Attached files
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| 8-K - FORM 8-K - RETAIL OPPORTUNITY INVESTMENTS CORP | f8k_051711.htm |
| EX-23 - EXHIBIT 23.1 - RETAIL OPPORTUNITY INVESTMENTS CORP | exh_231.htm |
Exhibit 99.1
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Page
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Marketplace Del Rio
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Independent Auditors’ Report
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F-1
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Statement of Revenues and Certain Expenses for the Year Ended December 31, 2010 (Audited) and three months ended March 31, 2011 (Unaudited)
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F-2
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Notes to Statement of Revenues and Certain Expenses for the Year Ended December 31, 2010 (Audited) and three months ended March 31, 2011 (Unaudited)
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F-3
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Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Corp.
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Pro Forma Consolidated Balance Sheet As of December 31, 2010 (Unaudited)
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F-6
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Pro Forma Consolidated Statement of Operations for the Three Months Ended March 31, 2011 (Unaudited)
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F-7
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Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2010 (Unaudited)
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F-8
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Notes to Pro Forma Consolidated Financial Statements (Unaudited)
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F-9
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INDEPENDENT AUDITORS’ REPORT
To the Board of Directors and Stockholders
We have audited the accompanying Statement of Revenues and Certain Expenses of the property known as Marketplace Del Rio, located in Oceanside, California (the “Property”) for the year ended December 31, 2010 (the “financial statement”). The financial statement is the responsibility of the Property's management. Our responsibility is to express an opinion on the financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Property's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in note 2 and is not intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property for the year ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
/s/ PKF LLP
New York, New York
May 17, 2011
F-1
MARKETPLACE DEL RIO
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
(Dollar amounts in thousands)
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Year Ended
December 31,
2010
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Three Months
Ended
March 31,
2011
(Unaudited)
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Revenues
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Rental income (note 3)
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$ | 3,460 | $ | 1,036 | ||||
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Other income
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2 | — | ||||||
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Total revenues
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3,462 | 1,036 | ||||||
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Certain Expenses
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Utilities
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113 | 21 | ||||||
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Cleaning services
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51 | 21 | ||||||
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Repairs, maintenance, and supplies
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330 | 80 | ||||||
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Real estate taxes
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226 | 57 | ||||||
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Insurance
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56 | 6 | ||||||
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Bad debt expense
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— | 13 | ||||||
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General & administrative
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19 | 2 | ||||||
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Total expenses
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795 | 200 | ||||||
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Excess of revenues over certain expenses
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$ | 2,667 | $ | 836 | ||||
See accompanying notes to statement of revenues and certain expenses.
F-2
MARKETPLACE DEL RIO
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2010 (AUDITED) AND
THREE MONTH ENDED MARCH 31, 2011 (UNAUDITED)
1.Business and Organization
Marketplace Del Rio (the “Property”) is a shopping center located in Oceanside, California. The Property was owned by Mission Center, LLC, (“Seller”). The Property, which is anchored by two tenants, has an aggregate gross rentable area of approximately 177,000 square feet. The anchored tenants occupy approximately 47,000 square feet.
On January 3, 2011, the Property was acquired by ROIC California, LLC, (“Buyer”), a wholly-owned subsidiary of Retail Opportunity Investments Corp. (the “Company”).
2.Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The Statement of Revenues and Certain Expenses (the “financial statement”) has been prepared for the purpose of complying with the provisions of Rule 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The financial statement includes the historical revenues and certain expenses of the Property, exclusive of rental income related to parcels not acquired by the Company, interest income, depreciation and amortization, rental income relating to the allocation of purchase price of the Property to above/below market leases and management and advisory fees, which may not be comparable to the corresponding amounts reflected in the future operations of the Property.
Revenue Recognition
The Property’s operations consist of rental income earned from tenants under leasing arrangements which generally provide for minimum rents and tenant reimbursements. All leases are classified as operating leases. Minimum rents are recognized by amortizing the aggregate lease payments on a straight-line basis over the terms of the lease (including rent holidays). Tenant reimbursements for real estate taxes, common area maintenance and other recoverable costs are recognized as rental income in the period that the expenses are incurred.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Property’s management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Accounts Receivable
Bad debts are recorded under the specific identification method, whereby uncollectible receivables are reserved for when identified.
Repairs and Maintenance
Repairs and maintenance costs are expensed as incurred, while significant improvements, renovations and replacements are capitalized.
F-3
3.Leases
The Property is subject to non-cancelable lease agreements, subject to various escalation clauses, with tenants for retail space. As of December 31, 2010, the future minimum rentals on non-cancelable operating leases expiring in various years are as follows:
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Year ending December 31
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Amounts
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2011
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$ | 2,714,606 | ||
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2012
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2,815,775 | |||
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2013
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2,616,073 | |||
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2014
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2,445,457 | |||
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2015
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1,869,846 | |||
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Thereafter
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9,303,028 | |||
| $ | 21,764,785 | |||
The tenant leases provide for annual rentals that include the tenants’ proportionate share of real estate taxes and certain property operating expenses. The Property’s tenant leases generally include tenant renewal options that can extend the lease terms.
