UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
þ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________ to _________
Commission file number 001-35713
WHEELER REAL ESTATE INVESTMENT TRUST, INC.
(Exact Name of Registrant as Specified in Its Charter)
Maryland
(State or Other Jurisdiction of
Incorporation or Organization)
2529 Virginia Beach Blvd.,
Virginia Beach, Virginia
(Address of Principal Executive Offices)
45-2681082
(I.R.S. Employer
Identification No.)
23452
(Zip Code)
(757) 627-9088
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, $0.01 par value per share
Series B Convertible Preferred Stock
Series D Cumulative Convertible Preferred Stock
7.00% Subordinated Convertible Notes due 2031
Trading Symbol(s)
WHLR
WHLRP
WHLRD
WHLRL
Name of each exchange on which registered
Nasdaq Capital Market
Nasdaq Capital Market
Nasdaq Capital Market
Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ
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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 file
Non-accelerated filer
¨
þ
¨
Accelerated filer
Smaller reporting company
Emerging growth company
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. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to
previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No þ
As of June 30, 2023, the last trading day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s Common Stock held by non-affiliates of
the registrant was $5,301,111, based on the closing price of the registrant’s Common Stock on such date as reported on the Nasdaq Capital Market. For the purposes of this computation, shares held by
directors and executive officer of the registrant have been excluded. Such exclusion is not intended, nor shall it be deemed, to be an admission that such persons are affiliates of the registrant.
As of March 1, 2024, there were 68,023,718 shares of Common Stock, $0.01 par value per share, outstanding.
Documents Incorporated by Reference
Portions of the registrant’s Proxy Statement for its 2024 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission not later than 120 days after the end of the
year covered by this Annual Report on Form 10-K, are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent described herein.
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
SIGNATURES
Table of Contents
PART I
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
PART II
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV
Exhibits and Financial Statement Schedules
Form 10-K Summary
3
6
6
6
8
11
11
11
12
12
25
25
25
25
26
26
26
26
26
27
27
27
68
69
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (the "Form 10-K") of Wheeler Real Estate Investment Trust, Inc. (the "Trust," the "REIT," the "Company," "WHLR," "we," "our" or "us") contains
"forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
that are subject to risks, uncertainties and other factors which may cause the actual results, performance or achievements to be materially different from future results, performance or achievements
expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe the Company's future plans, strategies and expectations,
are generally identifiable by use of the words "may", "will", "should", "estimates", "projects", "anticipates", "believes", "expects", "intends", "future", and words of similar import, or the negative
thereof. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could
cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.
Forward-looking statements that were true at the time made may ultimately prove to be incorrect or false. You are cautioned to not place undue reliance on forward-looking statements, which
reflect our management’s view only as of the date of this Form 10-K. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results.
Factors that could cause actual results, performance or achievements to differ materially from any forward-looking statements made in this Form 10-K include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the use of and demand for retail space;
general and economic business conditions, including those affecting the ability of individuals to spend in retail shopping centers and/or the rate and other terms on which we are able to lease our
properties;
the loss or bankruptcy of the Company's tenants;
the state of the U.S. economy generally, or specifically in the Mid-Atlantic, Southeast and Northeast where our properties are geographically concentrated;
consumer spending and confidence trends;
availability, terms and deployment of capital;
substantial dilution of our common stock, par value $0.01 ("Common Stock") and steep decline in its market value resulting from the exercise by the holders of our Series D Cumulative
Convertible Preferred Stock (the "Series D Preferred Stock") of their redemption rights and downward adjustment of the conversion price on our outstanding 7.00% Subordinated Convertible
Notes due 2031 (the "Convertible Notes"), each of which has already occurred and is anticipated to continue;
the degree and nature of our competition;
changes in governmental regulations, accounting rules, tax rates and similar matters;
adverse economic or real estate developments in our markets of the Mid-Atlantic, Southeast and Northeast;
the ability and willingness of the Company’s tenants and other third parties to satisfy their obligations under their respective contractual arrangements with the Company;
the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration;
the Company’s ability to re-lease its properties on the same or better terms in the event of non-renewal or in the event the Company exercises its right to replace an existing tenant, and
obligations the Company may incur in connection with the replacement of an existing tenant;
litigation risks generally;
the risk that shareholder litigation in connection with the Cedar Acquisition (as defined herein) may result in significant costs of defense, indemnification and liability;
financing risks, such as the Company’s inability to obtain new financing or refinancing on favorable terms as the result of market volatility or instability and increases in the Company’s
borrowing costs as a result of changes in interest rates and other factors;
the impact of the Company’s leverage on operating performance;
risks related to the market for retail space generally, including reductions in consumer spending, variability in retailer demand for leased space, adverse impact of e-commerce, ongoing
consolidation in the retail sector and changes in economic conditions and consumer confidence;
risks endemic to real estate and the real estate industry generally;
•
•
•
•
•
•
•
•
•
•
•
•
•
the adverse effect any future pandemic, endemic or outbreak of infectious diseases, and mitigation efforts, including government-imposed lockdowns, to control their spread;
risks to our information systems - or those of our tenants or vendors - from service interruption, misappropriation of data, breaches of security or information technology, or other cyber-related
attacks;
competitive risks;
risks related to the geographic concentration of the Company’s properties in the Mid-Atlantic, Southeast and Northeast;
the Company’s ability to maintain listing on Nasdaq Capital Market ("Nasdaq");
the effects of the one-for-ten reverse stock split of our Common Stock (which we refer to as the "Reverse Stock Split") on the trading market of our Common Stock;
damage to the Company’s properties from catastrophic weather and other natural events, and the physical effects of climate change;
the risk that an uninsured loss on the Company’s properties or a loss that exceeds the limits of the Company’s insurance policies could subject the Company to lost capital or revenue on those
properties;
the risk that continued increases in the cost of necessary insurance could negatively impact the Company's profitability;
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 ability of our operating partnership, Wheeler REIT, L.P., and each of our other partnerships and limited liability companies to be classified as partnerships or disregarded entities for federal
income tax purposes;
the impact of e-commerce on our tenants’ business; and
the inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws.
