f8k_071312.htm

 
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): May 4, 2012
 
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.)

 
     
81 Main Street, White Plains, NY
(Address of Principal Executive Offices)
 
10601
(Zip Code)
Registrant's telephone number, including area code: (914) 620-2700
 
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 May 4, 2012, a subsidiary of Retail Opportunity Investments Corp. (the "Company") completed the acquisition of a shopping center located in Foster City, California known as Marlin Cove from Marlin Cove Shopping Center, LLC (“Seller”), an unaffiliated third party. The net purchase price for Marlin Cove was approximately $17.4 million and was funded from the draw of approximately $16.4 million from our existing credit facility, and $1.0 million of 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 Marlin Cove, which individually is not considered significant within the meaning of Rule 3-14.
 
Item 9.01 Financial Statements and Exhibits.
 
(a)      Financial Statement of Property Acquired.
 
Marlin Cove
 
·  
Independent Auditors’ Report
 
·  
Statement of Revenues and Certain Expenses for the year ended December 31, 2011 (Audited) and three months ended March 31, 2012 (Unaudited)
 
·  
Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2011 (Audited) and three months ended March 31, 2012 (Unaudited)
 
(b)      Pro Forma Financial Information.
 
·  
Pro Forma Consolidated Balance Sheet as of March 31, 2012 (Unaudited)
 
·  
Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2012 (Unaudited)
 
·  
Pro Forma Consolidated Statement of Operations for the year ended December 31, 2011 (Unaudited)
 
·  
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
 
(c)      Exhibits.
 
Exhibit No.
 
Description
23.1
 
Consent of Independent Auditors
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:  July 13, 2012
 By: 
/s/ John B. Roche
John B. Roche
Chief Financial Officer
 

 
 

 

EXHIBIT INDEX
 
Exhibit No.
 
Description
23.1
 
Consent of Independent Auditors
99.1
 
Financial Statement of Property Acquired and Pro Forma Financial Information

 
 

 

exh_231.htm
Exhibit 23.1
 
CONSENT OF INDEPENDENT AUDITORS
 
We consent to the incorporation by reference in the Registration Statement (No. 333-163866) on Form S-3, the Registration Statement (No. 333-170692) on Form S-8 and 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. of our report dated July 13, 2012, relating to our audit of the Statement of Revenues and Certain Expenses of Marlin Cove, for the year ended December 31, 2011, included in this Current Report on Form 8-K.
 
/s/ PKF O'Connor Davies
A Division of O'Connor Davies, LLP
 
New York, New York
July 13, 2012
 

exh_991.htm
Exhibit 99.1
 
 
Page
Marlin Cove
 
   
   
   
   
 
   
F-6
   
F-7
   
F-8
   
F-9

 
 

 

INDEPENDENT AUDITORS’ REPORT
 
To the Board of Directors and Stockholders
Retail Opportunity Investments Corp.
 
We have audited the accompanying Statement of Revenues and Certain Expenses of the property known as Marlin Cove, located in Foster City, California (the “Property”) for the year ended December 31, 2011 (the “financial statement”). The financial statement is the responsibility of 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, 2011, in conformity with accounting principles generally accepted in the United States of America.
 
/s/ PKF O'Connor Davies
A Division of O'Connor Davies, LLP
 
New York, New York
July 13, 2012
 

 
F-1

 
 
MARLIN COVE
     STATEMENT OF REVENUES AND CERTAIN EXPENSES
(Dollar amounts in thousands)
 
   
Year Ended 
December 31,
2011
   
Three Months
Ended
March 31,
2012
(Unaudited)
 
Revenues
           
Rental income (note 4)
  $ 1,570     $ 403  
Total revenues
    1,570       403  
                 
Certain Expenses
               
Utilities
    157       39  
Repairs, maintenance, and supplies
    158       50  
Cleaning
    39       12  
Real estate taxes
    189       47  
Insurance
    33       8  
Total expenses
    576       156  
                 
Excess of revenues over certain expenses
  $ 994     $ 247  
 
 
    See accompanying notes to statement of revenues and certain expenses.
 
