EX-99.1 3 exh_991.htm EXHIBIT 99.1 exh_991.htm
Exhibit 99.1
 
 
Page
North Park Plaza
  
 
Independent Auditors’ Report
F-1
   
Statement of Revenues and Certain Expenses for the year ended December 31, 2013 (Audited) and three months ended March 31, 2014 (Unaudited)
F-2
   
Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2013 (Audited) and three months ended March 31, 2014 (Unaudited)
F-3
   
   
Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Corp.
  
   
Pro Forma Consolidated Balance Sheet as of March 31, 2014 (Unaudited)
F-6
   
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2014 (Unaudited)
F-7
   
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2013 (Unaudited)
F-8
   
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
F-9
   
   
Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Partnership, LP
  
   
Pro Forma Consolidated Balance Sheet as of March 31, 2014 (Unaudited)
F-11
   
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the three months ended March 31, 2014 (Unaudited)
F-12
   
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2013 (Unaudited)
F-13
   
Notes to Pro Forma Consolidated Financial Statements (Unaudited)
F-14
 
 
 
 
 
INDEPENDENT AUDITORS’ REPORT
 

To the Board of Directors and Stockholders
Retail Opportunity Investments Corp.
Retail Opportunity Investments Partnership, LP

We have audited the accompanying financial statement of the property known as North Park Plaza, located in San Jose, California (“North Park Plaza”) which is comprised of the statement of revenues and certain expenses for the year ended December 31, 2013, and the related notes to the financial statement.

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

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

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

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

Opinion
In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of North Park Plaza for the year ended December 31, 2013 in accordance with accounting principles generally accepted in the United States of America.

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

/s/ PKF O'Connor Davies                                                      
A Division of O'Connor Davies, LLP
 
New York, New York
July 2, 2014
 
 
F-1
 
NORTH PARK PLAZA
     STATEMENT OF REVENUES AND CERTAIN EXPENSES
(Dollar amounts in thousands)
 
   
Year Ended 
December 31,
2013
    
Three Months
Ended
March 31,
2014
(Unaudited)
  
Revenues
            
Rental income (note 4)
   $ 2,348     $ 564  
Total revenues
     2,348       564  
                 
Certain Expenses
                
Utilities
     80       18  
Repairs, maintenance and supplies
     208       25  
Cleaning and landscaping
     219       41  
Real estate taxes
     240       60  
Insurance
     18       4  
Total certain expenses
     765       148  
                 
Excess of revenues over certain expenses
     1,583       416  
 
See accompanying notes to statement of revenues and certain expenses.
 
 
F-2
 
NORTH PARK PLAZA
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2013 (AUDITED)
AND THREE MONTHS ENDED MARCH 31, 2014 (UNAUDITED)

1.             Business Organization
 
Retail Opportunity Investments Corp., a Maryland corporation (“ROIC”), is organized in a traditional umbrella partnership real estate investment trust format pursuant to which Retail Opportunity Investments GP, LLC, its wholly-owned subsidiary, serves as the general partner of, and ROIC conducts substantially all of its business through, its operating partnership subsidiary, Retail Opportunity Investments Partnership, LP, a Delaware limited partnership (the “Operating Partnership”) and its subsidiaries.  Unless otherwise indicated or unless the context requires otherwise, all references to the “Company” refer to ROIC together with its consolidated subsidiaries, including the Operating Partnership.
 
On April 30, 2014, the Company acquired the property known as North Park Plaza located in San Jose, California, within the San Francisco Bay metropolitan area, for a purchase price of approximately $27.8 million. North Park Plaza is approximately 77,000 square feet and is anchored by SF Supermarket. The property was acquired with borrowings under the Company’s credit facility and available cash.
 
2.            Basis of Presentation and Summary of Significant Accounting Policies
 
Basis of Presentation
 
The Statement of Revenues and Certain Expenses (the “financial statement”) has been prepared for the purpose of complying with the provisions of Rule 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The financial statement includes the historical revenues and certain expenses of North Park Plaza, exclusive of rental income related to parcels not acquired by the Company, interest income, depreciation and amortization, rental income relating to the allocation of purchase price of North Park Plaza to above/below market leases and management and advisory fees, which may not be comparable to the corresponding amounts reflected in the future operations of North Park Plaza.
 
The statement of revenue and certain expenses for the three month period ended March 31, 2014 is unaudited.  In the opinion of management, such statement reflects all adjustments necessary for a fair presentation of revenue and certain expenses in accordance with the SEC Rule 3-14. All such adjustments are of a normal recurring nature.
 
