UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017March 31, 2022
OR
¨☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto
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.) |
| | |
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.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)
Securities registered pursuant to Section 12(b) of the Act: |
| | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value per share | | WHLR | Nasdaq Capital Market |
Series B Convertible Preferred Stock | | WHLRP | Nasdaq Capital Market |
Series D Cumulative Convertible Preferred Stock | | WHLRD | Nasdaq Capital Market |
7.00% Senior Subordinated Convertible Notes due 2031 | | WHLRL | Nasdaq Capital Market |
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.
|
| | | | | | | | | | | | | | | | | | | |
Large accelerated filer | | ¨ | | Accelerated filer | | ý |
Non-accelerated filer | | ¨ (do not check if a smaller reporting company)
| | Smaller reporting company | | ¨ |
Non-accelerated filer | | ý | | Smaller reporting company | | ☒ |
| | | | Emerging growth company | | ý☐ |
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 November 7, 2017,May 9, 2022, there were 8,730,8599,723,093 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 | Page |
PART I – FINANCIAL INFORMATION | |
| | |
Item 1. | Financial Statements | |
| | |
| | |
| | |
| | |
| | |
| | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
| |
PART II – OTHER INFORMATION | |
| | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
| | |
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except par value and share data)
| | | September 30, 2017 | | December 31, 2016 | | March 31, 2022 | | December 31, 2021 |
| (unaudited) | | | | (unaudited) | | |
ASSETS: | | | | ASSETS: | |
Investment properties, net | $ | 383,861 |
| | $ | 388,880 |
| Investment properties, net | $ | 384,327 | | | $ | 386,730 | |
Cash and cash equivalents | 5,663 |
| | 4,863 |
| Cash and cash equivalents | 21,109 | | | 22,898 | |
Restricted cash | 9,625 |
| | 9,652 |
| Restricted cash | 15,709 | | | 17,521 | |
Rents and other tenant receivables, net | 5,108 |
| | 3,984 |
| Rents and other tenant receivables, net | 8,839 | | | 9,233 | |
Related party receivables | 2,322 |
| | 1,456 |
| |
Notes receivable | 12,000 |
| | 12,000 |
| |
Goodwill | 5,486 |
| | 5,486 |
| |
Assets held for sale | — |
| | 366 |
| Assets held for sale | 519 | | | 2,047 | |
Above market lease intangible, net | 9,521 |
| | 12,962 |
| |
Above market lease intangibles, net | | Above market lease intangibles, net | 2,185 | | | 2,424 | |
Operating lease right-of-use assets | | Operating lease right-of-use assets | 12,381 | | | 12,455 | |
Deferred costs and other assets, net | 37,477 |
| | 49,397 |
| Deferred costs and other assets, net | 14,967 | | | 11,973 | |
Total Assets | $ | 471,063 |
| | $ | 489,046 |
| Total Assets | $ | 460,036 | | | $ | 465,281 | |
LIABILITIES: | | | | LIABILITIES: | | | |
Loans payable, net | $ | 306,962 |
| | $ | 305,973 |
| Loans payable, net | $ | 331,143 | | | $ | 333,283 | |
Liabilities associated with assets held for sale | — |
| | 1,350 |
| Liabilities associated with assets held for sale | — | | | 3,381 | |
Below market lease intangible, net | 10,356 |
| | 12,680 |
| |
Below market lease intangibles, net | | Below market lease intangibles, net | 3,180 | | | 3,397 | |
Derivative liabilities | | Derivative liabilities | 8,738 | | | 4,776 | |
Operating lease liabilities | | Operating lease liabilities | 12,999 | | | 13,040 | |
Accounts payable, accrued expenses and other liabilities | 10,307 |
| | 7,735 |
| Accounts payable, accrued expenses and other liabilities | 12,201 | | | 11,054 | |
Dividends payable | 5,478 |
| | 3,586 |
| |
Total Liabilities | 333,103 |
| | 331,324 |
| Total Liabilities | 368,261 | | | 368,931 | |
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) | 53,052 |
| | 52,530 |
| |
| Series D Cumulative Convertible Preferred Stock (no par value, 6,000,000 shares authorized, 3,152,392 shares issued and outstanding; $107.09 million and $104.97 million aggregate liquidation value, respectively) | | Series D Cumulative Convertible Preferred Stock (no par value, 6,000,000 shares authorized, 3,152,392 shares issued and outstanding; $107.09 million and $104.97 million aggregate liquidation value, respectively) | 94,791 | | | 92,548 | |
| | | | | | | |
EQUITY: | | | | EQUITY: | |
Series A Preferred Stock (no par value, 4,500 shares authorized, 562 shares issued and outstanding) | 453 |
| | 453 |
| Series A Preferred Stock (no par value, 4,500 shares authorized, 562 shares issued and outstanding) | 453 | | | 453 | |
Series B Convertible Preferred Stock (no par value, 5,000,000 authorized, 1,875,848 and 1,871,244 shares issued and outstanding, respectively; $46.90 million and $46.78 million aggregate liquidation preference, respectively) | 40,893 |
| | 40,733 |
| |
Common Stock ($0.01 par value, 18,750,000 shares authorized, 8,730,859 and 8,503,819 shares issued and outstanding, respectively) | 87 |
| | 85 |
| |
Series B Convertible Preferred Stock (no par value, 5,000,000 authorized, 1,868,343 and 1,872,448 shares issued and outstanding, respectively; $46.71 million and $46.81 million aggregate liquidation preference) | | Series B Convertible Preferred Stock (no par value, 5,000,000 authorized, 1,868,343 and 1,872,448 shares issued and outstanding, respectively; $46.71 million and $46.81 million aggregate liquidation preference) | 41,121 | | | 41,189 | |
Common Stock ($0.01 par value, 200,000,000 shares authorized 9,723,093 and 9,720,532 shares issued and outstanding, respectively) | | Common Stock ($0.01 par value, 200,000,000 shares authorized 9,723,093 and 9,720,532 shares issued and outstanding, respectively) | 97 | | | 97 | |
Additional paid-in capital | 226,864 |
| | 223,939 |
| Additional paid-in capital | 234,319 | | | 234,229 | |
Accumulated deficit | (191,256 | ) | | (170,377 | ) | Accumulated deficit | (280,951) | | | (274,107) | |
Total Shareholders’ Equity | 77,041 |
| | 94,833 |
| |
Total Stockholders’ Equity | | Total Stockholders’ Equity | (4,961) | | | 1,861 | |
Noncontrolling interests | 7,867 |
| | 10,359 |
| Noncontrolling interests | 1,945 | | | 1,941 | |
Total Equity | 84,908 |
| | 105,192 |
| Total Equity | (3,016) | | | 3,802 | |
Total Liabilities and Equity | $ | 471,063 |
| | $ | 489,046 |
| Total Liabilities and Equity | $ | 460,036 | | | $ | 465,281 | |
See accompanying notes to condensed consolidated financial statements.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
|
| | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
REVENUE: | | | | | | | |
Rental revenues | $ | 11,109 |
| | $ | 8,591 |
| | $ | 33,265 |
| | $ | 23,788 |
|
Asset management fees | 145 |
| | 163 |
| | 807 |
| | 623 |
|
Commissions | 449 |
| | 590 |
| | 758 |
| | 834 |
|
Tenant reimbursements | 2,711 |
| | 2,334 |
| | 8,127 |
| | 6,500 |
|
Development and other revenues | 784 |
| | 233 |
| | 1,282 |
| | 388 |
|
Total Revenue | 15,198 |
| | 11,911 |
| | 44,239 |
| | 32,133 |
|
OPERATING EXPENSES: | | | | | | | |
Property operations | 3,726 |
| | 3,027 |
| | 11,467 |
| | 8,499 |
|
Non-REIT management and leasing services | 618 |
| | 696 |
| | 1,525 |
| | 1,352 |
|
Depreciation and amortization | 7,746 |
| | 4,994 |
| | 20,455 |
| | 15,306 |
|
Provision for credit losses | 23 |
| | 31 |
| | 443 |
| | 196 |
|
Corporate general & administrative | 1,306 |
| | 1,497 |
| | 4,855 |
| | 6,291 |
|
Total Operating Expenses | 13,419 |
| | 10,245 |
| | 38,745 |
| | 31,644 |
|
Operating Income | 1,779 |
| | 1,666 |
| | 5,494 |
| | 489 |
|
(Loss) gain on disposal of properties | (1 | ) | | — |
| | 1,021 |
| | — |
|
Interest income | 364 |
| | 299 |
| | 1,080 |
| | 301 |
|
Interest expense | (4,250 | ) | | (3,639 | ) | | (12,997 | ) | | (9,801 | ) |
Net Loss from Continuing Operations Before Income Taxes | (2,108 | ) | | (1,674 | ) | | (5,402 | ) | | (9,011 | ) |
Income tax expense | (65 | ) | | — |
| | (175 | ) | | — |
|
Net Loss from Continuing Operations | (2,173 | ) | | (1,674 | ) | | (5,577 | ) | | (9,011 | ) |
Discontinued Operations | | | | | | | |
Income from operations | — |
| | 39 |
| | 16 |
| | 115 |
|
Gain on disposal of properties | — |
| | 1 |
| | 1,502 |
| | 689 |
|
Net Income from Discontinued Operations | — |
| | 40 |
| | 1,518 |
| | 804 |
|
Net Loss | (2,173 | ) | | (1,634 | ) | | (4,059 | ) | | (8,207 | ) |
Less: Net loss attributable to noncontrolling interests | (111 | ) | | (122 | ) | | (165 | ) | | (768 | ) |
Net Loss Attributable to Wheeler REIT | (2,062 | ) | | (1,512 | ) | | (3,894 | ) | | (7,439 | ) |
Preferred stock dividends | (2,496 | ) | | (1,240 | ) | | (7,473 | ) | | (2,263 | ) |
Net Loss Attributable to Wheeler REIT Common Shareholders | $ | (4,558 | ) | | $ | (2,752 | ) | | $ | (11,367 | ) | | $ | (9,702 | ) |
| | | | | | | |
Loss per share from continuing operations (basic and diluted) | $ | (0.52 | ) | | $ | (0.32 | ) | | $ | (1.48 | ) | | $ | (1.25 | ) |
Income per share from discontinued operations | — |
| | — |
| | 0.16 |
| | 0.09 |
|
| $ | (0.52 | ) | | $ | (0.32 | ) | | $ | (1.32 | ) | | $ | (1.16 | ) |
Weighted-average number of shares: | | | | | | | |
Basic and Diluted | 8,692,543 |
| | 8,487,438 |
| | 8,625,523 |
| | 8,394,398 |
|
| | | | | | | |
Dividends declared per common share | $ | 0.34 |
| | $ | 0.42 |
| | $ | 1.10 |
| | $ | 1.26 |
|
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
REVENUE: | | | |
Rental revenues | $ | 15,332 | | | $ | 14,656 | |
Other revenues | 165 | | | 72 | |
Total Revenue | 15,497 | | | 14,728 | |
OPERATING EXPENSES: | | | |
Property operations | 5,250 | | | 4,884 | |
Depreciation and amortization | 3,616 | | | 3,716 | |
Impairment of assets held for sale | 660 | | | — | |
Corporate general & administrative | 1,264 | | | 1,582 | |
Total Operating Expenses | 10,790 | | | 10,182 | |
(Loss) gain on disposal of properties | (15) | | | 176 | |
Operating Income | 4,692 | | | 4,722 | |
Interest income | 13 | | | — | |
Interest expense | (4,628) | | | (8,961) | |
Net changes in fair value of derivative liabilities | (3,962) | | | (347) | |
Other income | — | | | 552 | |
Other expense | (691) | | | — | |
| | | |
| | | |
Net Loss | (4,576) | | | (4,034) | |
Less: Net income attributable to noncontrolling interests | 4 | | | 15 | |
Net Loss Attributable to Wheeler REIT | (4,580) | | | (4,049) | |
Preferred Stock dividends - undeclared | (2,264) | | | (2,273) | |
Deemed contribution related to preferred stock redemption | — | | | 4,389 | |
Net Loss Attributable to Wheeler REIT Common Stockholders | $ | (6,844) | | | $ | (1,933) | |
| | | |
| | | |
Loss per share: | | | |
Basic and Diluted | $ | (0.70) | | | $ | (0.20) | |
Weighted-average number of shares: | | | |
Basic and Diluted | 9,720,589 | | | 9,704,638 | |
| | | |
See accompanying notes to condensed consolidated financial statements.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Condensed Consolidated StatementStatements 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 Stockholders’ Equity | | Interests | | Total |
| Shares | | Value | | Shares | | Value | | Shares | | Value | | | | | Units | | Value | | Equity |
Balance, December 31, 2021 | 562 | | | $ | 453 | | | 1,872,448 | | | $ | 41,189 | | | 9,720,532 | | | $ | 97 | | | $ | 234,229 | | | $ | (274,107) | | | $ | 1,861 | | | 215,343 | | | $ | 1,941 | | | $ | 3,802 | |
Accretion of Series B Preferred Stock discount | — | | | — | | | — | | | 22 | | | — | | | — | | | — | | | — | | | 22 | | | — | | | — | | | 22 | |
Conversion of Series B Preferred Stock to Common Stock | — | | | — | | | (4,105) | | | (90) | | | 2,561 | | | — | | | 90 | | | — | | | — | | | — | | | — | | | — | |
Dividends and distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,264) | | | (2,264) | | | — | | | — | | | (2,264) | |
Net (Loss) Income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,580) | | | (4,580) | | | — | | | 4 | | | (4,576) | |
Balance, March 31, 2022 (Unaudited) | 562 | | | $ | 453 | | | 1,868,343 | | | $ | 41,121 | | | 9,723,093 | | | $ | 97 | | | $ | 234,319 | | | $ | (280,951) | | | $ | (4,961) | | | 215,343 | | | $ | 1,945 | | | $ | (3,016) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 |
|
Proceeds from issuance of Series B preferred stock, net of expenses | — |
| | — |
| | 4,604 |
| | 96 |
| | — |
| | — |
| | — |
| | — |
| | 96 |
| | — |
| | — |
| | 96 |
|
Accretion of Series B Preferred Stock discount | — |
| | — |
| | — |
| | 64 |
| | — |
| | — |
| | — |
| | — |
| | 64 |
| | — |
| | — |
| | 64 |
|
Conversion of senior convertible notes to Common Stock | — |
| | — |
| | — |
| | — |
| | 2,509 |
| | — |
| | 31 |
| | — |
| | 31 |
| | — |
| | — |
| | 31 |
|
Conversion of operating partnership units to Common Stock | — |
| | — |
| | — |
| | — |
| | 119,589 |
| | 1 |
| | 1,295 |
| | — |
| | 1,296 |
| | (119,589 | ) | | (1,296 | ) | | — |
|
Issuance of Common Stock under Share Incentive Plan | — |
| | — |
| | — |
| | — |
| | 104,942 |
| | 1 |
| | 1,345 |
| | — |
| | 1,346 |
| | — |
| | — |
| | 1,346 |
|
Redemption of fractional units as a result of reverse stock split | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (66 | ) | | (1 | ) | | (1 | ) |
Adjustment for noncontrolling interest in operating partnership | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 254 |
| | — |
| | 254 |
| | — |
| | (254 | ) | | — |
|
Dividends and distributions | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (16,985 | ) | | (16,985 | ) | | — |
| | (776 | ) | | (17,761 | ) |
Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (3,894 | ) | | (3,894 | ) | | — |
| | (165 | ) | | (4,059 | ) |
Balance, September 30, 2017 (Unaudited) | 562 |
| | $ | 453 |
| | 1,875,848 |
| | $ | 40,893 |
| | 8,730,859 |
| | $ | 87 |
| | $ | 226,864 |
| | $ | (191,256 | ) | | $ | 77,041 |
| | 642,299 |
| | $ | 7,867 |
| | $ | 84,908 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A | | Series B | | | | | | | | | | Noncontrolling | | |
| Preferred Stock | | Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Total Stockholders’ Equity | | Interests | | Total |
| Shares | | Value | | Shares | | Value | | Shares | | Value | | | | | Units | | Value | | Equity |
Balance, December 31, 2020 | 562 | | | $ | 453 | | | 1,875,748 | | | $ | 41,174 | | | 9,703,874 | | | $ | 97 | | | $ | 234,061 | | | $ | (260,867) | | | $ | 14,918 | | | 224,429 | | | $ | 1,931 | | | $ | 16,849 | |
Accretion of Series B Preferred Stock discount | — | | | — | | | — | | | 22 | | | — | | | — | | | — | | | — | | | 22 | | | — | | | — | | | 22 | |
Conversion of operating partnership units to Common Stock | — | | | — | | | — | | | — | | | 2,864 | | | — | | | 9 | | | — | | | 9 | | | (2,864) | | | (9) | | | — | |
Adjustment for noncontrolling interest in operating partnership | — | | | — | | | — | | | — | | | — | | | — | | | 16 | | | — | | | 16 | | | — | | | (16) | | | — | |
Dividends and distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,273) | | | (2,273) | | | — | | | — | | | (2,273) | |
Preferred Stock redemption discount | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,389 | | | 4,389 | | | — | | | — | | | 4,389 | |
Net (Loss) Income | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,049) | | | (4,049) | | | — | | | 15 | | | (4,034) | |
Balance, March 31, 2021 (Unaudited) | 562 | | | $ | 453 | | | 1,875,748 | | | $ | 41,196 | | | 9,706,738 | | | $ | 97 | | | $ | 234,086 | | | $ | (262,800) | | | $ | 13,032 | | | 221,565 | | | $ | 1,921 | | | $ | 14,953 | |
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 Nine Months Ended September 30, |
| 2017 | | 2016 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net loss | $ | (4,059 | ) | | $ | (8,207 | ) |
Adjustments to reconcile consolidated net loss to net cash from operating activities | | | |
Depreciation | 7,958 |
| | 5,751 |
|
Amortization | 12,497 |
| | 9,555 |
|
Loan cost amortization | 2,509 |
| | 1,464 |
|
Above (below) market lease amortization, net | 448 |
| | 69 |
|
Share-based compensation | 735 |
| | 582 |
|
Gain on disposal of properties | (1,021 | ) | | — |
|
Gain on disposal of properties-discontinued operations | (1,502 | ) | | (689 | ) |
Provision for credit losses | 443 |
| | 196 |
|
Changes in assets and liabilities, net of acquisitions | | | |
Rent and other tenant receivables, net | (612 | ) | | (251 | ) |
Unbilled rent | (955 | ) | | (221 | ) |
Related party receivables | (866 | ) | | (884 | ) |
Cash restricted for operating property reserves | (328 | ) | | (1,257 | ) |
Deferred costs and other assets, net | (584 | ) | | 134 |
|
Accounts payable, accrued expenses and other liabilities | 3,819 |
| | 3,168 |
|
Net operating cash flows provided by (used in) discontinued operations | 32 |
| | (1 | ) |
Net cash from operating activities | 18,514 |
| | 9,409 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Investment property acquisitions | — |
| | (8,680 | ) |
Capital expenditures | (4,262 | ) | | (1,587 | ) |
Issuance of notes receivable | — |
| | (9,404 | ) |
Decrease (increase) in capital property reserves | 333 |
| | (622 | ) |
Increase in cash restricted for property acquisitions | — |
| | (837 | ) |
Cash received from disposal of properties | 2,416 |
| | — |
|
Cash received from disposal of properties-discontinued operations | 1,871 |
| | 1,385 |
|
Net cash from (used in) investing activities | 358 |
| | (19,745 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Payments for deferred financing costs | (646 | ) | | (3,571 | ) |
Dividends and distributions paid | (15,264 | ) | | (12,654 | ) |
Proceeds from sales of Preferred Stock, net of expenses | 78 |
| | 61,387 |
|
Loan proceeds | 17,170 |
| | 20,100 |
|
Loan principal payments | (17,723 | ) | | (29,575 | ) |
Net financing cash flows used in discontinued operations | (1,687 | ) | | (11 | ) |
Net cash (used in) provided by financing activities | (18,072 | ) | | 35,676 |
|
INCREASE IN CASH AND CASH EQUIVALENTS | 800 |
| | 25,340 |
|
CASH AND CASH EQUIVALENTS, beginning of period | 4,863 |
| | 10,478 |
|
CASH AND CASH EQUIVALENTS, end of period | $ | 5,663 |
| | $ | 35,818 |
|
Supplemental Disclosures: | | | |
Non-Cash Transactions: | | | |
Debt incurred for acquisitions | $ | — |
| | $ | 60,320 |
|
Noncontrolling interests resulting from the issuance of common units | $ | — |
| | $ | 3,499 |
|
Conversion of common units to common stock | $ | 1,296 |
| | $ | — |
|
Conversion of senior convertible debt into common stock | $ | 31 |
| | $ | 1,600 |
|
Accretion of preferred stock discounts | $ | 605 |
| | $ | 255 |
|
Note receivable in consideration of land | $ | — |
| | $ | 1,000 |
|
Other Cash Transactions: | | | |
Cash paid for taxes | $ | 220 |
| | $ | — |
|
Cash paid for interest | $ | 10,404 |
| | $ | 8,259 |
|
| | | | | | | | | | | |
| For the Three Months Ended March 31, |
| 2022 | | 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net Loss | $ | (4,576) | | | $ | (4,034) | |
Adjustments to reconcile consolidated net loss to net cash provided by operating activities: | | | |
Depreciation | 2,788 | | | 2,691 | |
Amortization | 828 | | | 1,025 | |
Loan cost amortization | 420 | | | 3,642 | |
Changes in fair value of derivative liabilities | 3,962 | | | 347 | |
Above (below) market lease amortization, net | 23 | | | (12) | |
Straight-line expense | 8 | | | 9 | |
Loss (gain) on disposal of properties | 15 | | | (176) | |
Credit losses on operating lease receivables | 53 | | | 119 | |
Impairment of assets held for sale | 660 | | | — | |
Net changes in assets and liabilities: | | | |
Rents and other tenant receivables, net | 421 | | | 1,987 | |
Unbilled rent | (78) | | | (459) | |
Deferred costs and other assets, net | (2,312) | | | (1,316) | |
Accounts payable, accrued expenses and other liabilities | 1,162 | | | 916 | |
Net cash provided by operating activities | 3,374 | | | 4,739 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Investment property acquisitions | (1,510) | | | — | |
Capital expenditures | (1,545) | | | (962) | |
Cash received from disposal of properties | 1,786 | | | 3,937 | |
Net cash (used in) provided by investing activities | (1,269) | | | 2,975 | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Payments for deferred financing costs | (992) | | | (4,193) | |
Loan proceeds | — | | | 40,150 | |
Loan principal payments | (4,714) | | | (35,440) | |
Preferred stock redemption | — | | | (6,103) | |
Loan prepayment penalty | — | | | (687) | |
Net cash used in financing activities | (5,706) | | | (6,273) | |
(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (3,601) | | | 1,441 | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 40,419 | | | 42,768 | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 36,818 | | | $ | 44,209 | |
Supplemental Disclosures: | | | |
Non-Cash Transactions: | | | |
Paycheck Protection Program forgiveness | $ | — | | | $ | 552 | |
Initial fair value of warrants | $ | — | | | $ | 2,018 | |
Conversion of common units to common stock | $ | — | | | $ | 9 | |
Conversion of Series B Preferred Stock to common stock | $ | 90 | | | $ | — | |
Accretion of Preferred Stock discounts | $ | 146 | | | $ | 162 | |
Deemed contribution related to Preferred Stock discount | $ | — | | | $ | 4,389 | |
Other Cash Transactions: | | | |
| | | |
Cash paid for interest | $ | 3,628 | | | $ | 5,301 | |
| | | |
The following table provides a reconciliation of cash, cash equivalents and restricted cash: | | | |
Cash and cash equivalents | $ | 21,109 | | | $ | 9,371 | |
Restricted cash | 15,709 | | | 34,838 | |
Cash, cash equivalents, and restricted cash | $ | 36,818 | | | $ | 44,209 | |
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",“Trust,” the "REIT",“REIT,” the “Company,” "we," "our" or "Company""us") 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. At March 31, 2022, the Trust owned 98.59% of the Operating Partnership. As of September 30, 2017,March 31, 2022, the Trust, through the Operating Partnership, owned and operated sixty-fourNaN centers one office building, sevenand 4 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
The Trust through the Operating Partnership acquired (i)owns 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 (collectively the “Operating Companies”), a real estate business operations firm, from Jon S. Wheeler, the Company's 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 of 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. 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 aare Taxable REIT SubsidiarySubsidiaries (“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, 20162021 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 amountsThe condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for allthe interim periods presented, reflect our one-for-eight reverse stock split (the "Reverse Stock Split"), which was effective March 31, 2017.and all such adjustments are of a normal recurring nature. All material balances and transactions between the consolidated entities of the Company have been eliminated. You should read theseThese condensed consolidated financial statements should be read in conjunction with our 2016the Company's 2021 Annual Report filed on Form 10-K for the year ended December 31, 20162021 (the “2016“2021 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
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 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. 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 and nine months ended September 30, 2017 and 2016.
