EX-99.1 3 exh_991.htm EXHIBIT 99.1 exh_991.htm
Exhibit 99.1
 
   
Page
  
       
Mission Foothill Marketplace
      
       
Independent Auditors’ Report
   F-1  
       
Statement of Revenues and Certain Expenses for the year ended December 31, 2013 (Audited) and nine months ended September 30, 2014 (Unaudited)
   F-2  
       
Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2013 (Audited) and nine months ended September 30, 2014 (Unaudited)
   F-3   
       
       
       
Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Corp.
  
   
Pro Forma Consolidated Balance Sheet as of September 30, 2014 (Unaudited)
   F-6  
       
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the nine months ended September 30, 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 September 30, 2014 (Unaudited)
   F-11  
       
Pro Forma Consolidated Statement of Operations and Comprehensive Income for the nine months ended September 30, 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 Mission Foothill Marketplace, located in Mission Viejo, California (“Mission Foothill”) 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 Mission Foothill’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 Mission Foothill 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 Mission Foothill’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
February 11, 2015

 
F-1
 
MISSION FOOTHILL MARKETPLACE
     STATEMENT OF REVENUES AND CERTAIN EXPENSES
(Dollar amounts in thousands)
 
   
Year Ended 
December 31,
2013
    
Nine Months
Ended
September 30,
2014
(Unaudited)
  
Revenues
            
Rental income (note 4)
   $ 1,990     $ 1,577  
Total revenues
     1,990       1,577  
                 
Certain Expenses
                
Utilities
     62       52  
Repairs, maintenance and supplies
     140       112  
Cleaning and landscaping
     78       69  
Real estate taxes
     285       200  
Insurance
     13       16  
Total certain expenses
     578       449  
                 
Excess of revenues over certain expenses
     1,412       1,128  

 

 
See accompanying notes to statement of revenues and certain expenses.
 
 
F-2
 
MISSION FOOTHILL MARKETPLACE
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2013 (AUDITED)
AND NINE MONTHS ENDED SEPTEMBER 30, 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 December 4, 2014, the Company acquired the property known as Mission Foothill Marketplace (“Mission Foothill”) located in Mission Viejo, California, within the Orange County metropolitan area for a purchase price of approximately $29.0 million. Mission Foothill is approximately 110,000 square feet and is anchored by Haggen Food & Pharmacy and CVS Pharmacy.  Mission Foothill was acquired with borrowings under ROIC’s credit facility.
 
2.   Basis of Presentation and Summary of Significant Accounting Policies
 
Basis of Presentation
 
The Statement of Revenues and Certain Expenses (the “financial statement”) has been prepared for the purpose of complying with the provisions of Rule 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The financial statement includes the historical revenues and certain expenses of Mission Foothill, 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 Mission Foothill 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 Mission Foothill.
 
The statement of revenue and certain expenses for the nine month period ended September 30, 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
 
Mission Foothill’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.
 
Lease Termination Income
 
Termination fees are fees that Mission Foothill has agreed to accept in consideration for permitting certain tenants to terminate their lease prior to the contractual expiration date.  Mission Foothill recognizes termination fees 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) collectability of the termination fee is assured.
 
 
F-3
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires Mission Foothill’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.
 
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 February 10, 2015, and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statement.
 
4.Leases
 
Mission Foothill is subject to non-cancelable lease agreements through 2023, subject to various escalation clauses, with tenants for retail space. 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
   $ 1,628  
2015
     1,661  
2016
     1,494  
2017
     802  
2018
     431  
Thereafter
     1,314  
    $ 7,330  
 
The tenant leases provide for annual rents that include the tenants’ proportionate share of real estate taxes and certain property operating expenses. Mission Foothill’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 increase in rental income of approximately $12,000 and $4,000 for the year ended December 31, 2013 and the nine months ended September 30, 2014, respectively.
 
