UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2017~~2018

¨ 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 001-35713

WHEELER REAL ESTATE INVESTMENT TRUST, INC.

(Exact Name of Registrant as Specified in Its Charter)



Maryland		45-2681082
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

2529 Virginia Beach Blvd., Suite 200 Virginia Beach. Virginia		23452
(Address of Principal Executive Offices)		(Zip Code)

(757) 627-9088

(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. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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. ~~(Check one):~~

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. ý¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

As of May ~~1, 2017,~~7, 2018, there were ~~8,616,247~~9,056,723 common shares, $0.01 par value per share, outstanding.

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries



		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of March 31, ~~2017~~2018 (unaudited) and December 31, ~~2016~~2017	3
	Condensed Consolidated Statements of Operations (unaudited) for the three month periods ended March 31, ~~2017~~2018 and ~~2016~~2017	4
	Condensed Consolidated Statement of Equity (unaudited) for the three month period ended March 31, ~~2017~~2018	5
	Condensed Consolidated Statements of Cash Flows (unaudited) for the three month periods ended March 31, ~~2017~~2018 and ~~2016~~2017	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2529
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3337
Item 4.	Controls and Procedures	3337

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	3439
Item 1A.	Risk Factors	3439
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3440
Item 3.	Defaults Upon Senior Securities	3440
Item 4.	Mine Safety Disclosures	3440
Item 5.	Other Information	3440
Item 6.	Exhibits	3541
	Signatures	3844

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)


	March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017
	(unaudited)						(unaudited)
ASSETS:
Investment properties, net	$	386,704		$	388,880		$	448,555		$	384,334
Cash and cash equivalents	4,664			4,863			5,148			3,677
Restricted cash	9,324			9,652			12,198			8,609
Rents and other tenant receivables, net	3,370			3,984			4,621			5,619
Related party receivables	1,566			1,456
Notes receivable	12,000			12,000
Notes receivable, net							6,739			6,739
Goodwill	5,486			5,486			5,486			5,486
Assets held for sale	—			366			9,134			—
Above market lease intangible, net	11,976			12,962			9,862			8,778
Deferred costs and other assets, net	46,453			49,397			41,010			34,432
Total Assets	$	481,543		$	489,046		$	542,753		$	457,674
LIABILITIES:
Loans payable, net	$	305,893		$	305,973		$	373,047		$	308,122
Liabilities associated with assets held for sale	—			1,350			708			—
Related party payables, net							5			—
Below market lease intangible, net	11,886			12,680			13,382			9,616
Accounts payable, accrued expenses and other liabilities	12,274			11,321			11,033			10,624
Dividends payable							3,037			5,480
Total Liabilities	330,053			331,324			401,212			333,842
Commitments and contingencies
Series D Cumulative Convertible Preferred Stock (no par value, 4,000,000 shares authorized, 2,237,000 shares issued and outstanding; $55.93 million aggregate liquidation preference)	52,686			52,530
Series D Cumulative Convertible Preferred Stock (no par value, 4,000,000 shares authorized, 3,600,636 and 2,237,000 shares issued and outstanding; $90.02 million and $55.93 million aggregate liquidation preference, respectively)							74,542			53,236

EQUITY:
Series A Preferred Stock (no par value, 4,500 shares authorized, 562 shares issued and outstanding)	453			453			453			453
Series B Convertible Preferred Stock (no par value, 5,000,000 authorized, 1,871,244 shares issued and outstanding; $46.78 million aggregate liquidation preference)	40,754			40,733
Common Stock ($0.01 par value, 18,750,000 shares authorized, 8,588,470 and 8,503,819 shares issued and outstanding, respectively)	86			85
Series B Convertible Preferred Stock (no par value, 5,000,000 authorized, 1,875,748 and 1,875,848 shares issued and outstanding, respectively; $46.90 million aggregate liquidation preference)							40,935			40,915
Common Stock ($0.01 par value, 18,750,000 shares authorized, 8,947,416 and 8,744,189 shares issued and outstanding, respectively)							89			87
Additional paid-in capital	225,104			223,939			229,007			226,978
Accumulated deficit	(177,576		)	(170,377		)	(209,957		)	(204,925		)
Total Shareholders’ Equity	88,821			94,833			60,527			63,508
Noncontrolling interests	9,983			10,359			6,472			7,088
Total Equity	98,804			105,192			66,999			70,596
Total Liabilities and Equity	$	481,543		$	489,046		$	542,753		$	457,674

See accompanying notes to condensed consolidated financial statements.

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

(Unaudited)


	Three Months Ended March 31,						Three Months Ended March 31,
	2017			2016			2018			2017
REVENUE:
Rental revenues	$	11,129		$	6,742		$	12,697		$	11,129
Asset management fees	162			255			48			162
Commissions	115			153			14			115
Tenant reimbursements and other revenues	2,916			1,988
Tenant reimbursements							3,222			2,680
Development and other revenues							333			236
Total Revenue	14,322			9,138			16,314			14,322
OPERATING EXPENSES:
Property operations	3,994			2,675			4,599			3,994
Non-REIT management and leasing services	271			377			36			271
Depreciation and amortization	6,400			4,880			7,476			6,400
Provision for credit losses	252			88			21			252
Corporate general & administrative	2,232			2,282			2,508			2,232
Total Operating Expenses	13,149			10,302			14,640			13,149
Operating Income (Loss)	1,173			(1,164		)
Gain on disposal of properties							1,055			—
Operating Income							2,729			1,173
Interest income	356			1			1			356
Interest expense	(4,177		)	(2,420		)	(4,577		)	(4,177		)
Net Loss from Continuing Operations Before Income Taxes	(2,648		)	(3,583		)	(1,847		)	(2,648		)
Income tax expense	(41		)	—			(25		)	(41		)
Net Loss from Continuing Operations	(2,689		)	(3,583		)	(1,872		)	(2,689		)
Discontinued Operations
Income from discontinued operations	16			21			—			16
Gain on disposal of properties	1,513			—			—			1,513
Net Income from Discontinued Operations	1,529			21			—			1,529
Net Loss	(1,160		)	(3,562		)	(1,872		)	(1,160		)
Less: Net loss attributable to noncontrolling interests	(41		)	(333		)	(47		)	(41		)
Net Loss Attributable to Wheeler REIT	(1,119		)	(3,229		)	(1,825		)	(1,119		)
Preferred stock dividends	(2,483		)	(511		)	(3,207		)	(2,483		)
Net Loss Attributable to Wheeler REIT Common Shareholders	$	(3,602	)	$	(3,740	)	$	(5,032	)	$	(3,602	)

Loss per share from continuing operations (basic and diluted)	$	(0.59	)	$	(0.45	)	$	(0.57	)	$	(0.59	)
Income per share from discontinued operations	0.17			—			—			0.17
	$	(0.42	)	$	(0.45	)	$	(0.57	)	$	(0.42	)
Weighted-average number of shares:
Basic and Diluted	8,554,304			8,284,116			8,900,416			8,554,304

Dividends declared per common share	$	0.42		$	0.42		$	—		$	0.42

See accompanying notes to condensed consolidated financial statements.

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Condensed Consolidated Statement of Equity

(in thousands, except share data)

(Unaudited)

Series A Series B Noncontrolling
Preferred Stock Preferred Stock Common Stock
Additional
Paid-in Capital
Accumulated Deficit
Total
Shareholders’ Equity
Interests Total
Shares Value Shares Value Shares Value Units Value Equity
Balance,
December 31, 2016
562
$ 453
1,871,244
$ 40,733
8,503,819
$ 85
$ 223,939
$ (170,377 ) $ 94,833
761,954
$ 10,359
$ 105,192
Accretion of
Series B Preferred Stock discount
—
—
—
21
—
—
—
—
21
—
—
21
Conversion of senior
convertible notes to
Common Stock —
—
—
—
2,509
—
31
—
31
—
—
31
Issuance of
Common Stock under Share Incentive Plan —
—
—
—
82,142
1
1,120
—
1,121
—
—
1,121
Redemption of fractional units as a result of reverse stock split —
—
—
—
—
—
—
—
—
(66 ) (1 ) (1 )
Adjustment for
noncontrolling interest in operating partnership
—
—
—
—
—
—
14
—
14
—
(14 ) —
Dividends and
distributions
—
—
—
—
—
—
—
(6,080 ) (6,080 ) —
(320 ) (6,400 )
Net loss —
—
—
—
—
—
—
(1,119 ) (1,119 ) —
(41 ) (1,160 )
Balance,
March 31, 2017 (Unaudited)
562
$ 453
1,871,244
$ 40,754
8,588,470
$ 86
$ 225,104
$ (177,576 ) $ 88,821
761,888
$ 9,983
$ 98,804




	Series A			Series B																Noncontrolling
	Preferred Stock			Preferred Stock					Common Stock			Additional Paid-in Capital		Accumulated Deficit			Total Shareholders’ Equity			Interests					Total
	Shares	Value		Shares		Value			Shares	Value		Additional Paid-in Capital		Accumulated Deficit			Total Shareholders’ Equity			Units		Value			Equity
Balance, December 31, 2017	562	$	453	1,875,848		$	40,915		8,744,189	$	87	$	226,978	$	(204,925	)	$	63,508		635,018		$	7,088		$	70,596
Accretion of Series B Preferred Stock discount	—	—		—		22			—	—		—		—			22			—		—			22
Conversion of Series B Preferred Stock to Common Stock	—	—		(100	)	(2		)	62	—		2		—			—			—		—			—
Conversion of operating partnership units to Common Stock	—	—		—		—			9,706	—		64		—			64			(9,706	)	(64		)	—
Issuance of Common Stock under Share Incentive Plan	—	—		—		—			43,459	—		330		—			330			—		—			330
Issuance of Common Stock for acquisition of JANAF	—	—		—		—			150,000	2		1,128		—			1,130			—		—			1,130
Adjustment for noncontrolling interest in operating partnership	—	—		—		—			—	—		505		—			505			—		(505		)	—
Dividends and distributions	—	—		—		—			—	—		—		(3,207		)	(3,207		)	—		—			(3,207		)
Net loss	—	—		—		—			—	—		—		(1,825		)	(1,825		)	—		(47		)	(1,872		)
Balance, March 31, 2018 (Unaudited)	562	$	453	1,875,748		$	40,935		8,947,416	$	89	$	229,007	$	(209,957	)	$	60,527		625,312		$	6,472		$	66,999

See accompanying notes to condensed consolidated financial statements.

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(~~Unaudited,~~ in thousands)


	For the Three Months Ended March 31,						For the Three Months Ended March 31,
	2017			2016			2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,160	)	$	(3,562	)	$	(1,872	)	$	(1,160	)
Adjustments to reconcile consolidated net loss to net cash from operating activities
Depreciation	2,671			1,733			3,173			2,671
Amortization	3,729			3,147			4,303			3,729
Loan cost amortization	763			190			379			763
Above (below) market lease amortization, net	193			72			(22		)	193
Share-based compensation	377			70			419			377
Gain on disposal of properties	(1,513		)	—			(1,055		)	—
Gain on disposal of properties-discontinued operations							—			(1,513		)
Provision for credit losses	252			88			21			252
Changes in assets and liabilities, net of acquisitions
Rent and other tenant receivables, net	546			323			978			546
Unbilled rent	(185		)	(8		)	(83		)	(185		)
Related party receivables	(110		)	(10		)	84			(110		)
Cash restricted for operating property reserves	329			122
Deferred costs and other assets, net	(786		)	(1,870		)	(197		)	(786		)
Accounts payable, accrued expenses and other liabilities	1,683			329			346			1,683
Net operating cash flows provided by discontinued operations	32			4			—			32
Net cash from operating activities	6,821			628
Net cash provided by operating activities							6,474			6,492
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment property acquisitions							(23,153		)	—
Capital expenditures	(494		)	(369		)	(1,472		)	(494		)
Increase in capital property reserves	(1		)	37
Cash received from disposal of properties	1,871			—			1,160			—
Net cash from (used in) investing activities	1,376			(332		)
Cash received from disposal of properties-discontinued operations							—			1,871
Net cash (used in) provided by investing activities							(23,465		)	1,377
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for deferred financing costs	(163		)	(97		)	(128		)	(163		)
Dividends and distributions paid	(6,193		)	(4,143		)	(5,480		)	(6,193		)
Offering costs on preferred stock	(18		)	—
Proceeds from sales of Preferred Stock, net of expenses							21,158			(18		)
Loan proceeds	6,181			3,000			7,403			6,181
Loan principal payments	(6,516		)	(2,752		)	(902		)	(6,516		)
Net financing cash flows used in discontinued operations	(1,687		)	(5		)	—			(1,687		)
Net cash used in financing activities	(8,396		)	(3,997		)
DECREASE IN CASH AND CASH EQUIVALENTS	(199		)	(3,701		)
CASH AND CASH EQUIVALENTS, beginning of period	4,863			10,478
CASH AND CASH EQUIVALENTS, end of period	$	4,664		$	6,777
Net cash provided (used in) by financing activities							22,051			(8,396		)
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH							5,060			(527		)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period							12,286			14,515
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period							$	17,346		$	13,988
Supplemental Disclosures:
Non-Cash Transactions:
Noncontrolling interests resulting from the issuance of common units	$	—		$	1,499
Debt assumed for acquisition							$	58,867		$	—
Conversion of common units to common stock							$	64		$	—
Conversion of Series B Preferred Stock to Common Stock							$	2		$	—
Conversion of senior convertible debt into common stock	$	31		$	—		$	—		$	31
Issuance of Common Stock for acquisition							$	1,130		$	—
Accretion of preferred stock discounts	$	195		$	89		$	170		$	195
Other Cash Transactions:
Cash paid for taxes	$	107		$	—		$	—		$	107
Cash paid for interest	$	3,309		$	2,262		$	3,911		$	3,309

See accompanying notes to condensed consolidated financial statements.

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Basis of Presentation and Consolidation

Wheeler Real Estate Investment Trust, Inc. (the "Trust", the "REIT", or "Company") is a Maryland corporation formed on June 23, 2011. The Trust serves as the general partner of Wheeler REIT, L.P. (the “Operating Partnership”), which was formed as a Virginia limited partnership on April 5, 2012. As of March 31, ~~2017,~~2018, the Trust, through the Operating Partnership, owned and operated ~~sixty-four~~sixty-five centers, one office building, ~~eight~~seven undeveloped properties, and one redevelopment project in Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, Oklahoma, Tennessee, Kentucky, New Jersey, Pennsylvania and West Virginia. Accordingly, the use of the word “Company” refers to the Trust and its consolidated subsidiaries, except where the context otherwise requires.

On October 24, 2014, the Trust, through the Operating Partnership, acquired (i) Wheeler Interests, LLC (“WI”), an acquisition and asset management firm, (ii) Wheeler Real Estate, LLC (“WRE”), a real estate leasing, management and administration firm and (iii) WHLR Management, LLC (“WM” and collectively with WI and WRE the “Operating Companies”), a real estate business operations firm, from Jon S. Wheeler, the Company's then Chairman and CEO, resulting in the Company becoming an internally-managed REIT. Accordingly, the responsibility for identifying targeted real estate investments, the handling of the disposition of real estate investments our ~~board~~Board of ~~directors~~Directors chooses to sell, administering our day-to-day business operations, including but not limited to, leasing, property management, payroll and accounting functions, acquisitions, asset management and administration are now handled internally.

Prior to being acquired by the Company, the Operating Companies served as the external manager for the Company and its properties (the “REIT Properties”) and performed property management and leasing functions for certain related and non-related third parties (the “Non-REIT Properties”). The Company will continue to perform these services for the Non-REIT Properties through the Operating Companies, primarily through WRE. Accordingly, the Company converted WRE to a Taxable REIT Subsidiary (“TRS”) to accommodate serving the Non-REIT Properties since applicable REIT regulations consider the income derived from these services to be “bad” income subject to taxation. The regulations allow for costs incurred by the Company commensurate with the services performed for the Non-REIT Properties to be allocated to a TRS.

During January 2014, the Company acquired Wheeler Development, LLC (“WD”) and converted it to a TRS. The Company began performing development activities for both REIT Properties and Non-REIT Properties during 2015.

The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (the “Form 10-Q”) are unaudited and the results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for future periods or the year. However, amounts presented in the condensed consolidated balance sheet as of December 31, ~~2016~~2017 are derived from the Company’s audited consolidated financial statements as of that date, but do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. The Company prepared the accompanying condensed consolidated financial statements in accordance with GAAP for interim financial statements. All per share amounts, common units and shares outstanding and stock-based compensation amounts for all periods presented reflect our one-for-eight reverse stock split (the "Reverse Stock Split"), which was effective March 31, 2017. All material balances and transactions between the consolidated entities of the Company have been eliminated. You should read these condensed consolidated financial statements in conjunction with our ~~2016~~2017 Annual Report filed on Form 10-K for the year ended December 31, ~~2016~~2017 (the ~~“2016~~“2017 Form 10-K”).

2. Summary of Significant Accounting Policies

Investment Properties

The Company records investment properties and related intangibles at fair value upon acquisition. Investment properties include both acquired and constructed assets. Improvements and major repairs and maintenance are capitalized when the repair and maintenance substantially extends the useful life, increases capacity or improves the efficiency of the asset. All other repair and maintenance costs are expensed as incurred. The Company capitalizes interest on projects during periods of construction until the projects reach the completion point that corresponds with their intended purpose.

The Company allocates the purchase price of acquisitions to the various components of the asset based upon the fair value of each component which may be derived from various observable or unobservable inputs and assumptions. Also, the Company may utilize third party valuation specialists. These components typically include buildings, land and any intangible assets related to out-of-market leases, tenant relationships and in-place leases the Company determines to exist. The Company

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (continued)

Company may utilize third party valuation specialists. These components typically include buildings, land and any intangible assets related to out-of-market leases, tenant relationships and in-place leases the Company determines to exist. The Company determines fair value based on estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including the historical operating results, known trends and specific market and economic conditions that may affect the property. Factors considered by management in the analysis of determining the as-if-vacant property value include an estimate of carrying costs during the expected lease-up periods considering market conditions, and costs to execute similar leases. In estimating carrying costs, management includes real estate taxes, insurance and estimates of lost rentals at market rates during the expected lease-up periods, tenant demand and other economic conditions. Management also estimates costs to execute similar leases including leasing commissions, tenant improvements, legal and other related expenses. Intangibles related to out-of-market leases, tenant relationships and in-place lease value are recorded as acquired lease intangibles and are amortized as an adjustment to rental revenue or amortization expense, as appropriate, over the remaining terms of the underlying leases. Premiums or discounts on acquired out-of-market debt are amortized to interest expense over the remaining term of such debt.