Revenue Recognition
 
North Park Plaza’s operations consist of rental income earned from tenants under leasing arrangements which generally provide for minimum rents and tenant reimbursements.  All leases are classified as operating leases. Minimum rents are recognized by amortizing the aggregate lease payments on a straight-line basis over the terms of the lease (including rent holidays). Tenant reimbursements for real estate taxes, common area maintenance and other recoverable costs are recognized as rental income in the period that the expenses are incurred.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires North Park Plaza’s management to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from those estimates.
 
Accounts Receivable
 
Bad debts are recorded under the specific identification method, whereby uncollectible receivables are reserved for when identified.
 
 
F-3
 
Repairs and Maintenance
 
Repairs and maintenance costs are expensed as incurred, while significant improvements, renovations and replacements are capitalized.
 
3.             Subsequent Events
 
The Company has evaluated subsequent events through July 3, 2014, and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statement.
 
4.        Leases
 
North Park Plaza is subject to non-cancelable lease agreements, subject to various escalation clauses, with tenants for retail space. As of December 31, 2013, the future minimum rents on non-cancelable operating leases expiring in various years are as follows (dollar amounts in thousands):
 
Year ending December 31
  
Amounts
  
       
2014
   $ 1,787  
2015
     1,693  
2016
     1,671  
2017
     1,511  
2018
     479  
Thereafter
     423  
    $ 7,564  
 
The tenant leases provide for annual rents that include the tenants’ proportionate share of real estate taxes and certain property operating expenses. North Park Plaza’s tenant leases generally include tenant renewal options that can extend the lease terms.
 
Rental income on the financial statement includes the effect of amortizing the aggregate minimum lease payments on a straight-line basis over the entire term of each lease, which resulted in a decrease in rental income of approximately $105,000 and $29,000 for the year ended December 31, 2013 and three months ended March 31, 2014.
 
5.       Concentration
 
For each of the periods ended December 31, 2013 and March 31, 2014, three tenants represented approximately 25%, 15% and 10% (50% in total) of North Park Plaza’s rental income.
 
 
F-4
 
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The unaudited pro forma consolidated statement of operations and comprehensive income for the three months ended March 31, 2014 and for the year ended December 31, 2013 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisition of North Park Plaza (the “Property”) on January 1, 2013. Additionally, the pro forma consolidated balance sheet as of March 31, 2014 has been presented as if the acquisition had been completed on March 31, 2014.

The purchase price allocation is calculated based on a 20/80 allocation to Land and Building and Improvements, respectively.  As of the date of this report, the Company is in the process of evaluating the purchase price allocation in accordance with the Accounting Standards Codification 805.  The purchase price is preliminary and could be subject to change.
 
The pro forma consolidated financial statements should be read in conjunction with the Company’s 2013 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ended March 31, 2014. The pro forma consolidated financial statements do not purport to represent the Company’s financial position as of March 31, 2014 or results of operations that would actually have occurred assuming the completion of the acquisition of the Property had occurred on January 1, 2013; nor do they purport to project the Company’s results of operations as of any future date or for any future period.
 
 
 
F-5
 
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2014
(UNAUDITED)
(in thousands)
 
   
Company
Historical (1)
    
Pro Forma
Adjustments
    
Company
Pro Forma
  
ASSETS:
                  
Real Estate Investments:
                  
Land
   $ 472,198     $ 22,200 (2)   $ 494,398  
Building and improvements
     967,639       5,550 (2)     973,189  
      1,439,837       27,750       1,467,587  
Less: accumulated depreciation
     61,691       —       61,691  
Real Estate Investments, net
     1,378,146       27,750       1,405,896  
Cash and cash equivalents
     12,765       (9,750 ) (2)     3,015  
Restricted cash
     1,584       —       1,584  
Tenant and other receivables, net
     22,781       —       22,781  
Deposits
     25       —       25  
Acquired lease intangible assets, net of accumulated amortization
     52,013       —       52,013  
Prepaid expenses
     1,746       —       1,746  
Deferred charges, net of accumulated amortization
     31,180       —       31,180  
Other
     2,941       —       2,941  
Total assets
   $ 1,503,181     $ 18,000     $ 1,521,181  
                         
LIABILITIES AND EQUITY
                        
                         
Liabilities:
                        
