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): January 3, 2011
 
RETAIL OPPORTUNITY INVESTMENTS CORP.
 
(Exact Name of Registrant as Specified in Its Charter)
 
Delaware
(State or other jurisdiction
of incorporation)
 
001-33749
(Commission File Number)
 
26-0500600
(I.R.S. Employer
Identification No.)
 
3 Manhattanville Road, Purchase, NY
(Address of Principal Executive Offices)
 
10577
(Zip Code)
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):
 
[  ]
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))
 
 
 

 
Item 8.01 Other Events.
 
On January 3, 2011, a subsidiary of Retail Opportunity Investments Corp. (the "Company") completed the acquisition of a shopping center located in Oceanside, California known as Marketplace Del Rio from Mission Center, LLC, (“Seller”), an unaffiliated third party. The net purchase price for Marketplace Del Rio was approximately $35.7 million and was funded from available cash.
 
Set forth in Item 9.01 are financial statements prepared pursuant to Rule 3-14 of Regulation S-X relating to the acquisition of Marketplace Del Rio, which individually is not considered significant within the meaning of Rule 3-14.
 
Item 9.01 Financial Statements and Exhibits.
 
(a) 
Financial Statements of Business Acquired.
 
Marketplace Del Rio
 
·  
Independent Auditors’ Report
 
·  
Statement of Revenues and Certain Expenses for the Year Ended December 31, 2010 (Audited) and three months ended March 31, 2011 (Unaudited)
 
·  
Notes to Statement of Revenues and Certain Expenses for the Year Ended December 31, 2010 (Audited) and three months ended March 31, 2011(Unaudited)
 
(b) 
Pro Forma Financial Information.
 
·  
Pro Forma Consolidated Balance Sheet As of December 31, 2010 (Unaudited)
 
·  
Pro Forma Consolidated Statement of Operations for the Three Months Ended March 31, 2011 (Unaudited)
 
·  
Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2010 (Unaudited)
 
·  
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
 
(c) 
Exhibits.
 
Exhibit No.
 
Description
23.1
 
Consent of Independent Auditor.
     
99.1
 
Financial statements and pro forma financial information referenced above under paragraphs (a) and (b) 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:  May 17, 2011
By:
/s/ John B. Roche
 
  Name:
John B. Roche
 
  Title:
Chief Financial Officer
 
 
 
 
 

 
EXHIBIT INDEX
 
Exhibit No.
 
Description
23.1
 
Consent of Independent Auditor
     
99.1
 
Financial Statement of Property Acquired and Pro Forma Financial Information.
 
Exhibit 23.1
 
CONSENT OF INDEPENDENT AUDITOR
 
We consent to the incorporation by reference in the Registration Statement (No. 333-163866) on Form S-3 and the Registration Statement on Form S-8 (No. 333-170692) of Retail Opportunity Investments Corp. of our report dated May 17, 2011, relating to our audit of the Statement of Revenues and Certain Expenses of Marketplace Del Rio, for the year ended December 31, 2010, included in this Current Report on Form 8-K.
 
/s/ PKF LLP
 
New York, New York
May 17, 2011
Exhibit 99.1
 
 
Page
Marketplace Del Rio
 
Independent Auditors’ Report
F-1
Statement of Revenues and Certain Expenses for the Year Ended December 31, 2010 (Audited) and three months ended March 31, 2011 (Unaudited)
F-2
Notes to Statement of Revenues and Certain Expenses for the Year Ended December 31, 2010 (Audited) and three months ended March 31, 2011 (Unaudited)
F-3
Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Corp.
 
Pro Forma Consolidated Balance Sheet As of December 31, 2010 (Unaudited)
F-6
Pro Forma Consolidated Statement of Operations for the Three Months Ended March 31, 2011 (Unaudited)
F-7
Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2010 (Unaudited)
F-8
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
F-9

 

 

 

 

 
 

 
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 Marketplace Del Rio, located in Oceanside, California (the “Property”) for the year ended December 31, 2010 (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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, 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, 2010, in conformity with accounting principles generally accepted in the United States of America.
 