Rental income on the financial statement includes the effect of amortizing the aggregate minimum lease payments on a straight-line basis over the entire terms of the leases, which amounted to an increase of $112,800 and $81,000 in rental income for the year ended December 31, 2010 and the three months ended March 31, 2011, respectively.
4.Commitments and Contingencies
None.
F-4
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The unaudited pro forma consolidated statement of operations for the three months ended March 31, 2011 and for the year ended December 31, 2010 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisition of the property known as Marketplace Del Rio on the first day of each period presented. Additionally the pro forma consolidated balance sheet has been presented as if the acquisition had been completed on December 31, 2010.
The purchase price allocation is calculated based on a 20/80 allocation to Land and Building, respectively. As of the date of this report, the 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 2010 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ending March 31, 2011. The pro forma consolidated financial statements do not purport to represent the Company’s financial position or results of operations that would actually have occurred assuming the completion of the acquisition of the Property had occurred by the first day of the periods presented; nor do they purport to project the Company’s results of operations as of any future date or for any future period.
F-5
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 2010
(UNAUDITED)
(in thousands)
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Company
Historical(1)
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Pro Forma
Adjustments
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Company
Pro Forma
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ASSETS:
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Real Estate Investments:
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Land
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$ | 85,473 | $ | 7,140 | (2) | $ | 92,613 | |||||
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Building and improvements
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187,260 | 28,560 | (2) | 215,820 | ||||||||
| 272,733 | 35,700 | 308,433 | ||||||||||
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Less: accumulated depreciation
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3,078 | — | 3,078 | |||||||||
| 269,655 | 35,700 | 305,355 | ||||||||||
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Mortgage Notes Receivables
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57,778 | 57,778 | ||||||||||
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Investment in and advances to unconsolidated joint venture
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16,779 | — | 16,779 | |||||||||
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Real Estate Investments, net
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344,212 | 35,700 | 379,912 | |||||||||
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Cash and cash equivalents
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84,736 | (35,200 | )(2) | 49,536 | ||||||||
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Restricted cash
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Tenant and other receivables
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2,838 2,056 | — — | 2,838 2,056 | |||||||||
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Deposits
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1,500 | (500 | )(2) | 1,000 | ||||||||
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Acquired lease intangible asset, net of accumulated amortization
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17,673 | — | 17,673 | |||||||||
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Prepaid expenses
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799 | — | 799 | |||||||||
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Deferred charges, net of accumulated amortization
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9,577 | — | 9,577 | |||||||||
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Other
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802 | — | 802 | |||||||||
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Total assets
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$ | 464,193 | $ | — | $ | 464,193 | ||||||
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LIABILITIES AND EQUITY
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Liabilities:
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Mortgage notes payable
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$ | 42,417 | $ | — | $ | 42,417 | ||||||
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Acquired lease intangible liability, net
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20,996 | — | 20,996 | |||||||||
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Accrued expenses
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4,889 | — | 4,889 | |||||||||
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Tenants’ security deposit
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860 | — | 860 | |||||||||
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Other liabilities
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4,508 | — | 4,508 | |||||||||
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Total liabilities
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$ | 73,670 | $ | — | $ | 73,670 | ||||||
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Equity:
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Preferred stock
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— | — | — | |||||||||
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Common stock
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4 | — | 4 | |||||||||
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Additional-paid-in capital
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403,916 | — | 403,916 | |||||||||
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Accumulated deficit
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(12,881 | ) | — | (12,881 | ) | |||||||
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Accumulated other comprehensive loss
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(518 | ) | — | (518 | ) | |||||||
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Total Retail Opportunity Investments Corp. shareholders’ equity
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390,521 | — | 390,521 | |||||||||
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Noncontrolling interests
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2 | — | 2 | |||||||||
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Total equity
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390,523 | — | 390,523 | |||||||||
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Total liabilities and equity
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$ | 464,193 | $ | — | $ | 464,193 | ||||||
See accompanying notes to pro forma consolidated financial statements
F-6
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
(UNAUDITED)
(in thousands, except per share data)
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Company
Historical(1)
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Marketplace
Del Rio (7)
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Company
Pro Forma
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Revenue
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Base rents
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$ | 7,181 | $ | 25 | $ | 7,206 | ||||||
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Recoveries from tenants
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1,905 | 7 | 1,912 | |||||||||
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Mortgage interest
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955 | 955 | ||||||||||
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Total revenues
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10,041 | 32 | 10,073 | |||||||||
| Operating expenses | ||||||||||||
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Property operating
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1,096 | 5 | 1,101 | |||||||||
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Property taxes
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1,052 | 3 | 1,055 | |||||||||
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Depreciation and amortization
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4,252 | 14 | 4,266 | |||||||||
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General & Administrative Expenses
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2,389 | 2,389 | ||||||||||
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Acquisition transaction costs
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175 | 175 | ||||||||||
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Total operating expenses
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8,964 | 22 | 8,986 | |||||||||
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Operating income
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1,077 | 10 | 1,087 | |||||||||
| Non-operating income (expenses) | ||||||||||||
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Interest expense
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(916 | ) | (916 | ) | ||||||||
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Gain on bargain purchase
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5,762 | 5,762 | ||||||||||
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Equity in earnings from unconsolidated joint ventures
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243 | 243 | ||||||||||
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Interest income
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14 | 14 | ||||||||||
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Net income attributable to Retail Opportunity Investments Corp.
