Stuart A. Tanz - Chief Executive Officer, President and Director Michael B. Haines - Chief Financial Officer, Executive Vice President, Treasurer and Secretary Richard K. Schoebel - Chief Operating Officer

Grant Keeney - KeyBanc Capital Markets Inc., Research Division Paul E. Adornato - BMO Capital Markets Canada

Welcome to Retail Opportunity Investments 2014 Second Quarter Conference Call. [Operator Instructions] Please note that certain matters discussed in this call today constitute forward-looking statements within the meaning of Federal Securities Laws. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the company can give no assurance that these expectations will be achieved. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause actual results to differ materially from the future results expressed or implied by such forward-looking statements and expectations. Information regarding such risks and factors is described in the company's filings with the Securities and Exchange Commission, including in the most recent annual report on Form 10-K. Participants are encouraged to refer to the company's filings with the SEC regarding such risks and factors, as well as for more information regarding the company's financial and operational results. The company's filings can be found on its website. I would now like to introduce Stuart Tanz, the company's Chief Executive Officer. Stuart A. Tanz: Thank you. Here with me today is Michael Haines, our Chief Financial Officer; and Rich Schoebel, our Chief Operating Officer. We are pleased to report that the company had a very active and successful quarter, achieving record results across all aspects of our business. Starting with acquisitions. Thus far in 2014, we've had a strong year in sourcing off-market opportunities to acquire exceptional, irreplaceable shopping centers across each of our core markets. During the first 6 months, we've acquired $323 million of shopping centers, including our largest, most significant acquisition to date, Fallbrook Center. With respect to Fallbrook, given our market knowledge and our relationship with the seller, having previously acquired off-market properties from them in the past, we successfully negotiated, underwrote and closed the deal in less than 30 days time. Importantly, Fallbrook Center is an excellent strategic fit with our portfolio. The property is one of the leading, dominant shopping centers serving the West San Fernando Valley. Specifically, Fallbrook is ideally situated in the densely populated, affluent community of West Hills, with a trade area population base of upwards of 0.5 million people with an average household income in excess of $100,000. In addition, Warner Center, which is a Class A, 5 million square foot office complex, is less than 2 miles away and draws over 175,000 daytime employees to the trade area. Fallbrook Center features one of the best, and most diverse mix of tenants in the San Fernando Valley market, many of which are necessity-based retailers. The shopping center is uniquely anchored by 3 supermarkets, each with a different market niche, that's well suited for the surrounding community, and each has a strong, loyal customer base. Additionally, the property is anchored by a number of leading retailers, including Walmart, Home Depot, Target and Kohl's, just to name a few, along with many other national, regional and local retailers. In fact, the range of retail offerings at Fallbrook Center, and the cross-shopping synergies afforded by the tenant mix, is unparalleled in the San Fernando Valley, making the property a major retail destination in the market, drawing over 15 million shoppers to Fallbrook each year. Nearly 90% of Fallbrook is leased to anchor tenants with an average remaining lease term of approximately 12 years, providing a very stable cash flow base. Furthermore, given the property's expansive, 118-acre site, its diverse mix of space formats from large to small and its strong demographic profile, Fallbrook offers retailers rare access to one of the most sought-after, highly desirable infill markets on the West Coast. As such, demand for space at this center is very strong. With that in mind, looking ahead there are numerous opportunities to steadily grow cash flow and enhance the underlying value. We are already hard at work with several initiatives, as Rich will discuss in a minute. In addition, to acquiring Fallbrook, we also acquired 2 other exceptional shopping centers during the second quarter, 1 property in Northern California is specifically in the Bay Area, and 1 property in our Seattle market. Just like Fallbrook, both acquisitions were off-market transactions that we sourced through long-standing relationships and both shopping centers are well leased with good upside potential going forward. Along with acquiring the 254 million of shopping centers during the second quarter, we also sold 1, non-core property for $16 million, achieving a gain of over $3 million. Additionally, we are currently in the process of selling another noncore property, which we expect to complete in the second half of the year. Turning to property operations and leasing. We again posted solid results in the second quarter, achieving an all-time high portfolio lease rate of 96.8%, a 2.8% increase in same-center cash net operating income and an 8.3% increase in same-space re-leasing cash rents for the quarter. With respect to our balance sheet, we continue to work hard at maintaining our strong financial position. During the second quarter, we successfully raised $255 million of capital from 3 sources: