously focused primarily on wholesale distribution through department stores, Melrose Place is now key to their L.A. presence.
Finally, what we have found throughout our street and urban portfolio is that where we can aggregate enough buildings in the right locations, where we can connect the dots in the right markets, and then use our team's capabilities to curate these streets with the right mix of tenants. This can lead to strong long-term growth. Now, that being said, rents on many of the great shopping corridors have been a rollercoaster ride. As we have pointed out many times in years past, rents grew way too fast and then corrected abruptly. We have worked very hard to make sure we have mitigated our exposure to this volatility.
Thankfully, not only were our results solid last year, but if we look at our results over the last decade, while it has been a bumpy road, NOI growth for our street and urban assets has averaged 4% over that extended period. We see this trajectory continuing when we look forward over the next several years. While our NOI this year will be impacted by some long-anticipated bankruptcies of tenants like Pier 1 and Forever 21 , and a couple of important re-leasings, we are well on our way to the profitable re-leasing of these spaces. As these positive trends continue to play out, we believe Acadia's portfolio is well-positioned to disproportionately benefit from them. Complementing this internal growth is the accretion from our external investment activity, both with respect to our Core Portfolio and our fund platform.
Our acquisition team did a very strong job this past year of finding and executing on compelling investment opportunities that are consistent with the trends I've been discussing. During 2019, we completed over $500 million of new acquisitions. The team also completed $100 million of dispositions. Collectively, this activity, the additions from acquisitions, and the subtractions from dispositions should add about $0.05 or roughly 3% of annual FFO accretion. More importantly, in terms of our core acquisitions, they include great additions in SoHo, Armitage Avenue, and Melrose Place, which are consistent with our focus on those streets and urban properties in key must-have markets where we believe we can capture outsized growth over an extended period of time. All of these acquisitions are well-positioned to capitalize on the retailing trends I discussed earlier.
While these portfolios are well-leased today, we have also received strong retailer interest for when we have the opportunity to re-lease some of these locations. In addition to these core investments, subsequent to year-end, we closed on a structured finance loan on a retail and mixed-use property in Brooklyn adjacent to Industry City. We'll get into the details of this on our next quarterly call, but the transaction is in conjunction with a borrower, Madison Capital, with whom we have done significant business over the years and hold in high regard, and a lender, Blackstone, with whom we've also done significant transactions with over the years. Our position in the capital stack affords us a very attractive risk-adjusted return and a comfortable position on a price per square foot basis , as well as yield on stabilization. Turning to our fund investments.
While our focus for our core has been on supply- constrained must- have markets. In our fund platform, we have, for the last couple of years, been opportunistically acquiring out-of-favor suburban shopping centers, where, through careful underwriting, we have been able to achieve mid-teens levered returns. Last year, we completed $320 million worth of these investments on behalf of Fund V. So far, a few years in, we have acquired about $650 million of centers that have successfully maintained levered yields in excess of 15%. It is rare to see the spread between borrowing costs and unlevered yields be as wide as they are now, such that we can achieve our return goals from existing cash flow without material growth or capital appreciation. Fourth quarter activity was quiet as sellers over the last couple of years, primarily public REITs, have substantially slowed their disposition process, in some cases making acquisitions.
Now we're seeing private institutions seeking liquidity for a variety of reasons, and we expect our fund investment pipeline to refill. While this transition often takes a couple of quarters, most indications are that there is still a lack of institutional capital to cause pricing to have moved materially from the last couple of years. Eventually, that's going to change. In the interim, we'll continue to opportunistically add similar assets as attractive leverage returns continue. If cap rates begin to compress materially below the 8% yield that we're now at, there's nothing against our profitably recapitalizing or selling existing Fund IV and Fund V suburban shopping centers that would be worth in excess of $1 billion. While our investment thesis does not require capital appreciation to achieve mid-teen returns, there is absolutely nothing wrong with outperforming those goals.
In conclusion, as supported by a strong performance in the fourth quarter, we see enough opportunities for growth that we can continue to drive solid NOI growth in our Core Portfolio, continue to carefully and creatively add assets to our core, and finally, utilize our fund platform for opportunistic growth. Now I'll turn the call over to Amy.
