10-Q 1 roic-20220930.htm 10-Q roic-20220930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2022
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____

Commission file number 001-33749

RETAIL OPPORTUNITY INVESTMENTS CORP.
RETAIL OPPORTUNITY INVESTMENTS PARTNERSHIP, LP
(Exact name of registrant as specified in its charter)
Maryland (Retail Opportunity Investments Corp.)26-0500600 (Retail Opportunity Investments Corp.)
Delaware (Retail Opportunity Investments Partnership, LP)94-2969738 (Retail Opportunity Investments Partnership, LP)
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
11250 El Camino Real
Suite 200
San Diego,California
92130
(Address of Principal Executive Offices)(Zip Code)


(858) 677-0900
(Registrant’s telephone number, including area code)
 
N/A
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Retail Opportunity Investments Corp.YesNo
Retail Opportunity Investments Partnership, LPYesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Retail Opportunity Investments Corp.Yes No
Retail Opportunity Investments Partnership, LPYes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 

Retail Opportunity Investments Corp.
Large accelerated filer Accelerated filerNon-accelerated filer Smaller reporting company
Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Retail Opportunity Investments Partnership, LP
Large accelerated filerAccelerated filerNon-accelerated filer Smaller reporting company
Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Retail Opportunity Investments Corp.Yes  No
Retail Opportunity Investments Partnership, LPYes No

Securities registered pursuant to Section 12(b) of the Act:
Name of RegistrantTitle of each classTrading SymbolName of each exchange on which registered
Retail Opportunity Investments Corp.Common Stock, par value $0.0001 per shareROICNASDAQ
Retail Opportunity Investments Partnership, LPNoneNoneNone

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date: 124,541,618 shares of common stock, par value $0.0001 per share, of Retail Opportunity Investments Corp. outstanding as of October 20, 2022.
 



EXPLANATORY PARAGRAPH
 
This report combines the quarterly reports on Form 10-Q for the quarter ended September 30, 2022 of Retail Opportunity Investments Corp., a Maryland corporation (“ROIC”), and Retail Opportunity Investments Partnership, LP, a Delaware limited partnership (the “Operating Partnership”), of which ROIC is the parent company and general partner. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “the Company,” “we,” “us,” “our,” or “our company” refer to ROIC together with its consolidated subsidiaries, including the Operating Partnership. Unless otherwise indicated or unless the context requires otherwise, all references in this report to “the Operating Partnership” refer to Retail Opportunity Investments Partnership, LP together with its consolidated subsidiaries.
 
ROIC operates as a real estate investment trust and as of September 30, 2022, ROIC owned an approximate 93.6% partnership interest in the Operating Partnership. Retail Opportunity Investments GP, LLC, ROIC’s wholly-owned subsidiary, is the sole general partner of the Operating Partnership, and as the parent company, ROIC has the full and complete authority over the Operating Partnership’s day-to-day management and control.
 
The Company believes that combining the quarterly reports on Form 10-Q of ROIC and the Operating Partnership into a single report will result in the following benefits:
 
facilitate a better understanding by the investors of ROIC and the Operating Partnership by enabling them to view the business as a whole in the same manner as management views and operates the business;

remove duplicative disclosures and provide a more straightforward presentation in light of the fact that a substantial portion of the disclosure applies to both ROIC and the Operating Partnership; and

create time and cost efficiencies through the preparation of one combined report instead of two separate reports.

Management operates ROIC and the Operating Partnership as one enterprise. The management of ROIC and the Operating Partnership are the same.
 
There are a few differences between ROIC and the Operating Partnership, which are reflected in the disclosures in this report. The Company believes it is important to understand the differences between ROIC and the Operating Partnership in the context of how these entities operate as an interrelated consolidated company. ROIC is a real estate investment trust, whose only material asset is its ownership of direct or indirect partnership interests in the Operating Partnership and membership interest in Retail Opportunity Investments GP, LLC, which is the sole general partner of the Operating Partnership. As a result, ROIC does not conduct business itself, other than acting as the parent company of the Operating Partnership and issuing equity from time to time. The Operating Partnership holds substantially all the assets of the Company and directly or indirectly holds the ownership interests in the Company’s real estate ventures. The Operating Partnership conducts the operations of the Company’s business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by ROIC, which are contributed to the Operating Partnership, the Operating Partnership generates the capital required by the Company’s business through the Operating Partnership’s operations, by the Operating Partnership’s incurrence of indebtedness (directly and through subsidiaries) or through the issuance of operating partnership units (“OP Units”).
 
