Retail Opportunity Investments (ROIC) Ratings Affirms by S&P; Notes Well-Occupied, High-Barrier Shopping Centers

Standard & Poor's Ratings Services affirmed its 'BBB-' corporate credit rating on Retail Opportunity Investments (NASDAQ: ROIC) and its operating partnership, Retail Opportunity Investments Partnership L.P. (collectively, ROIC). The outlook is stable. At the same time, we affirmed our 'BBB-' issue-level rating on ROIC's senior unsecured notes.

"ROIC's well-occupied, grocery-anchored shopping center portfolio located in high barrier to entry West Coast markets supports our view of its business risk profile as "satisfactory"," said credit analyst Michael Souers.

The outlook is stable. We expect cash flow from ROIC's portfolio of West Coast shopping center properties will be stable over the next two years and believe incremental EBITDA will be derived from same-store NOI growth and investment activity. We believe debt to EBITDA will be variable quarter to quarter, given the impact of growth on a smaller asset base, but will steadily trend toward
below 7.5x and FCC will remain in the low to mid-3x area.

We would consider raising the rating if the company grows the portfolio meaningfully and prudently such that scale is more comparable to rated peers, while also maintaining strong operating performance from the core portfolio and improving credit measures such that debt to EBITDA trends below 7.0x.

We see limited downside to the rating in the near term but we could lower the rating if operations falter or if the company commits to a large debt-financed transaction that causes leverage and coverage metrics to weaken such that debt to EBITDA exceeds 8.0x on a sustained basis, or FCC falls below 2.1x. However, we view this latter scenario as less likely, given our expectations for measured, leverage-neutral growth.

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