f8k_052913.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) April 15, 2013
 
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.)
 
8905 Towne Centre Drive, Suite 108
San Diego, CA
(Address of Principal Executive Offices)
 
 
92122
(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 April 15, 2013, Retail Opportunity Investments Corp. (the "Company") acquired the property known as Canyon Crossing Shopping Center (“Canyon Crossing Shopping Center”) located in Puyallup, Washington, within the Seattle metropolitan area, for a purchase price of approximately $35.0 million, from an unaffiliated third-party seller. Canyon Crossing Shopping Center is approximately 121,000 square feet and is anchored by Safeway Supermarket. The property was acquired using borrowings under the Company’s credit facility.
 
On April 22, 2013, the Company acquired the property known as Diamond Hills Plaza (“Diamond Hills Plaza”) located in Diamond Bar, California, within the Los Angeles metropolitan area, for a purchase price of approximately $48.0 million, from an unaffiliated third-party seller. Diamond Hills Plaza is approximately 140,000 square feet and is anchored by an H Mart Supermarket and a Rite Aid. The property was acquired using borrowings under the Company’s credit facility.
 
Set forth in Item 9.01 are financial statements prepared pursuant to Rule 3-14 of Regulation S-X relating to the acquisition of each of Canyon Crossing Shopping Center and Diamond Hills Plaza, each of which individually is not considered significant within the meaning of Rule 3-14.
 
Item 9.01 Financial Statements and Exhibits.
 
(a)  
Financial Statements of Businesses Acquired.
 
Canyon Crossing Shopping Center
 
·  
Independent Auditors’ Report
 
·  
Statement of Revenues and Certain Expenses for the year ended December 31, 2012 (Audited) and three months ended March 31, 2013 (Unaudited)
 
·  
Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2012 (Audited) and three months ended March 31, 2013 (Unaudited)
 
Diamond Hills Plaza
 
·  
Independent Auditors’ Report
 
·  
Statement of Revenues and Certain Expenses for the year ended December 31, 2012 (Audited) and three months ended March 31, 2013 (Unaudited)
 
·  
Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2012 (Audited) and three months ended March 31, 2013 (Unaudited)
 
 (b)   
Pro Forma Financial Information.
 
·  
Pro Forma Consolidated Balance Sheet as of March 31, 2013 (Unaudited)
 
·  
Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2013 (Unaudited)
 
·  
Pro Forma Consolidated Statement of Operations for the year ended December 31, 2012 (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:  May 29,  2013
By: /s/ Michael B. Haines
       Michael B. Haines
       Chief Financial Officer
 

 

 
 

 
EXHIBIT INDEX

 
 
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
 

 
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 reports dated May 29, 2013, relating to (1) our audit of the Statement of Revenues and Certain Expenses of Canyon Crossing Shopping Center, for the year ended December 31, 2012 and (2) our audit of the Statement of Revenues and Certain Expenses of Diamond Hills Plaza, for the year ended December 31, 2012, each as 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
May 29, 2013
 
exh_991.htm
Exhibit 99.1
 
 
 
 
 
Page
Canyon Crossing Shopping Center
 
   
Independent Auditors’ Report
F-1
   
Statement of Revenues and Certain Expenses for the year ended December 31, 2012 (Audited) and three months ended March 31, 2013 (Unaudited)
F-2
   
Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2012 (Audited) and three months ended March 31, 2013 (Unaudited)
F-3
   
Diamond Hills Plaza
 
   
Independent Auditors’ Report
F-5
   
Statement of Revenues and Certain Expenses for the year ended December 31, 2012 (Audited) and three months ended March 31, 2013 (Unaudited)
F-6
   
Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2012 (Audited) and three months ended March 31, 2013 (Unaudited)
F-7
   
Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Corp.
 
