Exhibit 99.1
| Page | |
| Hawthorne Crossings | |
| Independent Auditors’ Report | F-1 |
| Statement of Revenues and Certain Expenses for the year ended December 31, 2012 (Audited) and three months ended March 31, 2013 (Unaudited) | F-2 |
| Notes to Statement of Revenues and Certain Expenses for the year ended December 31, 2012 (Audited) and three months ended March 31, 2013 (Unaudited) | F-3 |
| Pro Forma Consolidated Financial Statements of Retail Opportunity Investments Corp. | |
| Pro Forma Consolidated Balance Sheet as of March 31, 2013 (Unaudited) | F-6 |
| Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2013 (Unaudited) | F-7 |
| Pro Forma Consolidated Statement of Operations for the year ended December 31, 2012 (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, 2013 (Unaudited) | F-11 |
| Pro Forma Consolidated Statement of Operations for the three months ended March 31, 2013 (Unaudited) | F-12 |
| Pro Forma Consolidated Statement of Operations for the year ended December 31, 2012 (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 Hawthorne Crossings, located in San Diego, California (“Hawthorne Crossings") which is comprised of the statement of revenues and certain expenses for the year ended December 31, 2012, 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 Hawthorne Crossings’ 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 Hawthorne Crossings for the year ended December 31, 2012 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 Hawthorne Crossings’ 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
August 1, 2013
F-1
HAWTHORNE CROSSINGS
STATEMENT OF REVENUES AND CERTAIN EXPENSES
(Dollar amounts in thousands)
Year Ended December 31, 2012 | Three Months Ended March 31, 2013 (Unaudited) | |||||||
| Revenues | ||||||||
| Rental income (note 4) | $ | 3,343 | $ | 846 | ||||
| Total revenues | 3,343 | 846 | ||||||
| Certain Expenses | ||||||||
| Utilities | 75 | 19 | ||||||
| Repairs, maintenance and supplies | 158 | 35 | ||||||
| Cleaning and landscaping | 106 | 22 | ||||||
| Real estate taxes | 352 | 86 | ||||||
| Insurance | 9 | 3 | ||||||
| Bad debt | 34 | - | ||||||
| Total expenses | 734 | 165 | ||||||
| Excess of revenues over certain expenses | $ | 2,609 | $ | 681 | ||||
See accompanying notes to statement of revenues and certain expenses.
F-2
HAWTHORNE CROSSINGS
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2012 (AUDITED) AND
THREE MONTHS ENDED MARCH 31, 2013 (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 wholly-owned 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 June 27, 2013, the Company, acquired the property known as Hawthorne Crossings (“Hawthorne Crossings”) located in San Diego, California, for a purchase price of approximately $41.5 million, from an unaffiliated third-party seller. Hawthorne Crossings is approximately 141,000 square feet and is anchored by Mitsuwa Marketplace, Ross Dress For Less and Staples. The property was acquired using borrowings under the Operating Partnership’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 Hawthorne Crossings, 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 Hawthorne Crossings 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 Hawthorne Crossings.
The statement of revenue and certain expenses for the three month period ended March 31, 2013 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
Hawthorne Crossings 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 Hawthorne Crossings’ 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 August 1, 2013, and has determined that there were no subsequent events or transactions which would require recognition or disclosure in the financial statements.
4. Leases
Hawthorne Crossings is subject to non-cancelable lease agreements, subject to various escalation clauses, with tenants for retail space. As of December 31, 2012, the future minimum rents on non-cancelable operating leases expiring in various years are as follows:
| Year ending December 31 | Amounts | |||
| 2013 | $ | 2,809 | ||
| 2014 | 2,880 | |||
| 2015 | 2,852 | |||
| 2016 | 2,644 | |||
| 2017 | 2,193 | |||
| Thereafter | 3,220 | |||
| $ | 16,598 | |||
The tenant leases provide for annual rents that include the tenants’ proportionate share of real estate taxes and certain property operating expenses. Hawthorne Crossings’ 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 an increase in rental income of approximately $61,000 and $13,000 for the year ended December 31, 2012 and three months ended March 31, 2013, respectively.
