EX-99 3 exh_991.htm EXHIBIT 99.1 exh_991.htm
Exhibit 99.1
 
 
Page
Pinole Vista
  
   
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 Statement of Operations for the Three Months Ended March 31, 2011 (Unaudited)
F-6
   
Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2010 (Unaudited)
F-7
   
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
F-8

 

 

 

 
 
 
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 Pinole Vista, located in Pinole, 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
June 1, 2011
 
 
F-1
 
PINOLE VISTA
     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 4)
   $ 1,698     $ 394  
Other income
     1       —  
Total revenues
     1,699       394  
                 
Certain Expenses
                
Utilities
     44       12  
Cleaning services
     18       15  
Repairs, maintenance, and supplies
     139       46  
Real estate taxes
     203       51  
Insurance
     19       7  
General & administrative
     —       1  
Total expenses
     423       132  
                 
Excess of revenues over certain expenses
   $ 1,276     $ 262  
 
See accompanying notes to statement of revenues and certain expenses.

 
F-2
 
PINOLE VISTA
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
 
Pinole Vista (the “Property”) is a shopping center located in Pinole, California.  The Property was owned by Pinole Vista, LLC, (“Seller”).  The Property, which is anchored by one tenant, has an aggregate gross rentable area of approximately 165,000 square feet.  The anchor tenant occupies approximately 87,000 square feet.
 
On January 6, 2011, the Property was acquired by ROIC Pinole Vista, 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.
 
3.           Subsequent Events
 
 
F-3
 
The Company has evaluated subsequent events through June 1, 2011, and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statements.
 
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, 2010, the future minimum rentals on non-cancelable operating leases expiring in various years are as follows:
 
Year ending December 31
  
Amounts
  
       
2011
   $ 1,412,671  
2012
     1,106,121  
2013
     974,626  
2014
     842,820  
2015
     863,869  
Thereafter
     289,187  
    $ 5,489,294  
 
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 a decrease of $168,200 and $84,900 in rental income for the year ended December 31, 2010 and the three months ended March 31, 2011, 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, 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 Pinole Vista on the first day of each period presented.
 
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 purchase price allocation is calculated in accordance with the Accounting Standards Codification 805, and is preliminary and could be subject to change.
 
The pro forma consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 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 STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
 
(UNAUDITED)
(in thousands, except per share data)

   
Company
Historical(1)
    
Pinole
Vista (6)
    
Company
Pro Forma
  
Revenue
                  
Base rents
   $ 7,181     $ 26     $ 7,207  
Recoveries from tenants
     1,905       6       1,911  
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       24       4,276  
General & Administrative Expenses
     2,389               2,389  
Acquisition transaction costs
     175               175  
Total operating expenses
     8,964       32       8,996  
                         
Operating income
     1,077       —       1,077  
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     $ —     $ 6,180  
                         
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-6
 
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)
    
Pinole
Vista
    
Pro Forma
Adjustments
    
Company
Pro Forma
  
Revenue
                        
Base rents
   $ 12,381     $ 1,262     $ 572 (2)   $ 14,215  
Recoveries from tenants
     2,879       437               3,316  
Mortgage interest
     1,069                       1,069  
Total revenues
     16,329       1,699       572       18,600  
                                 
Operating expenses                                
Property operating
     2,848       220               3,068  
Property taxes
     1,697       203               1,900  
Depreciation and amortization
     6,081               433 (3)     6,514  
General & Administrative Expenses
     8,381                       8,381  
Acquisition transaction costs
     2,636               40 (4)     2,676  
Total operating expenses
     21,643       423       473       22,539  
                                 
Operating (loss) income
     (5,314 )     1,276       99       (3,939 )
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               (100 )(5)     1,009  
Other income
     1,873                       1,875  
Net (loss) income attributable to Retail Opportunity Investments Corp.
   $ (401 )   $ 1,276     $ (1 )   $ 876  
                                 
Pro forma weighted average shares outstanding – basic and diluted
     41,582                       41,582  
                                 
Pro forma (loss) income per share                                
Basic and diluted:
   $ (0.01 )                   $ 0.02  
                                 
Pro forma dividends per common share:
   $ 0.18                     $ 0.18  
 
See accompanying notes to pro forma consolidated financial statements

 
F-7
 
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 Statement of Operations
 
 
1.  
Derived from the Company’s audited and unaudited financial statements for the year ended December 31, 2010 and the three months ended March 31 2011.
 
2.  
Reflects the pro forma adjustment of $572 for the year ended December 31, 2010, to record operating rents on a straight-line basis beginning January 1, 2010.
 
3.  
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
      $ 433  
 
4.  
Reflects the pro forma adjustment for estimated costs related to the acquisition of the Property.
 
5.  
Reflects the pro forma adjustment to interest income to assume the acquisition has been made on January 1, 2010.
 
6.  
Reflects the operating results for the period January 1, 2011 to January 5, 2011.
 

 
 
F-8