a common stock offering, totaling $206 million; the property sale I mentioned for $16 million; and over $33 million in proceeds from warrants that were exercised during the quarter. As a result, we lowered our debt ratio down by 17%. Additionally, we acquired Fallbrook unencumbered, thereby, increasing our unencumbered GLA by over 17%. All in all, it was a very strong quarter for the company and a great first 6 months. Now I'll turn the call over to Michael Haines, the company's Chief Financial Officer, to take you through our financial results. Mike? Michael B. Haines: Thank, Stuart. For the 3 months ended June 30, the company had $36.9 million in total revenues and $9.7 million in net operating income, as compared to $26 million in total revenues and $6.6 million in net operating income for the second quarter of 2013. For the first 6 months of 2014, the company had $73.3 million in total revenues and $19.8 million in net operating income, as compared to $50.4 million in total revenues and $12.5 million in net operating income for the first 6 months of 2013. In terms of same-center net operating income, NOI increased by 2.8% during the second quarter, on a cash basis, which represents our 10th consecutive quarter of achieving same-center NOI growth. The 2.8% growth for the second quarter was impacted by 2 items. One involved removing an underperforming anchor tenant, that had an above market lease that had been in place for years, and replacing that tenant with a stronger retailer. The other item involved renewing an anchor lease where there was a onetime CAM recovery adjustment. Looking ahead, we remain on track to achieve our previously stated guidance for same-center NOI growth for the year of approximately 5%. With respect to net income for the second quarter of 2014, the company had net income of $5.8 million, equating to $0.07 per diluted share, as compared to net income of $2.5 million or $0.03 per diluted share for the second quarter of 2013. Net income for the first 6 months of 2014 was $9 million, or $0.12 per diluted share, as compared to net income of $4.8 million, or $0.07 per diluted share for the first 6 months of 2013. In terms of funds from operations for the second quarter of 2014, FFO totaled $17 million, as compared to FFO of $12.7 million for the second quarter of 2013. FFO per diluted share for the second quarter of 2014 was $0.21, representing a 16.7% increase over FFO per diluted share for the second quarter of 2013. FFO for the first 6 months of 2014 was $33.6 million, or $0.42 per diluted share, as compared to FFO of $24.2 million, or $0.36 per diluted share for the first 6 months of 2013. In light of our strong acquisition pace this year, we executed a common stock offering during the second quarter, as Stuart indicated. We issued a total of 14.4 million shares, including the underwriters overallotment option, raising approximately $206 million in net proceeds. We completed the offering towards the end of the quarter, so only a portion of 14.4 million shares was reflected in our weighted average share count for the second quarter, whereas all of the newly-issued shares from the offering will be reflected in the third quarter. With respect to the warrants, during the second quarter roughly 2.8 million warrants were exercised, generating approximately $33 million of proceeds to the company. To date in the third quarter, an additional 600,000 warrants have been exercised, generating another 7.2 million of proceeds to the company. Year-to-date, 4 million warrants have been exercised in total, generating 48 million in proceeds. Looking ahead, there's only 1.9 million warrants left outstanding, that expire in less than 90 days from now. Turning to the balance sheet, taking into account the stock offering and warrants exercised, the company's total market cap surpassed the $2 billion mark, reaching $2.2 billion as of June 30. And as Stuart indicated, we lowered our debt ratio during the second quarter. As of June 30, the company had $684 million of total debt outstanding, equating to a debt-to-total market cap ratio of 31.6%. With respect to the $684 million of debt, approximately $160 million is secured debt, $568 million dollars is unsecured. At June 30, we had approximately $122 million outstanding on our unsecured credit facility. As Stuart indicated, our unencumbered pool increased during the second quarter, with the acquisition of Fallbrook Center. As of June 30, 87% of our portfolio on a square footage basis, was unencumbered. And for the second quarter of 2014, the company's interest coverage was a solid 3.5x. Now I'll turn the call over to the Rich Schoebel, our COO, to discuss property operations. Rich? Richard K. Schoebel: Thanks, Mike. As we commented on last quarter, the demand for space that we're seeing across our portfolio continues to be among the strongest that we've seen in our 25 years of operating shopping centers on the West Coast. Needless to say, we continue to work very hard at making the most of this demand to drive our occupancy and cash flow higher each quarter. As Stuart indicated, we ended the second quarter at a new record high for the company of 96.8% lease, which is a 90-basis-point increase from the first quarter and a 330-basis-point increase from a year ago. Breaking that down between anchor versus non-anchor, at June 30, our anchor space was 100% leased and our non-anchor, in-line space was 92.9% leased. Indicative of all of our ongoing leasing activity, the economic spread between occupied space and leased space, which includes newly signed tenants that will soon