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roic-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 001-33749

RETAIL OPPORTUNITY INVESTMENTS CORP.

RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP

(Exact name of registrant as specified in its charter)

Maryland

(Retail Opportunity Investments Corp.)

26-0500600

(Retail Opportunity Investments Corp.)

Delaware

(Retail Opportunity Investments Partnership, LP)

94-2969738

(Retail Opportunity Investments Partnership, LP)

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

11250 El Camino Real

Suite 200

San Diego,

California

92130

(Address of Principal Executive Offices)

(Zip Code)

(858) 677-0900

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Retail Opportunity Investments Corp.

Yes

☒

☐

Retail Opportunity Investments Partnership, LP

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Retail Opportunity Investments Corp.

Yes

☒

☐

Retail Opportunity Investments Partnership, LP

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Retail Opportunity Investments Corp.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

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.

☐

Retail Opportunity Investments Partnership, LP

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Retail Opportunity Investments Corp.

Yes

☐

☒

Retail Opportunity Investments Partnership, LP

Yes

☐

☒

Securities registered pursuant to Section 12(b) of the Act:


Name of Registrant	Title of each class	Trading Symbol	Name of each exchange on which registered
Retail Opportunity Investments Corp.	Common Stock, par value $0.0001 per share	ROIC	NASDAQ
Retail Opportunity Investments Partnership, LP	None	None	None

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 121,423,616 shares of common stock, par value $0.0001 per share, of Retail Opportunity Investments Corp. outstanding as of October 22, 2021.

EXPLANATORY PARAGRAPH

This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2021 of Retail Opportunity Investments Corp., a Maryland corporation (“ROIC”), and Retail Opportunity Investments Partnership, LP, a Delaware limited partnership (the “Operating Partnership”), of which ROIC is the parent company and general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “the Company,” “we,” “us,” “our,” or “our company” refer to ROIC together with its consolidated subsidiaries, including the Operating Partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “the Operating Partnership” refer to Retail Opportunity Investments Partnership, LP together with its consolidated subsidiaries.

ROIC operates as a real estate investment trust and as of September 30, 2021, ROIC owned an approximate 93.4% partnership interest in the Operating Partnership. Retail Opportunity Investments GP, LLC, ROIC’s wholly-owned subsidiary, is the sole general partner of the Operating Partnership, and as the parent company, ROIC has the full and complete authority over the Operating Partnership’s day-to-day management and control.

The Company believes that combining the quarterly reports on Form 10-Q of ROIC and the Operating Partnership into a single report will result in the following benefits:

•facilitate a better understanding by the investors of ROIC and the Operating Partnership by enabling them to view the business as a whole in the same manner as management views and operates the business;

•remove duplicative disclosures and provide a more straightforward presentation in light of the fact that a substantial portion of the disclosure applies to both ROIC and the Operating Partnership; and

•create time and cost efficiencies through the preparation of one combined report instead of two separate reports.

Management operates ROIC and the Operating Partnership as one enterprise. The management of ROIC and the Operating Partnership are the same.

There are a few differences between ROIC and the Operating Partnership, which are reflected in the disclosures in this report. The Company believes it is important to understand the differences between ROIC and the Operating Partnership in the context of how these entities operate as an interrelated consolidated company. ROIC is a real estate investment trust, whose only material asset is its ownership of direct or indirect partnership interests in the Operating Partnership and membership interest in Retail Opportunity Investments GP, LLC, which is the sole general partner of the Operating Partnership. As a result, ROIC does not conduct business itself, other than acting as the parent company of the Operating Partnership and issuing equity from time to time. The Operating Partnership holds substantially all the assets of the Company and directly or indirectly holds the ownership interests in the Company’s real estate ventures. The Operating Partnership conducts the operations of the Company’s business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by ROIC, which are contributed to the Operating Partnership, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s incurrence of indebtedness (directly and through subsidiaries) or through the issuance of operating partnership units (“OP Units”).

