Retail Opportunity Investments (ROIC) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This part provides the unaudited consolidated financial statements and related disclosures for ROIC and its Operating Partnership, detailing their financial position and performance Item 1. Financial Statements This section presents the unaudited consolidated financial statements for ROIC and its Operating Partnership, including balance sheets, income statements, and cash flow statements Consolidated Financial Statements of Retail Opportunity Investments Corp. This chapter presents the unaudited consolidated financial statements for Retail Opportunity Investments Corp., including balance sheets, income statements, and cash flow statements Consolidated Balance Sheets (ROIC) - Key Figures (in thousands): | Metric | Sep 30, 2022 | Dec 31, 2021 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Total Assets | $3,001,688 | $2,928,844 | +$72,844 | | Real Estate Investments, net | $2,843,917 | $2,760,194 | +$83,723 | | Total Liabilities | $1,610,611 | $1,562,491 | +$48,120 | | Total Equity | $1,391,077 | $1,366,353 | +$24,724 | Consolidated Statements of Operations and Comprehensive Income (ROIC) - Key Figures (in thousands, except share data): | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenues | $78,038 | $71,385 | $232,736 | $211,302 | | Operating Income | $34,464 | $36,945 | $87,742 | $91,421 | | Net Income Attributable to ROIC | $18,522 | $21,095 | $41,670 | $44,994 | | Earnings per share – basic | $0.15 | $0.17 | $0.34 | $0.38 | | Dividends per common share | $0.15 | $0.11 | $0.41 | $0.33 | Consolidated Statements of Cash Flows (ROIC) - Key Figures (in thousands): | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net Cash Provided by Operating Activities | $133,041 | $115,164 | | Net Cash (Used in) Provided by Investing Activities | $(131,227) | $4,372 | | 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 End of Period | $9,436 | $93,469 | Consolidated Financial Statements of Retail Opportunity Investments Partnership, LP This chapter presents the unaudited consolidated financial statements for Retail Opportunity Investments Partnership, LP, detailing its financial position and performance Consolidated Balance Sheets (Operating Partnership) - Key Figures (in thousands): | Metric | Sep 30, 2022 | Dec 31, 2021 | Change | | :-------------------------------- | :----------- | :----------- | :----- | | Total Assets | $3,001,688 | $2,928,844 | +$72,844 | | Real Estate Investments, net | $2,843,917 | $2,760,194 | +$83,723 | | Total Liabilities | $1,610,611 | $1,562,491 | +$48,120 | | Total Capital | $1,391,077 | $1,366,353 | +$24,724 | Consolidated Statements of Operations and Comprehensive Income (Operating Partnership) - Key Figures (in thousands, except unit data): | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenues | $78,038 | $71,385 | $232,736 | $211,302 | | Operating Income | $34,464 | $36,945 | $87,742 | $91,421 | | Net Income Attributable to Operating Partnership | $19,786 | $22,589 | $44,566 | $48,248 | | Earnings per unit – basic | $0.15 | $0.17 | $0.34 | $0.38 | | Distributions per unit | $0.15 | $0.11 | $0.41 | $0.33 | Consolidated Statements of Cash Flows (Operating Partnership) - Key Figures (in thousands): | Metric | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net Cash Provided by Operating Activities | $133,041 | $115,164 | | Net Cash (Used in) Provided by Investing Activities | $(131,227) | $4,372 | | 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 End of Period | $9,436 | $93,469 | Notes to Consolidated Financial Statements (Unaudited) This section provides detailed notes to the unaudited consolidated financial statements, explaining accounting policies, transactions, and financial instrument fair values 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies This note describes the Company's REIT structure, business operations, and significant accounting policies, including the impact of COVID-19 on rent concessions - ROIC operates as a fully integrated, self-managed REIT specializing in necessity-based community and neighborhood shopping centers on the west coast, anchored by supermarkets and drugstores[39] - ROIC conducts substantially all of its business through its Operating Partnership, in which ROIC holds an approximate 93.6% partnership interest as of September 30, 2022[8][40][116] - The Company elected not to account for COVID-19 related rent concessions as lease modifications, having deferred approximately $10.9 million of contractual amounts billed since the pandemic's onset. As of September 30, 2022, $8.6 million of these deferrals have been rebilled, with approximately 91.0% ($7.8 million) collected[67] - The allowance for doubtful accounts was approximately $16.8 million at September 30, 2022, a decrease from $18.4 million at December 31, 