Term Loan
   $ 200,000     $ —     $ 200,000  
Credit facility
     122,450       18,000 (2)     140,450  
Senior Notes Due 2023
     245,925       —       245,925  
Mortgage notes payable
     117,716       —       117,716  
Acquired lease intangible liabilities, net of accumulated amortization
     81,909       —       81,909  
Accounts payable and accrued expenses
     14,557       —       14,557  
Tenants’ security deposits
     3,614       —       3,614  
Other liabilities
     13,285       —       13,285  
Total liabilities
     799,456       18,000       817,456  
                         
Equity:
                        
Preferred stock
     —       —       —  
Common stock
     7       —       7  
Additional-paid-in capital
     740,528       —       740,528  
Dividends in excess of earnings
     (56,270 )     —       (56,270 )
Accumulated other comprehensive loss
     (9,469 )     —       (9,469 )
Total Retail Opportunity Investments Corp. stockholders’ equity
     674,796       —       674,796  
Non-controlling interests
     28,929       —       28,929  
Total equity
     703,725       —       703,725  
Total liabilities and equity
   $ 1,503,181     $ 18,000     $ 1,521,181  
 
See accompanying notes to pro forma consolidated financial statements
 
 
F-6
 
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED  MARCH 31, 2014
(UNAUDITED)
(in thousands, except per share data)
 
   
Company
Historical (1)
    
North Park Plaza
    
Pro Forma
Adjustments
    
Company
Pro Forma
  
Revenues
                        
Base rents
   $ 27,537     $ 410     $ 34 (3)   $ 27,981  
Recoveries from tenants
     7,614       154       —       7,768  
Other income
     1,199       —       —       1,199  
Total revenues
     36,350       564       34       36,948  
                                 
Operating expenses
                                
Property operating
     6,262       88       —       6,350  
Property taxes
     3,588       60       —       3,648  
Depreciation and amortization
     13,364       —       142 (4)     13,506  
General and administrative expenses
     2,561       —       —       2,561  
Acquisition transaction costs
     218       —       — (5)     218  
Other expense (income)
     217       —       —       217  
Total operating expenses
     26,210       148       142       26,500  
                                 
Operating income
     10,140       416       (108 )     10,448  
Non-operating income (expenses)
                                
Interest expense and other finance expenses
     (6,874 )     —       (56 ) (6)     (6,930 )
Net income
     3,266       416       (164 )     3,518  
Net income attributable to non-controlling interests
     (134 )     —       —       (134 )
Net Income (Loss) Attributable to Retail Opportunity Investments Corp.
   $ 3,132     $ 416     $ (164 )   $ 3,384  
                                 
Basic and diluted per share
   $ 0.04                     $ 0.04  
                                 
Dividends per common share
   $ 0.16                     $ 0.16  
                                 
Comprehensive income:
                                
Net income
   $ 3,266     $ 416     $ (164 )   $ 3,518  
Other comprehensive loss
                                
Unrealized (loss) gain on swap derivative
                                
Unrealized swap derivative loss arising during the period
     (1,383 )     —       —       (1,383 )
Reclassification adjustment for amortization of interest expense included in net income
     883       —       —       883  
Other comprehensive loss
     (500 )     —       —       (500 )
Comprehensive income (loss)
     2,766       416       (164 )     3,018  
Comprehensive income attributable to non-controlling interests
     (134 )     —       —       (134 )
Comprehensive income attributable to Retail Opportunity Investments Corp.
   $ 2,632     $ 416     $ (164 )   $ 2,884  
 
See accompanying notes to pro forma consolidated financial statements
 
 
F-7
 
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2013
(UNAUDITED)
(in thousands, except per share data)
 
   
Company
Historical (1)
    
North Park Plaza
    
Pro Forma
Adjustments
    
Company
Pro Forma
  
Revenues
                        
Base rents
   $ 86,194     $ 1,623     $ 137 (3)   $ 87,954  
Recoveries from tenants
     22,498       725       —       23,223  
Mortgage interest
     624       —       —       624  
Other income
     1,916       —       —       1,916  
Total revenues
     111,232       2,348       137       113,717  
                                 
Operating expenses
                                
Property operating
     19,750       525       —       20,275  
Property taxes
     11,247       240       —       11,487  
Depreciation and amortization
     40,398       —       569 (4)     40,967  
General and administrative expenses
     10,059       —       —       10,059  
Acquisition transaction costs
     1,688       —       94 (5)     1,782  
Other expense
     315       —       —       315  
Total operating expenses
     83,457       765       663       84,885  
                                 