take occupancy and commence paying rents, is currently at 5.9%. So there's considerable embedded cash flow growth to come. In addition to capitalizing on the strong demand to increase occupancy across our portfolio, we are also capitalizing on the strong demand to enhance our tenant mix at every opportunity. For example, notwithstanding our anchor space being virtually full and only having 1 anchor lease scheduled to expire later this year, we successfully replaced 2 anchor tenants during the second quarter with new stronger retailers. We also reconfigured a number of shop spaces at one of our properties, creating a new 20,000 square foot space and leased it to a new anchor tenant. Additionally, as we have grown our portfolio this year, we've kept a careful eye on enhancing our tenant diversity. Our largest tenant, Safeway, now only accounts for about 4% of our total base rent, and our 10 largest tenants now account for less than 20% of our total base rent. With respect to our specific leasing results, during the second quarter we executed 76 leases, totaling over 266,000 square feet, achieving a same-space comparative rent increase of 8.3% on a cash basis. Breaking that down between new and renewed leases, we executed 42 new leases totaling 203,000 square feet, achieving a same-space comparative rent increase of 9.4% on a cash basis. And we executed 34 renewals, totaling approximately 63,000 square feet, achieving a same-space cash increase of 6.9%. With respect to Fallbrook Center, to underscore Stuart's comments regarding this landmark acquisition for the company, our property management and leasing team is very excited to own and operate this unique retail asset. Our team has the skill set to make the most of this property, capitalizing on our market knowledge and our long-standing retailer relationships, including relationships with the vast majority of Fallbrook's existing tenants, as well as long-standing relationships with the major retailers vying to get access to the San Fernando Valley market. In fact, we are nothing short of astounded by the level of retailer inquiries that we have received since acquiring Fallbrook. Our leasing team has moved quickly to capitalize on available space spoken for. Additionally, we are in the process of implementing several initiatives aimed at enhancing key pedestrian entrances and arcades at the center. Furthermore, through our underwriting, we identified a perimeter pad building that we believe represents an excellent opportunity for being redeveloped, enlarge and re-tenanted. Shortly after acquiring Fallbrook, we initiated discussions with the city about the redevelopment, and its now looking like there's a strong possibility of not just redeveloping the pad, but redeveloping the entire corner of the site as mixed-use, which we -- which could prove to be a significant enhancement to the overall property and could lead to other similar opportunities down the road. In short, we are very excited about the future prospects of Fallbrook. With that, I'll turn the call back over to Stuart. Stuart A. Tanz: Thanks, Rich. Looking ahead at the second half of the year, we expect to continue growing our business and achieving solid results. In terms of acquisitions, our pipeline is active, as we continue to source off-market opportunities to acquire exceptional shopping centers on attractive terms, enhancing our market presence across each of our core markets. We are pleased to report that we just signed a contract to acquire another strong asset in our Portland market. Specifically, we are acquiring a well established, 116,000 square foot grocery and drugstore anchored shopping center that is located just down the street from the shopping center that we developed in 2012, Wilsonville Old Town Square. With this new acquisition, we will now own 2 of the 3 primary grocery-anchored centers serving the community, enhancing our ability to capitalize on strong demand for space in the market. The purchase price for the new center is $35 million and the seller is taking his equity in the property, not in cash, but instead, all in the form of operating partnership units, based on a value of $16 per share. Beyond this acquisition, our goal is to acquire approximately another $100 million by year-end. On the leasing front, we are continuing to carefully cull our portfolio, seeking out every opportunity to enhance our tenant base and cash flow. As Rich indicated, there's cash flow growth to come in our portfolio as newly signed leases take occupancy and commence paying rent, which help -- should help drive our same-center NOI higher in the second half of the year. With respect to our balance sheet, as Michael discussed, the warrants will be winding down soon. The remaining warrants should generate about another $23 million in equity proceeds by their expiration in October. In terms of debt, during the second half of the year, depending upon market conditions, we may look to replace a portion of our short-term, floating-rate debt, with longer-term fixed-rate bonds. In summary, with our accomplishments during the first 6 months of 2014, together with the ongoing demand for space and the multitude of opportunities embedded in our portfolio to enhance value, we are heading into the second half of the year with good momentum, and remain on track to achieve our stated growth objectives for the year. As always, we remain firmly committed to prudently growing our portfolio, backed by a conservative, straightforward balance sheet and business plan. Now we will open up the call for your questions. Operator?

