Document

UNITED STATES
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
Date of Report (Date of earliest event reported):
March 17, 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 March 17, 2017, Retail Opportunity Investments Partnership, LP (the “Operating Partnership”), the operating partnership subsidiary of Retail Opportunity Investments Corp. (the “Company”), acting through wholly owned subsidiaries, acquired The Terraces (“The Terraces”) located in Rancho Palos Verdes, California, for an adjusted purchase price of approximately $54.2 million. The Terraces is approximately 173,000 square feet and is anchored by Trader Joe’s, Marshall’s and LA Fitness. The Terraces was acquired with borrowings under the Company’s credit facility.

Item 9.01 Financial Statements and Exhibits.
(a)
Financial Statement of Business Acquired.

The Terraces
Independent Auditors’ Report
Statement of Revenues and Certain Expenses for the year ended December 31, 2016 (Audited)
Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2016 (Audited)

(b) Pro Forma Financial Statements for Retail Opportunity Investments Corp.
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 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 Financial Statements for Retail Opportunity Investments Partnership, LP
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 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.
Exhibit No.
 
Description
23.1
 
Consent of Independent Auditors
99.1
 
Financial statement and pro forma financial information referenced above under paragraphs (a), (b) and (c) of this Item 9.01





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: July 5, 2017
By:
/s/ Michael B. Haines    
Name: Michael B. Haines
Title: Chief Financial Officer
RETAIL OPPORTUNITY INVESTMENTS
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

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 July 5, 2017, relating to our audit of the Statement of Revenues and Certain Expenses of The Terraces, 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
July 5, 2017





Exhibit

Exhibit 99.1
 
Page
The Terraces
 
Independent Auditors’ Report
F-1
Statement of Revenues and Certain Expenses for the year ended December 31, 2016 (Audited)
F-2
Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2016 (Audited)
F-3
 
 
Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Corp.
 
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2017 (Unaudited)
F-6
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2016 (Unaudited)
F-7
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
F-8
 
 
Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Partnership, LP
 
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2017 (Unaudited)
F-10
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2016 (Unaudited)
F-11
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
F-12






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 Terraces located in Rancho Palos Verdes, California, (“The Terraces”) 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 The Terraces’ 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 The Terraces 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 The Terraces’ revenues and expenses. Our opinion is not modified with respect to this matter.




/s/ PKF O’Connor Davies, LLP            

New York, New York
July 5, 2017



F-1


THE TERRACES
STATEMENT OF REVENUES AND CERTAIN EXPENSES
(Dollar amounts in thousands)
 
Year Ended December 31, 2016
Revenues
 
Rental income (note 4)
$
3,932

Total revenues
3,932

 
 
Certain Expenses
 
Utilities
124

Repairs, maintenance and supplies
328

Cleaning and landscaping
102

Real estate taxes
572

Insurance
102

Total certain expenses
1,228

 
 
Excess of revenues over certain expenses
$
2,704


    
See accompanying notes to statement of revenues and certain expenses.



F-2


THE TERRACES
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2016 (AUDITED)


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 March 17, 2017, the Operating Partnership acquired The Terraces, located in Rancho Palos Verdes, California, for an adjusted purchase price of approximately $54.2 million. The Terraces is approximately 173,000 square feet and is anchored by Trader Joe’s, Marshall’s and LA Fitness. The Terraces was acquired with borrowings under the Company’s credit facility.

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 The Terraces 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 The Terraces.
Revenue Recognition
The Terraces’ 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 The Terraces’ 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.

3.     Subsequent Events
The Company has evaluated subsequent events through July 5, 2017, and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statement.


F-3


4.    Leases
The Terraces is subject to non-cancelable lease agreements through 2031, 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
$
3,110

2018
2,849

2019
2,649

2020
2,433

2021
2,073

Thereafter
11,293

 
$
24,407


The tenant leases provide for annual rents that include the tenants’ proportionate share of real estate taxes and certain property operating expenses. The Terraces’ 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 $48,000 for the year ended December 31, 2016.
5.             Concentrations
 
For the year ended December 31, 2016, three tenants represented approximately 22%, 14% and 11%, respectively, of The Terraces’ 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 three months ended March 31, 2017 and for the year ended December 31, 2016 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisitions of The Terraces (the “Property”) on January 1, 2016.