The Company records depreciation on buildings and improvements utilizing the straight-line method over the estimated useful life of the asset, generally 5 to 40 years. The Company reviews depreciable lives of investment properties periodically and makes adjustments to reflect a shorter economic life, when necessary. Tenant allowances, tenant inducements and tenant improvements are amortized utilizing the straight-line method over the term of the related lease or ~~occupancy~~occupancrey term of the tenant, if shorter.

Amounts allocated to buildings are depreciated over the estimated remaining life of the acquired building or related improvements. The Company amortizes amounts allocated to tenant improvements, in-place lease assets and other lease-related intangibles over the remaining life of the underlying leases. The Company also estimates the value of other acquired intangible assets, if any, and amortizes them over the remaining life of the underlying related intangibles.

The Company reviews investment properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable, but at least annually. These circumstances include, but are not limited to, declines in the property’s cash flows, occupancy and fair market value. The Company measures any impairment of investment property when the estimated undiscounted operating income before depreciation and amortization, plus its residual value, is less than the carrying value of the property. Estimated undiscounted operating income before depreciation and amortization includes various level 3 fair value assumptions including renewal and renegotiations of current leases, estimates of operating costs and fluctuating market conditions. The renewal and renegotiations of leases in some cases must be approved by additional third parties outside the control of the Company and the tenant. If such renewed or renegotiated leases are approved at amounts below correct estimates, then impairment adjustments may be necessary in the future. To the extent impairment has occurred, the Company charges to income the excess of the carrying value of the property over its estimated fair value. The Company estimates fair value using unobservable data such as operating income, estimated capitalization rates, or multiples, leasing prospects and local market information. The Company may decide to sell properties that are held for use and the sale prices of these properties may differ from their carrying values. The Company did not record any impairment adjustments to its properties during the three months ended March 31, ~~2017~~2018 and ~~2016.~~2017.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash and cash equivalents. Cash equivalents are carried at cost, which approximates fair value. Cash equivalents consist primarily of bank operating accounts and money markets. Financial instruments that potentially subject the Company to concentrations of credit risk include its cash and cash equivalents and its trade accounts receivable. The Company places its cash and cash equivalents with institutions of high credit quality.

Restricted cash represents amounts held by lenders for real estate taxes, insurance, reserves for capital improvements and tenant security deposits. The Company presents changes in cash restricted for real estate taxes, insurance and tenant security deposits as operating activities in the condensed consolidated statement of cash flows. The Company presents changes in cash restricted for capital improvements as investing activities in the condensed consolidated statement of cash flows.

The Company places its cash and cash equivalents and restricted cash on deposit with financial institutions in the United States, which are insured by the Federal Deposit Insurance Company (“FDIC”) up to $250 thousand. The Company's credit loss in the event of failure of these financial institutions is represented by the difference between the FDIC limit and the total amounts on deposit. Management monitors the financial institutions credit worthiness in conjunction with balances on deposit to minimize risk.

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (continued)

Tenant Receivables and Unbilled Rent

Tenant receivables include base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. The Company determines an allowance for the uncollectible portion of accrued rents and accounts receivable based upon customer credit-worthiness (including expected recovery of a claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. The Company considers a receivable past due once it becomes delinquent per the terms of the lease. The Company’s standard lease form considers a rent charge past due after five days. A past due receivable triggers certain events such as notices, fees and other allowable and required actions per the lease. As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company’s allowance for uncollectible accounts totaled ~~$964~~$723 thousand and ~~$691~~$705 thousand, respectively. During the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, the Company recorded bad debt expenses in the amount of ~~$252~~$98 thousand and ~~$88~~$252 thousand, respectively, related to tenant receivables that were specifically identified as potentially uncollectible based on an assessment of the tenant’s credit-worthiness. During the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, the Company did not realize any recoveries related to tenant receivables previously written off.

Notes Receivable

Notes receivable represent financing to Sea Turtle Development as discussed in Note 4 for development of the project. The notes are secured by the underlying real estate known as Sea Turtle Development. The Company evaluates the collectability of both the interest on and principal of the notes receivable based primarily upon the projected fair market value of the project at stabilization. The notes receivable are determined to be impaired when, based upon current information, it is no longer probable that the Company will be able to collect all contractual amounts due from the borrower. The amount of impairment loss recognized is measured as the difference between the carrying amount of the loan and its estimated realizable value.

Goodwill

Goodwill is deemed to have an indefinite economic life and is not subject to amortization. Goodwill is tested annually for impairment and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. To test for impairment, the Company first assesses qualitative factors, such as current macroeconomic conditions and our overall financial and operating performance, to determine the likelihood that the fair value of a reporting unit is less than its carrying amount. If the Company determines it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company proceeds with the two-step approach to evaluating impairment. First, the Company estimates the fair value of the reporting unit and compares it to the reporting unit’s carrying value. If the carrying value exceeds fair value, the Company proceeds with the second step, which requires us to assign the fair value of the reporting unit to all of the assets and liabilities of the reporting unit as if it had been acquired in a business combination at the date of the impairment test. The excess fair value of the reporting unit over the amounts assigned to the assets and liabilities is the implied value of goodwill and is used to determine the amount of impairment. The Company would recognize an impairment loss to the extent the carrying value of goodwill exceeds the implied value. As of March 31, 2018 and December 31, 2017, no adjustments were made to goodwill.

Above and Below Market Lease Intangibles, net

The Company determines the above and below market lease intangibles upon acquiring a property. Above and below market lease intangibles are amortized over the life of the respective leases. Amortization of above and below market lease intangibles is recorded as a component of rental revenues.

Deferred Costs and Other Assets, net

The Company’s deferred costs and other assets consist primarily of leasing commissions, leases in place, capitalized legal and marketing costs, ~~and~~ tenant relationship and ground lease sandwich interest intangibles associated with acquisitions. The Company’s lease origination costs consist primarily of the portion of property acquisitions allocated to lease originations and commissions paid in connection with lease originations.

~~Details of these deferred costs, net of amortization, and other assets are as follows (in thousands):~~

March 31, 2017 December 31, 2016
(unaudited)
Leases in place, net $ 33,075
$ 35,655
Tenant relationships, net 9,880
10,944
Lease origination costs, net 1,131
1,096
Other 1,213
517
Deposits of acquisitions 1,061
1,086
Legal and marketing costs, net 93
99
Total Deferred Costs and Other Assets, net $ 46,453
$ 49,397

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (continued)

Details of these deferred costs, net of amortization, and other assets are as follows (in thousands):



	March 31, 2018		December 31, 2017
	(unaudited)
Leases in place, net	$	30,010	$	25,118
Tenant relationships, net	5,830		6,804
Ground lease sandwich interest	2,694		—
Other	1,171		810
Lease origination costs, net	1,070		1,077
Deposits	163		547
Legal and marketing costs, net	72		76
Total Deferred Costs and Other Assets, net	$	41,010	$	34,432

Amortization of lease origination costs, leases in place, legal and marketing costs, ~~and~~ tenant relationships and ground lease sandwich interest represents a component of depreciation and amortization expense. As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company’s intangible accumulated amortization totaled ~~$32.28~~$45.36 million and ~~$28.55~~$41.83 million, respectively. During the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, the Company’s intangible amortization expense totaled $4.30 million and $3.73 million, ~~and $3.15 million,~~ respectively. ~~Future~~As of March 31, 2018, the Company's annual amortization offor its lease origination costs, leases in place, legal and marketing costs ~~and~~ tenant relationships, and ground lease sandwich interests is as follows (in ~~thousands, unaudited)~~thousands):

For the Periods Ending March 31,
Lease
Origination
Costs, net

Leases In
Place, net

Legal &
Marketing
Costs, net

Tenant
Relationships, net
Total
2018 $ 296
$ 9,029
$ 21
$ 3,607
$ 12,953
2019 206
6,797
16
2,428
9,447
2020 149
4,816
13
1,428
6,406
2021 112
3,363
11
811
4,297
2022 94
2,340
8
505
2,947
Thereafter 274
6,730
24
1,101
8,129
$ 1,131
$ 33,075
$ 93
$ 9,880
$ 44,179



	Leases In Place, net		Tenant Relationships, net		Legal & Marketing Costs, net		Ground Lease Sandwich Interest		Lease Origination Costs, net		Total
For the remaining nine months ended December 31, 2018	$	7,413	$	2,028	$	13	$	205	$	190	$	9,849
December 31, 2019	6,635		1,581		14		274		195		8,699
December 31, 2020	4,735		874		11		274		151		6,045
December 31, 2021	2,964		458		9		274		134		3,839
December 31, 2022	2,277		364		6		274		93		3,014
December 31, 2023	1,762		235		6		274		75		2,352
Thereafter	4,224		290		13		1,119		232		5,878
	$	30,010	$	5,830	$	72	$	2,694	$	1,070	$	39,676

Revenue Recognition

Adoption of ASC Topic 606, “Revenue from Contracts with Customers”

As detailed in “Recent Accounting Pronouncements”, the Company adopted Topic 606, Revenue from Contracts with Customers on January 1, 2018 with the cumulative effect of initially applying the standard recognized on this date. As a result, the Company has changed its accounting policies for revenue recognized on non-real estate lease contracts. As of adoption, non-lease revenue streams are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

Lease Contract Revenue

The Company retains substantially all of the risks and benefits of ownership of the investment properties and accounts for its leases as operating leases. The Company accrues minimum rents on a straight-line basis over the terms of the respective leases which results in an unbilled rent asset or deferred rent liability being recorded on the balance sheet. At March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, there were ~~$1.42~~$2.42 million and ~~$1.24~~$2.34 million in unbilled rent ~~amount~~ which is included in ~~rents~~"rents and other tenant receivables, net." Additionally, certain of the lease agreements contain provisions that grant additional rents based on tenants’

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (continued)

sales volumes (contingent or percentage rent). Percentage rents are recognized when the tenants achieve the specified targets as defined in their lease agreements. ~~During the three months ended March 31, 2017 and 2016, the Company recognized percentage rents of $87 thousand and $70 thousand, respectively.~~

The Company’s leases generally require the tenant to reimburse the Company for a substantial portion of its expenses incurred in operating, maintaining, repairing, insuring and managing the shopping center and common areas (collectively defined as Common Area Maintenance or “CAM” expenses). The Company includes these reimbursements, along with other revenue derived from late fees and seasonal events, under the Condensed Consolidated Statements of Operations caption "Tenant reimbursements and other revenues." This significantly reduces the Company’s exposure to increases in costs and operating expenses resulting from inflation or other outside factors. The Company accrues reimbursements from tenants for recoverable portions of all these expenses as revenue in the period the applicable expenditures are incurred. The Company calculates the tenant’s share of operating costs by multiplying the total amount of the operating costs by a fraction, the numerator of which is the total number of square feet being leased by the tenant, and the denominator of which is the average total square footage of all leasable buildings at the property. The Company also receives escrow payments for these reimbursements from substantially all its tenants throughout the year. The Company recognizes differences between estimated recoveries and the final billed amounts in the subsequent year. These differences were not material for the three months ended March 31, ~~2017~~2018 and ~~2016.~~

2017.

The Company recognizes lease termination fees in the ~~period~~year that the lease is terminated and collection of the ~~fees~~fee is reasonably assured. Upon early lease termination, the Company provides for losses related to unrecovered intangibles and other assets.

Asset Management Fees

Asset management fees are generated from Non-REIT properties. The Non-REIT Properties pay WRE property management and/or asset management fees of 3% and 2% of collected revenues, respectively for services performed. Revenues are governed by the management fee agreements for the various properties. Obligations under the agreements include and are not limited to: managing of maintenance, janitorial, security, landscaping, vendors, back office (collecting rents, paying bills), etc. Each of the obligations are bundled together to be one service and are satisfied over time. Non-REIT Properties are billed monthly and typically pay monthly for these services.

Commissions

Commissions are generated from Non-REIT properties. The Non-REIT Properties pay WRE leasing commissions based on the total contractual revenues to be generated under the new/renewed lease agreement (6% for new leases and 3% for renewals). Revenues are governed by the leasing commission agreements for the various properties. Obligations under the agreements include and are not limited to: monitoring upcoming vacancies, new tenant identification, proposal preparation, lease negotiation, document preparation, etc. Each of the obligations are bundled together to be one service as the overall objective of these services is to maintain the overall occupancy of the property. Revenue is recognized and billed upon lease execution.

Development Income

Non-REIT properties pay development fees of 5% of hard costs. Revenues are governed by the development agreements for each development. Obligations under the agreements include overseeing the development of the project. The Company’s performance creates or enhances the project that the Non-REIT property controls as such this revenue is recognized over time. The projects are billed monthly and typically pay monthly for these services.

1011

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (continued)

The below table disaggregates the Company’s revenue by type of service for the three months ended March 31, 2018 and 2017 (unaudited, in thousands):



	Three Months Ended March 31,
	2018		2017

Minimum rent	$	12,610	$	11,042
Tenant reimbursements	3,222		2,680
Lease termination fees	246		—
Percentage rent	87		87
Asset management fees	48		162
Commissions	14		115
Development income	—		136
Other	87		100
Total	$	16,314	$	14,322

Income Taxes

The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code and applicable Treasury regulations relating to REIT qualification. In order to maintain this REIT status, the regulations require the Company to distribute at least 90% of its taxable income to shareholders and meet certain other asset and income tests, as well as other requirements. The TRS' have accrued ~~$41~~$98 thousand and ~~$107~~$15 thousand for ~~2017 and 2016~~ federal and state income ~~tax expenses~~taxes as of March 31, ~~2017~~2018 and December 31, ~~2016.~~2017. If the Company fails to qualify as a REIT, it will be subject to tax at regular corporate rates for the years in which it fails to qualify. If the Company loses its REIT status, it could not elect to be taxed as a REIT for five years unless the Company’s failure to qualify was due to a reasonable cause and certain other conditions were satisfied.

Taxable REIT Subsidiary Cost Allocation

The Company’s overall philosophy regarding cost allocation centers around the premise that the Trust exists to acquire, lease and manage properties for the benefit of its investors. Accordingly, a majority of the Company’s operations occur at the property level. Each property must carry its own weight by absorbing the costs associated with generating its revenues. Additionally, leases generally allow the Company to pass through to the tenant most of the costs involved in operating the property, including, but not limited to, the direct costs associated with owning and maintaining the property (landscaping, repairs and maintenance, taxes, insurance, etc.), property management and certain administrative costs.

Service vendors bill the majority of the direct costs of operating the properties directly to the REIT Properties and Non-REIT Properties and each property pays them accordingly. The Non-REIT Properties pay WRE property management and/or asset management fees of 3% and 2% of collected revenues, respectively. The Non-REIT Properties also pay WRE leasing commissions based on the total contractual revenues to be generated under the new/renewed lease agreement (6% for new leases and 3% for renewals). Non-REIT properties pay development fees of 5% of hard costs.

Costs incurred to manage, lease and administer the Non-REIT Properties are allocated to the TRS. These costs include compensation and benefits, property management, leasing and other corporate, general and administrative expenses associated with generating the TRS' revenues.

Financial Instruments

The carrying amount of financial instruments included in assets and liabilities approximates fair market value due to their immediate or short-term maturity.

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (continued)

Use of Estimates

The Company has made estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reported periods. The Company’s actual results could differ from these estimates.

Advertising Costs

The Company expenses advertising and promotion costs as incurred. The Company incurred advertising and promotion costs of ~~$76~~$43 thousand and ~~$62~~$60 thousand for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, respectively.

Assets Held For Sale and Discontinued Operations

The Company records assets as held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year.

Assets held for sale are presented as discontinued operations in all periods presented if the disposition represents a strategic shift that has, or will have, a major effect on the Company's financial position or results of operations. This includes the net gain (or loss) upon disposal of property held for sale, the property's operating results, depreciation and interest expense.

Corporate General and Administrative Expense

A detail for the "Corporate General & Administrative" line item from the Condensed Consolidated Statements of Operations is presented below (in thousands):

~~Table of Contents~~

~~Wheeler Real Estate Investment Trust, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~2. Summary of Significant Accounting Policies (continued)~~


	Three Months Ended March 31,				Three Months Ended March 31,
	2017		2016		2018		2017
	(unaudited)
Professional fees					$	931	$	637
Compensation and benefits	$	683	$	968	903		683
Professional fees	637		378
Corporate administration	257		235		336		257
Taxes and Licenses					165		49
Travel					70		66
Capital related costs	220		62		53		220
Acquisition and development costs	260		413
Travel	66		136
Advertising	60		62		43		60
Taxes and licenses	49		28
Total	$	2,232	$	2,282
Acquisition costs					7		260
Total Corporate General & Administrative					$	2,508	$	2,232

An allocation of professional fees, compensation and benefits, corporate administration and travel is included in Non-REIT management and leasing services on the statements of operations, which can vary period to period depending on the relative operational fluctuations of these respective services.

Noncontrolling Interests

Noncontrolling interests is the portion of equity in the Operating Partnership not attributable to the Trust. The ownership interests not held by the ~~parent~~Company are considered noncontrolling interests. Accordingly, noncontrolling interests have been reported in equity on the condensed consolidated balance sheets but separate from the Company’s equity. On the condensed consolidated statements of operations, the subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling interests. Condensed consolidated statement of equity includes

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (continued)

beginning balances, activity for the period and ending balances for shareholders’ equity, noncontrolling interests and total equity.