5.             Concentrations
 
For the year ended December 31, 2013, two tenants represented approximately 30% and 14% of Mission Foothill’s rental income. For the nine months ended September 30, 2014, such tenants represented approximately 28% and 13% of Mission Foothill’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 nine months ended September 30, 2014 and for the year ended December 31, 2013 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisition of Mission Foothill Marketplace (the “Property”) on January 1, 2013. Additionally, the pro forma consolidated balance sheet as of September 30, 2014 has been presented as if the acquisition had been completed on September 30, 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 allocation 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 September 30, 2014. The pro forma consolidated financial statements do not purport to represent the Company’s financial position as of September 30, 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 SEPTEMBER 30, 2014
(UNAUDITED)
(in thousands)
 
   
Company
Historical (1)
    
Pro Forma
Adjustments
    
Company
Pro Forma
  
   ASSETS:
                  
Real Estate Investments:
                  
Land
   $ 521,240     $ 5,800 (2)   $ 527,040  
Building and improvements
     1,163,078       23,200 (2)     1,186,278  
      1,684,318       29,000       1,713,318  
Less: accumulated depreciation
     77,876       —       77,876  
Real estate investments, net
     1,606,442       29,000       1,635,442  
Cash and cash equivalents
     10,996    
___
       10,996  
Restricted cash
     13,427       —       13,427  
Tenant and other receivables, net
     25,488       —       25,488  
Deposits
     5,000       —       5,000  
Acquired lease intangible assets, net of accumulated amortization
     69,787       —       69,787  
Prepaid expenses
     544       —       544  
Deferred charges, net of accumulated amortization
     36,501       —       36,501  
Other
     2,399       —       2,399  
    Total assets
   $ 1,770,584     $ 29,000     $ 1,799,584  
                         
    LIABILITIES AND EQUITY
                        
                         
    Liabilities:
                        
Term loan
   $ 200,000     $ —     $ 200,000  
    Credit facility     123,300        29,000 (2)      152,300  
Senior Notes Due 2023
     246,091       —       246,091  
Mortgage notes payable
     107,306       —       107,306  
Acquired lease intangible liabilities, net of accumulated amortization
     112,238       —       112,238  
Accounts payable and accrued expenses
     18,858       —       18,858  
Tenants’ security deposits
     3,709       —       3,709  
Other liabilities
     14,482       —       14,482  
Total liabilities
     825,984       29,000       854,984  
                         
    Equity:
                        
Preferred stock
     —       —       —  
Common stock
     9       —       9  
Additional-paid-in capital
     993,075       —       993,075  
Dividends in excess of earnings
     (70,639 )     —       (70,639 )
Accumulated other comprehensive loss
     (9,120 )     —       (9,120 )
Total Retail Opportunity Investments Corp. stockholders’ equity
     913,325       —       913,325  
Non-controlling interests
     31,275       —       31,275  
Total equity
     944,600       —       944,600  
   Total liabilities and equity
   $  1,770,584     $ 29,000     $ 1,799,584  
 
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 NINE MONTHS ENDED  SEPTEMBER 30, 2014
(UNAUDITED)
(in thousands, except per share data)
 
   
Company
Historical (1)
    
Mission Foothill
Marketplace (3)
    
Pro Forma
Adjustments
    
Company
Pro Forma
  
Revenues
                        
Base rents
   $ 87,230     $ 1,223     $ 36 (4)   $ 88,489  
Recoveries from tenants
     24,137       354       —       24,491  
Other income
     2,754       —       —       2,754  
Total revenues
     114,121       1,577       36       115,734  
                                 
Operating expenses
                                
Property operating
     18,062       249       —       18,311  
Property taxes
     11,566       200       —       11,766  
Depreciation and amortization
     42,986       —       446 (5)     43,432  
General and administrative expenses
     8,324       —       —       8,324  
Acquisition transaction costs
     654       —       —       654  
Other expense
     405       —       —       405  
Total operating expenses
     81,997       449       446       82,892  
                                 
Operating income
     32,124       1,128       (410 )     32,842  
Non-operating income (expenses)
                                
Interest expense and other finance expenses
     (20,695 )     —       (274 ) (7)     (20,969 )
Gain on sale of real estate
     4,869       —       —       4,869  
Net income
     16,298       1,128       (684 )     16,742  
Net income attributable to non-controlling interests
     (584 )     —       —       (584 )
Net Income (Loss) Attributable to Retail Opportunity Investments Corp.
   $ 15,714     $ 1,128     $ (684 )   $ 16,158  
                                 