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 March 31, 2017. The pro forma consolidated financial statements do not purport to represent the Company’s 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 STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE
THREE MONTHS ENDED MARCH 31, 2017
(UNAUDITED)
(in thousands, except per share data)
 
Company Historical (1)
 
The Terraces (2)
 
Pro Forma Adjustments
 
Company
Pro Forma
Revenues
 
 
 
 
 
 
 
Base rents
$
51,479

 
$
653

 
$ 8 (4)

 
$
52,140

Recoveries from tenants
13,668

 
230

 

 
13,898

Other income
753

 

 

 
753

Total revenues
65,900

 
883

 
8

 
66,791

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Property operating
9,300

 
123

 

 
9,423

Property taxes
7,068

 
119

 

 
7,187

Depreciation and amortization
23,058

 

 
226 (5)

 
23,284

General and administrative expenses
3,499

 

 

 
3,499

Other expense
49

 

 

 
49

Total operating expenses
42,974

 
242

 
226

 
43,442

 
 
 
 
 
 
 
 
Operating income
22,926

 
641

 
(218)

 
23,349

Non-operating expenses
 
 
 
 
 
 
 
Interest expense and other finance expenses
(11,675)

 

 
(203) (6)

 
(11,878)

Net income
11,251

 
641

 
(421)

 
11,471

Net income attributable to non-controlling interests
(1,081)

 

 
(21) (7)

 
(1,102)

Net Income Attributable to Retail Opportunity Investments Corp.
$
10,170

 
$
641

 
$
(442
)
 
$
10,369

 
 
 
 
 
 
 
 
Earnings per share – basic and diluted
$
0.09

 
 
 
 
 
$
0.09

 
 
 
 
 
 
 
 
Dividends per common share
$
0.1875

 
 
 
 
 
$
0.1875

 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
Net income
$
11,251

 
$
641

 
$
(421
)
 
$
11,471

Other comprehensive income
 
 
 
 
 
 
 
Unrealized swap derivative gain arising during the period
161

 

 

 
161

Reclassification adjustment for amortization of interest expense included in net income
555

 

 

 
555

Other comprehensive income
716

 

 

 
716

Comprehensive income
11,967

 
641

 
(421)

 
12,187

Comprehensive income attributable to non-controlling interests
(1,081)

 

 
(21)

 
(1,102)

Comprehensive income attributable to Retail Opportunity Investments Corp.
$
10,886

 
$
641

 
$
(442
)
 
$
11,085


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
YEAR ENDED DECEMBER 31, 2016
(UNAUDITED)
(in thousands, except per share data)
 
Company Historical (1)
 
The Terraces (3)
 
Pro Forma Adjustments
 
Company
Pro Forma
Revenues
 
 
 
 
 
 
 
Base rents
$
183,330

 
$
2,843

 
$ 36 (4)
 
$
186,209

Recoveries from tenants
51,454

 
1,089

 

 
52,543

Other income
2,405

 

 

 
2,405

Total revenues
237,189

 
3,932

 
36

 
241,157

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Property operating
32,201

 
656

 

 
32,857

Property taxes
25,058

 
572

 

 
25,630

Depreciation and amortization
88,359

 

 
1,084 (5)

 
89,443

General and administrative expenses
13,120

 

 

 
13,120

Acquisition transaction costs
824

 

 

 
824

Other expense
456

 

 

 
456

Total operating expenses
160,018

 
1,228

 
1,084

 
162,330

 
 
 
 
 
 
 
 
Operating income
77,171

 
2,704

 
(1,048)

 
78,827

Non-operating expenses
 
 
 
 
 
 
 
Interest expense and other finance expenses
(40,741)

 

 
(976) (6)

 
(41,717)

Net income
36,430

 
2,704

 
(2,024)

 
37,110

Net income attributable to non-controlling interests
(3,676)

 

 
(69) (7)

 
(3,745)

Net Income Attributable to Retail Opportunity Investments Corp.
$
32,754

 
$
2,704

 
$
(2,093
)
 
$
33,365

 
 
 
 
 
 
 
 
Earnings per share – basic and diluted
$
0.31

 
 
 
 
 
$
0.32

 
 
 
 
 
 
 
 
Dividends per common share
$
0.72

 
 
 
 
 
$
0.72

 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
Net income
$
36,430

 
$
2,704

 
$
(2,024
)
 
$
37,110

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

 
2,704

 
(2,024)

 
40,124

Comprehensive income attributable to non-controlling interests
(3,676)

 

 
(69)

 
(3,745)

Comprehensive income attributable to Retail Opportunity Investments Corp.
$
35,768

 
$
2,704

 
$
(2,093
)
 
$
36,379


See accompanying notes to pro forma consolidated financial statements




F-7


RETAIL OPPORTUNITY INVESTMENTS CORP.
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 three months ended March 31, 2017 and the year ended December 31, 2016, respectively.
2.
Derived from the Property’s unaudited financial statements for the period January 1, 2017 through the date of acquisition of March 17, 2017.
3.
Derived from the Property’s audited financial statements for the year ended December 31, 2016.
4.
Reflects the pro forma adjustment of $8,000 and $36,000 for the three months ended March 31, 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
2017 Depreciation Expense (a)
Year Ended December 31, 2016 Depreciation Expense
 
 
 
 
Building
40 years

$226


$1,084


(a) Represents the period January 1, 2017 through the date of acquisition of March 17, 2017 for the Property.

6.
Reflects the pro forma adjustment to interest expense, assuming the Company had borrowed funds from its 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-8


RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The unaudited pro forma consolidated statements of operations and comprehensive income for the three months ended March 31, 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 The Terraces (the “Property”) on January 1, 2016.