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.
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 September 30, 2017March 31, 2022 and December 31, 2016,2021, the Company’s allowance for uncollectible accountstenant receivables totaled $703$616 thousand and $691$633 thousand, respectively. During the three
Revenue Recognition
Lease Contract Revenue
The Company has 2 classes of underlying assets relating to rental revenue activity, retail and nine months ended September 30, 2017, theoffice space. The Company recorded bad debt expenses in the amount of $23 thousand and $443 thousand, respectively, related to tenant receivables that were specifically identified as potentially uncollectible based on an assessmentretains substantially all of the tenant’s credit-worthiness. During the threerisks and nine months ended September 30, 2016, the Company recorded bad debt expenses in the amountbenefits of $31 thousandownership of these underlying assets and $196 thousand, respectively. During the three and nine months ended September 30, 2017 and 2016, the Company did not realize any recoveries related to tenant receivables previously written off.
Above and Below Market Lease Intangibles, net
accounts for these leases as operating leases. The Company determines the abovecombines lease and below marketnonlease components in 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 costscontracts, which includes combining base rent and tenant relationship 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.reimbursement revenue.
Details of these deferred costs, net of amortization, and other assets are as follows (in thousands): |
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| (unaudited) | | |
Leases in place, net | $ | 27,306 |
| | $ | 35,655 |
|
Tenant relationships, net | 7,670 |
| | 10,944 |
|
Lease origination costs, net | 1,059 |
| | 1,096 |
|
Other | 824 |
| | 517 |
|
Deposits on acquisitions | 536 |
| | 1,086 |
|
Legal and marketing costs, net | 82 |
| | 99 |
|
Total Deferred Costs and Other Assets, net | $ | 37,477 |
| | $ | 49,397 |
|
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
Amortization of lease origination costs, leases in place, legal and marketing costs, and tenant relationships represents a component of depreciation and amortization expense. As of September 30, 2017 and December 31, 2016, the Company’s intangible accumulated amortization totaled $38.72 million and $28.55 million, respectively. During the three and nine months ended September 30, 2017, the Company’s intangible amortization expense totaled $5.09 million and $12.50 million, respectively. Amortization expense for the three and nine months ended September 30, 2017 includes $1.74 million of accelerated amortization on intangibles related to the Bi-Lo lease termination at the Shoppes at Myrtle Park. During the three and nine months ended September 30, 2016, the Company’s intangible amortization expense totaled $3.00 million and $9.56 million, respectively. As of September 30, 2017, the Company's annual amortization for its lease origination costs, leases in place, legal and marketing costs and tenant relationships is as follows (in thousands): |
| | | | | | | | | | | | | | | | | | | |
| Leases In Place, net | | Tenant Relationships, net | | Lease Origination Costs, net | | Legal & Marketing Costs, net | | Total |
For the remaining three months ended December 31, 2017 | $ | 2,179 |
| | $ | 865 |
| | $ | 81 |
| | $ | 6 |
| | $ | 3,131 |
|
December 31, 2018 | 7,132 |
| | 2,613 |
| | 241 |
| | 17 |
| | 10,003 |
|
December 31, 2019 | 5,176 |
| | 1,646 |
| | 175 |
| | 14 |
| | 7,011 |
|
December 31, 2020 | 3,698 |
| | 940 |
| | 131 |
| | 11 |
| | 4,780 |
|
December 31, 2021 | 2,380 |
| | 523 |
| | 115 |
| | 9 |
| | 3,027 |
|
December 31, 2022 | 1,931 |
| | 406 |
| | 74 |
| | 6 |
| | 2,417 |
|
Thereafter | 4,810 |
| | 677 |
| | 242 |
| | 19 |
| | 5,748 |
|
| $ | 27,306 |
| | $ | 7,670 |
| | $ | 1,059 |
| | $ | 82 |
| | $ | 36,117 |
|
Revenue Recognition
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 September 30, 2017March 31, 2022 and December 31, 2016,2021, there were $2.19$5.85 million and $1.24$5.77 million, respectively, in unbilled rent 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’ 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 and nine months ended September 30, 2017, the Company recognized percentage rents of $30 thousand and $165 thousand, respectively. During the three and nine months ended September 30, 2016, the Company recognized percentage rents of $58 thousand and $214 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 under the Condensed Consolidated Statements of Operations caption "Tenant reimbursements." This significantly reducesbelow table disaggregates 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 portionsrevenue by type 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 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 and nine months ended September 30, 2017 and 2016.service (in thousands, unaudited):
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Minimum rent | $ | 11,886 | | | $ | 11,330 | |
Tenant reimbursements - variable lease revenue | 3,305 | | | 3,093 | |
Percentage rent - variable lease revenue | 117 | | | 129 | |
Straight-line rents | 77 | | | 223 | |
Lease termination fees | 75 | | | 4 | |
Other | 90 | | | 68 | |
Total | 15,550 | | | 14,847 | |
Credit losses on operating lease receivables | (53) | | | (119) | |
Total | $ | 15,497 | | | $ | 14,728 | |
The Company recognizes lease termination fees in the period that the lease is terminated and collection of the fees is reasonably assured. Upon early lease termination, the Company provides for losses related to unrecovered intangibles and other assets. During the three and nine months ended September 30, 2017, the Company recognized lease termination fees of $470 thousand and $491 thousand, respectively, primarily a result of the Bi-Lo at Shoppes at Myrtle Park lease termination. During the three and nine months ended September 30, 2016, the Company recognized lease termination fees of $0 thousand and $26 thousand, respectively. The Company includes termination fees under the Condensed Consolidated Statement of Operations caption "Development and other revenues."
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
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 $62 thousand and $107 thousand for 2017 and 2016 federal and state income taxes as of September 30, 2017 and December 31, 2016. 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.
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 $52 thousand and $195 thousand for the three and nine months ended September 30, 2017, respectively. The Company incurred advertising and promotion costs of $23 thousand and $176 thousand for the three and nine months ended September 30, 2016, 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.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
Corporate General and Administrative Expense
A detailCorporate general & administrative expenses consist of the following (in thousands, unaudited):
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Corporate administration | $ | 446 | | | $ | 380 | |
Professional fees | 407 | | | 764 | |
Compensation and benefits | 315 | | | 237 | |
Advertising costs for leasing activities | 45 | | | 20 | |
Other | 51 | | | 181 | |
Total | $ | 1,264 | | | $ | 1,582 | |
Other Expense
Other expense represents expenses which are non-operating in nature. Other expenses were $691 thousand for the "Corporate General & Administrative" line item fromthree months ended March 31, 2022, which consist of legal settlement costs. There were no other expenses for the Condensed Consolidated Statements of Operations is presented below (in thousands):three months ended March 31, 2021.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (unaudited) |
Compensation and benefits | | $ | 444 |
| | $ | 392 |
| | $ | 1,384 |
| | $ | 2,440 |
|
Professional fees | | 295 |
| | 391 |
| | 1,247 |
| | 1,181 |
|
Acquisition and development costs | | 233 |
| | 117 |
| | 832 |
| | 903 |
|
Corporate administration | | 132 |
| | 301 |
| | 483 |
| | 806 |
|
Capital related costs | | 82 |
| | 61 |
| | 468 |
| | 311 |
|
Advertising | | 52 |
| | 23 |
| | 195 |
| | 176 |
|
Travel | | 39 |
| | 153 |
| | 133 |
| | 374 |
|
Taxes and licenses | | 29 |
| | 59 |
| | 113 |
| | 100 |
|
Total Corporate General & Administrative | | $ | 1,306 |
| | $ | 1,497 |
| | $ | 4,855 |
| | $ | 6,291 |
|
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 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 statementstatements of equity includes include
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’stockholders' 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 ofRecently Adopted 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
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
provides further guidance on identifying performance obligations and intellectual property licensing implementation. In June 2016, the FASBFinancial Accounting Standards Board (the “FASB”) issued ASU 2016-12, “Revenue2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This update enhances the methodology of measuring expected credit losses to include the use of forward-looking information to better calculate credit loss estimates. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, such as accounts receivable and loans. The guidance will require that the Company estimate the lifetime expected credit loss with respect to these receivables and record allowances that, when deducted 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 applicationbalance of the standard. Companies are permitted to adoptreceivables, represent 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 amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)." These new standards will be effective for the Company in the first quarter of the year ending December 31, 2018 and can be applied either retrospectively to all periods presented or as a cumulative-effect adjustment as of the date of adoption.
The Company is currently evaluating the impact of this standard. 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 not have a material impact on our financial position or results of operations. The Company will increase disclosures around revenue recognition in the notes to condensed consolidated financial statements to comply with the standard upon adoption. The Company will adopt the standard January 1, 2018 as a cumulative-effect adjustment.
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 thenet 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 leasesexpected to be recognized on the balance sheet the new ASU will require both types of leases (i.e. operating and capital) to be recognized 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 implementationcollected. This guidance on the previously issued ASU 2016-02. "Leases (Topic 842)."
The leasing standard will beis 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 for interim reporting periods within those fiscal years, beginning after December 15, 2018. Early adoption will be permitted for all companies and organizations upon issuance of2022, however the standard. For calendar year-end public companies, this means an adoption dateCompany is early adopting as of January 1, 2019 and retrospective application to previously issued annual and interim financial statements for2022. In November 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): Improvements2018-19 to Employee Share-Based Payment Accounting.” This ASU simplifies several aspectsclarify that operating lease receivables, including straight-line rent receivables, recorded by lessors are explicitly excluded from the scope of the accounting for share-based payment transactions, including the income tax consequences, classificationTopic 326. The adoption 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
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
permitted. The Company adopted this ASU as of January 1, 2017 and applied prospectively. The adoptionstandard 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 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 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 condensed 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. The adoption did not have a material impact on the financial position or results of operations.
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.Recent Accounting Pronouncements
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 the impact that ASU 2017-05 on its financial statements.
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 does not expect the update to have a material impact on its 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
Reclassifications
Certain reclassifications have been made to
The Company has reclassified certain prior period amounts in the accompanying condensed consolidated financial statements in order to make their presentation comparablebe consistent with the current period. These reclassifications had no impact onperiod presentation. The condensed consolidated statements of operations reported within Form 10-Q for the three months ended March 31, 2021, presented net income. Allloss attributable to Wheeler REIT Common Stockholders and basic and diluted loss per share amounts of $3.00 million and $0.31 per share, respectively. On November 3, 2021, common unitsstockholders of the Company voted to amend the Company’s Charter to remove the cumulative dividend rights of the Series A Preferred and shares outstandingSeries B Preferred. As a result, the net loss attributable to Wheeler REIT Common Stockholders and stock based compensationbasic and diluted loss per share amounts have been restated to conform with this amendment, resulting in net loss attributable to Wheeler REIT Common Stockholders and basic and diluted loss per share amounts of $1.93 million and $0.20 per share, respectively, for all periods presented reflect our Reverse Stock Split which was effectivethe three months ended March 31, 2017.2021.
No other reclassifications had an effect on net income, total assets, total liabilities or equity.
3. Investment PropertiesReal Estate
Investment properties consist of the following (in thousands)(in thousands, unaudited):
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Land and land improvements | $ | 95,679 | | | $ | 96,752 | |
Buildings and improvements | 359,014 | | | 357,606 | |
Investment properties at cost | 454,693 | | | 454,358 | |
Less accumulated depreciation | (70,366) | | | (67,628) | |
Investment properties, net | $ | 384,327 | | | $ | 386,730 | |
|
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| (unaudited) | | |
Land and land improvements | $ | 91,108 |
| | $ | 90,531 |
|
Land held for improvement | 11,170 |
| | 11,420 |
|
Buildings and improvements | 310,000 |
| | 307,411 |
|
Investment properties at cost | 412,278 |
| | 409,362 |
|
Less accumulated depreciation | (28,417 | ) | | (20,482 | ) |
Investment properties, net | $ | 383,861 |
| | $ | 388,880 |
|
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
3. Real Estate (continued)
The Company’s depreciation expense on investment properties was $2.65$2.79 million and $7.96$2.69 million for the three and nine months ended September 30, 2017,March 31, 2022 and 2021, respectively. The Company’s depreciation expense on investment properties was $2.00 million and $5.75 million for the three and nine months ended September 30, 2016, respectively.
A significant portion of the Company’s land, buildings and improvements servesserve as collateral for its mortgage loans payable portfolio.loans. Accordingly, restrictions exist as to the encumbered property’s transferability, use and other common rights typically associated with property ownership.
Assets Held for Sale and Dispositions
On June 27, 2017,
At March 31, 2022, assets held for sale included Harbor Pointe Associates, LLC, as the Company completedhas committed to a plan to sell the sale of the 2.14entity, which holds an approximate 5 acre land parcel at Carolina Place("Harbor Pointe Land Parcel"). At December 31, 2021, assets held for sale included Walnut Hill Plaza.
Impairment expenses on assets held for sale are a contract priceresult of $250reducing the carrying value for the amount that exceeded the property's fair value less estimated selling costs. The valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 2 inputs. Impairment expense was $660 thousand for the three months ended March 31, 2022, resulting in a lossfrom reducing the carrying value of $12 thousand with net proceeds of $238 thousand.Harbor Pointe Land Parcel. No impairment expense was recorded for the three months ended March 31, 2021.
On June 26, 2017, the Company completed the
Assets held for sale and associated liabilities consisted of the Steak n' Shake, a 1.06 acre outparcel at Rivergate, for a contract price of approximately $2.25 million, resulting following (in a gain of $1.03 million with net proceeds of $2.18 million.thousands, unaudited): | | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
Investment properties, net | | $ | 519 | | | $ | 1,824 | |
Rents and other tenant receivables, net | | — | | | 18 | |
Deferred costs and other assets, net | | — | | | 205 | |
Total assets held for sale | $ | 519 | | | $ | 2,047 | |
| | | | | | | | | | | | | | |
| | March 31, 2022 | | December 31, 2021 |
Loans payable | | $ | — | | | $ | 3,145 | |
Accounts payable, accrued expenses and other liabilities | | — | | | 236 | |
Total liabilities associated with assets held for sale | $ | — | | | $ | 3,381 | |
The salesfollowing properties were sold during the three months ended March 31, 2022 and 2021 (in thousands, unaudited):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Disposal Date | | Property | | Contract Price | | Gain (loss) | | Net Proceeds |
January 11, 2022 | | Walnut Hill Plaza | | $ | 1,986 | | | $ | (15) | | | $ | 1,786 | |
March 25, 2021 | | Berkley Shopping Center and Berkley Land Parcel (0.75 acres) | | 4,150 | | | 176 | | | 3,937 | |
4. Deferred Costs and Other Assets, Net
Deferred costs and other assets, net of the Steak n' Shake outparcel at Rivergate and the land parcel at Carolina Place do 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 these properties remains classified within continuing operations for all periods presented.
accumulated amortization are as follows (in thousands, unaudited):
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
4. Notes Receivable | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Leases in place, net | $ | 6,959 | | | $ | 7,519 | |
Ground lease sandwich interest, net | 1,598 | | | 1,667 | |
Lease origination costs, net | 1,691 | | | 1,474 | |
Tenant relationships, net | 760 | | | 853 | |
Legal and marketing costs, net | 13 | | | 14 | |
Acquisition costs | 1,510 | | | — | |
Other | 2,436 | | | 446 | |
Total deferred costs and other assets, net | $ | 14,967 | | | $ | 11,973 | |
The Company, through WD, is performing development services for a related partyacquisition costs consist of professional fees incurred associated with the Company, for the redevelopmentpending acquisition of Pineland Station Shopping Center in Hilton Head, South Carolina to be known in the future as Sea Turtle MarketplaceCedar Realty Trust, Inc. (“Sea Turtle Development”Cedar”). Sea Turtle Development is a related party as discussed in Note 10.
