UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM 8-K
_________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 30, 2017
RETAIL OPPORTUNITY INVESTMENTS CORP.
(Exact Name of Registrant as Specified in Its Charter)
_________________
Maryland (State or other jurisdiction of incorporation) | 001-33749 (Commission File Number) | 26-0500600 (I.R.S. Employer Identification No.) |
_________________
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
(Exact Name of Registrant as Specified in Its Charter)
_________________
Delaware (State or other jurisdiction of incorporation) | 333-189057-01 (Commission File Number) | 94-2969738 (LR.S. Employer Identification No.) |
8905 Towne Centre Drive, Suite 108 San Diego, California | (858) 677-0900 (Registrants’ Telephone Number, Including Area Code) | 92122 (Zip Code) |
Not applicable (Former Name or Former Address, if Changed Since Last Report) | ||
_________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d‑2(b))
[_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e‑4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (Section 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (Section 240.12b-2 of this chapter)
[_] Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]
Item 8.01 Other Events.
On November 30, 2017, Retail Opportunity Investments Partnership, LP (the “Operating Partnership”), the operating partnership subsidiary of Retail Opportunity Investments Corp. (the “Company”), acting through a wholly owned subsidiary, acquired The Village at Nellie Gail Ranch (“Nellie Gail Ranch”), located in Laguna Hills, California for a purchase price of approximately $46.0 million. The acquisition was funded through borrowings on the Company’s credit facility. Nellie Gail Ranch is approximately 88,000 square feet and is anchored by Smart & Final Extra Supermarket.
Item 9.01 Financial Statements and Exhibits.
(a) | Financial Statement of Business Acquired. |
Nellie Gail Ranch
• | Independent Auditors’ Report |
• | Statement of Revenues and Certain Expenses for the year ended December 31, 2016 (Audited) and the nine months ended September 30, 2017 (Unaudited) |
• | Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2016 (Audited) and the nine months ended September 30, 2017 (Unaudited) |
(b) Pro Forma Consolidated Financial Statements for Retail Opportunity Investments Corp.
• | Pro Forma Consolidated Balance Sheet as of September 30, 2017 (Unaudited) |
• | Pro Forma Consolidated Statement of Operations and Comprehensive Income for the nine months ended September 30, 2017 (Unaudited) |
• | Pro Forma Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2016 (Unaudited) |
• | Notes to Pro Forma Consolidated Financial Statements (Unaudited) |
(c) Pro Forma Consolidated Financial Statements for Retail Opportunity Investments Partnership, LP
• | Pro Forma Consolidated Balance Sheet as of September 30, 2017 (Unaudited) |
• | Pro Forma Consolidated Statement of Operations and Comprehensive Income for the nine months ended September 30, 2017 (Unaudited) |
• | Pro Forma Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2016 (Unaudited) |
• | Notes to Pro Forma Consolidated Financial Statements (Unaudited) |
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
RETAIL OPPORTUNITY INVESTMENTS CORP.
Dated: February 21, 2018
By: | /s/ Michael B. Haines Name: Michael B. Haines Title: Chief Financial Officer |
RETAIL OPPORTUNITY INVESTMENTS
PARTNERSHIP, LP
PARTNERSHIP, LP
By: | RETAIL OPPORTUNITY INVESTMENTS GP, LLC, its general partner |
By: | /s/ Michael B. Haines Name: Michael B. Haines Title: Chief Financial Officer |
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements (Nos. 333-211521, 333-210413 and 333-198974) on Form S-3, the Registration Statement (No. 333-170692) on Form S-8, the Registration Statement (No. 333-146777) on Post-Effective Amendment No. 1 on Form S-3 to Form S-1/MEF of Retail Opportunity Investments Corp., and the Registration Statement (No. 333-211521-01) on Form S-3 of Retail Opportunity Investments Partnership, LP of our report dated February 21, 2018, relating to our audit of the Statement of Revenues and Certain Expenses of The Village at Nellie Gail Ranch, for the year ended December 31, 2016, included in this Current Report on Form 8-K.