2021[65] 2. Real Estate Investments This note details the Company's real estate investment activities during the nine months ended September 30, 2022, including the acquisition of five properties for a total of approximately $120.6 million and the disposition of one property for net proceeds of $34.4 million, resulting in a gain on sale of $7.7 million - During the nine months ended September 30, 2022, the Company acquired five properties: Olympia Square North ($18.4 million), Powell Valley Junction ($17.7 million), Village Oaks Shopping Center ($24.1 million), Ballinger Village ($29.3 million), and Thomas Lake Shopping Center ($31.1 million)[83][84][85][86] Property Asset Acquisitions - Purchase Price Allocation (9 Months Ended Sep 30, 2022, in thousands): | Asset/Liability | Amount | | :-------------------------- | :----- | | Land | $35,240 | | Building and improvements | $99,589 | | Acquired lease intangible asset | $4,782 | | Deferred charges | $2,851 | | Assets acquired | $142,462 | | Acquired lease intangible liability | $21,823 | | Liabilities assumed | $21,823 | - On August 19, 2022, the Company sold Aurora Square for a sales price of $36.2 million, generating net proceeds of approximately $34.4 million and recording a gain on sale of real estate of approximately $7.7 million[88] 3. Tenant Leases This note summarizes the Company's tenant lease agreements, which are primarily operating leases with provisions for renewal options and additional rents based on operating expenses and sales volume. It also provides a schedule of future minimum rents to be received under non-cancellable leases Future Minimum Rents Under Non-Cancellable Leases (as of Sep 30, 2022, in thousands): | Period | Minimum Rents | | :------------- | :------------ | | Remaining 2022 | $54,969 | | 2023 | $209,099 | | 2024 | $178,757 | | 2025 | $150,783 | | 2026 | $122,766 | | Thereafter | $446,504 | | Total | $1,162,878 | 4. Mortgage Notes Payable, Credit Facilities and Senior Notes This note details the Company's debt structure, including mortgage notes payable, term loan, credit facility, and senior notes. It highlights the repayment of two mortgage notes, the extension of the term loan and credit facility maturity dates, and the shift of the term loan to a variable interest rate after interest rate swaps matured - The Company repaid mortgage notes related to Casitas Plaza Shopping Center ($6.6 million) and Riverstone Marketplace ($16.7 million) in full during Q1 2022[92] Mortgage Notes Payable (in thousands): | Property | Sep 30, 2022 | Dec 31, 2021 | | :------------------------ | :----------- | :----------- | | Casitas Plaza Shopping Center | $0 | $6,660 | | Riverstone Marketplace | $0 | $16,811 | | Fullerton Crossroads | $26,000 | $26,000 | | Diamond Hills Plaza | $34,899 | $35,393 | | Total Mortgage Notes Payable | $61,130 | $85,354 | - The $300.0 million unsecured term loan's maturity date was extended to January 20, 2025. The weighted average interest rate was 3.2% for the three months and 2.0% for the nine months ended September 30, 2022[94][98] - The $600.0 million unsecured revolving credit facility's maturity date was extended to February 20, 2024, with two six-month extension options. $52.0 million was outstanding as of September 30, 2022, with $548.0 million available to borrow[96][97][98] - The Company's four interest rate swaps matured on August 31, 2022, making the term loan subject to a variable interest rate effective September 1, 2022[98] 5. Preferred Stock of ROIC ROIC is authorized to issue 50,000,000 shares of preferred stock, but as of September 30, 2022, and December 31, 2021, no shares of preferred stock were issued or outstanding - ROIC has 50,000,000 shares of preferred stock authorized, but none were issued or outstanding as of September 30, 2022, and December 31, 2021[105] 6. Common Stock of ROIC This note discusses ROIC's common stock activities, including its 'at the market' (ATM) sales agreement, under which it sold 1,288,213 shares for $25.2 million gross proceeds during the nine months ended September 30, 2022. The Company did not repurchase any shares under its stock repurchase program during this period - During the nine months ended September 30, 2022, ROIC sold 1,288,213 shares under its ATM sales agreement, generating gross proceeds of approximately $25.2 million[108] - ROIC did not repurchase any shares of common stock under its $50.0 million stock repurchase program during the nine months ended September 30, 2022[109] 7. Stock Compensation for ROIC This note outlines ROIC's stock-based compensation plan, including the adoption of the Second Amended and Restated 2009 Equity Incentive Plan. It details restricted stock awards, LTIP Units vesting and conversion, and the total stock-based compensation expense incurred - ROIC adopted the Second Amended and Restated 2009 Equity Incentive