Forward-looking statements in this Form 10-K should be read in light of these factors. Except for ongoing obligations to disclose material information as required by the federal securities laws,
the Company undertakes no obligation to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events. All of the above factors are difficult to predict, contain uncertainties that may materially affect the Company’s actual results and may be beyond the Company’s control. New
factors emerge from time to time, and it is not possible for the Company’s management to predict all such factors or to assess the effects of each factor on the Company’s business. Accordingly, there
can be no assurance that the Company’s current expectations will be realized.
2
Item 1. Business.
Overview
Part I
Wheeler Real Estate Investment Trust, Inc. is a Maryland corporation formed on June 23, 2011 in connection with the Company's initial public offering. 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. Prior to the Cedar Acquisition (as defined below), substantially all
of our assets were held by, and all of our operations were conducted through, our Operating Partnership. At December 31, 2023, the Company owned 99.13% of the Operating Partnership.
On August 22, 2022, the Company completed a merger transaction with Cedar Realty Trust, Inc. ("Cedar" or "CDR"). As a result of the merger, the Company acquired all of the outstanding
shares of Cedar’s common stock (the "Cedar Acquisition"), which ceased to be publicly traded on the New York Stock Exchange ("NYSE"). Cedar’s outstanding 7.25% Series B Preferred Stock and
6.50% Series C Preferred Stock remain outstanding and continue to trade on the NYSE. As a result, Cedar became a subsidiary of the REIT. Cedar's assets are held by, and its operations are
conducted through, its operating partnership, Cedar Realty Trust Partnership, LP.
The Company has elected to be taxed as a REIT under applicable provisions of the Internal Revenue Code of 1986, as amended (the "Code"). To qualify as a REIT under those provisions,
the Company must have a preponderant percentage of its assets invested in, and income derived from, real estate and related sources. The Company is a fully-integrated, self-managed commercial
real estate investment company that owns, leases and operates income-producing retail properties with a primary focus on grocery-anchored centers.
For additional information on recent business developments, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in this Form 10-K.
Portfolio
Our portfolio contains retail properties in secondary and tertiary markets, with a particular emphasis on grocery-anchored retail centers. Our properties are in communities that have stable
demographics and have historically exhibited favorable trends, such as strong population and income growth. We generally lease our properties to national and regional retailers that offer consumer
goods and services and generate regular consumer traffic. We believe our tenants carry goods and offer services that are less impacted by fluctuations in the broader U.S. economy and consumers’
disposable income, generating more predictable property level cash flows.
The Company’s portfolio of properties is dependent upon regional and local economic conditions. As of December 31, 2023, we own a portfolio consisting of seventy-nine properties,
including seventy-five retail shopping centers, totaling 8,142,065 leasable square feet which is 93.7% leased (our "operating portfolio"), and four undeveloped land parcels totaling approximately 61
acres. The properties are geographically located in the Mid-Atlantic, Southeast and Northeast, which markets represented approximately 45%, 40% and 15%, respectively, of the total annualized base
rent of the properties in its portfolio as of December 31, 2023.
No tenant represents greater than approximately 6% of the Company’s annualized base rent or 7% of gross leasable square footage. The top 10 tenants account for 23.4% or $17.7 million of
annualized base rent and 26.2% or $2.1 million of gross leasable square footage at December 31, 2023.
Human Capital Management
As of December 31, 2023, we have 52 full-time employees. We seek to hire experienced leaders and team members and offer competitive wage and benefit programs. Employees are offered
flexibility to meet personal and family needs, which was further expanded when the COVID-19 pandemic began. In addition to medical insurance support, the Company offers wellness programs,
including free short- and long-term disability insurance, free basic life insurance policy with accidental death and dismemberment coverage, employee assistance programs that include emotional
health support, gym memberships,
3
volunteer time off and tuition assistance. Tuition assistance includes assistance to learn a new language as the Company identifies opportunities to better serve a diverse tenant base.
The Company takes steps to measure and improve upon its level of employee engagement and to create
a diverse and inclusive workplace, all while creating value for our stakeholders. The Company’s employees are expected to exhibit honest, ethical and respectful conduct in the workplace. Every year,
the Company requires its employees to review and certify their compliance with the Company's various policies, including its Code of Business Conduct and Ethics.
Business Objectives and Investment Strategy
Our primary business objective is to maximize the value of our portfolio. We intend to achieve this objective utilizing the following investment strategies:
•
•
•
•
•
•
•
Focus on necessity-based retail. Own and operate retail properties that serve the essential day-to-day shopping needs of the surrounding communities. These necessity-based centers attract
high levels of daily traffic resulting in cross-selling of goods and services from our tenants. The majority of our tenants provide non-cyclical consumer goods and services that are less impacted
by fluctuations in the economy. We believe these centers that provide essential goods and services such as groceries result in a stable, lower-risk portfolio of retail investment properties.
Focus on secondary and tertiary markets with strong demographics and demand. Our properties are in markets that have strong demographics such as population density, population stability,
consistent tenant sales trends and growth in household income. We seek to identify new tenants and renew leases with existing tenants in these locations that support the need for necessity-
based retail and limited new supply. We aim to identify and pursue attractive investment opportunities in regions with low taxes and a pro-business environment.
Increase operating income through leasing strategies and expense management. We employ intensive lease management strategies to optimize occupancy. Management has extensive
expertise in acquiring and managing under-performing properties and increasing operating income through more effective leasing strategies and expense management. Our leases generally
require the tenant to reimburse us for a substantial portion of the expenses incurred in operating, maintaining, repairing, and managing the shopping center and the common areas, along with
the associated insurance costs and real estate taxes. In many cases, the tenant is either fully or partially responsible for all maintenance of the property, thereby limiting our financial exposure
towards maintaining the center and increasing our net income. We refer to this arrangement as a "triple net lease."
Selectively utilize our capital to improve retail properties. We intend to make capital investments where the risk adjusted returns on such capital is accretive to our stockholders. We allocate
capital to value-added improvements of retail properties to increase rents, extend long-term leases with anchor tenants and increase occupancy. We selectively allocate capital to revenue
enhancing projects that we believe will improve the market position of a given property.