/s/ PKF O'Connor Davies, LLP
New York, New York
February 21, 2018
Exhibit 99.1
Page | |
Nellie Gail Ranch | |
Independent Auditors’ Report | F-1 |
Statement of Revenues and Certain Expenses for the year ended December 31, 2016 (Audited) and the nine months ended September 30, 2017 (Unaudited) | F-2 |
Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2016 (Audited) and the nine months ended September 30, 2017 (Unaudited) | F-3 |
Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Corp. | |
Pro Forma Consolidated Balance Sheet as of September 30, 2017 (Unaudited) | F-6 |
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the nine months ended September 30, 2017 (Unaudited) | F-7 |
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2016 (Unaudited) | F-8 |
Notes to Pro Forma Consolidated Financial Statements (Unaudited) | F-9 |
Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Partnership, LP | |
Pro Forma Consolidated Balance Sheet as of September 30, 2017 (Unaudited) | F-11 |
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the nine months ended September 30, 2017 (Unaudited) | F-12 |
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2016 (Unaudited) | F-13 |
Notes to Pro Forma Consolidated Financial Statements (Unaudited) | F-14 |
INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Stockholders
Retail Opportunity Investments Corp.
Retail Opportunity Investments Partnership, LP
We have audited the accompanying financial statement of the property known as The Village at Nellie Gail Ranch located in Laguna Hills, California (“Nellie Gail Ranch”) which is comprised of the statement of revenues and certain expenses for the year ended December 31, 2016, and the related notes to the financial statement.
Management’s Responsibility for the Financial Statement
Management is responsible for the preparation and fair presentation of this financial statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Nellie Gail Ranch’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of Nellie Gail Ranch for the year ended December 31, 2016 in accordance with accounting principles generally accepted in the United States of America.
Emphasis-of-Matter
We draw attention to Note 2 to the financial statement, which describes that the accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and is not intended to be a complete presentation of Nellie Gail Ranch’s revenues and expenses. Our opinion is not modified with respect to this matter.
/s/ PKF O’Connor Davies, LLP
New York, New York
February 21, 2018
F-1
THE VILLAGE AT NELLIE GAIL RANCH
STATEMENT OF REVENUES AND CERTAIN EXPENSES
(Dollar amounts in thousands)
(Dollar amounts in thousands)
Year Ended December 31, 2016 | Nine Months Ended September 30, 2017 (Unaudited) | ||||||
Revenues | |||||||
Rental income (note 4) | $ | 2,604 | $ | 2,099 | |||
Total revenues | 2,604 | 2,099 | |||||
Certain Expenses | |||||||
Utilities | 55 | 35 | |||||
Repairs, maintenance and supplies | 110 | 68 | |||||
Cleaning and landscaping | 116 | 87 | |||||
Real estate taxes | 197 | 141 | |||||
Insurance | 10 | 8 | |||||
Total certain expenses | 488 | 339 | |||||
Excess of revenues over certain expenses | $ | 2,116 | $ | 1,760 | |||
See accompanying notes to statement of revenues and certain expenses.
F-2
THE VILLAGE AT NELLIE GAIL RANCH
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2016 (AUDITED)
AND NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)
1. Business Organization
Retail Opportunity Investments Corp., a Maryland corporation (“ROIC”), is organized in a traditional umbrella partnership real estate investment trust format pursuant to which Retail Opportunity Investments GP, LLC, its wholly-owned subsidiary, serves as the general partner of, and ROIC conducts substantially all of its business through, its operating partnership subsidiary, Retail Opportunity Investments Partnership, LP, a Delaware limited partnership (the “Operating Partnership”) and its subsidiaries. Unless otherwise indicated or unless the context requires otherwise, all references to the “Company” refer to ROIC together with its consolidated subsidiaries, including the Operating Partnership.
On November 30, 2017, the Operating Partnership, through a wholly owned subsidiary, acquired The Village at Nellie Gail Ranch (“Nellie Gail Ranch”), located in Laguna Hills, California, for a purchase price of approximately $46.0 million. The acquisition was funded through borrowings on the Company’s credit facility. Nellie Gail Ranch is approximately 88,000 square feet and is anchored by Smart & Final Extra Supermarket.