Pro forma weighted average shares outstanding:
                                
Basic
     80,336                       80,366  
Diluted
     84,477                       84,477  
                                 
Basic income per share
   $ 0.19                     $ 0.20  
Diluted income per share
   $ 0.19                     $ 0.19  
Dividends per common share
   $ 0.48                     $ 0.48  
                                 
Comprehensive income:
                                
Net income
   $ 16,298     $ 1,128     $ (684 )   $ 16,742  
Other comprehensive loss
                                
Unrealized (loss) gain on swap derivative
                                
Unrealized swap derivative loss arising during the period
     (2,792 )     —       —       (2,792 )
Reclassification adjustment for amortization of interest expense included in net income
     2,641       —       —       2,641  
Other comprehensive loss
     (151 )     —       —       (151 )
Comprehensive income (loss)
     16,147       1,128       (684 )     16,591  
Comprehensive income attributable to non-controlling interests
     (584 )     —       —       (584 )
Comprehensive income attributable to Retail Opportunity Investments Corp.
   $ 15,563     $ 1,128     $ (684 )   $ 16,007  
 

 
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)
    
Mission Foothill
Marketplace (3)
    
Pro Forma
Adjustments
    
Company
Pro Forma
  
Revenues
                        
Base rents
   $ 86,195     $ 1,534     $ 50 (4)   $ 87,779  
Recoveries from tenants
     22,497       456       —       22,953  
Mortgage interest
     624       —       —       624  
Other income
     1,916       —       —       1,916  
Total revenues
     111,232       1,990       50       113,272  
                                 
Operating expenses
                                
Property operating
     19,750       293       —       20,043  
Property taxes
     11,247       285       —       11,532  
Depreciation and amortization
     40,398       —       595 (5)     40,993  
General and administrative expenses
     10,059       —       —       10,059  
Acquisition transaction costs
     1,688       —       64 (6)     1,752  
Other expense
     315       —       —       315  
Total operating expenses
     83,457       578       659       84,694  
                                 
Operating income
     27,775       1,412       (609 )     28,578  
Non-operating income (expenses)
                                
Interest expense and other finance expenses
     (15,855 )     —       (365 ) (7)     (16,220 )
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       1,412       (974 )     35,130  
Loss from discontinued operations
     (714 )     —       —       (714 )
Net income
     33,978       1,412       (974 )     34,416  
Net income attributable to non-controlling interests
     (165 )     —       —       (165 )
Net Income Attributable to Retail Opportunity Investments Corp.
   $ 33,813     $ 1,412     $ (974 )   $ 34,251  
                                 
Pro forma weighted average shares outstanding:
                                
Basic
     67,419                       67,419  
Diluted
     71,004                       71,004  
                                 
Net income per share – basic:
Income from continuing operations
   $ 0.51                     $ 0.52  
Loss from discontinued operations
     (0.01 )                     (0.01 )
Net earnings per share
   $ 0.50                     $ 0.51  
Net income per share – diluted:
                                
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     $ 1,412     $ (974 )   $ 34,416  
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       1,412       (974 )     43,602  
Comprehensive income attributable to non-controlling interests
     (165 )     —       —       (165 )
Comprehensive income attributable to Retail Opportunity Investments Corp.
   $ 42,999     $ 1,412     $ (974 )   $ 43,437  
 
 
See accompanying notes to pro forma consolidated financial statements
 
 
F-8
 
RETAIL OPPORTUNITY INVESTMENTS CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 
Notes to the Pro Forma Consolidated Financial Statements
 
1.
Derived from the Company’s unaudited and audited financial statements for the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively.
2.
Reflects the pro forma acquisition of the Property for approximately $29.0 million. The acquisition was funded with borrowings under ROIC’s credit facility.
3.
Derived from the Property’s unaudited and audited financial statements for the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively.
4.
Reflects the pro forma adjustment of $36,000 and $50,000 for the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively, to record operating rents on a straight-line basis beginning January 1, 2013.
5.
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
  