Operating income
     27,775       1,583       (526 )     28,832  
Non-operating income (expenses)
                                
Interest expense and other finance expenses
     (15,855 )     —       (227 ) (6)     (16,082 )
Gain on consolidation of joint venture
     20,382       —       —       20,382  
Equity in earnings from unconsolidated joint venture
     2,390       —       —       2,390  
Income from continuing operations
     34,692       1,583       (753 )     35,522  
Loss from discontinued operations
     (714 )     —       —       (714 )
Net income
     33,978       1,583       (753 )     34,808  
Net income attributable to non-controlling interests
     (165 )     —       —       (165 )
Net Income Attributable to Retail Opportunity Investments Corp.
   $ 33,813     $ 1,583     $ (753 )   $ 34,643  
                                 
Pro forma weighted average shares outstanding
                                
Basic
     67,419                       67,419  
Diluted
     71,004                       71,004  
                                 
Net earnings per share - basic:                                
Income from continuing operations
   $ 0.51                     $ 0.51  
Loss from discontinued operations
     (0.01 )                     (0.01 )
Net earnings per share
   $ 0.50                     $ 0.50  
                                 
Comprehensive income:
                                
Income from continuing operations
   $ 0.49                     $ 0.49  
Loss from discontinued operations
     (0.01 )                     (0.01 )
Net earnings per share
   $ 0.48                     $ 0.48  
                                 
Dividends per common share
   $ 0.60                     $ 0.60  
                                 
Comprehensive income:
                                
Net income
   $ 33,978     $ 1,583     $ (753 )   $ 34,808  
Other comprehensive income
                                
Unrealized swap derivative gain arising during the period
     4,565       —       —       4,565  
Reclassification adjustment for amortization of interest expense included in net income
     4,621       —       —       4,621  
Other comprehensive income
     9,186       —       —       9,186  
Comprehensive income
     43,164       1,583       (753 )     43,994  
Comprehensive income attributable to non-controlling interests
     (165 )     —       —       (165 )
Comprehensive income attributable to Retail Opportunity Investments Corp.
   $ 42,999     $ 1,583     $ (753 )   $ 43,829  
 
See accompanying notes to pro forma consolidated financial statements
 
 
F-8
 
RETAIL OPPORTUNITY INVESTMENTS CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
Adjustments to the Pro Forma Consolidated Financial Statements
 
1.
Derived from the Company’s audited and unaudited financial statements for the year ended December 31, 2013 and the three months ended March 31, 2014, respectively.
 
2.
Reflects the pro forma acquisition of the Property for approximately $27.8 million.  The acquisition was funded by drawdowns on the Company’s credit facility and available cash.
 
3.
Reflects the pro forma adjustment of $137,000 and $34,000 for the year ended December 31, 2013 and the three months ended March 31, 2014, respectively, to record operating rents on a straight-line basis beginning January 1, 2013.
 
4.
Reflects the estimated depreciation for the Property based on the estimated values allocated to the building at the beginning of the periods presented.  Depreciation expense is computed on a straight-line basis over the estimated useful life of the assets as follows (dollar amounts in thousands):
 
 
Estimated Useful
Life
  
For the Three
Months Ended
March 31, 2014
Depreciation 
Expense
    
Year Ended
December 31,
2013
Depreciation
Expense
  
               
Building
39 years
   $ 142     $ 569  
 
5.
Reflects the pro forma adjustment for estimated costs related to the acquisition of the Property.
 
6.
Reflects the pro forma adjustment to interest expense, assuming the Company had borrowed funds from its credit facility to cover the purchase price of the Property, as if the acquisition had been made on the first day of the periods presented.
 
 
F-9
 
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
The unaudited pro forma consolidated statement of operations and comprehensive income for the three months ended March 31, 2014 and for the year ended December 31, 2013 are presented as if Retail Opportunity Investments Partnership, LP (the “Operating Partnership”) had completed the acquisition of North Park Plaza (the “Property”) on January 1, 2013. Additionally, the pro forma consolidated balance sheet as of March 31, 2014 has been presented as if the acquisition had been completed on March 31, 2014.
 
The purchase price allocation is calculated based on a 20/80 allocation to Land and Building and Improvements, respectively.  As of the date of this report, the Operating Partnership is in the process of evaluating the purchase price allocation in accordance with the Accounting Standards Codification 805.  The purchase price is preliminary and could be subject to change.
 