Plan on April 25, 2022, reserving 10,954,694 Fungible Units for grants[111] - During the nine months ended September 30, 2022, ROIC awarded 574,070 shares of restricted common stock, with 192,464 shares being performance-based grants[112] - 201,860 LTIP Units vested and were converted into OP Units during the nine months ended September 30, 2022[114] Stock-Based Compensation Expense (in thousands): | Period | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Three Months Ended Sep 30 | $3,200 | $2,600 | | Nine Months Ended Sep 30 | $8,800 | $7,900 | 8. Capital of the Operating Partnership This note details the capital structure of the Operating Partnership, including the number of outstanding OP Units and ROIC's ownership interest. It also covers the redemption of OP Units for ROIC common stock and the accounting treatment of OP Units as permanent equity - As of September 30, 2022, the Operating Partnership had 132,988,735 OP Units outstanding, with ROIC owning approximately 93.6% (124,541,618 OP Units)[116] - During the nine months ended September 30, 2022, ROIC issued 296,840 shares of its common stock to redeem an equal number of OP Units[118] - The redemption value of outstanding OP Units owned by limited partners (excluding ROIC) was approximately $124.5 million as of September 30, 2022[119] 9. Fair Value of Financial Instruments This note explains the Company's fair value measurement hierarchy and provides estimated fair values for various financial instruments. It highlights that the Company's interest rate swaps matured on August 31, 2022, and details the impact of derivative activities on comprehensive income - The fair value of Senior Notes Due 2027 and 2026 were approximately $220.1 million and $179.4 million, respectively (Level 3 inputs)[126] - The fair value of Senior Notes Due 2024 and 2023 were approximately $239.3 million and $248.2 million, respectively (Level 2 inputs)[126] - The Company's four interest rate swaps, previously designated as cash flow hedges, matured effective August 31, 2022, resulting in a fair value of $0 at September 30, 2022, down from $(3.447) million at December 31, 2021[132][134] Derivative Financial Instruments - Gain (Loss) Recognized in OCI (in thousands): | Period | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | | :---------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Amount of gain (loss) recognized in OCI on derivatives | $61 | $(122) | $1,104 | $(159) | | Amount of (gain) loss reclassified from AOCI into interest | $(27) | $1,469 | $2,300 | $4,422 | 10. Commitments and Contingencies This note addresses the Company's legal proceedings, ground leases, and Tax Protection Agreements. It states that no material adverse effects are expected from legal actions, details the lease liability and right-to-use asset for ground leases, and explains the indemnification obligations under Tax Protection Agreements - The Company's net lease liability for operating leases as a lessee was approximately $16.9 million, with a related net right-to-use asset of approximately $15.3 million as of September 30, 2022[137] - The weighted average remaining lease term for operating leases is approximately 36.0 years, with a weighted average discount rate of approximately 5.2%[137] - The Company has Tax Protection Agreements with certain limited partners, requiring indemnification against specific tax liabilities for 10-12 years post-acquisition[139] 11. Related Party Transactions This note discloses related party transactions, specifically lease agreements with an officer of the Company for storage space, incurring expenses of $23,000 and $71,000 for the three and nine months ended September 30, 2022, respectively Related Party Expenses (in thousands): | Period | 2022 | 2021 | | :-------------------------- | :----- | :----- | | Three Months Ended Sep 30 | $23 | $21 | | Nine Months Ended Sep 30 | $71 | $63 | 12. Subsequent Events This note reports a subsequent event: ROIC's board of directors declared a cash dividend of $0.15 per share on common stock and OP Units, payable on December 29, 2022, to holders of record on December 15, 2022 - On October 25, 2022, ROIC declared a cash dividend of $0.15 per share on its common stock and OP Units, payable on December 29, 2022[141] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the Company's financial condition, operating results, liquidity, and capital resources, including non-GAAP measures and critical accounting policies Overview This overview summarizes the Company's property portfolio, including total square footage and retail occupancy as of September 30, 2022 - As of September 30, 2022, the Company's portfolio comprised 94 properties (93 retail, 1 office) totaling approximately 10.6 million square feet of gross leasable area (GLA), with a retail portfolio occupancy of approximately 97.8%[148] - During the nine