F-2

 

MARLIN COVE
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2011 (AUDITED) AND
THREE MONTHS ENDED MARCH 31, 2012 (UNAUDITED)


1.Business and Organization
 
Marlin Cove (the “Property”) is a shopping center located in Foster City, California.  The Property was owned by Marlin Cove Shopping Center, LLC (“Seller”).  The Property, which is anchored by Tawa Supermarkets, Inc., has an aggregate gross rentable area of 73,186 square feet.  The anchor tenant occupies approximately 29,300 square feet.
 
On May 4, 2012, 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.
 
In the opinion of the Company’s management, all adjustments necessary for a fair presentation of the financial statement for the three months ended March 31, 2012 (unaudited) and for the year ended December 31, 2011 have been included.  Such adjustments consisted of normal recurring items.  Interim results are not necessarily indicative of results for a year.
 
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.
 
 
F-3

 
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 13, 2012, and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statement.
 
4.Leases
 
The Property is subject to non-cancelable lease agreements, subject to various escalation clauses, with tenants for retail space. As of December 31, 2011, the future minimum rentals on non-cancelable operating leases expiring in various years are as follows:
 
Year ending December 31
 
Amounts
 
       
2012
  $ 1,281,987  
2013
    1,202,231  
2014
    1,091,724  
2015
    982,455  
2016
    826,369  
Thereafter
    2,487,458  
    $ 7,872,224  

 
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 approximately $29,500 and a decrease of approximately $3,900 in rental income for the year ended December 31, 2011 and the three months ended March 31, 2012, respectively.
 
5.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, 2012 and for the year ended December 31, 2011 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisition of the property known as Marlin Cove (the "Property") on January 1, 2011. Additionally, the pro forma consolidated balance sheet as of March 31, 2012 has been presented as if the acquisition had been completed on March 31, 2012.
 
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 2011 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ended March 31, 2012. 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 on January 1, 2011; 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 MARCH 31, 2012
(UNAUDITED)
(in thousands)
 
   
Company
Historical(1)
   
Pro Forma
Adjustments
   
Company
Pro Forma
 
    ASSETS:
                 
Real Estate Investments:
                 
Land
  $ 176,193     $ 3,476 (2)   $ 179,669  
Building and improvements
    449,999       13,904 (2)     463,903  
      626,192       17,380       643,572  
Less: accumulated depreciation
    18,376             18,376  
      607,816       17,380       625,196  
Mortgage notes receivables
    10,000             10,000  
Investment in and advances to unconsolidated joint ventures
    26,650             26,650  
Real Estate Investments, net
    644,466       17,380       661,846  
                         
Cash and cash equivalents
    10,739       (1,000 )(2)     9,739  
Restricted cash
    1,703             1,703  
Tenant and other receivables
    7,721             7,721  
Deposits
    500             500  
Acquired lease intangible asset, net of accumulated amortization
    32,297             32,297  
Prepaid expenses
    981             981  
Deferred charges, net of accumulated amortization
    14,970             14,970  
Other
    852       80 (2)     932  
    Total assets
  $ 714,229     $ 16,460     $ 730,689  
                         
    LIABILITIES AND EQUITY
                       
                         
    Liabilities:
                       
Credit facilities
  $ 125,000     $ 16,380 (2)   $ 141,380  
Mortgage notes payable
    67,864             67,864  
Acquired lease intangible liability, net
    46,735             46,735  
Accrued expenses
    5,420             5,420  
Tenants’ security deposit
    1,578       80 (2)     1,658  
Other liabilities
    18,000             18,000  
Total liabilities
  $ 264,597     $ 16,460     $ 281,057  
                         
    Equity:
                       
Preferred stock
                 
Common stock
    5             5  
Additional paid-in capital
    487,206             487,206  
Accumulated deficit
    (24,453 )           (24,453 )
Accumulated other comprehensive loss
    (13,128 )           (13,128 )
Total Retail Opportunity Investments Corp.   shareholders’ equity
    449,630             449,630  
Noncontrolling interests
    2             2  
Total equity
    449,632             449,632  
   Total liabilities and equity
  $  714,229     $ 16,460     $ 730,689  
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, 2012
 
(UNAUDITED)
(in thousands, except per share data)

   
Company
Historical(1)
   
Marlin Cove (6)
   