Recycling and sensible management of our property portfolio. We intend to sell non-income producing land parcels or non-core assets utilizing sales proceeds to deleverage the balance sheet
and invest in higher yielding opportunities. Properties may be slated for disposition based upon management's periodic review of our portfolio, and approval by our Board of Directors (the
"Board of Directors").
Strategy for optimizing capital structure. The Company seeks to mitigate risk and optimize its capital structure through continuous focus on maintaining prudent leverage and lengthy average
debt maturities, as well as access to a diverse selection of capital sources, including the secured and unsecured debt markets, unsecured lines of credit, and other sources.
Strategy for integrating acquisitions. As the Company undertakes acquisitions, we seek to thoughtfully integrate the acquired properties and any software and personnel to maximize
efficiencies both at the property and corporate level.
Governmental Regulations Affecting Our Properties
We and our properties are subject to a variety of federal, state and local environmental, health, safety, tax and similar laws. The application of these laws to a specific property that we own
depends on a variety of property-specific circumstances,
4
including the current and former uses of the property, the building materials used at the property and the physical layout of the property. Neither existing environmental, health, safety and similar laws
nor the costs of our compliance with these laws has had a material adverse effect on our financial condition or results of operations, and management does not believe they will for the fiscal year
ending December 31, 2024. In addition, we have not incurred, and do not expect to incur, any material costs or liabilities due to environmental contamination at properties we currently own or have
owned in the past. However, we cannot predict the impact of new or changed laws or regulations on properties we currently own or may acquire in the future. We have no current plans for substantial
capital expenditures with respect to compliance with environmental, health, safety and similar laws and we carry environmental insurance that covers a number of environmental risks for most of our
properties.
Competition
Numerous commercial developers and real estate companies compete with us with respect to the leasing of properties. Some of these competitors may possess greater capital resources than
we do, although we do not believe that any single competitor or group of competitors in any of the primary markets where our properties are located are dominant in that market. This competition may
interfere with our ability to attract and retain tenants, leading to increased vacancy rates and/or reduced rents and adversely affect our ability to minimize operating expenses.
Retailers at our properties also face increasing competition from online retailers, outlet stores, discount shopping clubs, superstores, and other forms of sales and marketing of goods and
services, such as direct mail. This competition could contribute to lease defaults and insolvency of tenants.
Climate
Some of our properties could be subject to natural or other disasters. In addition, we may acquire properties that are located in areas that are subject to natural disasters, such as earthquakes
and droughts. Properties could also be affected by increases in the frequency or severity of tornadoes, hurricanes or other severe weather, whether such increases are caused by global climate changes
or other factors. The occurrence of natural disasters or severe weather conditions can increase investment costs to repair or replace damaged properties, increase operating costs, increase future
property insurance costs, and/or negatively impact the tenant demand for lease space. If insurance is unavailable to us, or is unavailable on acceptable terms, or if our insurance is not adequate to cover
business interruption or losses from such events, our earnings, liquidity and/or capital resources could be adversely affected. While several of our properties are located in areas that have experienced
hurricanes, tornados, severe rain storms, or snow during the past two years, there has been no substantial damage or change in operations related to weather events.
Insurance
The Company carries comprehensive liability, property, fire, flood, wind, extended coverage, business interruption and rental loss insurance covering all of the properties in its portfolio
under an 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 losses. Increases in the occurrence of natural disasters and severe weather patterns have led to a consistent increase in overall rates, deductibles and valuations from insurance carriers,
which have resulted in increased costs of necessary insurance required to protect our assets.
Available Information
We are subject to the information reporting requirements of the Exchange Act. Therefore, we file reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the
SEC, including us.
Additionally, we make available free of charge through our website http://www.whlr.us our most recent Annual Report on Form 10-K, including our audited consolidated financial
statements, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, including exhibits, and amendments to those reports as soon as reasonably practicable after we electronically file or
furnish such materials to the SEC. The content of our website is not incorporated by reference into this Annual Report on Form
5
10-K 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.
Investors and others should note that we currently announce material information using SEC filings and press releases. In the future, we will continue to use these channels to distribute
material information about the Company, and may also utilize public conference calls, webcasts, our website and/or various social media sites to communicate important information about the
Company, key personnel, trends, corporate initiatives and other matters. Information that we post on our website or on social media channels could be deemed material; therefore, investors, the media,
our customers, business partners and others interested in the Company should review the information posted on our website as well as on LinkedIn at https://www.linkedin.com/company/wheeler-real-
estate-investment-trust/, in addition to following the Company’s press releases and SEC filings. Any updates to the list of social media channels we may use to communicate material information will
be posted on the Investor Relations page of our website at http://www.whlr.us. The information we post through these channels is not a part of this Annual Report on Form 10-K or any other
document we file with the SEC, and the inclusion of our website addresses and LinkedIn account are as inactive textual references only.
Item 1A. Risk Factors.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 1B. Unresolved Staff Comments.
None.
Item 1C. Cybersecurity.
Cybersecurity Risk Management and Strategy
The Company depends on the proper functioning, availability and security of its information systems, including financial, data processing, communications and operating systems. Several
information systems are software applications provided by third parties. Although risks from cybersecurity threats have to date not materially affected, and we do not believe they are reasonably likely
to materially affect, us, our business strategy, results of operations or financial condition, like other companies in our industry, we could, from time to time, experience threats and security incidents
related to our and our third-party vendors’ information systems, including attempts to gain unauthorized access to our confidential data, and other electronic security breaches. Such cybersecurity
attacks can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats. While we employ a number of measures to
prevent, detect and mitigate these threats, there is no guarantee such efforts will be successful in preventing a cybersecurity attack. A cybersecurity attack could compromise the confidential
information of our employees, tenants and vendors. A successful cybersecurity attack could disrupt and otherwise adversely affect our business operations.
Assessment, identification and management of cybersecurity related risks are integrated into our overall risk management process. Cybersecurity related risks are included in the risk universe
we evaluate to assess top risks to the Company at least annually. To the extent our processes identify a heightened cybersecurity related risk, risk owners are assigned to develop risk mitigation plans,
which are then tracked to completion.