5. Concentration
For the year ended December 31, 2012, Hawthorne Crossings’ three largest tenants accounted for 58% of total 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, 2013 and for the year ended December 31, 2012 are presented as if Retail Opportunity Investments Corp. (the “Company”) had completed the acquisition of Hawthorne Crossings (the “Property”) on January 1, 2012. Additionally, the pro forma consolidated balance sheet as of March 31, 2013 has been presented as if the acquisition had been completed on March 31, 2013.
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 2012 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ended March 31, 2013. The pro forma consolidated financial statements do not purport to represent the Company’s financial position as of March 31, 2013 or results of operations that would actually have occurred assuming the completion of the acquisition of the Property had occurred on January 1, 2012; 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, 2013
(UNAUDITED)
(in thousands)
Company Historical(1) | Pro Forma Adjustments | Company Pro Forma | ||||||||||
| ASSETS: | ||||||||||||
| Real Estate Investments: | ||||||||||||
| Land | $ | 296,178 | $ | 8,300 | (2) | $ | 304,478 | |||||
| Building and improvements | 617,112 | 33,200 | (2) | 650,312 | ||||||||
| 913,290 | 41,500 | 954,790 | ||||||||||
| Less: accumulated depreciation | 37,852 | — | 37,852 | |||||||||
| 875,438 | 41,500 | 916,938 | ||||||||||
| Mortgage notes receivables | 10,294 | — | 10,294 | |||||||||
| Investment in and advances to unconsolidated joint ventures | 15,526 | — | 15,526 | |||||||||
| Real Estate Investments, net | 901,258 | 41,500 | 942,758 | |||||||||
| Cash and cash equivalents | 6,894 | — | 6,894 | |||||||||
| Restricted cash | 1,880 | — | 1,880 | |||||||||
| Tenant and other receivables | 13,973 | — | 13,973 | |||||||||
| Deposits | 2,000 | — | 2,000 | |||||||||
| Acquired lease intangible asset, net of accumulated amortization | 40,345 | — | 40,345 | |||||||||
| Prepaid expenses | 3,099 | — | 3,099 | |||||||||
| Deferred charges, net of accumulated amortization | 21,975 | — | 21,975 | |||||||||
| Other | 949 | — | 949 | |||||||||
| Total assets | $ | 992,373 | $ | 41,500 | $ | 1,033,873 | ||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Liabilities: | ||||||||||||
| Term Loan | $ | 200,000 | $ | — | $ | 200,000 | ||||||
| Credit facilities | 18,000 | 41,500 | (2) | 59,500 | ||||||||
| Mortgage notes payable | 81,753 | — | 81,753 | |||||||||
| Acquired lease intangible liability, net | 56,774 | — | 56,774 | |||||||||
| Accrued expenses | 3,800 | — | 3,800 | |||||||||
| Tenants’ security deposit | 2,428 | — | 2,428 | |||||||||
| Other liabilities | 24,387 | — | 24,387 | |||||||||
| Total liabilities | $ | 387,142 | $ | 41,500 | $ | 428,642 | ||||||
| Equity: | ||||||||||||
| Preferred stock | — | — | — | |||||||||
| Common stock | 7 | — | 7 | |||||||||
| Additional-paid-in capital | 668,342 | — | 668,342 | |||||||||
| Accumulated deficit | (46,485 | ) | — | (46,485 | ) | |||||||
| Accumulated other comprehensive loss | (16,635 | ) | — | (16,635 | ) | |||||||
| Total Retail Opportunity Investments Corp. shareholders’ equity | 605,229 | — | 605,229 | |||||||||
| Non-controlling interests | 2 | — | 2 | |||||||||
| Total equity | 605,231 | — | 605,231 | |||||||||
| Total liabilities and equity | $ | 992,373 | $ | 41,500 | $ | 1,033,873 | ||||||
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, 2013
(UNAUDITED)
(in thousands, except per share data)
Company Historical(1) | Hawthorne Crossings | Pro forma Adjustments | Company Pro Forma | |||||||||||||
| Revenue | ||||||||||||||||