 
Pro Forma
Adjustments
   
Company
Pro Forma
 
Revenue
                       
Base rents
  $ 13,341     $ 310       38 (3)   $ 13,689  
Recoveries from tenants
    3,104       93       -       3,197  
Mortgage interest
    202       -       -       202  
Total revenues
    16,647       403       38       17,088  
                                 
Operating expenses                                
Property operating
    2,969       109       -       3,078  
Property taxes
    1,599       47       -       1,646  
Depreciation and amortization
    6,650       -       89 (4)     6,739  
General & Administrative Expenses
    2,420       -               2,420  
Acquisition transaction costs
    122       -       263 (5)     385  
Total operating expenses
    13,760       156       352       14,268  
                                 
Operating income
    2,887       247       (314 )     2,820  
Non-operating income (expenses)
                               
Interest expense
    (2,294 )     -       (20 )(7)     (2,314 )
Equity in earnings from unconsolidated joint ventures
    524       -       -       524  
Interest income
    10       -       -       10  
Net income attributable to Retail Opportunity Investments Corp.
  $ 1,127     $ 247     $ (334 )   $ 1,040  
                                 
Pro forma weighted average shares outstanding
                               
                                 
Basic:
    49,604                       49,604  
Diluted:
    49,690                       49,690  
                                 
Pro forma income per share
                               
                                 
Basic and diluted:
  $ 0.02                     $  0.02  
                                 
Pro forma dividends per share:
  $  0.12                     $  0.12  

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, 2011
 
(UNAUDITED)
(in thousands, except per share data)
 
   
Company Historical
         
Pro Forma
   
Company
 
    (1)     Marlin Cove    
Adjustments
   
Pro Forma
 
Revenue
                       
Base rents
  $ 39,581     $ 1,203     $ 140 (3)   $ 40,924  
Recoveries from tenants
    10,248       367       -       10,615  
Mortgage interest
    1,909       -       -       1,909  
Total revenues
    51,738       1,570       140       53,448  
                                 
Operating expenses
                         
Property operating
     8,404        387       -        8,791  
Property taxes
    5,023       189       -       5,212  
Depreciation and amortization
    21,264       -       357 (4)     21,621  
General & Administrative Expenses
    9,801       -       -       9,801  
Acquisition transaction costs
    2,291       -       263 (5)     2,554  
Total operating expenses
    46,783       576       620       47,979  
                                 
Operating income (loss)
    4,955       994       (480 )     5,469  
Non-operating income (expenses)
                         
Interest expense
    (6,225 )     -       (81 )(7)     (6,306 )
Gain on bargain purchase
    9,449       -       -       9,449  
Equity in earnings from unconsolidated joint ventures
    1,458       -       -       1,458  
Interest income
    19       -       -       19  
Net income (loss) attributable to Retail Opportunity Investments Corp.
  $ 9,656     $ 994     $ (561 )   $ 10,089  
                                 
Pro forma weighted average shares outstanding
                               
                                 
Basic:
     42,477                        42,477  
Diluted:
     42,526                        42,526  
                                 
Pro forma income per share
                               
                                 
Basic and diluted:
  $  0.23                     $  0.24  
                                 
Pro forma dividends per share:
  $  0.39                     $  0.39  
 
 
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 and unaudited financial statements for the year ended December 31, 2011 and the three months ended March 31, 2012.
 
2.  
Reflects the pro forma acquisition of the Property for approximately $17,380.  The acquisition was funded from the draw of approximately $16,380 from our existing credit facility, and $1,000 of available cash, and other assets and liabilities.
 
Adjustments to the Pro Forma Consolidated Statement of Operations
 
3.  
Reflects the pro forma adjustment of $38 and $140 for three months ended March 31, 2012 and year ended December 31, 2011, respectively, to record operating rents on a straight-line basis beginning on the first day of the periods presented.
 
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
 
For the Three
Months Ended
March 31, 2012
Depreciation 
Expense
   
Year Ended
December 31, 2011
Depreciation 
Expense
 
               
Building
39 years
  $ 89     $ 357  
 
5.  
Reflects the pro forma adjustment for estimated costs related to the acquisition of the Property.
 
6.  
Reflects the operating results for the period January 1, 2012 to March 31, 2012.
 
7.  
Reflects the pro forma adjustment to interest expense on the draw from the credit facility to assume the acquisition has been made on the first day of the periods presented.
 

 
F-9