Cybersecurity Governance
Our Board of Directors considers cybersecurity risk as part of its risk oversight function and has delegated oversight of cybersecurity risk strategy and governance and of other information
technology risks to the Audit Committee of the Board of Directors (the "Audit Committee"). The Audit Committee reports to the full Board of Directors regarding its activities, including those related
to cybersecurity. Senior management, including the Company's CEO, CFO, and General Counsel, is responsible for assessing and managing cybersecurity risk, and provides briefings regarding the
assessment and management of such risk to the Audit Committee, which then reports, as necessary, to the Board of Directors. Although members of our senior management do not have direct
cybersecurity expertise obtained through certifications, their experience managing the Company, which includes consulting and coordinating as necessary with a third party information technology
expert referred to below, enables them to effectively assess and manage material risks from cybersecurity threats.
6
The Company retained an information technology expert third party company to assist in managing relevant risks. In particular, the Company outsources its information technology function
and monitoring to a third party provider whereby it benefits from a professionally managed network monitoring, management, maintenance, detection and response system and a 24/7 security
operations center with both onsite and remote support services. Any cybersecurity incident would be reported to the Company promptly by our third party consultant and material and potentially
material incidents would be assessed by management and the Audit Committee for remediation and future prevention and detection.
The Company, at least annually, updates its policies or procedures that could help mitigate cybersecurity risks. Notwithstanding the extensive approach we take to cybersecurity, we may not
be successful in preventing or mitigating a cybersecurity incident that could have a material adverse effect on us. The Company has incorporated cybersecurity coverage in its insurance policies;
however, there is no assurance that the insurance the Company maintains will cover all cybersecurity breaches or that policy limits will be sufficient to cover all related losses.
7
Item 2. Properties.
Real Estate Portfolio
The following table presents an overview of our properties, based on information as of December 31, 2023.
Property
WHLR
Alex City
Marketplace
City, AL
Amscot
Beaver Ruin
Beaver Ruin
Building
Village
Village II
Brook Run
Shopping Center
Brook Run
Properties (3)
Station
Plaza
Square
Plaza
Bryan
Cardinal
Chesapeake
Clover
Courtland
VA
VA
KY
NC
Commons (3)
VA
Location
Alexander
Tampa, FL
Lilburn, GA
Lilburn, GA
Richmond,
Richmond,
Lexington,
Henderson,
Onley, VA
Clover, SC
Courtland,
Crossing
Square
Conyers
Crockett
Cypress
Shopping Center
Darien
Shopping Center
Street
Devine
Edenton
Commons (3)
Folly Road
Forrest
Gallery
Fort Howard
Shopping Center
Freeway
Franklin
Franklinton
Junction
Village
Square
Georgetown
Grove Park
Shopping Center
Harbor
Point (3)
Harrodsburg
Marketplace
Square
Crossing
JANAF (4)
Laburnum
Ladson
LaGrange
Marketplace
Lake
Greenwood Crossing
Lake
Murray
Conyers, GA
Morristown,
TN
Boiling
Springs, SC
Darien, GA
Columbia,
Edenton, NC
Charleston,
Tullahoma,
Rincon, GA
Stockbridge,
Kittanning,
Franklinton,
Georgetown,
Orangeburg,
Grove, OK
Harrodsburg,
Norfolk, VA
Richmond,
Ladson, SC
LaGrange,
Greenwood,
Lexington,
SC
SC
TN
GA
PA
NC
SC
SC
KY
VA
GA
SC
SC
Litchfield
Pawleys
Market Village
Island, SC
Lumber
Lumberton,
River Village
NC
Corner
Moncks
Nashville
Moncks
Corner, SC
Nashville,
Commons
NC
New Market
Crossing
Plaza
Centre
Parkway
Pierpont
GA
WV
Mt. Airy, NC
Brunswick,
Morgantown,
Number
Total
of
Tenants (1)
Leasable
Square Feet
Percentage
Leased (1)
Percentage Occupied
Occupied
Total SF
Annualized
Base Rent (in 000's) (2)
Annualized Base
Rent per Occupied Sq. Foot
19
1
29
4
19
—
9
9
14
10
—
14
4
18
1
1
—
5
26
20
18
24
15
2
14
—
8
118
20
16
13
8
4
25
11
1
12
13
5
15
151,843
2,500
74,038
34,925
147,738
—
54,277
50,000
108,982
45,575
—
170,475
107,122
80,435
26,001
38,464
—
47,794
214,451
113,652
156,834
151,821
65,366
29,572
93,265
—
60,048
798,086
109,405
52,607
76,594
43,618
39,218
86,740
66,781
26,800
56,100
117,076
52,365
111,162
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
100.0
100.0
94.8
100.0
87.2
—
94.5
100.0
92.1
100.0
—
100.0
100.0
59.9
100.0
89.1
—
100.0
89.5
100.0
98.2
93.3
100.0
100.0
100.0
—
91.0
89.9
99.1
100.0
91.8
100.0
15.3
98.5
100.0
100.0
100.0
100.0
84.8
98.5
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
%
100.0
100.0
96.8
100.0
94.2
—
94.5
100.0
92.1
100.0
—
100.0
100.0
59.9
100.0
89.1
—
100.0
89.5
100.0
98.2
93.3
100.0