2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Statement of Revenues and Certain Expenses (the “financial statement”) has been prepared for the purpose of complying with the provisions of Rule 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The financial statement includes the historical revenues and certain expenses of the seller, exclusive of rental income related to parcels not acquired by the Company, interest income, depreciation and amortization, rental income relating to the allocation of purchase price of Nellie Gail Ranch to above/below market leases and management and advisory fees, which may not be comparable to the corresponding amounts reflected in the future operations of Nellie Gail Ranch.
The statement of revenue and certain expenses for the nine month period ended September 30, 2017 is unaudited. In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of revenue and certain expenses in accordance with the SEC Rule 3-14. All such adjustments are of a normal recurring nature.
Revenue Recognition
Nellie Gail Ranch’s operations consist of rental income earned from tenants under leasing arrangements which generally provide for minimum rents and tenant reimbursements. All leases are classified as operating leases. Minimum rents are recognized by amortizing the aggregate lease payments on a straight-line basis over the terms of the lease (including rent holidays). Tenant reimbursements for real estate taxes, common area maintenance and other recoverable costs are recognized as rental income in the period that the expenses are incurred.
Use of Estimates
The preparation of the financial statement in conformity with accounting principles generally accepted in the United States of America requires Nellie Gail Ranch’s management to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from those estimates.
Accounts Receivable
Bad debts are recorded under the specific identification method, whereby uncollectible receivables are reserved for when identified.
Repairs and Maintenance
Repairs and maintenance costs are expensed as incurred, while significant improvements, renovations and replacements are capitalized.
F-3
3. Subsequent Events
The Company has evaluated subsequent events through February 21, 2018, and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statement.
4. Leases
Nellie Gail Ranch is subject to non-cancelable lease agreements through 2030, subject to various escalation clauses, with tenants for retail space. As of December 31, 2016, the future minimum rents on non-cancelable operating leases expiring in various years are as follows (dollar amounts in thousands):
Year Ending December 31, | Amounts | ||
2017 | $ | 2,169 | |
2018 | 2,422 | ||
2019 | 2,327 | ||
2020 | 2,070 | ||
2021 | 2,013 | ||
Thereafter | 10,054 | ||
$ | 21,055 | ||
The tenant leases provide for annual rents that include the tenants’ proportionate share of real estate taxes and certain property operating expenses. Nellie Gail Ranch’s tenant leases generally include tenant renewal options that can extend the lease terms.
Rental income on the financial statement includes the effect of amortizing the aggregate minimum lease payments on a straight-line basis over the entire term of each lease, which resulted in an increase in rental income of approximately $113,000 and $38,000 for the year ended December 31, 2016 and the nine months ended September 30, 2017, respectively.
5. Concentrations
For the year ended December 31, 2016 one tenant represented approximately 24% of Nellie Gail Ranch’s rental income. For the nine months ended September 30, 2017, one tenant represented approximately 22% of Nellie Gail Ranch’s rental income.
F-4
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The unaudited pro forma consolidated statements of operations and comprehensive income for the nine months ended September 30, 2017 and for the year ended December 31, 2016 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisition of Nellie Gail Ranch (the “Property”) on January 1, 2016. Additionally, the pro forma consolidated balance sheet as of September 30, 2017 has been presented as if the acquisition had been completed on September 30, 2017.
The purchase price allocation is calculated based on a 20/80 allocation to Land and Building and Improvements, respectively. As of the date of this report, the Company is in the process of evaluating the purchase price allocation in accordance with the Accounting Standards Codification 805. The purchase price is preliminary and could be subject to change.
The pro forma consolidated financial statements should be read in conjunction with the Company’s 2016 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ended September 30, 2017. The pro forma consolidated financial statements do not purport to represent the Company’s financial position as of September 30, 2017 or results of operations that would actually have occurred assuming the completion of the acquisition of the Property had occurred on January 1, 2016, nor does it purport to project the Company’s results of operations as of any future date or for any future period.