Thanks, Ken. Today, I'll review the steady and important progress that we continue to make on our fund platform's buy, fix, sell mandate, beginning with acquisitions. During 2019, we completed approximately $320 million of acquisitions. Over the past few years, we've successfully aggregated an approximately $650 million portfolio of open-air suburban shopping centers on behalf of Fund V, and we've done so at an unleveraged yield of approximately 8%. With 2/3 leverage at a blended all-in interest rate of 3.7%, we are currently clipping a high teens yield on our invested equity. This 14-property portfolio has strong geographic diversity. Based on invested equity, 39% is in the Northeast, 26% is in the South, 12% is in the Midwest. These are primarily non-supermarket anchored properties. Top tenants include The TJX Companies, Ross Dress for Less, Best Buy, and Walmart.
As previously discussed, cash flow stability is key to our strategy. To that point, we're pleased to report that these carefully selected assets continue to perform consistent with our underwritten expectations. Turning now to dispositions. During 2019, we completed approximately $100 million of dispositions. This compares to approximately $75 million of fund disposition volume in 2018. Looking ahead, we continue to actively assess our portfolio for monetization opportunities. Finally, with respect to existing investments, strong leasing velocity continues at City Point, our urban retail property in downtown Brooklyn. During 2019, we executed leases for more than 60,000 square feet of space, and looking ahead, we have a healthy pipeline. Our 2019 activity included an expansion of Alamo Drafthouse, which is already one of the most productive movie theaters per screen in the country.
Alamo leased another 25,000 sq ft at City Point, which will enable it to respond to strong demand from moviegoers by doubling its screen count and adding a second kitchen. During 2019, we also executed an 18,000 sq ft lease with NYU Dental on the fourth and fifth floors. On the ground floor, we were pleased to welcome CAMP, a family experience store, and Casper, both now open. Looking ahead, McNally Jackson, a longstanding New York City-based independent bookstore, is planning to open on Prince Street this month. We are accelerating leasing discussions with other leading national brands for Prince Street space. Overall, as it relates to this final lease-up, we have remained patient and selective, focused on merchandise mix and retailers' ability to deliver strong sales volume at the successful project. After all, our concourse level is already delivering sales of approximately $100 million.
City Point benefits from its strong location at the epicenter of growth in downtown Brooklyn and its critical mass of compelling food, entertainment, and soft goods uses, which continues to drive strong foot traffic and anchor sales. In conclusion, we had another productive quarter in our fund platform as we continue to execute on our opportunistic and value-add investment strategy, monetize our stabilized properties, and create value within our existing Funds portfolio. Now, I'll turn the call over to John.
Thank you, Amy, and good afternoon. I will begin with an overview of the quarter, followed by a discussion on our 2020 guidance, and then closing with an update on our balance sheet. Starting with the same-store NOI. Same-store NOI grew 3.9% for the year and 3.1% during the fourth quarter. It's worth highlighting that our current quarter's growth is being driven by a strong fourth quarter 2018 comp, which was in excess of 4%. Our street and urban portfolio continued to drive our same-store results with growth of approximately 6% in 2019, and 1% coming from our suburban portfolio. As a reminder, our street and urban portfolio comprises over 70% of our underlying core net asset value.
As outlined in our release, we are guiding towards 1.5% - 2.5% of same-store NOI growth in 2020. Now, before diving into some of the details for 2020, I want to reiterate that our Core Portfolio remains on track to produce long-term growth in excess of 4%, inclusive of a 1% contribution from redevelopments over the next several years. Now, in terms of 2020, incorporated into our guidance includes the previously discussed expiration of a handful of street leases, along with the anticipated impact from a couple of known tenant exposures, namely Forever 21 and Pier 1. The combined aggregate impact of our street rollover and known tenant exposures is estimated to be in a 150 to 200 basis point range on our 2020 same-store NOI expectations. Starting with the expiring street leases.
As we had discussed on our prior call, upon the natural expiration of the leases, we recently got back a few of our best street locations, including spaces on Rush and Walton in Chicago, Mercer Street in SoHo, and Greenwich Avenue in Greenwich, Connecticut. Consistent with Ken's remarks on must-have locations, we experienced significant retailer demand for these spaces, and thus, we have already profitably leased or are in the final stages of leasing the vast majority of these spaces. We will provide additional details over the coming months on the exciting retailers that we will be adding to these key streets. Additionally, as we had previously discussed, we had a single Forever 21 along with four Pier 1 locations in our Core Portfolio.