months ended September 30, 2022, the Company leased or renewed approximately 1.2 million square feet[148] Impact of COVID-19 This section details the ongoing impact of the COVID-19 pandemic on the Company's operations, particularly regarding rent concessions and collections - Since the onset of the COVID-19 pandemic, the Company entered into lease concessions deferring approximately $10.9 million of contractual amounts. As of September 30, 2022, $8.6 million has been rebilled, with 91.0% ($7.8 million) collected[150] Results of Operations for the three months ended September 30, 2022 compared to the three months ended September 30, 2021. This section analyzes the Company's operating results for the three months ended September 30, 2022, compared to the same period in the prior year Property Operating Income (in thousands): | Period | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :----- | | Consolidated Property Operating Income | $56,457 | $51,812 | +$4,645 | | Same-Center Property Operating Income | $51,598 | $49,882 | +$1,716 | | Non Same-Center Property Operating Income | $4,859 | $1,930 | +$2,929 | - The increase in same-center property operating income was primarily due to higher base rents from increased occupancy and re-leasing spreads, partially offset by a decrease in early lease termination income[159] Key Expenses (in thousands): | Expense Category | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Depreciation and amortization | $24,332 | $22,854 | +$1,478 | | General and administrative expenses | $5,203 | $4,746 | +$457 | | Interest expense and other finance expenses | $14,678 | $14,356 | +$322 | - The Company recorded a gain on sale of real estate of approximately $7.7 million from the sale of Aurora Square in Q3 2022, compared to $12.9 million from the sales of Green Valley Station and Mills Shopping Center in Q3 2021[162] Results of Operations for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. This section analyzes the Company's operating results for the nine months ended September 30, 2022, compared to the same period in the prior year Property Operating Income (in thousands): | Period | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | | :-------------------------- | :-------------------------- | :-------------------------- | :----- | | Consolidated Property Operating Income | $169,456 | $153,466 | +$15,990 | | Same-Center Property Operating Income | $156,677 | $147,794 | +$8,883 | | Non Same-Center Property Operating Income | $12,779 | $5,672 | +$7,107 | - The increase in same-center property operating income was primarily due to higher base rents and straight-line rents from increased occupancy and re-leasing spreads[168] Key Expenses (in thousands): | Expense Category | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Depreciation and amortization | $72,444 | $69,401 | +$3,043 | | General and administrative expenses | $16,145 | $14,353 | +$1,792 | | Interest expense and other finance expenses | $43,176 | $43,173 | +$3 | - The Company recorded a gain on sale of real estate of approximately $7.7 million from the sale of Aurora Square in 2022, significantly lower than the $22.3 million gain from multiple property sales in 2021[171] Funds From Operations This section presents the Company's Funds From Operations (FFO), a key non-GAAP metric for REIT performance, for the reported periods Funds From Operations (FFO) (in thousands): | Metric | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 3021 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | FFO – basic | $35,201 | $31,069 | $106,461 | $92,055 | | FFO – diluted | $36,465 | $32,563 | $109,357 | $95,309 | - Basic FFO increased by $4.1 million (13.3%) for the three months and $14.4 million (15.7%) for the nine months ended September 30, 2022, compared to the prior year periods[175] Cash Net Operating Income ("NOI") This section details the Company's Cash Net Operating Income (NOI), a non-GAAP measure reflecting property-level profitability, for same-center properties Same-Center Cash NOI (in thousands): | Period | 3 Months Ended Sep 30, 2022 | 3 Months Ended Sep 30, 2021 | Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Same-Center Cash NOI | $48,532 | $47,523 | +$1,009 | +2.1% | | Period | 9 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2021 | Change | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :----- | :------- | | Same-Center Cash NOI | $146,862 | $140,616 | +$6,246 | +4.4% | - The increase in same-center cash NOI was primarily driven by higher base rents due to contractual rent increases, increased occupancy, and re-leasing spreads[181] Critical Accounting Policies This section outlines the Company's critical accounting policies, including revenue recognition, allowance for doubtful accounts, and real estate investment valuation - Key critical accounting policies include