Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - RETAIL OPPORTUNITY INVESTMENTS CORP | f8k_071312.htm |
| EX-23.1 - EXHIBIT 23.1 - RETAIL OPPORTUNITY INVESTMENTS CORP | exh_231.htm |
Exhibit 99.1
To the Board of Directors and Stockholders
Retail Opportunity Investments Corp.
We have audited the accompanying Statement of Revenues and Certain Expenses of the property known as Marlin Cove, located in Foster City, California (the “Property”) for the year ended December 31, 2011 (the “financial statement”). The financial statement is the responsibility of 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, 2011, in conformity with accounting principles generally accepted in the United States of America.
/s/ PKF O'Connor Davies
A Division of O'Connor Davies, LLP
New York, New York
July 13, 2012
F-1
MARLIN COVE
(Dollar amounts in thousands)
|
Year Ended
December 31,
2011
|
Three Months
Ended
March 31,
2012
(Unaudited)
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|||||||
|
Revenues
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||||||||
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Rental income (note 4)
|
$ | 1,570 | $ | 403 | ||||
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Total revenues
|
1,570 | 403 | ||||||
|
Certain Expenses
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||||||||
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Utilities
|
157 | 39 | ||||||
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Repairs, maintenance, and supplies
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158 | 50 | ||||||
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Cleaning
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39 | 12 | ||||||
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Real estate taxes
|
189 | 47 | ||||||
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Insurance
|
33 | 8 | ||||||
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Total expenses
|
576 | 156 | ||||||
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Excess of revenues over certain expenses
|
$ | 994 | $ | 247 | ||||
See accompanying notes to statement of revenues and certain expenses.
F-2
MARLIN COVE
FOR THE YEAR ENDED DECEMBER 31, 2011 (AUDITED) AND
THREE MONTHS ENDED MARCH 31, 2012 (UNAUDITED)
1.Business and Organization
Marlin Cove (the “Property”) is a shopping center located in Foster City, California. The Property was owned by Marlin Cove Shopping Center, LLC (“Seller”). The Property, which is anchored by Tawa Supermarkets, Inc., has an aggregate gross rentable area of 73,186 square feet. The anchor tenant occupies approximately 29,300 square feet.
On May 4, 2012, 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.
In the opinion of the Company’s management, all adjustments necessary for a fair presentation of the financial statement for the three months ended March 31, 2012 (unaudited) and for the year ended December 31, 2011 have been included. Such adjustments consisted of normal recurring items. Interim results are not necessarily indicative of results for a year.
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.
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 13, 2012, and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statement.
4.Leases
The Property is subject to non-cancelable lease agreements, subject to various escalation clauses, with tenants for retail space. As of December 31, 2011, 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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|||
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2012
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$ | 1,281,987 | ||
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2013
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1,202,231 | |||
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2014
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1,091,724 | |||
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2015
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982,455 | |||
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2016
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826,369 | |||
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Thereafter
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2,487,458 | |||
| $ | 7,872,224 | |||
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 approximately $29,500 and a decrease of approximately $3,900 in rental income for the year ended December 31, 2011 and the three months ended March 31, 2012, respectively.
5.Commitments and Contingencies
None.
F-4
RETAIL OPPORTUNITY INVESTMENTS CORP.
(Unaudited)
The unaudited pro forma consolidated statement of operations for the three months ended March 31, 2012 and for the year ended December 31, 2011 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisition of the property known as Marlin Cove (the "Property") on January 1, 2011. Additionally, the pro forma consolidated balance sheet as of March 31, 2012 has been presented as if the acquisition had been completed on March 31, 2012.
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 2011 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ended March 31, 2012. 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 on January 1, 2011; nor do they purport to project the Company’s results of operations as of any future date or for any future period.
