UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-Q

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

OR

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 001-33749

RETAIL OPPORTUNITY INVESTMENTS CORP.

(Exact name of registrant as specified in its charter)

Maryland (State or other jurisdiction of incorporation or organization)	26-0500600 (I.R.S. Employer Identification No.)
8905 Towne Centre Drive, Suite 108 San Diego, California (Address of principal executive offices)	92122 (Zip code)

(858) 677-0900

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [x]   No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [x]   No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [x] Non-accelerated filer [ ] (Do not check if a smaller reporting company) Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ]   No [x]

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date: 66,430,489 shares of common stock, par value $0.0001 per share, outstanding as of April 30, 2013. 

TABLE OF CONTENTS

Page

Part I. Financial Information		1
Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012	1
	Consolidated Statements of Operations and Comprehensive Income (Unaudited) for the three months ended March 31, 2013 and March 31, 2012	2
	Consolidated Statements of Equity (Unaudited) for the three months ended March 31, 2013	3
	Consolidated Statements of Cash Flow (Unaudited) for the three months ended March 31, 2013 and March 31, 2012	4
	Notes to Consolidated Financial Statements	5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
Part II. Other Information		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	29

PART I. FINANCIAL INFORMATION

Item 1.  Financial Statements

RETAIL OPPORTUNITY INVESTMENTS CORP.

Consolidated Balance Sheet

	March 31, 2013 (unaudited)			December 31,  2012
ASSETS
Real Estate Investments:
Land	$	296,177,411		$	283,445,257
Building and improvements		617,112,385			588,248,338
		913,289,796			871,693,595
Less:  accumulated depreciation		37,851,711			32,364,772
		875,438,085			839,328,823
Mortgage note receivable		10,294,000			10,000,000
Investment in and advances to unconsolidated joint venture		15,526,417			15,295,223
Real Estate Investments, net		901,258,502			864,624,046
Cash and cash equivalents		6,893,609			4,692,230
Restricted cash		1,879,697			1,700,692
Tenant and other receivables		13,973,065			12,455,190
Deposits		2,000,000			2,000,000
Acquired lease intangible asset, net of accumulated amortization		40,345,275			41,230,616
Prepaid expenses		3,099,149			1,245,778
Deferred charges, net of accumulated amortization		21,974,857			21,623,474
Other		948,774			1,339,501
Total assets	$	992,372,928		$	950,911,527
LIABILITIES AND EQUITY
Liabilities:
Term loan	$	200,000,000		$	200,000,000
Credit facility		18,000,000			119,000,000
Mortgage notes payable		81,753,145			72,689,842
Acquired lease intangibles liability, net of accumulated amortization		56,773,932			57,371,803
Accounts payable and accrued expenses		3,799,600			6,468,580
Tenants' security deposits		2,428,389			2,336,680
Other liabilities		24,387,028			26,502,551
Total liabilities		387,142,094			484,369,456
Commitments and contingencies		—			—
Equity:
Preferred stock, $.0001 par value 50,000,000 shares authorized; none issued and outstanding		—			—
Common stock, $.0001 par value 500,000,000 shares authorized; and 66,410,588 and  52,596,754 shares issued and outstanding at March 31, 2013 and December 31, 2012		6,635			5,260
Additional paid-in-capital		668,342,198			523,540,268
Accumulated deficit		(46,485,714	)		(38,851,234	)
Accumulated other comprehensive loss		(16,634,674	)		(18,154,612	)
Total Retail Opportunity Investments Corp. stockholders' equity		605,228,445			466,539,682
Noncontrolling interests		2,389			2,389
Total equity		605,230,834			466,542,071
Total liabilities and equity	$	992,372,928		$	950,911,527

See accompanying notes to consolidated financial statements.

-1-

RETAIL OPPORTUNITY INVESTMENTS CORP.

Consolidated Statement of Operations and Comprehensive Income

(unaudited)

	For the Three Months Ended
	March 31, 2013			March 31, 2012
Revenues
Base rents	$	19,349,561		$	13,341,420
Recoveries from tenants		4,830,829			3,104,042
Mortgage interest		204,059			202,222
Total revenues		24,384,449			16,647,684
Operating expenses
Property operating		4,158,881			2,969,348
Property taxes		2,315,178			1,599,159
Depreciation and amortization		8,881,130			6,649,818
General & Administrative Expenses		2,736,581			2,419,838
Acquisition transaction costs		408,836			122,843
Total operating expenses		18,500,606			13,761,006
Operating income		5,883,843			2,886,678
Non-operating income (expenses)
Interest expense and other finance expenses		(3,825,151	)		(2,293,748	)
Equity in earnings from unconsolidated joint ventures		231,194			524,329
Interest income		—			10,145
Net Income Attributable to Retail Opportunity Investments Corp.	$	2,289,886		$	1,127,404
Basic and diluted per share:	$	0.04		$	0.02
Dividends per common share	$	0.15		$	0.12
Comprehensive income:
Net income attributable to Retail Opportunity Investments Corp.	$	2,289,886		$	1,127,404
Other comprehensive income
Unrealized gain on swap derivative
Unrealized swap derivative gain arising during the period		322,254			394,464
Reclassification adjustment for amortization of interest expense included in net income		1,197,684			572,076
Unrealized gain on swap derivative		1,519,938			966,540
Total other comprehensive income		1,519,938			966,540
Total Comprehensive income	$	3,809,824		$	2,093,944

See accompanying notes to consolidated financial statements.

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RETAIL OPPORTUNITY INVESTMENTS CORP.

Consolidated Statements of Equity

(unaudited)

	Common Stock
	Shares			Amount			Additional paid-in capital			Retained earnings (Accumulated deficit)			Accumulated other comprehensive loss			Noncontrolling interests		Equity
Balance at December 31, 2012		52,596,754		$	5,260		$	523,540,268		$	(38,851,234	)	$	(18,154,612	)	$	2,389	$	466,542,071
Shares issued under the 2009 Plan		191,414			19			(19	)		—			—			—		—
Repurchase of common stock		(21,865	)		(2	)		(280,972	)		—			—			—		(280,974	)
Retirement of options		—			—			(268,550	)		—			—			—		(268,550	)
Stock based compensation expense		—			—			596,220			—			—			—		596,220
Proceeds from the exercise of warrants		12,955,785			1,290			155,468,124			—			—			—		155,469,414
Exercise of Sponsor warrants		688,500			68			(68	)		—			—			—		—
Buyback of warrants		—			—			(10,687,500	)		—			—			—		(10,687,500	)
Registration expenditures		—			—			(25,305	)		—			—			—		(25,305	)
Dividends ($.15 per share)		—			—			—			(9,896,866	)		—			—		(9,896,866	)
Dividends payable on performance-based shares		—			—			—			(27,500	)		—			—		(27,500	)
Net Income Attributable to Retail Opportunity Investments Corp.		—			—			—			2,289,886			—			—		2,289,886
Other comprehensive gain		—			—			—			—			1,519,938			—		1,519,938
Balance at March 31, 2013		66,410,588		$	6,635		$	668,342,198		$	(46,485,714	)	$	(16,634,674	)	$	2,389	$	605,230,834

See accompanying notes to consolidated financial statements.

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RETAIL OPPORTUNITY INVESTMENTS CORP.

Consolidated Statements of Cash Flow

(unaudited)

	Three Months Ended March 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	2,289,886		$	1,127,404
Adjustments to reconcile net income  to cash provided by operating activities:
Depreciation and amortization		8,881,130			6,649,818
Amortization of deferred financing costs and mortgage premiums, net		113,863			110,582
Straight-line rent adjustment		(1,021,723	)		(959,388	)
Amortization of above and below market rent		(1,080,739	)		(748,257	)
Amortization  relating to stock based compensation		596,220			555,199
Provisions for tenant credit losses		312,348			382,608
Equity earned in earnings from unconsolidated joint ventures		(231,194	)		(524,329	)
Distribution of cumulative earnings from unconsolidated joint ventures		—			234,000
Other		108,411			—
Change in operating assets and liabilities
Restricted cash		(72,890	)		(361,907	)
Tenant and other receivables		(208,501	)		(248,680	)
Prepaid expenses		(1,853,371	)		(308,334	)
Accounts payable and accrued expenses		(2,704,999	)		(2,307,295	)
Other asset and liabilities, net		(714,820	)		512,686
Net cash provided by operating activities		4,413,621			4,114,107
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in real estate		(28,955,340	)		(36,471,938	)
Investments in mortgage notes receivables		(294,000	)		—
Investments in unconsolidated joint ventures		—			(735,000	)
Return of capital from unconsolidated joint ventures		—			617,500
Improvements to properties		(3,093,770	)		(1,603,327	)
Deposits on real estate acquisitions		(2,000,000	)		(500,000	)
Construction escrows and other		(106,115	)		(110,364	)
Net cash used in investing activities		(34,449,225	)		(38,803,129	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayment on mortgages		(365,198	)		(263,089	)
Proceeds from the draw on term loan/credit facility		32,000,000			15,000,000
Payments on credit facility		(133,000,000	)		—
Proceeds from exercise of warrants		154,869,414			—
Payments to acquire warrants		(10,687,500	)		—
Proceeds from the sale of stock		—			2,556,422
Deferred financing and other costs		(108,038	)		(130,986	)
Registration expenditures		(25,305	)		(97,915	)
Dividends paid to common shareholders		(9,896,866	)		(5,954,011	)
Repurchase of common stock		(280,974	)		—
Retirement of options		(268,550	)		—
Net cash provided by financing activities		32,236,983			11,110,421
Net increase (decrease) in cash and cash equivalents		2,201,379			(23,578,601	)
Cash and cash equivalents at beginning of period		4,692,230			34,317,588
Cash and cash equivalents at end of period	$	6,893,609		$	10,738,987
Other non-cash investing and financing activities:
Assumed mortgage at fair value	$	9,670,900		$	—
Intangible lease liabilities		1,056,997			1,235,988
Proceeds receivable from exercise of warrants		600,000			—
Accrued real estate improvement costs		—			106,659

See accompanying notes to consolidated financial statements.