Non-controlling interests is the primary area of difference between the Consolidated Financial Statements for ROIC and the Operating Partnership. The OP Units in the Operating Partnership that are not owned by ROIC are accounted for as partners’ capital in the Operating Partnership’s financial statements and as non-controlling interests in ROIC’s financial statements. Accordingly, this report presents the Consolidated Financial Statements for ROIC and the Operating Partnership separately, as required, as well as Earnings Per Share / Earnings Per Unit and Capital of the Operating Partnership.

This report also includes separate Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources, Item 4. Controls and Procedures sections and separate Chief Executive Officer and Chief Financial Officer certifications for each of ROIC and the Operating Partnership as reflected in Exhibits 31 and 32.

TABLE OF CONTENTS


Part I. Financial Information			1
Item 1. Financial Statements			1
Consolidated Financial Statements of Retail Opportunity Investments Corp.:
Consolidated Balance Sheets (Unaudited)			1
Consolidated Statements of Operations and Comprehensive Income (Unaudited)			2
Consolidated Statements of Equity (Unaudited)			3
Consolidated Statements of Cash Flow (Unaudited)			5
Consolidated Financial Statements of Retail Opportunity Investments Partnership, LP:
Consolidated Balance Sheets (Unaudited)			6
Consolidated Statements of Operations and Comprehensive Income (Unaudited)			7
Consolidated Statements of Partners’ Capital (Unaudited)			8
Consolidated Statements of Cash Flow (Unaudited)			10
Notes to Consolidated Financial Statements (Unaudited)			11
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			44
Item 4. Controls and Procedures			44
Part II. Other Information			45
Item 1. Legal Proceedings			45
Item 1A. Risk Factors			45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			45
Item 3. Defaults Upon Senior Securities			45
Item 4. Mine Safety Disclosures			45
Item 5. Other Information			45
Item 6. Exhibits			46
Signatures			47

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

RETAIL OPPORTUNITY INVESTMENTS CORP.

Consolidated Balance Sheets

(In thousands, except share data)


	September 30, 2021 (unaudited)		December 31, 2020
ASSETS
Real Estate Investments:
Land	$	875,818	$	881,872
Building and improvements	2,272,296		2,274,680
	3,148,114		3,156,552
Less: accumulated depreciation	490,638		460,165
	2,657,476		2,696,387
Mortgage note receivable	4,896		4,959
Real Estate Investments, net	2,662,372		2,701,346
Cash and cash equivalents	91,150		4,822
Restricted cash	2,319		1,814
Tenant and other receivables, net	56,545		58,756
Deposits	1,000		—
Acquired lease intangible assets, net	44,342		50,110
Prepaid expenses	1,328		4,811
Deferred charges, net	22,198		25,655
Other assets	16,982		17,296
Total assets	$	2,898,236	$	2,864,610

LIABILITIES AND EQUITY
Liabilities:
Term loan	$	298,797	$	298,524
Credit facility	—		48,000
Senior Notes	944,833		943,655
Mortgage notes payable	85,727		86,509
Acquired lease intangible liabilities, net	117,166		125,796
Accounts payable and accrued expenses	51,215		17,687
Tenants’ security deposits	6,918		6,854
Other liabilities	40,700		46,426
Total liabilities	1,545,356		1,573,451

Commitments and contingencies



Equity:
Preferred stock, $0.0001 par value 50,000,000 shares authorized; none issued and outstanding	—		—
Common stock, $0.0001 par value, 500,000,000 shares authorized; 121,423,616 and 118,085,155 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	12		12
Additional paid-in capital	1,552,447		1,497,662
Dividends in excess of earnings	(284,144)		(289,309)
Accumulated other comprehensive loss	(4,877)		(8,812)
Total Retail Opportunity Investments Corp. stockholders’ equity	1,263,438		1,199,553
Non-controlling interests	89,442		91,606
Total equity	1,352,880		1,291,159
Total liabilities and equity	$	2,898,236	$	2,864,610

See accompanying notes to consolidated financial statements.

- 1 -

RETAIL OPPORTUNITY INVESTMENTS CORP.