F-5
AS OF MARCH 31, 2012
(UNAUDITED)
(in thousands)
|
Company
Historical(1)
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Pro Forma
Adjustments
|
Company
Pro Forma
|
||||||||||
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ASSETS:
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||||||||||||
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Real Estate Investments:
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||||||||||||
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Land
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$ | 176,193 | $ | 3,476 | (2) | $ | 179,669 | |||||
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Building and improvements
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449,999 | 13,904 | (2) | 463,903 | ||||||||
| 626,192 | 17,380 | 643,572 | ||||||||||
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Less: accumulated depreciation
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18,376 | — | 18,376 | |||||||||
| 607,816 | 17,380 | 625,196 | ||||||||||
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Mortgage notes receivables
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10,000 | — | 10,000 | |||||||||
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Investment in and advances to unconsolidated joint ventures
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26,650 | — | 26,650 | |||||||||
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Real Estate Investments, net
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644,466 | 17,380 | 661,846 | |||||||||
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Cash and cash equivalents
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10,739 | (1,000 | )(2) | 9,739 | ||||||||
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Restricted cash
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1,703 | — | 1,703 | |||||||||
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Tenant and other receivables
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7,721 | — | 7,721 | |||||||||
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Deposits
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500 | — | 500 | |||||||||
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Acquired lease intangible asset, net of accumulated amortization
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32,297 | — | 32,297 | |||||||||
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Prepaid expenses
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981 | — | 981 | |||||||||
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Deferred charges, net of accumulated amortization
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14,970 | — | 14,970 | |||||||||
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Other
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852 | 80 | (2) | 932 | ||||||||
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Total assets
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$ | 714,229 | $ | 16,460 | $ | 730,689 | ||||||
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LIABILITIES AND EQUITY
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||||||||||||
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Liabilities:
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||||||||||||
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Credit facilities
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$ | 125,000 | $ | 16,380 | (2) | $ | 141,380 | |||||
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Mortgage notes payable
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67,864 | — | 67,864 | |||||||||
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Acquired lease intangible liability, net
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46,735 | — | 46,735 | |||||||||
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Accrued expenses
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5,420 | — | 5,420 | |||||||||
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Tenants’ security deposit
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1,578 | 80 | (2) | 1,658 | ||||||||
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Other liabilities
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18,000 | — | 18,000 | |||||||||
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Total liabilities
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$ | 264,597 | $ | 16,460 | $ | 281,057 | ||||||
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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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5 | — | 5 | |||||||||
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Additional paid-in capital
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487,206 | — | 487,206 | |||||||||
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Accumulated deficit
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(24,453 | ) | — | (24,453 | ) | |||||||
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Accumulated other comprehensive loss
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(13,128 | ) | — | (13,128 | ) | |||||||
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Total Retail Opportunity Investments Corp. shareholders’ equity
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449,630 | — | 449,630 | |||||||||
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Noncontrolling interests
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2 | — | 2 | |||||||||
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Total equity
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449,632 | — | 449,632 | |||||||||
|
Total liabilities and equity
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$ | 714,229 | $ | 16,460 | $ | 730,689 | ||||||
See accompanying notes to pro forma consolidated financial statements
F-6
RETAIL OPPORTUNITY INVESTMENTS CORP.
FOR THE THREE MONTHS ENDED MARCH 31, 2012
(UNAUDITED)
(in thousands, except per share data)
|
Company
Historical(1)
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Marlin Cove (6)
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Pro Forma
Adjustments
|
Company
Pro Forma
|
|||||||||||||
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Revenue
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||||||||||||||||
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Base rents
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$ | 13,341 | $ | 310 | 38 | (3) | $ | 13,689 | ||||||||
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Recoveries from tenants
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3,104 | 93 | - | 3,197 | ||||||||||||
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Mortgage interest
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202 | - | - | 202 | ||||||||||||
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Total revenues
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16,647 | 403 | 38 | 17,088 | ||||||||||||
| Operating expenses | ||||||||||||||||
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Property operating
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2,969 | 109 | - | 3,078 | ||||||||||||
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Property taxes
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1,599 | 47 | - | 1,646 | ||||||||||||
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Depreciation and amortization
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6,650 | - | 89 | (4) | 6,739 | |||||||||||
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General & Administrative Expenses
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2,420 | - | 2,420 | |||||||||||||
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Acquisition transaction costs
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122 | - | 263 | (5) | 385 | |||||||||||
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Total operating expenses
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13,760 | 156 | 352 | 14,268 | ||||||||||||
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Operating income
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2,887 | 247 | (314 | ) | 2,820 | |||||||||||
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Non-operating income (expenses)
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||||||||||||||||
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Interest expense
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(2,294 | ) | - | (20 | )(7) | (2,314 | ) | |||||||||
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Equity in earnings from unconsolidated joint ventures
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524 | - | - | 524 | ||||||||||||
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Interest income
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10 | - | - | 10 | ||||||||||||
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Net income attributable to Retail Opportunity Investments Corp.