F-5
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2017
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2017
(UNAUDITED)
(in thousands)
(in thousands)
Company Historical (1) | Pro Forma Adjustments | Company Pro Forma | |||||||||
ASSETS | |||||||||||
Real Estate Investments: | |||||||||||
Land | $ | 818,660 | $ 9,200 (2) | $ | 827,860 | ||||||
Building and improvements | 2,108,511 | 36,800 (2) | 2,145,311 | ||||||||
2,927,171 | 46,000 | 2,973,171 | |||||||||
Less: accumulated depreciation | 241,269 | — | 241,269 | ||||||||
Real Estate Investments, net | 2,685,902 | 46,000 | 2,731,902 | ||||||||
Cash and cash equivalents | 10,073 | — | 10,073 | ||||||||
Tenant and other receivables, net | 39,431 | — | 39,431 | ||||||||
Deposits | 5,550 | — | 5,550 | ||||||||
Acquired lease intangible assets, net of accumulated amortization | 79,300 | — | 79,300 | ||||||||
Prepaid expenses | 939 | — | 939 | ||||||||
Deferred charges, net of accumulated amortization | 35,075 | — | 35,075 | ||||||||
Other assets | 4,629 | — | 4,629 | ||||||||
Total assets | $ | 2,860,899 | $ | 46,000 | $ | 2,906,899 | |||||
LIABILITIES AND EQUITY | |||||||||||
Liabilities: | |||||||||||
Term loan | $ | 298,753 | $ | — | $ | 298,753 | |||||
Credit facility | 313,737 | 46,000 (2) | 359,737 | ||||||||
Senior Notes Due 2026 | 199,745 | — | 199,745 | ||||||||
Senior Notes Due 2024 | 245,753 | — | 245,753 | ||||||||
Senior Notes Due 2023 | 245,533 | — | 245,533 | ||||||||
Mortgage notes payable | 62,265 | — | 62,265 | ||||||||
Acquired lease intangible liabilities, net of accumulated amortization | 159,815 | — | 159,815 | ||||||||
Accounts payable and accrued expenses | 30,169 | — | 30,169 | ||||||||
Tenants’ security deposits | 6,392 | — | 6,392 | ||||||||
Other liabilities | 12,224 | — | 12,224 | ||||||||
Total liabilities | 1,574,386 | 46,000 | 1,620,386 | ||||||||
Equity: | |||||||||||
Preferred stock | — | — | — | ||||||||
Common stock | 11 | — | 11 | ||||||||
Additional paid-in capital | 1,363,114 | — | 1,363,114 | ||||||||
Dividends in excess of earnings | (200,221 | ) | — | (200,221 | ) | ||||||
Accumulated other comprehensive loss | (621 | ) | — | (621 | ) | ||||||
Total Retail Opportunity Investments Corp. stockholders’ equity | 1,162,283 | — | 1,162,283 | ||||||||
Non-controlling interests | 124,230 | — | 124,230 | ||||||||
Total equity | 1,286,513 | — | 1,286,513 | ||||||||
Total liabilities and equity | $ | 2,860,899 | $ | 46,000 | $ | 2,906,899 | |||||
See accompanying notes to pro forma consolidated financial statements
F-6
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(UNAUDITED)
(in thousands, except per share data)
(in thousands, except per share data)
Company Historical (1) | Nellie Gail Ranch (3) | Pro Forma Adjustments | Company Pro Forma | ||||||||||||
Revenues | |||||||||||||||
Base rents | $ | 154,878 | $ | 1,791 | $ 32 (4) | $ | 156,701 | ||||||||
Recoveries from tenants | 43,100 | 308 | — | 43,408 | |||||||||||
Other income | 2,528 | — | — | 2,528 | |||||||||||
Total revenues | 200,506 | 2,099 | 32 | 202,637 | |||||||||||
Operating expenses | |||||||||||||||
Property operating | 28,630 | 198 | — | 28,828 | |||||||||||
Property taxes | 21,801 | 141 | — | 21,942 | |||||||||||
Depreciation and amortization | 71,330 | — | 690 (5) | 72,020 | |||||||||||
General and administrative expenses | 10,790 | — | — | 10,790 | |||||||||||
Acquisition transaction costs | 4 | — | — | 4 | |||||||||||
Other expense | 316 | — | — | 316 | |||||||||||
Total operating expenses | 132,871 | 339 | 690 | 133,900 | |||||||||||