/s/ PKF LLP
 
New York, New York
May 17, 2011
 

 
F-1

 
MARKETPLACE DEL RIO
     STATEMENTS OF REVENUES AND CERTAIN EXPENSES
 
(Dollar amounts in thousands)
 
   
Year Ended 
December 31,
2010
   
Three Months
Ended
March 31,
2011
(Unaudited)
 
Revenues
           
Rental income (note 3)
  $ 3,460     $ 1,036  
Other income
    2        
Total revenues
    3,462       1,036  
                 
Certain Expenses
               
Utilities
    113       21  
Cleaning services
    51       21  
Repairs, maintenance, and supplies
    330       80  
Real estate taxes
    226       57  
Insurance
    56       6  
Bad debt expense
          13  
General & administrative
    19       2  
Total expenses
    795       200  
                 
Excess of revenues over certain expenses
  $ 2,667     $ 836  
 
See accompanying notes to statement of revenues and certain expenses.

 
F-2

 
MARKETPLACE DEL RIO
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2010 (AUDITED) AND
THREE MONTH ENDED MARCH 31, 2011 (UNAUDITED)


1.Business and Organization
 
Marketplace Del Rio (the “Property”) is a shopping center located in Oceanside, California.  The Property was owned by Mission Center, LLC, (“Seller”).  The Property, which is anchored by two tenants, has an aggregate gross rentable area of approximately 177,000 square feet.  The anchored tenants occupy approximately 47,000 square feet.
 
On January 3, 2011, the Property was acquired by ROIC California, LLC, (“Buyer”), a wholly-owned subsidiary of Retail Opportunity Investments Corp. (the “Company”).
 
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 Property, 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 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

 
3.Leases
 
The Property is subject to non-cancelable lease agreements, subject to various escalation clauses, with tenants for retail space. As of December 31, 2010, the future minimum rentals on non-cancelable operating leases expiring in various years are as follows:
 
Year ending December 31
 
Amounts
 
       
2011
  $ 2,714,606  
2012
    2,815,775  
2013
    2,616,073  
2014
    2,445,457  
2015
    1,869,846  
Thereafter
    9,303,028  
    $ 21,764,785  
 
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 of $112,800 and $81,000 in rental income for the year ended December 31, 2010 and the three months ended March 31, 2011, respectively.
 
4.Commitments and Contingencies
 
None.
 
 
F-4

 
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The unaudited pro forma consolidated statement of operations for the three months ended March 31, 2011 and for the year ended December 31, 2010 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisition of the property known as Marketplace Del Rio on the first day of each period presented.  Additionally the pro forma consolidated balance sheet has been presented as if the acquisition had been completed on December 31, 2010.
 
The purchase price allocation is 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 2010 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ending March 31, 2011. The pro forma consolidated financial statements do not purport to represent the Company’s financial position or 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 DECEMBER 31, 2010
(UNAUDITED)
(in thousands)
 
   
Company
Historical(1)
   
Pro Forma
Adjustments
   
Company
Pro Forma
 
    ASSETS:
                 
Real Estate Investments:
                 
Land
  $ 85,473     $ 7,140 (2)   $ 92,613  
Building and improvements
    187,260       28,560 (2)     215,820  
      272,733       35,700       308,433  
Less: accumulated depreciation
    3,078             3,078  
      269,655       35,700       305,355  
Mortgage Notes Receivables
    57,778               57,778  
Investment in and advances to unconsolidated joint venture
    16,779             16,779  
Real Estate Investments, net
    344,212       35,700       379,912  
                         
Cash and cash equivalents
    84,736       (35,200 )(2)     49,536  
Restricted cash
                       
Tenant and other receivables
    2,838 2,056             2,838 2,056  
Deposits
    1,500       (500 )(2)     1,000  
Acquired lease intangible asset, net of accumulated amortization
    17,673             17,673  
Prepaid expenses
    799             799  
Deferred charges, net of accumulated amortization
    9,577             9,577  
Other
    802             802  
    Total assets
  $ 464,193     $     $ 464,193  
                         
    LIABILITIES AND EQUITY
                       
                         
    Liabilities:
                       
Mortgage notes payable
  $ 42,417     $     $ 42,417  
Acquired lease intangible liability, net
    20,996             20,996  
Accrued expenses
    4,889             4,889  
Tenants’ security deposit
    860             860  
Other liabilities
    4,508             4,508  
Total liabilities
  $ 73,670     $     $ 73,670  
                         
    Equity:
                       
Preferred stock
                 
Common stock
    4             4  
Additional-paid-in capital
    403,916             403,916  
Accumulated deficit
    (12,881 )           (12,881 )
Accumulated other comprehensive loss
    (518 )           (518 )
Total Retail Opportunity Investments Corp.   shareholders’ equity
    390,521             390,521  
Noncontrolling interests
    2             2  
Total equity
    390,523             390,523  
   Total liabilities and equity
  $  464,193     $     $  464,193  
 