In terms of Forever 21, we have recently taken back their location in Lincoln Park and are in the midst of working through various profitable alternatives, ranging from an as-is lease-up to a possible redevelopment and densification option. As it relates to Pier 1, while we have not yet gotten back any of the space, our 2020 guidance assumes that we do. In anticipation, we have a clear and profitable path forward with the majority of locations spoken for at rents in excess of what we are currently collecting. As rents begin to commence on these executed leases, this will be a tailwind for us in the latter half of the year as well as into 2021, while at the same time creating some softness in our first half 2020 results.
It's also worth pointing out that the NOI from our most recent core acquisitions are projected to grow in excess of 4% over the near term. We will begin reporting the accretion from these investments within our same-store pool, beginning with our 2021 metrics. Now moving on to spreads. We had strong spreads on conforming new leases executed this past quarter, driven by our street and urban portfolio, with growth of approximately 24% and 30% on a cash and GAAP basis, respectively. In terms of overall lease activity, over the past year, our leasing team not only achieved strong volumes but also continued to execute on rents in line with or in excess of our expectations. Consistent with Ken's remarks, our leasing team is experiencing an overall environment that feels noticeably more stable than what we experienced a few years ago.
Between conforming and non-conforming new leases within our Core Portfolio, our team executed approximately $9 million of ABR on over 225,000 sq ft in 2019, with over 70% coming from our street and urban portfolio. While rollover within our portfolio creates a bit of choppiness in our short-term same-store NOI and FFO results, this has and will continue to be a profitable experience for us and continues to validate our underlying thesis that our Core Portfolio is set up to generate 3%-4% of sustained NOI growth. In terms of earnings, our fourth quarter FFO was in line with our expectations at $0.32 a share and $1.41 for the year. Our full year 2019 came in at the high end of our initial pre-transactional range.
This strength came from a combination of better-than-expected internal growth within our core, along with the accretion of our $500 million of core and fund acquisitions executed during 2019. As outlined in our release, we are anticipating an overall 2020 FFO of $1.32-$1.46, with the variability in this range being driven by potential transactional activities within our dual platform. While we don't provide quarterly guidance, I would point out that between the expected timing of rent commencement on the street leases I just discussed, along with the monetization of potential transactional activities, we see increased strength showing up in the second half of the year. Now, moving on to our balance sheet. Our balance sheet continues to remain exactly where we want it in terms of overall leverage, borrowing cost, and maturity profile.
As Ken mentioned, we created approximately $0.05 of FFO in 2019 through our external growth, deploying over $500 million between our core and fund businesses. We have the balance sheet bandwidth to do a similar volume in 2020 through anticipated repayments on maturing loans, recycled capital from our fund business, and the proceeds we raised through the sale of a core suburban asset in 2019. In summary, we ended a strong year with a strong quarter. Through the combination of internal and external growth, we believe we have continued to operate and assemble a best-in-class portfolio that is set up to drive meaningful value creation. With that, I will turn the call over to the operator for questions.
Thank you. As a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Again, to ask a question, press star one. Please stand by while we compile the Q&A roster. Our first question comes from the line of Craig Schmidt of Bank of America. Your line is open.
Thank you. I was wondering who you're competing with regarding your acquisitions, and where you get a collection of contiguous high street assets?
It's interesting, Craig, because there is no specific one group that shows up consistently. There are a couple of private funds that have been set up to do this. One of them, Asana Partners, for instance, is continuing to acquire, although as often as not, we're finding them not where we are at a specific time. They were the ones who cashed us out of our transaction, you may recall, in the West Loop of Chicago, where we had a preferred position. They're a very good and capable group. In general, our biggest competition right now for these great assets is simply getting sellers to understand the reality of where rents are today and thus where pricing is.
What we have found is that when sellers are realistic and cognizant of what's going on, we're in a uniquely good position because there is much less capital formation today for these kinds of assets than in the last five, 10, 15 years.
Great. Then , on the DTC, the direct-to-consumers, how big of a trend do you see this being, and how successful have these vendors been in terms of opening their own store and operating them profitably?
I'll start with a question for you. How bullish are you about the rebound of the department store? Okay. I'll take that as a non-answer, and I won't answer it either. One component of this is coming just from the reality that until that channel rebounds, the best way for so many brands to connect with their consumer on a cost-effective basis, where they have a lower cost per acquisition of that customer, higher repeat sales, and frankly, higher profit margin, is that they're recognizing that they have to be good at retailing. It's not easy. It's a tough business. Not everyone will succeed. We are seeing increased demand from that side of DTC.