-4-

RETAIL OPPORTUNITY INVESTMENTS CORP.

Notes to Consolidated Financial Statements

1.   Organization, Basis of Presentation and Summary of Significant Accounting Policies

Business

Retail Opportunity Investments Corp. (the "Company") is a fully integrated and self-managed real estate investment trust ("REIT").  The Company specializes in the acquisition, ownership and management of necessity-based community and neighborhood shopping centers in the western and eastern regions of the United States anchored by national and regional supermarkets and drugstores.  The Company refers to the properties it targets for investments as its target assets.

With the approval of its stockholders, the Company reincorporated as a Maryland corporation on June 2, 2011.  The Company began operations as a Delaware corporation, known as NRDC Acquisition Corp., which was incorporated on July 10, 2007, for the purpose of acquiring assets or operating business through a merger, capital stock exchange, stock purchase, asset acquisition or other similar business combination with one or more assets or control of one or more operating businesses.  On October 20, 2009, the Company's stockholders and warrantholders approved each of the proposals presented at the special meetings of stockholders and warrantholders, respectively, in connection with the transactions contemplated by the Framework Agreement (the "Framework Agreement") the Company entered into on August 7, 2009 with NRDC Capital Management, LLC, which, among other things, set forth the steps to be taken by the Company to continue its business as a corporation that has elected to qualify as a REIT for U.S. federal income tax purposes, commencing with its taxable year ended December 31, 2010.  The Company is organized in a traditional umbrella partnership real estate investment trust ("UpREIT") format pursuant to which Retail Opportunity Investments GP, LLC, its wholly-owned subsidiary, serves as the general partner of, and the Company conducts substantially all of its business through, its wholly-owned operating partnership subsidiary, Retail Opportunity Investments Partnership, LP, a Delaware limited partnership (the "operating partnership"), and its subsidiaries.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update to improve the reporting of reclassifications out of accumulated other comprehensive income (“AOCI”), requiring companies to present information about reclassifications out of AOCI in one place and by component.  This guidance is effective for interim and annual periods beginning on or after December 15, 2012.  Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Principles of Consolidation

The accompanying consolidated financial statements are prepared on the accrual basis in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statement disclosures. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Results of operations for the three month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2012.

The consolidated financial statements include the accounts of the Company and those of its subsidiaries, which are wholly-owned or controlled by the Company.  Entities which the Company does not control through its voting interest and entities which are variable interest entities ("VIEs"), but where it is not the primary beneficiary, are accounted for under the equity method.  All significant intercompany balances and transactions have been eliminated.

-5-

The Company follows the FASB guidance for determining whether an entity is a VIE and requires the performance of a qualitative rather than a quantitative analysis to determine the primary beneficiary of a VIE.  Under this guidance, an entity would be required to consolidate a VIE if it has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE.

A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent.  Non-controlling interests are required to be presented as a separate component of equity in the consolidated balance sheet and modifies the presentation of net income by requiring earnings and other comprehensive income to be attributed to controlling and non-controlling interests.

The Company assesses the accounting treatment for each joint venture.  This assessment includes a review of each joint venture or limited liability company agreement to determine which party has what rights and whether those rights are protective or participating.  For all VIEs, the Company reviews such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity's economic performance.  In situations where the Company or its partner approves, among other things, the annual budget, receives a detailed monthly reporting package from the Company, meets on a quarterly basis to review the results of the joint venture, reviews and approves the joint venture's tax return before filing, and approves all leases that cover more than a nominal amount of space relative to the total rentable space at each property, the Company does not consolidate the joint venture as it considers these to be substantive participation rights that result in shared power of the activities that most significantly impact the performance of the joint venture.  The Company's joint venture agreements also contain certain protective rights such as the requirement of partner approval to sell, finance or refinance the property and the payment of capital expenditures and operating expenditures outside of the approved budget or operating plan.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the disclosure of contingent assets and liabilities, the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods covered by the financial statements.  The most significant assumptions and estimates relate to the purchase price allocations, depreciable lives, revenue recognition and the collectability of tenant receivables, other receivables, notes receivables, the valuation of performance based restricted stock, stock options, warrants, and derivatives.  Actual results could differ from these estimates.

Federal Income Taxes

Commencing with the Company's taxable year ended December 31, 2010, the Company has elected to qualify as a REIT under Sections 856-860 of the Internal Revenue Code (the "Code").  Under those sections, a REIT that, among other things, distributes at least 90% of REIT taxable income and meets certain other qualifications prescribed by the Code will not be taxed on that portion of its taxable income that is distributed.

Although it may qualify as a REIT for U.S. federal income tax purposes, the Company is subject to state income or franchise taxes in certain states in which some of its properties are located.  In addition, taxable income from non-REIT activities managed through the Company's taxable REIT subsidiary ("TRS") is fully subject to U.S. federal, state and local income taxes.

The Company follows the FASB guidance that defines a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  The FASB also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.  The Company records interest and penalties relating to unrecognized tax benefits, if any, as interest expense.  As of March 31, 2013, the tax years 2009 through and including 2012 remain open to examination by the Internal Revenue Service ("IRS") and state taxing authorities.  During the year ended December 31, 2011, the IRS conducted an examination of the Company's 2009 federal tax return.  During the three months ended March 31, 2012 the Company reached a settlement with the IRS in which the Company paid to the IRS approximately $122,000.

-6-

Real Estate Investments

All costs related to the improvement or replacement of real estate properties are capitalized.  Additions, renovations and improvements that enhance and/or extend the useful life of a property are also capitalized.  Expenditures for ordinary maintenance, repairs and improvements that do not materially prolong the normal useful life of an asset are charged to operations as incurred.  The Company expenses transaction costs associated with business combinations in the period incurred.  During the three months ended March 31, 2013 and 2012, capitalized costs related to the improvements or replacement of real estate properties were approximately $3.1 million and $1.8 million, respectively.

Upon the acquisition of real estate properties, the fair value of the real estate purchased is allocated to the acquired tangible assets (consisting of land, buildings and improvements), and acquired intangible assets and liabilities (consisting of above-market and below-market leases and acquired in-place leases).  Acquired lease intangible assets include above-market leases and acquired in-place leases in the accompanying consolidated balance sheet.  The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, which value is then allocated to land, buildings and improvements based on management's determination of the relative fair values of these assets.  In valuing an acquired property's intangibles, factors considered by management include an estimate of carrying costs during the expected lease-up periods, and estimates of lost rental revenue during the expected lease-up periods based on its evaluation of current market demand.  Management also estimates costs to execute similar leases, including leasing commissions, tenant improvements, legal and other related costs.  Leasing commissions, legal and other related costs ("lease origination costs") are classified as deferred charges in the accompanying consolidated balance sheet.

The value of in-place leases is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates, over (ii) the estimated fair value of the property as if vacant.  Above-market and below-market lease values are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be received and management's estimate of market lease rates, measured over the terms of the respective leases that management deemed appropriate at the time of acquisition.  Such valuations include a consideration of the non-cancellable terms of the respective leases as well as any applicable renewal periods.  The fair values associated with below-market rental renewal options are determined based on the Company's experience and the relevant facts and circumstances that existed at the time of the acquisitions.  The value of the above-market and below-market leases associated with the original lease term is amortized to rental income, over the terms of the respective leases.  The value of below-market rental lease renewal options is deferred until such time as the renewal option is exercised and subsequently amortized over the corresponding renewal period.  The value of in-place leases are amortized to expense, and the above-market and below-market lease values are amortized to rental income, over the remaining non-cancellable terms of the respective leases.  If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recognized in operations at that time.  The Company may record a bargain purchase gain if it determines that the purchase price for the acquired assets was less than the fair value.  The Company will record a liability in situations where any part of the cash consideration is deferred.  The amounts payable in the future are discounted to their present value.  The liability is subsequently re-measured to fair value with changes in fair value recognized in the consolidated statements of operations.  If, up to one year from the acquisition date, information regarding fair value of assets acquired and liabilities assumed is received and estimates are refined, appropriate property adjustments are made to the purchase price allocation on a retrospective basis.

In conjunction with the Company's pursuit and acquisition of real estate investments, the Company expensed acquisition transaction costs during the three months ended March 31, 2013 and 2012 of approximately $409,000 and $123,000, respectively.

Regarding the Company's 2013 property acquisitions (see Note 2), the fair value of in-place leases and other intangibles have been allocated to intangible asset and liability accounts.

Asset Impairment

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to aggregate future net cash flows (undiscounted and without interest) expected to be generated by the asset.  If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value.  Management does not believe that the value of any of the Company's real estate investments was impaired at March 31, 2013.

-7-

The Company reviews its investment in its unconsolidated joint venture for impairment periodically and the Company would record an impairment charge when events or circumstances change indicating that a decline in the fair values below the carrying values has occurred and such decline is other-than temporary.  The ultimate realization of the Company's investment in its unconsolidated joint venture is dependent on a number of factors, including the performance of each investment and market conditions.  Management does not believe that the carrying value of the Company's unconsolidated joint venture was impaired at March 31, 2013.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.  Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed the federally insured limit by the Federal Deposit Insurance Corporation.  The Company has not experienced any losses related to these balances.

Restricted Cash

The terms of several of the Company's mortgage loans payable require the Company to deposit certain replacement and other reserves with its lenders.  Such "restricted cash" is generally available only for property-level requirements for which the reserves have been established and is not available to fund other property-level or Company-level obligations.