revenue recognition (straight-line rent, tenant reimbursements), allowance for doubtful accounts (based on tenant creditworthiness, economic trends, COVID-19 impact), real estate investments (capitalization, fair value allocation, intangible assets/liabilities), and asset impairment reviews[183][184][186][190] - Management does not believe that the value of any of the Company's real estate investments was impaired at September 30, 2022, or December 31, 2021[190] REIT Qualification Requirements This section confirms the Company's adherence to REIT qualification requirements under the Internal Revenue Code, including distribution mandates - The Company has elected and believes it continues to qualify as a REIT under the Internal Revenue Code, requiring annual distribution of at least 90% of its REIT taxable income[191][192] Liquidity and Capital Resources of the Company This section discusses ROIC's liquidity and capital resources, focusing on dividend funding, working capital, and equity contributions - ROIC's primary funding requirement is dividend payments, sourced from distributions from the Operating Partnership. ROIC itself does not hold indebtedness other than guarantees of Operating Partnership debt[195] - The Company has adequate working capital to meet its dividend funding obligations for the next twelve months as of September 30, 2022[200] - During the nine months ended September 30, 2022, ROIC sold 1,288,213 shares under its ATM sales agreement, generating gross proceeds of approximately $25.2 million for general corporate purposes[203] Dividends and Distributions Paid (in millions): | Period | Dividends to Stockholders | Distributions to OP Unitholders | | :-------------------------- | :------------------------ | :------------------------------ | | 9 Months Ended Sep 30, 2022 | $54.2 | $4.1 | | 9 Months Ended Sep 30, 2021 | $39.8 | $2.9 | Liquidity and Capital Resources of the Operating Partnership This section details the Operating Partnership's liquidity and capital resources, including cash sources, debt outstanding, and compliance with covenants - The Operating Partnership's primary cash sources for the nine months ended September 30, 2022, were cash flow from operations, credit facility borrowings, real estate sales, and ROIC equity contributions[207] - As of September 30, 2022, $300.0 million was outstanding under the term loan and $52.0 million under the credit facility, with $548.0 million available under the credit facility[210] - The Operating Partnership was in compliance with all debt covenants as of September 30, 2022[213] - The Company maintains investment grade credit ratings from Moody's (Baa2), S&P (BBB-), and Fitch (BBB)[215] Material Cash Requirements This section outlines the Company's material cash requirements, including debt obligations and operating lease liabilities, and their funding strategies Material Cash Requirements (as of Sep 30, 2022, in thousands): | Obligation | Short-Term (Next 12 Months) | Long-Term (Beyond 12 Months) | Total | | :-------------------------- | :-------------------------- | :--------------------------- | :---------- | | Mortgage Notes Payable Principal | $680 | $60,219 | $60,899 | | Mortgage Notes Payable Interest | $2,488 | $3,239 | $5,727 | | Term loan | $0 | $300,000 | $300,000 | | Credit facility | $0 | $52,000 | $52,000 | | Senior Notes Due 2027 | $10,475 | $297,138 | $307,613 | | Senior Notes Due 2026 | $7,900 | $223,700 | $231,600 | | Senior Notes Due 2024 | $10,000 | $265,000 | $275,000 | | Senior Notes Due 2023 | $12,500 | $256,250 | $268,750 | | Operating lease obligations | $1,343 | $34,696 | $36,039 | | Total | $45,386 | $1,492,242 | $1,537,628 | - Short-term liquidity requirements will be met through operating cash flows and credit facility borrowings. Long-term requirements will be financed through operating cash flows, debt refinancings, new debt, equity offerings, and asset dispositions[222][223] Real Estate Taxes This section clarifies the Company's policy regarding real estate taxes, noting that tenants generally bear a pro-rata portion - The Company's leases generally require tenants to pay a pro-rata portion of real estate taxes[226] Inflation This section explains how the Company's lease structures, including rent increases and short-term renewals, mitigate the impact of inflation - The Company's long-term leases include provisions such as scheduled base rent increases and percentage rents based on sales volume, and many non-anchor leases are short-term, allowing for rent adjustments to market rates upon renewal, mitigating inflation's adverse impact[227] Leverage Policies This section describes the Company's leverage policies, emphasizing the use of prudent, primarily unsecured debt for acquisitions and portfolio diversification - The Company uses prudent leverage, primarily unsecured debt, to fund acquisitions