On September 29, 2016, the Company entered into an $11.0 million note receivable for the partial funding of the Sea Turtle Development and a $1.0 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 2nd 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 principal balance on the notes receivable at September 30, 2017 is $12.0 million. Accrued but unpaid interest is included in related party receivables on the condensed consolidated balance sheets.
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 September 30, 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 of Ruby Tuesday’s and Outback Steakhouse at Pierpont Centre for a contract price of approximately $2.29 million, resulting in a gain of $1.50 million. The Company has defeased the $1.69 million loan payable at a cost of $223 thousand.
As of September 30, 2017March 31, 2022 and December 31, 2016, assets held for sale consisted2021, the Company’s intangible accumulated amortization totaled $63.52 million and $62.94 million, respectively. During the three months ended March 31, 2022 and 2021, the Company’s intangible amortization expense totaled $828 thousand and $1.03 million, respectively. Future amortization of the followingleases in place, ground lease sandwich interest, lease origination costs, tenant relationships, and legal and marketing costs is as follows (in thousands)thousands, unaudited):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Leases In Place, net | | Ground Lease Sandwich Interest, net | | Lease Origination Costs, net | | Tenant Relationships, net | | Legal & Marketing Costs, net | | Total |
For the remaining nine months ending December 31, 2022 | $ | 1,531 | | | $ | 205 | | | $ | 195 | | | $ | 256 | | | $ | 5 | | | $ | 2,192 | |
December 31, 2023 | 1,612 | | | 274 | | | 246 | | | 222 | | | 5 | | | 2,359 | |
December 31, 2024 | 1,111 | | | 274 | | | 219 | | | 126 | | | 3 | | | 1,733 | |
December 31, 2025 | 794 | | | 274 | | | 185 | | | 62 | | | — | | | 1,315 | |
December 31, 2026 | 422 | | | 274 | | | 161 | | | 11 | | | — | | | 868 | |
December 31, 2027 | 270 | | | 274 | | | 138 | | | 11 | | | — | | | 693 | |
Thereafter | 1,219 | | | 23 | | | 547 | | | 72 | | | — | | | 1,861 | |
| $ | 6,959 | | | $ | 1,598 | | | $ | 1,691 | | | $ | 760 | | | $ | 13 | | | $ | 11,021 | |
|
| | | | | | | | |
| | September 30, 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 September 30, 2017 and December 31, 2016, liabilities associated with assets held for sale consisted of the following (in thousands): |
| | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | (unaudited) | | |
Loans payable | | $ | — |
| | $ | 1,350 |
|
Total liabilities associated with assets held for sale | $ | — |
| | $ | 1,350 |
|
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.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
5. Loans Payable
The following is a summaryCompany’s loans payable consist of the income from discontinued operationsfollowing (in thousands, except monthly payment):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Property/Description | | Monthly Payment | | Interest Rate | | Maturity | | March 31, 2022 | | December 31, 2021 |
Litchfield Market Village | | $ | 46,057 | | | 5.50 | % | | November 2022 | | $ | 7,274 | | | $ | 7,312 | |
Twin City Commons | | $ | 17,827 | | | 4.86 | % | | January 2023 | | 2,824 | | | 2,843 | |
New Market | | $ | 48,747 | | | 5.65 | % | | June 2023 | | 6,233 | | | 6,291 | |
Benefit Street Note (3) | | $ | 53,185 | | | 5.71 | % | | June 2023 | | 6,853 | | | 6,914 | |
Deutsche Bank Note (2) | | $ | 33,340 | | | 5.71 | % | | July 2023 | | 5,466 | | | 5,488 | |
JANAF | | $ | 333,159 | | | 4.49 | % | | July 2023 | | 46,592 | | | 47,065 | |
First National Bank (6) (7) | | $ | 24,656 | | | LIBOR + 350 basis points | | August 2023 | | 723 | | | 789 | |
Lumber River (7) | | $ | 10,723 | | | LIBOR + 350 basis points | | September 2023 | | 1,277 | | | 1,296 | |
Tampa Festival | | $ | 50,797 | | | 5.56 | % | | September 2023 | | 7,708 | | | 7,753 | |
Forrest Gallery | | $ | 50,973 | | | 5.40 | % | | September 2023 | | 8,016 | | | 8,060 | |
South Carolina Food Lions Note (5) | | $ | 68,320 | | | 5.25 | % | | January 2024 | | 11,201 | | | 11,259 | |
JANAF Bravo | | $ | 35,076 | | | 5.00 | % | | May 2024 | | 5,905 | | | 5,936 | |
Cypress Shopping Center | | $ | 34,360 | | | 4.70 | % | | July 2024 | | 5,999 | | | 6,031 | |
Port Crossing | | $ | 34,788 | | | 4.84 | % | | August 2024 | | 5,744 | | | 5,778 | |
Freeway Junction | | $ | 41,798 | | | 4.60 | % | | September 2024 | | 7,391 | | | 7,431 | |
Harrodsburg Marketplace | | $ | 19,112 | | | 4.55 | % | | September 2024 | | 3,247 | | | 3,267 | |
Bryan Station | | $ | 23,489 | | | 4.52 | % | | November 2024 | | 4,203 | | | 4,226 | |
Crockett Square | | Interest only | | 4.47 | % | | December 2024 | | 6,338 | | | 6,338 | |
Pierpont Centre | | $ | 39,435 | | | 4.15 | % | | February 2025 | | 7,825 | | | 7,861 | |
Shoppes at Myrtle Park | | $ | 33,180 | | | 4.45 | % | | February 2025 | | 5,721 | | | 5,757 | |
Folly Road | | $ | 41,482 | | | 4.65 | % | | March 2025 | | 7,020 | | | 7,063 | |
Alex City Marketplace | | Interest only | | 3.95 | % | | April 2025 | | 5,750 | | | 5,750 | |
Butler Square | | Interest only | | 3.90 | % | | May 2025 | | 5,640 | | | 5,640 | |
Brook Run Shopping Center | | 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 | |
Sunshine Shopping Plaza | | Interest only | | 4.57 | % | | August 2025 | | 5,900 | | | 5,900 | |
Barnett Portfolio (4) | | Interest only | | 4.30 | % | | September 2025 | | 8,770 | | | 8,770 | |
Fort Howard Shopping Center | | Interest only | | 4.57 | % | | October 2025 | | 7,100 | | | 7,100 | |
Conyers Crossing | | Interest only | | 4.67 | % | | October 2025 | | 5,960 | | | 5,960 | |
Grove Park Shopping Center | | Interest only | | 4.52 | % | | October 2025 | | 3,800 | | | 3,800 | |
Parkway Plaza | | Interest only | | 4.57 | % | | October 2025 | | 3,500 | | | 3,500 | |
Winslow Plaza | | $ | 24,295 | | | 4.82 | % | | December 2025 | | 4,464 | | | 4,483 | |
JANAF BJ's | | $ | 29,964 | | | 4.95 | % | | January 2026 | | 4,694 | | | 4,725 | |
Tuckernuck | | $ | 32,202 | | | 5.00 | % | | March 2026 | | 5,018 | | | 5,052 | |
Chesapeake Square | | $ | 23,857 | | | 4.70 | % | | August 2026 | | 4,170 | | | 4,192 | |
Sangaree/Tri-County | | $ | 32,329 | | | 4.78 | % | | December 2026 | | 6,153 | | | 6,176 | |
Riverbridge | | Interest only | | 4.48 | % | | December 2026 | | 4,000 | | | 4,000 | |
Franklin Village | | $ | 45,336 | | | 4.93 | % | | January 2027 | | 8,243 | | | 8,277 | |
Village of Martinsville | | $ | 89,664 | | | 4.28 | % | | July 2029 | | 15,486 | | | 15,589 | |
Laburnum Square | | Interest only | | 4.28 | % | | September 2029 | | 7,665 | | | 7,665 | |
Rivergate (8) | | $ | 100,222 | | | 4.25 | % | | September 2031 | | 18,325 | | | 18,430 | |
Convertible Notes | | Interest only | | 7.00 | % | | December 2031 | | 33,000 | | | 33,000 | |
Walnut Hill Plaza | | $ | 26,850 | | | 5.50 | % | | March 2023 | | — | | | 3,145 | |
Total Principal Balance (1) | | | | | | | | 341,548 | | | 346,262 | |
Unamortized debt issuance cost (1) | | | | | | | | (10,405) | | | (9,834) | |
Total Loans Payable, including assets held for sale | | | | | | | | 331,143 | | | 336,428 | |
Less loans payable on assets held for sale, net loan amortization costs | | | | | — | | | 3,145 | |
Total Loans Payable, net | | | | | | | | $ | 331,143 | | | $ | 333,283 | |
(1) Includes loans payable on assets held for sale, see Note 3.
(2) Collateralized by LaGrange Marketplace, Ridgeland and Georgetown.
(3) Collateralized by Ladson Crossing, Lake Greenwood Crossing and South Park.
(4) Collateralized by Cardinal Plaza, Franklinton Square, and Nashville Commons.
(5) Collateralized by Clover Plaza, South Square, St. George, Waterway Plaza and Westland Square.
(6) Collateralized by Surrey Plaza and Amscot Building.
(7) Certain loans bear interest at a variable interest rate equal to LIBOR or another index rate, subject to a floor, in each case plus or minus a specified margin.
(8) October 2026 the three and nine months ended September 30, 2017 and 2016 (in thousands):interest rate changes to variable interest rate equal to the 5 years U.S. Treasury Rate plus 2.70%, with a floor of 4.25%.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (unaudited) |
Revenues | | $ | — |
| | $ | 54 |
| | $ | 26 |
| | $ | 249 |
|
Expenses | | — |
| | 1 |
| | 1 |
| | 78 |
|
Operating income | | — |
| | 53 |
| | 25 |
| | 171 |
|
Interest expense | | — |
| | 14 |
| | 9 |
| | 56 |
|
Income from discontinued operations before gain on disposal of properties | | — |
| | 39 |
| | 16 |
| | 115 |
|
Gain on disposal of properties | | — |
| | 1 |
| | 1,502 |
| | 689 |
|
Net Income from discontinued operations | | $ | — |
| | $ | 40 |
| | $ | 1,518 |
| | $ | 804 |
|
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
6.5. Loans Payable
Convertible Notes
During the three months ended March 31, 2022, the interest expense related to the Convertible Notes totaled $578 thousand.
Walnut Hill Plaza Payoff
In conjunction with the Walnut Hill Plaza sale the Company made a $1.79 million principal paydown on the Walnut Hill Plaza loan. On February 17, 2022 the Company paid the remaining loan balance of $1.34 million in full after the sale of Walnut Hill Plaza, as detailed in Note 3.
Debt Maturity
The Company’s loans payable consistscheduled principal repayments on indebtedness as of March 31, 2022, including assets held for sale, are as follows (in thousands, unaudited):
| | | | | |
For the remaining nine months ended December 31, 2022 | $ | 11,848 | |
December 31, 2023 | 86,294 | |
December 31, 2024 | 50,490 | |
December 31, 2025 | 92,016 | |
December 31, 2026 | 23,530 | |
December 31, 2027 | 8,711 | |
Thereafter | 68,659 | |
Total principal repayments and debt maturities | $ | 341,548 | |
6. Derivative Liabilities
Warrants to purchase shares of common stock are as follows:
| | | | | | | | | | | | | | |
Warrants | | Exercise Price | | Expiration Date |
496,415 | | $3.120 | | 12/22/2023 |
510,204 | | $3.430 | | 3/12/2026 |
424,242 | | $4.125 | | 3/12/2026 |
127,273 | | $6.875 | | 3/12/2026 |
| | | | |
Fair Value of Warrants
The Company utilized the Monte Carlo simulation model to calculate the fair value of the Powerscourt Warrant and Wilmington Warrant (collectively, the "Warrant Agreements"). Significant observable and unobservable inputs include stock price, conversion price, risk-free rate, term, likelihood of an event of contractual conversion and expected volatility. The Monte Carlo simulation is a Level 3 valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators. The Warrant Agreements contain terms and features that give rise to derivative liability classification.
In measuring the warrant liabilities, the Company used the following
(in thousands except monthly payment): |
| | | | | | | | | | | | | | | | |
Property/Description | Monthly Payment | | Interest Rate | | Maturity | | September 30, 2017 | | December 31, 2016 |
Bank Line of Credit | Interest only |
| | 4.25 | % | | December 2017 | | 3,000 |
| | 3,000 |
|
Columbia Fire House | Interest only |
| | 8.00 | % | | December 2017 | | 259 |
| | 487 |
|
Monarch Bank Building | $ | 9,473 |
| | 4.15 | % | | December 2017 | | 1,276 |
| | 1,320 |
|
KeyBank Line of Credit | Interest only |
| | Libor + 250 basis points |
| | December 2017 | | 18,032 |
| | — |
|
Shoppes at Eagle Harbor | $ | 25,100 |
| | 4.34 | % | | March 2018 | | 3,380 |
| | 3,492 |
|
Revere Loan | Interest only |
| | 8.00 | % | | April 2018 | | 6,808 |
| | 7,450 |
|
KeyBank Line of Credit | Interest only |
| | Libor + 250 basis points |
| | May 2018 | | 50,000 |
| | 74,077 |
|
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 |
|
Harbor Point | $ | 11,024 |
| | 5.85 | % | | December 2018 | | 578 |
| | 649 |
|
Perimeter Square | Interest only |
| | 5.50 | % | | December 2018 | | 5,236 |
| | 4,500 |
|
Riversedge North | $ | 8,802 |
| | 6.00 | % | | January 2019 | | 876 |
| | 914 |
|
DF I-Moyock | $ | 10,665 |
| | 5.00 | % | | July 2019 | | 224 |
| | 309 |
|
Rivergate | Interest only |
| | Libor + 295 basis points |
| | December 2019 | | 22,689 |
| | 24,213 |
|
LaGrange Marketplace | $ | 15,065 |
| | Libor + 375 basis points |
| | March 2020 | | 2,331 |
| | 2,369 |
|
Folly Road | Interest only |
| | 4.00 | % | | March 2020 | | 6,181 |
| | — |
|
Columbia Fire House construction loan | Interest only |
| | 4.00 | % | | May 2020 | | 1,850 |
| | — |
|
Shoppes at TJ Maxx | $ | 33,880 |
| | 3.88 | % | | May 2020 | | 5,773 |
| | 5,908 |
|
Walnut Hill Plaza | Interest only |
| | 5.50 | % | | September 2022 | | 3,903 |
| | 3,440 |
|
Twin City Commons | $ | 17,827 |
| | 4.86 | % | | January 2023 | | 3,126 |
| | 3,170 |
|
Tampa Festival | $ | 50,797 |
| | 5.56 | % | | September 2023 | | 8,403 |
| | 8,502 |
|
Forrest Gallery | $ | 50,973 |
| | 5.40 | % | | September 2023 | | 8,704 |
| | 8,802 |
|
South Carolina Food Lions Note | $ | 68,320 |
| | 5.25 | % | | January 2024 | | 12,096 |
| | 12,224 |
|
Cypress Shopping Center | $ | 34,360 |
| | 4.70 | % | | July 2024 | | 6,510 |
| | 6,585 |
|
Port Crossing | $ | 34,788 |
| | 4.84 | % | | August 2024 | | 6,291 |
| | 6,370 |
|
Freeway Junction | $ | 41,798 |
| | 4.60 | % | | September 2024 | | 8,026 |
| | 8,119 |
|
Harrodsburg Marketplace | $ | 19,112 |
| | 4.55 | % | | September 2024 | | 3,570 |
| | 3,617 |
|
Graystone Crossing | $ | 20,386 |
| | 4.55 | % | | October 2024 | | 3,944 |
| | 3,990 |
|
Bryan Station | $ | 23,489 |
| | 4.52 | % | | November 2024 | | 4,566 |
| | 4,619 |
|
Crockett Square | Interest only |
| | 4.47 | % | | December 2024 | | 6,338 |
| | 6,338 |
|
Pierpont Centre | Interest only |
| | 4.15 | % | | February 2025 | | 8,113 |
| | 8,450 |
|
Alex City Marketplace | Interest only |
| | 3.95 | % | | April 2025 | | 5,750 |
| | 5,750 |
|
Butler Square | Interest only |
| | 3.90 | % | | May 2025 | | 5,640 |
| | 5,640 |
|
Brook Run Shopping Center | 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 |
|
Sunshine Shopping Plaza | Interest only |
| | 4.57 | % | | August 2025 | | 5,900 |
| | 5,900 |
|
Barnett Portfolio | Interest only |
| | 4.30 | % | | September 2025 | | 8,770 |
| | 8,770 |
|
Fort Howard Shopping Center | Interest only |
| | 4.57 | % | | October 2025 | | 7,100 |
| | 7,100 |
|
Conyers Crossing | Interest only |
| | 4.67 | % | | October 2025 | | 5,960 |
| | 5,960 |
|
Grove Park Shopping Center | Interest only |
| | 4.52 | % | | October 2025 | | 3,800 |
| | 3,800 |
|
Parkway Plaza | Interest only |
| | 4.57 | % | | October 2025 | | 3,500 |
| | 3,500 |
|
Winslow Plaza | Interest only |
| | 4.82 | % | | December 2025 | | 4,620 |
| | 4,620 |
|
Chesapeake Square | $ | 23,857 |
| | 4.70 | % | | August 2026 | | 4,519 |
| | 4,578 |
|
Sangaree/Tri-County/Berkley | Interest only |
| | 4.78 | % | | December 2026 | | 9,400 |
| | 9,400 |
|
Riverbridge | Interest only |
| | 4.48 | % | | December 2026 | | 4,000 |
| | 4,000 |
|
Franklin | Interest only |
| | 4.93 | % | | January 2027 | | 8,516 |
| | 8,516 |
|
Total Principal Balance | | | | | | | 312,777 |
| | 313,698 |
|
Unamortized debt issuance cost | | | | | | | (5,815 | ) | | (7,725 | ) |
Total Loans Payable | | | | | | | $ | 306,962 |
| | $ | 305,973 |
|
inputs in its Monte Carlo model.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
6. Loans Payable (continued)Derivative Liabilities
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Range of exercise prices | $3.120 - $6.875 | | $3.120 - $6.875 |
Common Stock price | $2.30 | | $1.94 |
Weighted average contractual term to maturity | 3.2 years | | 3.5 years |
Range of expected market volatility % | 76.83% - 87.83% | | 70.12% - 81.00% |
Range of risk free interest rate | 1.96% - 2.44% | | 0.72% - 1.16% |
| | | |
KeyBank Credit Agreement
Fair Value of Conversion Features Related to Convertible Notes
On May 29, 2015, the Operating Partnership entered into a $45.00 million revolving credit line (the "Credit Agreement") with KeyBank National Association ("KeyBank"). Pursuant
The Company identified certain embedded derivatives related to the Credit Agreement, outstanding borrowings accrue monthly interest which is paid at a rate 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 14 retail shopping centers located in Georgia and South Carolina, commonly known as the A-C Portfolio ("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 Offering to reduce its borrowings under the 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. On August 7, 2017, the Company executed a Third Amendment to the KeyBank Credit Agreement (the "Third Amendment"). The Third Amendment changed the interest payment date to the first day of each calendar month and decreased the total commitment on the revolving credit line by $25 million to $50 million effective October 7, 2017. The Company and KeyBank agreed Shoppes at Myrtle Park shall continue to be included in the calculation of the Borrowing Base Availability (as defined in the Credit Agreement) through December 21, 2017. The unutilized amounts available to the Company under the Credit Agreement accrue fees which are paid at a rate of 0.25%. The Credit Agreement matures in May 2018.