The other side of direct to consumer is the digitally native, where you have now seen enough headlines over the last year that if you do not have a pathway to profitability in a relatively short period of time, it is really hard to grow your business online only. One, the cost per acquisition of a customer is going up, not down. Two, the profit rate for that pure online sale is very low and difficult, and the business is hard to scale. And then when those DTC tenants show up, and we talked about that on Armitage Avenue, they are seeing four-wall profitability.
They are also seeing what we refer to as the halo effect, which is that their online sales go up. It kind of makes sense because you get to try something on when you go into Allbirds, and whether you buy it in that store or online, they don't really care. It makes returns easier. It increases the customer's connection with the brand. We're seeing all of that grow. Now, that being said, I should temper everyone's expectation. None of these brands are articulating to us that they are going to replicate the 1,000-store fleet of years past. We're having to be very selective about which corridors we see this working.
I give our team a lot of credit for making sure we are in front of all of these brands and understanding who's going to succeed and who may not, that we're structuring these leases carefully, and that we're prepared for the appropriate level of turnover that comes with this trend. Do not expect this component of our business to compete with the revenues we're collecting from Target. Do expect to see a level of excitement on those corridors, a level of rental growth, I think , over a long time, a longer period of time, you're going to see this resonate in a permanent way.
Thank you.
Sure.
Thank you. Our next question comes from Floris van Dijkum of Compass Point. Your line is open.
Great. Thanks for taking my question, guys. I had a couple of questions. Number one, John, maybe if you could walk us through, you talk about your Pier 1 and Forever 21 impact and some of the total reserve that you're taking of 150-200 basis points impact on your same store for 2020. How much of that is bad debt reserve versus known tenants leaving?
Thanks, Floris. I would say first starting with Forever 21, that we actually recaptured right at the end of the year. Forever 21 is not in our bad debt reserve. We, in fact, have it back , and that's fully out. In terms of Pier 1, going back to what I said on the call, our guidance assumes that we're getting, so we have four spaces, and we assume we get all of that back. The assumption is that we get that back early in the year. What I can tell you is that right before the call, I confirmed that Pier 1 paid. I can't confirm the check cashed, but I can confirm they did pay February rent. We do have them coming out early in the year.
What we did, given that we haven't got the spaces back, not entirely sure when we'll get them back , other than we're assuming we do. We built in, what I mentioned on the call, 150 to 200 basis points sort of reserve into our same store for the expected recapture for that, which is inclusive of the street rollover that we've had as well , is baked into that. Getting back to your question on reserve. Pier 1 is out; call it in at the beginning of the year. Without giving you the exact month, it's effectively out, and on top of that, we've put a 1% reserve in our credit, which is consistent with what we had last year.
Great. Another question, maybe the wide range in guidance, I guess, is largely due to the activity in the fund platform, and there's a pretty wide range. John or Amy, maybe, is that dependent on a number of transactions happening, or is it also the size of transactions that you're looking at that could vary?
Yes to both, right? I think we're still early in the year and don't want to go through the specific deals of what and when it could unwind , other than we just highlighted that we expect it to happen in the latter half of the year. It's a number of potential things, Floris, that we think could show up as they do each year.
Could you walk us through maybe the Pacesetter transaction? I believe you sold the asset but provided a loan to the buyer as well.
Sure. This was one of the, you may recall , in the third quarter call, we had two grocers that we had the ability to re-tenant , and we did have them re-tenanted. The grocer on the Pacesetter asset came with an investor group and wished to purchase the asset at an incredibly attractive price that, as we put out in our release, we were able to creatively reinvest that. As part of that, they gave a very secure first financing that doesn't go out very far to accommodate. They had a 1031 money that they had to put to work, so short-term financing that we bridged to get their permanent financing.
Got it. The expectation is that it's going to get paid out pretty quickly-
Correct.
If I recall it. Okay. Maybe one last question from me. Rents, you talk about Armitage clearly, where you're seeing rental growth already. Would you call rents bottoming out in SoHo? Then maybe if you touch upon some of the other New York markets that tend to get a little bit more press, like Fifth Avenue or Times Square. Where do you see rents bottoming out? Have we reached that stage yet? Maybe if there's some particular evidence you can talk about in SoHo about why you feel so confident about that market.