| Base rents | $ | 19,350 | $ | 704 | $ | 6 | (3) | $ | 20,060 | |||||||
| Recoveries from tenants | 4,830 | 142 | — | 4,972 | ||||||||||||
| Mortgage interest | 204 | — | — | 204 | ||||||||||||
| Total revenues | 24,384 | 846 | 6 | 25,236 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Property operating | 4,159 | 79 | — | 4,238 | ||||||||||||
| Property taxes | 2,315 | 86 | — | 2,401 | ||||||||||||
| Depreciation and amortization | 8,881 | — | 213 | (4) | 9,094 | |||||||||||
| General & administrative expenses | 2,737 | — | — | 2,737 | ||||||||||||
| Acquisition transaction costs | 409 | — | — | 409 | ||||||||||||
| Total operating expenses | 18,501 | 165 | 213 | 18,879 | ||||||||||||
| Operating income (loss) | 5,883 | 681 | (207 | ) | 6,357 | |||||||||||
| Non-operating income (expenses) | ||||||||||||||||
| Interest expense | (3,825 | ) | — | (145 | ) (6) | (3,970 | ) | |||||||||
| Equity in earnings from unconsolidated joint ventures | 232 | — | — | 232 | ||||||||||||
| Net income (loss) attributable to Retail Opportunity Investments Corp. | $ | 2,290 | $ | 681 | $ | (352 | ) | $ | 2,619 | |||||||
| Pro forma weighted average shares outstanding | ||||||||||||||||
| Basic: | 57,373 | 57,373 | ||||||||||||||
| Diluted: | 60,816 | 60,816 | ||||||||||||||
| Pro forma income per share | ||||||||||||||||
| Basic and diluted: | $ | 0.04 | $ | 0.05 | ||||||||||||
| Pro forma dividends per share: | $ | 0.15 | $ | 0.15 | ||||||||||||
| Comprehensive income (loss): | ||||||||||||||||
| Net income (loss) attributable to Retail Opportunity Investments Corp. | $ | 2,290 | $ | 681 | $ | (352 | ) | $ | 2,619 | |||||||
| Other comprehensive income: | ||||||||||||||||
| Unrealized gain on swap derivative | ||||||||||||||||
| Unrealized swap derivative gain arising during the period | 322 | — | — | 322 | ||||||||||||
| Reclassification adjustment for amortization of interest expense included in net income | 1,198 | — | — | 1,198 | ||||||||||||
| Unrealized gain on swap derivative | 1,520 | — | — | 1,520 | ||||||||||||
| Total other comprehensive income | 1,520 | — | — | 1,520 | ||||||||||||
| Total comprehensive income (loss) | $ | 3,810 | $ | 681 | $ | (352 | ) | $ | 4,139 | |||||||
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, 2012
(UNAUDITED)
(in thousands, except per share data)
Company Historical(1) | Hawthorne Crossings | Pro forma Adjustments | Company Pro Forma | |||||||||||||
| Revenue | ||||||||||||||||
| Base rents | $ | 59,219 | $ | 2,749 | $ | 25 | (3) | $ | 61,993 | |||||||
| Recoveries from tenants | 14,771 | 594 | — | 15,365 | ||||||||||||
| Mortgage interest | 1,106 | — | — | 1,106 | ||||||||||||
| Total revenues | 75,096 | 3,343 | 25 | 78,464 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Property operating | 12,780 | 382 | — | 13,162 | ||||||||||||
| Property taxes | 7,281 | 352 | — | 7,633 | ||||||||||||
| Depreciation and amortization | 29,075 | — | 851 | (4) | 29,926 | |||||||||||
| General & administrative expenses | 13,059 | — | — | 13,059 | ||||||||||||
| Acquisition transaction costs | 1,347 | — | 37 | (5) | 1,384 | |||||||||||
| Total operating expenses | 63,542 | 734 | 888 | 65,164 | ||||||||||||
| Operating income (loss) | 11,554 | 2,609 | (863 | ) | 13,300 | |||||||||||
| Non-operating income (expenses) | ||||||||||||||||
| Interest expense | (11,380 | ) | — | (581 | ) (6) | (11,961 | ) | |||||||||
| Gain on consolidation of JV | 2,145 | — | — | 2,145 | ||||||||||||
| Gain on bargain purchase | 3,864 | — | — | 3,864 | ||||||||||||
| Equity in earnings from unconsolidated joint ventures | 1,698 | — | — | 1,698 | ||||||||||||
| Interest income | 12 | — | — | 12 | ||||||||||||