As of September 30, 2017, the Company has borrowed $68.03 million under the Credit Agreement, which is collateralized by 16 properties. At September 30, 2017, the outstanding borrowings are accruing interest at 3.74%. The 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 September 30, 2017. The Credit Agreement also contains certain events of default that if they occur may cause KeyBank to terminate the Credit Agreement and declare amounts owed to become immediately payable. As of September 30, 2017, the Company has not incurred an event of default.
Senior Convertible Notes Amendment
Effective as of April 28, 2016, 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. (collectively the “Bulldog Investors”) amended the convertible 9% senior notes (“Amended Convertible Notes”) to purchase shares of the Company’s Common Stock. Prior to the amendment, the aggregate principal amountconversion features of the Convertible Notes. In accordance with ASC 815-40, Derivatives and Hedging Activities, the embedded conversion options contained within the Convertible Notes ("Convertible Notes") was $3.00 million.
Pursuantwere accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through each reporting date. The Company utilized a multinomial lattice model to calculate the termsfair value of the Amended Convertible Notes, upon thirty (30) calendar days’ notice (“Notice”),embedded derivatives. Significant observable and unobservable inputs include, conversion price, stock price, dividend rate, expected volatility, risk-free rate and term. The multinomial lattice model is a Level 3 valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators.
In measuring the embedded derivative liability, the Company may prepay any portionused the following inputs in its multinomial lattice model:
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Conversion price | $6.25 | | $6.25 |
Common Stock price | $2.30 | | $1.94 |
Contractual term to maturity | 9.8 years | | 10.1 years |
Expected market volatility % | 85.00% | | 80.00% |
Risk-free interest rate | 2.31% | | 1.51% |
Traded WHLRL price, % of par | 125.36% | | 113.96% |
The following table sets forth a summary 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 repaymentchanges 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, pre-reverse split. As of September 30, 2017, the Bulldog Investors have converted approximately $1.64 million of principal amount into 1,417,079 shares, pre-reverse split,fair value of the Company's Common Stock,derivative liabilities, which include both the maximum number of shares allowed.warrant liabilities and embedded derivative liability (in thousands, unaudited):
Folly Road Refinance | | | | | | | | | | | |
| Three Months Ended March 31, 2022 | | Year Ended December 31, 2021 |
Balance at the beginning of period | $ | 4,776 | | | $ | 594 | |
Issuance of Wilmington Warrant | — | | | 2,018 | |
Issuance of embedded derivative | — | | | 5,932 | |
Changes in fair value | 3,962 | | | (3,768) | |
Balance at ending of period | $ | 8,738 | | | $ | 4,776 | |
On March 22, 2017, the Company executed a promissory note for $8.57 million to refinance the Folly Road collateralized portion of the KeyBank Credit Agreement totaling $6.05 million. The loan matures in March 2020 with monthly interest only payments due through April 2018 at which time monthly principal and interest payments begin based on a 25 year amortization. The loan bears interest at 4.00%. As of September 30, 2017, $6.18 million has been borrowed on the note with the remaining $2.39 million available for construction and development.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
6. Loans Payable (continued)
7. Rentals under Operating Leases
Revere Loan
On May 1, 2017, the Operating Partnership extended the $7.45 million Term Loan Agreement dated April 18, 2016 between the Operating Partnership, as borrower and Revere High Yield Fund, L.P., as lender ("Revere Loan") maturityFuture minimum rents to April 30, 2018, as permitted within the termsbe received under noncancelable tenant operating leases, excluding rents on assets held for sale properties, for each of the loan agreement,nine months ending December 31, 2022 and each of the next five years and thereafter, excluding tenant reimbursements and percentage rent based on tenant sales volume, as of March 31, 2022 are as follows (in thousands, unaudited):
| | | | | |
For the remaining nine months ended December 31, 2022 | $ | 35,899 | |
December 31, 2023 | 44,383 | |
December 31, 2024 | 37,333 | |
December 31, 2025 | 30,052 | |
December 31, 2026 | 21,859 | |
December 31, 2027 | 14,912 | |
Thereafter | 41,085 | |
Total minimum rents | $ | 225,523 | |
8. Equity and Mezzanine Equity
Series A Preferred Stock
At March 31, 2022 and December 31, 2021, the Company had 562 shares without par value of Series A Preferred Stock (“Series A Preferred”) issued and outstanding and a $1,000 liquidation preference per share, or $562 thousand in aggregate.
Series B Preferred Stock
At March 31, 2022 and December 31, 2021, the Company had 1,868,343 and 1,872,448 shares, issued and outstanding, respectively, and 5,000,000 authorized shares of Series B Convertible Preferred Stock, without par value (“Series B Preferred”) with a $450 thousand principal payment$25.00 liquidation preference per share, or $46.71 million and $140 thousand extension fee. In June 2017, upon$46.81 million in aggregate, respectively.
Series D Preferred Stock - Redeemable Preferred Stock
At March 31, 2022 and December 31, 2021, the completionCompany had 3,152,392 shares, issued and outstanding, and 6,000,000 authorized shares of Series D Cumulative Convertible Preferred Stock, without par value ("Series D Preferred") with a $25.00 liquidation preference per share, and a liquidation value of $107.09 million and $104.97 million in aggregate, respectively.
The changes in the carrying value of the sale of Carolina Place,Series D Preferred for the three months ended March 31, 2022 and 2021 are as discussed in Note 3, a $167 thousand principal payment was made on the loan. On August 29, 2017, a $25 thousand principal payment was made on the loan as a result of the Walnut Hill Plaza amendment discussed below. The balance on the loan is $6.81 million at September 30, 2017.
Columbia Fire House Construction Loan
On May 3, 2017, the Company executed a promissory note for $4.30 million related to construction at Columbia Fire House ("Columbia Fire House Construction Loan") at which time the original Columbia Fire House note ("Columbia Fire House Loan") was paid down to $262 thousand. The loan matures in May 2020 with monthly interest only payments through November 2018 at which time monthly principal and interest payments begin based on a 20 year amortization. The loan bears interest at 4.00%. As of September 30, 2017, $1.85 million has been borrowed on the note with the remaining $2.45 million available for construction and development.
Perimeter Refinance
On June 14, 2017, the Company executed a promissory note for $6.25 million to refinance the Perimeter loan totaling $4.50 million. The loan matures December 2018 with monthly interest only payments. Principal is due at maturity. The loan bears interest at 5.50%. As of September 30, 2017, $5.24 million has been borrowed on the note with the remaining $1.01 million available for tenant improvements.
Rivergate Paydown
With the sale of the Steak n' Shake outparcel at Rivergate, as discussed in Note 3, a $1.52 million principal payment was made on the Rivergate loan. The balance on the Rivergate loan was $22.69 million at September 30, 2017.
Walnut Hill Plaza Amendment
On July 18, 2017, the Company extended the $3.39 million Walnut Hill Plaza loan maturity to October 31, 2017.
On August 29, 2017, the Company amended the Walnut Hill Plaza promissory note for $3.90 million. The amended loan matures in September 2022 with monthly interest only payments through August 2018 at which time monthly principal and interest payments of $26,850 begin based on a 20 year amortization. The loan bears interest at 5.50%.
Bank Line of Credit
On September 16, 2017, the Company extended the $3.00 million bank line of credit to December 15, 2017.
Certain of the Company’s loans payable have covenants with which the Company is required to comply. As of September 30, 2017, the Company believes it is in compliance with all applicable covenants.
follows (in thousands, unaudited):
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
6. Loans Payable (continued)
Debt Maturity
The Company’s scheduled principal repayments on indebtedness as of September 30, 2017 are as follows (in thousands, unaudited): |
| | | |
For the remaining three months ended December 31, 2017 | $ | 23,013 |
|
December 31, 2018 | 71,099 |
|
December 31, 2019 | 24,785 |
|
December 31, 2020 | 17,016 |
|
December 31, 2021 | 1,907 |
|
December 31, 2022 | 5,534 |
|
Thereafter | 169,423 |
|
Total principal repayments and debt maturities | $ | 312,777 |
|
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 for the twelve months ended September 30, 2018 of $84.25 million, which includes the $68.03 million maturity of 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 $50.00 million prior to December 6, 2017 in accordance with the Fourth Amendment as described in Footnote 11. The Company is in the process of refinancing the $3.00 million Bank Line of Credit which has been extended to December 2017 and has the ability to repay the $259 thousand Columbia Fire House Loan with available funds from the Columbia Fire House Construction Loan. All loans due to mature are collateralized by properties within our portfolio. Additionally, the Company expects to meet the short-term liquidity requirements, through a combination of the following:
available cash and cash equivalents;
cash flows from operating activities;
refinancing of maturing debt; and
sale of additional properties, if necessary.
Management is currently working with lenders to refinance the loans noted above. The loans are expected to have customary interest rates similar to current loans. They are subject to formal lender commitment, definitive documentation and customary conditions.
7. Rentals under Operating Leases
Future minimum rentals 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 September 30, 2017 are as follows (in thousands, unaudited):
|
| | | |
For the remaining three months ended December 31, 2017 | $ | 10,769 |
|
December 31, 2018 | 41,601 |
|
December 31, 2019 | 35,685 |
|
December 31, 2020 | 28,514 |
|
December 31, 2021 | 21,420 |
|
December 31, 2022 | 16,564 |
|
Thereafter | 43,765 |
|
Total minimum rentals | $ | 198,318 |
|
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 September 30, 2017 and December 31, 2016, the Company had 562 and 4,500 shares of no par value Series A Preferred Stock (“Series A Preferred”) issued and outstanding 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 September 30, 2017 and December 31, 2016, the Company had 1,875,848 and 1,871,244 shares, respectively, and 5,000,000 shares of no par value Series B Preferred Stock (“Series B Preferred”) issued and authorized with a $25.00 liquidation preference per share, or $46.90 million and $46.78 million in aggregate, respectively. The Series B Preferred bears interest at a rate of 9% per annum. The Series B Preferred has no redemption rights. However, the Series B Preferred is subject to a mandatory conversion once the 20-trading day volume-weighted average closing price of our Common Stock, exceeds $58 per share; once this weighted average closing price is met, each share of our Series B Preferred will automatically convert into shares of our Common Stock at a conversion price equal to $40.00 per share of Common Stock. In addition, holders of our Series B Preferred also have the option, at any time, to convert shares of our Series B Preferred 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 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 B 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, 1,986,600 warrants were issued. Each warrant permits investors to purchase 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 September 30, 2017 and December 31, 2016, the Company had 2,237,000 and 4,000,000 shares of no par value Series D Preferred Stock (“Series D Preferred”) issued and authorized with a $25.00 liquidation preference per share, or $55.93 million in aggregate. Until September 21, 2023, the holders of the Series D Preferred 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, for cash at a redemption price of $25.00 per share, plus an amount
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
8. Equity and Mezzanine Equity (continued)
| | | | | |
| Series D Preferred |
Balance December 31, 2021 | $ | 92,548 | |
Accretion of Preferred Stock discount | 125 | |
Undeclared dividends | 2,118 | |
| |
Balance March 31, 2022 | $ | 94,791 | |
| | | | | |
| Series D Preferred |
Balance December 31, 2020 | $ | 95,563 | |
Accretion of Preferred Stock discount | 140 | |
Undeclared dividends | 2,111 | |
Redemption of Preferred Stock | (10,493) | |
Balance March 31, 2021 | $ | 87,321 | |
equal to all accrued and unpaid dividends, if any, to and including the redemption date. The holder of the Series D Preferred 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 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 Series D Preferred requires the Company maintain asset coverage of at least 200%. Accretion of Series D Preferred was $540 thousand for the nine months ended September 30, 2017.
Earnings per share
Basic earnings per share for the Company’s common shareholdersstockholders is calculated by dividing income (loss) from continuing operations, excluding amounts attributable to preferred stockholders and the net lossincome (loss) attributable to noncontrolling interests, by the Company’s weighted-average shares of Common Stock outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) attributable to common shareholders,stockholders, excluding amounts attributable to preferred shareholdersstockholders and the net lossincome (loss) attributable to noncontrolling interests, by the weighted-average number of common shares including any dilutive shares.
As
The following table summarizes the potential dilution of September 30, 2017,conversion of common units, Series B Preferred, Series D Preferred, warrants and Convertible Notes into the below shares are able to be converted toCompany's Common Stock. The common units, convertible preferred stock, cumulative convertible preferred stock, and warrantsThese 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 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, 2022 |
| | | | | | Outstanding shares | | Potential Dilutive Shares |
Common units | | | | | | 215,343 | | | 215,343 | |
Series B Preferred Stock | | | | | | 1,868,343 | | | 1,167,714 | |
Series D Preferred Stock | | | | | | 3,152,392 | | | 6,314,249 | |
Warrants to purchase Common Stock | | | | | | — | | | 1,558,134 | |
Convertible Notes | | | | | | — | | | 28,436,060 | |
|
| | | | | | |
| | September 30, 2017 |
| | Outstanding shares | | Potential Dilutive Shares |
| | (unaudited) |
Common units | | 642,299 |
| | 599,333 |
|
Series B Preferred Stock | | 1,875,848 |
| | 1,172,405 |
|
Series D Preferred Stock | | 2,237,000 |
| | 3,297,465 |
|
Warrants to purchase Common Stock | | | | 329,378 |
|
Dividends
Dividends
The following table summarizes the Series D Preferred dividends (unaudited, in thousands except for per share amounts):
| | | | | | | | | | | |
| | Series D Preferred |
Record Date/Arrears Date | | Arrears | Per Share |
For the three months ended March 31, 2022 | | $ | 2,118 | | $ | 0.67 | |
| | | |
For the three months ended March 31, 2021 | | $ | 2,111 | | $ | 0.67 | |
There were no dividends declared to holders of common units, common shares and preferred shares as follows (in thousands):
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | (unaudited) | | (unaudited) |
Common unit and common shareholders | | $ | 3,187 |
| | $ | 3,867 |
| | $ | 10,288 |
| | $ | 11,444 |
|
Preferred shareholders | | 2,496 |
| | 1,241 |
| | 7,473 |
| | 2,264 |
|
Total | | $ | 5,683 |
| | $ | 5,108 |
| | $ | 17,761 |
| | $ | 13,708 |
|
On September 18, 2017, the Company declared a quarterly $0.34 per share dividend payable on or about October 15, 2017 to common shareholders and unitholders of record as of September 29, 2017. Accordingly, the Company has accrued $3.19 million as of September 30, 2017 for this dividend.
DuringCommon Stock during the three months ended September 30, 2017, the Company declared quarterlyMarch 31, 2022 and 2021. The total cumulative dividends of $2.29 million to preferred shareholders of recordin arrears for Series D Preferred (per share $8.97) as of September 29, 2017 to be paid on October 15, 2017. Accordingly, the Company has accrued $2.29 million as of September 30, 2017 for this dividend.March 31, 2022 is $28.28 million.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
8. Equity9. Lease Commitments
The Company has ground leases and Mezzanine Equity (continued)
2015 Long-Term Incentive Plan
On June 4, 2015,leases its corporate headquarters; both are accounted for as operating leases. Most leases include one or more options to renew, with renewal terms that can extend the Company's shareholders approved the 2015 Long-Term Incentive Plan (the "2015 Incentive Plan"). The 2015 Incentive Plan allows for issuance of uplease term from 5 to 125,000 shares of the Company's Common Stock to employees, directors, officers and consultants for services rendered to the Company.
During the nine months ended September 30, 2017, the Company issued 11,465 shares to employees for services rendered to the Company. The market value of these shares at the time of issuance was approximately $155 thousand.50 years. As of September 30, 2017, there are 41,104 shares available for issuance underMarch 31, 2022 and 2021, the Company’s 2015 Incentive Plan.
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 issuanceweighted average remaining lease term of up to 625,000 shares of the Company's Common Stock to employees, directors, officersour leases is 31 and consultants for services rendered to the Company.
During the nine months ended September 30, 2017, the Company issued 93,478 shares to consultants, directors and employees for services rendered to the Company. The market value of these shares at the time of issuance was approximately $1.19 million. As of September 30, 2017, there are 526,921 shares available for issuance under the Company’s 2016 Incentive Plan.
9. Commitments and Contingencies
Lease Commitments
31 years, respectively. The following properties are subject to ground leases which requiresrequire the Company to make athe following fixed annual rental paymentpayments and includesvariable lease payments and include escalation clauses and renewal options as follows (unaudited,(in thousands, unaudited):
| | | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | |
| | 2022 | | 2021 | Expiration Year |
Amscot | | $ | 6 | | | $ | 6 | | 2045 |
Beaver Ruin Village | | 14 | | | 14 | | 2054 |
Beaver Ruin Village II | | 5 | | | 6 | | 2056 |
Moncks Corner | | 30 | | | 30 | | 2040 |
Devine Street (1) | | 99 | | | 99 | | 2051 |
JANAF (2) | | 68 | | | 68 | | 2069 |
Riversedge office space Virginia Beach, VA | | 42 | | | 42 | | 2030 |
Total rent expense | | $ | 264 | | | $ | 265 | | |
(1) Lease options are exercised through 2035 with options which are reasonably certain to be exercised through 2051.
(2) Includes $30 thousand and $31 thousand in thousands)variable percentage rent during the three months ended March 31, 2022 and 2021 respectively.
Supplemental information related to leases is as follows (in thousands, unaudited):
| | | | | | | | | | | |
| Three Months Ended March 31 |
| 2022 | | 2021 |
Cash paid for amounts included in the measurement of operating lease liabilities | $ | 226 | | | $ | 225 | |
| | | |
| | | |
|
| | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | Expiration Year |
| 2017 | | 2016 | | 2017 | | 2016 | | |
Amscot | $ | 5 |
| | $ | 5 |
| | $ | 14 |
| | $ | 14 |
| | 2045 |
Beaver Ruin Village | 11 |
| | 11 |
| | 34 |
| | 34 |
| | 2054 |
Beaver Ruin Village II | 5 |
| | 4 |
| | 14 |
| | 13 |
| | 2056 |
Leased office space Charleston, SC | 25 |
| | 26 |
| | 75 |
| | 67 |
| | 2019 |
Moncks Corner | 30 |
| | 30 |
| | 91 |
| | 57 |
| | 2040 |
Devine Street | 63 |
| | 62 |
| | 188 |
| | 117 |
| | 2035 |
Total Ground Leases | $ | 139 |
| | $ | 138 |
| | $ | 416 |
| | $ | 302 |
| | |
FutureUndiscounted cash flows of our scheduled obligations for future minimum lease payments due under the operating leases, including applicable automatic extension options and options reasonably certain of being exercised, as of September 30, 2017March 31, 2022 and a reconciliation of those cash flows to the operating lease liabilities at March 31, 2022 are as follows (in thousands, unaudited):
| | | | | |
For the remaining nine months ended December 31, 2022 | $ | 679 | |
December 31, 2023 | 907 | |
December 31, 2024 | 909 | |
December 31, 2025 | 913 | |
December 31, 2026 | 943 | |
December 31, 2027 | 946 | |
Thereafter | 21,897 | |
Total minimum lease payments (1) | 27,194 | |
Discount | (14,195) | |
Operating lease liabilities | $ | 12,999 | |
(1) Operating lease payments include $7.54 million related to options to extend lease terms that are reasonably certain of being exercised.
|
| | | |
For the remaining three months ended December 31, 2017 | $ | 132 |
|
December 31, 2018 | 530 |
|
December 31, 2019 | 499 |
|
December 31, 2020 | 433 |
|
December 31, 2021 | 485 |
|
December 31, 2022 | 488 |
|
Thereafter | 9,666 |
|
Total minimum lease payments | $ | 12,233 |
|
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
9.