Operating income | 67,635 | 1,760 | (658) | 68,737 | |||||||||||
Non-operating expenses | |||||||||||||||
Interest expense and other finance expenses | (37,060) | — | (724) (6) | (37,784) | |||||||||||
Net income | 30,575 | 1,760 | (1,382) | 30,953 | |||||||||||
Net income attributable to non-controlling interests | (2,947) | — | (36) (7) | (2,983) | |||||||||||
Net Income Attributable to Retail Opportunity Investments Corp. | $ | 27,628 | $ | 1,760 | $ | (1,418 | ) | $ | 27,970 | ||||||
Earnings per share – basic and diluted | $ | 0.25 | $ | 0.25 | |||||||||||
Dividends per common share | $ | 0.5625 | $ | 0.5625 | |||||||||||
Comprehensive income: | |||||||||||||||
Net income | $ | 30,575 | $ | 1,760 | $ | (1,382 | ) | $ | 30,953 | ||||||
Other comprehensive income | |||||||||||||||
Unrealized swap derivative gain arising during the period | 1,617 | — | — | 1,617 | |||||||||||
Reclassification adjustment for amortization of interest expense included in net income | 1,491 | — | — | 1,491 | |||||||||||
Other comprehensive income | 3,108 | — | — | 3,108 | |||||||||||
Comprehensive income | 33,683 | 1,760 | (1,382) | 34,061 | |||||||||||
Comprehensive income attributable to non-controlling interests | (2,947) | — | (36) | (2,983) | |||||||||||
Comprehensive income attributable to Retail Opportunity Investments Corp. | $ | 30,736 | $ | 1,760 | $ | (1,418 | ) | $ | 31,078 | ||||||
See accompanying notes to pro forma consolidated financial statements
F-7
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016
(UNAUDITED)
(in thousands, except per share data)
(in thousands, except per share data)
Company Historical (1) | Nellie Gail Ranch(3) | Pro Forma Adjustments | Company Pro Forma | ||||||||||||
Revenues | |||||||||||||||
Base rents | $ | 183,330 | $ | 2,217 | $ 51 (4) | $ | 185,598 | ||||||||
Recoveries from tenants | 51,454 | 387 | — | 51,841 | |||||||||||
Other income | 2,405 | — | — | 2,405 | |||||||||||
Total revenues | 237,189 | 2,604 | 51 | 239,844 | |||||||||||
Operating expenses | |||||||||||||||
Property operating | 32,201 | 291 | — | 32,492 | |||||||||||
Property taxes | 25,058 | 197 | — | 25,255 | |||||||||||
Depreciation and amortization | 88,359 | — | 920 (5) | 89,279 | |||||||||||
General and administrative expenses | 13,120 | — | — | 13,120 | |||||||||||
Acquisition transaction costs | 824 | — | — | 824 | |||||||||||
Other expense | 456 | — | — | 456 | |||||||||||
Total operating expenses | 160,018 | 488 | 920 | 161,426 | |||||||||||
Operating income | 77,171 | 2,116 | (869) | 78,418 | |||||||||||
Non-operating expenses | |||||||||||||||
Interest expense and other finance expenses | (40,741) | — | (690) (6) | (41,431) | |||||||||||
Net income | 36,430 | 2,116 | (1,559) | 36,987 | |||||||||||
Net income attributable to non-controlling interests | (3,676) | — | (56) (7) | (3,732) | |||||||||||
Net Income Attributable to Retail Opportunity Investments Corp. | $ | 32,754 | $ | 2,116 | $ | (1,615 | ) | $ | 33,255 | ||||||
Earnings per share – basic and diluted | $ | 0.31 | $ | 0.32 | |||||||||||
Dividends per common share | $ | 0.72 | $ | 0.72 | |||||||||||
Comprehensive income: | |||||||||||||||
Net income | $ | 36,430 | $ | 2,116 | $ | (1,559 | ) | $ | 36,987 | ||||||
Other comprehensive income | |||||||||||||||
Unrealized swap derivative gain arising during the period | 541 | — | — | 541 | |||||||||||
Reclassification adjustment for amortization of interest expense included in net income | 2,473 | — | — | 2,473 | |||||||||||
Other comprehensive income | 3,014 | — | — | 3,014 | |||||||||||
Comprehensive income | 39,444 | 2,116 | (1,559) | 40,001 | |||||||||||