   
Pro Forma Consolidated Balance Sheet as of March 31, 2013 (Unaudited)
F-10
   
Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2013 (Unaudited)
F-11
   
Pro Forma Consolidated Statement of Operations for the year ended December 31, 2012 (Unaudited)
F-12
   
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
F-13
 
 
 

 
INDEPENDENT AUDITORS’ REPORT
 
To the Board of Directors and Stockholders

We have audited the accompanying financial statement of the property known as Canyon Crossing Shopping Center, located in Puyallup, Washington (“Canyon Crossing") which is comprised of the statement of revenues and certain expenses for the year ended December 31, 2012, and the related notes to the financial statement.

Management’s Responsibility for the Financial Statement
 
Management is responsible for the preparation and fair presentation of this financial statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility
 
Our responsibility is to express an opinion on this financial statement based on our audit.  We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement.  The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error.  In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Canyon Crossing’s internal controls.  Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
 
In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of Canyon Crossing for the year ended December 31, 2012 in accordance with accounting principles generally accepted in the United States of America.

Emphasis-of-Matter
 
We draw attention to Note 2 to the financial statement, which describes that the accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and is not intended to be a complete presentation of Canyon Crossing’s revenues and expenses.  Our opinion is not modified with respect to this matter.
 

/s/ PKF O'Connor Davies
A Division of O'Connor Davies, LLP
 
New York, New York
May 29, 2013
 
 
F-1

 
CANYON CROSSING SHOPPING CENTER
     STATEMENT OF REVENUES AND CERTAIN EXPENSES
(Dollar amounts in thousands)
 

 
   
Year Ended 
December 31,
2012
   
Three Months
Ended
March 31,
2013
(Unaudited)
 
Revenues
           
Rental income (note 4)
  $ 2,057     $ 542  
Total revenues
    2,057       542  
                 
Certain Expenses
               
Utilities
    41       13  
Repairs, maintenance and supplies
    141       42  
Cleaning and landscaping
    99       26  
Real estate taxes
    255       65  
Insurance
    29       8  
Total expenses
    565       154  
                 
Excess of revenues over certain expenses
  $ 1,492     $ 388  
 
See accompanying notes to statement of revenues and certain expenses.
 
 
F-2

 
CANYON CROSSING SHOPPING CENTER
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2012 (AUDITED) AND
THREE MONTHS ENDED MARCH 31, 2013 (UNAUDITED)

1.            Business Organization
 
On April 15, 2013, Retail Opportunity Investments Corp. ("the Company") acquired the property known as Canyon Crossing Shopping Center located in Puyallup, Washington ("Canyon Crossing"), within the Seattle metropolitan area, for a purchase price of approximately $35.0 million. Canyon Crossing is approximately 121,000 square feet and is anchored by Safeway Supermarket. Canyon Crossing was acquired using borrowings under the Company’s credit facility.
 
2.             Basis of Presentation and Summary of Significant Accounting Policies
 
Basis of Presentation
 
The Statement of Revenues and Certain Expenses (the “financial statement”) has been prepared for the purpose of complying with the provisions of Rule 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The financial statement includes the historical revenues and certain expenses of Canyon Crossing, 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 Canyon Crossing 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 Canyon Crossing.
 
The statement of revenue and certain expenses for the three month period ended March 31, 2013 is unaudited.  In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of revenue and certain expenses in accordance with the SEC Rule 3-14. All such adjustments are of a normal recurring nature.
 
Revenue Recognition
 
Canyon Crossing operations consist of rental income earned from tenants under leasing arrangements which generally provide for minimum rents and tenant reimbursements.  All leases are classified as operating leases. Minimum rents are recognized by amortizing the aggregate lease payments on a straight-line basis over the terms of the lease (including rent holidays). Tenant reimbursements for real estate taxes, common area maintenance and other recoverable costs are recognized as rental income in the period that the expenses are incurred.
 
Use of Estimates
 
The preparation of the financial statement in conformity with accounting principles generally accepted in the United States of America requires Canyon Crossing’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 May 29, 2013, and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statements.
 