The pro forma consolidated financial statements should be read in conjunction with the Operating Partnership’s 2013 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ended March 31, 2014. The pro forma consolidated financial statements do not purport to represent the Operating Partnership’s financial position as of March 31, 2014 or results of operations that would actually have occurred assuming the completion of the acquisition of the Property had occurred on January 1, 2013; nor do they purport to project the Operating Partnership’s results of operations as of any future date or for any future period.
 


 
F-10
 
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2014
(UNAUDITED)
(in thousands)
 
   
Company
Historical (7)
    
Pro Forma
Adjustments
    
Company
Pro Forma
  
ASSETS:
                  
Real Estate Investments:
                  
Land
   $ 472,198     $ 22,200 (8)   $ 494,398  
Building and improvements
     967,639       5,550 (8)     973,189  
      1,439,837       27,750       1,467,587  
Less: accumulated depreciation
     61,691       —       61,691  
Real Estate Investments, net
     1,378,146       27,750       1,405,896  
Cash and cash equivalents
     12,765       (9,750 ) (8)     3,015  
Restricted cash
     1,584       —       1,584  
Tenant and other receivables, net
     22,781       —       22,781  
Deposits
     25       —       25  
Acquired lease intangible assets, net of accumulated amortization
     52,013       —       52,013  
Prepaid expenses
     1,746       —       1,746  
Deferred charges, net of accumulated amortization
     31,180       —       31,180  
Other
     2,941       —       2,941  
Total assets
   $ 1,503,181     $ 18,000     $ 1,521,181  
                         
LIABILITIES AND EQUITY
                        
                         
Liabilities:
                        
Term Loan
   $ 200,000     $ —     $ 200,000  
Credit facility
     122,450       18,000 (8)     140,450  
Senior Notes Due 2023
     245,925       —       245,925  
Mortgage notes payable
     117,716       —       117,716  
Acquired lease intangible liabilities, net of accumulated amortization
     81,909       —       81,909  
Accounts payable and accrued expenses
     14,557       —       14,557  
Tenants’ security deposits
     3,614       —       3,614  
Other liabilities
     13,285       —       13,285  
Total liabilities
     799,456       18,000       817,456  
                         
Capital:
                        
ROIC capital
     684,265       —       684,265  
Limited partners’ capital
     28,929       —       28,929  
Accumulated other comprehensive loss
     (9,469 )     —       (9,469 )
Total capital
     703,725       —       703,725  
Total liabilities and capital
   $ 1,503,181     $ 18,000     $ 1,521,181  
 
See accompanying notes to pro forma consolidated financial statements
 
 
F-11
 
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2014
(UNAUDITED)
(in thousands, except per share data)
 
   
Company
Historical (7)
    
North Park Plaza
    
Pro Forma
Adjustments
    
Company
Pro Forma
  
Revenues
                        
Base rents
   $ 27,537     $ 410     $ 34 (9)   $ 27,981  
Recoveries from tenants
     7,614       154       —       7,768  
Other income
     1,199       —       —       1,199  
Total revenues
     36,350       564       34       36,948  
                                 
Operating expenses
                                
Property operating
     6,262       88       —       6,350  
Property taxes
     3,588       60       —       3,648  
Depreciation and amortization
     13,364       —       142 (10)     13,506  
General and administrative expenses
     2,561       —       —       2,561  
Acquisition transaction costs
     218       —       — (11)     218  
Other (income) expense
     217       —       —       217  
Total operating expenses
     26,210       148       142       26,500  
                                 
Operating income
     10,140       416       (108 )     10,448  
Non-operating income (expenses)
                                
Interest expense and other finance expenses
     (6,874 )     —       (56 ) (12)     (6,930 )
Net Income Attributable to Retail Opportunity Investments Partnership, LP
   $ 3,266     $ 416     $ (164 )   $ 3,518  
                                 
Basic and diluted per unit
   $ 0.04                     $ 0.04  
                                 
Distributions per unit
   $ 0.16                     $ 0.16  
                                 
Comprehensive income:
                                
Net income
   $ 3,266     $ 416     $ (164 )   $ 3,518  
Other comprehensive loss
                                
Unrealized (loss) gain on swap derivative
                                
Unrealized swap derivative loss  arising during the period
     (1,383 )     —       —       (1,383 )
Reclassification adjustment for amortization of interest expense included in net income
     883       —       —       883  
Other comprehensive loss
     (500 )     —       —       (500 )
Comprehensive income attributable to Retail Opportunity Investments Partnership, LP
   $ 2,766     $ 416     $ (164 )   $ 3,018  
 
