UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
–––––––––––––
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 20, 2010
RETAIL OPPORTUNITY INVESTMENTS CORP.
(Exact Name of Registrant as Specified in Its Charter)
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Delaware
(State or other jurisdiction
of incorporation)
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001-33749
(Commission File Number)
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26-0500600
(I.R.S. Employer
Identification No.)
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3 Manhattanville Road, Purchase, NY
(Address of Principal Executive Offices)
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10577
(Zip Code)
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Registrant's telephone number, including area code: (914) 272-8080
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 (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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EXPLANATORY NOTE
This Current Report on Form 8-K/A (this “Amendment”) is being filed to include disclosures that amend and supplement those disclosures made by Retail Opportunity Investments Corp. (the "Company") in its Current Report on Form 8-K (the “Original Form 8-K”) filed with the Securities and Exchange Commission on August 25, 2010, as set forth below. The financial statements and pro forma financial information described in Item 9.01 below should be read in conjunction with the Original Form 8-K and this Amendment.
Item 2.01 Completion of Acquisition or Disposition of Assets.
Cascade Summit Town Square Acquisition
On August 20, 2010, a subsidiary of the Company completed the previously announced acquisition of a grocery-anchored neighborhood shopping center located in West Linn, Oregon ("Cascade Summit Town Square") from Cascade Summit Retail LLC, an unaffiliated third party. The net purchase price for Cascade Summit Town Square was approximately $17.1 million. Included in the net purchase price was the assumption of an existing mortgage loan (the “Cascade Summit Loan”) with an outstanding principal balance of approximately $7.2 million. The Cascade Summit Loan bears interest at a rate of 7.25% per annum and has a maturity date of July 2012. The remainder of
the net purchase price was funded in cash.
In connection with the acquisition of Cascade Summit Town Square, the Company filed the Original Form 8-K describing the acquisition. This Amendment is being filed to include disclosures that amend and supplement the disclosures in the Original Form 8-K.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
Cascade Summit Town Square
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·
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Independent Auditors’ Report
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·
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Statements of Revenues and Certain Expenses for the Year Ended December 31, 2009 (Audited) and Six Months Ended June 30, 2010 (Unaudited)
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·
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Notes to Statements of Revenues and Certain Expenses for the Year Ended December 31, 2009 (Audited) and Six Months Ended June 30, 2010 (Unaudited)
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(b) Pro Forma Financial Information.
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·
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Pro Forma Consolidated Balance Sheet as of June 30, 2010 (Unaudited)
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·
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Pro Forma Consolidated Statement of Operations for the Six Months Ended June 30, 2010 (Unaudited)
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·
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Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2009 (Unaudited)
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·
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Notes to Pro Forma Consolidated Financial Statements (Unaudited)
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(c) Exhibits.
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Exhibit No.
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Description
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23.1
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Consent of Independent Registered Public Accounting Firm.
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99.1
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Financial statements and pro forma financial information referenced above under paragraphs (a) and (b) of this Item 9.01
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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.
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Retail Opportunity Investments Corp.
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Dated: October 8, 2010
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By: /s/ John B. Roche
John B. Roche
Chief Financial Officer
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EXHIBIT INDEX
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Exhibit No.
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Description
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23.1
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Consent of Independent Registered Public Accounting Firm.
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99.1
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Financial Statements of Property Acquired and Pro Forma Financial Information.
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statement (No. 333-163866) on Form S-3 of Retail Opportunity Investments Corp. of our report dated October 5, 2010, relating to our audit of the Statements of Revenues and Certain Expenses of Cascade Summit Town Square, for the year ended December 31, 2009, included in this Current Report on Form 8-K/A.
/s/ PKF LLP
New York, New York
October 5, 2010
Exhibit 99.1
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Page
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Cascade Summit Town Square
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Independent Auditors’ Report
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F-1
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Statements of Revenues and Certain Expenses for the Year Ended December 31, 2009 (Audited) and Six Months Ended June 30, 2010 (Unaudited)
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F-2
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Notes to Statements of Revenues and Certain Expenses for the Year Ended December 31, 2009 (Audited) and Six Months Ended June 30, 2010 (Unaudited)
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F-3
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Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Corp.