| Net income (loss) attributable to Retail Opportunity Investments Corp. | $ | 7,893 | $ | 2,609 | $ | (1,444 | ) | $ | 9,058 | |||||||
| Pro forma weighted average shares outstanding | ||||||||||||||||
| Basic: | 51,059 | 51,059 | ||||||||||||||
| Diluted: | 52,371 | 52,371 | ||||||||||||||
| Pro forma income per share | ||||||||||||||||
| Basic and diluted: | $ | 0.15 | $ | 0.18 | ||||||||||||
| Pro forma dividends per share: | $ | 0.53 | $ | 0.53 | ||||||||||||
| Comprehensive income (loss): | ||||||||||||||||
| Net income (loss) attributable to Retail Opportunity Investments Corp. | $ | 7,893 | $ | 2,609 | $ | (1,444 | ) | $ | 9,058 | |||||||
| Other comprehensive loss: | ||||||||||||||||
| Unrealized loss on swap derivative | ||||||||||||||||
| Unrealized swap derivative loss arising during the period | (7,859 | ) | — | — | (7,859 | ) | ||||||||||
| Reclassification adjustment for amortization of interest expense included in net income | 3,799 | — | — | 3,799 | ||||||||||||
| Unrealized loss on swap derivative | (4,060 | ) | — | — | (4,060 | ) | ||||||||||
| Total other comprehensive loss | (4,060 | ) | — | — | (4,060 | ) | ||||||||||
| Total comprehensive income (loss) | $ | 3,833 | $ | 2,609 | $ | (1,444 | ) | $ | 4,998 | |||||||
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, 2012 and the three months ended March 31, 2013, respectively. |
| 2. | Reflects the pro forma acquisition of the Property for approximately $41.5 million. The acquisition was funded entirely by draws on the Company’s credit facility. |
| 3. | Reflects the pro forma adjustment of $25,000 and $6,000 for the year ended December 31, 2012 and the three months ended March 31, 2013, respectively, to record operating rents on a straight-line basis beginning January 1, 2012. |
| 4. | Reflects the estimated depreciation for the Property based on estimated values allocated to 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, 2013 Depreciation Expense | Year Ended December 31, 2012 Depreciation Expense | |||||||
| Building | 39 years | $ | 213 | $ | 851 | ||||
| 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 to borrow funds from its credit facility to cover the purchase price 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, 2013 and for the year ended December 31, 2012 are presented as if Retail Opportunity Investments Partnership, LP (the “Company”) had completed the acquisition of Hawthorne Crossings (the “Property”) on January 1, 2012. Additionally, the pro forma consolidated balance sheet as of March 31, 2013 has been presented as if the acquisition had been completed on March 31, 2013.
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 2012 Annual Report on Form 10-K and the Quarterly Report on Form 10-Q for the period ended March 31, 2013. The pro forma consolidated financial statements do not purport to represent the Company’s financial position as of March 31, 2013 or results of operations that would actually have occurred assuming the completion of the acquisition of the Property had occurred on January 1, 2012; nor do they purport to project the Company’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, 2013
(UNAUDITED)
(in thousands)
Company Historical(1) | Pro Forma Adjustments | Company Pro Forma | ||||||||||
| ASSETS: | ||||||||||||
| Real Estate Investments: | ||||||||||||
| Land | $ | 296,178 | $ | 8,300 | (2) | $ | 304,478 | |||||
| Building and improvements | 617,112 | 33,200 | (2) | 650,312 | ||||||||
| 913,290 | 41,500 | 954,790 | ||||||||||
| Less: accumulated depreciation | 37,852 | — | 37,852 | |||||||||
| 875,438 | 41,500 | 916,938 | ||||||||||
| Mortgage notes receivables | 10,294 | — | 10,294 | |||||||||