Revenue Recognition

Management has determined that all of the Company's leases with its various tenants are operating leases.  Rental income is generally recognized based on the terms of leases entered into with tenants.  In those instances in which the Company funds tenant improvements and the improvements are deemed to be owned by the Company, revenue recognition will commence when the improvements are substantially completed and possession or control of the space is turned over to the tenant.  When the Company determines that the tenant allowances are lease incentives, the Company commences revenue recognition and lease incentive amortization when possession or control of the space is turned over to the tenant for tenant work to begin.  Minimum rental income from leases with scheduled rent increases is recognized on a straight-line basis over the lease term.  Percentage rent is recognized when a specific tenant's sales breakpoint is achieved.  Property operating expense recoveries from tenants of common area maintenance, real estate taxes and other recoverable costs are recognized in the period the related expenses are incurred.  Lease incentives are amortized as a reduction of rental revenue over the respective tenant lease terms.

Termination fees (included in rental revenue) are fees that the Company has agreed to accept in consideration for permitting certain tenants to terminate their lease prior to the contractual expiration date.  The Company recognizes termination fees in accordance with Securities and Exchange Commission Staff Accounting Bulletin 104, "Revenue Recognition," when the following conditions are met:  (a) the termination agreement is executed; (b) the termination fee is determinable; (c) all landlord services pursuant to the terminated lease have been rendered; and (d) collectivity of the termination fee is assured.  Interest income is recognized as it is earned.  Gains or losses on disposition of properties are recorded when the criteria for recognizing such gains or losses under generally accepted accounting principles have been met.

The Company must make estimates as to the collectability of its accounts receivable related to base rent, straight-line rent, expense reimbursements and other revenues.  Management analyzes accounts receivable and the allowance for bad debts by considering tenant creditworthiness, current economic trends, and changes in tenants' payment patterns when evaluating the adequacy of the allowance for doubtful accounts receivable.  The Company also provides an allowance for future credit losses of the deferred straight-line rents receivable.  The provision for doubtful accounts at March 31, 2013 and December 31, 2012 was approximately $3.3 million and $3.2 million, respectively.

-8-

Depreciation and Amortization

The Company uses the straight-line method for depreciation and amortization.  Buildings are depreciated over the estimated useful lives which the Company estimates to be 39-40 years.  Property improvements are depreciated over the estimated useful lives that range from 10 to 20 years.  Furniture and fixtures are depreciated over the estimated useful lives that range from 3 to 10 years.  Tenant improvements are amortized over the shorter of the life of the related leases or their useful life.

Deferred Charges

Deferred charges consist principally of leasing commissions and acquired lease origination costs (which are amortized ratably over the life of the tenant leases) and financing fees (which are amortized over the term of the related debt obligation).  Deferred charges in the accompanying consolidated balance sheets are shown at cost, net of accumulated amortization of approximately $10.5 million and $9.1 million, as of March 31, 2013 and December 31, 2012, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and tenant receivables.  The Company places its cash and cash equivalents in excess of insured amounts with high quality financial institutions.  The Company performs ongoing credit evaluations of its tenants and requires tenants to provide security deposits.

Earnings Per Share

Basic earnings per share ("EPS") excludes the impact of dilutive shares and is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue shares of common stock were exercised or converted into shares of common stock and then shared in the earnings of the Company.

During the three months ended March 31, 2012 the effect of the 41,400,000 warrants to purchase the Company's common stock  (the "Public Warrants") issued in connection with the Company's initial public offering (the "IPO") and the 8,000,000 warrants (the "Private Placement Warrants") purchased by NRDC Capital Management, LLC (the "Sponsor") simultaneously with the consummation of the IPO, were not included in the calculation of diluted EPS as the weighted average share price was less than the exercise price during this period.  During the three months ended March 31, 2013, the effect of the outstanding Public Warrants and Private Placement Warrants, for the period of time these were outstanding during the quarter, were included in the calculation of diluted EPS as the weighted average share price was greater than the exercise price during this period.  See Note 5 to the accompanying consolidated financial statements.

For the three months ended March 31, 2013 and 2012, basic EPS was determined by dividing net income allocable to common stockholders for the applicable period by the weighted average number of shares of common stock outstanding during such period. Net income during the applicable period is also allocated to the time-based unvested restricted stock as these grants are entitled to receive dividends and are therefore considered a participating security.  Time-based unvested restricted stock is not allocated net losses and/or any excess of dividends declared over net income; such amounts are allocated entirely to the common stockholders other than the holders of time-based unvested restricted stock.  The performance based restricted stock awards outstanding under the 2009 Plan described in Note 6 are excluded from the basic EPS calculation, as these units are not participating securities until they vest.

-9-

The following table sets forth the reconciliation between basic and diluted EPS:

	For the Three Months Ended
	March 31, 2013			March 31, 2012
Numerator:
Net Income attributable to Retail Opportunity Investments Corp.	$	2,289,886		$	1,127,404
Less, earnings allocated to unvested shares		(69,750	)		(29,754	)
Net income  available for common shareholders, basic and diluted	$	2,220,136		$	1,097,650
Denominator:
Denominator for basic EPS – weighted average common shares		57,373,417			49,603,759
Warrants		3,314,539			—
Restricted stock awards - Performance-based		76,593			45,413
Stock Options		50,966			41,078
Denominator for dilutive EPS – weighted average common shares		60,815,515			49,690,250

Stock-Based Compensation

The Company has a stock-based employee compensation plan, which is more fully described in Note 6.

The Company accounts for its stock-based compensation plans based on the FASB guidance which requires that compensation expense be recognized based on the fair value of the stock awards less estimated forfeitures.  Restricted stock grants vest based upon the completion of a service period ("time-based grants") and/or the Company meeting certain established financial performance criteria ("performance-based grants").  Time-based grants are valued according to the market price for the Company's common stock at the date of grant.  For performance-based grants, the Company generally engages an independent appraisal company to determine the value of the shares at the date of grant, taking into account the underlying contingency risks associated with the performance criteria.  It is the Company's policy to grant options with an exercise price equal to the quoted closing market price of stock on the grant date or the date immediately prior to the grant date.  Awards of stock options and time-based grants stock are expensed as compensation ratably over the vesting period.  Awards of performance-based grants are expensed as compensation under an accelerated method and are recognized in income (loss) regardless of the Company results against the performance criteria.

Derivatives

The Company records all derivatives on the balance sheet at fair value.  The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting.  Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges.  Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges.  Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge.

Segment Reporting

The Company operates in one industry segment, ownership of commercial real estate properties.  The Company does not distinguish in property operations for purposes of measuring performance.  The Company reassesses its conclusion that it has one reportable operating segment at least annually.

2.   Real Estate Investments

The following real estate investment transactions have occurred during the three months ended March 31, 2013.

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Property Acquisitions

On February 1, 2013, the Company acquired the property known as Diamond Bar Town Center located in Diamond Bar, California, within the Los Angeles metropolitan area, for a purchase price of approximately $27.4 million.  Diamond Bar Town Center is approximately 100,000 square feet and is anchored by a national grocer. The property was acquired with borrowings under the Company’s credit facility.

On February 6, 2013, the Company acquired the property known as Bernardo Heights Plaza in Rancho Bernardo, California, within the San Diego metropolitan area, for a purchase price of approximately $12.4 million. Bernardo Heights Plaza is approximately 38,000 square feet and is anchored by Sprouts Farmers Market and Tuesday Morning. The property was acquired with cash of approximately $3.6 million and the assumption of an existing mortgage with a principal amount of approximately $8.9 million, and a fair value of approximately $9.7 million.

The Company assessed the fair value of the lease intangibles based on estimated cash flow projections that utilize appropriate discount rates and available market information. Such inputs are Level 3 in the fair value hierarchy.  See Note 7, “Fair Value of Financial Instruments,” for a discussion of the framework for measuring fair value.

The financial information set forth below summarizes the Company's purchase price allocation for the properties acquired during the three months ended March 31, 2013.

	March 31, 2013
ASSETS
Land	$	12,732,158
Building and improvements		25,734,322
Acquired lease intangible asset		2,100,578
Deferred charges		1,116,179
Assets acquired	$	41,683,237
LIABILITIES
Acquired lease intangible liability		1,056,997
Mortgage notes assumed		9,670,900
Liabilities assumed	$	10,727,897

Pro Forma Financial Information

The pro forma financial information set forth below is based upon the Company's historical consolidated statements of operations for the three months ended March 31, 2013 and 2012, adjusted to give effect of these transactions as if they had been completed at the beginning of 2012.

The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the transaction occurred at the beginning of each year, nor does it purport to represent the results of future operations.

	For the Three Months Ended
	March 31, 2013		March 31, 2012
Statement of operations:
Revenues	$	24,716,783	$	22,200,435
Property operating and other expenses		13,389,476		10,929,628
Depreciation and amortization		9,038,594		8,493,471
Net income attributable to Retail Opportunity Investments Corp.	$	2,288,713	$	2,777,336

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The following table summarizes the operating results included in the Company's historical consolidated statement of operations for the three months ended March 31, 2013, for the properties acquired during the three months ended March 31, 2013.

	For the Three Months Ended
	March 31, 2013
Statement of operations:
Revenues	$	554,662
Property operating and other expenses		261,049
Depreciation and amortization		273,267
Net income attributable to Retail Opportunity Investments Corp.	$	20,346

Mortgage Notes Receivable

The Company holds a $10.0 million second mortgage loan to the joint venture that owns the Crossroads Shopping Center.  The Company owns a 49% equity interest in the joint venture.  The interest rate on the loan is 8% per annum and the loan matures on September 1, 2015, which is coterminous with the existing first mortgage. Additionally, during the three months ended March 31, 2013, the Company funded a $294,000 partner loan to the joint venture.

Unconsolidated Joint Ventures

At March 31, 2013 and December 31, 2012, investment in and advances to unconsolidated joint venture consisted of a 49% ownership of Crossroads Shopping Center of $15.5 million and $15.3 million, respectively.

The Company has no material contractual capital contribution commitments to its joint venture.