Comprehensive income attributable to non-controlling interests | (3,676) | — | (56) | (3,732) | |||||||||||
Comprehensive income attributable to Retail Opportunity Investments Corp. | $ | 35,768 | $ | 2,116 | $ | (1,615 | ) | $ | 36,269 | ||||||
See accompanying notes to pro forma consolidated financial statements
F-8
RETAIL OPPORTUNITY INVESTMENTS CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Adjustments to the Pro Forma Consolidated Financial Statements
1. | Derived from the Company’s unaudited and audited financial statements for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. |
2. | Reflects the pro forma acquisition of the Property for a purchase price of approximately $46.0 million. The acquisition was funded through borrowings on the credit facility. |
3. | Derived from the Property’s unaudited and audited financial statements for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. |
4. | Reflects the pro forma adjustment of $32,000 and $51,000 for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively, to record operating rents on a straight-line basis beginning January 1, 2016. |
5. | Reflects the estimated depreciation for the Property based on the estimated values allocated to the buildings at the beginning of the period presented. Depreciation expense is computed on a straight-line basis over the estimated useful life of the assets as follows (dollar amounts in thousands): |
Estimated Useful Life | Nine Months Ended September 30, 2017 Depreciation Expense | Year Ended December 31, 2016 Depreciation Expense | |||||
Building | 40 years | $690 | $920 | ||||
6. | Reflects the pro forma adjustment to interest expense, assuming the Company had borrowed on the credit facility to cover the purchase price of the Property, as if the acquisition had been made on the first day of the period presented. |
7. | Reflects the pro forma adjustment of net income attributable to non-controlling interests as if the Company had acquired the Property on January 1, 2016. |
F-9
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The unaudited pro forma consolidated statements of operations and comprehensive income for the nine months ended September 30, 2017 and for the year ended December 31, 2016 are presented as if Retail Opportunity Investments Partnership, LP (the “Operating Partnership”) had completed the acquisition of Nellie Gail Ranch (the “Property”) on January 1, 2016. Additionally, the pro forma consolidated balance sheet as of September 30, 2017 has been presented as if the acquisition had been completed on September 30, 2017.
The purchase price allocation is calculated based on a 20/80 allocation to Land and Building and Improvements, respectively. As of the date of this report, the Company is in the process of evaluating the purchase price allocation in accordance with the Accounting Standards Codification 805. The purchase price is preliminary and could be subject to change.
The pro forma consolidated financial statements should be read in conjunction with the Operating Partnership’s 2016 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ended September 30, 2017. The pro forma consolidated financial statements do not purport to represent the Operating Partnership’s financial position as of September 30, 2017 or results of operations that would actually have occurred assuming the completion of the acquisition of the Property had occurred on January 1, 2016, nor does it purport to project the Operating Partnership’s results of operations as of any future date or for any future period.