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F-5 |
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Pro Forma Consolidated Balance Sheet as of June 30, 2010 (Unaudited)
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F-6
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Pro Forma Consolidated Statement of Operations for the Six Months Ended June 30, 2010 (Unaudited)
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F-7
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Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2009 (Unaudited)
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F-8
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Notes to Pro Forma Consolidated Financial Statements (Unaudited)
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F-9
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INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Stockholders
We have audited the accompanying Statement of Revenues and Certain Expenses of the property known as Cascade Summit Town Square, located in West Linn, Oregon (the “Property”) for the year ended December 31, 2009 (the “financial statement”). The financial statement is the responsibility of the Property's management. Our responsibility is to express an opinion on the 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 of material misstatement. An audit includes consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in note 2 and is not intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property for the year ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.
/s/ PKF LLP
New York, New York
October 5, 2010
F-1
CASCADE SUMMIT TOWN SQUARE
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(Dollar amounts in thousands)
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Year Ended
December 31,
2009
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Six
Months Ended
June 30,
2010
(Unaudited)
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|||||||
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Revenues
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Rental income (note 3)
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$ | 1,558 | $ | 789 | ||||
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Other income
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25 | 7 | ||||||
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Total revenues
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1,583 | 796 | ||||||
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Certain Expenses
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Utilities
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30 | 16 | ||||||
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Cleaning services
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7 | 4 | ||||||
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Repairs, maintenance, and supplies
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114 | 47 | ||||||
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Real estate taxes
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168 | 88 | ||||||
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Insurance
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13 | 7 | ||||||
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Bad debt expense
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24 | 24 | ||||||
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Total expenses
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356 | 186 | ||||||
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Excess of revenues over certain expenses
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$ | 1,227 | $ | 610 | ||||
See accompanying notes to statements of revenues and certain expenses.
F-2
CASCADE SUMMIT TOWN SQUARE
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2009 (AUDITED) AND
SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
Cascade Summit Town Square (the “Property”) is a shopping center located in West Linn, Oregon. The Property is owned by Cascade Summit Retail LLC. The Property, which has one anchor tenant, has an aggregate gross rentable area of approximately 94,924 square feet. The anchor tenant occupies approximately 48,000 square feet.
On August 20, 2010, the Property was acquired by Retail Opportunity Investments Corp. (the “Company”), an unaffiliated party.
2.Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Statements of Revenues and Certain Expenses (the “financial statement”) have 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 Property, exclusive of interest income, depreciation and amortization, rental income relating to the allocation of purchase price of the Property 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 Property.
Revenue Recognition
The Property’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 financial statements in conformity with accounting principles generally accepted in the United States of America requires the Property’s management to make estimates and assumptions that affect the reported amounts of revenues and 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
The Property is subject to non-cancelable lease agreements, subject to various escalation clauses, with tenants for retail space. As of December 31, 2009, the future minimum rentals on non-cancelable operating leases expiring in various years are as follows:
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Year ending December 31
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Amounts
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2010
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$ | 1,187,658 | ||
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2011
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881,195 | |||
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2012
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676,583 | |||
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2013
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532,311 | |||
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2014
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305,970 | |||
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Thereafter
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1,177,333 | |||
| $ | 4,761,050 | |||
The tenant leases provide for annual rentals that include the tenants’ proportionate share of real estate taxes and certain property operating expenses. The Property’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 terms of the leases, which amounted to an increase in rental income for the year ended December 31, 2009 and six months ended June 30, 2010 of $53,000 and $34,000, respectively.
None.
F-4
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2010 and for the year ended December 31, 2009 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisition of the property known as Cascade Summit Town Square (the “Property”) on the first day of each period presented. Additionally, the pro forma consolidated balance sheet as of June 30, 2010 has been presented as if the acquisition had been completed on June 30, 2010.
Pro forma purchase adjustments to the purchase price are calculated based on a 20/80 allocation to Land and Building, 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 allocation is preliminary and could be subject to change.