Non-controlling interests is the primary area of difference between the Consolidated Financial Statements for ROIC and the Operating Partnership. The OP Units in the Operating Partnership that are not owned by ROIC are accounted for as partners’ capital in the Operating Partnership’s financial statements and as non-controlling interests in ROIC’s financial statements. Accordingly, this report presents the Consolidated Financial Statements for ROIC and the Operating Partnership separately, as required, as well as Earnings Per Share / Earnings Per Unit and Capital of the Operating Partnership.
 
This report also includes separate Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources, Item 4. Controls and Procedures sections and separate Chief Executive Officer and Chief Financial Officer certifications for each of ROIC and the Operating Partnership as reflected in Exhibits 31 and 32.




TABLE OF CONTENTS
 
 




PART I. FINANCIAL INFORMATION 
Item 1. Financial Statements

RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Balance Sheets
(In thousands, except share data)
 September 30, 2022
 (unaudited)
December 31, 2021
ASSETS  
Real Estate Investments:  
Land$942,276 $915,861 
Building and improvements2,453,763 2,350,294 
 3,396,039 3,266,155 
Less:  accumulated depreciation556,930 510,836 
2,839,109 2,755,319 
Mortgage note receivable4,808 4,875 
Real Estate Investments, net2,843,917 2,760,194 
Cash and cash equivalents7,439 13,218 
Restricted cash1,997 2,145 
Tenant and other receivables, net54,177 55,787 
Deposits500  
Acquired lease intangible assets, net50,496 50,139 
Prepaid expenses1,504 5,337 
Deferred charges, net25,221 25,017 
Other assets16,437 17,007 
Total assets$3,001,688 $2,928,844 
LIABILITIES AND EQUITY  
Liabilities:  
Term loan$299,162 $298,889 
Credit facility52,000  
Senior Notes946,440 945,231 
Mortgage notes payable61,130 85,354 
Acquired lease intangible liabilities, net146,178 136,608 
Accounts payable and accrued expenses56,585 48,598 
Tenants’ security deposits7,525 7,231 
Other liabilities41,591 40,580 
Total liabilities1,610,611 1,562,491 
Commitments and contingencies
Equity:  
Preferred stock, $0.0001 par value 50,000,000 shares authorized; none issued and outstanding
  
Common stock, $0.0001 par value, 500,000,000 shares authorized; 124,541,618 and 122,685,266 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively
12 12 
Additional paid-in capital1,609,588 1,577,837 
Accumulated dividends in excess of earnings(307,394)(297,801)
Accumulated other comprehensive income (loss)27 (3,154)
Total Retail Opportunity Investments Corp. stockholders’ equity1,302,233 1,276,894 
Non-controlling interests88,844 89,459 
Total equity1,391,077 1,366,353 
Total liabilities and equity$3,001,688 $2,928,844 
See accompanying notes to consolidated financial statements.
- 1 -


RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
(In thousands, except share data)
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Revenues  
Rental revenue$77,420 $69,907 $229,675 $208,925 
Other income618 1,478 3,061 2,377 
Total revenues78,038 71,385 232,736 211,302 
Operating expenses
Property operating12,705 11,009 37,468 32,334 
Property taxes8,876 8,564 25,812 25,502 
Depreciation and amortization24,332 22,854 72,444 69,401 
General and administrative expenses5,203 4,746 16,145 14,353 
Other expense111 147 778 631 
Total operating expenses51,227 47,320 152,647 142,221 
Gain on sale of real estate7,653 12,880 7,653 22,340 
Operating income34,464 36,945 87,742 91,421 
Non-operating expenses  
Interest expense and other finance expenses(14,678)(14,356)(43,176)(43,173)
Net income19,786 22,589 44,566 48,248 
Net income attributable to non-controlling interests(1,264)(1,494)(2,896)(3,254)
Net Income Attributable to Retail Opportunity Investments Corp.$18,522 $21,095 $41,670 $44,994 
Earnings per share – basic$0.15 $0.17 $0.34 $0.38 
Earnings per share – diluted
$0.15 $0.17 $0.33 $0.38 
Dividends per common share$0.15 $0.11 $0.41 $0.33 
Comprehensive income:
Net income$19,786 $22,589 $44,566 $48,248 
Other comprehensive income:
Unrealized swap derivative gain (loss) arising during the period61 (122)1,104 (159)
Reclassification adjustment for amortization of interest expense included in net income(27)1,469 2,300 4,422 
Other comprehensive income:34 1,347 3,404 4,263 
Comprehensive income19,820 23,936 47,970 52,511 
Comprehensive income attributable to non-controlling interests(1,266)(1,585)(3,119)(3,582)
Comprehensive income attributable to Retail Opportunity Investments Corp.$18,554 $22,351 $44,851 $48,929 
See accompanying notes to consolidated financial statements.
- 2 -



RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Statements of Equity
(Unaudited)
(In thousands, except share data)

 Common StockAdditional
paid-in capital
Accumulated dividends in excess of earningsAccumulated
other
comprehensive (loss) income
Non-
controlling
interests
Equity
 SharesAmount
Balance at December 31, 2021122,685,266 $12 $1,577,837 $(297,801)$(3,154)$89,459 $1,366,353 
Shares issued under the Equity Incentive Plan406,106 — 302 — — — 302 
Shares withheld for employee taxes(122,658)— (2,405)— — — (2,405)
Cancellation of restricted stock(10,649)— — — — — — 
Stock based compensation expense— — 2,572 — — — 2,572 
Redemption of OP Units50,000 — 978 — — (978)— 
Adjustment to non-controlling interests ownership in Operating Partnership— — (2,668)— — 2,668  
Proceeds from the issuance of common stock724,279 — 14,211 — — — 14,211 
Registration expenditures— — (172)— — — (172)
Cash dividends ($0.13 per share)
— — — (16,009)— (1,130)(17,139)
Dividends payable to officers— — — (110)—  (110)
Net income attributable to Retail Opportunity Investments Corp.— — — 11,641 — — 11,641 
Net income attributable to non-controlling interests— — — — — 825 825 
Other comprehensive income— — — — 2,059 144 2,203 
Balance at March 31, 2022123,732,344 $12 $1,590,655 $(302,279)$(1,095)$90,988 $1,378,281 
Cancellation of restricted stock(1,500)— — — — — — 
Stock based compensation expense— — 3,028 — —  3,028 
Redemption of OP Units46,840 — 917 — — (917) 
Adjustment to non-controlling interests ownership in Operating Partnership— — (932)— — 932  
Proceeds from the issuance of common stock563,934 — 10,988 — — — 10,988 
Registration expenditures— — (161)— — — (161)
Cash dividends ($0.13 per share)
— — — (16,164)— (1,126)(17,290)
Dividends payable to officers— — — (103)—  (103)
Net income attributable to Retail Opportunity Investments Corp.— — — 11,507 — — 11,507 
Net income attributable to non-controlling interests— — — — — 807 807 
Other comprehensive income— — — — 1,090 77 1,167 
Balance at June 30, 2022124,341,618 $12 $1,604,495 $(307,039)$(5)$90,761 $1,388,224 
Stock based compensation expense— — 3,221 — —  3,221 
Redemption of OP Units200,000 — 3,176 — — (3,176)— 
Adjustment to non-controlling interests ownership in Operating Partnership— — (1,260)— — 1,260 — 
Registration expenditures— — (44)— — — (44)
Cash dividends ($0.15 per share)
— — — (18,680)— (1,267)(19,947)
Dividends payable to officers— — — (197)—  (197)
Net income attributable to Retail Opportunity Investments Corp.— — — 18,522 — — 18,522 
Net income attributable to non-controlling interests— — — — — 1,264 1,264 
Other comprehensive income— — — — 32 2 34 
Balance at September 30, 2022124,541,618 $12 $1,609,588 $(307,394)$27 $88,844 $1,391,077 
- 3 -



RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Statements of Equity (continued)
(Unaudited)
(In thousands, except share data)