4.       Leases
 
Canyon Crossing is subject to non-cancelable lease agreements, subject to various escalation clauses, with tenants for retail space. As of December 31, 2012, the future minimum rents on non-cancelable operating leases expiring in various years are as follows:
 
Year ending December 31
 
Amounts
 
       
2013
  $ 1,737  
2014
    1,729  
2015
    1,733  
2016
    1,738  
2017
    1,730  
Thereafter
    14,236  
    $ 22,903  

 
The tenant leases provide for annual rents that include the tenants’ proportionate share of real estate taxes and certain property operating expenses. Canyon Crossing’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 term of each lease, which resulted in an increase in rental income of approximately $97,000 and $23,000 for the year ended December 31, 2012 and three months ended March 31, 2013, respectively.
 
5.Concentration
 
For the year ended December 31, 2012, Canyon Crossing’s anchor tenant and its affiliate accounted for 57% of total rental income.
 
 
F-4

 
INDEPENDENT AUDITORS’ REPORT
 
To the Board of Directors and Stockholders

We have audited the accompanying financial statement of the property known as Diamond Hills Plaza, located in Diamond Bar, California (“Diamond Hills Plaza”) which is comprised of the statement of revenues and certain expenses for the year ended December 31, 2012, and the related notes to the financial statement.

Management’s Responsibility for the Financial Statement
 
Management is responsible for the preparation and fair presentation of this financial statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of the financial statement that is free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility
 
Our responsibility is to express an opinion on this financial statement based on our audit.  We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement.  The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statement, whether due to fraud or error.  In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Diamond Hills Plaza’s internal controls.  Accordingly, we express no such opinion.  An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of Diamond Hills Plaza for the year ended December 31, 2012 in accordance with accounting principles generally accepted in the United States of America.

Emphasis-of-Matter
 
We draw attention to Note 2 to the financial statement, which indicates that the accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and is not intended to be a complete presentation of Diamond Hills Plaza’s revenues and expenses.  Our opinion is not modified with respect to this matter.

 

/s/ PKF O'Connor Davies
A Division of O'Connor Davies, LLP
 
New York, New York
May 29, 2013
 
 
F-5

 
DIAMOND HILLS PLAZA
     STATEMENT OF REVENUES AND CERTAIN EXPENSES
(Dollar amounts in thousands)
 
   
Year Ended 
December 31,
2012
   
Three Months
Ended
March 31,
2013
(Unaudited)
 
Revenues
           
Rental income (note 4)
  $ 3,930     $ 1,101  
Total revenues
    3,930       1,101  
                 
Certain Expenses
               
Utilities
    103       21  
Repairs, maintenance and supplies
    153       40  
Cleaning and landscaping
    137       30  
Real estate taxes
    570       144  
Insurance
    74       18  
Total expenses
    1,037       253  
                 
Excess of revenues over certain expenses
  $ 2,893     $ 848  
 
See accompanying notes to statement of revenues and certain expenses.
 
 
F-6

 
DIAMOND HILLS PLAZA
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2012 (AUDITED) AND
THREE MONTHS ENDED MARCH 31, 2013 (UNAUDITED)

1.             Business and Organization
 
On April 22, 2013, Retail Opportunity Investments Corp. (the "Company") acquired the property known as Diamond Hills Plaza located in Diamond Bar, California, within the Los Angeles metropolitan area, for a purchase price of approximately $48.0 million. Diamond Hills Plaza is approximately 140,000 square feet and is anchored by an H Mart Supermarket and a Rite Aid. Diamond Hills Plaza was acquired using borrowings under the Company’s credit facility.
 
2.             Basis of Presentation and Summary of Significant Accounting Policies
 
Basis of Presentation
 
The Statement of Revenues and Certain Expenses (the “financial statement”) has been prepared for the purpose of complying with the provisions of Rule 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The financial statement includes the historical revenues and certain expenses of Diamond Hills, 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 Diamond Hills Plaza 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 Diamond Hills Plaza.
 