The pro forma consolidated financial statements should be read in conjunction with the Company’s 2009 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ending June 30, 2010. The pro forma consolidated financial statements do not purport to represent the Company’s financial position or the results of operations that would actually have occurred assuming the completion of the acquisition of the Property had occurred by the first day of the periods presented; nor do they 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 JUNE 30, 2010
(UNAUDITED)
(in thousands)
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Company
Historical(1)
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Pro Forma
Adjustments
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Company
Pro Forma
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||||||||||
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ASSETS:
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Real Estate Investments:
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Land
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$ | 32,246 | $ | 3,423 | (2) | $ | 35,669 | |||||
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Building and improvements
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69,014 | 13,691 | (2) | 82,705 | ||||||||
| 101,260 | 17,114 | 118,374 | ||||||||||
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Less: accumulated depreciation
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678 | — | 678 | |||||||||
| 100,582 | 17,114 | 117,696 | ||||||||||
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Mortgage Notes Receivables
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14,983 | — | 14,983 | |||||||||
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Real Estate Investments, net
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115,565 | 17,114 | 132,679 | |||||||||
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Cash and cash equivalents
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272,269 | (9,195 | )(2) | 263,074 | ||||||||
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Tenant and other receivables
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422 | — | 422 | |||||||||
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Notes Receivables
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1,016 | — | 1,016 | |||||||||
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Deposits
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2,000 | (760 | )(2) | 1,240 | ||||||||
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Acquired lease intangible asset, net of accumulated amortization
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5,050 | — | 5,050 | |||||||||
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Income taxes receivable
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1,236 | — | 1,236 | |||||||||
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Prepaid expenses
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358 | — | 358 | |||||||||
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Deferred charges, net of accumulated amortization
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2,051 | — | 2,051 | |||||||||
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Other
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58 | 38 | (2) | 96 | ||||||||
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Total assets
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$ | 400,025 | $ | 7,197 | $ | 407,222 | ||||||
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LIABILITIES AND EQUITY
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Liabilities:
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Mortgage notes payable
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$ | — | $ | 7,197 | (2) | $ | 7,197 | |||||
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Acquired lease intangible liability, net
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3,843 | — | 3,843 | |||||||||
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Accrued expenses
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2,126 | — | 2,126 | |||||||||
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Due to related party
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6 | — | 6 | |||||||||
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Tenants’ security deposit
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348 | — | 348 | |||||||||
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Other liabilities
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1,155 | — | 1,155 | |||||||||
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Total liabilities
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$ | 7,478 | $ | 7,197 | $ | 14,675 | ||||||
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Equity:
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||||||||||||
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Preferred stock
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— | — | — | |||||||||
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Common stock
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4 | — | 4 | |||||||||
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Additional-paid-in capital
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403,643 | — | 403,643 | |||||||||
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Accumulated deficit
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(10,233 | ) | — | (10,233 | ) | |||||||
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Accumulated other comprehensive loss
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(869 | ) | — | (869 | ) | |||||||
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Total Retail Opportunity Investments Corp. shareholders’ equity
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392,545 | — | 392,545 | |||||||||
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Noncontrolling interests
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2 | — | 2 | |||||||||
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Total equity
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392,547 | — | 392,547 | |||||||||
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Total liabilities and equity
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$ | 400,025 | $ | 7,197 | $ | 407,222 | ||||||
See accompanying notes to pro forma consolidated financial statements
F-6
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
(UNAUDITED)
(in thousands, except per share data)
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Company
Historical(1)
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Cascade
Summit
Town Square
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Pro Forma
Adjustments
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Company
Pro Forma
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|||||||||||||
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Revenue
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||||||||||||||||
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Base rents
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$ | 3,457 | $ | 614 | $ | 53 | (3) | $ | 4,124 | |||||||
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Recoveries from tenants
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807 | 175 | — | 982 | ||||||||||||
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Mortgage receivable
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18 | — | — | 18 | ||||||||||||
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Other income
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— | 7 | — | 7 | ||||||||||||
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Total revenues
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4,282 | 796 | 53 | 5,131 | ||||||||||||
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Operating expenses
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||||||||||||||||
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Property operating
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736 | 98 | — | 834 | ||||||||||||
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Property taxes
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480 | 88 | — | 568 | ||||||||||||
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Depreciation and amortization
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1,282 | — | 176 | (5) | 1,458 | |||||||||||
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General & Administrative Expenses
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4,214 | — | — | 4,214 | ||||||||||||
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Acquisition transaction costs
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1,003 | — | 25 | (4) | 1,028 | |||||||||||
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Total operating expenses
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7,715 | 186 | 201 | 8,102 | ||||||||||||
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Operating (loss) income
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(3,433 | ) | 610 | (148 | ) | (2,971 | ) | |||||||||
| Non-operating income (expenses) | ||||||||||||||||
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Interest expense
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— | — | (264 | )(7) | (264 | ) | ||||||||||
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Interest income
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702 | — | (20 | )(6) | 682 | |||||||||||
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Non-operating income (loss)
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702 | — | (284 | ) | 418 | |||||||||||
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Net loss (income) Attributable to
Retail Opportunity Investments Corp.