F-10
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP LP
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2017
(UNAUDITED)
(in thousands)
Company Historical (8) | Pro Forma Adjustments | Company Pro Forma | |||||||||
ASSETS | |||||||||||
Real Estate Investments: | |||||||||||
Land | $ | 818,660 | $ 9,200 (9) | $ | 827,860 | ||||||
Building and improvements | 2,108,511 | 36,800 (9) | 2,145,311 | ||||||||
2,927,171 | 46,000 | 2,973,171 | |||||||||
Less: accumulated depreciation | 241,269 | — | 241,269 | ||||||||
Real Estate Investments, net | 2,685,902 | 46,000 | 2,731,902 | ||||||||
Cash and cash equivalents | 10,073 | — | 10,073 | ||||||||
Tenant and other receivables, net | 39,431 | — | 39,431 | ||||||||
Deposits | 5,550 | — | 5,550 | ||||||||
Acquired lease intangible assets, net of accumulated amortization | 79,300 | — | 79,300 | ||||||||
Prepaid expenses | 939 | — | 939 | ||||||||
Deferred charges, net of accumulated amortization | 35,075 | — | 35,075 | ||||||||
Other assets | 4,629 | — | 4,629 | ||||||||
Total assets | $ | 2,860,899 | $ | 46,000 | $ | 2,906,899 | |||||
LIABILITIES AND CAPITAL | |||||||||||
Liabilities: | |||||||||||
Term loan | $ | 298,753 | $ | — | $ | 298,753 | |||||
Credit facility | 313,737 | 46,000 (9) | 359,737 | ||||||||
Senior Notes Due 2026 | 199,745 | — | 199,745 | ||||||||
Senior Notes Due 2024 | 245,753 | — | 245,753 | ||||||||
Senior Notes Due 2023 | 245,533 | — | 245,533 | ||||||||
Mortgage notes payable | 62,265 | — | 62,265 | ||||||||
Acquired lease intangible liabilities, net of accumulated amortization | 159,815 | — | 159,815 | ||||||||
Accounts payable and accrued expenses | 30,169 | — | 30,169 | ||||||||
Tenants’ security deposits | 6,392 | — | 6,392 | ||||||||
Other liabilities | 12,224 | — | 12,224 | ||||||||
Total liabilities | 1,574,386 | 46,000 | 1,620,386 | ||||||||
Capital: | |||||||||||
Partners’ capital, unlimited partnership units authorized: | |||||||||||
ROIC capital | 1,162,904 | — | 1,162,904 | ||||||||
Limited partners’ capital | 124,230 | — | 124,230 | ||||||||
Accumulated other comprehensive loss | (621 | ) | — | (621 | ) | ||||||
Total capital | 1,286,513 | — | 1,286,513 | ||||||||
Total liabilities and capital | $ | 2,860,899 | $ | 46,000 | $ | 2,906,899 | |||||
See accompanying notes to pro forma consolidated financial statements
F-11
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017
(UNAUDITED)
(in thousands, except per share data)
(in thousands, except per share data)
Company Historical (8) | Nellie Gail Ranch (10) | Pro Forma Adjustments | Company Pro Forma | ||||||||||||
Revenues | |||||||||||||||
Base rents | $ | 154,878 | $ | 1,791 | $ 32 (11) | $ | 156,701 | ||||||||
Recoveries from tenants | 43,100 | 308 | — | 43,408 | |||||||||||
Other income | 2,528 | — | — | 2,528 | |||||||||||
Total revenues | 200,506 | 2,099 | 32 | 202,637 | |||||||||||
Operating expenses | |||||||||||||||
Property operating | 28,630 | 198 | — | 28,828 | |||||||||||
Property taxes | 21,801 | 141 | — | 21,942 | |||||||||||
Depreciation and amortization | 71,330 | — | 690 (12) | 72,020 | |||||||||||
General and administrative expenses | 10,790 | — | — | 10,790 | |||||||||||
Acquisition transaction costs | 4 | — | — | 4 | |||||||||||
Other expense | 316 | — | — | 316 | |||||||||||
Total operating expenses | 132,871 | 339 | 690 | 133,900 | |||||||||||
Operating income | 67,635 | 1,760 | (658) | 68,737 | |||||||||||
Non-operating expenses | |||||||||||||||
Interest expense and other finance expenses | (37,060) | — | (724) (13) | (37,784) | |||||||||||
Net Income Attributable to Retail Opportunity Investments Partnership, LP | $ | 30,575 | $ | 1,760 | $ | (1,382 | ) | $ | 30,953 | ||||||
Earnings per unit – basic and diluted | $ | 0.25 | $ | 0.25 | |||||||||||
Distributions per unit | $ | 0.5625 | $ | 0.5625 | |||||||||||
Comprehensive income: | |||||||||||||||
Net income | $ | 30,575 | $ | 1,760 | $ | (1,382 | ) | $ | 30,953 | ||||||
Other comprehensive income | |||||||||||||||