Sure. It's building by building, street by street. I am less comfortable talking about other people's assets than our own, with the following caveat. Asking rents are a very peculiar animal, especially on streets, because people can ask whatever they want. Asking rents very well may still decline for a significant period of time because we've seen a meaningful decline in execution rents, 22% as much as 50%. That doesn't require a landlord to reduce his asking rents. Don't be surprised to see asking rents continue to decline. What we are seeing in our portfolio on the streets that we're active in, SoHo specifically, as opposed to a year or 24 months ago, tenants are showing up
While they're all certainly focused on where rents are, that's frankly just one piece of an overall puzzle of why they want to open a store. What's the cost of opening a store? How mission-critical is it? What we're hearing from tenants throughout the country and throughout the world is that, now that rents have reset in SoHo, it's one of those markets where they can present themselves to their customers in a unique way. There are a lot of other choices, and you could think in New York City alone, you could say, "Well, what about here and what about there?" I'm not going to mention those, but needless to say, Times Square is a much different shopping experience than SoHo. Times Square is providing significant marketing importance to a variety of retailers.
We're not currently invested there, so I won't comment on where those rents are relative to the market. Specifically , in SoHo, we are seeing that rebound , and that's why we have been adding there.
Great. Thanks, guys .
Sure.
Thank you. Our next question comes from Vince Tibone of Green Street Advisors. Your line is open.
Hey, good morning. I'm just curious of how much you're looking to grow the Structured Financing portfolio over the next, let's say, year or two. Is this something you're considering more seriously now than maybe over the last few years? Is the current deal more of a one-off? How do you just weigh that business as a source of funds or use of funds, rather, compared to core acquisitions?
Yeah. What we have said in the past, and continues to be the case , is that a component of our book has been reduced pretty significantly over the last several years, somewhat because of where rates have gone. Also , because we never want it to be more than 10% of our overall gross asset value, and now it's considerably less. We have been paid back successfully on a bunch of deals, and it's situational events, meaning if there's the right opportunity, we will pursue it, especially if it's an asset that we think is long-term consistent with something that we'd be prepared to own if the opportunity arose. That being said, this latest deal, we will make a high single-digit and under certain circumstances, low-double digit IRR. We're very safe in the capital stack and on a risk-adjusted basis. We said, you know what.
That's probably a pretty good place to put some dollars over the next several years. It is not something that we're going to do or grow significantly, or I don't anticipate in assets that we're not passionate about.
Got it. Makes sense. Next question is just on the acquisition of Prince and Broadway. Just curious how you underwrote the tenant risk there, given the space is currently leased to Pink. There's some uncertainty with that retailer. Are you expecting to get that space back? Is that how you underwrote the building?
Absolutely. They have a few years left, and we would be happy to take it back sooner. Indications are that that won't be the case. We have plenty of lead time, but we look forward to getting that space back and re-tenancing it. If , through the transactions that occur, they become more aggressive, more passionate, then we certainly would be happy to talk to them as well.
Interesting. All right. Thank you.
Sure.
Thank you. Our next question comes from Todd Thomas of KeyBanc Capital Markets. Your line is open.
Hi. Thanks. John, the first question I have is on the same-store NOI growth and the same-store pool, and the guidance implies growth in core property NOI of about 1.5%- 1.6%, but the same-store NOI growth forecast is 1.5%-2.5%. I appreciate the clarification about the 150 - 200 basis point same-store reserve, but can you help us understand what assets are maybe moving in and out of the same-store pool for the year, either for redevelopment purposes or otherwise , as you've taken back some spaces and recaptured some space?
No, absolutely, Todd. I think the first one would be, if you look in our supplemental, and this is one we had mentioned last quarter. We had an Acme at our Elmwood Park property. That one, we've taken that back. We will be demolishing the former Acme space as we transition that to legal and additional expansions beyond that. That one is out of the pool and in redevelopment. Forever 21, as I mentioned on the call, we are at this point still evaluating what the most profitable real estate deal for us. To the extent we do a demolition of that, we would put that into the redevelopment pool. That's one that we will give more clarity on as we have it. That is a possibility that could be in there.