| Investment in and advances to unconsolidated joint ventures | 15,526 | — | 15,526 | |||||||||
| Real Estate Investments, net | 901,258 | 41,500 | 942,758 | |||||||||
| Cash and cash equivalents | 6,894 | — | 6,894 | |||||||||
| Restricted cash | 1,880 | — | 1,880 | |||||||||
| Tenant and other receivables | 13,973 | — | 13,973 | |||||||||
| Deposits | 2,000 | — | 2,000 | |||||||||
| Acquired lease intangible asset, net of accumulated amortization | 40,345 | — | 40,345 | |||||||||
| Prepaid expenses | 3,099 | — | 3,099 | |||||||||
| Deferred charges, net of accumulated amortization | 21,975 | — | 21,975 | |||||||||
| Other | 949 | — | 949 | |||||||||
| Total assets | $ | 992,373 | $ | 41,500 | $ | 1,033,873 | ||||||
| LIABILITIES AND CAPITAL | ||||||||||||
| Liabilities: | ||||||||||||
| Term Loan | $ | 200,000 | $ | — | $ | 200,000 | ||||||
| Credit facilities | 18,000 | 41,500 | (2) | 59,500 | ||||||||
| Mortgage notes payable | 81,753 | — | 81,753 | |||||||||
| Acquired lease intangible liability, net | 56,774 | — | 56,774 | |||||||||
| Accrued expenses | 3,800 | — | 3,800 | |||||||||
| Tenants’ security deposit | 2,428 | — | 2,428 | |||||||||
| Other liabilities | 24,387 | — | 24,387 | |||||||||
| Total liabilities | $ | 387,142 | $ | 41,500 | $ | 428,642 | ||||||
| Capital: | ||||||||||||
| General partner’s capital | 621,864 | — | 621,864 | |||||||||
| Accumulated other comprehensive loss | (16,635 | ) | — | (16,635 | ) | |||||||
| Total partner’s capital | 605,229 | — | 605,229 | |||||||||
| Non-controlling interests | 2 | — | 2 | |||||||||
| Total capital | 605,231 | — | 605,231 | |||||||||
| Total liabilities and capital | $ | 992,373 | $ | 41,500 | $ | 1,033,873 | ||||||
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, 2013
(UNAUDITED)
(in thousands, except per share data)
Company Historical(1) | Hawthorne Crossings | Pro forma Adjustments | Company Pro Forma | |||||||||||||
| Revenue | ||||||||||||||||
| Base rents | $ | 19,350 | $ | 704 | $ | 6 | (3) | $ | 20,060 | |||||||
| Recoveries from tenants | 4,830 | 142 | — | 4,972 | ||||||||||||
| Mortgage interest | 204 | — | — | 204 | ||||||||||||
| Total revenues | 24,384 | 846 | 6 | 25,236 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Property operating | 4,159 | 79 | — | 4,238 | ||||||||||||
| Property taxes | 2,315 | 86 | — | 2,401 | ||||||||||||
| Depreciation and amortization | 8,881 | — | 213 | (4) | 9,094 | |||||||||||
| General & administrative expenses | 2,737 | — | — | 2,737 | ||||||||||||
| Acquisition transaction costs | 409 | — | — | 409 | ||||||||||||
| Total operating expenses | 18,501 | 165 | 213 | 18,879 | ||||||||||||
| Operating income (loss) | 5,883 | 681 | (207 | ) | 6,357 | |||||||||||
| Non-operating income (expenses) | ||||||||||||||||
| Interest expense | (3,825 | ) | — | (145 | ) (6) | (3,970 | ) | |||||||||
| Equity in earnings from unconsolidated joint ventures | 232 | — | — | 232 | ||||||||||||
| Net income (loss) attributable to Retail Opportunity Investments Partnership, LP | $ | 2,290 | $ | 681 | $ | (352 | ) | $ | 2,619 | |||||||
| Comprehensive income (loss): | ||||||||||||||||
| Net income (loss) attributable to Retail Opportunity Investments Partnership, LP | $ | 2,290 | $ | 681 | $ | (352 | ) | $ | 2,619 | |||||||
| Other comprehensive income: | ||||||||||||||||
| Unrealized gain on swap derivative | ||||||||||||||||
| Unrealized swap derivative gain arising during the period | 322 | — | — | 322 | ||||||||||||
| Reclassification adjustment for amortization of interest expense included in net income | 1,198 | — | — | 1,198 | ||||||||||||
| Unrealized gain on swap derivative | 1,520 | — | — | 1,520 | ||||||||||||