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(In thousands, except share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenues
Rental revenue	$	69,907	$	69,066	$	208,925	$	208,997

Other income	1,478		706		2,377		2,199
Total revenues	71,385		69,772		211,302		211,196

Operating expenses
Property operating	11,009		10,313		32,334		30,203
Property taxes	8,564		8,510		25,502		25,265
Depreciation and amortization	22,854		24,649		69,401		73,041
General and administrative expenses	4,746		4,101		14,353		11,974

Other expense	147		165		631		525
Total operating expenses	47,320		47,738		142,221		141,008

Gain on sale of real estate	12,880		—		22,340		—

Operating income	36,945		22,034		91,421		70,188

Non-operating expenses
Interest expense and other finance expenses	(14,356)		(15,065)		(43,173)		(45,047)
Net income	22,589		6,969		48,248		25,141
Net income attributable to non-controlling interests	(1,494)		(503)		(3,254)		(2,026)
Net Income Attributable to Retail Opportunity Investments Corp.	$	21,095	$	6,466	$	44,994	$	23,115

Earnings per share – basic and diluted	$	0.17	$	0.06	$	0.38	$	0.20

Dividends per common share	$	0.11	$	—	$	0.33	$	0.20

Comprehensive income:
Net income	$	22,589	$	6,969	$	48,248	$	25,141
Other comprehensive income (loss):
Unrealized swap derivative (loss) gain arising during the period	(122)		62		(159)		(9,954)
Reclassification adjustment for amortization of interest expense included in net income	1,469		1,498		4,422		3,061
Other comprehensive income (loss):	1,347		1,560		4,263		(6,893)
Comprehensive income	23,936		8,529		52,511		18,248
Comprehensive income attributable to non-controlling interests	(1,585)		(645)		(3,582)		(1,231)
Comprehensive income attributable to Retail Opportunity Investments Corp.	$	22,351	$	7,884	$	48,929	$	17,017

See accompanying notes to consolidated financial statements.

- 2 -

RETAIL OPPORTUNITY INVESTMENTS CORP.

Consolidated Statements of Equity

(Unaudited)

(In thousands, except share data)


	Common Stock			Additional paid-in capital		Accumulated dividends in excess of earnings		Accumulated other comprehensive loss		Non- controlling interests		Equity
	Shares	Amount
Balance at December 31, 2020	118,085,155	$	12	$	1,497,662	$	(289,309)	$	(8,812)	$	91,606	$	1,291,159
Shares issued under the Equity Incentive Plan	535,819	—		428		—		—		—		428
Shares withheld for employee taxes	(142,247)	—		(1,905)		—		—		—		(1,905)

Stock based compensation expense	—	—		1,809		—		—		254		2,063

Redemption of OP Units	98,986	—		1,439		—		—		(1,439)		—

Adjustment to non-controlling interests ownership in Operating Partnership	—	—		2		—		—		(2)		—


Registration expenditures	—	—		(15)		—		—		—		(15)
Cash dividends ($0.11 per share)	—	—		—		(13,041)		—		(978)		(14,019)
Dividends payable to officers	—	—		—		(48)		—		(20)		(68)
Net income attributable to Retail Opportunity Investments Corp.	—	—		—		7,415		—		—		7,415
Net income attributable to non-controlling interests	—	—		—		—		—		559		559
Other comprehensive income	—	—		—		—		1,454		119		1,573
Balance at March 31, 2021	118,577,713	$	12	$	1,499,420	$	(294,983)	$	(7,358)	$	90,099	$	1,287,190



Stock based compensation expense	—	—		2,774		—		—		459		3,233

Redemption of OP Units	325,000	—		5,419		—		—		(5,419)		—

Adjustment to non-controlling interests ownership in Operating Partnership	—	—		(2,823)		—		—		2,823		—
Proceeds from the issuance of common stock	1,903,653	—		34,844		—		—		—		34,844