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$ | 1,127 | $ | 247 | $ | (334 | ) | $ | 1,040 | |||||||
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Pro forma weighted average shares outstanding
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||||||||||||||||
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Basic:
|
49,604 | 49,604 | ||||||||||||||
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Diluted:
|
49,690 | 49,690 | ||||||||||||||
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Pro forma income per share
|
||||||||||||||||
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Basic and diluted:
|
$ | 0.02 | $ | 0.02 | ||||||||||||
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Pro forma dividends per share:
|
$ | 0.12 | $ | 0.12 | ||||||||||||
See accompanying notes to pro forma consolidated financial statements
F-7
RETAIL OPPORTUNITY INVESTMENTS CORP.
(UNAUDITED)
(in thousands, except per share data)
|
Company Historical
|
Pro Forma
|
Company
|
||||||||||||||
| (1) | Marlin Cove |
Adjustments
|
Pro Forma
|
|||||||||||||
|
Revenue
|
||||||||||||||||
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Base rents
|
$ | 39,581 | $ | 1,203 | $ | 140 | (3) | $ | 40,924 | |||||||
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Recoveries from tenants
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10,248 | 367 | - | 10,615 | ||||||||||||
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Mortgage interest
|
1,909 | - | - | 1,909 | ||||||||||||
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Total revenues
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51,738 | 1,570 | 140 | 53,448 | ||||||||||||
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Operating expenses
|
||||||||||||||||
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Property operating
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8,404 | 387 | - | 8,791 | ||||||||||||
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Property taxes
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5,023 | 189 | - | 5,212 | ||||||||||||
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Depreciation and amortization
|
21,264 | - | 357 | (4) | 21,621 | |||||||||||
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General & Administrative Expenses
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9,801 | - | - | 9,801 | ||||||||||||
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Acquisition transaction costs
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2,291 | - | 263 | (5) | 2,554 | |||||||||||
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Total operating expenses
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46,783 | 576 | 620 | 47,979 | ||||||||||||
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Operating income (loss)
|
4,955 | 994 | (480 | ) | 5,469 | |||||||||||
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Non-operating income (expenses)
|
||||||||||||||||
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Interest expense
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(6,225 | ) | - | (81 | )(7) | (6,306 | ) | |||||||||
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Gain on bargain purchase
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9,449 | - | - | 9,449 | ||||||||||||
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Equity in earnings from unconsolidated joint ventures
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1,458 | - | - | 1,458 | ||||||||||||
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Interest income
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19 | - | - | 19 | ||||||||||||
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Net income (loss) attributable to Retail Opportunity Investments Corp.
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$ | 9,656 | $ | 994 | $ | (561 | ) | $ | 10,089 | |||||||
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Pro forma weighted average shares outstanding
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||||||||||||||||
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Basic:
|
42,477 | 42,477 | ||||||||||||||
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Diluted:
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42,526 | 42,526 | ||||||||||||||
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Pro forma income per share
|
||||||||||||||||
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Basic and diluted:
|
$ | 0.23 | $ | 0.24 | ||||||||||||
|
Pro forma dividends per share:
|
$ | 0.39 | $ | 0.39 | ||||||||||||
See accompanying notes to pro forma consolidated financial statements
F-8
RETAIL OPPORTUNITY INVESTMENTS CORP.
(Dollar amounts in thousands, except per share data)
Adjustments to the Pro Forma Consolidated Balance Sheet
|
1.
|
Derived from the Company’s audited and unaudited financial statements for the year ended December 31, 2011 and the three months ended March 31, 2012.
|
|
2.
|
Reflects the pro forma acquisition of the Property for approximately $17,380. The acquisition was funded from the draw of approximately $16,380 from our existing credit facility, and $1,000 of available cash, and other assets and liabilities.
|
Adjustments to the Pro Forma Consolidated Statement of Operations
|
3.
|
Reflects the pro forma adjustment of $38 and $140 for three months ended March 31, 2012 and year ended December 31, 2011, respectively, to record operating rents on a straight-line basis beginning on the first day of the periods presented.
|
|
4.
|
Reflects the estimated depreciation for the Property based on estimated values allocated to building at the beginning period presented. Depreciation expense is computed on a straight-line basis over the estimated useful life of the assets as follows:
|
|
Estimated Useful
Life
|
For the Three
Months Ended
March 31, 2012
Depreciation
Expense
|
Year Ended
December 31, 2011
Depreciation
Expense
|
|||||||
|
Building
|
39 years
|
$ | 89 | $ | 357 | ||||
|
5.
|
Reflects the pro forma adjustment for estimated costs related to the acquisition of the Property.
|
|
6.
|
Reflects the operating results for the period January 1, 2012 to March 31, 2012.
|
|
7.
|
Reflects the pro forma adjustment to interest expense on the draw from the credit facility to assume the acquisition has been made on the first day of the periods presented.
|
F-9