| Total other comprehensive income | 1,520 | — | — | 1,520 | ||||||||||||
| Total comprehensive income (loss) | $ | 3,810 | $ | 681 | $ | (352 | ) | $ | 4,139 | |||||||
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, 2012
(UNAUDITED)
(in thousands, except per share data)
Company Historical(1) | Hawthorne Crossings | Pro forma Adjustments | Company Pro Forma | |||||||||||||
| Revenue | ||||||||||||||||
| Base rents | $ | 59,219 | $ | 2,749 | $ | 25 | (3) | $ | 61,993 | |||||||
| Recoveries from tenants | 14,771 | 594 | — | 15,365 | ||||||||||||
| Mortgage interest | 1,106 | — | — | 1,106 | ||||||||||||
| Total revenues | 75,096 | 3,343 | 25 | 78,464 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Property operating | 12,780 | 382 | — | 13,162 | ||||||||||||
| Property taxes | 7,281 | 352 | — | 7,633 | ||||||||||||
| Depreciation and amortization | 29,075 | — | 851 | (4) | 29,926 | |||||||||||
| General & administrative expenses | 13,059 | — | — | 13,059 | ||||||||||||
| Acquisition transaction costs | 1,347 | — | 37 | (5) | 1,384 | |||||||||||
| Total operating expenses | 63,542 | 734 | 888 | 65,164 | ||||||||||||
| Operating income (loss) | 11,554 | 2,609 | (863 | ) | 13,300 | |||||||||||
| Non-operating income (expenses) | ||||||||||||||||
| Interest expense | (11,380 | ) | — | (581 | ) (6) | (11,961 | ) | |||||||||
| Gain on consolidation of JV | 2,145 | — | — | 2,145 | ||||||||||||
| Gain on bargain purchase | 3,864 | — | — | 3,864 | ||||||||||||
| Equity in earnings from unconsolidated joint ventures | 1,698 | — | — | 1,698 | ||||||||||||
| Interest income | 12 | — | — | 12 | ||||||||||||
| Net income (loss) attributable to Retail Opportunity Investments Partnership, LP | $ | 7,893 | $ | 2,609 | $ | (1,444 | ) | $ | 9,058 | |||||||
| Comprehensive income (loss): | ||||||||||||||||
| Net income (loss) attributable to Retail Opportunity Investments Partnership, LP | $ | 7,893 | $ | 2,609 | $ | (1,444 | ) | $ | 9,058 | |||||||
| Other comprehensive loss: | ||||||||||||||||
| Unrealized loss on swap derivative | ||||||||||||||||
| Unrealized swap derivative loss arising during the period | (7,859 | ) | — | — | (7,859 | ) | ||||||||||
| Reclassification adjustment for amortization of interest expense included in net income | 3,799 | — | — | 3,799 | ||||||||||||
| Unrealized loss on swap derivative | (4,060 | ) | — | — | (4,060 | ) | ||||||||||
| Total other comprehensive loss | (4,060 | ) | — | — | (4,060 | ) | ||||||||||
| Total comprehensive income (loss) | $ | 3,833 | $ | 2,609 | $ | (1,444 | ) | $ | 4,998 | |||||||
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
| 1. | Derived from the Company’s audited and unaudited financial statements for the year ended December 31, 2012 and the three months ended March 31, 2013, respectively. |
| 2. | Reflects the pro forma acquisition of the Property for approximately $41.5 million. The acquisition was funded entirely by draws on the Company’s credit facility. |
| 3. | Reflects the pro forma adjustment of $25,000 and $6,000 for the year ended December 31, 2012 and the three months ended March 31, 2013, respectively, to record operating rents on a straight-line basis beginning January 1, 2012. |
| 4. | Reflects the estimated depreciation for the Property based on estimated values allocated to 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, 2013 Depreciation Expense | Year Ended December 31, 2012 Depreciation Expense | |||||||
| Building | 39 years | $ | 213 | $ | 851 | ||||
| 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 to borrow funds from its credit facility to cover the purchase price as if the acquisition had been made on the first day of the periods presented. |
F-14