The Company has evaluated its investment in the joint venture and has concluded that the joint venture is not a VIE.  The Company accounts for its investment in its unconsolidated joint ventures under the equity method of accounting since it exercises significant influence over, but does not control the unconsolidated joint venture.  The other members in the unconsolidated joint venture have substantial participation rights in the financial decisions and operations of the unconsolidated joint venture.

3.   Mortgage Notes Payable and Credit Facilities

Mortgage Notes Payable

The mortgage notes payable collateralized by respective properties and assignment of leases at March 31, 2013 and December 31, 2012, respectively, were as follows:

Property	Maturity Date	Interest Rate			March 31, 2013		December 31, 2012
Gateway Village I	February  2014		5.58	%		6,677,631		6,718,119
Gateway Village II	May 2014		5.73	%		6,832,537		6,872,265
Euclid Plaza	November 2014		5.23	%		8,276,366		8,329,824
Country Club Gate	January 2015		5.04	%		12,416,589		12,477,997
Renaissance Towne Centre	June 2015		5.13	%		16,691,106		16,760,383
Gateway Village III	July 2016		6.10	%		7,436,783		7,460,907
Bernardo Heights	July 2017		5.70	%		8,864,618		—
Santa Teresa Village	February 2018		6.20	%		11,177,215		11,223,888
					$	78,372,845	$	69,843,383
Mortgage Premium						3,380,300		2,846,459
Total mortgage notes payable					$	81,753,145	$	72,689,842

Credit Facilities

The Company has a revolving credit facility (the "credit facility") with several banks.  The credit facility provides for borrowings of up to $200.0 million and contains an accordion feature, which allows the Company to increase the facility amount up to an aggregate of $300.0 million subject to commitments and other conditions.  The initial maturity date of the credit facility is August 29, 2016, subject to a one-year extension option, which may be exercised by the Company upon satisfaction of certain conditions.

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The Company has a term loan agreement (the “term loan”) with several banks.  The term loan provides for a loan of $200.0 million and contains an accordion feature, which allows the Company to increase the facility amount up to an aggregate of $300.0 million subject to commitments and other conditions.  The maturity date of the term loan is August 29, 2017.

Borrowings under the credit facility and term loan agreements (collectively, the “loan agreements”) bear interest on the outstanding principal amount at a rate equal to, prior to such time as the Company has obtained an investment grade rating from at least two rating agencies, an applicable rate based on the consolidated leverage ratio of the Company and its subsidiaries, plus, as applicable, (i) a LIBOR rate determined by reference to the cost of funds for dollar deposits for the relevant period (the "Eurodollar Rate"), or (ii) a base rate determined by reference to the highest of (a) the federal funds rate plus 0.50%, (b) the rate of interest announced by KeyBank National Association as its "prime rate," and (c) the Eurodollar Rate plus 1.00% (the "Base Rate").  From, and after the time the Company obtains an investment grade rating from at least two rating agencies, borrowings under the loan agreements will bear interest on the outstanding principal amount at a rate equal to an applicable rate based on the credit rating level of the Company, plus, as applicable, (i) the Eurodollar Rate, or (ii) the Base Rate.  The Company is obligated to pay (i) prior to such time as the Company has obtained an investment grade rating from at least two rating agencies, an unused fee of  (a) 0.35% of the undrawn balance if the total outstanding principal amount is less than 50% of the aggregate commitments or (b) 0.25% if the total outstanding principal amount is greater than or equal to 50% of the aggregate commitments, (ii) from and after such time as the Company has obtained an investment grade rating from at least two rating agencies, a facility fee at a facility fee rate based on the credit rating level of the Company, and (iii) a fronting fee at a rate of 0.125% per year with respect to each letter of credit issued under the agreements.  The agreements contain certain representations, financial and other covenants typical for these types of facilities.  The Company's ability to borrow under the loan agreements is subject to its compliance with the covenants and other restrictions on an ongoing basis.  The Company was in compliance with such covenants at March 31, 2013.

As of March 31, 2013, $200.0 million and $18.0 million were outstanding under the term loan and credit facility, respectively.  The average interest rate on both the term loan and the credit facility during the three months ended March 31, 2013 was 1.8%.  The Company had $182.0 million available to borrow under the credit facility at March 31, 2013.  The Company had no available borrowings under the term loan.

In connection with the credit facility and term loan the Company incurred approximately $2.3 million of deferred financing costs which are being amortized over the term of the credit facility and term loan.

4.   Preferred Stock

The Company is authorized to issue 50,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the board of directors.  As of March 31, 2013 and December 31, 2012, there were no shares of preferred stock outstanding.

5.   Common Stock and Warrants

On June 23, 2011, the Company entered into an ATM Equity OfferingSM Sales Agreement ("sales agreement") with Merrill Lynch, Pierce, Fenner & Smith Incorporated to sell shares of the Company's common stock par value $0.0001 per share, having aggregate sales proceeds of $50.0 million from time to time, through an "at the market" equity offering program under which Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as sales (“agent”) and/or principal agent.  During the three months ended March 31, 2013, the Company did not sell any shares under the sales agreement. As of March 31, 2013, the Company had sold since the inception of the plan a total of 3,183,245 shares under the sales agreement, which resulted in gross proceeds of approximately $39.3 million and commissions of approximately $687,600 paid to the agent.

Simultaneously with the consummation of the IPO, the Sponsor purchased 8,000,000 Private Placement Warrants at a purchase price of $1.00 per warrant.  The Private Placement Warrants were identical to the Public Warrants except that the Private Placement Warrants were exercisable on a cashless basis as long as they were still held by the Sponsor or its members, members of its members’ immediate family or their controlled affiliates.  The purchase price of the Private Placement Warrants approximated the fair value of such warrants at the purchase date.

-13-

During the three months ended March 31, 2013, the Sponsor exercised the outstanding 8,000,000 Private Placement Warrants on a cashless basis pursuant to which the Company issued 688,500 shares to the Sponsor.

The Company has the right to redeem all of the warrants it issued in the IPO, at a price of $0.01 per warrant upon 30 days' notice while the warrants are exercisable, only in the event that the last sale price of the common stock is at least a specified price.  The terms of the warrants are as follows:

·   The exercise price of the warrants is $12.00.

·   The expiration date of the warrants is October 23, 2014.

·   The price at which the Company's common stock must trade before the Company is able to redeem the warrants it issued in the IPO is $18.75.

·   To provide that a warrantholder's ability to exercise warrants is limited to ensure that such holder's "Beneficial Ownership" or "Constructive Ownership," each as defined in the Company's charter, does not exceed the restrictions contained in the charter limiting the ownership of shares of the Company's common stock.

The Company has reserved 53,400,000 shares for the exercise of the Public Warrants and the Private Placement Warrants, and issuance of shares under the Company's 2009 Equity Incentive Plan (the "2009 Plan").  During the three months ended March 31, 2013, the third-party warrant holders exercised a total of 12,955,785 Public Warrants during the period, resulting in a total of $155.5 million proceeds.

Warrant Repurchase

In May 2010, the Company's board of directors authorized a warrant repurchase program to repurchase up to a maximum of $40.0 million of the Company's warrants.  During the three months ended March 31, 2013, the Company repurchased 7,750,000 warrants under the program in privately negotiated transactions, for approximately $10.7 million.

As of March 31, 2013, 20,693,215 of the 41,400,000 original Public Warrants remain outstanding and no Private Placement Warrants are outstanding.

6.   Stock Compensation

The Company follows the FASB guidance related to stock compensation which establishes financial accounting and reporting standards for stock-based employee compensation plans, including all arrangements by which employees receive shares of stock or other equity instruments of the employer, or the employer incurs liabilities to employees in amounts based on the price of the employer's stock.  The guidance also defines a fair value-based method of accounting for an employee stock option or similar equity instrument.

In 2009, the Company adopted the 2009 Plan.  The 2009 Plan provides for grants of restricted common stock and stock option awards up to an aggregate of 7.5% of the issued and outstanding shares of the Company's common stock at the time of the award, subject to a ceiling of 4,000,000 shares.

Restricted Stock

During the three months ended March 31, 2013, the Company awarded 200,500 shares of restricted common stock under the 2009 Plan, of which 86,250 shares are performance-based grants and the remainder of the shares are time based grants.  The performance-based grants vest in three equal annual tranches, based on pre-defined market-specific performance criteria with vesting dates on January 1, 2014, 2015 and 2016.

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A summary of the status of the Company's non-vested restricted stock awards as of March 31, 2013, and changes during the three months ended March 31, 2013 are presented below:

	Shares			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2012		391,264		$	10.48
Granted		200,500		$	12.00
Vested		(77,164	)	$	10.50
Non-vested at  March 31, 2013		514,600		$	11.08

For the three months ended March 31, 2013 and 2012, the amounts charged to expenses for all stock-based compensation arrangements totaled approximately $596,000 and $555,000, respectively.

7.   Fair Value of Financial Instruments

The Company follows the FASB guidance that defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  The guidance applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements; accordingly, the standard does not require any new fair value measurements of reported balances.

The guidance emphasizes that fair value is a market-based measurement, not an entity-specific measurement.  Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.  As a basis for considering market participant assumptions in fair value measurements, the guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity's own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.  Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.  Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.  Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if any, related market activity.  In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety.  The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The following disclosures of estimated fair value were determined by management, using available market information and appropriate valuation methodologies as discussed in Note 1.  Considerable judgment is necessary to interpret market data and develop estimated fair value.  Accordingly, the estimates presented herein are not necessarily indicative of the amounts realizable upon disposition of the financial instruments.  The use of different market assumptions or estimation methodologies may have a material effect on the estimated fair value amounts.

The carrying values of cash and cash equivalents, restricted cash, tenant and other receivables, deposits, prepaid expenses, other assets, accounts payable and accrued expenses are reasonable estimates of their fair values because of the short-term nature of these instruments. The carrying values of the credit facility and term loan are deemed to be at fair value since the outstanding debt is directly tied to monthly LIBOR contracts.  Mortgage notes receivables were recorded at the actual purchase price.  Mortgage notes payable were recorded at their fair value at the time they were assumed and are estimated to have a fair value of approximately $84.8 million with an interest rate range of 1.9% to 3.3% and the weighted average interest rate of 2.5% as of March 31, 2013. These fair value measurements fall within level 3 of the fair value hierarchy.