See accompanying notes to pro forma consolidated financial statements
 
 
F-6

 
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
 
(UNAUDITED)
(in thousands, except per share data)

   
Company
Historical(1)
   
Marketplace
Del Rio (7)
   
Company
Pro Forma
 
Revenue
                 
Base rents
  $ 7,181     $ 25     $ 7,206  
Recoveries from tenants
    1,905       7       1,912  
Mortgage interest
    955               955  
Total revenues
    10,041       32       10,073  
                         
Operating expenses                        
Property operating
    1,096       5       1,101  
Property taxes
    1,052       3       1,055  
Depreciation and amortization
    4,252       14       4,266  
General & Administrative Expenses
    2,389               2,389  
Acquisition transaction costs
    175               175  
Total operating expenses
    8,964       22       8,986  
                         
Operating income
    1,077       10       1,087  
Non-operating income (expenses)                        
Interest expense
    (916 )             (916 )
Gain on bargain purchase
    5,762               5,762  
Equity in earnings from unconsolidated joint ventures
    243               243  
Interest income
    14               14  
Net income attributable to Retail Opportunity Investments Corp.
  $ 6,180     $ 10     $ 6,190  
                         
Pro forma weighted average shares outstanding – basic and diluted
    41,847               41,847  
Pro forma income per share                        
Basic and diluted:
  $ 0.15             $ 0.15  
Pro forma dividends per common share:    $ 0.08             $ 0.08  
 
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, 2010
 
(UNAUDITED)
(in thousands, except per share data)

   
Company
Historical(1)
   
Marketplace
Del Rio
   
Pro Forma
Adjustments
   
Company
Pro Forma
 
Revenue
                       
Base rents
  $ 12,381     $ 2,752     $ 290 (3)   $ 15,423  
Recoveries from tenants
    2,879       708               3,587  
Mortgage interest
    1,069                     1,069  
Total revenues
    16,329       3,460       290       20,079  
                                 
Operating expenses                                
Property operating
    2,848       550               3,398  
Property taxes
    1,697       226               1,923  
Depreciation and amortization
    6,081               732 (4)     6,813  
General & Administrative Expenses
    8,381       19               8,400  
Acquisition transaction costs
    2,636               35 (5)     2,671  
Total operating expenses
    21,643       795       767       23,205  
                                 
Operating (loss) income
    (5,314 )     2,665       (477 )     (3,126 )
Non-operating income (expenses)                                
Interest expense
    (324 )                     (324 )
Gain on bargain purchase
    2,217                       2,217  
Equity in earnings from unconsolidated joint ventures
    38                       38  
Interest income
    1,109               (169 )(6)     940  
Other income
    1,873       2               1,875  
Net (loss) income attributable to Retail Opportunity Investments Corp.
  $ (401 )   $ 2,667     $ (646 )   $ 1,620  
                                 
Pro forma weighted average shares outstanding – basic and diluted
    41,582                       41,582  
Pro forma (loss) income per share                                
Basic and diluted:
  $ (0.01 )                   $ 0.04  
Pro forma dividends per common share:   $ 0.18                     $ 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
 
 
1.  
Derived from the Company’s audited financial statements for the year ended December 31, 2010.
 
2.  
Reflects the pro forma acquisition of the Property for approximately $35,700.  The acquisition was funded with available cash.
 
Adjustments to the Pro Forma Consolidated Statement of Operations
 
3.  
Reflects the pro forma adjustment of $290 for the year ended December 31, 2010, to record operating rents on a straight-line basis beginning January 1, 2010.
 
4.  
Reflects the estimated depreciation for the Property based on estimated values allocated to building at the beginning period presented.  Depreciation expense is computed on a straight-line basis over the estimated useful life of the assets as follows:
 
 
Estimated
Useful Life
 
Year Ended
December 31, 2010
Depreciation 
Expense
 
         
Building
39 years
  $ 732  
           
 
5.  
Reflects the pro forma adjustment for estimated costs related to the acquisition of the Property.
 
6.  
Reflects the pro forma adjustment to interest income to assume the acquisition has been made on January 1, 2010.
 
7.  
Reflects the operating results for the period January 1, 2011 to January 2, 2011.
 

 
F-9