The statement of revenue and certain expenses for the three month period ended March 31, 2013 is unaudited.  In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of revenue and certain expenses in accordance with the SEC Rule 3-14. All such adjustments are of a normal recurring nature.
 
Revenue Recognition
 
Diamond Hills Plaza operations consist of rental income earned from tenants under leasing arrangements which generally provide for minimum rents and tenant reimbursements.  All leases are classified as operating leases. Minimum rents are recognized by amortizing the aggregate lease payments on a straight-line basis over the terms of the lease (including rent holidays). Tenant reimbursements for real estate taxes, common area maintenance and other recoverable costs are recognized as rental income in the period that the expenses are incurred.
 
Use of Estimates
 
The preparation of the financial statement in conformity with accounting principles generally accepted in the United States of America requires Diamond Hills Plaza’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-7

 
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 May 29, 2013, and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statements.
 
4.             Leases
 
Diamond Hills Plaza is subject to non-cancelable lease agreements, subject to various escalation clauses, with tenants for retail space. As of December 31, 2012, the future minimum rentals on non-cancelable operating leases expiring in various years are as follows:
 
Year ending December 31
 
Amounts
 
       
2013
  $ 3,092  
2014
    3,182  
2015
    3,134  
2016
    2,981  
2017
    2,370  
Thereafter
    15,352  
    $ 30,111  

 
The tenant leases provide for annual rentals that include the tenants’ proportionate share of real estate taxes and certain property operating expenses. Diamond Hills Plaza’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 each lease, which resulted in an increase in rental income of approximately $2,000 for the year ended December 31, 2012 and a decrease in rental income of approximately $4,000 for the three months ended March 31, 2013.
 
5.Concentration
 
For the year ended December 31, 2012, Diamond Hills Plaza’s anchor tenant and its affiliate accounted for 30% of total rental income.
 
 
F-8

 
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The unaudited pro forma consolidated statement of operations and comprehensive income for the three months ended March 31, 2013 and for the year ended December 31, 2012 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisitions of Canyon Crossing and Diamond Hills Plaza (the “Properties”) on January 1, 2012. Additionally, the pro forma consolidated balance sheet as of March 31, 2013 has been presented as if the acquisitions had been completed on March 31, 2013.
 
The purchase price allocation is calculated based on a 20/80 allocation to Land and Building and Improvements, 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 2012 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ended March 31, 2013. The pro forma consolidated financial statements do not purport to represent the Company’s financial position as of March 31, 2013 or results of operations that would actually have occurred assuming the completion of the acquisition of the Properties had occurred on January 1, 2012; nor do they purport to project the Company’s results of operations as of any future date or for any future period.
 
 
 
 
F-9

 
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2013
(UNAUDITED)
(in thousands)
 
   
Company
Historical(1)
   
Pro Forma
Adjustments
   
Company
Pro Forma
 
ASSETS:
                 
Real Estate Investments:
                 
Land
  $ 296,178     $ 16,600 (2)   $ 312,778  
Building and improvements
    617,112       66,400 (2)     683,512  
      913,290       83,000       996,290  
Less: accumulated depreciation
    37,852             37,852  
      875,438       83,000       958,438  
Mortgage notes receivables
    10,294             10,294  
Investment in and advances to unconsolidated joint ventures
    15,526             15,526  
Real Estate Investments, net
    901,258       83,000       984,258  
                         
Cash and cash equivalents
    6,894             6,894  
Restricted cash
    1,880             1,880  
Tenant and other receivables
    13,973             13,973  
Deposits
    2,000       393 (3)     2,393  
Acquired lease intangible asset, net of accumulated amortization
    40,345             40,345  
Prepaid expenses
    3,099             3,099  
Deferred charges, net of accumulated amortization
    21,975             21,975  
Other
    949             949  
Total assets
  $ 992,373     $ 83,393     $ 1,075,766  
                         