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 March 31, 2017. The pro forma consolidated financial statements do not purport to represent the Operating Partnership’s 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-9


RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE
THREE MONTHS ENDED MARCH 31, 2017
(UNAUDITED)
(in thousands, except per share data)
 
Company Historical (8)
 
The Terraces (9)
 
Pro Forma Adjustments
 
Company
Pro Forma
Revenues
 
 
 
 
 
 
 
Base rents
$
51,479

 
$
653

 
$ 8 (11)

 
$
52,140

Recoveries from tenants
13,668

 
230

 

 
13,898

Other income
753

 

 

 
753

Total revenues
65,900

 
883

 
8

 
66,791

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Property operating
9,300

 
123

 

 
9,423

Property taxes
7,068

 
119

 

 
7,187

Depreciation and amortization
23,058

 

 
226 (12)

 
23,284

General and administrative expenses
3,499

 

 

 
3,499

Other expense
49

 

 

 
49

Total operating expenses
42,974

 
242

 
226

 
43,442

 
 
 
 
 
 
 
 
Operating income
22,926

 
641

 
(218)

 
23,349

Non-operating expenses
 
 
 
 
 
 
 
Interest expense and other finance expenses
(11,675)

 

 
(203) (13)

 
(11,878)

Net Income Attributable to Retail Opportunity Investments Partnership, LP
$
11,251

 
$
641

 
$
(421
)
 
$
11,471

 
 
 
 
 
 
 
 
Earnings per unit – basic and diluted
$
0.09

 
 
 
 
 
$
0.09

 
 
 
 
 
 
 
 
Distributions per unit
$
0.1875

 
 
 
 
 
$
0.1875

 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
Net income
$
11,251

 
$
641

 
$
(421
)
 
$
11,471

Other comprehensive income
 
 
 
 
 
 
 
Unrealized swap derivative gain arising during the period
161

 

 

 
161

Reclassification adjustment for amortization of interest expense included in net income
555

 

 

 
555

Other comprehensive income
716

 

 

 
716

Comprehensive income
$
11,967

 
$
641

 
$
(421
)
 
$
12,187

See accompanying notes to pro forma consolidated financial statements







F-10


RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE
YEAR ENDED DECEMBER 31, 2016
(UNAUDITED)
(in thousands, except per share data)
 
Company Historical (8)
 
The Terraces (10)
 
Pro Forma Adjustments
 
Company
Pro Forma
Revenues
 
 
 
 
 
 
 
Base rents
$
183,330

 
$
2,843

 
$ 36 (11)

 
$
186,209

Recoveries from tenants
51,454

 
1,089

 

 
52,543

Other income
2,405

 

 

 
2,405

Total revenues
237,189

 
3,932

 
36

 
241,157

 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Property operating
32,201

 
656

 

 
32,857

Property taxes
25,058

 
572

 

 
25,630

Depreciation and amortization
88,359

 

 
1,084 (12)

 
89,443

General and administrative expenses
13,120

 

 

 
13,120

Acquisition transaction costs
824

 

 

 
824

Other expense
456

 

 

 
456

Total operating expenses
160,018

 
1,228

 
1,084

 
162,330

 
 
 
 
 
 
 
 
Operating income
77,171

 
2,704

 
(1,048)

 
78,827

Non-operating expenses
 
 
 
 
 
 
 
Interest expense and other finance expenses
(40,741)

 

 
(976) (13)

 
(41,717)

Net Income Attributable to Retail Opportunity Investments Partnership, LP
$
36,430

 
$
2,704

 
$
(2,024
)
 
$
37,110

 
 
 
 
 
 
 
 
Earnings per unit – basic and diluted
$
0.31

 
 
 
 
 
$
0.32

 
 
 
 
 
 
 
 
Distributions per unit
$
0.72

 
 
 
 
 
$
0.72

 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
Net income
$
36,430

 
$
2,704

 
$
(2,024
)
 
$
37,110

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

 
$
2,704

 
$
(2,024
)
 
$
40,124

See accompanying notes to pro forma consolidated financial statements






F-11


RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
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 three months ended March 31, 2017 and the year ended December 31, 2016, respectively.
9.
Derived from the Property’s unaudited financial statements for the period January 1, 2017 through the date of acquisition of March 17, 2017.
10.
Derived from the Property’s audited financial statements for the year ended December 31, 2016.
11.
Reflects the pro forma adjustment of $8,000 and $36,000 for the three months ended March 31, 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
2017 Depreciation Expense (a)
Year Ended December 31, 2016 Depreciation Expense
 
 
 
 
Building
40 years

$226


$1,084


(a)
Represents the period January 1, 2017 through the date of acquisition of March 17, 2017 for the Property.

13.
Reflects the pro forma adjustment to interest expense, assuming the Operating Partnership had borrowed funds from its 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-12