Common StockAdditional
paid-in capital
Accumulated dividends in excess of earningsAccumulated
other
comprehensive loss
Non-
controlling
interests
Equity
SharesAmount
Balance at December 31, 2020118,085,155 $12 $1,497,662 $(289,309)$(8,812)$91,606 $1,291,159 
Shares issued under the Equity Incentive Plan535,819 — 428 — — — 428 
Shares withheld for employee taxes(142,247)— (1,905)— — — (1,905)
Stock based compensation expense— — 1,809 — — 254 2,063 
Redemption of OP Units98,986 — 1,439 — — (1,439)— 
Adjustment to non-controlling interests ownership in Operating Partnership— — 2 — — (2) 
Registration expenditures— — (15)— — — (15)
Cash dividends ($0.11 per share)
— — — (13,041)— (978)(14,019)
Dividends payable to officers— — — (48)— (20)(68)
Net income attributable to Retail Opportunity Investments Corp.— — — 7,415 — — 7,415 
Net income attributable to non-controlling interests— — — — — 559 559 
Other comprehensive income— — — — 1,454 119 1,573 
Balance at March 31, 2021118,577,713 $12 $1,499,420 $(294,983)$(7,358)$90,099 $1,287,190 
Stock based compensation expense— — 2,774 — — 459 3,233 
Redemption of OP Units325,000 — 5,419 — — (5,419) 
Adjustment to non-controlling interests ownership in Operating Partnership— — (2,823)— — 2,823  
Proceeds from the issuance of common stock1,903,653 — 34,844 — — — 34,844 
Registration expenditures— — (371)— — — (371)
Cash dividends ($0.11 per share)
— — — (13,270)— (940)(14,210)
Dividends payable to officers— — — (70)— (10)(80)
Net income attributable to Retail Opportunity Investments Corp.— — — 16,484 — — 16,484 
Net income attributable to non-controlling interests— — — — — 1,201 1,201 
Other comprehensive income— — — — 1,225 118 1,343 
Balance at June 30, 2021120,806,366 $12 $1,539,263 $(291,839)$(6,133)$88,331 $1,329,634 
Cancellation of restricted stock(5,482)— — — — — — 
Stock based compensation expense— — 2,293 — — 274 2,567 
Adjustment to non-controlling interests ownership in Operating Partnership— — (211)— — 211 — 
Proceeds from the issuance of common stock622,732  11,217 — — — 11,217 
Registration expenditures— — (115)— — — (115)
Cash dividends ($0.11 per share)
— — — (13,356)— (939)(14,295)
Dividends payable to officers— — — (44)— (20)(64)
Net income attributable to Retail Opportunity Investments Corp.— — — 21,095 — — 21,095 
Net income attributable to non-controlling interests— — — — — 1,494 1,494 
Other comprehensive income— — — — 1,256 91 1,347 
Balance at September 30, 2021121,423,616 $12 $1,552,447 $(284,144)$(4,877)$89,442 $1,352,880 

See accompanying notes to consolidated financial statements.
- 4 -


RETAIL OPPORTUNITY INVESTMENTS CORP.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
 Nine Months Ended September 30,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES  
Net income$44,566 $48,248 
Adjustments to reconcile net income to cash provided by operating activities:  
Depreciation and amortization72,444 69,401 
Amortization of deferred financing costs and mortgage discounts and premiums, net1,884 1,783 
Straight-line rent adjustment(2,288)(438)
Amortization of above and below market rent(9,218)(6,571)
Amortization relating to stock based compensation8,821 7,863 
Provisions for tenant credit losses1,528 2,023 
Other noncash interest (income) expense(42)59 
Gain on sale of real estate(7,653)(22,340)
Change in operating assets and liabilities:  
Tenant and other receivables1,545 (1,498)
Prepaid expenses3,823 3,412 
Accounts payable and accrued expenses14,325 16,194 
Other assets and liabilities, net3,306 (2,972)
Net cash provided by operating activities133,041 115,164 
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in real estate(120,639)(30,304)
Proceeds from sale of real estate34,435 68,003 
Improvements to properties(44,590)(32,390)
Deposits on real estate acquisitions, net(500)(1,000)
Proceeds on repayment of mortgage note receivable67 63 
Net cash (used in) provided by investing activities(131,227)4,372 
CASH FLOWS FROM FINANCING ACTIVITIES  
Principal repayments on mortgages(23,965)(453)
Proceeds from draws on credit facility117,000 20,000 
Payments on credit facility(65,000)(68,000)
Distributions to OP Unitholders(4,096)(1,918)
Proceeds from the sale of common stock25,199 46,061 
Registration expenditures(553)(500)
Dividends paid to common stockholders(54,223)(26,416)
Common shares issued under the Equity Incentive Plan302 428 
Shares withheld for employee taxes(2,405)(1,905)
Net cash used in financing activities(7,741)(32,703)
Net (decrease) increase in cash, cash equivalents and restricted cash(5,927)86,833 
Cash, cash equivalents and restricted cash at beginning of period15,363 6,636 
Cash, cash equivalents and restricted cash at end of period$9,436 $93,469 
Other non-cash investing and financing activities increase (decrease):
Intangible lease liabilities$21,823 $ 
Interest rate swap liabilities$(3,447)$(4,204)
Accrued real estate improvement costs$4,375 $8,206 
Equity redemption of OP Units$5,071 $6,858 
Dividends and distributions payable$20,687 $14,739 
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows:
Nine Months Ended September 30,
20222021
Cash and cash equivalents$7,439 $91,150 
Restricted cash1,997 2,319 
Total cash, cash equivalents and restricted cash shown in Statements of Cash Flows$9,436 $93,469 

See accompanying notes to consolidated financial statements.