The noncontrolling interest of the Operating Partnership common unit holders is calculated by multiplying the noncontrolling interest ownership percentage at the balance sheet date by the Operating Partnership’s net assets (total assets less total liabilities). The noncontrolling interest percentage is calculated at any point in time by dividing the number of units not owned by the Company by the total number of units outstanding. The noncontrolling interest ownership percentage will change as additional units are issued or as units are exchanged for the Company’s common stock $0.01 par value per share (“~~common stock”~~Common Stock”). In accordance with GAAP, any changes in the value from period to period are charged to additional paid-in capital.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements of Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition” and most industry-specific guidance on revenue recognition throughout the ASC. The new standard is principles based and provides a five step model to determine when and how revenue is recognized. The core principle of the new standard is that revenue should be recognized when a company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also requires disclosure of qualitative and quantitative information surrounding the amount, nature, timing and uncertainty of revenues and cash flows arising from contracts with customers. In March 2016, the FASB issued ASU No. 2016-08, "Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, "Revenue from contracts with customers (Topic 606): Identifying Performance Obligations and Licensing," which provides further guidance on identifying performance obligations and intellectual property licensing implementation. In June 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which relates to assessing collectability, presentation of sales taxes, noncash consideration and completed contracts and contract modifications in transition. In December 2016, the FASB issued 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers," which clarifies or corrects unintended application of the standard. Companies are permitted to adopt the ASUs as early as fiscal years beginning after December 15, 2016, but the adoption is required for fiscal years beginning after December 15, 2017. In September 2017, the FASB issued ASU 2017-13, "Revenue Recognition (Topic 605)," "Revenue from Contracts with Customers (Topic 606)," "Leases (Topic 840)," and "Leases (Topic 842)." These ~~new standards will be effective for~~amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)."

~~Table of Contents~~

~~Wheeler Real Estate Investment Trust, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~2. Summary of Significant Accounting Policies (continued)~~

On January 1, 2018, the Company inadopted Topic 606 retrospectively with the ~~first quarter~~cumulative effect of initially applying the ~~year ending December 31, 2018 and can be applied either retrospectively to all periods presented or as a cumulative-effect adjustment~~standard as of ~~the~~this date to those contracts which were not completed as of ~~adoption.~~

~~The Company is currently evaluating the impact of this standard.~~January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605. The majority of the Company’s revenue is based on real estate lease contracts which are not within the scope of this ASU. The Company has identified its non-lease revenue streams and ~~initial analysis indicates the~~ adoption of this standard ~~will~~does not have a material impact on our financial position or results of operations.

The Company has increased disclosures around revenue recognition in the notes to condensed consolidated financial statements to comply with the standard.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)." ASU 2016-02 is intended to improve financial reporting about leasing transactions. The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment. The ASU will require organizations that lease assets referred to as “Lessees” to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. An organization is to provide disclosures designed to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the financial statements. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease terms of more than 12 months. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike current GAAP which requires only capital leases to be recognized on the balance sheet the new ASU will require both types of leases (i.e. operating and capital) to be recognized

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (continued)

on the balance sheet. The FASB lessee accounting model will continue to account for both types of leases. The capital lease will be accounted for in substantially the same manner as capital leases are accounted for under existing GAAP. The operating lease will be accounted for in a manner similar to operating leases under existing GAAP, except that lessees will recognize a lease liability and a lease asset for all of those leases.

In September 2017, the FASB issued ASU 2017-13, "Revenue Recognition (Topic 605)," "Revenue from Contracts with Customers (Topic 606)," "Leases (Topic 840)," and "Leases (Topic 842)," which provides additional implementation guidance on the previously issued ASU 2016-02. "Leases (Topic 842)."

The leasing standard will be effective for calendar year-end public companies beginning after December 15, 2018. Public companies will be required to adopt the new leasing standard for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption will be permitted for all companies and organizations upon issuance of the standard. For calendar year-end public companies, this means an adoption date of January 1, 2019 and retrospective application to previously issued annual and interim financial statements for 2018 and 2017. The accounting for leases under which we are the lessor remains largely unchanged. Lessees with a large portfolio of leases are likely to see a significant increase in balance sheet assets and liabilities. While we are currently assessing the impact of the standard on our financial position and results of operations we expect the primary impact to be on those ground leases which we are the lessor. The new standard will result in the recording of right of use assets and lease obligations. See Note 9 for the Company’s current lease commitments. The Company continues to evaluate the impact of ASU 2016-02 on its financial statements.

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This ASU is effective for annual periods beginning after December 15, 2016 and early adoption is permitted. The Company adopted this ASU as of January 1, 2017 and applied prospectively. The adoption did not have a material impact on the financial position or results of operations.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of certain cash receipts and cash payments (a consensus of the Emerging Issues Task Force).” The ASU addresses eight specific cash flow issues in an effort to reduce diversity in practice. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017 and early adoption is permitted. The new standard is to be applied retrospectively for all period presented. The Company will adopt this ASU in 2018 and does not expect the adoption to materially impact its consolidated statements of cash flows.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force).” The ASU provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows in an effort to reduce diversity in practice. The standard requires a reconciliation of total cash, cash equivalents and restricted cash in the cash flow statement or in the notes to the financial statements. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017 and early adoption is permitted. The new standard is to be applied retrospectively for all ~~period~~periods presented. ~~The Company will adopt this ASU in 2018 and does not expect the adoption to materially impact its consolidated statements of cash flows.~~

~~Table of Contents~~

~~Wheeler Real Estate Investment Trust, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~2. Summary of Significant Accounting Policies (continued)~~

In February 2015, the FASB issued ASU 2015-02 related to ASC Topic 810, “Consolidation (Topic 810): Amendments to the Consolidation Analysis.” This new guidance changes the identification of variable interests, the variable interest entity (“VIE”) characteristics for a limited partnership or similar entity, and primary beneficiary determination. The guidance also eliminates the presumption that a general partner controls a limited partnership. The ASU is effective for annual periods beginning after December 15, 2015. The Company has adopted this ASU with no material impact on the Company’s consolidated financial statements. In October 2016, the FASB issued ASU 2016-17, “Consolidation (Topic 810) Interests Held through Related Parties That are under Common Control,” which amends the consolidation guidance on how a reporting entity that is the single decision maker of a VIE should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The primary beneficiary of a VIE is the reporting entity that has a controlling financial interest in a VIE and, therefore, consolidates the VIE. A reporting entity has an indirect interest in a VIE if it has a direct interest in a related party that, in turn, has a direct interest in the VIE. The ASU is effective for annual periods beginning after December 15, 2016. The Company adopted this ASU as of January 1, ~~2017.~~2018 and applied retrospectively. The adoption ~~did not have~~resulted in a ~~material impact~~reduction of $329 thousand in net cash from operating activities and $1 thousand increase in net cash from investing activities for the three months ended March 31, 2017 on the ~~financial position or results~~Condensed Consolidated Statements of ~~operations.~~Cash Flows.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” The ASU clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This ASU is effective for annual and interim reporting periods beginning after December 15, 2017 and early adoption is permitted. The new standard is to be applied prospectively. The adoption of this standard will most likely result in less real estate acquisitions qualifying as businesses and, accordingly, acquisition costs for those acquisitions that are not businesses will be capitalized rather than expensed. The Company adopted this ASU as of January 1, 2018. As a result of this adoption, the acquisition costs associated with the purchase of JANAF were capitalized as a cost of the asset.

In January 2017, the FASB issued ASU 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the test for Goodwill Impairment.” The amendments in ASU 2017-04 eliminate the current two-step approach used to test goodwill for impairment and require an entity to apply a one-step quantitative test and record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. This ASU is effective for annual and interim reporting periods beginning after December 15, 2019 and early adoption is permitted on testing dates after January 1, 2017. The new standard is to be applied prospectively. The Company will adopt this ASU in 2020 and does not expect the adoption to materially impact its financial position or results of operations.

In February 2017, the FASB issued ASU 2017-05, “Other Income-Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” This amendment provides guidance for partial sales of nonfinancial assets. This ASU is effective for annual periods beginning after December 15, 2017. Early adoption is permitted. The standard is to be applied retrospectively or modified retrospectively. The Company ~~is evaluating~~adopted this ASU as of January 1, 2018. The adoption did not have a material impact on the ~~impact that ASU 2017-05 on its~~ financial ~~statements.~~position or results of operations.

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (continued)

In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This updates clarifies when modification accounting guidance in Topic 718 should be applied to a change in terms or conditions of a share-based payment award. This ASU is effective for annual and interim periods beginning after December 15, 2017 with early adoption permitted. The new standard is to be applied prospectively to an award modified on or after the adoption date. The Company adopted this ASU as of January 1, 2018. The adoption did not have a material impact on the financial position or results of operations.

Other accounting standards that have been issued or proposed by the FASB or other standard-setting bodies are not currently applicable to the Company or are not expected to have a significant impact on the Company’s financial position, results of operations and cash flows.

~~Reclassifications~~

Certain reclassifications have been made to prior period amounts to make their presentation comparable with the current period. These reclassifications had no impact on net income. All per share amounts, common units and shares outstanding and stock based compensation amounts for all periods presented reflect our one-for-eight reverse stock split which was effective March 31, 2017.

~~Table of Contents~~

~~Wheeler Real Estate Investment Trust, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

3. Investment Properties

Investment properties consist of the following (in thousands):


	March 31, 2017			December 31, 2016			March 31, 2018			December 31, 2017
	(unaudited)						(unaudited)
Land and land improvements	$	90,732		$	90,531		$	99,313		$	91,108
Land held for improvement	11,420			11,420			2,305			11,228
Buildings and improvements	307,704			307,411			381,137			313,043
Investment properties at cost	409,856			409,362			482,755			415,379
Less accumulated depreciation	(23,152		)	(20,482		)	(34,200		)	(31,045		)
Investment properties, net	$	386,704		$	388,880		$	448,555		$	384,334

The Company’s depreciation expense on investment properties was ~~$2.67~~$3.17 million and ~~$1.73~~$2.67 million for the three months ended March 31, ~~2017~~2018 and ~~March 31, 2016,~~2017, respectively.

A significant portion of the Company’s land, buildings and improvements serves as collateral for its mortgage loans payable portfolio. Accordingly, restrictions exist as to the encumbered property’s transferability, use and other common rights typically associated with property ownership.

Disposition

On January 12, 2018, the Company completed the sale of the Chipotle ground lease at Conyers Crossing for a contract price of $1.27 million, resulting in a gain of $1.06 million with net proceeds of $1.16 million.

The sale of the Chipotle ground lease at Conyers Crossing did not represent a strategic shift that has a major effect on the Company's financial position or results of operations. Accordingly, the operating results of this property remains classified within continuing operations for all periods presented.

JANAF Acquisition

On January 18, 2018, the Company acquired JANAF, a retail shopping center located in Norfolk, Virginia, for a purchase price of $85.65 million, paid through a combination of cash, restricted cash, debt assumption and the issuance of 150,000 shares of Common Stock at $7.53 per share. The shopping center, anchored by BJ's Wholesale Club, totals 810,137 square feet and was 94% leased at the acquisition date.

The following summarizes the consideration paid and the purchase allocation of assets acquired and liabilities assumed in conjunction with the acquisition described above in accordance with ASU 2017-01, along with a description of the methods used to determine the purchase price allocation (in thousands, unaudited). In determining the purchase price allocation, the Company considered many factors including, but not limited to, cash flows, market cap rates, location, occupancy rates, appraisals, other acquisitions and management’s knowledge of the current acquisition market for similar properties.

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)



Purchase price allocation of assets acquired and liabilities assumed:
	Investment property (a)	$	75,123
	Lease intangibles and other assets (b)	10,718
	Above market leases (d)	2,019
	Restricted cash (c)	2,500
	Below market leases (d)	(4,710		)
	Debt assumption (e)	(58,867		)
	Net purchase price allocation of assets acquired and liabilities assumed:	$	26,783

Purchase consideration:
	Consideration paid with cash and restricted cash	$	25,653
	Consideration paid with assumption of debt	58,867
	Consideration paid with common stock	1,130

	Total consideration (f)	$	85,650


a.	Represents the purchase price allocation of the net investment properties acquired which includes land, buildings, site improvements and tenant improvements. The purchase price allocation was determined using following approaches:

i. the market approach valuation methodology for land by considering similar transactions in the markets;

ii. a combination of the cost approach and income approach valuation methodologies for buildings, including replacement cost evaluations, “go dark” analyses and residual calculations incorporating the land values; and


iii.	the cost approach valuation methodology for site and tenant improvements, including replacement costs and prevailing quoted market rates.


b.	Represents the purchase price allocation of lease intangibles and other assets. Lease intangibles includes in place leases and ground lease sandwich interests associated with replacing existing leases. The income approach was used to determine the allocation of these intangible assets which included estimated market rates and expenses.


c.	Represents the purchase price allocation of deleveraging reserve (the “Deleveraging Reserve”) released upon the maturity or earlier payment in full of the loan or until the reduction of the principal balance of the loan to $50,000,000.


d.	Represents the purchase price allocation of above/below market leases. The income approach was used to determine the allocation of above/below market leases using market rental rates for similar properties.


e.	Assumption of $53.71 million of debt at a rate of 4.49%, maturing July 2023 with monthly principal and interest payments of $333,159 and assumption of $5.16 million of debt at a rate of 4.95%, maturing January 2026 with monthly principal and interest payments of $29,964.


f.	Represents the components of purchase consideration paid.

Unaudited pro forma financial information in the aggregate is presented below for the acquisition of JANAF. The unaudited pro forma information presented below includes the effects of the JANAF acquisition as if it had been consummated as of the beginning of the prior fiscal year. The pro forma results include adjustments for depreciation and amortization associated with acquired tangible and intangible assets, straight-line rent adjustments, interest expense related to debt incurred and assumed. The unaudited pro forma financial information is presented for informational purposes only and may not be indicative of the results of operations that would have been achieved if these acquisition had taken place in January 1, 2018 or 2017.

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)



	Three Months Ended March 31,
	2018			2017
	(in thousands, unaudited)
Rental revenues	$	13,007		$	13,178
Net loss from continuing operations	$	(1,874	)	$	(3,135	)
Net loss attributable to Wheeler REIT	$	(1,827	)	$	(1,549	)
Net loss attributable to Wheeler REIT common shareholders	$	(5,034	)	$	(4,778	)
Basic loss per share	$	(0.57	)	$	(0.56	)
Diluted loss per share	$	(0.57	)	$	(0.56	)

4. Notes Receivable

The Company, through WD, is performing development services for a related party of the Company, for the redevelopment of Pineland Station Shopping Center in Hilton Head, South Carolina to be known in the future as Sea Turtle Marketplace (“Sea Turtle Development”). Sea Turtle Development is a related party as discussed in Note 10.

On September 29, 2016, the Company entered into an ~~$11.0~~$11.00 million note receivable for the partial funding of the Sea Turtle Development and ~~an $1.0~~a $1.00 million note receivable in consideration for the sale of 10.39 acres of land owned by the Company. Both promissory notes are collateralized by a 2^nd deed of trust on the property and accrue interest at a rate of 12% annually. Interest only payments at a rate of 8% are due on the notes at the beginning of every calendar quarter starting October 2016. Interest at a rate of 4% accrues and is due at maturity. The notes mature the earlier of September 29, 2021 or the disposition of the property. ~~The balance~~As of December 31, 2017, the Company recognized a $5.26 million impairment charge on the notes receivable atreducing the carrying value to $6.74 million as of March 31, ~~2017~~2018 and December 31, 2017. The Company placed the notes receivable on nonaccrual status and has not recognized $355 thousand of interest income due on the notes for the three months ended March 31, 2018.

As of March 31, 2018, the Company believes the estimated fair market value of the development upon stabilization at a future date will provide for the cash required to repay the $6.74 million carrying value of the notes receivable due the Company in the event of a sale. The Company’s estimated fair value of the project is ~~$12.0 million.~~based upon cash flow models that include development costs to date, anticipated cost to complete, executed leases, and financing available to complete and stabilize the project. Capitalization rates utilized in these models are based upon rates that the Company believes to be within a reasonable range of current market rates for the respective project. These valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. If the holder of the 1st deed of trust proceeds to foreclosure, this may have an adverse effect on assumptions used in the Company's fair value analysis leading to further impairment.

5. Assets Held for Sale ~~and Discontinued Operations~~

In August 2015, the Company’s management and Board of Directors committed to a plan to sell Bixby Commons, Jenks Reasors, Harps at Harbor Point, Starbucks/Verizon and the ground leases for Ruby Tuesday’s and Outback Steakhouse at Pierpont Centre (the “Freestanding Properties”) as part of the Company’s continuous evaluation of strategic alternatives. Accordingly, the Freestanding Properties have been classified as held for sale and the results of their operations have been classified as discontinued operations for all periods presented. As of March 31, 2017 the sales of all Freestanding Properties have occurred and the Company will receive no residual cash flows.

On February 28, 2017, the Company completed its ~~sales~~sale of the last remaining Freestanding Properties, Ruby Tuesday’s and Outback Steakhouse at Pierpont Centre, for a contract price of approximately $2.29 million, resulting in a gain of $1.51 million. ~~The Company has defeased~~

In February 2018, the ~~$1.69 million loan payable at~~Company’s management and Board of Directors committed to a ~~cost~~plan to sell the seven undeveloped land parcels (the “Land Parcels”) as part of ~~$223 thousand.~~Company’s strategic initiative. Accordingly, the Land Parcels have been classified as held for sale.

As of March 31, 2018 and December 31, 2017, assets held for sale consisted of the following (in thousands):



	March 31, 2018		December 31, 2017
	(unaudited)
Investment properties, net	$	9,134	$	—
Total assets held for sale	$	9,134	$	—

1518

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

~~5. Assets Held for Sale and Discontinued Operations (continued)~~

As of March 31, ~~2017~~2018 and December 31, ~~2016, assets held for sale consisted of the following (in thousands):~~

March 31, 2017 December 31, 2016
(unaudited)
Investment properties, net $ —
$ 217
Above market lease intangible, net —
3
Deferred costs and other assets, net —
146
Total assets held for sale $ —
$ 366

~~As of March 31,~~ 2017, ~~and December 31, 2016,~~ liabilities associated with assets held for sale consisted of the following (in thousands):


		March 31, 2017		December 31, 2016			March 31, 2018		December 31, 2017
		(unaudited)					(unaudited)
Loans payable		$	—	$	1,350		$	693	$	—
Accounts payable							15		—
Total liabilities associated with assets held for sale	Total liabilities associated with assets held for sale	$	—	$	1,350	Total liabilities associated with assets held for sale	$	708	$	—

The condensed consolidated statements of operations reflect reclassifications of revenues, property operating expenses, corporate general and administrative expenses and interest expense from continuing operations to income from discontinued operations for all periods presented. All interest expense disclosed below is directly related to the debt incurred to acquire the Freestanding Properties.