LIABILITIES AND EQUITY
                       
                         
Liabilities:
                       
Team Loan   $ 200,000     $     $ 200,000  
Credit facilities
    18,000       83,000 (2)     101,000  
Mortgage notes payable
    81,753             81,753  
Acquired lease intangible liability, net
    56,774             56,774  
Accrued expenses
    3,800             3,800  
Tenants’ security deposit
    2,428       393 (3)     2,821  
Other liabilities
    24,387             24,387  
Total liabilities
  $ 387,142     $ 83,393     $ 470,535  
                         
Equity:
                       
Preferred stock
                 
Common stock
    7             7  
Additional-paid-in capital
    668,342             668,342  
Accumulated deficit
    (46,485 )           (46,485 )
Accumulated other comprehensive loss
    (16,635 )           (16,635 )
Total Retail Opportunity Investments Corp. shareholders’ equity
    605,229             605,229  
Non-controlling interests
    2             2  
Total equity
    605,231             605,231  
Total liabilities and equity
  $  992,373     $ 83,393     $ 1,075,766  
 
See accompanying notes to pro forma consolidated financial statements
 
 
F-10

 
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2013
 
(UNAUDITED)
(in thousands, except per share data)
 
   
Company
Historical(1)
   
Canyon
Crossing
Shopping
Center
   
Diamond
Hills Plaza
   
 
 
Pro forma
Adjustments
   
Company
Pro Forma
 
Revenue
                             
Base rents
  $ 19,350     $ 470     $ 764     $ 32 (4)   $ 20,616  
Recoveries from tenants
    4,830       72       337             5,239  
Mortgage interest
    204                         204  
Total revenues
    24,384       542       1,101       32       26,059  
                                         
Operating expenses                                        
Property operating
    4,159       89       109             4,357  
Property taxes
    2,315       65       144             2,524  
Depreciation and amortization
    8,881                   426 (5)     9,307  
General & administrative expenses
    2,737                         2,737  
Acquisition transaction costs
    409                         409  
Total operating expenses
    18,501       154       253       426       19,334  
                                         
Operating income (Loss)
    5,883       388       848       (394 )     6,725  
Non-operating income (expenses)
                                       
Interest expense
    (3,825 )                 (210 )(7)     (4,035 )
Equity in earnings from unconsolidated joint ventures
    232                         232  
Net income attributable to Retail Opportunity Investments Corp.
  $ 2,290     $ 388     $ 848     $ (604 )   $ 2,922  
                                         
Pro forma weighted average shares outstanding                                        
     Basic:
    57,373                               57,373  
     Diluted:
    60,816                               60,816  
Pro forma income per share                                        
     Basic and diluted:
  $ 0.04                             $ 0.05  
     Pro forma dividends per share:
  $ 0.15                             $ 0.15  
Comprehensive (loss) income:                                        
Net income attributable to Retail Opportunity Investments Corp.
  $ 2,290     $ 388     $ 848     $ (604 )   $ 2,922  
Other comprehensive loss:
                                       
Unrealized gain on swap derivative
                                       
Unrealized swap derivative gain arising during the period
    322                         322  
Reclassification adjustment for amortization of interest expense included in net income
    1,198              —        —       1,198  
   Unrealized loss on swap derivative
    1,520                         1,520  
Total other comprehensive loss
    1,520                         1,520  
Total Comprehensive (loss) income
  $ 3,810     $ 388     $ 848     $ (604 )   $ 4,442  

See accompanying notes to pro forma consolidated financial statements
 
 
F-11

 
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2012
 
(UNAUDITED)
(in thousands, except per share data)
 
   
Company
Historical(1)
   
Canyon
Crossing
Shopping
Center
   
Diamond
Hills Plaza
   
 
 