Registration expenditures	—	—		(371)		—		—		—		(371)
Cash dividends ($0.11 per share)	—	—		—		(13,270)		—		(940)		(14,210)
Dividends payable to officers	—	—		—		(70)		—		(10)		(80)
Net income attributable to Retail Opportunity Investments Corp.	—	—		—		16,484		—		—		16,484
Net income attributable to non-controlling interests	—	—		—		—		—		1,201		1,201
Other comprehensive income	—	—		—		—		1,225		118		1,343
Balance at June 30, 2021	120,806,366	$	12	$	1,539,263	$	(291,839)	$	(6,133)	$	88,331	$	1,329,634


Cancellation of restricted stock	(5,482)	—		—		—		—		—		—
Stock based compensation expense	—	—		2,293		—		—		274		2,567



Adjustment to non-controlling interests ownership in Operating Partnership	—	—		(211)		—		—		211		—
Proceeds from the issuance of common stock	622,732	—		11,217		—		—		—		11,217

Registration expenditures	—	—		(115)		—		—		—		(115)
Cash dividends ($0.11 per share)	—	—		—		(13,356)		—		(939)		(14,295)
Dividends payable to officers	—	—		—		(44)		—		(20)		(64)
Net income attributable to Retail Opportunity Investments Corp.	—	—		—		21,095		—		—		21,095
Net income attributable to non-controlling interests	—	—		—		—		—		1,494		1,494
Other comprehensive income	—	—		—		—		1,256		91		1,347
Balance at September 30, 2021	121,423,616	$	12	$	1,552,447	$	(284,144)	$	(4,877)	$	89,442	$	1,352,880

- 3 -

RETAIL OPPORTUNITY INVESTMENTS CORP.

Consolidated Statements of Equity (continued)

(Unaudited)

(In thousands, except share data)


	Common Stock			Additional paid-in capital		Accumulated dividends in excess of earnings		Accumulated other comprehensive loss		Non- controlling interests		Equity
	Shares	Amount
Balance at December 31, 2019	116,496,016	$	12	$	1,481,466	$	(297,998)	$	(4,132)	$	112,480	$	1,291,828
Shares issued under the Equity Incentive Plan	428,170	—		—		—		—		—		—
Shares withheld for employee taxes	(128,614)	—		(2,272)		—		—		—		(2,272)
Cancellation of restricted stock	(1,000)	—		—		—		—		—		—
Stock based compensation expense	—	—		1,636		—		—		220		1,856


Cash redemption for non-controlling interests	—	—		—		—		—		(1,999)		(1,999)
Adjustment to non-controlling interests ownership in Operating Partnership	—	—		652		—		—		(652)		—

Repurchase of common stock	(673,868)	—		(8,846)		—		—		—		(8,846)
Registration expenditures	—	—		(90)		—		—		—		(90)
Cash dividends ($0.20 per share)	—	—		—		(23,273)		—		(2,187)		(25,460)
Dividends payable to officers	—	—		—		(56)		—		(33)		(89)
Net income attributable to Retail Opportunity Investments Corp.	—	—		—		12,002		—		—		12,002
Net income attributable to non-controlling interests	—	—		—		—		—		1,134		1,134
Other comprehensive loss	—	—		—		—		(8,717)		—		(8,717)
Balance at March 31, 2020	116,120,704	$	12	$	1,472,546	$	(309,325)	$	(12,849)	$	108,963	$	1,259,347


Cancellation of restricted stock	(2,499)	—		—		—		—		—		—
Stock based compensation expense	—	—		2,081		—		—		87		2,168

Redemption of OP Units	1,521,833	—		15,211		—		—		(15,211)		—

Adjustment to non-controlling interests ownership in Operating Partnership	—	—		(1,064)		—		—		1,064		—


Registration expenditures	—	—		6		—		—		—		6


Net income attributable to Retail Opportunity Investments Corp.	—	—		—		4,647		—		—		4,647
Net income attributable to non-controlling interests	—	—		—		—		—		389		389
Other comprehensive income (loss)	—	—		—		—		1,201		(937)		264
Balance at June 30, 2020	117,640,038	$	12	$	1,488,780	$	(304,678)	$	(11,648)	$	94,355	$	1,266,821