-15-

Derivative and Hedging Activities

The Company's objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements.  To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

During the year ended December 31, 2010, the Company entered into a $25.0 million forward starting interest rate swap with Wells Fargo Bank, N.A.  The forward starting swap is being used to hedge variable cash flows associated with the Company's variable-rate debt.  The swap was effective on April 15, 2011, has a maturity date of April 15, 2021 and a cash settlement date of September 22, 2014.  The effective portion of changes in the fair value of the derivative that is designated as a cash flow hedge is being recorded in AOCI and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.  Ineffectiveness, if any, related to the Company's changes in estimates about the debt issuance related to the forward starting swap would be recognized directly in earnings.

During the year ended December 31, 2010, the Company entered into a $50.0 million forward starting interest rate swap with PNC Bank, N.A.  The forward starting swap is being used to hedge the variable cash flows associated with the Company's variable-rate debt.  The swap was effective on July 1, 2011, has a maturity date of July 1, 2018 and a cash settlement date of December 1, 2013.  The effective portion of changes in the fair value of the derivative that is designated as a cash flow hedge is being recorded in AOCI and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.  Ineffectiveness, if any, related to the Company's changes in estimates about the debt issuance related to the forward starting swap would be recognized directly in earnings.

During the year ended December 31, 2011, the Company entered into a $50.0 million forward starting interest rate swap with Bank of Montreal.  The forward starting swap is being used to hedge the anticipated variable cash flows associated with the Company's variable-rate debt that is issued by March 1, 2015.  The swap has a maturity date of April 1, 2019 and a cash settlement date of December 1, 2013.  The effective portion of changes in the fair value of the derivative that is designated as a cash flow hedge is being recorded in AOCI and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.  Ineffectiveness, if any, related to the Company's changes in estimates about the debt issuance related to the forward starting swap would be recognized directly in earnings.

During the year ended December 31, 2011, the Company entered into a $25.0 million forward starting interest rate swap with Wells Fargo Bank, N.A.  The forward starting swap is being used to hedge the anticipated variable cash flows associated with the Company's variable-rate debt that is planned to be issued between April 2, 2011 and April 2, 2019.  The swap has a maturity date of April 2, 2019 and a cash settlement date of September 22, 2014.  The effective portion of changes in the fair value of the derivative that is designated as a cash flow hedge is being recorded in AOCI and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.  Ineffectiveness, if any, related to the Company's changes in estimates about the debt issuance related to the forward starting swap would be recognized directly in earnings.

On May 31, 2012, the Company entered into a $25.0 million forward starting interest rate swap with Royal Bank of Canada.  The forward starting swap is being used to hedge the anticipated variable cash flows associated with the Company's variable-rate debt that is planned to be issued between April 1, 2013 and April 3, 2023.  The swap has a maturity date of April 3, 2023 and a cash settlement date of 10/31/2014.  The effective portion of changes in the fair value of the derivative that is designated as a cash flow hedge is being recorded in AOCI and will be subsequently reclassified into earnings during the period in which the hedged forecasted transaction affects earnings.  Ineffectiveness, if any, related to the Company's changes in estimates about the debt issuance related to the forward starting swap would be recognized directly in earnings.

The valuation of these instruments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of the derivative.  This analysis reflects the contractual terms of the derivative, including the period to maturity, and uses observable market-based inputs, including interest rate curves, and implied volatilities.  The fair value of the interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts).  The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

-16-

The Company incorporates credit valuation adjustments to appropriately reflect both its own non-performance risk and the respective counterparty's non-performance risk in the fair value measurements.  In adjusting the fair value of its derivative contract for the effect of non-performance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties.  However, as of March 31, 2013, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative position and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives.  As a result, the Company has determined that its derivative valuation in its entirety is classified in Level 2 of the fair value hierarchy.

The table below presents the Company's liabilities measured at fair value on a recurring basis, aggregated by the level in the fair value hierarchy within which those measurements fall.

	Quoted Prices in Active Markets for Identical Assets and  Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
March 31, 2013:
Liabilities
Derivative financial instruments	$	—	$	(16,676,796	)	$	—	$	(16,676,796	)
December 31, 2012:
Liabilities
Derivative financial instruments	$	—	$	(18,012,516	)	$	—	$	(18,012,516	)

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest expense is recognized on the hedged debt. During the next twelve months, the Company estimates that $4.6 million will be reclassified as an increase to interest expense.

As of March 31, 2013, the Company had the following outstanding interest rate derivatives that were designated as cash flow hedges of interest rate risk:

Interest Rate Derivative	Number of instruments		Notional
Interest rate swap		5	$	175,000,000

The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the balance sheet as of March 31, 2013 and December 31, 2012, respectively:

Derivatives designed as hedging instruments	Balance sheet location	March 31, 2013 Fair Value (liability)			December 31, 2012 Fair Value (liability)
Interest rate products	Other liabilities	$	(16,676,796	)	$	(18,012,516	)

Derivatives in Cash Flow Hedging Relationships

The table below details the location in the financial statements of the gain or loss recognized on interest rate derivatives designated as cash flow hedges for the three months ended March 31, 2013 and 2012, respectively. Amounts reclassified from other comprehensive income (“OCI”) and ineffectiveness are recognized as interest expense and amounts related to ineffectiveness.

-17-

	Three Months Ended
	March 31, 2013			March 31, 2012
Amount of gain recognized in OCI on derivative	$	(322,254	)	$	(394,464	)
Amount of  loss reclassified from AOCI into interest	$	(1,197,684	)	$	(572,076	)
Amount of loss recognized in income on derivative (ineffective portion and amount excluded from effectiveness testing)	$	(37,360	)	$	(25,651	)

8.   Commitments and Contingencies

In the normal course of business, from time to time, the Company is involved in legal actions relating to the ownership and operations of its properties.  In management's opinion, the liabilities, if any, that ultimately may result from such legal actions are not expected to have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company.

9.   Related Party Transactions

In August 2011, the Company entered into two lease agreements effective July 1, 2011, with an officer of the Company.  Pursuant to the lease agreements, the Company is provided the use of storage space.  For the three months ended March 31, 2013 and 2012, the Company incurred approximately $5,000 and $2,400, respectively, of expenses relating to the agreements which were included in general and administrative expenses in the accompanying consolidated statements of operations.

10.   Subsequent Events

In determining subsequent events, the Company reviewed all activity from April 1, 2013 to the date the financial statements are issued and discloses the following items:

On April 15, 2013, the Company acquired the property known as Canyon Crossing Shopping Center located in Puyallup, Washington, within the Seattle metropolitan area, for a purchase price of approximately $35.0 million.  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 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. The property was acquired using borrowings under the Company’s credit facility.

The purchase price allocations have not been finalized and are expected to be completed during the second quarter of 2013.

On May 1, 2013, the Company’s board of directors declared a cash dividend on its common stock of $0.15 per share, payable on June 28, 2013 to holders of record on June 14, 2013.

Subsequent to the quarter end, the Company received notice of warrant exercises for 90,000 warrants, totaling approximately $1.1 million in proceeds.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

In this Quarterly Report on Form 10-Q, we refer to Retail Opportunity Investments Corp. and its consolidated subsidiaries as "we," "us," "Company," or "our," unless we specifically state otherwise or the context indicates otherwise.

When used in this discussion and elsewhere in this Quarterly Report on Form 10-Q, the words "believes," "anticipates," "projects," "should," "estimates," "expects," and similar expressions are intended to identify forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and in Section 21F of the Securities and Exchange Act of 1934, as amended (the "Exchange Act").  Actual results may differ materially due to uncertainties including:

·   our ability to identify and acquire retail real estate investments that meet our investment standards in our target markets;

·   the level of rental revenue and net interest income we achieve from our target assets;

·   the market value of our assets and the supply of, and demand for, retail real estate investments in which we invest;

·   the length of the current economic downturn;

·   the conditions in the local markets in which we operate and our concentration in those markets, as well as changes in national economic and market conditions;

·   consumer spending and confidence trends;

·   our ability to enter into new leases or to renew leases with existing tenants at the properties we own or acquire at favorable rates;

·   our ability to anticipate changes in consumer buying practices and the space needs of tenants;

·   the competitive landscape impacting the properties we own or acquire and their tenants;

·   our relationships with our tenants and their financial condition and liquidity;

·   our ability to continue to qualify as a real estate investment trust (a “REIT”) for U.S. federal income tax;

·   our use of debt as part of our financing strategy and our ability to make payments or to comply with any covenants under any borrowings or other debt facilities we currently have or subsequently obtain;

·   the level of our operating expenses, including amounts we are required to pay to our management team and to engage third party property managers;

·   changes in interest rates that could impact the market price of our common stock and the cost of our borrowings; and

·   legislative and regulatory changes (including changes to laws governing the taxation of REITs).

Forward-looking statements are based on estimates as of the date of this report.  We disclaim any obligation to publicly release the results of any revisions to these forward-looking statements reflecting new estimates, events or circumstances after the date of this report.

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The risks included here are not exhaustive.  Other sections of this report may include additional factors that could adversely affect our business and financial performance.  Moreover, we operate in a very competitive and rapidly changing environment.  New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.  Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

 Overview

Retail Opportunity Investments Corp. commenced operations in October 2009 as a fully integrated and self-managed REIT.  The Company specializes in the acquisition, ownership and management of necessity-based community and neighborhood shopping centers in the western and eastern regions of the United States, anchored by national and regional supermarkets and drugstores.  The Company refers to the properties it targets for investment as its target assets.