Unrealized swap derivative gain arising during the period | 1,617 | — | — | 1,617 | |||||||||||
Reclassification adjustment for amortization of interest expense included in net income | 1,491 | — | — | 1,491 | |||||||||||
Other comprehensive income | 3,108 | — | — | 3,108 | |||||||||||
Comprehensive income | $ | 33,683 | $ | 1,760 | $ | (1,382 | ) | $ | 34,061 | ||||||
See accompanying notes to pro forma consolidated financial statements
F-12
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2016
(UNAUDITED)
(in thousands, except per share data)
(in thousands, except per share data)
Company Historical (8) | Nellie Gail Ranch (10) | Pro Forma Adjustments | Company Pro Forma | ||||||||||||
Revenues | |||||||||||||||
Base rents | $ | 183,330 | $ | 2,217 | $ 51 (11) | $ | 185,598 | ||||||||
Recoveries from tenants | 51,454 | 387 | — | 51,841 | |||||||||||
Other income | 2,405 | — | — | 2,405 | |||||||||||
Total revenues | 237,189 | 2,604 | 51 | 239,844 | |||||||||||
Operating expenses | |||||||||||||||
Property operating | 32,201 | 291 | — | 32,492 | |||||||||||
Property taxes | 25,058 | 197 | — | 25,255 | |||||||||||
Depreciation and amortization | 88,359 | — | 920 (12) | 89,279 | |||||||||||
General and administrative expenses | 13,120 | — | — | 13,120 | |||||||||||
Acquisition transaction costs | 824 | — | — | 824 | |||||||||||
Other expense | 456 | — | — | 456 | |||||||||||
Total operating expenses | 160,018 | 488 | 920 | 161,426 | |||||||||||
Operating income | 77,171 | 2,116 | (869) | 78,418 | |||||||||||
Non-operating expenses | |||||||||||||||
Interest expense and other finance expenses | (40,741) | — | (690) (13) | (41,431) | |||||||||||
Net Income Attributable to Retail Opportunity Investments Partnership, LP | $ | 36,430 | $ | 2,116 | $ | (1,559 | ) | $ | 36,987 | ||||||
Earnings per unit – basic and diluted | $ | 0.31 | $ | 0.32 | |||||||||||
Distributions per unit | $ | 0.72 | $ | 0.72 | |||||||||||
Comprehensive income: | |||||||||||||||
Net income | $ | 36,430 | $ | 2,116 | $ | (1,559 | ) | $ | 36,987 | ||||||
Other comprehensive income | |||||||||||||||
Unrealized swap derivative gain arising during the period | 541 | — | — | 541 | |||||||||||
Reclassification adjustment for amortization of interest expense included in net income | 2,473 | — | — | 2,473 | |||||||||||
Other comprehensive income | 3,014 | — | — | 3,014 | |||||||||||
Comprehensive income | $ | 39,444 | $ | 2,116 | $ | (1,559 | ) | $ | 40,001 | ||||||
See accompanying notes to pro forma consolidated financial statements
F-13
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Adjustments to the Pro Forma Consolidated Financial Statements
8. | Derived from the Operating Partnership’s unaudited and audited financial statements for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. |
9. | Reflects the pro forma acquisition of the Property for a purchase price of approximately $46.0 million. The acquisition was funded through borrowings on the credit facility. |
10. | Derived from the Property’s unaudited and audited financial statements for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. |
11. | Reflects the pro forma adjustment of $32,000 and $51,000 for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively, to record operating rents on a straight-line basis beginning January 1, 2016. |
12. | Reflects the estimated depreciation for the Property based on the estimated values allocated to the buildings at the beginning of the period presented. Depreciation expense is computed on a straight-line basis over the estimated useful life of the assets as follows (dollar amounts in thousands): |
Estimated Useful Life | Nine Months Ended September 30, 2017 Depreciation Expense | Year Ended December 31, 2016 Depreciation Expense | |||||
Building | 40 years | $690 | $920 | ||||
13. | Reflects the pro forma adjustment to interest expense, assuming the Operating Partnership had borrowed on the credit facility to cover the purchase price of the Property, as if the acquisition had been made on the first day of the period presented. |
F-14