100.0
100.0
—
91.0
94.3
99.1
100.0
91.8
100.0
100.0
98.5
100.0
100.0
100.0
100.0
84.8
98.5
8
151,843
$
1,278
$
2,500
70,148
34,925
128,810
—
51,275
50,000
100,406
45,575
—
170,475
107,122
48,175
26,001
34,264
—
47,794
191,859
113,652
154,034
141,573
65,366
29,572
93,265
—
54,648
717,171
108,445
52,607
70,300
43,618
6,000
85,477
66,781
26,800
56,100
117,076
44,385
109,437
83
1,290
492
1,133
—
613
508
779
384
—
1,006
978
622
140
180
—
735
1,445
1,283
1,351
1,359
599
267
764
—
465
8,993
1,011
566
435
410
96
1,085
501
330
665
1,045
480
1,063
8.42
33.00
18.39
14.08
8.80
—
11.95
10.16
7.76
8.42
—
5.90
9.13
12.90
5.38
5.25
—
15.39
7.53
11.29
8.77
9.60
9.17
9.04
8.19
—
8.51
12.54
9.33
10.75
6.19
9.41
15.98
12.70
7.51
12.31
11.86
8.93
10.81
9.71
Property
Port Crossing
Ridgeland
Riverbridge Shopping Center
Rivergate Shopping Center
Sangaree Plaza
Shoppes at Myrtle Park
South Lake
South Park
South Square
St. George Plaza
Sunshine Plaza
Surrey Plaza
Tampa Festival
Tri-County Plaza
Tuckernuck
Twin City Commons
Village of Martinsville
Waterway Plaza
Westland Square
Winslow Plaza
CDR
Brickyard Plaza
Carll's Corner
Coliseum Marketplace
Fairview Commons
Fieldstone Marketplace
Gold Star Plaza
Golden Triangle
Hamburg Square
Kings Plaza
Oakland Commons
Oregon Avenue (5)
Patuxent Crossing
Pine Grove Plaza
South Philadelphia
Southington Center
Timpany Plaza
Trexler Mall
Washington Center Shoppes
Webster Commons
Location
Harrisonburg, VA
Ridgeland, SC
Carrollton, GA
Macon, GA
Summerville, SC
Bluffton, SC
Lexington, SC
Mullins, SC
Lancaster, SC
St. George, SC
Lehigh Acres, FL
Hawkinsville, GA
Tampa, FL
Royston, GA
Richmond, VA
Batesburg-Leesville, SC
Martinsville, VA
Little River, SC
West Columbia, SC
Sicklerville, NJ
WHLR TOTAL
Berlin, CT
Bridgeton, NJ
Hampton, VA
New Cumberland, PA
New Bedford, MA
Shenandoah, PA
Lancaster, PA
Hamburg, PA
New Bedford, MA
Bristol, CT
Philadelphia, PA
California, MD
Brown Mills, NJ
Philadelphia, PA
Southington, CT
Gardner, MA
Trexlertown, PA
Sewell, NJ
Webster, MA
CDR TOTAL
Number of
Tenants (1)
Total Leasable
Square Feet
Percentage
Leased (1)
Percentage Occupied
Total SF Occupied
Annualized
Base Rent (in 000's) (2)
Annualized Base Rent
per Occupied Sq. Foot
8
1
10
24
10
14
11
3
6
9
23
4
21
7
16
5
22
10
12
18
779
10
5
9
11
10
7
19
7
17
2
—
27
13
10
11
14
22
29
9
232
65,365
20,029
91,188
193,960
66,948
56,609
44,318
60,734
44,350
59,174
111,189
42,680
141,580
67,577
93,391
47,680
288,254
49,750
62,735
40,695
5,309,936
227,598
116,532
106,648
50,119
193,970
71,720
202,790
102,058
168,243
90,100
—
264,068
79,306
221,511
155,842
182,799
342,541
157,300
98,984
2,832,129
100.0 %
100.0 %
96.9 %
87.5 %
100.0 %
99.3 %
100.0 %
84.9 %
81.0 %
100.0 %
100.0 %
100.0 %
100.0 %
90.7 %
96.9 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
95.9 %
97.8 %
19.4 %
94.9 %
87.7 %
75.5 %
100.0 %
98.4 %
100.0 %
98.5 %
100.0 %
— %
81.6 %
77.6 %
88.1 %
100.0 %
81.8 %
99.7 %
97.5 %
100.0 %
89.6 %
100.0 %
100.0 %
95.4 %
85.8 %
100.0 %
99.3 %
100.0 %
84.9 %
81.0 %
100.0 %
100.0 %
100.0 %
74.9 %
90.7 %
96.9 %
100.0 %
100.0 %
100.0 %
100.0 %
100.0 %
93.6 %
97.8 %
19.4 %
94.9 %
87.7 %
71.7 %
100.0 %
98.4 %
100.0 %
98.5 %
100.0 %
— %
81.6 %
77.6 %
68.3 %
100.0 %
63.3 %
98.9 %
95.9 %
100.0 %
86.4 %
65,365 $
20,029
86,975
166,362
66,948
56,189
44,318
51,543
35,900
59,174
111,189
42,680
105,980
61,277
90,462
47,680
288,254
49,750
62,735
40,695
4,970,984 $
222,598 $
22,554
101,198
43,969
139,139
71,720
199,605
102,058
165,743
90,100
—
215,589
61,526
151,388
155,842
115,735
338,788
150,800
98,984
2,447,336 $
865 $
140
721
2,338
716
687
259
365
305
466
1,113
258
1,029
434
1,057
490
2,441
505
533
663
49,819 $
2,024 $
267
1,217
512
1,655
642
2,619
689
1,444
574
—
2,646
742
1,432
1,288
1,121
3,710
1,895
1,278
25,755 $
13.23
7.00
8.29
14.05
10.70
12.23
5.84
7.08
8.49
7.87
10.01
6.05
9.71
7.08
11.69
10.27
8.47
10.15
8.50
16.30
10.02
9.09
11.84
12.03
11.63
11.90
8.95
13.12
6.75
8.71
6.37
—
12.27
12.05
9.46
8.27
9.68
10.95
12.56
12.91
10.52
COMBINED TOTAL
1,011
8,142,065
93.7 %
91.1 %
7,418,320 $
75,574 $
10.19
(1) Reflects leases executed through December 31, 2023 that commence subsequent to the end of the current reporting period.
(2) Annualized based rent per occupied square foot; assumes base rent as of the end of the current reporting period; excludes the impact of tenant concessions and rent abatements.
(3) This information is not available because the property is undeveloped.
(4) Square footage is net of the Company's on-premise management office and net of building square footage whereby the Company only leases the land.
(5) Includes property where a redevelopment opportunity exists.
9
Major Tenants
The following table sets forth information regarding the ten largest tenants in our operating portfolio based on annualized base rent as of December 31, 2023.