From the commencement of its operations through March 31, 2013, the Company has completed approximately $930.7 million of shopping center investments.  As of March 31, 2013, the Company's portfolio consisted of 46 wholly-owned retail properties totaling approximately 4.5 million square feet of gross leasable area (“GLA”). The Company also owns one retail property through a joint venture, which is comprised of a 49% ownership interest in the Crossroads Shopping Center, a 463,402 square foot shopping center situated on approximately 40 acres of land, which is currently 97.7% leased.

As of March 31, 2013, the Company's wholly-owned portfolio was approximately 93.0% leased.  At March 31, 2013, the Company considered 42 of its wholly-owned properties to be stabilized properties with a weighted average leased area of 95.3%.  The remaining four properties were considered by the Company to be re-development properties that were 67.4% leased at March 31, 2013.  During the three months ended March 31, 2013, the Company leased or renewed a total of 171,200 square feet in its portfolio.  The Company has committed approximately $451,000 and $146,000 in tenant improvements and leasing commissions, respectively, for the new leases and renewals that occurred during the three months ended March 31, 2013.  During the three months ended March 31, 2013, rental rates across the Company’s portfolio, with respect to lease renewals that expired during such period, remained essentially flat.

The Company reincorporated as a Maryland corporation on June 2, 2011.  The Company has elected to be taxed as a REIT, for U.S. federal income tax purposes, commencing with the year ended December 31, 2010.

Subsequent Events

On April 15, 2013, the Company acquired the property known as Canyon Crossing Shopping Center located in Puyallup, Washington, within the Seattle metropolitan area, for a purchase price of approximately $35.0 million.  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 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. The property was acquired using borrowings under the Company’s credit facility.

On May 1, 2013, the Company’s board of directors declared a cash dividend on its common stock of $0.15 per share, payable on June 28, 2013 to holders of record on June 14, 2013.

Subsequent to the quarter end, the Company received notice of warrant exercises for 90,000 warrants, totaling approximately $1.1 million in proceeds.

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Report on Operating Results

Funds from operations ("FFO"), is a widely-recognized non-GAAP financial measure for REITs that the Company believes when considered with financial statements determined in accordance with GAAP, provides additional and useful means to assess its financial performance.  FFO is frequently used by securities analysts, investors and other interested parties to evaluate the performance of REITs, most of which present FFO along with net income as calculated in accordance with GAAP.

The Company computes FFO in accordance with the "White Paper" on FFO published by the National Association of Real Estate Investment Trusts ("NAREIT"), which defines FFO as net income attributable to common stockholders (determined in accordance with GAAP) excluding gains or losses from debt restructuring, sales of depreciable property, and impairments, plus real estate related depreciation and amortization, and after adjustments for partnerships and unconsolidated joint ventures.

In accordance with the Financial Accounting Standards Board ("FASB") guidance relating to business combinations, which, among other things, requires any acquirer of a business (investment property) to expense all acquisition costs related to the acquisition, the amount of which will vary based on each specific acquisition and the volume of acquisitions.  Accordingly, the costs of completed acquisitions will reduce our FFO. Acquisition costs for the three months ended March 31, 2013 and 2012 were approximately $409,000 and $123,000, respectively.

However, FFO:

· does not represent cash flows from operating activities in accordance with GAAP (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income); and

· should not be considered an alternative to net income as an indication of our performance.

FFO as defined by the Company may not be comparable to similarly titled items reported by other REITs due to possible differences in the application of the NAREIT definition used by such REITs.  The table below provides a reconciliation of net income applicable to stockholders in accordance with GAAP to FFO for the three months ended March 31, 2013 and 2012.

	For the Three Months Ended
	March 31, 2013		March 31, 2012
Net income for period	$	2,289,886	$	1,127,404
Plus:  Real property depreciation		4,248,789		2,954,481
Amortization of tenant improvements and allowances		1,180,376		946,342
Amortization of deferred leasing costs		3,451,965		2,748,995
Depreciation attributable to unconsolidated joint ventures		352,076		606,265
Funds from operations	$	11,523,092	$	8,383,487

Results of Operations

At March 31, 2013, the Company had equity interests in 47 properties, of which 46 are consolidated (“consolidated properties”) in the accompanying financial statements and one is accounted for under the equity method of accounting. The Company believes, because of the location of the properties in densely populated areas, the nature of its investment provides for relatively stable revenue flows even during difficult economic times. The Company has a strong capital structure with manageable debt. The Company expects to continue to actively explore acquisition opportunities consistent with its business strategy.

Results of Operations for the three months ended March 31, 2013 compared to the three months ended March 31, 2012.

The following comparison for the three months ended March 31, 2013 compared to the three months ended March 31, 2012, makes reference to the effect of the same-store properties. Same-store properties represent all consolidated operating properties owned by the Company in the same manner during both periods which totaled 30 of the Company’s 46 consolidated properties. Operating income is defined as operating income generated from the Company’s consolidated operating properties (net of depreciation and amortization).

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During the three months ended March 31, 2013, the Company generated net income of approximately $2.3 million compared to net income of $1.1 million generated during the three months ended March 31, 2012.  Operating income increased by $3.0 millionduring the three months ended March 31, 2013 primarily as a result of an increase in the number of properties owned by the Company in 2013 compared to 2012 and an increase in same-store properties operating income.  As of March 31, 2013, the Company owned 46 consolidated properties as compared to 32 properties at March 31, 2012. The newly acquired properties increased operating income in 2013 by approximately $4.2 million.  Operating income from the 30 same-store properties increased operating income by approximately $440,000.  During the three months ended March 31, 2013, the Company incurred approximately $3.8 million of interest expense compared to approximately $2.3 million during the three months ended March 31, 2012, due to higher net borrowings on the term loan/credit facility. During the three months ended March 31, 2013, the Company had a total of $218.0 million outstanding on its term loan and credit facility as compared to $110.0 million outstanding on its term loan at March 31, 2012. The Company incurred property acquisition costs during the three months ended March 31, 2013 of approximately $409,000 compared to $123,000 incurred during the comparable period in 2012. Property acquisition costs were higher in 2013 due to legal costs incurred related to potential acquisitions.

Critical Accounting Policies

Critical accounting policies are those that are both important to the presentation of the Company's financial condition and results of operations and require management's most difficult, complex or subjective judgments.  Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements.  This summary should be read in conjunction with the more complete discussion of the Company's accounting policies included in Note 1 to the Company's consolidated financial statements.

Revenue Recognition

The Company records base rents on a straight-line basis over the term of each lease.  The excess of rents recognized over amounts contractually due pursuant to the underlying leases is included in tenant and other receivables on the accompanying consolidated balance sheets.  Most leases contain provisions that require tenants to reimburse a pro-rata share of real estate taxes and certain common area expenses.  Adjustments are also made throughout the year to tenant and other receivables and the related cost recovery income based upon the Company's best estimate of the final amounts to be billed and collected.  In addition, the Company also provides an allowance for future credit losses in connection with the deferred straight-line rent receivable.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is established based on a quarterly analysis of the risk of loss on specific accounts.  The analysis places particular emphasis on past-due accounts and considers information such as the nature and age of the receivables, the payment history of the tenants or other debtors, the financial condition of the tenants and any guarantors and management's assessment of their ability to meet their lease obligations, the basis for any disputes and the status of related negotiations, among other things.  Management's estimates of the required allowance is subject to revision as these factors change and is sensitive to the effects of economic and market conditions on tenants, particularly those at retail properties.  Estimates are used to establish reimbursements from tenants for common area maintenance, real estate tax and insurance costs.  The Company analyzes the balance of its estimated accounts receivable for real estate taxes, common area maintenance and insurance for each of its properties by comparing actual recoveries versus actual expenses and any actual write-offs.  Based on its analysis, the Company may record an additional amount in its allowance for doubtful accounts related to these items.  In addition, the Company also provides an allowance for future credit losses in connection with the deferred straight-line rent receivable.

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Real Estate

Land, buildings, property improvements, furniture/fixtures and tenant improvements are recorded at cost.  Expenditures for maintenance and repairs are charged to operations as incurred.  Renovations and/or replacements, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.

Upon the acquisition of real estate properties, the fair value of the real estate purchased is allocated to the acquired tangible assets (consisting of land, buildings and improvements), and acquired intangible assets and liabilities (consisting of above-market and below-market leases and acquired in-place leases).  The fair value of the tangible assets of an acquired property is determined by valuing the property as if it were vacant, which value is then allocated to land, buildings and improvements based on management's determination of the relative fair values of these assets.  In valuing an acquired property's intangibles, factors considered by management include an estimate of carrying costs during the expected lease-up periods, and estimates of lost rental revenue during the expected lease-up periods based on its evaluation of current market demand.  Management also estimates costs to execute similar leases, including leasing commissions, tenant improvements, legal and other related costs.

The value of in-place leases is measured by the excess of (i) the purchase price paid for a property after adjusting existing in-place leases to market rental rates, over (ii) the estimated fair value of the property as if vacant.  Above-market and below-market lease values are recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between the contractual amounts to be received and management's estimate of market lease rates, measured over the terms of the respective leases that management deemed appropriate at the time of acquisition.  Such valuations include a consideration of the non-cancellable terms of the respective leases as well as any applicable renewal periods.  The fair values associated with below-market rental renewal options are determined based on the Company's experience and the relevant facts and circumstances that existed at the time of the acquisitions.  The value of the above-market and below-market leases associated with the original lease term is amortized to rental income, over the terms of the respective leases.  The value of below-market rental lease renewal options is deferred until such time as the renewal option is exercised and subsequently amortized over the corresponding renewal period.  The value of in-place leases are amortized to expense, and the above-market and below-market lease values are amortized to rental income, over the remaining non-cancellable terms of the respective leases.  If a lease were to be terminated prior to its stated expiration, all unamortized amounts relating to that lease would be recognized in operations at that time.  The Company will record a bargain purchase gain if it determines that the purchase price for the acquired assets was less than the fair value.  The Company will record a liability in situations where any part of the cash consideration is deferred.  The amounts payable in the future are discounted to their present value.  The liability is subsequently re-measured to fair value with changes in fair value recognized in the consolidated statements of operations.  If, up to one year from the acquisition date, information regarding fair value of assets acquired and liabilities assumed is received and estimates are refined, appropriate property adjustments are made to the purchase price allocation on a retrospective basis.