10. Commitments and Contingencies (continued)
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 blanketan 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 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,Southeast, Mid-Atlantic Southeast and Southwest,Northeast, which markets representedrepresent approximately 4%61%, 24%, 71%35% and 1%,4% respectively, of the total annualized base rent of the properties in its portfolio as of September 30, 2017.March 31, 2022. 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.
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. In addition, the below legal proceedings are in process:
David Kelly v. Wheeler Real Estate Investment Trust, Inc., Circuit Court for the City of Virginia Beach, Virginia. Former CEO David Kelly filed suit on May 28, 2020, alleging breach of his employment contract. On March 15, 2022, the Court granted Mr. Kelly $340 thousand with interest thereon at a rate of 6% per annum from the date of termination, April 13, 2020, until paid, plus attorneys' fees and costs in the amount of $311 thousand. On March 31,
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
10. Commitments and Contingencies (continued)
2022, $691 thousand was paid to Mr. Kelly. The Company has now fulfilled its obligations pursuant to the Court’s Order in this case.
JCP Investment Partnership LP, et al v. Wheeler Real Estate Investment Trust, Inc., United States District Court for the District of Maryland. On March 22, 2021, JCP Investment Partnership, LP, a Texas limited partnership and stockholder of the Company, JCP Investment Partners, LP, a Texas limited partnership and stockholder of the Company, JCP Investment Holdings, LLC, a Texas limited liability company and stockholder of the Company, and JCP Investment Management, LLC, a Texas limited liability company and stockholder of the Company (collectively, the “JCP Plaintiffs”), filed suit against the Company and certain current and former directors and former officers of the Company (the “Individual Defendants”). The complaint alleges that the Company amended provisions of its Articles Supplementary in 2018 governing the issuance of the Company’s Series D Preferred in violation of Maryland corporate law and without obtaining the consent of preferred stockholders and, therefore, the court should declare the Company’s said amendment invalid, enjoin further purportedly unauthorized amendments, and either compel the Company to redeem the JCP Plaintiffs' stock or enter judgment for monetary damages the JCP Plaintiffs purportedly sustained based on the Company’s alleged breach of its contractual duties to redeem the JCP Plaintiffs’ Series D Preferred. The complaint also alleges certain violations of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 10b-5 promulgated thereunder, and alleges that the Individual Defendants violated Section 20(a) of the Exchange Act. The JCP Plaintiffs are each purportedly a holder of the Company’s Series D Preferred. The complaint seeks damages, interest, attorneys’ fees, other costs and expenses, and such other relief as the court may deem just and equitable. The Company has filed an answer to the complaint denying any liability. The Individual Defendants filed a motion to dismiss the complaint, which was denied. The JCP Plaintiffs filed a Motion For Partial Summary Judgment, as to which the Company and the Individual Defendants filed oppositions. The Judge denied the JCP Plaintiffs' Motion and ordered the parties to prepare a joint discovery schedule. At this juncture, the outcome of the litigation is uncertain.
Steamboat Capital Partners Master Fund, LP and Steamboat Capital Partners II, LP v. Wheeler Real Estate Investment Trust, Inc., Steamboat Capital Partners Master Fund, LP and Steamboat Capital Partners II, LP v. Wheeler Real Estate Investment Trust, Inc., Circuit Court for Baltimore County, Maryland. On October 25, 2021, Steamboat Capital Partners Master Fund, LP, a Cayman Islands exempted limited partnership and stockholder of the Company, and Steamboat Capital Partners II, LP, a Delaware limited partnership and stockholder of the Company, filed a putative class action on behalf of holders of the Company’s Series B Preferred Stock and Series D Preferred Stock. The complaint alleges that the Company's rights offering of convertible debt to the Company's common stockholders, and the notes issued pursuant to the rights offering, breached the provisions of the Company's governing documents and violated the rights of the holders of the Series B Preferred and Series D Preferred with respect to accumulated and unpaid dividends. Plaintiffs seek relief as follows: require the Company to pay all dividends accrued, as of the date of the rights offering, on the Series B Preferred and Series D Preferred, and prohibit the Company from paying interest on the notes held by the Company's common stockholders (upon exercise of the rights) until all accrued dividends on the Series B Preferred and Series D Preferred are paid. Plaintiffs also seek a declaration that the rights offering by the Company to its common stockholders, which resulted in the issuance of notes, when accrued Series B Preferred dividends and Series D Preferred dividends had not been fully paid, breached the provisions of the Company's governing documents. In addition, the complaint contends that the Company's amendment of its charter to remove the cumulative nature of dividends from the Series B Preferred cannot be applied retroactively. A trial date is set for May 2023. The parties have each filed potentially dispositive motions. At this juncture, the outcome of the litigation is uncertain.
David Sydney, et. al. v. Cedar Realty Trust, Inc., Wheeler Real Estate Investment Trust, Inc. et al., Circuit Court for Montgomery County, Maryland. On April 8, 2022, several purported holders of preferred stock of Cedar Realty Trust, Inc. (“Cedar”) filed a putative class action against Cedar, Cedar’s Board of Directors, and the Company arising out of the pending acquisition of Cedar by the Company. The complaint includes allegations of breach of contract against Cedar and Cedar’s Board of Directors with respect to the articles supplementary governing the terms of Cedar’s preferred stock and breach of fiduciary duty against Cedar’s Board of Directors. The complaint further alleges that the Company tortiously interfered with Cedar’s contract with the owners of Cedar’s preferred stock and aided and abetted the alleged breach of fiduciary duty by Cedar’s Board of Directors. The complaint seeks, among other relief, an injunction enjoining the proposed acquisition, an injunction enjoining the distribution by Cedar to Cedar’s common stockholders of funds to be received by Cedar from selling a portion of its assets prior to the acquisition, and
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
10. Commitments and Contingencies (continued)
compensatory damages. On May 6, 2022, the plaintiffs filed an amended complaint and added a claim against Cedar alleging breach of contract with respect to conversion rights for the preferred shareholders and a related claim against the Company for tortious interference with contract with respect to conversion rights. On May 6, 2022, the plaintiffs also filed motions seeking to enjoin the merger, asking the Court to allow expedited discovery, and to set a date for a preliminary injunction hearing. At this juncture, the outcome of the litigation is uncertain.
Harbor Pointe Tax Increment Financing
On September 1, 2011, the Grove Economic Development Authority issued the Grove Economic Development Authority Tax Increment Revenue Note, Taxable Series 2011 in the amount of $2.42 million, bearing a variable interest rate of 2.29%, not to exceed 14% and payable in 50 semi-annual installments. The proceeds of the bonds were to provide funding for the construction of public infrastructure and other site improvements and to be repaid by incremental additional property taxes generated by development. Harbor Pointe Associates, LLC, then owned by an affiliate of former CEO, Jon Wheeler, entered into an Economic Development Agreement with the Grove Economic Development Authority for this infrastructure development and in the event the ad valorem taxes were insufficient to cover annual debt service, Harbor Pointe Associates, LLC would reimburse the Grove Economic Development Authority (the “Harbor Pointe Agreement”). In 2014, Harbor Pointe Associates, LLC was acquired by the Company.
The total debt service shortfall over the life of the bond is uncertain as it is based on ad valorem taxes, assessed property values, property tax rates, LIBOR and future potential development ranging until 2036. The Company’s future total principal obligation under the Harbor Pointe Agreement will be no more than $2.11 million, the principal amount of the bonds, as of March 31, 2022. In addition, the Company may have an interest obligation on the note based on the principal balance and LIBOR rates in effect at future payment dates. During the three months ended March 31, 2022 and 2021, the Company funded $0 and $44 thousand, respectively, in debt service shortfalls. No amounts have been accrued for this as of March 31, 2022 as a reasonable estimate of future debt service shortfalls cannot be determined based on variables noted above.
11. Related Party Transactions
The related party amounts disclosed below reflect the activity between the Company and Mr. Wheeler's affiliates.its affiliates (in thousands, unaudited):
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Amounts paid to affiliates | $ | — | | | $ | 35 | |
| | | |
|
| | | | | | | |
| September 30, |
| 2017 | | 2016 |
| (unaudited, in thousands) |
Amounts paid to affiliates | $ | 39 |
| | $ | 115 |
|
Amounts received from affiliates | $ | 1,573 |
| | $ | 785 |
|
Amounts due from affiliates | $ | 2,322 |
| | $ | 1,366 |
|
Notes receivable | $ | 12,000 |
| | $ | 12,000 |
|
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. The Company is performing development, leasing, property and asset management services for Sea Turtle Development. Development fees of 5% of hard costs incurred are paid to the Company. Leasing, property and asset management fees are consistent with those charged for services provided to non-related properties. Amounts due from affiliates include $1.02 million and $294 thousand at September 30, 2017 and 2016, respectively, in accrued interest on the notes receivable, of this $1.02 million at September 30, 2017, $774 thousand is due at maturity. Amounts due from affiliates also include $272 thousand and $169 thousand in development fees at September 30, 2017 and 2016, respectively.
11. Subsequent Events
KeyBank Agreement
On October 6, 2017, the Company executed a Fourth Amendment to the KeyBank Credit Agreement (the "Fourth Amendment"). The Fourth Amendment provides for a sixty day extension from October 7, 2017 to December 6, 2017 upon which the $75 million total commitment on the revolving credit line decreases to $50 million.
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 20162021 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, which was effective at the Effective Time.2021. 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
When used in this discussion and elsewhere in this Form 10-Q, containsthe words “believes,” “should,” “estimates,” “expects,” and similar expressions are intended to identify forward-looking statements within the meaning of that term in Section 27A of the federal securities laws, including discussionSecurities Act of 1933, as amended (the “Securities Act”), and analysisin Section 21F of our financial condition, anticipated capital expenditures required to complete projects, amountsthe Securities Exchange Act of anticipated cash distributions to our shareholders in the future and other matters.1934, as amended (the “Exchange Act”). 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
Important factors that were true at we think could cause our actual results to differ materially from those expressed or forecasted in
the forward-looking statement are summarized below:
•the ongoing adverse effect and the ultimate duration of the COVID-19 pandemic,and federal, state, and/or local regulatory guidelines and private business actions to control it, on the Company’s financial condition, operating results and cash flows, the Company’s tenants and their customers, the use of and demand for retail space, the real estate market in which the Company operates, the U.S. economy, the global economy and the financial markets;
•the level of rental revenue we achieve from our assets and our ability to collect rents;
•the state of the U.S. economy generally, or specifically in the Southeast, Mid-Atlantic and Northeast where our properties are geographically concentrated;
•consumer spending and confidence trends;
•tenant bankruptcies;
•availability, terms and deployment of capital;
•general volatility of the capital markets and the market price of our common and preferred stock;
•the degree and nature of our competition;
•changes in governmental regulations, accounting rules, tax rates and similar matters;
•litigation risks;
•lease-up risks;
•increases in the Company’s financing and other costs as a result of changes in interest rates and other factors, including the discontinuation of the London Interbank Offered Rate (“LIBOR”);
•changes in our ability to obtain and maintain financing;
•damage to the Company’s properties from catastrophic weather and other natural events, and the physical effects of climate change;
•information technology security breaches;
•the Company’s ability and willingness to maintain its qualification as a real estate investment trust (“REIT”) in light of economic, market, legal, tax and other considerations;
•the impact of e-commerce on our tenants’ business; and
•inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws.
We caution that the foregoing list of factors is not all-inclusive. Moreover, we operate in a very competitive and rapidly
changing environment. New factors emerge from time madeto time and it is not possible for management to predict all such factors, nor
can it assess the impact of all such factors on our business or the extent to which any factor, or combination of factors, may ultimately provecause
actual results to be incorrect or false. You are cautioneddiffer materially from those contained in any forward-looking statements. Given these risks and uncertainties,
investors should not to place undue reliance on forward-looking statements as a prediction of actual results. All subsequent written
and oral forward-looking statements concerning us or any person acting on our behalf are expressly qualified in their entirety by
the cautionary statements above. We caution not to place undue reliance upon any forward-looking statements, which reflect our management’s viewspeak only
as of the date of this Form 10-Q.made. We do not undertake noor accept any obligation or undertaking to updaterelease publicly any updates or reviserevisions to
any forward-looking statementsstatement to reflect changed assumptions, the occurrence of unanticipatedany change in our expectations or any change in events, conditions or changes to future operating results.circumstances on
which any such statement is based.
Company Overview
The forward-looking statements should be read in light of these factorsCompany, a Maryland corporation, is a fully integrated, self-managed commercial real estate investment trust that owns, leases and the factors identified in the “Risk Factors” sections in our most recent Annual Reportoperates income-producing retail properties with a primary focus on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 28, 2017.grocery-anchored centers.
Executive Overview
As of September 30, 2017,March 31, 2022, the Trust, through the Operating Partnership, owned and operated sixty-fourfifty-seven retail shopping centers one office building, sevenand four 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,
Recent Trends and Activities
Pending Acquisition of Cedar Realty Trust
On March 2, 2022, the useCompany entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”) with Cedar Realty Trust, Inc. (“Cedar”), Cedar Realty Trust Partnership, L.P., (“Cedar OP”), WHLR Merger Sub Inc., a wholly owned subsidiary of the word “Company” refersCompany, and WHLR OP Merger Sub LLC, a wholly owned subsidiary of Merger Sub I (“Merger Sub II”), pursuant to which the Company agreed to acquire Cedar, including 19 of its shopping center assets, in an all-cash merger transaction (the “Cedar Acquisition”). The Cedar Acquisition is conditioned on, among other things, the completion of Cedar’s pending sale of 33 grocery-anchored shopping centers and sale of certain redevelopment assets.
On the terms and subject to the Trustconditions set forth in the Merger Agreement, Merger Sub II will merge with and its consolidatedinto Cedar OP (the “Partnership Merger”), with Cedar OP being the surviving partnership (the “Surviving Partnership”) in such merger, and, immediately following the Partnership Merger, Merger Sub I will merge with and into Cedar (the “REIT Merger” and, together with the Partnership Merger, the “Mergers”), with Cedar being the surviving company (the “Surviving Company”) in the REIT Merger.
On April 19, 2022, the parties to the Merger Agreement executed the First Amendment to the Merger Agreement
pursuant to which Section 2.4(a) of the Merger Agreement was amended and restated to clarify that the articles of incorporation
and bylaws of Cedar immediately prior to the merger effective time will be the articles of incorporation and bylaws of the
Surviving Company immediately after the merger effective time, until thereafter amended as provided therein or by applicable
law.
Upon completion of and by virtue of the Mergers, the issued and outstanding shares of Cedar’s common stock, par value $0.06 per share (“Cedar Common Stock”), and the issued and outstanding common units of Cedar OP held by persons other than Cedar (“Third Party Cedar OP Units”), will be cancelled and converted into the right to receive an aggregate of $130.00 million of cash merger consideration (the “Aggregate Merger Consideration”), without interest. The portion of the Aggregate Merger Consideration to be received per share of Cedar Common Stock and per Third Party Cedar OP Unit will depend on the number of shares of Cedar Common Stock and the number of Third Party Cedar OP Units outstanding immediately prior to the effective time of the Mergers.
Following the REIT Merger, the Cedar Common Stock will be held by the Company and will no longer be publicly traded. Pursuant to the terms of the Merger Agreement, Cedar’s currently outstanding 7.25% Series B Preferred Stock and 6.50% Series C Preferred Stock (collectively, the “Cedar Preferred Stock”) will remain outstanding as shares of preferred stock in the Surviving Company following the Mergers. Both classes of Cedar Preferred Stock are expected to remain listed on the New York Stock Exchange following closing of the Mergers, and the Surviving Company is expected to continue to be an independent filer of periodic reports with the Securities and Exchange Commission (the “SEC”) under the Exchange Act. This post-closing structure whereby the Cedar Preferred Stock will remain outstanding preferred securities of an independent public reporting entity that holds a portfolio of income-producing assets is intended to provide for the Surviving Company to pay all required dividends
on the Cedar Preferred Stock in accordance with the articles supplementary governing the terms of the Cedar Preferred Stock and applicable law.
The Cedar Acquisition has been approved by the boards of directors of each of the Company and Cedar. The consummation of the Cedar Acquisition is subject to Cedar receiving the approval of holders of two-thirds of the issued and outstanding shares of Cedar Common Stock, among other conditions.
In connection with the transactions contemplated by the Merger Agreement, WHLR has obtained a debt financing commitment from KeyBank National Association (the “Lender”) in an amount of up to $130.00 million. The Lender’s commitment to provide debt financing (the “Debt Financing”) for the Cedar Acquisition consists of a bridge loan on the terms, and subject to the conditions set forth in a debt commitment letter, dated as of March 2, 2022, and delivered to WHLR concurrently with the execution of the Merger Agreement (the “Debt Commitment Letter”).
The obligations of the Lender to provide the Debt Financing under the Debt Commitment Letter are subject to a number of customary conditions, including the consummation of the transactions contemplated in the Merger Agreement, the delivery of specified due diligence items, the receipt of executed loan documentation, the payment of certain fees, and the absence of any material adverse change in the business, financial condition, assets or results of operations of Cedar or Cedar OP that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect. The Debt Financing will be secured by first mortgage liens on substantially all of the properties owned by certain subsidiaries except whereof Cedar OP.
The “outside date” for closing of the context otherwise requires.Cedar Acquisition is August 30, 2022 (subject to possible extension for up to an additional 60 days under certain circumstances).However, we currently expect the Cedar Acquisition to close by the end of the second quarter of 2022, subject to receipt of the approval of Cedar’s stockholders and the satisfaction or waiver of the other conditions to closing described in the Merger Agreement.
The Cedar Acquisition is expected to increase the Company’s presence in the Northeast, and create a total operating portfolio of 76 shopping centers (the majority of which will be grocery-anchored), consisting of approximately 8.3 million square feet of gross leasable area.
The amounts presented herein for the three months ended March 31, 2022, are solely the Company’s stand-alone results of operations and therefore do not include Cedar’s results of operations for these periods.
Dispositions
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Disposal Date | | Property | | Contract Price | | Gain (loss) | | Net Proceeds |
| | | | (in thousands, unaudited) |
January 11, 2022 | | Walnut Hill Plaza - Petersburg, VA | | $ | 1,986 | | | $ | (15) | | | $ | 1,786 | |
In conjunction with the Walnut Hill Plaza sale the Company made a $1.79 million principal paydown on the Walnut Hill Plaza loan and on February 17, 2022, the Company paid the remaining loan balance of $1.34 million.
Assets Held for Sale
At March 31, 2022, assets held for sale included Harbor Pointe Associates, LLC as the Company had committed to a plan to sell the entity. At December 31 2021, assets held for sale included Walnut Hill Plaza.