Tenants
Food Lion
Dollar Tree (1)
Kroger Co (2)
TJX Companies (3)
Planet Fitness
Piggly Wiggly
Lowes Foods (4)
Big Lots
Kohl's
Winn Dixie
Category
Grocery
Discount Retailer
Grocery
Discount Retailer
Gym
Grocery
Grocery
Discount Retailer
Discount Retailer
Grocery
$
$
Annualized Base
Rent
($ in 000s)
% of Total Annualized
Base Rent
Total Occupied Square
Feet
Percent Total Leasable
Square Foot
Annualized Base
Rent Per Occupied
Square Foot
4,476
2,214
2,097
1,703
1,497
1,363
1,223
1,100
1,031
984
17,688
5.92 %
2.93 %
2.77 %
2.25 %
1.98 %
1.80 %
1.62 %
1.46 %
1.36 %
1.30 %
23.39 %
549,000
255,000
239,000
195,000
140,000
170,000
130,000
171,000
147,000
134,000
2,130,000
6.74 % $
3.13 %
2.94 %
2.39 %
1.72 %
2.09 %
1.60 %
2.10 %
1.81 %
1.65 %
26.17 % $
8.15
8.68
8.77
8.73
10.69
8.02
9.41
6.43
7.01
7.34
8.30
(1) Line item comprises 18 Dollar Tree stores and 7 Family Dollar stores.
(2) Line item comprises 4 Kroger stores, 1 Harris Teeter store and 3 fuel stations.
(3) Line item comprises 4 Marshall's stores, 2 HomeGoods stores and 1 TJ Maxx store.
(4) Line item comprises 1 Lowes Foods store and 2 KJ's Market stores.
Lease Expirations
The following table sets forth information with respect to the lease expirations of our properties as of December 31, 2023.
Lease Expiration Period
Available
Month-to-Month
2024
2025
2026
2027
2028
2029
2030
2031
2032
Thereafter
Total
Number of Expiring
Leases
Total Expiring Square
Footage
% of Total Expiring
Square Footage
% of Total Occupied
Square Footage
Expiring
Expiring
Annualized Base
Rent (in 000s)
% of Total Annualized
Base Rent
Expiring Base
Rent Per Occupied
Square Foot
—
16
145
159
170
139
143
74
43
32
32
58
1,011
723,745
75,333
570,852
904,927
910,565
691,220
1,345,729
745,647
636,575
441,000
390,668
705,804
8,142,065
8.89 %
0.93 %
7.01 %
11.11 %
11.18 %
8.49 %
16.53 %
9.16 %
7.82 %
5.42 %
4.80 %
8.66 %
100.00 %
— % $
1.02 %
7.70 %
12.20 %
12.27 %
9.32 %
18.14 %
10.05 %
8.58 %
5.94 %
5.27 %
9.51 %
100.00 % $
—
620
6,634
9,635
9,962
8,711
12,592
6,970
4,884
4,288
3,442
7,836
75,574
— % $
0.82 %
8.78 %
12.75 %
13.18 %
11.53 %
16.66 %
9.22 %
6.46 %
5.67 %
4.55 %
10.38 %
100.00 % $
—
8.23
11.62
10.65
10.94
12.60
9.36
9.35
7.67
9.72
8.81
11.10
10.19
Property Management and Leasing Strategy
We self-administer our property management and substantially all of our leasing activities and operating and administrative functions (including leasing, legal, acquisitions, development,
data processing, finance and accounting). On-site
10
functions such as maintenance, landscaping, sweeping, plumbing and electrical are subcontracted out at each location and, to the extent permitted by their respective leases, the cost of these functions
is passed on to the tenants.
We believe that focused property management, leasing and customer retention are essential to maximizing the revenue per square foot, operating cash flow and value of our properties. Our
primary goal in property management is to maintain an attractive shopping environment on a cost effective basis for our tenants.
The majority of our property management and leasing functions are supervised and administered by us. We maintain regular contact with our tenants and frequently visit each asset to ensure
the proper implementation and execution of our market strategies. As part of our ongoing property management, we conduct regular physical property reviews to improve our properties, react to
changing market conditions and ensure proper maintenance.
Our leasing representatives are experienced in the markets in which we operate; they are familiar with current tenants and potential local, regional, and national tenants that would
complement our current tenant base. We study demographics, customer sales, merchandising mix and cultivate tenant relationships to optimize the sales performance of our centers and thereby
increase rents. We believe this hands-on approach maximizes the value of our shopping centers.
Item 3. Legal Proceedings.
See the discussion set forth under the heading “Commitments and Contingencies" in Note 8 to the accompanying audited consolidated financial statements.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Part II
Market Information
Our Common Stock is traded on Nasdaq under the symbol “WHLR.”
Approximate Number of Holders of Our Common Stock
As of March 4, 2024 there were 147 holders of record of our Common Stock. This number excludes stockholders whose stock is held in nominee or street name by brokers.
Dividend Policy
In March 2018, the Board of Directors suspended the payment of dividends on our Common Stock. The Board of Directors also suspended the quarterly dividends on shares of our Series A
Preferred Stock ("Series A Preferred"), Series B Convertible Preferred Stock ("Series B Preferred") and Series D Cumulative Convertible Preferred Stock ("Series D Preferred Stock"), beginning with
the three months ended December 31, 2018.
As the Company has failed to pay cash dividends on the outstanding Series D Preferred Stock, the annual dividend rate on the Series D Preferred Stock has increased to 10.75%; commencing
on the first day after the first missed quarterly payment, January 1, 2019 and will continue until such time as the Company has paid all accumulated and unpaid dividends on the Series D Preferred
Stock in full. Commencing September 21, 2023, the Series D Preferred Stock holders are entitled to cumulative cash dividends at an annual dividend rate of 12.75% increased by 2% of the liquidation
preference per annum on each subsequent anniversary thereafter, subject to a maximum annual dividend rate of 16%, including the 2% default rate. See Note 10, Equity and Mezzanine Equity, to the
accompanying audited consolidated financial statements.