On the Pier 1s, we haven't gotten the space back yet, so we can't definitively make a call, but there's a handful of those that would be redevelopment possibilities, including one we have in Lincoln Park that we would actively look to redevelop. We'll provide more clarity as we have it.
Okay, got it. As it stands today, the 1.5% - 2.5%, so that includes Forever 21 being taken back , and Pier 1 is still in that range as well?
Yeah. I think Forever 21, we do have it back, right? As I mentioned in my notes, it'll be an as-is lease-up, which we would have a few months of downtime, or it would be redevelopment, and we will update you for certain on the first quarter call.
Okay. Then, Ken, in terms of core acquisition, your cost of capital has risen a little bit here in recent months, and I understand you don't have anything-
Thanks for reminding me.
I understand you don't have anything embedded in the guidance for the core. I'm assuming that you're in the market , having discussions with sellers and brokers. How quickly are you able to turn on and off those discussions, and does that impact your ability in the long run to win deals and source investments, just given the sensitivity that you have to your stock price?
Yes. The short answer, and there's always a balance. If my acquisition team spent every hour looking at their stock price, they'd never get a deal done. Generally, these deals take a long period of time where stock can move considerably during a negotiation period. Given our historic track record of match funding, given our historic track record of making sure that our acquisitions are: one, NAV accretive; two, generally FFO accretive; and three, consistent with our long-term focus. I don't intend ever to abandon that and say, "What the heck, we're just going to lever up." That being said, as John alluded to in the prepared remarks, we have other sources of capital coming back in. We have capacity within our balance sheet, so that if something were compelling today, even though I would not issue stock at today's level, we certainly could consider it.
That being said, the stars have to align in order for us to do a core acquisition. You need to check the boxes I just said. I would still argue today that the biggest challenge is finding realistic sellers. When we find realistic sellers, one way or another, we find a way to get these deals done. We have very good, strong institutional relationships for capital. We obviously have our fund business. My biggest concern is not our cost of capital, although that is certainly a focus. It is still making sure we find the right deals and the right realistic sellers. When we do, we have historically found a way to get those deals done.
Is there another equity source of capital, perhaps an institutional investor or otherwise , that you would consider looking to bring in to help with core investments , just to help mitigate some of the volatility?
Yes. We have done that successfully with our funds, and we certainly would consider it otherwise. It is a very bizarre time where you have risk-free returns as low as they are right now, capital surrounding a whole bunch of other areas of real estate, and retail still is a dirty word. There is capital starting to form, but frankly, it's still more on the sidelines than not. Several institutions have reached out and would welcome the opportunity to partner with us if that's the most accretive way of getting deals done. I can tell you with confidence, we have not walked away from a deal recently over stock price. It's, again, just a matter of educating sellers as to where the reality of the private market is today. I am confident we can compete successfully with the private market when those opportunities arise.
Okay, got it. Just one more for John or maybe Amy as well. The $0.06-$0.10 of net promote and other transactional income that's embedded in the guidance, can you talk about the level of fund dispositions that are embedded in that assumption? Then I know that there's a debt maturity at City Point in a few months, $200 million. It's $53 million at Acadia's share. Is there any fee or transactional income associated with a potential refi or recap of that asset that's included?
No, there's no fee associated with that embedded in our guidance, Todd, so no. I think in terms of dispositions, it could just vary widely, and as we have historically done, we've just not provided disposition guidance when we put this out, so we have not put that out.
We need to leave something for you to guess about, Todd.
All right. Sounds good. Thank you.
Thank you. Our next question comes from Linda Tsai of Jefferies. Your line is open.
Hi. How do you feel about 70% of your NAV being in street and urban portfolio? Do you think this would be subject to change materially over time, given the disruption you're seeing in retail and across different markets?
What we have found is that over any extended period of time, where we can own the right supply-constrained assets in the right market, street and urban , especially, they have provided for us about 200 basis points of superior NOI growth. You've got to time it right so that you're not buying top-of-market rents and that you're also not overpaying from a cap rate perspective. With those caveats in mind, where we can add street and urban retail, what our tenants are telling us, what we're seeing in general, is that's where we will, for our Core Portfolio, be able to deliver the highest risk-adjusted returns. That being said, that meant a few years ago, just navigating around a lot of volatility.