Cancellation of restricted stock	(1,400)	—		—		—		—		—		—
Stock based compensation expense	—	—		2,086		—		—		255		2,341

Redemption of OP Units	301,517	—		3,076		—		—		(3,076)		—

Adjustment to non-controlling interests ownership in Operating Partnership	—	—		64		—		—		(64)		—


Registration expenditures	—	—		(17)		—		—		—		(17)


Net income attributable to Retail Opportunity Investments Corp.	—	—		—		6,466		—		—		6,466
Net income attributable to non-controlling interests	—	—		—		—		—		503		503
Other comprehensive income	—	—		—		—		1,418		142		1,560
Balance at September 30, 2020	117,940,155	$	12	$	1,493,989	$	(298,212)	$	(10,230)	$	92,115	$	1,277,674

See accompanying notes to consolidated financial statements.

- 4 -

RETAIL OPPORTUNITY INVESTMENTS CORP.

Consolidated Statements of Cash Flow

(Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	48,248	$	25,141
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	69,401		73,041
Amortization of deferred financing costs and mortgage premiums, net	1,783		1,623
Straight-line rent adjustment	(438)		(563)
Amortization of above and below market rent	(6,571)		(10,756)
Amortization relating to stock based compensation	7,863		6,365
Provisions for tenant credit losses	2,023		8,808
Other noncash interest expense	59		220
Gain on sale of real estate	(22,340)		—

Change in operating assets and liabilities:

Tenant and other receivables	(1,498)		(18,718)
Prepaid expenses	3,412		1,885
Accounts payable and accrued expenses	16,194		11,807
Other assets and liabilities, net	(2,972)		(5,927)
Net cash provided by operating activities	115,164		92,926
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in real estate	(30,304)		—
Proceeds from sale of real estate	68,003		—


Improvements to properties	(32,390)		(24,839)
Deposits on real estate acquisitions, net	(1,000)		—
Proceeds on repayment of mortgage note receivable	63		8,020

Net cash provided by (used in) investing activities	4,372		(16,819)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments on mortgages	(453)		(429)



Proceeds from draws on credit facility	20,000		160,000
Payments on credit facility	(68,000)		(140,500)



Redemption of OP Units	—		(1,999)
Distributions to OP Unitholders	(1,918)		(2,187)
Deferred financing and other costs	—		(1,130)
Proceeds from the sale of common stock	46,061		—
Repurchase of common stock	—		(8,846)
Registration expenditures	(500)		(356)
Dividends paid to common shareholders	(26,416)		(23,398)
Common shares issued under the Equity Incentive Plan	428		—
Shares withheld for employee taxes	(1,905)		(2,272)
Net cash used in financing activities	(32,703)		(21,117)
Net increase in cash, cash equivalents and restricted cash	86,833		54,990
Cash, cash equivalents and restricted cash at beginning of period	6,636		5,458
Cash, cash equivalents and restricted cash at end of period	$	93,469	$	60,448

Other non-cash investing and financing activities increase (decrease):




Interest rate swap liabilities	$	(4,204)	$	7,112
Accrued real estate improvement costs	$	8,206	$	3,478
Equity redemption of OP Units	$	6,858	$	18,287

Dividends and distributions payable	$	14,739	$	363

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statement of cash flows:


	Nine Months Ended September 30,
	2021		2020
Cash and cash equivalents	$	91,150	$	58,458
Restricted cash	2,319		1,990
Total cash, cash equivalents and restricted cash shown in Statements of Cash Flows	$	93,469	$	60,448

See accompanying notes to consolidated financial statements.

- 5 -

RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP

Consolidated Balance Sheets

(In thousands)


	September 30, 2021 (unaudited)		December 31, 2020
ASSETS
Real Estate Investments:
Land	$	875,818	$	881,872
Building and improvements	2,272,296		2,274,680
	3,148,114		3,156,552
Less: accumulated depreciation	490,638