The following is a summary of the income from discontinued operations for the three months ended March 31, ~~2017~~2018 and ~~2016~~2017 (in thousands):


	Three Months Ended March 31,				Three Months Ended March 31,
	2017		2016		2018		2017
	(unaudited)
Revenues	$	26	$	100	$	—	$	26
Expenses	1		57		—		1
Operating income	25		43		—		25
Interest expense	9		22		—		9
Income from discontinued operations before gain on disposals	16		21
Income from discontinued operations before gain on disposal of properties					—		16
Gain on disposal of properties	1,513		—		—		1,513
Income from discontinued operations	$	1,529	$	21
Net Income from discontinued operations					$	—	$	1,529

1619

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Loans Payable

The Company’s loans payable consist of the following (in thousands except monthly payment):


Property/Description	Monthly Payment		Interest Rate		Maturity	March 31, 2017			December 31, 2016			Monthly Payment		Interest Rate		Maturity	March 31, 2018			December 31, 2017
Revere Loan(2)	Interest only		8.00	%	April 2017	$	7,450		$	7,450		Interest only		8.00	%	April 2018	$	6,808		$	6,808
Walnut Hill Plaza	$	24,273	5.50	%	July 2017	3,414			3,440
Lumber River												$	10,723	Libor + 295 basis points		June 2018	1,485			1,500
Bank Line of Credit	Interest only		4.25	%	September 2017	3,000			3,000			Interest only		Libor + 300 basis points		June 2018	3,000			3,000
Columbia Fire Station	Interest only		8.00	%	December 2017	497			487
Monarch Bank Building	$	9,473	4.15	%	December 2017	1,305			1,320
Shoppes at Eagle Harbor	$	25,100	4.34	%	March 2018	3,455			3,492
KeyBank Line of Credit	Interest only		Libor + 250 basis points		May 2018	68,032			74,077			Interest only		Libor + 250 basis points		July 2018	15,532			15,532
Lumber River	Interest only		Libor + 295 basis points		June 2018	1,500			1,500
Senior convertible notes	Interest only		9.00	%	December 2018	1,369			1,400			Interest only		9.00	%	December 2018	1,369			1,369
Harbor Point	$	11,024	5.85	%	December 2018	626			649			$	11,024	5.85	%	December 2018	(1)			553
Perimeter Square												Interest only		5.50	%	December 2018	5,691			5,382
Riversedge North	$	8,802	6.00	%	January 2019	901			914			$	8,802	6.00	%	January 2019	849			863
Monarch Bank Building												$	7,340	4.85	%	June 2019	1,259			1,266
DF I-Moyock	$	10,665	5.00	%	July 2019	281			309			$	10,665	5.00	%	July 2019	(1)			194
Rivergate	Interest only		Libor + 295 basis points		December 2019	24,213			24,213			$	127,217	Libor + 295 basis points		December 2019	22,546			22,689
KeyBank Line of Credit												Interest only		Libor + 250 basis points		December 2019	52,500			52,500
LaGrange Marketplace	$	15,065	Libor + 375 basis points		March 2020	2,357			2,369			$	15,065	Libor + 375 basis points		March 2020	2,305			2,317
Folly Road	Interest only		4.00	%	March 2020	6,181			—			Interest only		4.00	%	March 2020	6,181			6,181
Columbia Fire Station construction loan												Interest only		4.00	%	May 2020	4,014			3,421
Shoppes at TJ Maxx	$	33,880	3.88	%	May 2020	5,863			5,908			$	33,880	3.88	%	May 2020	5,681			5,727
JANAF Bravo												Interest only		4.65	%	January 2021	6,500			—
Walnut Hill Plaza												Interest only		5.50	%	September 2022	3,903			3,903
Twin City Commons	$	17,827	4.86	%	January 2023	3,155			3,170			$	17,827	4.86	%	January 2023	3,095			3,111
Shoppes at Eagle Harbor												$	26,528	5.10	%	March 2023	3,316			3,341
JANAF												$	333,159	4.49	%	July 2023	53,436			—
Tampa Festival	$	50,797	5.56	%	September 2023	8,468			8,502			$	50,797	5.56	%	September 2023	8,332			8,368
Forrest Gallery	$	50,973	5.40	%	September 2023	8,768			8,802			$	50,973	5.40	%	September 2023	8,633			8,669
South Carolina Food Lions Note	$	68,320	5.25	%	January 2024	12,180			12,224			$	68,320	5.25	%	January 2024	12,004			12,050
Cypress Shopping Center	$	34,360	4.70	%	July 2024	6,559			6,585			$	34,360	4.70	%	July 2024	6,458			6,485
Port Crossing	$	34,788	4.84	%	August 2024	6,343			6,370			$	34,788	4.84	%	August 2024	6,234			6,263
Freeway Junction	$	31,265	4.60	%	September 2024	8,087			8,119			$	41,798	4.60	%	September 2024	7,961			7,994
Harrodsburg Marketplace	$	19,112	4.55	%	September 2024	3,601			3,617			$	19,112	4.55	%	September 2024	3,536			3,553
Graystone Crossing	$	15,672	4.55	%	October 2024	3,973			3,990			$	20,386	4.55	%	October 2024	3,912			3,928
Bryan Station	$	17,421	4.52	%	November 2024	4,600			4,619			$	23,489	4.52	%	November 2024	4,528			4,547
Crockett Square	Interest only		4.47	%	December 2024	6,338			6,338			Interest only		4.47	%	December 2024	6,338			6,338
Pierpont Centre	Interest only		4.15	%	February 2025	8,113			8,450			Interest only		4.15	%	February 2025	8,113			8,113
Alex City Marketplace	Interest only		3.95	%	April 2025	5,750			5,750			Interest only		3.95	%	April 2025	5,750			5,750
Butler Square	Interest only		3.90	%	May 2025	5,640			5,640			Interest only		3.90	%	May 2025	5,640			5,640
Brook Run Shopping Center	Interest only		4.08	%	June 2025	10,950			10,950			Interest only		4.08	%	June 2025	10,950			10,950
Beaver Ruin Village I and II	Interest only		4.73	%	July 2025	9,400			9,400			Interest only		4.73	%	July 2025	9,400			9,400
Sunshine Shopping Plaza	Interest only		4.57	%	August 2025	5,900			5,900			Interest only		4.57	%	August 2025	5,900			5,900
Barnett Portfolio	Interest only		4.30	%	September 2025	8,770			8,770			Interest only		4.30	%	September 2025	8,770			8,770
Fort Howard Shopping Center	Interest only		4.57	%	October 2025	7,100			7,100			Interest only		4.57	%	October 2025	7,100			7,100
Conyers Crossing	Interest only		4.67	%	October 2025	5,960			5,960			Interest only		4.67	%	October 2025	5,960			5,960
Grove Park Shopping Center	Interest only		4.52	%	October 2025	3,800			3,800			Interest only		4.52	%	October 2025	3,800			3,800
Parkway Plaza	Interest only		4.57	%	October 2025	3,500			3,500			Interest only		4.57	%	October 2025	3,500			3,500
Winslow Plaza	Interest only		4.82	%	December 2025	4,620			4,620			Interest only		4.82	%	December 2025	4,620			4,620
JANAF BJ's												$	29,964	4.95	%	January 2026	5,141			—
Chesapeake Square	$	23,857	4.70	%	August 2026	4,559			4,578			$	23,857	4.70	%	August 2026	4,486			4,507
Perimeter Square	Interest only		4.06	%	August 2026	4,500			4,500
Sangaree/Tri-County/Berkley	Interest only		4.78	%	December 2026	9,400			9,400
Berkley/Sangaree/Tri-County												Interest only		4.78	%	December 2026	9,400			9,400
Riverbridge	Interest only		4.48	%	December 2026	4,000			4,000			Interest only		4.48	%	December 2026	4,000			4,000
Franklin	Interest only		4.93	%	January 2027	8,515			8,516			Interest only		4.93	%	January 2027	8,516			8,516
Total Principal Balance						312,993			313,698
Total Principal Balance ⁽¹⁾																	378,452			313,778
Unamortized debt issuance cost						(7,100		)	(7,725		)						(5,405		)	(5,656		)
Total Loans Payable						$	305,893		$	305,973							$	373,047		$	308,122

(1) Excludes loans payable on assets held for sale, see Note 5.

(2) Subsequent to March 31, 2018, the Company extended the Revere Loan to May 15, 2018.

1720

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Loans Payable (continued)

KeyBank Credit Agreement

On ~~May 29, 2015,~~December 21, 2017, the ~~Operating Partnership~~Company entered into ~~a $45.00 million revolving credit line (the "Credit Agreement") with KeyBank National Association ("KeyBank"). Pursuant~~an Amended and Restated Credit Agreement to the KeyBank Credit Agreement ~~outstanding borrowings accrue monthly interest which is paid at a rate~~(the “Amended and Restated Credit Agreement”). The Amended and Restated Credit Agreement provides for an increase in borrowing capacity from $50.00 million to $52.50 million and also increases the accordion feature by $50.00 million to $150.00 million. Additionally, the Amended and Restated Credit Agreement provides for an extension of the one-month London Interbank Offer Rate ("LIBOR") plus a margin ranging from 1.75% to 2.50% depending on the Company's consolidated leverage ratio. On April 12, 2016, the Operating Partnership entered into a First Amendment and Joinder Agreement (“First Amendment”) to the Credit Agreement. The First Amendment increased the $45.00 million revolving credit line with KeyBank to $67.20 million and the Company utilized this additional borrowing capacity to acquire the A-C Portfolio. Pursuant to the terms of the First Amendment, the monthly interest of the increased credit facility is adjusted to LIBOR plus a margin of 5.00% until such time that the Company can meet certain repayment and leverage conditions. The Company used proceeds from the 2016 Series B Preferred Stock Offeringrequirement to reduce ~~its~~the outstanding borrowings under the facility from $68.03 million to $52.50 million by July 1, 2018. The revolving facility will mature on December 21, 2019, but may be extended at the Company’s option for an additional one year period, subject to certain customary conditions. The interest rate remains the same at LIBOR plus 250 basis points based on the Company’s Consolidated Leverage Ratio (as defined in the Amended and Restated Credit Agreement to $46.10 million and the margin reduced back to the stated range of the original Credit Agreement on August 15, 2016. On December 7, 2016, the Operating Partnership entered into a Second Amendment and Joinder Agreement ("Second Amendment") to the Credit Agreement. The Second Amendment increased the line of credit to $75.0 million. Pursuant to the terms of the Second Amendment, the pricing reverts back to the original Credit Agreement.Agreement). The unutilized amounts available to the Company under the Credit Agreement accrue fees which are paid at a rate of ~~0.30%~~0.25%.

On March 2, 2018, KeyBank reduced the liquidity requirement from $5.00 million to $3.50 million through March 31, 2018. The liquidity requirement reverts back to $5.00 million subsequent to March 31, 2018 until such time as the Total Commitment (as defined in the Amended and Restated Credit Agreement) has been reduced to $52.50 million and $3.50 million at all times thereafter.

As of March 31, ~~2017,~~2018, the Company has borrowed $68.03 million under the Credit Agreement, which is collateralized by 16 properties. At March 31, ~~2017,~~2018, the outstanding borrowings are accruing interest at ~~3.46%~~4.38%. The Amended and Restated Credit Agreement contains certain financial covenants that the Company must meet, including minimum leverage, fixed charge coverage and debt service coverage ratios as well as a minimum tangible net worth requirement. The Company was in compliance with the financial covenants ~~under the Credit Agreement~~ as of March 31, ~~2017.~~2018. The Amended and Restated Credit Agreement also contains certain events of default that if they occur may cause KeyBank to terminate the Amended and Restated Credit Agreement and declare amounts owed to become immediately payable. As of March 31, ~~2017,~~2018, the Company has not incurred an event of default.

~~Senior Convertible Notes Amendment~~Bank Line of Credit Renewal

~~Effective as of April 28, 2016,~~On January 10, 2018, the Company and certain investors: Calapasas West Partners, L.P.; Full Value Partners, L.P.; Full Value Special Situations Fund, L.P.; MCM Opportunity Partners, L.P.; Mercury Partners, L.P.; Opportunity Partners, L.P.; Special Opportunities Fund, Inc.; and Steady Gain Partners, L.P. (collectivelyextended the ~~“Bulldog Investors”) amended the convertible 9% senior notes (“Amended Convertible Notes”~~$3.00 million bank line of credit ("Bank Line of Credit") to ~~purchase shares~~June 15, 2018 with interest only payments due monthly at a rate of ~~the Company’s common stock. Prior to the amendment, the aggregate principal amount~~Libor + 3.00% with a floor of ~~the Convertible Notes ("Convertible Notes") was $3.00 million.~~4.25%.

Pursuant to the terms of the Amended Convertible Notes, upon thirty (30) calendar days’ notice (“Notice”), the Company may prepay any portion of the outstanding Principal Amount and accrued and unpaid interest, if any, without penalty. In addition, upon Notice the Bulldog Investors may now exercise their right to convert all or any portion of the outstanding Principal Amount and any accrued but unpaid interest into shares of common stock any time prior to the repayment in full of the Amended Convertible Notes. The maximum number of shares of common stock issuable upon conversion of the Amended Convertible Notes is 1,417,079 shares. As of March 31, 2017, the Bulldog Investors have converted approximately $1.64 million of principal amount into 1,417,079 shares of the Company's Common Stock, the maximum number of shares allowed.JANAF

~~Folly Road Refinance~~

~~In March 2017,~~On January 18, 2018, the Company executed a promissory note for ~~$8.57~~$53.71 million ~~to refinance~~for the ~~Folly Road collateralized portion~~purchase of ~~the KeyBank Credit Agreement totaling $6.05 million.~~JANAF at a rate of 4.49%. The loan matures in ~~March 2020~~July 2023 with ~~monthly interest only payments due through April 2018 at which time~~ monthly principal and interest payments ~~begin based~~of $333,159.

JANAF - BJ's

On January 18, 2018, the Company executed a promissory note for $5.16 million for the purchase of JANAF at a rate of 4.95%. The loan matures in January 2026 with monthly principal and interest payments of $29,964.

JANAF - Bravo

On January 18, 2018, the Company executed a promissory note for $6.50 million for the purchase of JANAF at a rate of 4.65%. The loan matures in January 2021 with interest due monthly.

Eagle Harbor Renewal

On March 11, 2018, the Company renewed the promissory note for $3.32 million on ~~a 25 year amortization.~~Eagle Harbor for five years. The loan matures on March 2023 with monthly principal and interest payments of $26,528. The loan bears interest at ~~4.00%~~5.10%. ~~As of March 31, 2017, $6.18 million has been borrowed on the note with the remaining $2.39 million available for construction and development.~~

~~Certain of the Company’s loans payable have covenants with which the Company is required to comply. As of March 31, 2017, the Company believes it is in compliance with all applicable covenants.~~

1821

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

6. Loans Payable (continued)

Loan Covenants

Certain of the Company’s loans payable have covenants with which the Company is required to comply. As of March 31, 2018, the Company has received a waiver through loan maturity for the debt to tangible net worth ratio on the Bank Line of Credit and a waiver on the debt service coverage ratio. As of March 31, 2018, the Company believes it is in compliance with all other applicable covenants.

Debt Maturity

The Company’s scheduled principal repayments on indebtedness as of March 31, ~~2017~~2018, including assets held for sale, are as follows (in ~~thousands)~~thousands, unaudited):

For the Periods Ending March 31,

(unaudited)
2018 $ 20,804
2019 74,141
2020 33,770
2021 6,952
2022 1,776
Thereafter 175,550
Total principal maturities $ 312,993



For the remaining nine months ended December 31, 2018	$	37,561
December 31, 2019	80,641
December 31, 2020	21,249
December 31, 2021	10,236
December 31, 2022	7,736
December 31, 2023	67,722
Thereafter	154,000
Total principal repayments and debt maturities	$	379,145

The Company has considered our short-term (one year or less) liquidity needs and the adequacy of our estimated cash flows from operating activities and other expected financing sources to meet these needs. In particular, we have considered our scheduled debt maturities and principal payments for the ~~next year~~nine months ended December 31, 2018 of ~~$20.80 million. Included~~$37.56 million, which includes the $15.53 million maturity of the KeyBank line of credit. Management is in the ~~$20.80~~process of refinancing properties off the KeyBank line of credit to reduce the line to under $52.50 million isprior to July 1, 2018 in accordance with the ~~Revere Term Loan of $7.45 million which has a maturity date of April 30, 2017. A $450 thousand principal payment~~Amended and $140 thousand extension fee were made on this loan on May 1, 2017 and, as a result, the loan maturity date has been extended to April 30, 2018, as disclosed in Note 11. There are an additional five loans totaling $11.67 million that have maturitiesRestated Credit Agreement. Management is in the ~~next twelve months, each~~process of refinancing the $6.81 million Revere Loan. All loans due to mature are collateralized by properties within our portfolio. ~~The~~Additionally, the Company expects to meet ~~these~~the short-term liquidity requirements, ~~including maturing loans,~~ through a combination of the following:

available cash and cash equivalents;

cash flows from operating activities;

~~borrowings under our revolving credit facility; and~~

refinancing of maturing ~~debt.~~debt; and

intended sale of seven undeveloped land parcels and sale of additional properties, if necessary.

Management is currently working with lenders to refinance the ~~five~~ loans noted above. The loans are expected to have customary interest rates similar to ~~the five loans noted above.~~current loans. They are subject to formal lender commitment, definitive documentation and customary conditions.