New Leases, Leasing Renewals and Expirations
The following table presents selected lease activity statistics for our properties.properties:
| | | | | | | | | | | | Three Months Ended March 31, |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | 2022 | | 2021 |
| 2017 | | 2016 | | 2017 | | 2016 | |
Renewals: | | | | | | | | |
Renewals(1): | | Renewals(1): | | | |
Leases renewed with rate increase (sq feet) | 118,074 |
| | 31,527 |
| | 235,337 |
| | 96,715 |
| Leases renewed with rate increase (sq feet) | 66,348 | | | 145,173 | |
Leases renewed with rate decrease (sq feet) | 1,007 |
| | — |
| | 53,669 |
| | — |
| Leases renewed with rate decrease (sq feet) | 5,328 | | | 24,873 | |
Leases renewed with no rate change (sq feet) | 86,018 |
| | 9,847 |
| | 203,957 |
| | 53,476 |
| Leases renewed with no rate change (sq feet) | 20,329 | | | 17,959 | |
Total leases renewed (sq feet) | 205,099 |
| | 41,374 |
| | 492,963 |
| | 150,191 |
| Total leases renewed (sq feet) | 92,005 | | | 188,005 | |
| | | | | | | | | | | |
Leases renewed with rate increase (count) | 25 |
| | 11 |
| | 60 |
| | 31 |
| Leases renewed with rate increase (count) | 20 | | | 27 | |
Leases renewed with rate decrease (count) | 1 |
| | — |
| | 6 |
| | — |
| Leases renewed with rate decrease (count) | 2 | | | 5 | |
Leases renewed with no rate change (count) | 8 |
| | 4 |
| | 24 |
| | 10 |
| Leases renewed with no rate change (count) | 12 | | | 8 | |
Total leases renewed (count) | 34 |
| | 15 |
| | 90 |
| | 41 |
| Total leases renewed (count) | 34 | | | 40 | |
| | | | | | | | | | | |
Option exercised (count) | 22 |
| | 4 |
| | 44 |
| | 15 |
| Option exercised (count) | 2 | | | 4 | |
| | | | | | | | |
Weighted average on rate increases (per sq foot) | $ | 0.90 |
| | $ | 1.21 |
| | $ | 0.81 |
| | $ | 0.99 |
| Weighted average on rate increases (per sq foot) | $ | 1.15 | | | $ | 0.68 | |
Weighted average on rate decreases (per sq foot) | $ | (3.97 | ) | | $ | — |
| | $ | (1.07 | ) | | $ | — |
| Weighted average on rate decreases (per sq foot) | $ | (2.13) | | | $ | (1.15) | |
Weighted average rate (per sq foot) | $ | 0.50 |
| | $ | 0.92 |
| | $ | 0.27 |
| | $ | 0.64 |
| |
Weighted average rate on all renewals (per sq foot) | | Weighted average rate on all renewals (per sq foot) | $ | 0.71 | | | $ | 0.38 | |
| Weighted average change over prior rates | 5.78 | % | | 7.48 | % | | 3.13 | % | | 5.58 | % | Weighted average change over prior rates | 5.86 | % | | 4.22 | % |
| | | | | | | | | | | |
New Leases: | | | | | | | | |
New Leases(1) (2): | | New Leases(1) (2): | |
New leases (sq feet) | 30,364 |
| | 46,745 |
| | 118,435 |
| | 91,414 |
| New leases (sq feet) | 68,919 | | | 112,594 | |
New leases (count) | 12 |
| | 19 |
| | 44 |
| | 38 |
| New leases (count) | 23 | | | 19 | |
Weighted average rate (per sq foot) | $ | 10.98 |
| | $ | 10.01 |
| | $ | 12.92 |
| | $ | 14.15 |
| Weighted average rate (per sq foot) | $ | 13.09 | | | $ | 8.25 | |
| | | | | | | | |
Gross Leasable Area ("GLA") expiring during the next 3 months | 1.88 | % | | 2.10 | % | | 1.88 | % | | 2.10 | % | |
Gross Leasable Area ("GLA") expiring during the next 9 months, including month-to-month leases | | Gross Leasable Area ("GLA") expiring during the next 9 months, including month-to-month leases | 5.01 | % | | 4.43 | % |
Anchor(1) Lease Modificationsdata presented is based on average rate per square foot over the renewed or new lease term.
In September 2017,(2) The Company does not include ground leases entered into for the Company modified leases with two anchor tenants. Thepurposes of new lease modifications include a reduction of lease term from 2028 to 2023 on 34,264 squaresq feet and no change in the 2018 lease expiration term on 33,218 square feet. The overall weighted average base rent reduction is $5.59 per square foot. rate (per sq foot) on new leases.
On June 27, 2017, the Company completed the sale of the 2.14 acre land parcel at Carolina Place for a contract price of $250 thousand, resulting in a gain of gain of $12 thousand with net proceeds of $238 thousand.
On June 26, 2017, the Company completed the sale of the Steak n' Shake, a 1.06 acre outparcel at Rivergate, for a contract price of approximately $2.25 million, resulting in a gain of $1.03 million with net proceeds of $2.18 million.
Three and Nine Months Ended September 30, 2017March 31, 2022 Compared to the Three and Nine Months Ended September 30, 2016March 31, 2021
Results of Operations
The following table presents a comparison of the condensed consolidated statements of operations for the three and nine months ended September 30, 2017March 31, 2022 and 2016, respectively.2021, respectively:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, | | Three Months Ended Changes |
| 2022 | | 2021 | | Change | | % Change |
PROPERTY DATA: | | | | | | | |
Number of properties owned and leased at period end (1) | 57 | | | 59 | | | (2) | | | (3.39) | % |
Aggregate gross leasable area at period end (1) | 5,391,432 | | | 5,511,881 | | | (120,449) | | | (2.19) | % |
Ending leased rate at period end (1) | 95.8 | % | | 91.1 | % | | 4.7 | % | | 5.16 | % |
FINANCIAL DATA: | | | | | | | |
Rental revenues | $ | 15,332 | | | $ | 14,656 | | | $ | 676 | | | 4.61 | % |
Other revenues | 165 | | | 72 | | | 93 | | | 129.17 | % |
Total Revenue | 15,497 | | | 14,728 | | | 769 | | | 5.22 | % |
OPERATING EXPENSES: | | | | | | | |
Property operations | 5,250 | | | 4,884 | | | 366 | | | 7.49 | % |
Depreciation and amortization | 3,616 | | | 3,716 | | | (100) | | | (2.69) | % |
Impairment of assets held for sale | 660 | | | — | | | 660 | | | 100.00 | % |
Corporate general & administrative | 1,264 | | | 1,582 | | | (318) | | | (20.10) | % |
Total Operating Expenses | 10,790 | | | 10,182 | | | 608 | | | 5.97 | % |
(Loss) gain on disposal of properties | (15) | | | 176 | | | (191) | | | (108.52) | % |
Operating Income | 4,692 | | | 4,722 | | | (30) | | | (0.64) | % |
Interest income | 13 | | | — | | | 13 | | | 100.00 | % |
Interest expense | (4,628) | | | (8,961) | | | 4,333 | | | 48.35 | % |
Net changes in fair value of derivative liabilities | (3,962) | | | (347) | | | (3,615) | | | (100.00) | % |
Other income | — | | | 552 | | | (552) | | | (100.00) | % |
Other expense | (691) | | | — | | | (691) | | | (100.00) | % |
| | | | | | | |
| | | | | | | |
Net Loss | (4,576) | | | (4,034) | | | (542) | | | (13.44) | % |
Less: Net income attributable to noncontrolling interests | 4 | | | 15 | | | (11) | | | (73.33) | % |
Net Loss Attributable to Wheeler REIT | $ | (4,580) | | | $ | (4,049) | | | $ | (531) | | | (13.11) | % |
(1) Excludes the undeveloped land parcels. Includes assets held for sale.
Total Revenue
Total revenues were $15.50 million and $14.73 million for the three months ended March 31, 2022 and 2021, respectively, representing an increase of 5.22%. The increase in rental revenues of $676 thousand is primarily a result of an increase of 4.3% in occupancy, partially offset by the decrease from sold properties. See Same Store and Non-same Store Operating Income for further details about the changes within operating revenue.
Total Operating Expenses
Total operating expenses were $10.79 million and $10.18 million for the three months ended March 31, 2022 and 2021, respectively, representing an increase of 5.97%. Impairment of assets held for sale was $660 thousand and $0 for the three months ended March 31, 2022 and 2021, respectively, as a result of Harbor Pointe Land Parcel. Depreciation and amortization decreased $100 thousand for the three months ended March 31, 2022 primarily as a result of lease intangibles becoming fully amortized. See Same Store and Non-same Store Operating Income for further details about the changes within property operations expense.
Corporate general and administrative expenses were $1.26 million and $1.58 million for the three months ended March 31, 2022 and 2021, respectively, representing a decrease of 20.10%, primarily a result of the following:
•$357 thousand decrease in professional fees primarily related to lower legal fees and timing of director and officer insurance reimbursement;
•$130 thousand decrease in other expenses, primarily related to lower fees associated with capital, debt and financing activities; partially offset by
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended Changes | | Nine Months Ended Changes |
| 2017 | | 2016 | | 2017 | | 2016 | | Change | | % Change | | Change | | % Change |
PROPERTY DATA: | (in thousands, unaudited) |
Number of properties owned and leased at period end (1) | 64 |
| | 55 |
| | 64 |
| | 55 |
| | 9 |
| | 16.36 | % | | 9 |
| | 16.36 | % |
Aggregate gross leasable area at period end (1) | 4,902,381 |
| | 3,750,976 |
| | 4,902,381 |
| | 3,750,976 |
| | 1,151,405 |
| | 30.70 | % | | 1,151,405 |
| | 30.70 | % |
Ending occupancy rate at period end (1) | 92.80 | % | | 93.90 | % | | 92.80 | % | | 93.90 | % | | (1.10 | )% | | (1.17 | )% | | (1.10 | )% | | (1.17 | )% |
FINANCIAL DATA: | | | | | | | | | | | | | | | |
Rental revenues | $ | 11,109 |
| | $ | 8,591 |
| | $ | 33,265 |
| | $ | 23,788 |
| | $ | 2,518 |
| | 29.31 | % | | $ | 9,477 |
| | 39.84 | % |
Asset management fees | 145 |
| | 163 |
| | 807 |
| | 623 |
| | (18 | ) | | (11.04 | )% | | 184 |
| | 29.53 | % |
Commissions | 449 |
| | 590 |
| | 758 |
| | 834 |
| | (141 | ) | | (23.90 | )% | | (76 | ) | | (9.11 | )% |
Tenant reimbursements | 2,711 |
| | 2,334 |
| | 8,127 |
| | 6,500 |
| | 377 |
| | 16.15 | % | | 1,627 |
| | 25.03 | % |
Development income | 155 |
| | 169 |
| | 454 |
| | 169 |
| | (14 | ) | | (8.28 | )% | | 285 |
| | 168.64 | % |
Other revenues | 629 |
| | 64 |
| | 828 |
| | 219 |
| | 565 |
| | 882.81 | % | | 609 |
| | 278.08 | % |
Total Revenue | 15,198 |
| | 11,911 |
| | 44,239 |
| | 32,133 |
| | 3,287 |
| | 27.60 | % | | 12,106 |
| | 37.67 | % |
EXPENSES: | | | | | | | | | | | | | | | |
Property operations | 3,726 |
| | 3,027 |
| | 11,467 |
| | 8,499 |
| | 699 |
| | 23.09 | % | | 2,968 |
| | 34.92 | % |
Non-REIT management and leasing services | 618 |
| | 696 |
| | 1,525 |
| | 1,352 |
| | (78 | ) | | (11.21 | )% | | 173 |
| | 12.80 | % |
Depreciation and amortization | 7,746 |
| | 4,994 |
| | 20,455 |
| | 15,306 |
| | 2,752 |
| | 55.11 | % | | 5,149 |
| | 33.64 | % |
Provision for credit losses | 23 |
| | 31 |
| | 443 |
| | 196 |
| | (8 | ) | | (25.81 | )% | | 247 |
| | 126.02 | % |
Corporate general & administrative | 1,306 |
| | 1,497 |
| | 4,855 |
| | 6,291 |
| | (191 | ) | | (12.76 | )% | | (1,436 | ) | | (22.83 | )% |
Total Operating Expenses | 13,419 |
| | 10,245 |
| | 38,745 |
| | 31,644 |
| | 3,174 |
| | 30.98 | % | | 7,101 |
| | 22.44 | % |
Operating Income | 1,779 |
| | 1,666 |
| | 5,494 |
| | 489 |
| | 113 |
| | 6.78 | % | | 5,005 |
| | 1,023.52 | % |
(Loss) gain on disposal of properties | (1 | ) | | — |
| | 1,021 |
| | — |
| | (1 | ) | | — | % | | 1,021 |
| | — | % |
Interest income | 364 |
| | 299 |
| | 1,080 |
| | 301 |
| | 65 |
| | 21.74 | % | | 779 |
| | 258.80 | % |
Interest expense | (4,250 | ) | | (3,639 | ) | | (12,997 | ) | | (9,801 | ) | | (611 | ) | | (16.79 | )% | | (3,196 | ) | | (32.61 | )% |
Net Loss from Continuing Operations Before Income Taxes | (2,108 | ) | | (1,674 | ) | | (5,402 | ) | | (9,011 | ) | | (434 | ) | | (25.93 | )% | | 3,609 |
| | 40.05 | % |
Income tax expense | (65 | ) | | — |
| | (175 | ) | | — |
| | (65 | ) | | — | % | | (175 | ) | | — | % |
Net Loss from Continuing Operations | (2,173 | ) | | (1,674 | ) | | (5,577 | ) | | (9,011 | ) | | (499 | ) | | (29.81 | )% | | 3,434 |
| | 38.11 | % |
Discontinued Operations | | | | | | | | | | | | | | | |
Income from operations | — |
| | 39 |
| | 16 |
| | 115 |
| | (39 | ) | | (100.00 | )% | | (99 | ) | | (86.09 | )% |
Gain on disposal of properties | — |
| | 1 |
| | 1,502 |
| | 689 |
| | (1 | ) | | (100.00 | )% | | 813 |
| | 118.00 | % |
Net Income from Discontinued Operations | — |
| | 40 |
| | 1,518 |
| | 804 |
| | (40 | ) | | (100.00 | )% | | 714 |
| | 88.81 | % |
Net Loss | (2,173 | ) | | (1,634 | ) | | (4,059 | ) | | (8,207 | ) | | (539 | ) | | (32.99 | )% | | 4,148 |
| | 50.54 | % |
Net loss attributable to noncontrolling interests | (111 | ) | | (122 | ) | | (165 | ) | | (768 | ) | | 11 |
| | 9.02 | % | | 603 |
| | 78.52 | % |
Net Loss Attributable to Wheeler REIT | $ | (2,062 | ) | | $ | (1,512 | ) | | $ | (3,894 | ) | | $ | (7,439 | ) | | $ | (550 | ) | | (36.38 | )% | | $ | 3,545 |
| | 47.65 | % |
•$78 thousand increase in compensation and benefits primarily driven by payroll related costs; | |
(1) | Excludes the undeveloped land parcels and Riversedge North, our corporate headquarters, and the redevelopment property. Includes assets held for sale. |
Disposal of Properties
The net (loss) gain on disposal of properties change of $191 thousand for the three months ended March 31, 2022 is a result of the 2022 sale of Walnut Hill Plaza compared to the 2021 sale of the Berkley Shopping Center and Berkley Land Parcel.
Interest Expense
Interest expense was $4.63 million and $8.96 million for the three months ended March 31, 2022 and 2021, respectively, representing a decrease of 48.35%. Loan cost amortization accounted for $3.22 million of the decrease, primarily attributable to the 2021 write-off of debt issuance costs and $687 thousand in defeasance paid resulting from the sale of Berkley Shopping Center.
Net Change in Fair Value of Derivative Liabilities
The net change in fair value of the derivative liabilities loss of $3.96 million and $347 thousand for the three months ended March 31, 2022 and 2021, respectively, represents non-cash loss from changes in fair value. The largest impact on the derivative liabilities' valuation is a result of increased fair market value of the Company's securities described at Note 6 on this Form 10-Q and the 2021 conversion features on Convertible Notes.
Other Income and Expense
Other income was $552 thousand for the three months ended March 31, 2021, relating to Paycheck Protection Program ("PPP") Promissory Note forgiveness. Other expense was $691 thousand for the three months ended March 31, 2022 relating to legal settlement costs. Other income and other expense are non-operating in nature.
PreferredDividends
The Company had accumulated undeclared dividends of $28.28 million to holders of shares of our Series D Preferred, of which $2.12 million is attributable to the three months ended March 31, 2022.
Same Store and NewNon-same Store Operating Income
Net operating income ("NOI") is a widely-used non-GAAP financial measure for REITs. The September 30, 2017 threeCompany believes that NOI is a useful measure of the Company's property operating performance. The Company defines NOI as property revenues (rental and nine month periods includeother 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 and impairment of assets held for sale and held for use, it provides a performance measure, that when compared year over year, reflects the combinedrevenues 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 allfactors, 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 is a reconciliation of same store and non-same store NOI from the most directly comparable GAAP financial measure of net income (loss). Same stores consist of those properties owned at December 31, 2016 as describedduring all periods presented in our 2016 Form 10-K. Conversely, the September 30, 2016 three and nine month periods include the combined operations of all properties owned at December 31, 2015 as described in our 2015 Annual Report on Form 10-K for the year ended December 31, 2015 ("2015 Form 10-K") and those acquired during the nine months ended September 30, 2016. 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 and nine month periods (collectively referred to as “same store”) a
ndtheir entirety, while non-same stores consist of those properties acquired after December 31, 2015 (collectively referred to as “new store”). This illustratesor disposed of during the significant impact these properties acquired during 2016 had on our results of operations.
periods presented. The following tables provide samenon-same store and new store financial information. The discussion below primarily focuses on same store results of operations since ninecategory consists of the twenty-three 2016 retail acquisitions occurred subsequent to September 30, 2016following properties:
•Continuing operations:
◦Berkley Shopping Center and the remaining fourteen acquisitions occurred during the three months ended June 30, 2016.Berkley Land Parcel (sold March 25, 2021).
◦Tulls Creek Land Parcel (sold July 9, 2021);
◦Rivergate Shopping Center Out Parcel (sold August 31, 2021);
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| Same Store | | New Store | | Total |
| 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | (in thousands, unaudited) | | | | |
Property revenues | $ | 8,781 |
| | $ | 8,738 |
| | $ | 5,668 |
| | $ | 2,251 |
| | $ | 14,449 |
| | $ | 10,989 |
|
Property expenses | 2,388 |
| | 2,406 |
| | 1,338 |
| | 621 |
| | 3,726 |
| | 3,027 |
|
Property Net Operating Income | 6,393 |
| | 6,332 |
| | 4,330 |
| | 1,630 |
| | 10,723 |
| | 7,962 |
|
Asset Management and Commission Revenue | 594 |
| | 753 |
| | — |
| | — |
| | 594 |
| | 753 |
|
Development income | 155 |
| | 169 |
| | — |
| | — |
| | 155 |
| | 169 |
|
Other Income | 749 |
| | 922 |
| | — |
| | — |
| | 749 |
| | 922 |
|
Non-REIT management and leasing services | 618 |
| | 696 |
| | — |
| | — |
| | 618 |
| | 696 |
|
Depreciation and amortization | 3,612 |
| | 4,064 |
| | 4,134 |
| | 930 |
| | 7,746 |
| | 4,994 |
|
Provision for credit losses | (23 | ) | | 19 |
| | 46 |
| | 12 |
| | 23 |
| | 31 |
|
Corporate general & administrative | 1,251 |
| | 1,493 |
| | 55 |
| | 4 |
| | 1,306 |
| | 1,497 |
|
Total Other Operating Expenses | 5,458 |
| | 6,272 |
| | 4,235 |
| | 946 |
| | 9,693 |
| | 7,218 |
|
Loss on disposal of properties | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) | | — |
|
Interest income | 363 |
| | 299 |
| | 1 |
| | — |
| | 364 |
| | 299 |
|
Interest expense | (2,568 | ) | | (2,743 | ) | | (1,682 | ) | | (896 | ) | | (4,250 | ) | | (3,639 | ) |
Net Loss from Continuing Operations Before Income Taxes | (522 | ) | | (1,462 | ) | | (1,586 | ) | | (212 | ) | | (2,108 | ) | | (1,674 | ) |
Income tax expense | (65 | ) | | — |
| | — |
| | — |
| | (65 | ) | | — |
|
Net Loss from Continuing Operations | (587 | ) | | (1,462 | ) | | (1,586 | ) | | (212 | ) | | (2,173 | ) | | (1,674 | ) |
Discontinued Operations | | | | | | | | | | | |
Income from operations | — |
| | 39 |
| | — |
| | — |
| | — |
| | 39 |
|
Gain on disposal of properties | — |
| | 1 |
| | — |
| | — |
| | — |
| | 1 |
|
Net Income from Discontinued Operations | — |
| | 40 |
| | — |
| | — |
| | — |
| | 40 |
|
Net Loss | $ | (587 | ) | | $ | (1,422 | ) | | $ | (1,586 | ) | | $ | (212 | ) | | $ | (2,173 | ) | | $ | (1,634 | ) |
| | | | | | | | | | | |
◦Columbia Fire Station (sold November 17, 2021); and
◦Walnut Hill Plaza (sold January 11, 2022).