Nine Months Ended
September 30, 2014
Depreciation 
Expense
    
Year Ended
December 31, 2013
Depreciation 
Expense
  
               
Building
39 years
   $ 446     $ 595  
 
6.
Reflects the pro forma adjustment for estimated costs related to the acquisition of the Property.
7.
Reflects the pro forma adjustment to interest expense, assuming the Company had borrowed funds from the credit facility to fund 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 nine months ended September 30, 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 Mission Foothill Marketplace (the “Property”) on January 1, 2013. Additionally, the pro forma consolidated balance sheet as of September 30, 2014 has been presented as if the acquisition had been completed on September 30, 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 allocation 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 September 30, 2014. The pro forma consolidated financial statements do not purport to represent the Operating Partnership’s financial position as of September 30, 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 SEPTEMBER 30, 2014
(UNAUDITED)
(in thousands)
 
   
Operating
Partnership
Historical (8)
    
Pro Forma
Adjustments
    
Operating
Partnership
Pro Forma
  
   ASSETS:
                  
Real Estate Investments:
                  
Land
   $ 521,240     $ 5,800 (9)   $ 527,040  
Building and improvements
     1,163,078       23,200 (9)     1,186,278  
      1,684,318       29,000       1,713,318  
Less: accumulated depreciation
     77,876       —       77,876  
Real estate investments, net
     1,606,442       29,000       1,635,442  
Cash and cash equivalents
     10,996    
____
       10,996  
Restricted cash
     13,427       —       13,427  
Tenant and other receivables, net
     25,488       —       25,488  
Deposits
     5,000       —       5,000  
Acquired lease intangible assets, net of accumulated amortization
     69,787       —       69,787  
Prepaid expenses
     544       —       544  
Deferred charges, net of accumulated amortization
     36,501       —       36,501  
Other
     2,399       —       2,399  
    Total assets
   $ 1,770,584     $ 29,000     $ 1,799,584  
                         
    LIABILITIES AND CAPITAL
                        
                         
    Liabilities:
                        
    Term Loan   $  200,000     $  —     $  200,000  
Credit facility
     123,300         29,000 (9)     152,300  
Senior Notes Due 2023
     246,091       —       246,091  
Mortgage notes payable
     107,306       —       107,306  
Acquired lease intangible liabilities, net of accumulated amortization
     112,238       —       112,238  
Accounts payable and accrued expenses
     18,858       —       18,858  
Tenants’ security deposits
     3,709       —       3,709  
Other liabilities
     14,482       —       14,482  
Total liabilities
     825,984       29,000       854,984  
                         
    Capital:
                        
Partners’ capital, unlimited partnership units authorized :
                        
ROIC capital (consists of general and limited partnership interests held by ROIC)
     922,445       —       922,445  
Limited partners’ capital (consists of limited partnership interests held by third parties)
     31,275       —       31,275  
Accumulated other comprehensive loss
     (9,120 )     —       (9,120 )
Total capital
      944,600       —       944,600   
   Total liabilities and capital
   $ 1,770,584     $ 29,000     $ 1,799,584  
 
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 NINE MONTHS ENDED SEPTEMBER 30, 2014
(UNAUDITED)
(in thousands, except per share data)
 
 
   
Operating
Partnership
Historical (8)
    
Mission Foothill
Marketplace (10)
    
Pro Forma
Adjustments
    
Operating
Partnership
Pro Forma
  
Revenues
                        
Base rents
   $ 87,230     $ 1,223     $ 36 (11)   $ 88,489  
Recoveries from tenants
     24,137       354       —       24,491  
Other income
     2,754       —       —       2,754  
Total revenues
     114,121       1,577       36       115,734  
                                 
Operating expenses
                                
Property operating
     18,062       249       —       18,311  
Property taxes
     11,566       200       —       11,766  
Depreciation and amortization
     42,986       —       446 (12)     43,432  
General and administrative expenses
     8,324       —       —       8,324  
Acquisition transaction costs
     654       —       —       654  
Other expense
     405       —       —       405  
Total operating expenses
     81,997       449       446       82,892  
                                 