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$ | 6,180 | $ | 10 | $ | 6,190 | ||||||
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Pro forma weighted average shares outstanding – basic and diluted
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41,847 | 41,847 | ||||||||||
| Pro forma income per share | ||||||||||||
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Basic and diluted:
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$ | 0.15 | $ | 0.15 | ||||||||
| Pro forma dividends per common share: | $ | 0.08 | $ | 0.08 | ||||||||
See accompanying notes to pro forma consolidated financial statements
F-7
RETAIL OPPORTUNITY INVESTMENTS CORP.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(UNAUDITED)
(in thousands, except per share data)
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Company
Historical(1)
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Marketplace
Del Rio
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Pro Forma
Adjustments
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Company
Pro Forma
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Revenue
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Base rents
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$ | 12,381 | $ | 2,752 | $ | 290 | (3) | $ | 15,423 | |||||||
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Recoveries from tenants
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2,879 | 708 | 3,587 | |||||||||||||
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Mortgage interest
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1,069 | — | 1,069 | |||||||||||||
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Total revenues
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16,329 | 3,460 | 290 | 20,079 | ||||||||||||
| Operating expenses | ||||||||||||||||
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Property operating
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2,848 | 550 | 3,398 | |||||||||||||
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Property taxes
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1,697 | 226 | 1,923 | |||||||||||||
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Depreciation and amortization
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6,081 | 732 | (4) | 6,813 | ||||||||||||
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General & Administrative Expenses
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8,381 | 19 | 8,400 | |||||||||||||
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Acquisition transaction costs
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2,636 | 35 | (5) | 2,671 | ||||||||||||
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Total operating expenses
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21,643 | 795 | 767 | 23,205 | ||||||||||||
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Operating (loss) income
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(5,314 | ) | 2,665 | (477 | ) | (3,126 | ) | |||||||||
| Non-operating income (expenses) | ||||||||||||||||
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Interest expense
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(324 | ) | (324 | ) | ||||||||||||
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Gain on bargain purchase
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2,217 | 2,217 | ||||||||||||||
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Equity in earnings from unconsolidated joint ventures
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38 | 38 | ||||||||||||||
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Interest income
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1,109 | (169 | )(6) | 940 | ||||||||||||
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Other income
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1,873 | 2 | 1,875 | |||||||||||||
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Net (loss) income attributable to Retail Opportunity Investments Corp.
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$ | (401 | ) | $ | 2,667 | $ | (646 | ) | $ | 1,620 | ||||||
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Pro forma weighted average shares outstanding – basic and diluted
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41,582 | 41,582 | ||||||||||||||
| Pro forma (loss) income per share | ||||||||||||||||
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Basic and diluted:
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$ | (0.01 | ) | $ | 0.04 | |||||||||||
| Pro forma dividends per common share: | $ | 0.18 | $ | 0.18 | ||||||||||||
See accompanying notes to pro forma consolidated financial statements
F-8
RETAIL OPPORTUNITY INVESTMENTS CORP.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollar amounts in thousands, except per share data)
Adjustments to the Pro Forma Consolidated Balance Sheet
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1.
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Derived from the Company’s audited financial statements for the year ended December 31, 2010.
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2.
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Reflects the pro forma acquisition of the Property for approximately $35,700. The acquisition was funded with available cash.
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Adjustments to the Pro Forma Consolidated Statement of Operations
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3.
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Reflects the pro forma adjustment of $290 for the year ended December 31, 2010, to record operating rents on a straight-line basis beginning January 1, 2010.
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4.
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Reflects the estimated depreciation for the Property based on estimated values allocated to building at the beginning period presented. Depreciation expense is computed on a straight-line basis over the estimated useful life of the assets as follows:
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Estimated
Useful Life
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Year Ended
December 31, 2010
Depreciation
Expense
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Building
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39 years
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$ | 732 | ||
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5.
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Reflects the pro forma adjustment for estimated costs related to the acquisition of the Property.
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6.
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Reflects the pro forma adjustment to interest income to assume the acquisition has been made on January 1, 2010.
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7.
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Reflects the operating results for the period January 1, 2011 to January 2, 2011.
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F-9