See accompanying notes to pro forma consolidated financial statements
 
 
F-12
 
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2013
(UNAUDITED)
(in thousands, except per share data)
 
   
Company
Historical (7)
    
North Park
Plaza
    
Pro Forma
Adjustments
    
Company
Pro Forma
  
Revenues
                        
Base rents
   $ 86,194     $ 1,623     $ 137 (9)   $ 87,954  
Recoveries from tenants
     22,498       725       —       23,223  
Mortgage interest
     624       —       —       624  
Other income
     1,916       —       —       1,916  
Total revenues
     111,232       2,348       137       113,717  
                                 
Operating expenses
                                
Property operating
     19,750       525       —       20,275  
Property taxes
     11,247       240       —       11,487  
Depreciation and amortization
     40,398       —       569 (10)     40,967  
General and administrative expenses
     10,059       —       —       10,059  
Acquisition transaction costs
     1,688       —       94 (11)     1,782  
Other expense
     315       —       —       315  
Total operating expenses
     83,457       765       663       84,885  
                                 
Operating income
     27,775       1,583       (526 )     28,832  
Non-operating income (expenses)
                                
Interest expense and other finance expenses
     (15,855 )     —       (227 ) (12)     (16,082 )
Gain on consolidation of joint venture
     20,382       —       —       20,382  
Equity in earnings from unconsolidated joint venture
     2,390       —       —       2,390  
Income from continuing operations
     34,692       1,583       (753 )     35,522  
Loss from discontinued operations
     (714 )     —       —       (714 )
Net Income Attributable to Retail Opportunity Investments Partnership, LP
   $ 33,978     $ 1,583     $ (753 )   $ 34,808  
                                 
Pro forma weighted average units outstanding
                                
Basic
     68,258                       68,258  
Diluted
     71,004                       71,004  
                                 
Net income per unit - basic:                                
Income from continuing operations
   $ 0.51                     $ 0.51  
Loss from discontinued operations
     (0.01 )                     (0.01 )
Net income per unit
   $ 0.50                     $ 0.50  
Net income per unit - diluted:                                
Income from continuing operations
   $ 0.49                     $ 0.49  
Loss from discontinued operations
     (0.01 )                     (0.01 )
Net income per unit
   $ 0.48                     $ 0.48  
                                 
Distributions per unit
   $ 0.60                     $ 0.60  
Comprehensive income:
                                
Net income
   $ 33,978     $ 1,583     $ (753 )   $ 34,808  
Other comprehensive income
                                
Unrealized swap derivative gain arising during the period
     4,565       —       —       4,565  
Reclassification adjustment for amortization of interest expense included in net income
     4,621       —       —       4,621  
Other comprehensive income
     9,186       —       —       9,186  
Comprehensive income attributable to Retail Opportunity Investments Partnership, LP
   $ 43,164     $ 1,583     $ (753 )   $ 43,994  
 
See accompanying notes to pro forma consolidated financial statements

 
F-13
 
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
Adjustments to the Pro Forma Consolidated Financial Statements
 
 
7.
Derived from the Operating Partnership’s audited and unaudited financial statements for the year ended December 31, 2013 and the three months ended March 31, 2014, respectively.
 
8.
Reflects the pro forma acquisition of the Property for approximately $27.8 million.  The acquisition was funded drawdowns on the Operating Partnership’s credit facility and available cash.
 
9.
Reflects the pro forma adjustment of $137,000 and $34,000 for the year ended December 31, 2013 and the three months ended March 31, 2014, respectively, to record operating rents on a straight-line basis beginning January 1, 2013.
 
10.
Reflects the estimated depreciation for the Property based on the estimated values allocated to the building at the beginning of the periods presented.  Depreciation expense is computed on a straight-line basis over the estimated useful life of the assets as follows (dollar amounts in thousands):
 
 
Estimated Useful
Life
  
For the Three
Months Ended
March 31, 2014
Depreciation
Expense
    
Year Ended
December 31, 2013
Depreciation
Expense
  
               
Building
39 years
   $ 142     $ 569  
 
11.
Reflects the pro forma adjustment for estimated costs related to the acquisition of the Property.
 
12.
Reflects the pro forma adjustment to interest expense, assuming the Operating Partnership had borrowed funds from its credit facility to cover the purchase price of the Property, as if the acquisition had been made on the first day of the period presented.
 
 
 
F-14