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

7. Rentals under Operating Leases

Future minimum ~~rentals~~rents to be received under noncancelable tenant operating leases for each of the next five years and thereafter, excluding CAM and percentage rent based on tenant sales volume, as of March 31, ~~2017~~2018 are as follows (in ~~thousands)~~thousands, unaudited):

For the Periods Ending March 31,
(unaudited)
2018 $ 43,349
2019 37,862
2020 31,200
2021 23,661
2022 17,795
Thereafter 48,288
Total minimum rentals $ 202,155



For the remaining nine months ended December 31, 2018	$	36,782
December 31, 2019	43,641
December 31, 2020	35,556
December 31, 2021	27,176
December 31, 2022	21,078
December 31, 2023	15,448
Thereafter	44,183
Total minimum rents	$	223,864

1923

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

8. Equity and Mezzanine Equity

~~Common Stock One-for-Eight Reverse Stock Split~~

On February 27, 2017, we announced that our Board of Directors had approved the Reverse Stock Split. The Reverse Stock Split took effect at approximately 5:00 p.m. Eastern Time on March 31, 2017 (the “Effective Time”). At the Effective Time, every eight issued and outstanding shares of common stock were converted into one share of common stock, and as a result, the number of outstanding shares of common stock was reduced from approximately 68,707,755 to approximately 8,588,470. At the Effective Time, the number of authorized shares of common stock was also reduced, on a one-for-eight basis, from 150,000,000 to 18,750,000. The par value of each share of common stock remained unchanged. No fractional shares were issued in connection with the Reverse Stock Split. Instead, the Company's transfer agent, aggregated all fractional shares that otherwise would have been issued as a result of the Reverse Stock Split and those shares were sold into the market. Shareholders who would otherwise hold a fractional share of the Company's stock received a cash payment from the net proceeds of the sale in lieu of such fractional shares. All share and share-related information presented in this Quarterly Report on Form 10-Q, including our consolidated financial statements, has been retroactively adjusted to reflect the decreased number of shares resulting from the Reverse Stock Split.

Series A Preferred Stock

At March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had 562 ~~and 4,500~~ shares of ~~no par value~~ Series A Preferred Stock, without par value (“Series A Preferred”) issued and outstanding and 4,500 shares authorized with a $1,000 liquidation preference per share, or $562 thousand in aggregate. The Series A Preferred accrues cumulative dividends at a rate of 9% per annum, which is paid quarterly. The Company has the right to redeem the 562 shares of Series A Preferred, on a pro rata basis, at any time at a price equal to 103% of the purchase price for the Series A Preferred plus any accrued but unpaid dividends.

Series B Preferred Stock

At March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, the Company had ~~1,871,244~~1,875,748 and 1,875,848 shares, respectively, and 5,000,000 shares of noSeries B Convertible Preferred Stock, without par value ~~Series B Preferred Stock~~ (“Series B Preferred”) issued and authorized with a $25.00 liquidation preference per share, or ~~$46.78~~$46.90 million in aggregate. The Series B Preferred bears interest at a rate of 9% per annum. The Series B Preferred ~~Stock~~ has no redemption rights. However, the Series B Preferred ~~Stock~~ is subject to a mandatory conversion once the 20-trading day volume-weighted average closing price of our Common Stock, ~~$0.01 par value per share,~~ exceeds $58 per share; once this weighted average closing price is met, each share of our Series B Preferred ~~Stock~~ will automatically convert into shares of our Common Stock at a conversion price equal to $40.00 per ~~share.~~share of Common Stock. In addition, holders of our Series B Preferred ~~Stock~~ also have the option, at any time, to convert shares of our Series B Preferred ~~Stock~~ into shares of our Common Stock at a conversion price of $40.00 per share of Common Stock. Upon any voluntary or involuntary liquidation, dissolution or winding up of our company, the holders of shares of our Series B Preferred ~~Stock~~ shall be entitled to be paid out of our assets a liquidation preference of $25.00 per share, plus an amount equal to all accumulated, accrued and unpaid dividends to and including the date of payment. The Series ~~Preferred~~ B ~~Stock~~Preferred has no maturity date and will remain outstanding indefinitely unless subject to a mandatory or voluntary conversion as described above.

In conjunction with the 2014 issuance of Series B Preferred, ~~248,325~~1,986,600 warrants were issued. Each warrant permits investors to purchase ~~one~~0.125 share of Common Stock at an exercise price of $44 per share of Common Stock, subject to adjustment. The warrants expire in April 2019.

Series D Preferred Stock - Redeemable Preferred Stock

~~At March 31, 2017 and December 31, 2016,~~In January 2018, the Company, ~~had 2,237,000~~issued and ~~4,000,000~~sold 1,363,636 shares of no par value Series D Cumulative Convertible Preferred Stock, without par value (“Series D Preferred”), in a public offering. Each share of Series D Preferred Stock was sold to investors at an offering price of $16.50 per share. Net proceeds from the public offering totaled $21.16 million, which includes the impact of the underwriters' selling commissions and legal, accounting and other professional fees.

At March 31, 2018 and December 31, 2017, the Company had 3,600,636 and 2,237,000 shares of Series D Preferred issued and authorized with a $25.00 liquidation preference per share, or $90.02 million and $55.93 million in ~~aggregate.~~aggregate, respectively. Until September 21, 2023, the holders of the Series D Preferred ~~Stock~~ are entitled to receive cumulative cash dividends at a rate of 8.75% per annum of the $25.00 liquidation preference per share (equivalent to the fixed annual amount of $2.1875 per share) (the “Initial Rate”). Commencing September 21, 2023, the holders will be entitled to cumulative cash dividends at an annual dividend rate of the Initial Rate increased by 2% of the liquidation preference per annum on each subsequent anniversary thereafter, subject to a maximum annual dividend rate of 14%. Dividends are payable quarterly in arrears on or before January 15th, April 15th, July 15th and October 15th of each year. On or after September 21, 2021, the Company may, at its option, redeem the Series D Preferred, ~~Stock,~~ for cash at a redemption price of $25.00 per share, plus an

~~Wheeler Real Estate Investment Trust, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~8. Equity and Mezzanine Equity (continued)~~

amount equal to all accrued and unpaid dividends, if any, to and including the redemption date. The holder of the Series D Preferred ~~Stock~~ may convert shares at any time into shares of the Company’s Common Stock at an initial conversion rate of $16.96 per share of Common Stock. On September 21, 2023, the holders of the Series D Preferred ~~Stock~~ may, at their option, elect to cause the Company to redeem any or all of their shares at a redemption price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends, if any, to and including the redemption date, payable in cash or in shares of Common Stock, or any combination thereof, at the holder’s option. ~~The~~

Accretion of Series D Preferred ~~Stock requires~~was $148 thousand for the ~~Company maintain asset coverage of at least 200%.~~three months ended March 31, 2018.

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

8. Equity and Mezzanine Equity (continued)

Earnings per share

Basic earnings per share for the Company’s common shareholders is calculated by dividing income (loss) from continuing operations, excluding amounts attributable to preferred stockholders and the net loss attributable to noncontrolling interests, by the Company’s weighted-average shares of ~~common stock~~Common Stock outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) attributable to common shareholders, excluding amounts attributable to preferred shareholders and the net loss attributable to noncontrolling interests, by the weighted-average number of common shares including any dilutive shares.

As of March 31, ~~2017,~~2018, the below shares are able to be converted to ~~common stock.~~Common Stock. The common units, convertible preferred stock, cumulative convertible preferred stock, and warrants have been excluded from the Company’s diluted earnings per share calculation because their inclusion would be antidilutive. In addition to the below, 750,000 shares of the Company's ~~common stock~~Common Stock may be issued upon exercise of a warrant, solely in the event of a default under a loan agreement in which we serve as a guarantor.


	March 31, 2017		March 31, 2018
	Outstanding shares	Potential Dilutive Shares	Outstanding shares	Potential Dilutive Shares
	(unaudited)		(unaudited)
Common units	761,888	607,877	625,312	625,312
Series B Preferred Stock	1,871,244	1,169,528	1,875,748	1,172,343
Series D Preferred Stock	2,237,000	3,297,465	3,600,636	5,307,541
Warrants to purchase		329,378
Warrants to purchase Common Stock				329,378

Dividends

Dividends were declared to holders of common units, common shares and preferred shares as follows (in thousands):


	Three Months Ended March 31,				Three Months Ended March 31,
	2017		2016		2018		2017
	(unaudited)				(unaudited)
Common unit and common shareholders	$	3,917	$	3,735	$	—	$	3,917
Preferred shareholders	2,483		511		3,207		2,483
Total	$	6,400	$	4,246	$	3,207	$	6,400

On March 17, 2017, the Company declared a $0.0175 per share dividend payable on or about April 28, 2017 to shareholders and unitholders of record as of March 31, 2017. Accordingly, the Company has accrued $1.31 million as of March 31, 2017 for this dividend.

During the three months ended March 31, ~~2017,~~2018, the Company declared quarterly dividends of ~~$2.29~~$3.04 million to preferred shareholders of record as of March 31, ~~2017~~2018 to be paid on April 15, ~~2017.~~2018. Accordingly, the Company has accrued ~~$2.29~~$3.04 million as of March 31, ~~2017~~2018 for this dividend.

~~Wheeler Real Estate Investment Trust, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~8. Equity and Mezzanine Equity (continued)~~

Effective April 1, 2017 the Company Board of Directors has approved a change in the Company's common stock dividend payment schedule such that future dividends are expected to be paid quarterly commencing in July 2017 to shareholders of record on June 30, 2017.

2015 Long-Term Incentive Plan

On June 4, 2015, the Company's shareholders approved the 2015 Long-Term Incentive Plan (the "2015 Incentive Plan"). The 2015 Incentive Plan allows for issuance of up to 125,000 shares of the Company's ~~common stock~~Common Stock to employees, directors, officers and consultants for services rendered to the Company.

During the three months ended March 31, ~~2017,~~2018, the Company issued ~~11,465~~no shares to ~~consultants and~~ employees for services rendered to the ~~Company. The market value of these shares at~~Company under the ~~time of issuance was approximately $155 thousand.~~2015 Incentive Plan. As of March 31, ~~2017,~~2018, there are 41,104 shares available for issuance under the Company’s 2015 Incentive Plan.

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

8. Equity and Mezzanine Equity (continued)

2016 Long-Term Incentive Plan

On June 15, 2016, the Company's shareholders approved the 2016 Long-Term Incentive Plan (the "2016 Incentive Plan"). The 2016 Incentive Plan allows for issuance of up to 625,000 shares of the Company's ~~common stock~~Common Stock to employees, directors, officers and consultants for services rendered to the Company.

During the three months ended March 31, ~~2017,~~2018, the Company issued ~~70,678~~43,459 shares to ~~consultants and employees~~directors for services rendered to the ~~Company.~~Company under the 2016 Incentive Plan. The market value of these shares at the time of issuance was approximately ~~$965~~$330 thousand. As of March 31, ~~2017,~~2018, there are ~~549,721~~477,413 shares available for issuance under the Company’s 2016 Incentive Plan.

9. Commitments and Contingencies

Lease Commitments

The following properties are subject to ground leases which requires the Company to make a fixed annual rental payment and includes escalation clauses and renewal options as follows (unaudited, in thousands):


	Three Months Ended March 31,					Three Months Ended March 31,
	2017		2016		Expiration Year	2018		2017		Expiration Year
Amscot	$	5	$	5	2045	$	5	$	5	2045
Beaver Ruin Village	11		11		2054	11		11		2054
Beaver Ruin Village II	5		4		2056	5		5		2056
Leased office space Charleston, SC	25		17		2019	25		25		2019
Moncks Corner	30		—		2040	30		30		2040
Devine Street	63		—		2035	63		63		2035
	$	139	$	37
JANAF						60		—		2069
Total Ground Leases						$	199	$	139

~~Wheeler Real Estate Investment Trust, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~9. Commitments and Contingencies (continued)~~

JANAF ground lease expense of $60 thousand for the three months ended March 31, 2018 includes $24 thousand in percentage rent.

Future minimum lease payments due under the operating leases, including applicable automatic extension options, as of March 31, 2018 are as follows ~~(unaudited, in thousands)~~(in thousands, unaudited):

For the Period Ended March 31,
2018 $ 521
2019 525
2020 467
2021 440
2022 480
Thereafter 9,891
$ 12,324



For the remaining nine months ended December 31, 2018	$	507
December 31, 2019	644
December 31, 2020	583
December 31, 2021	635
December 31, 2022	638
December 31, 2023	640
Thereafter	16,063
Total minimum lease payments	$	19,710

Insurance

The Company carries comprehensive liability, fire, extended coverage, business interruption and rental loss insurance covering all of the properties in its portfolio under a blanket insurance policy, in addition to other coverages, such as trademark and pollution coverage that may be appropriate for certain of its properties. Additionally, the Company carries a directors’, officers’, entity and employment practices liability insurance policy that covers such claims made against the Company and its directors and officers. The Company believes the policy specifications and insured limits are appropriate and adequate for its

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Commitments and Contingencies (continued)

properties given the relative risk of loss, the cost of the coverage and industry practice; however, its insurance coverage may not be sufficient to fully cover its losses.

Concentration of Credit Risk

The Company is subject to risks incidental to the ownership and operation of commercial real estate. These risks include, among others, the risks normally associated with changes in the general economic climate, trends in the retail industry, creditworthiness of tenants, competition for tenants and customers, changes in tax laws, interest rates, the availability of financing and potential liability under environmental and other laws.

The Company’s portfolio of properties is dependent upon regional and local economic conditions and is geographically concentrated in the Northeast, Mid-Atlantic, Southeast and Southwest, which markets represented approximately 4%3%, ~~23%~~20%, ~~72%~~76% and 1%, respectively, of the total annualized base rent of the properties in its portfolio as of March 31, ~~2017.~~2018. The Company’s geographic concentration may cause it to be more susceptible to adverse developments in those markets than if it owned a more geographically diverse portfolio. Additionally, the Company’s retail shopping center properties depend on anchor stores or major tenants to attract shoppers and could be adversely affected by the loss of, or a store closure by, one or more of these tenants.

Regulatory and Environmental

As the owner of the buildings on our properties, the Company could face liability for the presence of hazardous materials (e.g., asbestos or lead) or other adverse conditions (e.g., poor indoor air quality) in its buildings. Environmental laws govern the presence, maintenance, and removal of hazardous materials in buildings, and if the Company does not comply with such laws, it could face fines for such noncompliance. Also, the Company could be liable to third parties (e.g., occupants of the buildings) for damages related to exposure to hazardous materials or adverse conditions in its buildings, and the Company could incur material expenses with respect to abatement or remediation of hazardous materials or other adverse conditions in its buildings. In addition, some of the Company’s tenants routinely handle and use hazardous or regulated substances and wastes as part of their operations at our properties, which are subject to regulation. Such environmental and health and safety laws and regulations could subject the Company or its tenants to liability resulting from these activities. Environmental liabilities could affect a tenant’s ability to make rental payments to the Company, and changes in laws could increase the potential liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially and adversely affect the Company’s operations. The Company is not aware of any material contingent liabilities, regulatory matters or environmental matters that may exist.

~~Wheeler Real Estate Investment Trust, Inc. and Subsidiaries~~

~~Notes to Condensed Consolidated Financial Statements (Continued)~~

~~(Unaudited)~~

~~9. Commitments and Contingencies (continued)~~

Litigation

The Company is involved in various legal proceedings arising in the ordinary course of its business, including, but not limited to commercial disputes. The Company believes that such litigation, claims and administrative proceedings will not have a material adverse impact on its financial position or its results of operations. The Company records a liability when it considers the loss probable and the amount can be reasonably estimated.

10. Related Party Transactions

The amounts disclosed below reflect the activity between the Company and Mr. Wheeler's affiliates.


	March 31,				March 31,
	2017		2016		2018		2017
	(unaudited, in thousands)				(unaudited, in thousands)
Amounts paid to affiliates	$	9	$	76	$	8	$	9
Amounts received from affiliates	$	471	$	302	$	87	$	471
Amounts due from affiliates	$	1,566	$	465
Notes receivable	$	12,000	$	—

Table of Contents

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

10. Related Party Transactions (continued)



	March 31,		December 31,
	2018		2017
	(unaudited, in thousands)
Amounts payable to affiliates	$	5	$	—
Notes receivable	$	6,739	$	6,739

As discussed in Note 4, the Company ~~has~~ loaned $11.00 million for the partial funding of Pineland Station Shopping Center in Hilton Head, South Carolina to be known in the future as Sea Turtle Development and loaned $1.00 million for the sale of land to be used in the development. At December 31, 2017, the Company recognized a $5.26 million impairment charge on the note receivable as discussed in greater detail in Note 4. The Company ~~is performing~~has placed the notes receivable on nonaccrual status and has not recognized $355 thousand of interest income due on the notes for the three months ended March 31, 2018. In February 2018, the Company's agreement to perform development, leasing, property and asset management services for Sea Turtle ~~Development.~~ Development was terminated. Prior to the termination of the agreements, development fees of 5% of hard costs incurred ~~are~~were paid to the Company. Leasing, property and asset management fees ~~are~~were consistent with those charged for services provided to non-related properties.

The Company recovered $77 thousand in amounts due from related parties for the three months ended March 31, 2018 which were previously reserved. The recovery is included in “provision for credit losses” on the condensed consolidated statements of operations. The total allowance on related party receivables at March 31, 2018 and December 31, 2017 is $2.77 million and $2.36 million, respectively. These amounts are included in "related party payables, net" on the condensed consolidated balance sheets.

Amounts due from ~~affiliates include $770 thousand in accrued interest~~Sea Turtle Development are reserved due to uncertainty surrounding the collectability given the information currently available to the Company. Amounts due from other non-REIT properties have been reserved based on available cash flows at the ~~notes receivable~~respective properties and ~~$207 thousand in development fees at March 31, 2017.~~payment history. The management agreements for these properties have been terminated.

11. Subsequent Events

Series D Preferred Stock - Redeemable Preferred Stock

On May ~~1, 2017,~~3, 2018, the Company filed a Certificate of Correction (the “Certificate of Correction”) with the State Department of Assessments and Taxation of Maryland (the “SDAT”) correcting an inadvertently omitted reference to “accumulated amortization” in “Section 10(a) (Mandatory Redemption for Asset Coverage)” of the Articles Supplementary for the Series D Preferred that was previously filed with SDAT on September 16, 2016.

The Certificate of Correction became effective upon filing.

Revere Loan

On May 3, 2018, the Company extended the ~~$7.45~~$6.81 million Revere ~~Term~~ Loan ~~maturity~~ to ~~April 30, 2018, as permitted within the terms of the loan agreement, with a $450 thousand principal payment and $140 thousand extension fee.~~May 15, 2018.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Form 10-Q, along with the consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our ~~2016~~2017 Form 10-K for the year ended December 31, 2016. All per share amounts, common units and shares outstanding and stock-based compensation amounts for all periods presented reflect our one-for-eight reverse stock split (the "Reverse Stock Split"), which was effective March 31, 2017. For more detailed information regarding the basis of presentation for the following information, you should read the notes to the unaudited condensed consolidated financial statements included in this Form 10-Q.

This Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, including discussion and analysis of our financial condition, anticipated capital expenditures required to complete projects, amounts of anticipated cash distributions to our shareholders in the future and other matters. These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on its knowledge and understanding of our business and industry. Forward-looking statements are typically identified by the use of terms such as “may,” “will,” “should,” “potential,” “predicts,” “anticipates,” “expects,” “intends,” “plans,” “believes,” “seeks,” “estimates” or the negative of such terms and variations of these words and similar expressions, although not all forward-looking statements include these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. You are cautioned not to place undue reliance on forward-looking statements, which reflect our management’s view only as of the date of this Form 10-Q. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results.

The forward-looking statements should be read in light of these factors and the factors identified in the “Risk Factors” sections in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on ~~February 28, 2017.~~March 7, 2018.

Executive Overview

~~The~~As of March 31, ~~2017 three month periods include~~2018, the ~~combined operations~~Trust, through the Operating Partnership, owned and operated sixty-five centers, one office building, seven undeveloped properties, and one redevelopment project in Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, Oklahoma, Tennessee, Kentucky, New Jersey, Pennsylvania and West Virginia. Accordingly, the use of ~~all properties owned~~the word “Company” refers to the Trust and its consolidated subsidiaries, except where the context otherwise requires.

JANAF Acquisition

On January 18, 2018, the Company acquired JANAF, a retail shopping center located in Norfolk, Virginia, for a

purchase price of $85.65 million, paid through a combination of cash, restricted cash and debt assumption and the issuance of 150,000 shares of Common Stock at ~~December 31, 2016~~$7.53 per share. The shopping center, anchored by BJ's Wholesale Club, totals 810,137 square feet and was 94% leased at the acquisition date.

Disposition

Assets Held for Sale

In February 2018, the Company’s management and Board of Directors committed to a plan to sell the Land Parcels as ~~described in our 2016 Form 10-K. Conversely,~~part of Company’s strategic initiative. Accordingly, the ~~March 31, 2016 three month periods include the combined operations of all properties owned at December 31, 2015~~Land Parcels have been classified as ~~described in our 2015 Annual Report on Form 10-K~~held for the year ended December 31, 2015 ("2015 Form 10-K"). In providing the following discussion and analysis of our results of operations, we have separately identified the activities of properties owned for the entire 2016 annual and 2017 three month periods (collectively referred to as “same stores”) and of those properties acquired after December 31, 2015 (collectively referred to as “new stores”). This illustrates the significant impact these properties acquired during 2016 had on our results of operations.sale.

New Leases, Leasing Renewals and Expirations

The following table presents selected lease activity statistics for our properties.


	Three Months Ended March 31,					Three Months Ended March 31,
	2017			2016		2018			2017
Renewals:
Leases renewed with rate increase (sq feet)	92,223			26,081		35,393			92,223
Leases renewed with rate decrease (sq feet)	16,804			—		38,480			16,804
Leases renewed with no rate change (sq feet)	70,094			5,975		80,567			70,094
Total leases renewed (sq feet)	179,121			32,056		154,440			179,121


Leases renewed with rate increase (count)	22			7		16			22
Leases renewed with rate decrease (count)	3			—		5			3
Leases renewed with no rate change (count)	8			3		5			8
Total leases renewed (count)	33			10		26			33

Option exercised (count)	12			4		7			12

Weighted average on rate increases (per sq foot)	$	0.70		$	1.14	$	0.77		$	0.70
Weighted average on rate decreases (per sq foot)	$	(0.60	)	$	—	$	(1.86	)	$	(0.60	)
Weighted average rate (per sq foot)	$	0.30		$	0.93	$	(0.29	)	$	0.30
Weighted average change over prior rates	3.50		%	7.39%		(3.42		)%	3.50		%

New Leases:
New leases (sq feet)	54,279			18,937		72,076			54,279
New leases (count)	18			10		15			18
Weighted average rate (per sq foot)	$	13.92		$	14.03	$	8.08		$	13.92

Gross Leasable Area Expiring during the next 12 months	9.86		%	8.57%
Gross Leasable Area ("GLA") expiring during the next 9 months						8.44		%	4.71		%

~~Based~~Anchor Lease Modifications

During the three months ended March 31, 2018, the Company modified thirteen leases with Southeastern Grocer anchor tenants and recaptured four locations. These modifications include a combination of term adjustments, rent adjustments (decreases and increases), deferred landlord contributions for remodels, and adjusted lease language. The Company has elected to recapture Ladson Crossing, St. Matthews, South Park, and Tampa Festival in the second quarter of 2018. The Cypress Shopping Center lease expired on ~~recent market trends, we believe that these leases will be renewed at amounts and terms comparable to existing lease agreements.~~

~~Critical Accounting Policies~~

In preparing the condensed consolidated financial statements, we have made estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities asMarch 31, 2018. As part of the ~~date of~~negotiated recaptures the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results may differ from these estimates. A summary of our critical accounting policies is includedCompany received $246 thousand in ~~our 2016 Form 10-K under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” There have been no significant changes to these policies~~termination fees during the three months ended March 31, ~~2017. For disclosure regarding recent accounting pronouncements~~2018. The remaining thirteen lease modifications remain subject to Southeastern Grocer's bankruptcy court approval. The initial annualized base rent impact of these modifications and recaptures, including the ~~anticipated impact they will have on our operations, please refer to Note 2 of the condensed consolidated financial statements included in this Form 10-Q.~~Cypress lease expiration, is approximately $2.50 million.

Three Months Ended March 31, ~~2017~~2018 Compared to the Three Months Ended March 31, ~~2016~~2017

Results of Operations

The following table presents a comparison of the condensed consolidated statements of operations for the three months ended March 31, ~~2017~~2018 and ~~2016,~~2017, respectively.


	Three Months Ended March 31,						Three Months Ended Changes					Three Months Ended March 31,						Three Months Ended Changes
	2017			2016			Change			% Change		2018			2017			Change			% Change
PROPERTY DATA:				(in thousands)
Number of properties owned and leased at period end (1)	64			42			22			52.38	%	65			64			1			1.56	%
Aggregate gross leasable area at period end (1)	4,906,511			3,151,358			1,755,153			55.70	%	5,743,073			4,906,511			836,562			17.05	%
Ending occupancy rate at period end (1)	93.00		%	93.88		%	(0.88		)%	(0.94	)%	90.8		%	93.0		%	(2.20		)%	(2.37	)%
FINANCIAL DATA:
Rental revenues	$	11,129		$	6,742		$	4,387		65.07	%	$	12,697		$	11,129		$	1,568		14.09	%
Asset management fees	162			255			(93		)	(36.47	)%	48			162			(114		)	(70.37	)%
Commissions	115			153			(38		)	(24.84	)%	14			115			(101		)	(87.83	)%
Other non-property development income	136			—			136			—	%
Tenant reimbursements and other revenues	2,780			1,988			792			39.84	%
Tenant reimbursements												3,222			2,680			542			20.22	%
Development income												—			136			(136		)	(100.00	)%
Other revenues												333			100			233			233.00	%
Total Revenue	14,322			9,138			5,184			56.73	%	16,314			14,322			1,992			13.91	%
EXPENSES:
Property operations	3,994			2,675			1,319			49.31	%	4,599			3,994			605			15.15	%
Non-REIT management and leasing services	271			377			(106		)	(28.12	)%	36			271			(235		)	(86.72	)%
Depreciation and amortization	6,400			4,880			1,520			31.15	%	7,476			6,400			1,076			16.81	%
Provision for credit losses	252			88			164			186.36	%	21			252			(231		)	(91.67	)%
Corporate general & administrative	2,232			2,282			(50		)	(2.19	)%	2,508			2,232			276			12.37	%
Total Operating Expenses	13,149			10,302			2,847			27.64	%	14,640			13,149			1,491			11.34	%
Operating Income (Loss)	1,173			(1,164		)	2,337			200.77	%
Gain on disposal of properties												1,055			—			1,055			100.00	%
Operating Income												2,729			1,173			1,556			(132.65	)%
Interest income	356			1			355			35,500.00	%	1			356			(355		)	(99.72	)%
Interest expense	(4,177		)	(2,420		)	(1,757		)	(72.60	)%	(4,577		)	(4,177		)	(400		)	(9.58	)%
Net Loss from Continuing Operations Before Income Taxes	(2,648		)	(3,583		)	935			26.10	%	(1,847		)	(2,648		)	801			30.25	%
Income tax expense	(41		)	—			(41		)	—	%	(25		)	(41		)	16			39.02	%
Net Loss from Continuing Operations	(2,689		)	(3,583		)	894			24.95	%	(1,872		)	(2,689		)	817			30.38	%
Discontinued Operations
Income from operations	16			21			(5		)	(23.81	)%
Loss from discontinued operations												—			16			(16		)	100.00	%
Gain on disposal of properties	1,513			—			1,513			—	%	—			1,513			(1,513		)	(100.00	)%
Net Income from Discontinued Operations	1,529			21			1,508			7,180.95	%
Net (Loss) Income from Discontinued Operations												—			1,529			(1,529		)	(100.00	)%
Net Loss	(1,160		)	(3,562		)	2,402			67.43	%	(1,872		)	(1,160		)	(712		)	(61.38	)%
Net loss attributable to noncontrolling interests	(41		)	(333		)	292			87.69	%	(47		)	(41		)	(6		)	(14.63	)%
Net Loss Attributable to Wheeler REIT	$	(1,119	)	$	(3,229	)	$	2,110		65.35	%	$	(1,825	)	$	(1,119	)	$	(706	)	(63.09	)%


(1)	Excludes the undeveloped land parcels and Riversedge North, our corporate headquarters, and the redevelopment property. Includes assets held for sale.

Total Revenue

Total revenue was $16.31 million for the three months ended March 31, 2018 compared to $14.32 million for the three months ended March 31, 2017, a $1.99 million increase. The increase in rental revenues and tenant reimbursements of $2.11 million is attributable to a partial period of operations reported for the JANAF acquisition. The $233 thousand increase in other revenues is a result of lease termination fees associated with the Southeastern Grocers store recaptures. The decrease in commissions, development income and asset management fees of $351 thousand is primarily related to the February 2018 termination of the Company's agreement to perform these services for Sea Turtle Development and certain other non-REIT properties.

Total Operating Expenses

Total operating expenses for the three months ended March 31, 2018 were $14.64 million, representing an increase of $1.49 million over the three months ended March 31, 2017. Overall increases of $1.08 million were noted in depreciation and amortization and $605 thousand in property operations primarily resulting from the additional expenses associated with the JANAF acquisition. These amounts were offset by a decrease of $235 thousand in non-REIT management and leasing services a result of the decline in non-REIT properties the Company manages. The provision for credit losses decreased $231 thousand for the three months ended March 31, 2018, primarily related to $77 thousand in recoveries in amounts due from related parties and increase collections on tenant accounts receivable.

Corporate general and administrative expenses increased $276 thousand as a result of an increase of $294 thousand in professional fees associated with hiring of KeyBanc Advisors, increased audit and legal costs in addition to an increase of $220 thousand in compensation and benefits primarily driven by share based compensation for employees and directors, severance and reallocation of salary costs associated with acquisition personnel. These increases were offset by decreases in capital & debt financing costs as well as acquisition costs impacted by the adoption of ASU 2017-01.

Interest Income

Interest income was $1 thousand for the three months ended March 31, 2018, which represents an decrease of $355 thousand as compared to $356 thousand for the three months ended March 31, 2017. The decrease is primarily attributable to the Company placing the notes receivable on non-accrual status and not recognizing $355 thousand in interest income for the three months ended March 31, 2018 due to note impairment.

Interest Expense

Interest expense increased $400 thousand or 9.58% for the three months ended March 31, 2018, compared to $4.18 million for the three months ended March 31, 2017. The increase is primarily attributable to the incremental debt service associated with the additional borrowings utilized to acquire JANAF.

Discontinued Operations

Net loss from discontinued operations totaled $1.53 million for the for the three months ended March 31, 2017. The income for 2017 primarily resulted from the sale of Ruby Tuesday’s and Outback Steakhouse at Pierpont Centre whereas there was no 2018 discontinued operations activity,

Same Store and New Store Operating Income

Net operating income (“NOI”) is a widely-used non-GAAP financial measure for REITs. The Company believes that NOI is a useful measure of the Company's property operating performance. The Company defines NOI as property revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Because NOI excludes general and administrative expenses, depreciation and amortization, interest expense, interest income, provision for income taxes, gain or loss on sale or capital expenditures and leasing costs, it provides a performance measure, that when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing perspective not immediately apparent from net income. The Company uses NOI to evaluate its operating performance since NOI allows the Company to evaluate the impact of factors, such as occupancy levels, lease structure, lease rates and tenant base, have on the Company's results, margins and returns. NOI should not be viewed as a measure of the Company's overall financial performance since it does not reflect general and administrative expenses, depreciation and amortization, involuntary conversion, interest expense, interest income, provision for income taxes, gain or loss on sale or disposition of assets, and the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties. Other REITs may use different methodologies for calculating NOI, and accordingly, the Company's NOI may not be comparable to that of other REITs.

The following table ~~provides~~is a reconciliation of same store and new store NOI from the most directly comparable GAAP financial ~~information.~~measure of net income (loss). Same stores consist of those properties we owned during all periods presented in their entirety, while new stores consist of those properties acquired during the periods presented. The discussion below ~~primarily~~ focuses on same store results of operations since ~~all twenty-three of our 2016 retail acquisitions~~the JANAF acquisition occurred ~~subsequent to March 31, 2016.~~in January 2018 and there were no 2017 acquisitions.

Same store discontinued operations financial information reflects the activity for the following properties:

Outback Steakhouse and Ruby Tuesday ground leases at Pierpont Centre (acquired January 14, 2015, sold February 28, 2017)


	Three Months Ended March 31,																		Three Months Ended March 31,
	Same Store						New Store					Total							Same Store						New Store				Total
	2017			2016			2017			2016		2017			��	2016			2018			2017			2018		2017		2018			2017
							(in thousands)												(in thousands)
Net Loss																			$	(1,932	)	$	(1,160	)	$	60	$	—	$	(1,872	)	$	(1,160	)
Adjustments:
Net Income from Discontinued Operations																			—			(1,529		)	—		—		—			(1,529		)
Income tax expense																			25			41			—		—		25			41
Interest expense																			3,974			4,177			603		—		4,577			4,177
Interest income																			(1		)	(356		)	—		—		(1		)	(356		)
Gain on disposal of properties																			(1,055		)	—			—		—		(1,055		)	—
Corporate general & administrative																			2,499			2,232			9		—		2,508			2,232
Provision for credit losses - non-tenant																			(77		)	—			—		—		(77		)	—
Depreciation and amortization																			6,495			6,400			981		—		7,476			6,400
Non-REIT management and leasing services																			36			271			—		—		36			271
Development income																			—			(136		)	—		—		—			(136		)
Asset management and commission revenues																			(62		)	(277		)	—		—		(62		)	(277		)
Property Net Operating Income																			$	9,902		$	9,663		$	1,653	$	—	$	11,555		$	9,663

Property revenues	$	8,734		$	8,730		$	5,175		$	—	$	13,909			$	8,730		$	13,970		$	13,909		$	2,282	$	—	$	16,252		$	13,909
Property expenses	2,546			2,675			1,448			—		3,994				2,675			3,970			3,994			629		—		4,599			3,994
Provision for credit losses - tenant																			98			252			—		—		98			252
Property Net Operating Income	6,188			6,055			3,727			—		9,915				6,055			$	9,902		$	9,663		$	1,653	$	—	$	11,555		$	9,663
Asset Management and Commission Revenue	277			408			—			—		277				408
Other non-property income	136			—			—			—		136				—
Other Income	413			408			—			—		413				408
Non-REIT management and leasing services	271			377			—			—		271				377
Depreciation and amortization	3,854			4,880			2,546			—		6,400				4,880
Provision for credit losses	229			88			23			—		252				88
Corporate general & administrative	2,065			2,282			167			—		2,232				2,282
Total Other Operating Expenses	6,419			7,627			2,736			—		9,155				7,627
Interest income	356			1			—			—		356				1
Interest expense	(2,600		)	(2,420		)	(1,577		)	—		(4,177		)		(2,420		)
Net Loss from Continuing Operations Before Income Taxes	(2,062		)	(3,583		)	(586		)	—		(2,648		)		(3,583		)
Income tax expense	(41		)	—			—			—		(41		)		—
Net Loss from Continuing Operations	(2,103		)	(3,583		)	(586		)	—		(2,689		)		(3,583		)
Discontinued Operations
Income from operations	16			21			—			—		16				21
Gain on disposal of properties	1,513			—			—			—		1,513				—
Net Income from Discontinued Operations	1,529			21			—			—		1,529				21
Net Loss	$	(574	)	$	(3,562	)	$	(586	)	$	—	$	(1,160	)		$	(3,562	)

Property Revenues

Total same store property revenues for the three ~~month periods~~months ended March 31, ~~2017 and 2016~~2018 were ~~consistent~~relatively flat at ~~$8.73 million.~~$13.97 million, compared to $13.91 million for the three months ended March 31, 2017.

~~New store~~The three months ended March 31, 2018 represents a partial period of activity for JANAF shopping center. This property (new stores) contributed $2.28 million in revenues for the three ~~month periods~~months ended March 31, ~~2017 and 2016 were $5.18 million and $0, respectively. The~~2018, compared to no revenue for the three ~~month period~~months ended March 31, 2017 represents a full period of operations reported for the twenty-three retail acquisitions made in 2016. These properties will generate a significant amount of revenue for us and we will benefit from future contractual rent increases and expansion opportunities.2017.

Property Expenses

Total same store property expenses for the three ~~month periods~~months ended March 31, ~~2017 and 2016~~2018 were ~~$2.55~~relatively flat at $3.97 million, ~~and $2.68~~compared to $3.99 million ~~respectively. The decrease was primarily due to~~for the ~~following:~~

~~$110 thousand decrease in grounds and landscaping and parking lot repairs needed;~~

$three months ended March 31, ~~thousand decrease in real estate taxes.~~

2017. Total property expenses increased primarily due to new store increases of ~~$1.45 million for the three month period ended March 31, 2017, respectively, over the comparable prior year period.~~ $629 thousand.