Pro forma
Adjustments
   
Company
Pro Forma
 
Revenue
                             
Base rents
  $ 59,219     $ 1,686     $ 2,885     $ 127 (4)   $ 63,917  
Recoveries from tenants
    14,771       371       1,045             16,187  
Mortgage interest
    1,106                         1,106  
Total revenues
    75,096       2,057       3,930       127       81,210  
                                         
Operating expenses                                        
Property operating
    12,780       310       467             13,557  
Property taxes
    7,281       255       570             8,106  
Depreciation and amortization
    29,075                   1,703 (5)     30,778  
General & administrative expenses
    13,059                         13,059  
Acquisition transaction costs
    1,347                   60 (6)     1,407  
Total operating expenses
    63,542       565       1,037       1,763       66,907  
                                         
Operating income (Loss)
    11,554       1,492       2,893       (1,636 )     14,303  
Non-operating income (expenses)
                                       
Interest expense
    (11,380 )                 (838 )(7)     (12,218 )
Gain on consolidation of JV
    2,145                         2,145  
Gain on bargain purchase
    3,864                         3,864  
Equity in earnings from unconsolidated joint ventures
    1,698                         1,698  
Interest income
    12                         12  
Net income attributable to Retail Opportunity Investments Corp.
  $ 7,893     $ 1,492     $ 2,893     $ (2,474 )   $ 9,804  
                                         
Pro forma weighted average shares outstanding                                        
     Basic:
    51,059                               51,059  
     Diluted:
    52,371                               52,371  
Pro forma income per share                                        
     Basic and diluted:
  $ 0.15                             $ 0.19  
     Pro forma dividends per share:
  $ 0.53                             $ 0.53  
                                         
Comprehensive (loss) income:                                        
Net income attributable to Retail Opportunity Investments Corp.
  $ 7,893     $ 1,492     $ 2,893     $ (2,474 )   $ 9,804  
Other comprehensive loss:
                                       
Unrealized loss on swap derivative
                                       
Unrealized swap derivative gain arising during the period
    (7,859 )                       (7,859 )
Reclassification adjustment for amortization of interest expense included in net income
    3,799              —        —       3,799  
   Unrealized loss on swap derivative
    (4,060 )                       (4,060 )
Total other comprehensive loss
    (4,060 )                       (4,060 )
Total Comprehensive (loss) income
  $ 3,833     $ 1,492     $ 2,893     $ (2,474 )   $ 5,744  
 
See accompanying notes to pro forma consolidated financial statements
 
 
F-12

 
RETAIL OPPORTUNITY INVESTMENTS CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
 
Adjustments to the Pro Forma Consolidated Financial Statements
 
 
1.  
Derived from the Company’s audited and unaudited financial statements for the year ended December 31, 2012 and the three months ended March 31, 2013, respectively.
 
2.  
Reflects the pro forma acquisition of the Properties for approximately $83.0 million.  The acquisitions were funded entirely by draws on the Company’s credit facility.
 
3.  
Reflects security deposits assumed on purchase of the Properties.
 
4.  
Reflects the pro forma adjustment of $127,000 and $32,000 for the year ended December 31, 2012 and the three months ended March 31, 2013, respectively, to record operating rents on a straight-line basis beginning January 1, 2012.
 
5.  
Reflects the estimated depreciation for the Properties based on estimated values allocated to building at the beginning of the periods presented.  Depreciation expense is computed on a straight-line basis over the estimated useful life of the assets as follows (dollar amounts in thousands):
 
 
Estimated
Useful Life
 
For the Three
Months Ended
March 31, 2013
Depreciation 
Expense
   
Year Ended
December 31, 2012
Depreciation 
Expense
 
               
Building
39 years
  $ 426     $ 1,703  
 
6.  
Reflects the pro forma adjustment for estimated costs related to the acquisition of the Properties.
 
7.  
Reflects the pro forma adjustment to interest expense, assuming the Company had to borrow funds from its credit facility to cover the purchase price as if the acquisition had been made on the first day of the periods presented.
 
 
 
 
 
 
F-13