Operating income
     32,124       1,128       (410 )     32,842  
Non-operating income (expenses)
                                
Interest expense and other finance expenses
     (20,695 )     —       (274 ) (14)     (20,969 )
Gain on sale of real estate
     4,869       —       —       4,869  
Net Income Attributable to Retail Opportunity Investments Partnership, LP
   $ 16,298     $ 1,128     $ (684 )   $ 16,742  
                                 
Pro forma weighted average units outstanding:
                                
Basic
     80,366                       80,366  
Diluted
     84,477                       84,477  
                                 
Basic income per unit
   $ 0.19                     $ 0.21  
Diluted income per unit
   $ 0.19                     $ 0.20  
                                 
Distributions per unit
   $ 0.48                     $ 0.48  
                                 
Comprehensive income:
                                
Net income
   $ 16,298     $ 1,128     $ (684 )   $ 16,742  
Other comprehensive loss
                                
Unrealized (loss) gain on swap derivative
                                
Unrealized swap derivative loss  arising during the period
     (2,792 )     —       —       (2,792 )
Reclassification adjustment for amortization of interest expense included in net income
     2,641       —       —       2,641  
Other comprehensive loss
     (151 )     —       —       (151 )
                                 
Comprehensive income attributable to Retail Opportunity Investments Partnership, LP
   $ 16,147     $ 1,128     $ (684 )   $ 16,591  
 
 
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)
 
   
Operating
Partnership
Historical (8)
    
Mission Foothill
Marketplace (10)
    
Pro Forma
Adjustments
    
Operating
Partnership
Pro Forma
  
Revenues
                        
Base rents
   $ 86,195     $ 1,534     $ 50 (11)   $ 87,779  
Recoveries from tenants
     22,497       456       —       22,953  
Mortgage interest
     624       —       —       624  
Other income
     1,916       —       —       1,916  
Total revenues
     111,232       1,990       50       113,272  
                                 
Operating expenses
                                
Property operating
     19,750       293       —       20,043  
Property taxes
     11,247       285       —       11,532  
Depreciation and amortization
     40,398       —       595 (12)     40,993  
General and administrative expenses
     10,059       —       —       10,059  
Acquisition transaction costs
     1,688       —       64 (13)     1,752  
Other expense
     315       —       —       315  
Total operating expenses
     83,457       578       659       84,694  
                                 
Operating income
     27,775       1,412       (609 )     28,578  
Non-operating income (expenses)
                                
Interest expense and other finance expenses
     (15,855 )     —       (365 ) (14)     (16,220 )
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       1,412       (974 )     35,130  
Loss from discontinued operations
     (714 )     —       —       (714 )
Net Income Attributable to Retail Opportunity Investments Partnership, LP
   $ 33,978     $ 1,412     $ (974 )   $ 34,416  
                                 
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     $ 1,412     $ (974 )   $ 34,416  
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     $ 1,412     $ (974 )   $ 43,602  

See accompanying notes to pro forma consolidated financial statements
 
 
F-13
 
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Notes to the Pro Forma Consolidated Financial Statements
 
8.
Derived from the Operating Partnership’s unaudited and audited financial statements for the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively.
9.
Reflects the pro forma acquisition of the Property for approximately $29.0 million. The acquisition was funded with borrowings under ROIC’s credit facility.
10.
Derived from the Property’s unaudited and audited financial statements for the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively.
11.
Reflects the pro forma adjustment of $36,000 and $50,000 for the nine months ended September 30, 2014 and the year ended December 31, 2013, respectively, to record operating rents on a straight-line basis beginning January 1, 2013.
12.
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
  
Nine Months Ended
September 30, 2014
Depreciation 
Expense
    
Year Ended
December 31, 2013
Depreciation 
Expense
  
               
Building
39 years
   $ 446     $ 595  
 
13.
Reflects the pro forma adjustment for estimated costs related to the acquisition of the Property.
14.
Reflects the pro forma adjustment to interest expense, assuming the Operating Partnership had borrowed funds from the credit facility to fund the purchase price of the Property, as if the acquisition had been made on the first day of the period presented.
 
 
F-14