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| Same Store | | New Store | | Total |
| 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 |
| | | | | (in thousands, unaudited) | | | | |
Property revenues | $ | 26,120 |
| | $ | 26,265 |
| | $ | 16,100 |
| | $ | 4,242 |
| | $ | 42,220 |
| | $ | 30,507 |
|
Property expenses | 7,334 |
| | 7,355 |
| | 4,133 |
| | 1,144 |
| | 11,467 |
| | 8,499 |
|
Property Net Operating Income | 18,786 |
| | 18,910 |
| | 11,967 |
| | 3,098 |
| | 30,753 |
| | 22,008 |
|
Asset Management and Commission Revenue | 1,565 |
| | 1,457 |
| | — |
| | — |
| | 1,565 |
| | 1,457 |
|
Development income | 454 |
| | 169 |
| | — |
| | — |
| | 454 |
| | 169 |
|
Other Income | 2,019 |
| | 1,626 |
| | — |
| | — |
| | 2,019 |
| | 1,626 |
|
Non-REIT management and leasing services | 1,525 |
| | 1,352 |
| | — |
| | — |
| | 1,525 |
| | 1,352 |
|
Depreciation and amortization | 11,269 |
| | 13,414 |
| | 9,186 |
| | 1,892 |
| | 20,455 |
| | 15,306 |
|
Provision for credit losses | 284 |
| | 184 |
| | 159 |
| | 12 |
| | 443 |
| | 196 |
|
Corporate general & administrative | 4,566 |
| | 5,636 |
| | 289 |
| | 655 |
| | 4,855 |
| | 6,291 |
|
Total Other Operating Expenses | 17,644 |
| | 20,586 |
| | 9,634 |
| | 2,559 |
| | 27,278 |
| | 23,145 |
|
(Loss) gain on disposal of properties | (12 | ) | | — |
| | 1,033 |
| | — |
| | 1,021 |
| | — |
|
Interest income | 1,079 |
| | 301 |
| | 1 |
| | — |
| | 1,080 |
| | 301 |
|
Interest expense | (7,921 | ) | | (7,899 | ) | | (5,076 | ) | | (1,902 | ) | | (12,997 | ) | | (9,801 | ) |
Net Loss from Continuing Operations Before Income Taxes | (3,693 | ) | | (7,648 | ) | | (1,709 | ) | | (1,363 | ) | | (5,402 | ) | | (9,011 | ) |
Income tax expense | (175 | ) | | — |
| | — |
| | — |
| | (175 | ) | | — |
|
Net Loss from Continuing Operations | (3,868 | ) | | (7,648 | ) | | (1,709 | ) | | (1,363 | ) | | (5,577 | ) | | (9,011 | ) |
Discontinued Operations | | | | | | | | | | | |
Income from operations | 16 |
| | 115 |
| | — |
| | — |
| | 16 |
| | 115 |
|
Gain on disposal of properties | 1,502 |
| | 689 |
| | — |
| | — |
| | 1,502 |
| | 689 |
|
Net Income from Discontinued Operations | 1,518 |
| | 804 |
| | — |
| | — |
| | 1,518 |
| | 804 |
|
Net Loss | $ | (2,350 | ) | | $ | (6,844 | ) | | $ | (1,709 | ) | | $ | (1,363 | ) | | $ | (4,059 | ) | | $ | (8,207 | ) |
| | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| Same Store | | Non-same Store | | Total |
| 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | | | | | |
| (in thousands, unaudited) |
Net Loss | $ | (4,539) | | | $ | (3,210) | | | $ | (37) | | | $ | (824) | | | $ | (4,576) | | | $ | (4,034) | |
Adjustments: | | | | | | | | | | | |
| | | | | | | | | | | |
Other expense | 691 | | | — | | | — | | | — | | | 691 | | | — | |
Net changes in fair value of derivative liabilities | 3,962 | | | 347 | | | — | | | — | | | 3,962 | | | 347 | |
Interest expense | 4,616 | | | 8,059 | | | 12 | | | 902 | | | 4,628 | | | 8,961 | |
Interest income | (13) | | | — | | | — | | | — | | | (13) | | | — | |
Loss (gain) on disposal of properties | — | | | — | | | 15 | | | (176) | | | 15 | | | (176) | |
Corporate general & administrative | 1,257 | | | 1,540 | | | 7 | | | 42 | | | 1,264 | | | 1,582 | |
Impairment of assets held for sale | 660 | | | — | | | — | | | — | | | 660 | | | — | |
Depreciation and amortization | 3,616 | | | 3,661 | | | — | | | 55 | | | 3,616 | | | 3,716 | |
Other non-property revenue | (8) | | | (565) | | | — | | | — | | | (8) | | | (565) | |
Property Net Operating Income | $ | 10,242 | | | $ | 9,832 | | | $ | (3) | | | $ | (1) | | | $ | 10,239 | | | $ | 9,831 | |
| | | | | | | | | | | |
Property revenues | $ | 15,486 | | | $ | 14,556 | | | $ | 3 | | | $ | 159 | | | $ | 15,489 | | | $ | 14,715 | |
Property expenses | 5,244 | | | 4,724 | | | 6 | | | 160 | | | 5,250 | | | 4,884 | |
Property Net Operating Income | $ | 10,242 | | | $ | 9,832 | | | $ | (3) | | | $ | (1) | | | $ | 10,239 | | | $ | 9,831 | |
Property Revenues
Total same store property revenues were $15.49 million and $14.56 million for the three months ended March 31, 2022 and nine month periods ended September 30, 2017 were $8.78 million and $26.12 million,2021, respectively, compared to $8.74 million and $26.27 million, respectively, for the three and nine month periods ended September 30, 2016, representing an increase of $43 thousand6.39% primarily due to:
•$1.05 million increase in rental revenues (excluding straight-line revenue) and a decrease of $145 thousand, respectively. The decrease for the nine months ended September 30, 2017 is a result of lostreimbursement revenue primarily due to the closure of Career Point Business School.increased occupancy; partially offset by
•$211 thousand decrease in straight-line rental revenues.
New store revenues for the three and nine month periods ended September 30, 2017 were $5.67 million and $16.10 million, respectively, compared to $2.25 million and $4.24 million, respectively, for the the three and nine month periods ended September 30, 2016, representing an increase of $3.42 million and $11.86 million, respectively. The three and nine month periods ended September 30, 2017 represents a full period of operations reported for the twenty-three retail acquisitions made in 2016, nine of which were acquired subsequent to September 30, 2016. These properties will generate a significant amount of revenue for us and we will benefit from future contractual rent increases and expansion opportunities.
Property Expenses
Total same store property expenses for the three and nine month periods ended September 30, 2017 were $2.39$5.24 million and $7.33 million, respectively, compared to $2.41 million and $7.36 million, respectively, for the the three and nine month periods ended September 30, 2016, representing a decrease of $18 thousand and $21 thousand, respectively.
Total property expenses increased primarily due to new store increases of $717 thousand and $2.99$4.72 million for the three months ended March 31, 2022 and nine month periods2021, respectively, an increase of 11.01%. The $520 thousand increase for the three months ended September 30, 2017, respectively, overMarch 31, 2022 is primarily due to increases of $113 thousand in insurance, $218 thousand in snow removal and $122 thousand in remaining common area expenses.
There were no significant unusual or non-recurring items included in non-same store property expenses for the comparable prior year period.three months ended March 31, 2022 and 2021.
Property Net Operating Income
Total property net operating income for the three and nine month periods ended September 30, 2017 were $10.72was $10.24 million and $30.75 million, respectively, representing an increase of $2.76 million and $8.75 million, respectively. New stores accounted for the majority of these increases by generating $4.33 million and $11.97 million, respectively, in property net operating income
for the three and nine month periods ended September 30, 2017, compared to $1.63 million and $3.10$9.83 million for the three months ended March 31, 2022, and nine month periods ended September 30, 2016, respectively.
Other Income
Total other income for the three and nine month periods ended September 30, 2017 was $749 thousand and $2.02 million,2021, respectively, representing a decrease of $173 thousand and an increase of $393$408 thousand respectively. The change is a result of a $14 thousand decrease and $285 thousand increase, respectively, in development fees earned on the Sea Turtle Development project as the development began in the three months ended September 30, 2016 and a $159 thousand decrease and $108 thousand increase, respectively, in asset management and commission revenue.
Other Operating Expenses
Same store other operating expenses for the three and nine month periods ended September 30, 2017 were $5.46 million and $17.64 million, respectively, representing a decrease of $814 thousand and $2.94 million, respectively, primarily due to the following:
$452 thousand and $2.15 million decrease, respectively, in depreciation and amortization expense from additional assets becoming fully depreciated;
$242 thousand and $1.07 million decrease, respectively, in general and administrative expenses due to an overall decrease in salaries and compensation partially related to the elimination of Chief Operating Officer role at June 30, 2016 and the allocation of property management expenses to the twenty-three properties acquired in 2016 for the full 2017 respective periods; and
$78 thousand decrease and $173 thousand increase, respectively, in non-REIT management and leasing services related to the revenue associated with asset management fees, leasing commissions and development fees.
Total other operating expenses increased by $2.48 million and $4.13 million, respectively, for the three and nine month periods ended September 30, 2017 due to an overall increase in depreciation and amortization resulting from the additional expense associated with the twenty-three properties acquired in 2016 of which $1.74 million relates to the Bi-Lo lease termination at Shoppes at Myrtle Park. The increase in depreciation and amortization is offset by an overall decrease in general and administrative expenses as noted above.
General and administrative expenses during the three and nine month periods ended September 30, 2017 included approximately $362 thousand and $1.48 million of expenses related to acquisitions, capital events and other miscellaneous costs.
Gain on Disposal of Properties - Operations
Overall, the gain on disposal of properties of $1.02 million for the nine month period ended September 30, 2017 isor 4.15%, primarily attributable to the sale of the Steak n' Shake outparcel at Rivergate in June 2017, as discussed in Note 3.same stores.
Interest Income
Same store interest income was $363 thousand and $1.08 million, respectively, for the three and nine month periods ended September 30, 2017, which represents increases of $64 thousand and $778 thousand, respectively, as compared to the same 2016 periods. The increase is primarily attributed to interest income on the Sea Turtle Development note receivable recognized during the three and nine months ended September 30, 2017 as the note receivable was issued in the three months ended September 30, 2016. The nine months ended September 30, 2017 represents a full nine months of interest income on the note receivable.
Interest Expense
During the three and nine month periods ended September 30, 2017, same store interest expense decreased $175 thousand and increased $22 thousand, respectively, when compared to the period in 2016, primarily due to incremental debt service associated with additional borrowings.
Total interest expense for the three and nine month periods ended September 30, 2017 increased by $611 thousand and $3.20 million, respectively, which is primarily attributable to amortization of loan costs and the incremental debt service associated with the additional borrowings utilized to acquire the twenty-three retail properties occurring in 2016, nine of which were acquired subsequent to September 30, 2016.
Discontinued Operations
Net (loss) income from discontinued operations totaled $0 thousand and $1.52 million, respectively, for the three and nine month periods ended September 30, 2017, compared to a net income of $40 thousand and $804 thousand, respectively, for three and nine month periods ended September 30, 2016. The nine month period increase is due to the sale of Ruby Tuesdays/Outback at Pierpont occurring during the nine months ended September 30, 2017, which resulted in a larger gain compared to the sale of Starbucks/Verizon occurring during the six months ended June 30, 2016.
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, April 2002 and April 2002)December 2018). 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), plus impairment of real estate related long-lived assets 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 newnon-same store FFO, which is a non-GAAP measurement for the three and nine month periods ended September 30, 2017 and 2016:(in thousands, unaudited):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, |
| Same Store | | Non-same Store | | Total | | Period Over Period Changes |
| 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | $ | | % |
| | | | | | | | | | | | | | | |
Net Loss | $ | (4,539) | | | $ | (3,210) | | | $ | (37) | | | $ | (824) | | | $ | (4,576) | | | $ | (4,034) | | | $ | (542) | | | (13.44) | % |
Depreciation and amortization of real estate assets | 3,616 | | | 3,661 | | | — | | | 55 | | | 3,616 | | | 3,716 | | | (100) | | | (2.69) | % |
Impairment of assets held for sale | 660 | | | — | | | — | | | — | | | 660 | | | — | | | 660 | | | 100.00 | % |
Loss (gain) on disposal of properties | — | | | — | | | 15 | | | (176) | | | 15 | | | (176) | | | 191 | | | 108.52 | % |
FFO | $ | (263) | | | $ | 451 | | | $ | (22) | | | $ | (945) | | | $ | (285) | | | $ | (494) | | | $ | 209 | | | 42.31 | % |
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, |
| Same Store | | New Store | | Total | | Period Over Period Changes |
| 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 | | $ | | % |
| | | | | | | (in thousands, unaudited) | | | | | | |
Net Loss | $ | (587 | ) | | $ | (1,422 | ) | | $ | (1,586 | ) | | $ | (212 | ) | | $ | (2,173 | ) | | $ | (1,634 | ) | | $ | (539 | ) | | (32.99 | )% |
Depreciation and amortization of real estate assets | 3,612 |
| | 4,064 |
| | 4,134 |
| | 930 |
| | 7,746 |
| | 4,994 |
| | 2,752 |
| | 55.11 | % |
Loss on disposal of properties | 1 |
| | — |
| | — |
| | — |
| | 1 |
| | — |
| | 1 |
| | — | % |
Gain on disposal of properties-discontinued operations | — |
| | (1 | ) | | — |
| | — |
| | — |
| | (1 | ) | | 1 |
| | 100.00 | % |
FFO | $ | 3,026 |
| | $ | 2,641 |
| | $ | 2,548 |
| | $ | 718 |
| | $ | 5,574 |
| | $ | 3,359 |
| | $ | 2,215 |
| | 65.94 | % |
| | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, |
| Same Store | | New Store | | Total | | Period Over Period Changes |
| 2017 | | 2016 | | 2017 | | 2016 | | 2017 | | 2016 | | $ | | % |
| | | | | | | (in thousands, unaudited) | | | | | | |
Net Loss | $ | (2,350 | ) | | $ | (6,844 | ) | | $ | (1,709 | ) | | $ | (1,363 | ) | | $ | (4,059 | ) | | $ | (8,207 | ) | | $ | 4,148 |
| | 50.54 | % |
Depreciation and amortization of real estate assets | 11,269 |
| | 13,414 |
| | 9,186 |
| | 1,892 |
| | 20,455 |
| | 15,306 |
| | 5,149 |
| | 33.64 | % |
Loss (gain) on disposal of properties | 12 |
| | — |
| | (1,033 | ) | | — |
| | (1,021 | ) | | — |
| | (1,021 | ) | | — | % |
Gain on disposal of properties-discontinued operations | (1,502 | ) | | (689 | ) | | — |
| | — |
| | (1,502 | ) | | (689 | ) | | (813 | ) | | (118.00 | )% |
FFO | $ | 7,429 |
| | $ | 5,881 |
| | $ | 6,444 |
| | $ | 529 |
| | $ | 13,873 |
| | $ | 6,410 |
| | $ | 7,463 |
| | 116.43 | % |
| | | | | | | | | | | | | | | |
During the three and nine month periodsmonths ended September 30, 2017,March 31, 2022, same store FFO increased $385decreased $714 thousand and $1.55 million, respectively, primarily due to the following:
•$2423.44 million decrease in interest expense;
•$410 thousand and $1.07 million, respectively,increase in property net operating income;
•$283 thousand decrease in corporate general and administrative expenses; partially offset by
•$1733.62 million decrease in the net change in fair value of derivative liability;
•$691 thousand increase in other expense for legal settlements; and
•$552 thousand decrease and $393 thousand increase, respectively, in other income as a result of development fees earned on Sea Turtle Development project and asset management and commission revenues;for PPP Promissory Note forgiveness in 2021.
$78 thousand decrease and $173 thousand increase, respectively, in non-REIT management and leasing services;
$65 thousand and $175 thousand, respectively, increase in income tax expense;
$64 thousand and $778 thousand, respectively, increase in interest income as a result of notes receivable; and
$61 thousand increase and $124 thousand decrease, respectively, in property net operating income.
Total FFO increased $2.22 million and $7.46 million, respectively, for the three and nine month periods ended September 30, 2017 compared to the same period in 2016, primarily due to incremental new store FFO of $1.83 million and $5.92 million, respectively, attributable to the twenty-three retail acquisitions that occured during 2016.
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 and nine month periods ended September 30, 2017 and 2016, respectively, is shown in the table below:
| | | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, |
| 2017 | | 2016 | | 2017 | | 2016 | | 2022 | | 2021 |
| (in thousands, unaudited) | | | | |
FFO | $ | 5,574 |
| | $ | 3,359 |
| | $ | 13,873 |
| | $ | 6,410 |
| FFO | $ | (285) | | | $ | (494) | |
Preferred stock dividends | (2,496 | ) | | (1,240 | ) | | (7,473 | ) | | (2,263 | ) | |
Preferred Stock dividends - undeclared | | Preferred Stock dividends - undeclared | (2,264) | | | (2,273) | |
Preferred stock accretion adjustments | 205 |
| | 78 |
| | 605 |
| | 255 |
| Preferred stock accretion adjustments | 146 | | | 162 | |
FFO available to common shareholders and common unitholders | 3,283 |
| | 2,197 |
| | 7,005 |
| | 4,402 |
| |
Acquisition costs | 233 |
| | 118 |
| | 832 |
| | 914 |
| |
FFO available to common stockholders and common unitholders | | FFO available to common stockholders and common unitholders | (2,403) | | | (2,605) | |
Capital related costs | 82 |
| | 61 |
| | 468 |
| | 311 |
| Capital related costs | (24) | | | 128 | |
Other non-recurring and non-cash expenses | 47 |
| | 47 |
| | 177 |
| | 506 |
| |
Share-based compensation | 134 |
| | 171 |
| | 735 |
| | 582 |
| |
Straight-line rent | (162 | ) | | (81 | ) | | (566 | ) | | (223 | ) | |
Other non-recurring and non-cash expense | | Other non-recurring and non-cash expense | 701 | | | 145 | |
Net changes in fair value of derivative liabilities | | Net changes in fair value of derivative liabilities | 3,962 | | | 347 | |
Straight-line rental revenue, net straight-line expense | | Straight-line rental revenue, net straight-line expense | (69) | | | (214) | |
Loan cost amortization | 682 |
| | 629 |
| | 2,509 |
| | 1,464 |
| Loan cost amortization | 420 | | | 3,642 | |
Accrued interest income | (121 | ) | | (294 | ) | | (359 | ) | | (294 | ) | |
| Above (below) market lease amortization | 65 |
| | (3 | ) | | 448 |
| | 69 |
| Above (below) market lease amortization | 23 | | | (12) | |
Recurring capital expenditures and tenant improvement reserves | (245 | ) | | (188 | ) | | (696 | ) | | (514 | ) | Recurring capital expenditures and tenant improvement reserves | (270) | | | (276) | |
AFFO | $ | 3,998 |
| | $ | 2,657 |
| | $ | 10,553 |
| | $ | 7,217 |
| AFFO | $ | 2,340 | | | $ | 1,155 | |
Acquisition expenses were primarily related to acquisitions personnel and due diligence of potential acquisitions currently in our pipeline.
Other nonrecurringnon-recurring and non-cash expenses are miscellaneous costs we believe will not be incurred on a goinggo forward basis includingbasis. Other nonrecurring expenses such as vacation accrual, severance and consulting fees which are no longer under contract and are not expected to be under contractof $701 thousand for the foreseeable future.three months ended March 31, 2022 primarily include legal settlement costs. Other nonrecurring expenses of $145 thousand for the three months ended March 31, 2021 include $687 thousand loan prepayment penalty on sale of the Berkley Shopping Center, partially offset with $552 thousand in PPP Promissory Note forgiveness.
Net changes in fair value of derivative liabilities is the result of the non-cash loss or gain from adjusting the warrant liabilities and embedded derivative liabilities to their fair market value, further details are described at Note 6 on this Form 10-Q.