The Company is required to make subjective assessments as to the useful life of its properties for purposes of determining the amount of depreciation.  These assessments have a direct impact on its net income.

Properties are depreciated using the straight-line method over the estimated useful lives of the assets.  The estimated useful lives are as follows:

Buildings	39-40 years
Property Improvements	10-20 years
Furniture/Fixtures	3-10 years
Tenant Improvements	Shorter of lease term or their useful life

Asset Impairment

The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to aggregate future net cash flows (undiscounted and without interest) expected to be generated by the asset.  If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value.  Management does not believe that the value of any of the Company's real estate investments was impaired at March 31, 2013.

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The Company reviews its investment in its unconsolidated joint venture for impairment periodically and the Company would record an impairment charge when events or circumstances change indicating that a decline in the fair values below the carrying values has occurred and such decline is other-than temporary.  The ultimate realization of the Company's investment in its unconsolidated joint ventures is dependent on a number of factors, including the performance of each investment and market conditions.  Management does not believe that the value of its unconsolidated joint venture was impaired at March 31, 2013.

REIT Qualification Requirements

The Company has elected and qualified to be taxed as a REIT under the Code, and believes that it has been organized and has operated in a manner that will allow it to continue to qualify for taxation as a REIT under the Code.

The Company is subject to a number of operational and organizational requirements to qualify and then maintain qualification as a REIT.  If the Company does not qualify as a REIT, its income would become subject to U.S. federal, state and local income taxes at regular corporate rates that would be substantial and the Company cannot re-elect to qualify as a REIT for four taxable years following the year that it failed to qualify as a REIT.  The resulting adverse effects on the Company's results of operations, liquidity and amounts distributable to stockholders would be material.

Liquidity and Capital Resources

Liquidity is a measure of the Company's ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain its assets and operations, make distributions to its stockholders and meet other general business needs.  During the three months ended March 31, 2013, the Company's primary sources of cash were (i) cash flows from operating activities, (ii) proceeds from bank borrowings and (iii) proceeds from the exercise of warrants. As of March 31, 2013, the Company has determined that it has adequate working capital to meet its debt obligations and operating expenses for the next twelve months.

The Company has a revolving credit facility (the “credit facility”) with several banks. The credit facility provides for borrowings of up to $200.0 million and contains an accordion feature, which allows the Company to increase the facility amount up to an aggregate of $300.0 million subject to commitments and other conditions.  The initial maturity date of the credit facility is August 29, 2016, subject to a one-year extension option, which may be exercised by the Company upon satisfaction of certain conditions.

In addition, the Company has a term loan agreement (the “term loan”) with several banks. The term loan provides for a loan of $200.0 million and contains an accordion feature, which allows the Company to increase the facility amount up to an aggregate of $300.0 million subject to commitments and other conditions.  The maturity date of the term loan is August 29, 2017.

As of March 31, 2013, $200.0 million and $18.0 million were outstanding under the term loan and credit facility, respectively.  The average interest rate on the term loan and credit facility during the three months ended March 31, 2013 was 1.8%.  The Company had $182.0 million available to borrow under the credit facility at March 31, 2013. The Company had no available borrowings under the term loan.

During the three months ended March 31, 2013, the Company assumed an existing mortgage loan with an outstanding principal balance of approximately $8.9 million as part of the acquisition of Bernardo Heights Plaza.

During the year ended December 31, 2011, the Company entered into an ATM Equity OfferingSM Sales Agreement ("sales agreement") with Merrill Lynch, Pierce, Fenner & Smith Incorporated to sell shares of the Company's common stock, par value $0.0001 per share, having aggregate sales proceeds of $50.0 million from time to time, through an "at the market" equity offering program under which Merrill Lynch, Pierce, Fenner & Smith Incorporated acts as sales agent and/or principal (“agent”).  During the three months ended March 31, 2013, the Company did not sell any shares under the sales agreement.

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While the Company generally intends to hold its target assets as long term investments, certain of its investments may be sold in order to manage the Company's interest rate risk and liquidity needs, meet other operating objectives and adapt to market conditions.  The timing and impact of future sales of its investments, if any, cannot be predicted with any certainty.

Potential future sources of capital include cash flows from operating activities, proceeds from unsecured or secured financings from banks or other lenders and undistributed funds from operations.  In addition, the Company anticipates raising additional capital from future equity and debt financings, and if the value of its common stock continues to exceed the exercise price of its warrants, through the sale of common stock to the holders of its warrants from time to time.  The Company is seeking to obtain a credit rating from certain credit agencies to provide it with access to the unsecured bond market, an additional avenue that can be used to fund the Company's liquidity and capital needs. However, no assurance can be given that the Company will continue to seek such a rating or what rating it may receive.

	For the Three Months Ended
	March 31, 2013			March 31, 2012
Net Cash Provided by (Used in):
Operating Activities	$	4,413,601		$	4,114,107
Investing Activities	$	(34,449,255	)	$	(38,803,129	)
Financing Activities	$	32,236,983		$	11,110,421

Net Cash Flows from:

Operating Activities

Net cash flows provided by operating activities amounted to $4.4 million in the three months ended March 31, 2013, compared to $4.1 million in the comparable period in 2012. During the three months ended March 31, 2013, cash flows from operating activities increased by approximately $300,000 primarily due to additional operating income from acquisitions, offset by an increase in prepaid expenses, primarily due to the timing of real estate tax payments and the additional number of properties owned during the three months ended March 31, 2013, as compared to the same period in 2012.  This increase was further offset by an increase in the change in other liabilities related to unearned rent during the three months ended March 31, 2013 as compared to the same period in 2012.

Investing Activities

Net cash flows used in investing activities amounted to $34.4 million in the three months ended March 31, 2013, compared to $38.8 million in the comparable period in 2012. During the three months ended March 31, 2013, cash flows used in investing activities decreased by approximately $4.4 million, primarily due to the decrease in investments in real estate of approximately $7.5 million, offset by an increase in improvements to properties of approximately $1.5 million, and an increase in deposits for real estate acquisitions of approximately $1.5 million.

Financing Activities

Net cash flows provided by financing activities amounted to $32.2 million for the three months ended March 31, 2013, compared to $11.1 million in the comparable period in 2012. During the three months ended March 31, 2013, cash flows provided by financing activities increased by approximately $21.1 million, primarily due to the receipt of $144.2 million of proceeds from the exercise of warrants, net of cash used to acquire warrants.  This increase was offset by net payments on the credit facility of approximately $116.0 million, an increase in the quarterly dividend paid to shareholders of approximately $3.9 million, and proceeds of approximately $2.6 million in proceeds received during the three months ended March 31, 2012 related to the sale of common stock under the ATM program, for which no activity occurred during the three months ended March 31, 2013.

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Contractual Obligations

The following table presents the principal amount of the Company's long-term debt maturing each year, including amortization of principal based on debt outstanding and other contractual obligations at March 31, 2013:

	2013		2014		2015		2016		2017		Thereafter		Total
Contractual obligations:
Mortgage Notes Payable (1)	$	1,066,797	$	22,440,636	$	28,685,585	$	7,582,838	$	8,460,412	$	10,136,577	$	78,372,845
Term loan		—		—		—		—		200,000,000		—		200,000,000
Credit facility		—		—		—		18,000,000		—		—		18,000,000
Earn-out obligations to the sellers of properties		2,001,854		—		—		—		—		—		2,001,854
Operating lease obligations		690,888		690,888		690,888		754,910		818,932		23,981,684		27,628,190
Total	$	3,759,539	$	23,131,524	$	29,376,473	$	26,337,748	$	209,279,344	$	34,118,261	$	326,002,889

_______________

(1) Does not include unamortized mortgage premium of $3.4 million as of March 31, 2013.

As of March 31, 2013, the Company did not have any capital lease obligations, or purchase obligations.

In August 2011, the Company entered into a lease agreement effective July 1, 2011, with an officer of the Company. Pursuant to the lease agreement, the Company is provided the use of storage space.

Off-Balance Sheet Arrangements

The Company's investment in an unconsolidated joint venture is an off-balance sheet investment.  This unconsolidated joint venture is accounted for under the equity method of accounting as the Company has the ability to exercise significant influence, but not control the operating and financial decisions of this investment.  The Company's off-balance sheet arrangements are more fully discussed in Note 2, "Real Estate Investments," in the accompanying consolidated financial statements.

Real Estate Taxes

The Company’s leases generally require the tenants to be responsible for a pro rata portion of the real estate taxes.

Inflation

The Company's long-term leases contain provisions to mitigate the adverse impact of inflation on its operating results.  Such provisions include clauses entitling the Company to receive (a) scheduled base rent increases and (b) percentage rents based upon tenants' gross sales which generally increase as prices rise.  In addition, many of the Company's non-anchor leases are for terms of less than ten years, which permits the Company to seek increases in rents upon renewal at then-current market rates if rents provided in the expiring leases are below then-existing market rates.  Most of the Company's leases require tenants to pay a share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation.

Leverage Policies

The Company employs prudent amounts of leverage and uses debt as a means of providing additional funds for the acquisition of its properties and the diversification of its portfolio.  The Company seeks to primarily utilize unsecured debt in order to maintain liquidity and flexibility in its capital structure.

 The Company has a revolving credit facility (the "credit facility") with several banks.  The credit facility provides for borrowings of up to $200.0 million and contains an accordion feature, which allows the Company to increase the facility amount up to an aggregate of $300.0 million subject to commitments and other conditions.  The initial maturity date of the credit facility is August 29, 2016, subject to a one-year extension option, which may be exercised by the Company upon satisfaction of certain conditions.