11
As a result of the dividend suspension on the Series D Preferred Stock, our Charter provides that no dividends may be declared or paid on the Common Stock or on our other outstanding
preferred until all accumulated accrued and unpaid dividends on the Series D Preferred Stock have been paid in full. At this time, the Company does not intend to pay dividends other than those
required dividend distributions, if any, that will enable us to maintain our REIT status and to eliminate or minimize our obligation to pay income and excise taxes. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations-Future Liquidity Needs.”
Item 6. Reserved
Item 7. 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 audited consolidated financial statements and the notes thereto included
in this Form 10-K. All per share amounts, common units and shares outstanding, stock-based compensation, warrants, and conversion features of our Convertible Notes for all periods presented
reflect the one-for-ten Reverse Stock Split, which took effect on August 17, 2023. For more detailed information regarding the basis of presentation for the following information, you should read the
notes to the audited consolidated financial statements included in this Form 10-K.
Company Overview
We are a Maryland corporation focused on owning, leasing and operating income producing grocery-anchored centers, neighborhood centers, community centers and free-standing retail
properties. We have targeted properties located within developed areas, commonly referred to as in-fill, that are surrounded by communities that have strong demographics and dynamic, diversified
economies that will continue to generate jobs and future demand for commercial real estate. Our primary target markets include the Mid-Atlantic, Southeast and Northeast.
Our portfolio is comprised of seventy-five retail shopping centers and four undeveloped land parcels. Twenty-one of these properties are located in South Carolina, twelve in Georgia, ten in
Virginia, eight in Pennsylvania, six in North Carolina, four in Massachusetts, four in New Jersey, three in Florida, three in Connecticut, two in Kentucky, two in Tennessee, one in Alabama, one in
Maryland, one in West Virginia, and one in Oklahoma. The Company’s portfolio had total gross rentable space of approximately 8,142,000 square feet and a leased level of approximately 93.7% at
December 31, 2023.
In August 2022, the Company acquired Cedar, and as a result of such transaction acquired 19 shopping centers (the majority of which are grocery-anchored), which increased the Company’s
presence in the Northeast.
The consolidated financial statements included in this Form 10-K include Cedar starting from the date of acquisition. We have determined that this acquisition is not a variable interest entity,
as defined under the consolidation topic of the Financial Accounting Standards Board (the "FASB"), Accounting Standards Codification, or ASC, and we evaluated such entity under the voting model
and concluded we should consolidate the entity. Under the voting model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting rights and that
other equity holders do not have substantive participating rights.
Recent Trends and Activities
There have been several significant events in 2023 that have impacted our Company. These events are summarized below.
Series D Preferred Stock - Exchange Offer and Consent Solicitation
On November 22, 2022, the Company commenced an exchange offer (the "Exchange Offer"), which, as subsequently amended, provided for the exchange of up to 2,112,103 outstanding shares of
Series D Preferred Stock, representing 67% of the outstanding shares of Series D Preferred Stock, for (i) 6.00% Subordinated Convertible Notes due 2028, and (ii) Common Stock, in each case to
have been newly issued by the Company. As of the expiration of the Exchange Offer on January 20, 2023, 864,391 shares of Series D Preferred Stock (representing 26.8% of the total outstanding
Series D Preferred Stock) had been validly tendered (and not validly withdrawn) in the Exchange Offer. Accordingly, the condition that the holders of at least
12
66 2/3% of the outstanding shares of Series D Preferred Stock validly tender their Series D Preferred Stock into the Exchange Offer had not been satisfied and the Exchange Offer expired on January
20, 2023.
Series D Preferred Stock - Redemptions
After September 21, 2023, each holder of the Series D Preferred Stock has the right, at such holder’s option, to request that the Company redeem any or all of such holder’s shares on a
monthly basis (each redemption date, a “Holder Redemption Date”), 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
Holder Redemption Date, payable in cash or in shares of Common Stock, or any combination thereof, at the Company's option. Redemptions commenced on September 22, 2023, and the first Holder
Redemption Date was October 5, 2023.
During the year ended December 31, 2023, the Company processed 175 redemption requests, collectively redeeming 864,070 shares of Series D Preferred Stock. Accordingly, during the
year ended December 31, 2023, the Company issued 52,788,687 shares of Common Stock in settlement of an aggregate redemption price of approximately $32.7 million.
At December 31, 2023, the Company had received requests to redeem 9,843 shares of Series D Preferred Stock with
respect to the January 2024 Holder Redemption Date. As such, the redemption of these Series D Preferred Stock is considered certain at December 31, 2023 and the liquidation value associated with
these shares of $0.4 million is presented as a liability.
Dispositions
At December 31, 2023 and 2022, there were no assets held for sale.
The following properties were sold during the year ended December 31, 2023 (in thousands):
Disposal Date
Property
Contract Price
Gain
Net Proceeds
July 11, 2023
Carll's Corner Outparcel - Bridgeton, New Jersey
$
3,000
$
2,204 $
2,759
Land Acquisitions
On February 21, 2023, the Company purchased a 2.5 acre land parcel adjacent to St. George Plaza, located in St.
George, South Carolina, for $0.2 million.
On August 18, 2023, the Company purchased a 3.25 acre land parcel within Devine Street, located in Columbia, South Carolina, for $4.1 million (the "Devine Street Land Acquisition"). The
Devine Street Land Acquisition terminated the Company's ground lease associated with this property, a savings of $0.3 million in annual ground rent.
Term Loan Agreement, 12 properties
On May 5, 2023, the Company entered into a loan agreement (the "Term Loan Agreement, 12 properties") for $61.1 million at a fixed rate of 6.194% and interest-only payments due monthly
through June 2025. Commencing in July 2025, until the maturity date of June 1, 2033, monthly principal and interest payments will be $0.4 million. Loan proceeds were used to refinance loans on 12
properties, including $1.1 million in defeasance.
Term Loan Agreement, 8 properties
On May 18, 2023, the Company entered into a loan agreement (the "Term Loan Agreement, 8 properties") for $53.1 million at a fixed rate of 6.24% and interest-only payments due monthly
through June 2028. Commencing in July 2028, until the maturity date of June 10, 2033, monthly principal and interest payments will be $0.3 million. Loan proceeds were used to refinance loans on 8
properties, including $0.7 million in defeasance.