Thankfully, we did that successfully, and I mentioned in the prepared remarks that over an extended period of time, we have seen outperformance by that street in urban. Then , when we think about going forward, the same applies, but we have to be patient. We have to be careful. We have to be disciplined. My guess is you will see, as you did over the last couple of years, that 70% continues to grow even if we don't do something with our suburban. There's also a chance it could grow over the next several years by us somehow monetizing our suburban, whether it would be in conjunction with , as we discussed, our Fund V assets. The demand for yield in the capital markets is strong, and one way or another, we'll figure out how to monetize it.
That's a long answer to expect us to continue to add street and urban assets on a disciplined basis, and then just the law of denominators, et cetera, will increase that, but it could also be more substantial.
Thanks for that. What kind of rent bumps are written in the leases for the street and urban portfolio? Did this change at all with the vintage of leases that were signed in 2019 versus prior years?
A little bit, less so. In general, if you had to pick one number, it'd be 3%. That's not to say that certain retailers, especially as you're talking about larger format, more suburban retailers, that those rent bumps with a TJX or a Target would be 3%. They would be lower. For the most part, 3%. The biggest change, and I would argue it's landlord and tenant-favored , is that the lease terms have shrunk. I don't mind a shorter initial lease term as long as there's not a series of perpetual options with low growth. The state-of-the-art today is a shorter lease term on the initial term, and then the option to renew by the tenant tends to be fair market value or something closer to that.
Shorter lease term, but if these tenants succeed, then after three, five, seven years, they have a reset to fair market value, and that works quite fine for us as well.
Thanks.
Thank you. Our next question comes from Christy McElroy of Citigroup. Your question, please.
Thanks. Good afternoon. Correct me if I'm wrong. I'm not sure if I heard this right. Did you say that Forever 21 is out of the same-store pool, but Pier 1 is in the same-store pool?
On Forever 21, Christy, that one we have the property back. As of December 31, it was in the pool all of 2019. In Q1, we will have a definitive decision whether or not it is in or out of the pool. Reason being is that we're looking at a number of alternatives, whether we lease as is and then have a little bit of downtime, or do we effectively demolish the building. Again, we're going to look at that from what's the right thing for the real estate, at which point it'll be out of the pool. Haven't yet made a firm decision on it, but we think should have a nominal impact on the same store NOI based on that reason.
Okay. Yeah, I guess we're just trying to sort of bridge the gap, as Todd mentioned, between sort of the same-store growth of 2% at the midpoint, but then the total NOI growth of 1.6% at the midpoint, especially given that the 2019 acquisitions are still out of the pool, and those are growing at 4%, as you said.
Yeah. I think in terms of the overall bridge, and maybe we can go through that post-call , so I don't overconfuse it, but I can walk you through what sort of NOI build-up between those two, because there's a number of moving pieces in there. Right?
Okay.
I think-
Yeah. I guess just maybe sort of bridging the gap between , as you think about your five-year plan, and that's 4% total NOI growth, including redevelopment impact, sort of getting from that 1.6% in 2020 to a higher growth rate back to that sort of target in 2021 and 2022.
Yeah. Keep in mind, the 4% is inclusive of 1% redevelopment, right? I think we look at our total NOI growth through, and starting with 2018 as the baseline through 2022, we think we grow 4% or 3% on a same-store basis. 2019, I think we had a solid year with 3.9%. We think we end based upon our 2020 guidance, we're going to be a bit softer if we blend to 2%, but think we are well on track to get to the all-in 4% with 3% on average over that period.
Okay. Then , just, I'm sorry if I missed this in Amy's remarks, just in terms of the promote income that you're expecting in 2020, what's driving that? What's putting you in that promote position? How do you think about sort of what you're harvesting this year versus expectations for future recognition?
Yeah. We'll provide more color , specifically on that, Christy, as the year progresses. Just early in the year, there are just a number of moving pieces that we feel could and should unwind in the latter half of the year. We just want to give it some more time before we provide color on that.
Okay. Thank you.
Thank you. Again, to ask a question, please press star one on your touch-tone telephone. Our next question comes from Michael Mueller of JPMorgan. Your line is open.
Oh, hey. I tried to jump out of the queue, Todd, already asked my questions earlier.
Always good to hear your voice.
There you go. Thanks.
Thank you. At this time, I'd like to turn the call back over to Ken Bernstein for closing remarks. Sir?
Thank you all for joining us today. We look forward to speaking with you again next quarter.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.