The Company has a term loan agreement (the “term loan”) with several banks.  The term loan provides for a loan of $200.0 million and contains an accordion feature, which allows the Company to increase the facility amount up to an aggregate of $300.0 million subject to commitments and other conditions.  The maturity date of the term loan is August 29, 2017.

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Borrowings under the credit facility and term loan agreements (collectively, the “loan agreements”) bear interest on the outstanding principal amount at a rate equal to, prior to such time as the Company has obtained an investment grade rating from at least two rating agencies, an applicable rate based on the consolidated leverage ratio of the Company and its subsidiaries, plus, as applicable, (i) a LIBOR rate determined by reference to the cost of funds for dollar deposits for the relevant period (the "Eurodollar Rate"), or (ii) a base rate determined by reference to the highest of (a) the federal funds rate plus 0.50%, (b) the rate of interest announced by KeyBank National Association as its "prime rate," and (c) the Eurodollar Rate plus 1.00% (the "Base Rate").  From, and after the time the Company obtains an investment grade rating from at least two rating agencies, borrowings under the loan agreements will bear interest on the outstanding principal amount at a rate equal to an applicable rate based on the credit rating level of the Company, plus, as applicable, (i) the Eurodollar Rate, or (ii) the Base Rate.  The Company is obligated to pay (i) prior to such time as the Company has obtained an investment grade rating from at least two rating agencies, an unused fee of  (a) 0.35% of the undrawn balance if the total outstanding principal amount is less than 50% of the aggregate commitments or (b) 0.25% if the total outstanding principal amount is greater than or equal to 50% of the aggregate commitments, (ii) from and after such time as the Company has obtained an investment grade rating from at least two rating agencies, a facility fee at a facility fee rate based on the credit rating level of the Company, and (iii) a fronting fee at a rate of 0.125% per year with respect to each letter of credit issued under the  agreements.  The agreements contain certain representations, financial and other covenants typical for these types of facilities.  The Company's ability to borrow under the loan agreements is subject to its compliance with the covenants and other restrictions on an ongoing basis.  The Company was in compliance with such covenants at March 31, 2013.

As of March 31, 2013, $200.0 million and $18.0 million were outstanding under the term loan and credit facility, respectively.  The average interest rate on the term loan and credit facility during the three months ended March 31, 2013 was 1.8%.  The Company had $182.0 million available to borrow under the credit facility at March 31, 2013. The Company had no available borrowings under the term loan.

In addition, in connection with the acquisition of a property on February 6, 2013, the Company assumed a mortgage representing an unpaid principal amount as of March 31, 2013 of approximately $8.9 million.

The Company may borrow on a non-recourse basis or at the corporate level or operating partnership level.  Non-recourse indebtedness means the indebtedness of the borrower or its subsidiaries is secured only by specific assets without recourse to other assets of the borrower or any of its subsidiaries.  Even with non-recourse indebtedness, however, a borrower or its subsidiaries will likely be required to guarantee against certain breaches of representations and warranties such as those relating to the absence of fraud, misappropriation, misapplication of funds, environmental conditions and material misrepresentations.  Because non-recourse financing generally restricts the lender's claim on the assets of the borrower, the lender generally may only proceed against the asset securing the debt.  This may protect the Company's other assets.

The Company plans to evaluate each investment opportunity and determine the appropriate leverage on a case-by-case basis and also on a Company-wide basis.  The Company may seek to refinance indebtedness, such as when a decline in interest rates makes it beneficial to prepay an existing mortgage, when an existing mortgage matures or if an attractive investment becomes available and the proceeds from the refinancing can be used to purchase the investment.

The Company plans to finance future acquisitions of its target assets through a combination of cash, borrowings under its credit facilities, the assumption of existing mortgage debt in connection with the future acquisition of properties, and equity and debt offerings.  In addition, the Company may acquire retail property indirectly through joint ventures with third parties as a means of increasing the funds available for the acquisition of properties.

Dividends

The Company intends to make regular quarterly distributions to holders of its common stock.  U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay U.S. federal income tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income.  The Company intends to pay regular quarterly dividends to its stockholders in an amount not less than its net taxable income, if and to the extent authorized by its board of directors.  If the Company's cash available for distribution is less than its net taxable income, the Company could be required to sell assets or borrow funds to make cash distributions or the Company may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

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Recently Issued Accounting Pronouncements

See Note 1 to the accompanying consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company's primary market risk exposure is to changes in interest rates related to its debt.  There is inherent rollover risk for borrowings as they mature and are renewed at current market rates.  The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and the Company's future financing requirements.

As of March 31, 2013, the Company had $218.0 million of variable rate debt outstanding.  As of March 31, 2013, the Company has primarily used fixed-rate debt and five forward starting interest rate swaps to manage its interest rate risk.  See the discussion under Note 8, “Derivative and Hedging Activities,” to the accompanying consolidated financial statements for certain quantitative details related to the interest rate swaps.

The Company entered into five forward starting interest rate swaps in order to economically hedge against the risk of rising interest rates that would affect the Company's interest expense related to its future anticipated debt issuances as part of its overall borrowing program.  The sensitivity analysis table presented below shows the estimated instantaneous parallel shift in the yield curve up and down by 50 and 100 basis points, respectively, on the clean market value of its interest rate derivatives as of March 31, 2013, exclusive of non-performance risk.

Swap Notional	Less 100 basis points	Less 50 basis points	March 31, 2013 Value	Increase 50 basis points	Increase 100 basis points
$         25M	(6,117,014)	(5,051,600)	(3,989,862)	(2,962,879)	(1,977,529)
$         50M	(8,071,882)	(6,918,468)	(5,697,770)	(4,368,634)	(3,076,919)
$         50M	(8,835,960)	(7,375,060)	(5,958,422)	(4,444,345)	(2,978,158)
$         25M	(2,950,139)	(2,230,750)	(1,542,811)	(806,984)	(94,667)
$         25M	(2,409,283)	(1,205,798)	(80,960)	1,054,226	2,131,730

Item 4. Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer, based on their evaluation of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, have concluded that as of the end of the period covered by this report, the Company's disclosure controls and procedures were effective to give reasonable assurances to the timely collection, evaluation and disclosure of information relating to the Company that would potentially be subject to disclosure under the Exchange Act and the rules and regulations promulgated thereunder.

During the three months ended March 31, 2013, there was no change in the Company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

We are not involved in any material litigation nor, to our knowledge, is any material litigation pending or threatened against us, other than routine litigation arising out of the ordinary course of business or which is expected to be covered by insurance and not expected to harm our business, financial condition or results of operations.

Item 1A.  Risk Factors

See our Annual Report on Form 10-K for the year ended December 31, 2012.  There have been no significant changes to our risk factors during the three months ended March 31, 2013.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

On February 1, 2013, the Sponsor exercised 8,000,000 Private Placement Warrants, exercisable for the Company's Common Stock at an exercise price of $12.00 per share.  The Private Placement Warrants were purchased by NRDC pursuant to that certain Warrant Agreement dated as of October 17, 2007 (as supplemented and amended by the Supplement & Amendment to the Warrant Agreement dated as of October 20, 2009, the "Warrant Agreement")  in connection with  the consummation of the Company's initial public offering. The Private Placement Warrants were exercised on a cashless basis (the "Cashless Exercise").  In connection with the Cashless Exercise, the Company issued 688,500 shares to NRDC, with an aggregate value of approximately $9.0 million, or $13.13 per share, based on a formula set forth in the Warrant Agreement.  The issuance of the Company's Common Stock upon exercise of the Private Warrants as described herein was exempt from registration requirements under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof, because none of the transactions involved a public offering, and Section 3(a)(9) thereof, because no commission or other remuneration was paid in connection with the exercise of the Private Placement Warrants.

During the three months ended March 31, 2013, we purchased outstanding Public Warrants as follows:

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares That May Yet be Purchased Under the Plans or Programs
January 1, 2013 to January 31, 2013		—	$	—		—		—
February 1, 2013 to February 28, 2013		—		—		—		—
March 1, 2013 to March 31, 2013		7,750,000		1.38		—		—
Total		7,750,000				—		—

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information

None.

Item 6.  Exhibits

3.1 Articles of Merger between Retail Opportunity Investments Corp., a Delaware corporation, and Retail Opportunity Investments Corp., a Maryland corporation, as survivor .(1)

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3.2 Articles of Amendment and Restatement.(1)

3.3 Bylaws.(2)

4.1 Specimen Unit Certificate.(2)

4.2 Specimen Common Stock Certificate.(2)

4.3 Specimen Warrant Certificate.(2)

4.4 Form of Warrant Agreement between Continental Stock Transfer & Trust Company NRDC Acquisition Corp.(3)

4.5 Supplement and Amendment to Warrant Agreement by and between NRDC Acquisition Corp. and Continental Stock Transfer & Trust Company, dated as of October 20, 2009.(2)

31.1 Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

31.2 Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002.

32.1 Certification of Chief Executive and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation Linkbase

101.DEF XBRL Taxonomy Extension Definition Linkbase

101.LAB XBRL Taxonomy Extension Label Linkbase

101.PRE XBRL Taxonomy Extension Presentation Linkbase

(1)   Incorporated by reference to the Company's current report on Form 8-K filed on June 2, 2011.

(2)   Incorporated by reference to the Company's current report on Form 8-K filed on February 9, 2009.

(3)   Incorporated by reference to the Company’s registration statement on Form S-1/A filed on September 7, 2007 (File No. 333-144871).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	RETAIL OPPORTUNITY INVESTMENTS CORP. Registrant
Date:  May 3, 2013	/s/ Stuart A. Tanz                                                                     Name: Stuart A. Tanz Title: Chief Executive Officer
Date:  May 3, 2013	/s/ Michael B. Haines                                                                    Name: Michael B. Haines Title: Chief Financial Officer

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