[Operator Instructions] Our first question comes from the line of Todd Thomas of KeyBanc Capital Market. Grant Keeney - KeyBanc Capital Markets Inc., Research Division: This is actually Grant on for Todd. I just wanted to touch on acquisition. So you said, $100 million more by the end of the year, you've had a very active year so far. So I just wanted to actually the net acquisitions, you feel comfortable with the $250 million, that would imply a pretty big pickup in the disposition. So just wanted to see how you're thinking about that? Stuart A. Tanz: Yes. We're still comfortable with that number on a net basis, that would include the dispositions. Grant Keeney - KeyBanc Capital Markets Inc., Research Division: Okay. So in addition to sales village, I guess, that would imply around $100 million more of dispositions? Stuart A. Tanz: No, we currently have a property of, as got forward to be sold in the upcoming, probably the third quarter, we're expected to close. And then we've got a couple of other assets that were also currently marketing. All 3 of those sales, in addition, to those we're going to hit our target of close to $50 million. Grant Keeney - KeyBanc Capital Markets Inc., Research Division: Okay, okay. And then the $100 million, I guess, how would you characterize, I mean, it is one-off sort of portfolio, couple of properties, or just a little color there? Stuart A. Tanz: Pipeline is very strong both in one-offs and portfolios at present time. So I can't really determine whether we'll meet that number as it relates to 1 property or a number of properties, but again, we're certainly comfortable with that assumption for the balance of the year. Grant Keeney - KeyBanc Capital Markets Inc., Research Division: Okay. And then Rich, the 96.8% lease rate, I guess, where do you see that going from here? Do you think that you might -- may have lost money on the table on the lease process, I guess, how are you looking at the portfolio right now? Richard K. Schoebel: No. I, wouldn't say we've lost any money on the table. I think given our history of high occupancy, at our previous company, we expect to maintain that here as well. And with that, high occupancy allows us to do is to drive the rents for the remainder space and also on the renewal. Grant Keeney - KeyBanc Capital Markets Inc., Research Division: Okay. And then just lastly on Crossroads. Can we get an update on where you guys stand with the redevelopment? Richard K. Schoebel: We are making some headway there on the senior housing. We have -- we're working very closely with the city, and we expect to give you a lot more color on that progress as we move through the balance of the year, but that process is proceeding at a pretty quick pace at this point.

Our next question comes from the line of Paul Adornato of BMO Capital Markets. Paul E. Adornato - BMO Capital Markets Canada: Interesting to see that Wilsonville is using OP units, or the seller is taking OP units. I was wondering if you could just provide kind of an update, if you will. How many OP units or what value of OP units have you issued so far in all of your acquisitions? And also in the pipeline, are there more OP unit deals out there? Stuart A. Tanz: Sure. There is still a number of very high quality assets on the West Coast that are owned by individuals or families, that we've continue to work with through the relationships that we had with these families that are individuals for many years. So I do believe that we'll be able to continue source, acquisitions, utilizing our currency, which of course, is our most precious commodity. But I do believe that we will continue be able to source acquisitions in terms of using the OP structure. In terms of what we issued in total today, Mike? Michael B. Haines: It was just the Crossroads in Five Points transactions from last year, and right now, it's about 3.1 million OP units outstanding which we take into account our fully diluted share count. Stuart A. Tanz: About $60 million in total, in terms of OP units, all that have been taken at a premium to where our stock was trading. Paul E. Adornato - BMO Capital Markets Canada: Great. And Stuart, I guess, over your career, you have been very good at the timing the market in terms of when to get in and when to get out. We've seen cap rates continue to compress on the West Coast. And so I was wondering if you could just give us kind of a big picture view of how you see the acquisition environment these days? Stuart A. Tanz: Sure. Well, certainly I have been probably more lucky than smart. But certainly, the current environment within terms of acquisitions is, it's not as busy as it's been in the past, but we continue to source very strong acquisitions. And of course, depending on specific property in market, again, we certainly see cap rate still in the low 5s and in some cases now getting into the 4s. The only other thing to comment on, Paul, going forward in terms of certainly our real estate, but probably weaken in general, as I think we're beginning, certainly to see, certainly, on the West Coast. For us, the coming out of the great recession we're begin to see as Rich mentioned, a large traction in terms of demand. So I do think when you look at our portfolio, and probably, a lot of retail in terms of the sector, there's probably still some inherited growth in income given the fact that a lot of these markets were just now starting to see the benefits no supply and the amount of absorption that has picked up, certainly, on the West Coast and other areas of the country.

Thank you. I'm showing no further questions at this time. I'll hand the call back over to Mr. Tanz for any closing remarks. Stuart A. Tanz: Well, in closing, I would like to thank all of you for joining us today. If you have any additional questions, please contact Mike, Rich or me directly. Also, you can find additional information on the company's quarterly supplemental package, which is posted on our website. Thanks, again, and have a great day everyone.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all now disconnect. Have a great day, everyone.