and diversify its portfolio, aiming for liquidity and capital structure flexibility[228] - Future acquisitions are planned to be financed through a combination of operating cash flows, credit facility borrowings, assumption of existing debt, issuance of OP Units, equity/debt offerings, and asset sales[234] Distributions This section outlines the Company's policy on distributions, aiming for regular quarterly payments to maintain REIT qualification - ROIC and the Operating Partnership intend to make regular quarterly distributions to maintain REIT qualification, requiring at least 90% of REIT taxable income to be distributed annually[235] Recently Issued Accounting Pronouncements This section refers to Note 1 for details on recently issued accounting pronouncements relevant to the Company's financial reporting - Refer to Note 1 for details on recently issued accounting pronouncements[236] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the Company's primary market risk exposure, which is to changes in interest rates related to its debt. It outlines the use of fixed-rate debt and interest rate swaps to manage this risk and quantifies the potential impact of interest rate fluctuations - The Company's primary market risk exposure is to changes in interest rates on its debt[237] - As of September 30, 2022, the Company had $352.0 million of variable rate debt outstanding[239] - A 100 basis-point increase in short-term interest rates would have increased the Company's interest expense by approximately $567,000 for the nine months ended September 30, 2022[239] Item 4. Controls and Procedures This section confirms the effectiveness of disclosure controls and procedures for both Retail Opportunity Investments Corp. and Retail Opportunity Investments Partnership, LP as of September 30, 2022, with no material changes to internal control over financial reporting during the period Controls and Procedures (Retail Opportunity Investments Corp.) This section confirms the effectiveness of ROIC's disclosure controls and procedures and reports no material changes to internal control over financial reporting - ROIC's disclosure controls and procedures were effective as of September 30, 2022, ensuring timely collection, evaluation, and disclosure of information[240] - No material changes occurred in ROIC's internal control over financial reporting during the nine months ended September 30, 2022[241] Controls and Procedures (Retail Opportunity Investments Partnership, LP) This section confirms the effectiveness of the Operating Partnership's disclosure controls and procedures and reports no material changes to internal control - The Operating Partnership's disclosure controls and procedures were effective as of September 30, 2022[242] - No material changes occurred in the Operating Partnership's internal control over financial reporting during the nine months ended September 30, 2022[243] PART II. OTHER INFORMATION This part provides additional information not covered in the financial statements, including legal proceedings, risk factors, and other disclosures Item 1. Legal Proceedings The Company is not involved in any material litigation, nor is any material litigation pending or threatened, beyond routine matters covered by insurance and not expected to harm business, financial condition, or results of operations - The Company is not involved in any material litigation that is expected to have a material adverse effect on its financial position, results of operations, or liquidity[245] Item 1A. Risk Factors There have been no significant changes to the Company's risk factors during the nine months ended September 30, 2022, as detailed in its Annual Report on Form 10-K for the year ended December 31, 2021 - No significant changes to risk factors occurred during the nine months ended September 30, 2022[246] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[247] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[248] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[249] Item 5. Other Information There is no other information to report for the period - No other information to report[250] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including organizational documents, certifications, and XBRL-related documents - Exhibits include Articles of Merger, Amended and Restated Bylaws, Amended and Restated Agreement of Limited Partnership, CEO/CFO certifications (302 and 906), and Inline XBRL Taxonomy Extension documents[254] Signatures The report is duly signed on behalf of Retail Opportunity Investments Corp. and Retail Opportunity Investments Partnership, LP by their respective Chief Executive Officer and Chief Financial Officer - The report is signed by Stuart A. Tanz (CEO) and Michael B. Haines (CFO) for both Retail Opportunity Investments Corp. and Retail Opportunity Investments Partnership, LP[256][257]