Loan cost amortization was $420 thousand and $3.64 million for three months ended March 31, 2022 and 2021, respectively. The 2022 decrease is primarily related to the write-off of loan costs associated with the Powerscourt Financing Agreement in 2021, partially offset with the amortization of the Convertible Notes.
The preferred stock accretion adjustments represent the amortization of offering costs associated with raising the Series B Preferred and Series D Preferred. 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
September 30, 2017,March 31, 2022, our consolidated cash,
and cash equivalents
and restricted cash totaled
$5.66$36.82 million compared to consolidated cash,
and cash equivalents
and restricted cash of
$4.86$44.21 million at
DecemberMarch 31,
2016.2021. Cash flows from operating activities, investing activities and financing activities
for the nine month period ended September 30, 2017 and 2016 were as
follows:follows (in thousands, unaudited): | | | Nine Months Ended September 30, | | Period Over Period Change | | | | | | | | | | | | | | | | | | | | |
| 2017 | | 2016 | | $ | | % | | Three Months Ended March 31, | | Period Over Period Change |
| | | (in thousands, unaudited) | | | | 2022 | | 2021 | | $ | | % |
Operating activities | $ | 18,514 |
| | $ | 9,409 |
| | $ | 9,105 |
| | 96.77 | % | Operating activities | $ | 3,374 | | | $ | 4,739 | | | $ | (1,365) | | | (28.80) | % |
Investing activities | $ | 358 |
| | $ | (19,745 | ) | | $ | 20,103 |
| | 101.81 | % | Investing activities | $ | (1,269) | | | $ | 2,975 | | | $ | (4,244) | | | (142.66) | % |
Financing activities | $ | (18,072 | ) | | $ | 35,676 |
| | $ | (53,748 | ) | | (150.66 | )% | Financing activities | $ | (5,706) | | | $ | (6,273) | | | $ | 567 | | | 9.04 | % |
Operating Activities
During the nine months ended September 30, 2017, our
Our cash flows from operating activities were $18.51$3.37 million compared to cash flows from operating activities of $9.41and $4.74 million duringfor the ninethree months ended September 30, 2016,March 31, 2022 and 2021, respectively, representing an increasea decrease of $9.1128.80% or $1.37 million. This increasedecrease is primarily thea result of a $4.15 million decrease in our consolidated net loss due to factors discussed in the Resultstiming of Operations section above, specifically the incremental increase in FFO of $5.92 million from new store properties earned during the respective periods. Also impacting operating cash flows is the fluctuation in acquisition deposits included withinreceivables, deferred costs and other assets and other non-operating expenses, partially offset by the decrease in interest expense, an increase in property NOI of $408 thousand, the timing of accounts payable, accrued expenses and other liabilities and the respective acquisitions accompanied by a decrease in cash restricted for operating property reserves.corporate general and administrative expense.
Investing Activities
During the nine months ended September 30, 2017, our cash flows from investing activities were $358 thousand, compared to
Our cash flows used in investing activities of $19.75were $1.27 million duringfor the ninethree months ended September 30, 2016,March 31, 2022, compared to $2.98 million of cash flows provided by investing activities for the three months ended 2021, representing an increasea decrease of $20.10142.66% or $4.24 million due to costs related to the following:
$9.40 million decreaseCedar Acquisition, sales described in cash outflows for the issuance of the Sea Turtle Development notes receivable;
$8.68 million decreaseNote 3 included in cash outflows used for the acquisition of the fourteen A-C Portfolio properties in 2016;
$2.42 millionthis Form 10-Q and an increase in cash as a resultcapital expenditures paid of the sale of a land parcel at Carolina Place and the Steak n' Shake outparcel at Rivergate;$583 thousand.
$955 thousand decrease in cash outflows for capital property reserves;
$837 thousand decrease in cash outflows for cash restricted for property acquisitions;
$486 thousand increase in cash received for disposal of properties as a result of the 2017 sale of the Ruby Tuesdays/Outback at Pierpont Shopping Center offset by the 2016 sale of Starbucks/Verizon; and
Offset by $2.68 million increase in cash outflows on capital expenditures.
Financing Activities
During the nine months ended September 30, 2017, ourOur cash flows used in financing activities were $18.07$5.71 million compared to $35.68and $6.27 million of cash flows provided by financing activities duringfor the ninethree months ended September 30, 2016,March 31, 2022 and 2021, respectively, representing a decreasean increase of $53.75 million9.04% or $567 thousand due to the following:
•$61.31 million decrease in proceeds from sale of preferred stock due to the Series B Preferred and Series D Preferred offerings occurring in 2016;
$2.93 million decrease in loan proceeds due to the $8.00 million Revere Loan occurring in 2016 offset by a $3.22 million increase in refinancing proceeds and the $1.85 million Columbia Fire House Construction Loan occurring in 2017;
$2.61 million in additional cash outflows for dividends and distributions primarily as a result of Series B Preferred and Series D Preferred offerings;
Partially offset by $11.859.42 million decrease in loan principal payments, due to the 2016 KeyBank pay-down of $21.1 million offset by the 2017 refinancing of loans along with paydown of the Rivergatenet loan and Revere Loanproceeds primarily as a result of Steak n' Shakethe 2021 Powerscourt Financing Agreement payoff, the Wilmington Financing Agreement proceeds, the Tuckernuck refinance and Carolina Place sales; andBerkley Shopping Center sale, partially offset by the 2022 Walnut Hill Plaza payoff;
•$2.936.10 million decrease as a result of 2021 preferred stock redemptions;
•$3.20 million decrease in payments for deferred financing costs primarily related to the acquisition ofWilmington Financing Agreement; and
•$687 thousand decrease in prepayment penalty related to the fourteen A-C Portfolio properties in 2016 comparedBerkley/Sangaree/Tri-County loan payoff.
We intend to costs associated with less 2017 refinances.
As of September 30, 2017continue managing our debt prudently so as to maintain a conservative capital structure and December 31, 2016, ourminimize leverage within the Company. Our debt balances, excluding unamortized debt issuance costs, consisted of the following:following (in thousands): |
| | | | | | | |
| September 30, 2017 | | December 31, 2016 |
| (in thousands, unaudited) |
Fixed-rate notes | $ | 218,225 |
| | $ | 211,539 |
|
Adjustable-rate mortgages | 26,520 |
| | 28,082 |
|
Fixed-rate notes, assets held for sale | — |
| | 1,350 |
|
Floating-rate line of credit | 68,032 |
| | 74,077 |
|
Total debt | $ | 312,777 |
| | $ | 315,048 |
|
| | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
| (unaudited) | | |
Fixed-rate notes (1) | $ | 339,548 | | | $ | 344,177 | |
Adjustable-rate mortgages | 2,000 | | | 2,085 | |
Total debt | $ | 341,548 | | | $ | 346,262 | |
(1) Includes portion attributable to liabilities held for sale, see Note 3 included in this Form 10-Q.
The weighted-average interest rate and term of our fixed-rate debt including assets held for sale are 4.78%4.90% and 6.413.91 years, respectively, at September 30, 2017.March 31, 2022. We have $23.01$16.20 million of debt maturing, including scheduled principal repayments, during the threetwelve months ending DecemberMarch 31, 2017.2023. While we anticipate being able to refinance our maturingall the loans at reasonable market terms upon maturity, our inability to do so may materially impact our financial position and results of operations. See Footnote 6Note 5 included in this Form 10-Q for additional mortgage indebtedness details.
Future Liquidity Needs
Material Cash Requirements, Contractual Obligations and Commitments
In
Our expected material cash requirements for the twelve months ended March 31, 2023 and thereafter are comprised of (i) contractually obligated expenditures; (ii) other essential expenditures; and (iii) opportunistic expenditures.
The primary liquidity needs of the Company, in addition to the funding of our ongoing operations, the primary liquidity needs of the Company at September 30, 2017March 31, 2022 are $84.25$16.20 million in debt maturitiesprincipal and regularly scheduled payments due in the twelve months ended September 30, 2018, debt service payments, Series B Preferred and Series D Preferred dividends (approximately $9.2 million), margin covenant requirements as detailed in our Credit Agreement with KeyBank and the $1.44 per share (approximately $13.50 million) targeted annual Common Stock dividends we are planning to pay on a quarterly basis. Included in the $84.25 million of debt maturities is the $68.03 million maturity of 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 $50.00 million prior to December 6, 2017 in accordance with the Fourth AmendmentMarch 31, 2023 as described in Footnote 11.Note 5 on this Form 10-Q. The Company is in the process of refinancing the $3.00 million Bank Line of Credit loan which has been extended to December 2017 and has the ability to repay the $259 thousand Columbia Fire House Loan with available funds from the Columbia Fire House Construction Loan. The KeyBank Line of Credit and all loans due are 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 meetpay these obligations will be successful.
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 inrefinances, dispositions and operating cash. Management intends to refinance or extend the capital markets andremaining maturing 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.as it comes due.
In addition to liquidity required to fund debt payments distributions and acquisitions, 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
To meet these future liquidity needs, at March 31, 2022 the Company had:
•$21.11 million in cash and cash equivalents;
•$15.71 million held in lender reserves for the purpose 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 requiredlease commissions, real estate taxes and insurance; and
•intends to make a space fit a particular tenant’s needs. Significant capital expenditures could also impactuse cash generated from operations during the twelve months ended March 31, 2023.
In addition, our abilityBoard of Directors suspended Series A Preferred, Series B Preferred and Series D Preferred dividend payments beginning with the fourth quarter 2018 dividend. On November 3, 2021, common stockholders of the Company approved amendments to the Company’s Articles Supplementary to remove the cumulative dividend of the Series A Preferred and the Series B Preferred. These amendments had the effect of significantly reducing the Company’s financial obligation to its preferred stockholders, which the Company believes impeded the potential growth and strategic opportunities available to it.
Additionally, the Company plans to undertake measures to grow its operations and payincrease liquidity through delivering space currently leased but not yet occupied, replacing tenants who are in default of their lease terms, increasing future dividends.lease revenue through tenant improvements partially funded by restricted cash, disposition of assets and refinancing properties.
Off-Balance Sheet Arrangements
Series D Preferred Stock
Beginning on September 21, 2023 (the “Series D Redemption Date”), holders of the Series D Preferred (the “Series D Preferred Holders”) will have the right to cause the Company to redeem their Series D Preferred at a price of $25.00 per share plus the amount of all accrued but unpaid dividends. This redemption price is payable by the Company, at the Company’s election, in cash or shares of the Company’s Common Stock, or a combination of cash and shares of the Company’s Common Stock. Since January 2019, the Company’s Series D Preferred (of which there are approximately 3.15 million shares outstanding at March 31, 2022) have been accruing unpaid dividends at a rate of 10.75% per annum of the $25.00 liquidation preference per share of Series D Preferred, or at $2.6875 per share per annum. As of March 31, 2022, the outstanding Series D Preferred had an aggregate liquidation preference of approximately $78.81 million, with aggregate accrued and unpaid dividends in the amount of approximately $28.28 million.
As of September 30, 2017,March 31, 2022, the Series D Preferred is convertible, in whole or in part, at any time, at the option of the Series D Preferred Holders, into previously unissued Common Stock at a conversion price of $16.96 per share of Common Stock. Based upon the closing price of our Common Stock on May 9, 2022 of $2.21 per share, we believe it unlikely that Series D Preferred Holders would convert their shares of Series D Preferred into Common Stock in advance of the Series D Redemption Date and would instead choose to exercise their redemption rights on or after the Series D Redemption Date.
The Company further believes that it is unlikely that on the Series D Redemption Date the Company will have no off-balance sheet arrangementssufficient available cash to pay the aggregate redemption price in cash. Accordingly, the Company would not be able to meet our redemption obligation without either liquidating assets or issuing significant additional amounts of Common Stock.
The Company does not believe it is in its interests to liquidate assets to fund redemptions. The Company further believes that areissuing Common Stock to either (i) fund cash redemptions or (ii) directly settle redemptions in Common Stock could result in a substantial dilution of our Common Stock, which would be detrimental both to holders of Common Stock and to Series D Preferred Holders, who would likely see a significant reduction in the value of any Common Stock paid to settle the Series D Preferred redemption amount.
In an effort to address this risk of a significant reduction to the value of a holder’s investment in Series D Preferred and Common Stock following the Series D Redemption Date, the Company executed a modified Dutch auction tender offer in March 2021 for up to $6.00 million of our Series D Preferred, in which 387,097 shares were accepted for purchase for an aggregate cost of $6.00 million. We subsequently launched a second modified Dutch auction tender offer in April 2021 for up to $12.00 million of our Series D Preferred, in which 103,513 shares were accepted for purchase for an aggregate cost of $1.86 million.
In July 2021, we raised additional capital for the Company by distributing to holders of our Common Stock, on a pro-rata basis, non-transferable subscription rights to purchase up to $30.00 million in aggregate principal amount (the “Rights Offering”) of our 7.00% senior subordinated convertible notes due 2031 (“Convertible Notes”). These Convertible Notes were fully subscribed in the Rights Offering and interest is payable on the Convertible Notes at the Company’s option in cash, Series B Preferred and/or Series D Preferred. On December 31, 2021, the first interest payment date on the Convertible Notes, interest was paid in the form of Series D Preferred. For purposes of determining the value of the Series D Preferred paid as interest on the Convertible Notes, each share of Series D Preferred was deemed to have a materialvalue equal to the product of (x) the average of the per share volume-weighted average prices of the Series D Preferred for the 15 consecutive trading days ending on the third business day immediately preceding the interest payment date, and (y) 0.55.
However, the Rights Offering could have the effect of causing, if interest on ourthe Convertible Notes is continued to be paid in shares of Series D Preferred, a further substantial dilution of the Series D Preferred and reduction in the value of any Series D Preferred.
The Company continues to analyze ways to address the risk associated with the significant and growing financial condition, revenues or expenses, resultsobligation to the Series D Preferred Holders which, as stated above, the Company is unlikely to be able to pay in cash, and which could cause a significant reduction to the value of operations, liquidity,a holder’s investment in Series D Preferred and Common Stock following the Series D Redemption Date, as well as ways to improve the Company’s capital resources or capital expenditures.structure.
Recent Accounting Pronouncements
See Note 2 to the condensed consolidated financial statements beginning on page 78 of this Current Report on Form 10-Q.
Critical Accounting Policies
In preparing the condensed consolidated financial statements, we have made estimates, assumptions and assumptionsjudgements 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 estimates and policies is included in our 20162021 Form 10-K under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” ThereDuring the three months ended March 31, 2022, there have been no significant changes to these estimates and policies during the nine months ended September 30, 2017.previously disclosed in our 2021 Form 10-K. 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.
The Company’s website address is www.whlr.us. We make available free of charge through our website our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. In addition, we have posted the Charters of our Audit Committee, Compensation Committee, and Governance and Nominating Committee, as well as our Code of Business Conduct and Ethics for Employees, Officers, Agents and Representatives, Code of Business Conduct and Ethics for Members of the Board of Directors, Corporate Governance Principles, including guidelines on director independence, and Insider Trading Policy, all under separate headings. The content of our website is not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our website is intended to be inactive textual references only.
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.Not applicable.
At September 30, 2017, approximately $218.23 million, or 69.77%, of our debt had fixed interest rates and approximately $94.55 million, or 30.23%, 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 $946 thousand per year. At September 30, 2017, LIBOR was approximately 123 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 $1.17 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 officer and principal financial officers,officer, 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’sCompany’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 September 30, 2017March 31, 2022 (the end of the period covered by this Form 10-Q)to provide reasonable assurance that information required to be disclosed by us in our filings under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
.
Changes in Internal Control Over Financial Reporting
None.
None.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
We are subjectSee Note 10, Commitments and Contingencies, to various legal proceedings and claims that ariseour condensed consolidated financial statements included 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.this Form 10-Q.
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 other than the revision
We are a smaller reporting company as defined by Rule 12b-2 of the following risk factor:Exchange Act and are not required to provide the information under this item.
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 September 30, 2017, our largest anchor tenant, Bi-Lo, which represents approximately 11.16% of our total annualized base has closed two of the fifteen stores located in our portfolio, representing 85,160 square feet and approximately $1.02 million of annualized base rent. The Bi-Lo lease at the Myrtle Park location has been terminated as of September 30, 2017. In addition, Martin’s at Brook Run, representing 58,473 square feet and $380 thousand of annualized base rent closed in August 2017. We are currently collecting rent from Bi-Lo at Cypress and Martin's at Brook Run on their remaining lease terms which expire in 2018 and 2020, respectively. The loss of these anchor tenants at these three properties 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 spaces.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
Item 3. Defaults Upon Senior Securities.
None.As of May 11, 2022, the Company had accumulated undeclared dividends of $28.28 million to holders of shares of our Series D Preferred, of which $2.12 million is attributable to the three months ended March 31, 2022.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
|
| | |
| | |
| | |
| | Tax Protection Agreement and Plan of Merger, dated October 24, 2014,as of March 2, 2022, by and among Jon S. Wheeler, Wheeler REIT, L.P., and Wheeler Real Estate Investment Trust, Inc. (7), WHLR Merger Sub Inc., WHLR OP Merger Sub LLC, Cedar Realty Trust, Inc., and Cedar Realty Trust Partnership, L.P.(Filed as an exhibit to Form 8-K, filed on March 7, 2022). |
| | |
| | Shareholders RightsFirst Amendment to Merger Agreement, dated Marchas of April 19, 2015,2022, by and betweenamong Wheeler Real Estate Investment Trust, Inc., WHLR Merger Sub Inc., WHLR OP Merger Sub LLC, Cedar Realty Trust, Inc., and Westport Capital Partners LLC as agent on behalf of certain investor. (9)Cedar Realty Trust Partnership, L.P. (Filed herewith). |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| | |
| |
| | |
| |
101.INS | | XBRL Instance Document. (23) |
| |
101.SCH | | |
101.INS XBRL | | Instance Document (Filed herewith). |
| | |
101.SCH | | XBRL Taxonomy Extension Schema Document. (23)Document (Filed herewith). |
| | |
| | Linkbase (Filed herewith). |
| | |
| | Linkbase (Filed herewith). |
| | |
| | Linkbase (Filed herewith). |
| | |
| | Linkbase (Filed herewith). |
35
| |
(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 8-K, filed on October 30, 2014 and hereby incorporated by reference. |
| |
(8) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on filed on April 3, 2017 and hereby incorporated by reference. |
| |
(9) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on March 19, 2015 and hereby incorporated by reference. |
| |
(10) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on June 2, 2015 and hereby incorporated by reference. |
| |
(11) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on March 16, 2016 and hereby incorporated by reference. |
| |
(12) | Filed as an exhibit to the Registrant's Report on Form 8-K/A, filed on December 12, 2016 and hereby incorporated by reference. |
| |
(13) | Filed as an exhibit to the Registrant's Report on Form 8-K/A, filed on April 12, 2016 and hereby incorporated by reference. |
| |
(14) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on May 2, 2016 and hereby incorporated by reference. |
| |
(15) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on February 10, 2017 and hereby incorporated by reference. |
| |
(16) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on June 16, 2016 and hereby incorporated by reference. |
| |
(17) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on September 20, 2016 and hereby incorporated by reference. |
| |
(18) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on July 15, 2016 and hereby incorporated by reference. |
| |
(19) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on December 5, 2016 and hereby incorporated by reference. |
| |
(20) | Filed as an exhibit to the Registrant's Report on Form 8-K, filed on June 8, 2015 and hereby incorporated by reference. |
| |
(21) | Filed as an exhibit to the Registrant's Report on Form 8-K/A, filed on August 9, 2017 and hereby incorporated by reference. |
| |
(22) | Filed as an exhibit to the Registrant's Report on Form 8-K/A filed on October 12, 2017 and hereby incorporated by reference. |
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. GRAHAMCrystal Plum |
| | | | | Wilkes J. GrahamCRYSTAL PLUM |
| | | | | Chief Financial Officer |
| | | | | (Principal Financial Officer and Principal Accounting Officer) |
Date: | November 9, 2017 | | |
Date: | May 11, 2022 | | | | |