There were no significant unusual or non-recurring items included in new store property expenses for the three ~~month period~~months ended March 31, ~~2017.~~2018.

Property Net Operating Income

Total property net operating income was $11.56 million for the three ~~month periods~~months ended March 31, 2018, compared to $9.66 million for the three months ended March 31, 2017, ~~and 2016 were $9.91 million and $6.05 million, respectively,~~ representing an increase of ~~$3.86 million.~~$1.90 million over 2017. New stores accounted for the majority of ~~these increases~~this increase by generating ~~$3.73~~$1.65 million in property net operating income for the three ~~month period~~months ended March 31, ~~2017,~~2018, compared to ~~$0 for the three month period ended March 31, 2016.~~

~~Other Income~~

~~Total other~~no property net operating income for the three month periods ended March 31, 2017 and 2016 were $413 thousand and $408 thousand, respectively, representing an increase of $5 thousand. The increase is a result of $136 thousand of development fees earned on the Sea Turtle Development project offset by a decrease of $131 thousand in asset management and commission revenue.

~~Other Operating Expenses~~

Same store other operating expenses for the three month periods ended March 31, 2017 and 2016 were $6.42 million and $7.63 million, respectively, representing a decrease of $1.21 million primarily due to the following:

~~$1.03 million decrease in depreciation and amortization expense from additional assets becoming fully depreciated;~~

$0.22 million decrease in general and administrative expenses, primarily a result of decreased acquisitions costs and capital related items, salaries and compensation due to elimination of Chief Operating Officer role in 2016, offset by an increase in professional fees as a result of year-end audit;

~~$106 thousand decrease in non-REIT management and leasing services due to less third party activity; and~~

~~Partially offset by an increase in provision for credit losses of $141 thousand.~~

Total other operating expenses increased by $1.53 million for the three month period ended March 31, 2017 due to an overall increase in depreciation and amortization resulting from the additional expense associated with the twenty-three properties acquired in 2016.

General and administrative expenses during the three month period ended March 31, 2017 included approximately $587 thousand of non-recurring expenses related to acquisitions, capital events and other miscellaneous costs which are detailed below.

Three Months Ended
March 31, 2017
(unaudited, thousands)
Acquisition costs $ 260
Capital related costs 220
Other 107
$ 587

Acquisition expenses were primarily related to financial statement audits and sourcing and due diligence of potential acquisitions currently in our pipeline. Other nonrecurring expenses are miscellaneous costs we believe will not be incurred on a going forward basis including non-cash expenses such as vacation accrual.

~~Interest Income~~

Same store interest income was $356 thousand for the three month period ended March 31, 2017, which represent increases of $355 thousand as compared to $1 thousand for the three period ended March 31, 2016. The increase is primarily attributed to interest income on the Sea Turtle Development note receivable recognized during the three months ended March 31, 2017.

~~Interest Expense~~

During the three month period ended March 31, 2017, same store interest expense increased $180 thousand when compared the period in 2016, primarily due to incremental debt service associated with additional borrowings.

Total interest expense for the three month period ended March 31, 2017 increased by $1.76 million, which is primarily attributed to amortization of loan costs and the incremental debt service associated with the additional borrowings utilized to acquire the twenty-three retail properties occurring subsequent to March 31, 2016.

~~Discontinued Operations~~

Net income from discontinued operations totaled $1.53 million for the three month period ended March 31, 2017, compared to a net income of $21 thousand for three month period ended March 31, 2016. The increase is due to the sale of Ruby Tuesdays/Outback at Pierpont occurring during the three months ended March 31, 2017.

Funds from Operations (FFO)

We use ~~Funds from Operations ("FFO"),~~FFO, a non-GAAP measure, as an alternative measure of our operating performance, specifically as it relates to results of operations and liquidity. We compute FFO in accordance with standards established by the Board of Governors of NAREIT in its March 1995 White Paper (as amended in November 1999 and April 2002). As defined by NAREIT, FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization (excluding amortization of loan origination costs) and after adjustments for unconsolidated partnerships and joint ventures. Most industry analysts and equity REITs, including us, consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions and excluding depreciation, FFO is a helpful tool that can assist in the comparison of the operating performance of a company’s real estate between periods, or as compared to different companies. Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income alone as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time, while historically real estate values have risen or fallen with market conditions. Accordingly, we believe FFO provides a valuable alternative measurement tool to GAAP when presenting our operating results.

Below is a comparison of same and new store FFO, which is a non-GAAP measurement, for the three month periods ended March 31, ~~2017~~2018 and ~~2016:~~2017:


	Three Months Ended March 31,																						Three Months Ended March 31,
	Same Stores						New Stores					Total						Period Over Period Changes					Same Store						New Store				Total						Period Over Period Changes
	2017			2016			2017			2016		2017			2016			$			%		2018			2017			2018		2017		2018			2017			$			%
										(in thousands)																					(in thousands, unaudited)
Net loss	$	(574	)	$	(3,562	)	$	(586	)	$	—	$	(1,160	)	$	(3,562	)	$	2,402		67.43	%
Net Loss																							$	(1,932	)	$	(1,160	)	$	60	$	—	$	(1,872	)	$	(1,160	)	$	(712	)	(61.38	)%
Depreciation and amortization of real estate assets	3,854			4,880			2,546			—		6,400			4,880			1,520			31.15	%	6,495			6,400			981		—		7,476			6,400			1,076			16.81	%
Gain on sale of discontinued operations	(1,513		)	—			—			—		(1,513		)	—			(1,513		)	—	%
Gain on disposal of properties																							(1,055		)	—			—		—		(1,055		)	—			(1,055		)	(100.00	)%
Gain on disposal of properties-discontinued operations																							—			(1,513		)	—		—		—			(1,513		)	1,513			100.00	%
FFO	$	1,767		$	1,318		$	1,960		$	—	$	3,727		$	1,318		$	2,409		182.78	%	$	3,508		$	3,727		$	1,041	$	—	$	4,549		$	3,727		$	822		22.06	%

During the three month period ended March 31, ~~2017,~~2018, same store FFO ~~increased $449~~decreased $219 thousand, primarily due to the following:

$~~133 thousand increase in property net operating income;~~

$355 thousand ~~increase~~decrease in interest income as a result of presenting notes ~~receivable;~~receivable on a non-accrual basis;

$116 thousand decrease in development, asset management and commission revenues, net savings on related non-REIT management and leasing services as a result of termination of related party agreements to perform services;

$267 thousand increase in corporate general and administrative expenses;

Offset by an increase in property net operating income ~~tax expense.~~of $239 thousand.

Total FFO increased ~~$2.41 million~~$822 thousand for the three month period ended March 31, ~~2017~~2018 compared to the same period in ~~2016,~~2017, primarily due to ~~the expansion of operations resulting from the twenty-three retail acquisitions occurring subsequent to March 31, 2016 that contributed~~ incremental new store FFO of ~~$1.96~~$1.04 million ~~when compared~~thousand attributable to the ~~same period prior year.~~JANAF acquisition.

We believe the computation of FFO in accordance with NAREIT's definition includes certain items that are not indicative of the results provided by our operating portfolio and affect the comparability of our period-over-period performance. These items include, but are not limited to, legal settlements, non-cash share-based compensation expense, non-cash amortization on loans and acquisition costs. Therefore, in addition to FFO, management uses Adjusted FFO ("AFFO"), which we define to exclude such items. Management believes that these adjustments are appropriate in determining AFFO as they are not indicative of the operating performance of our assets. In addition, we believe that AFFO is a useful supplemental measure for the investing

community to use in comparing us to other REITs as many REITs provide some form of adjusted or modified FFO. However, there can be no assurance that AFFO presented by us is comparable to the adjusted or modified FFO of other REITs.

Total AFFO for the three month periods ended March 31, ~~2017~~2018 and ~~2016,~~2017, respectively, is shown in the table below:


	Three Months Ended March 31,						Three Months Ended March 31,
	2017			2016			2018			2017
	(in thousands)						(in thousands)
FFO	$	3,727		$	1,318		$	4,549		$	3,727
Preferred stock dividends	(2,483		)	(511		)	(3,207		)	(2,483		)
Preferred stock accretion adjustments	195			89			170			195
FFO available to common shareholders and common unitholders	1,439			896			1,512			1,439
Acquisition costs	260			413			7			260
Capital related costs	220			62			53			220
Other non-recurring and non-cash expenses	107			237			103			107
Share-based compensation	377			150			419			377
Straight-line rent	(185		)	(7		)	(200		)	(185		)
Loan cost amortization	763			190			379			763
Accrued interest income	(118		)	—			—			(118		)
Above/below market lease amortization	193			72
(Below) above market lease amortization							(22		)	193
Recurring capital expenditures and tenant improvement reserves	(206		)	(139		)	(290		)	(206		)
AFFO	$	2,850		$	1,874		$	1,961		$	2,850

Acquisition expenses at March 31, 2017 were primarily related to compensation paid to personnel working directly on acquisitions related activities and other costs associated with due diligence of potential acquisitions currently in our pipeline. In 2018, the Company adopted ASU 2017-01 and external acquisition costs are now capitalized as part of the acquisition. The Company has ceased acquisition activities since acquiring JANAF. Thus, internal salaries previously related to acquisitions have been reallocated and not represented in acquisition costs. Other nonrecurring and non-cash expenses are miscellaneous costs we believe will not be incurred on a going forward basis including expenses such as vacation accrual, severance and consulting fees which are no longer under contract and are not expected to be under contract for the foreseeable future. Accrued interest income represents interest income on notes receivable due at maturity for the three months ended March 31, 2017 which have been fully reserved as of March 31, 2018.

The preferred stock accretion adjustments represent the amortization of offering costs associated with raising the Series B Preferred Stock and Series D Preferred Stock. ~~Other non-recurring expenses primarily relate to those costs that are related to miscellaneous items that we do not anticipate incurring on a going forward basis.~~

Liquidity and Capital Resources

At March 31, ~~2017,~~2018, our consolidated cash, ~~and~~ cash equivalents and restricted cash totaled ~~$4.66~~$17.35 million compared to consolidated cash, ~~and~~ cash equivalents and restricted cash of ~~$4.86~~$12.29 million at December 31, ~~2016.~~2017. Cash flows from operating activities, investing activities and financing activities for the three month period ended March 31, ~~2017~~2018 and ~~2016~~2017 were as follows:


	Three Months Ended March 31,						Period Over Period Change					Three Months Ended March 31,						Period Over Period Change
	2017			2016			$			%		2018			2017			$			%
				(in thousands)											(in thousands, unaudited)
Operating activities	$	6,821		$	628		$	6,193		986.15	%	$	6,474		$	6,492		$	(18	)	(0.28	)%
Investing activities	$	1,376		$	(332	)	$	1,708		514.46	%	$	(23,465	)	$	1,377		$	(24,842	)	(1,804.07	)%
Financing activities	$	(8,396	)	$	(3,997	)	$	(4,399	)	(110.06	)%	$	22,051		$	(8,396	)	$	30,447		362.64	%

Operating Activities

During the three months ended March 31, ~~2017,~~2018, our cash flows from operating activities were ~~$6.82~~$6.47 million, compared to cash flows from operating activities of ~~$628 thousand~~$6.49 million during the three months ended March 31, ~~2016,~~2017, representing ~~an increase~~a decrease of $6.19 million. This increase is primarily the result of a $2.40 million decrease in our consolidated net loss due to factors discussed in the Results of Operations section above, specifically the additional FFO of $1.96 million from new retail properties that were acquired in 2016. Also impacting operating cash flows is the fluctuation in acquisition deposits included within deferred costs and the timing of the respective acquisitions accompanied by an increase in prepaid rents primarily due to new stores and an increase of $1.52 million add-back related to depreciation and amortization.$18 thousand.

Investing Activities

During the three months ended March 31, ~~2017,~~2018, our ~~cash flows from investing activities were $1.38 million, compared to~~ cash flows used in investing activities were $23.47 million, compared to cash flows provided by investing activities of ~~$332 thousand~~$1.38 million during the three months ended March 31, ~~2016,~~2017, representing ~~an increase~~a decrease of ~~$1.71~~$24.84 million due to the following:

$~~1.87~~23.15 million increase in cash outflows used for the acquisition of JANAF;

$711 thousand net decrease in cash received ~~for~~on disposal of properties as a result of higher proceeds received on the 2017 sale of the Ruby Tuesdays/Outback at Pierpont Shopping ~~Center;~~Center as compared to the 2018 sale of the Chipotle ground lease sale at Conyers Crossing; and

~~Partially offset by an $125~~$978 thousand increase in cash outflows on capital expenditures ~~related to~~primarily a result of the ~~twenty-three properties acquired after March 31, 2016.~~redevelopment of Columbia Fire House and $310 thousand for Perimeter Centre tenant improvements.

Financing Activities

During the three months ended March 31, ~~2017,~~2018, our cash flows ~~used in~~provided by financing activities were ~~$8.40~~$22.05 million, compared to ~~$4.00~~$8.40 million of cash flows used in financing activities during the three months ended March 31, ~~2016,~~2017, representing an increase of ~~$4.40~~$30.45 million due to the following:

$~~2.05~~21.18 million increase in proceeds from sale of preferred stock due to the 2018 Series D Preferred offering;

$1.22 million increase in loan proceeds due to the $6.50 million JANAF Bravo Loan and $903 thousand Columbia Fire House Construction Loan advance occurring in 2018 offset by a $6.18 million increase in refinancing proceeds for Folly Road occurring in 2017;

$5.61 million decrease in loan principal payments due to the 2017 refinancing of the Folly Road collateralized portion of the KeyBank Credit Agreement;

$1.69 million decrease in cash flows used in discontinued operations for the pay-down of debt related to the sale of Ruby Tuesdays/Outback at Pierpont Shopping Center; and

$713 thousand decrease in cash outflows for dividends and distributions primarily as a result of ~~Series B and D preferred stock offerings after March 31, 2016;~~

~~$1.69 million~~the moving from monthly to quarterly dividend payments in ~~cash outflows for paydown~~the second quarter of ~~debt related to the sale of Ruby Tuesdays//Outback at Pierpont Shopping Center; and~~

~~$583 thousand in cash outflows primarily resulting from the incremental increase in debt service.~~2017.

We intend to continue managing our debt prudently so as to maintain a conservative capital structure and minimize leverage within our company. As of March 31, ~~2017~~2018 and December 31, ~~2016,~~2017, our debt balances, excluding unamortized debt issuance costs, consisted of the ~~following:~~following (in thousands):


	March 31, 2017		December 31, 2016		March 31, 2018		December 31, 2017
	(in thousands)				(unaudited)
Fixed-rate notes	$	216,891	$	211,539	$	281,084	$	216,240
Adjustable-rate mortgages	28,070		28,082		29,336		29,506
Fixed-rate notes, assets held for sale	—		1,350		693		—
Floating-rate line of credit	68,032		74,077		68,032		68,032
Total debt	$	312,993	$	315,048	$	379,145	$	313,778

The weighted-average interest rate and term of our fixed-rate debt including assets held for sale are ~~4.77%~~4.74% and ~~7.51~~5.86 years, respectively, at March 31, ~~2017.~~2018. We have ~~$20.80~~$37.56 million of debt maturing, including scheduled principal repayments, during the ~~twelve~~nine months ending ~~March~~December 31, 2018. While we anticipate being able to refinance our maturing loans at reasonable market terms upon maturity, our inability to do so may materially impact our financial position and results of operations. See Footnote 6 included in this Form 10-Q for additional mortgage indebtedness details.

Future Liquidity Needs

In addition to the funding of our ongoing operations, the primary liquidity needs of the Company at March 31, ~~2017~~2018 are ~~$20.80~~$37.56 million in debt maturities and principal payments due ~~within~~for the ~~following year,~~remaining nine months ended December 31, 2018 including debt service payments, Series B and Series D Preferred Stock dividends (approximately ~~$9.2~~$12.1 million), and margin covenant requirements as detailed in our Amended and Restated Credit Agreement ~~with KeyBank and the $1.68 per share (approximately $15.71 million) targeted annual Common Stock dividends we are planning to pay on a quarterly basis.~~as described in Note 8. Included in the ~~$20.80~~$37.56 million of debt maturities and principal payments is the ~~Revere Term Loan~~$15.53 million maturity of ~~$7.45~~the KeyBank Line of Credit. Management is in the process of refinancing properties off the KeyBank Line of Credit to reduce the line to under $52.50 million ~~which has a maturity date~~prior to July 1, 2018 in accordance with the Amended and Restated Credit Agreement. Management is in the process of ~~April 30, 2017. On May 1, 2017,~~refinancing the ~~Company extended the $7.45~~$6.81 million Revere ~~Term Loan maturity to April 30, 2018, as permitted within the terms~~Loan. The KeyBank Line of ~~the loan agreement, with a $450 thousand principal payment~~Credit and ~~$140 thousand extension fee. There~~all loans due are ~~an additional five loans totaling $11.67 million that have maturities in the next twelve months, each~~ collateralized by properties within our portfolio. Management is currently working with lenders to refinance these loans. Based on our proven ability to refinance debt and obtain alternative

sources of capital, and existing market conditions, we believe it to be probable that our plans to meet these obligations will be successful.

In addition to refinancing of debt, the Company is in the process of marketing the Land Parcels. The proceeds can be used to pay debt in addition to a savings of approximately $52 thousand annually in net operating income, primarily a result of real estate taxes. As part of an overall cost reduction strategy, the Company plans to close the Charleston office, a savings of $100 thousand annually. The Company continues to work to increase cash flows from properties through increasing occupancy by reducing tenant turnover, obtaining rental rate increases on new leases and monitoring operating expenses.

Our success in refinancing the debt, and executing on our ~~growth~~ strategy will dictate our liquidity needs going forward. If we are unable to execute in these areas, our ability to grow and pay future dividends may be limited without additional capital.

We believe significant opportunities exist in the current commercial real estate environment that will enable us to sufficiently leverage our capital and execute our growth plan. Several factors are contributing to an increased supply in available properties for acquisition, including a significant level of maturities of CMBS debt, strategic shifts by larger REITs to reduce debt levels and exit certain markets. We believe the public REIT model provides a unique growth vehicle whereby we can either acquire properties through traditional third party acquisitions using a combination of cash generated in the capital markets and debt financing; contributions of properties by third parties in exchange for common units issued by the Operating Partnership; and contributions of existing properties owned by Mr. Wheeler and his affiliates in exchange for common units issued by the Operating Partnership. Additionally, access to public market capital enhances our ability to formulate acquisition structures and terms that better meet our growth strategies.