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$ | (2,731 | ) | $ | 610 | $ | (432 | ) | $ | (2,553 | ) | |||||
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Pro forma Weighted average shares
outstanding – basic and diluted
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41,570 | 41,570 | ||||||||||||||
| Loss per share | ||||||||||||||||
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Basic and diluted:
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$ | (0.07 | ) | $ | (0.06 | ) | ||||||||||
See accompanying notes to pro forma consolidated financial statements
F-7
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
(UNAUDITED)
(in thousands, except per share data)
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Company
Historical
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Cascade
Summit
Town Square
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Pro Forma
Adjustments
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Company
Pro Forma
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|||||||||||||
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Revenue
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||||||||||||||||
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Base rents
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$ | 46 | $ | 1,219 | $ | 95 | (3) | $ | 1,360 | |||||||
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Recoveries from tenants
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— | 339 | — | 339 | ||||||||||||
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Other income
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— | 25 | — | 25 | ||||||||||||
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Total revenues
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46 | 1,583 | 95 | 1,724 | ||||||||||||
| Operating expenses | ||||||||||||||||
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Property operating
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9 | 188 | — | 197 | ||||||||||||
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Property taxes
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— | 168 | — | 168 | ||||||||||||
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General and administrative
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11,145 | — | — | 11,145 | ||||||||||||
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Property acquisition costs
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202 | — | 25 | (4) | 227 | |||||||||||
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Depreciation and Amortization
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29 | — | 351 | (5) | 380 | |||||||||||
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Total operating expenses
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11,385 | 356 | 376 | 12,117 | ||||||||||||
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Operating (loss) income
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(11,339 | ) | 1,227 | (281 | ) | (10,393 | ) | |||||||||
| Non-operating income (expenses) | ||||||||||||||||
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Interest expense
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— | — | (540 | )(7) | (540 | ) | ||||||||||
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Interest income
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1,705 | — | (43 | )(6) | 1,662 | |||||||||||
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Non-operating income (loss)
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1,705 | — | (583 | ) | 1,122 | |||||||||||
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(Loss) Income before Provision for Income Taxes
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(9,634 | ) | 1,227 | (864 | ) | (9,271 | ) | |||||||||
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Benefit for Income Taxes
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(268 | ) | — | — | (268 | ) | ||||||||||
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Net loss (income) for the period
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$ | (9,366 | ) | $ | 1,227 | $ | (864 | ) | $ | (9,003 | ) | |||||
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Pro forma Weighted average shares
outstanding – basic and diluted
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49,735 | 49,735 | ||||||||||||||
| Loss per share | ||||||||||||||||
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Basic and diluted:
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$ | (0.19 | ) | $ | (0.18 | ) | ||||||||||
See accompanying notes to pro forma consolidated financial statements
F-8
RETAIL OPPORTUNITY INVESTMENTS CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)
Adjustments to the Pro Forma Consolidated Balance Sheet
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1.
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Derived from the Company’s unaudited financial statements for the six months ended June 30, 2010.
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2.
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Reflects the pro forma acquisition of the Property for approximately $17,100. The acquisition was funded with available cash of approximately $9,900, the assumption of mortgage loans of approximately $7,200 and other assets.
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Adjustments to the Pro Forma Consolidated Statement of Operations
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3.
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Reflects the pro forma adjustment of $53 and $95 for the six month period ended June 30, 2010 and year ended December 31, 2009, respectively, to record operating rents on a straight-line basis beginning on the first day of the periods presented.
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4.
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Reflects the pro forma adjustment for estimated costs related to the acquisition of the Property.
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5.
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Reflects the estimated depreciation for the Property based on estimated values allocated to building at the beginning periods presented. Depreciation expense is computed on a straight-line basis over the estimated useful life of the assets as follows:
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Estimated
Useful Life
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Year Ended
December 31, 2009
Depreciation Expense
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Six Months Ended
June 30, 2010
Depreciation Expense
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|||||||
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Building
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39 years
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$ | 351 | $ | 176 | ||||
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6.
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Reflects the pro forma adjustment to interest income to assume the acquisition has been made on the first day of the periods presented.
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7.
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Reflects the pro forma adjustment to interest expense on the assumption of the mortgage loan as if the acquisition has been made on the first day of the periods presented.
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F-9