In addition to liquidity required to fund debt payments ~~distributions~~ and ~~acquisitions,~~distributions we may incur some level of capital expenditures during the year for our existing properties that cannot be passed on to our tenants. The majority of these expenditures occur subsequent to acquiring a new property that requires significant improvements to maximize occupancy and lease rates, with an existing property that needs a facelift to improve its marketability or when tenant improvements are required to make a space fit a particular tenant’s needs. Significant capital expenditures could also impact our ability to grow and pay future dividends.

Off-Balance Sheet Arrangements

As of March 31, ~~2017,~~2018, we have no off-balance sheet arrangements that are likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.

Recent Accounting Pronouncements

See Note 2 to the condensed consolidated financial statements beginning on page 8 of this Current Report on Form 10-Q.

Critical Accounting Policies

In preparing the condensed consolidated financial statements, we have made estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results may differ from these estimates. A summary of our critical accounting policies is included in our 2017 Form 10-K under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” There have been no significant changes to these policies during the three months ended March 31, 2018. For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 of the condensed consolidated financial statements included in this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The primary market risk to which we are exposed is interest rate risk. Our primary interest rate exposure is LIBOR. We primarily use fixed interest rate financing to manage our exposure to fluctuations in interest rates.

At March 31, ~~2017,~~2018, approximately ~~$216.89~~$281.78 million, or ~~69.30%~~74.32%, of our debt had fixed interest rates and approximately ~~$96.10~~$97.37 million, or ~~30.70%~~25.68%, had variable interest rates. Assuming no increase in the level of our variable rate debt, if interest rates increased by 1.0%, our cash flow would decrease by approximately ~~$961~~$974 thousand per year. At March 31, ~~2017,~~2018, LIBOR was approximately 79188 basis points. Assuming no increase in the level of our variable rate debt, if LIBOR was reduced to zero basis points, our cash flow would increase by approximately ~~$758 thousand~~$1.83 million per year.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The management of the Trust or the Company, under the supervision and with the participation of our principal executive and financial officers, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to the Trust’s management, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls and procedures were effective as of March 31, ~~2017~~2018 (the end of the period covered by this Form 10-Q).

Changes in Internal Control Over Financial Reporting

None.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on our financial position, results of operation or liquidity.

Item 1A. Risk Factors.

There have been no material changes from the risk factors disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017 other than the revision of the following risk factor:

The majority of our properties are retail shopping centers and depend on anchor stores or major tenants to attract shoppers and could be adversely affected by the loss of, or a store closure by, one or more of these tenants.

Large, regionally or nationally recognized tenants typically anchor our properties. At any time, our tenants may experience a downturn in their business that may significantly weaken their financial condition. As a result, our tenants, including our anchor and other major tenants, may fail to comply with their contractual obligations to us, seek concessions in order to continue operations or declare bankruptcy, any of which could result in the termination of such tenants’ leases and the loss of rental income attributable to the terminated leases. In addition, certain of our tenants may cease operations while continuing to pay rent, which could decrease customer traffic, thereby decreasing sales for our other tenants at the applicable retail property. In addition to these potential effects of a business downturn, mergers or consolidations among large retail establishments could result in the closure of existing stores or duplicate or geographically overlapping store locations, which could include stores at our retail properties.

Loss of, or a store closure by, an anchor or major tenant could significantly reduce our occupancy level or the rent we receive from our retail properties, and we may not have the right to re-lease vacated space or we may be unable to re-lease vacated space at attractive rents or at all. Moreover, in the event of default by a major tenant or anchor store, we may experience delays and costs in enforcing our rights as landlord to recover amounts due to us under the terms of our agreements with those parties. The occurrence of any of the situations described above, particularly if it involves an anchor tenant with leases in multiple locations, could seriously harm our performance and could adversely affect the value of the applicable retail property.

As of March 31, 2018, approximately 25.96% of the contractual base revenue of our total portfolio was derived from our ten largest tenants. The largest tenant as of March 31, 2018, Bi-Lo, LLC (“BI-LO”), a subsidiary of Southeastern Grocers, LLC (“Southeastern Grocers”), leased thirteen BI-LO grocery store locations from us with an aggregate of 468,913 leased square feet for an aggregate annualized base rent of approximately $4.38 million, which together represents 8.16% of our gross leasable area and 8.57% of our total annualized base rent. In addition, subsidiaries of Southeastern Grocers lease three Winn Dixie locations and two Harvey’s locations from us with an aggregate of 208,175 leased square feet for an aggregate annualized base rent of approximately $1.46 million, which together represents 3.62% of our gross leasable area and 2.86% of our total annualized base rent. During the second quarter of 2018, the Company has agreed to recapture, three of the BI-LO and a Harvey’s location, representing 133,838 square feet and $1.44 million in aggregate annualized base rent. In addition to these recaptures, the Company has modified leases with Southeastern Grocers which are subject to bankruptcy court approval, resulting in a decrease of $624 thousand or 1.22% of aggregate annualized base rent. If the lease modifications with Southeastern Grocers are not accepted by the bankruptcy court, our efforts to collect rental payments could be delayed and, ultimately, precluded. Any modification by the bankruptcy court could result in an additional reduction in our cash flow and the amount of cash available to distribute to our stockholders.

During Southeastern Grocers' bankruptcy proceedings, there can be no assurance that Southeastern Grocers, or the bankruptcy trustee would assume our leases. If any lease is not assumed or we cannot lease the space to another tenant, our cash flow and the amounts available for distributions to our stockholders may be adversely affected.

The loss of these anchor tenants at the properties being recaptured may result in decrease customer traffic for our other tenants at these properties, thereby decreasing sales for such tenants and may make it more difficult for us to secure tenant lease renewals or new tenants for these properties. Management is currently in negotiations with potential backfills on the three BI-LO and Harvey's location..

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Not applicable.

(b) Not applicable.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.




Exhibit

3.1		Articles of Amendment and Restatement of the Registrant. (1)

3.2		Articles of Supplementary of the Registrant dated September 16, 2016. ~~(18)~~(14)

3.3		Articles of Supplementary of the Registrant dated December 1, 2016. ~~(20)~~(16)

3.4		Articles of Amendment and Restatement, effective March 31, ~~2017. (9)~~2017 (17)

3.5		Articles of Amendment and Restatement, effective March 31, ~~2017. (9)~~2017 (17)

3.6		Amended and Restated Bylaws of ~~Registrant.~~Registrant (2)

~~4.1~~ 3.7		Certificate of Correction of Articles Supplementary (23)

4.1		Form of Certificate of Common Stock of ~~Registrant. (9)~~Registrant (17)

4.2		Form of Certificate of Series B Preferred Stock of ~~Registrant.~~Registrant (3)

4.3		Form of Certificate of Series D Preferred Stock of the Registrant. ~~(18)~~(14)

4.4		Form of Warrant Certificate of ~~Registrant.~~Registrant (3)

4.5		Form of Warrant Agreement for December 2013/January 2014 Private Placement ~~Offering.~~Offering (4)

4.6		Form of Warrant Agreement with Revere High Yield Fund, LP. ~~(14)~~(10)

4.7		Calapasas West Partners, L.P. Amended Convertible Promissory Note. ~~(15)~~(11)

4.8		Full Value Partners, L.P. Amended Convertible Promissory Note. ~~(15)~~(11)

4.9		Full Value Special Situations Fund, L.P. Amended Convertible Promissory Note. ~~(15)~~(11)

4.10		MCM Opportunity Partners, L.P. Amended Convertible Promissory Note. ~~(15)~~(11)

4.11		Mercury Partners, L.P. Amended Convertible Promissory Note. ~~(15)~~(11)

4.12		Opportunity Partners, L.P. Amended Convertible Promissory Note. ~~(15)~~(11)

4.13		Special Opportunities Fund, Inc. Amended Convertible Promissory Note. ~~(15)~~(11)

4.14		Steady Gain Partners, L.P. Amended Convertible Promissory Note. ~~(15)~~(11)

4.15		Warrant Agreement by and among the Registrant, Computershare, Inc. and Computershare Trust Company, N.A. (3)

10.1		Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P. (5)

10.2		Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P. Designation of Series A Convertible Preferred Units. (6)

10.3		Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P. Designation of Series B Convertible Preferred Units. ~~(19)~~(15)

10.4		Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P. Designation of Series D Cumulative Convertible Preferred Units. ~~(18)~~(14)

10.5		Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P. Amended Designation of Additional Series D Cumulative Convertible Preferred Units. ~~(20)~~(16)

10.6		Wheeler Real Estate Investment Trust, Inc. 2015 Long-Term Incentive ~~Plan. (21)~~Plan (7)

10.7		Wheeler Real Estate Investment Trust, Inc. 2016 Long-Term Incentive ~~Plan. (17)~~Plan (13)

10.8		Employment Agreement with ~~Jon S. Wheeler. (12)~~

~~10.9~~		~~Employment Agreement with Robin A. Hanisch. (12)~~

~~10.10~~		~~Employment Agreement with Wilkes Graham. (12)~~

~~10.11~~		~~Subordination Agreement. (5)~~David Kelly (21)



~~10.12~~ 10.9		Employment Agreement with Matthew Reddy (21)

10.10		Employment Agreement with M. Andrew Franklin (21)

10.11		Tax Protection Agreement dated October 24, 2014, by and among Jon S. Wheeler, Wheeler REIT, L.P., and Wheeler Real Estate Investment Trust, Inc. (8)

~~10.13~~ 10.12		Shareholders Rights Agreement, dated March 19, 2015, by and between Wheeler Real Estate Investment Trust, Inc. and Westport Capital Partners LLC as agent on behalf of certain investor. ~~(10)~~(9)

~~10.14~~ 10.13		Board Observer Rights Agreement, dated March 19, 2015, by and between Wheeler Real Estate Investment Trust, Inc. and MFP Investors, LLC. ~~(10)~~(9)

~~10.15~~ 10.14		Letter Agreement, dated March 19, 2015, by and between Wheeler Real Estate Investment Trust, Inc. and Jon S. Wheeler. ~~(10)~~(9)

~~10.16~~ 10.15		~~Credit Agreement, dated May 29, 2015, between Wheeler REIT, L.P. and KeyBank National Association. (11)~~

~~10.17~~		Term Loan Agreement by and between Wheeler REIT, LP and Revere High Yield Fund, LP dated April 8, 2016. ~~(14)~~(10)

~~10.18~~ 10.16		~~First Amendment and Joinder Agreement to KeyBank Credit~~ Tax Protection Agreement dated ~~April 12, 2016. (14)~~February 8, 2017 (12)

~~10.19~~ 10.17		~~Second Amendment~~ Amended and ~~Joinder Agreement to KeyBank~~Restated Credit Agreement dated December ~~7, 2016. (13)~~21, 2017. (18)

~~10.20~~ 10.18		~~Tax Protection~~ Purchase and Sale Agreement dated ~~February 8, 2017. (16)~~November 3, 2016 between WHLR-JANAF, LLC, JANAF Shopping Center, LLC, JANAF Shops, LLC, JANAF HQ, LLC, and JANAF Crossing, LLC. (19)

~~31.1~~ 10.19		First Amendment to JANAF Purchase and Sale Agreement, dated December 2, 2016. (19)

10.20		Second Amendment to JANAF Purchase and Sale Agreement, dated January 6, 2017. (19)

10.21		Third Amendment to JANAF Purchase and Sale Agreement, dated January 9, 2017. (19)

10.22		Fourth Amendment to JANAF Purchase and Sale Agreement, dated January 11, 2017. (19)

10.23		Fifth Amendment to JANAF Purchase and Sale Agreement, dated January 13, 2017. (19)

10.24		Sixth Amendment to JANAF Purchase and Sale Agreement, dated February 3, 2017. (19)

10.25		Seventh Amendment to JANAF Purchase and Sale Agreement, dated March 6, 2017. (19)

10.26		Eighth Amendment to JANAF Purchase and Sale Agreement, dated March 7, 2017. (19)

10.27		Ninth Amendment to JANAF Purchase and Sale Agreement, dated March 8, 2017. (19)

10.28		Tenth Amendment to JANAF Purchase and Sale Agreement, dated June 9, 2017. (19)

10.29		Eleventh Amendment to JANAF Purchase and Sale Agreement, dated October 17, 2017. (19)

10.30		Twelfth Amendment to JANAF Purchase and Sale Agreement, dated November 9, 2017. (19)

10.31		Thirteenth Amendment to JANAF Purchase and Sale Agreement, dated November 30, 2017. (19)

10.32		Fourteenth Amendment to JANAF Purchase and Sale Agreement, dated December 19, 2017. (19)

10.33		Fifteenth Amendment to JANAF Purchase and Sale Agreement, dated January 17, 2018 (22)

10.34		JANAF Loan Agreement dated June 5, 2013. (20)

10.35		Borrower's Certification Regarding Loan Extension and Guarantor's Reaffirmation of Obligation as Lender Guaranty by and between Wheeler REIT, LP and Revere High Yield Fund, LP dated May 3, 2018. (24)

31.1		Certification of the Chief Executive Officer of Wheeler Real Estate Investment Trust, Inc. pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002. (22)~~2002 (24)

31.2		Certification of the Chief Financial Officer of Wheeler Real Estate Investment Trust, Inc. pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002. (22)~~2002 (24)

32.1		~~Certifications~~ Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002. (22)~~2002 (24)



32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (24)

~~101.INS~~		~~XBRL Instance Document. (22)~~
101.INS XBRL		Instance Document (24)

101.SCH		XBRL Taxonomy Extension Schema ~~Document. (22)~~Document (24)

101.CAL		XBRL Taxonomy Extension Calculation ~~Linkbase. (22)~~Linkbase (24)

101.DEF		XBRL Taxonomy Extension Definition ~~Linkbase. (22)~~Linkbase (24)

101.LAB		XBRL Taxonomy Extension Labels ~~Linkbase. (22)~~Linkbase (24)

101.PRE		XBRL Taxonomy Extension Presentation ~~Linkbase. (22)~~Linkbase (24)


(1)	Filed as an exhibit to the Registrant's report on Form 8-K, filed on August 8, 2016 and hereby incorporated by reference.


(2)	Filed as an exhibit to the Registrant's Registration Statement on Form S-11 (Registration No. 333-177262) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference.


(3)	Filed as an exhibit to the Registrant's Registration Statement on Form S-11 (Registration No. 333-194831) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference.


(4)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on December 18, 2013 and hereby incorporated by reference.


(5)	Filed as an exhibit to the Registrant's Registration Statement on Form S-11 (Registration No. 333-198245) previously filed pursuant to the Securities Act of 1933 and hereby incorporated by reference.


(6)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on April 15, 2015 and hereby incorporated by reference.


(7)	Filed as an exhibit to the Registrant's Report on Form ~~S-8,~~8-K, filed on ~~April 7, 2017~~June 8, 2015 and hereby incorporated by reference.


(8)	Filed as an exhibit to the Registrant's report on Form 8-K, filed on October 30, 2014 and hereby incorporated by reference.


(9)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on ~~filed on April 3, 2017~~March 19, 2015 and hereby incorporated by reference.


(10)	Filed as an exhibit to the Registrant's Report on Form ~~8-K, filed on March 19, 2015 and hereby incorporated by reference.~~


~~(11)~~	~~Filed as an exhibit to the Registrant's Report on Form 8-K, filed on June 2, 2015 and hereby incorporated by reference.~~


~~(12)~~	~~Filed as an exhibit to the Registrant's Report on Form 8-K, filed on March 16, 2016 and hereby incorporated by reference.~~


~~(13)~~	~~Filed as an exhibit to the Registrant's Report on Form~~ 8-K/A, ~~filed on December 12, 2016 and hereby incorporated by reference.~~


~~(14)~~	~~Filed as an exhibit to the Registrant's Report on Form 8-K,~~ filed on April 12, 2016 and hereby incorporated by reference.


~~(15)~~(11)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on May 2, 2016 and hereby incorporated by reference.


~~(16)~~(12)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on February 10, 2017 and hereby incorporated by reference.


~~(17)~~(13)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on June 16, 2016 and hereby incorporated by reference.


~~(18)~~(14)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on September 20, 2016 and hereby incorporated by reference.


~~(19)~~(15)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on July 15, 2016 and hereby incorporated by reference.


~~(20)~~(16)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on December 5, 2016 and hereby incorporated by reference.


(17)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on April 3, 2017 and hereby incorporated by reference.


(18)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on December 22, 2017 and hereby incorporated by reference.


(29)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on January 9, 2018 and hereby incorporated by reference.


(20)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on January 23, 2018 and hereby incorporated by reference.


(21)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on ~~June 8, 2015~~February 20, 2018 and hereby incorporated by reference.


(22)	Filed as an exhibit to the Registrant's Report on Form 10-K, filed on March 7, 2018 and hereby incorporated by reference.


(23)	Filed as an exhibit to the Registrant's Report on Form 8-K, filed on May 4, 2018 and hereby incorporated by reference.


(24)	Filed herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




		WHEELER REAL ESTATE INVESTMENT TRUST, INC.

		By:	/s/ ~~WILKES J. GRAHAM~~MATTHEW T. REDDY
			~~Wilkes J. Graham~~MATTHEW T. REDDY
			Chief Financial Officer

Date:	May ~~2, 2017~~9, 2018

3844



For the Periods Ending March 31,	Lease Origination Costs, net		Leases In Place, net		Legal & Marketing Costs, net		Tenant Relationships, net		Total
2018	$	296	$	9,029	$	21	$	3,607	$	12,953
2019	206		6,797		16		2,428		9,447
2020	149		4,816		13		1,428		6,406
2021	112		3,363		11		811		4,297
2022	94		2,340		8		505		2,947
Thereafter	274		6,730		24		1,101		8,129
	$	1,131	$	33,075	$	93	$	9,880	$	44,179



	For the Period Ended March 31,
2018	$	521
2019	525
2020	467
2021	440
2022	480
Thereafter	9,891
	$	12,324



	Three Months Ended March 31, 2017
	(unaudited, thousands)
Acquisition costs	$	260
Capital related costs	220
Other	107
	$	587

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company