Timpany Plaza Loan Agreement
On September 12, 2023, the Company entered into a loan agreement (the "Timpany Plaza Loan Agreement") for $11.6 million at a fixed rate of 7.27% with interest-only payments due
monthly for the first twelve months. Commencing on
13
September 12, 2024, until the maturity date of September 12, 2028, monthly principal and interest payments will be made based on a 30-year amortization schedule calculated based on the principal
amount as of that time. On the closing date, the Company received $9.1 million of the $11.6 million, and the remaining $2.5 million will be received upon the satisfaction of certain lease-related
contingencies within one year of the agreement date. The Timpany Plaza Loan Agreement is collateralized by the Timpany Plaza shopping center.
Convertible Notes
The Company’s Convertible Notes bear interest at a rate of 7.00% per annum. Interest on the Convertible Notes is payable semi-annually in arrears on June 30 and December 31 of each
year.
For the years ended December 31,
2023
2022
Interest expense on the Convertible Notes consists of the following (in thousands, except for shares):
Series D Preferred Stock
number of shares
Series B Preferred
(1)
number of shares
(1)
Convertible Note interest
at 7% coupon
Fair value adjustment
Interest expense
—
1,511,541
306,380 $
— $
2,259 $
2,310 $
1,649 $
1,429 $
3,908
3,739
(1) Shares issued as interest payment on Convertible Notes.
On June 8, 2023, the Company paid down $0.6 million of the Convertible Notes through an open market purchase
of 23,784 units totaling $1.2 million. On September 11, 2023, the Company paid down $0.9 million of the Convertible Notes through an open market purchase of 35,000 units totaling $1.9 million.
As a result of these transactions the Company recognized a $1.6 million loss for the year ended December 31, 2023 which represents the fair value of the purchase over principal pay down. The loss is
included in "other expense" on the consolidated statements of operations.
As of December 5, 2023, the Conversion Price (as defined below) for the Convertible Notes was approximately $0.21 per share of the Company’s Common Stock (approximately 116.46
shares of Common Stock for each $25.00 of principal amount of the Convertible Notes being converted).
As of February 5, 2024, the Conversion Price for the Convertible Notes was approximately $0.12 per share of the Company’s Common Stock (approximately 209.84 shares of Common
Stock for each $25.00 of principal amount of the Convertible Notes being converted).
Related Party Transactions
Management and Leasing Services for Cedar
The Company performs property management and leasing services for Cedar, a subsidiary of the Company. During the years ended December 31, 2023 and 2022, Cedar paid the Company
$2.1 million and $1.0 million, respectively, for these services. Related party amounts due to the Company from Cedar were $8.1 million and $7.3 million as of December 31, 2023 and 2022,
respectively, and have been eliminated for consolidation purposes.
Investment in Stilwell Activist Investments, L.P
On June 1, 2023, the Company subscribed for an investment in the amount of $3.0 million for limited partnership interests in Stilwell Activist Investments, L.P., a Delaware limited
partnership (“SAI”). On September 1, 2023 and November 30, 2023, the Company subscribed for additional investments each in the amount of $3.5 million for limited partnership interests in SAI.
The Company’s SAI investment is accounted for under the equity method and measured at net asset value as a practical expedient and has not been classified within the fair value hierarchy.
All gains and losses, realized and unrealized, and fees are recorded through "gains (losses) on investment securities, net" on the consolidated statements of operations. As of December 31, 2023, the
fair value of the Company’s SAI investment was $10.7 million, which includes $10.0 million from subscriptions and $0.2 million in fees. Unrealized gains on investment securities, net of fees were
$0.7 million for the year ended December 31, 2023. See Note 4 to the accompanying audited consolidated financial statements for additional details.
14
The Company’s initial subscription in SAI was approved by the disinterested directors of the Company, and, after the formation of the Related Person Transactions Committee, the further
subscriptions in SAI were approved by that Committee.
Excepted Holder Limits
On December 4, 2023, the Board of Directors, under the terms of the Charter, created a Capital Stock Excepted Holder Limit of 55% and a Common Stock Excepted Holder Limit of 86% for
each of SAI, Stilwell Activist Fund, L.P., Stilwell Value Partners VII, L.P., and Stilwell Associates, L.P. (collectively, the “Investors”). Joseph Stilwell, a member of our Board of Directors, is the
managing member and owner of Stilwell Value LLC, which is the general partner of each of the Investors.
On December 5, 2023, the Company entered into an Excepted Holder Agreement with the Investors with respect to such limits. The Capital Stock Excepted Holder Limit provides that the
Investors are exempted from the Charter’s aggregate stock ownership limit of not more than 9.8% in value of the aggregate of the outstanding shares of all classes of the Company's capital stock (as
calculated under the definitions of “Aggregate Stock Ownership Limit” and “Beneficial Ownership” in the Charter) and are instead subject to the percentage limit established by the Board of
Directors. The Common Stock Excepted Holder Limit provides that the Investors are exempted from the Charter’s common stock ownership limit of not more than 9.8% in value of the aggregate of
the outstanding shares of the Company's Common Stock (as calculated under the definitions of “Common Stock Ownership Limit” and “Beneficial Ownership” in the Charter) and is instead subject to
the percentage limit established by the Board of Directors. The Capital Stock Excepted Holder Limit and Common Stock Excepted Holder Limit will automatically terminate upon reduction of the
Investors’ capital stock and Common Stock ownership below 9.8%, respectively.
In consideration of the grant of these Excepted Holder Limits, the Investors concurrently entered into a one-year letter agreement with the Company whereby each Investor agreed that it will
not exercise its right to convert the Convertible Notes into shares of Common Stock to the extent that such conversion would result in such Investor, whether on its own or as part of a “group” within
the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), becoming the direct or indirect “beneficial owner”, as defined in Rule 13d-3 under the
Exchange Act, of common equity of the Company representing 50% or more of the total voting power of all outstanding shares of common equity of the Company that is entitled to vote generally in
the election of directors.
Following the transfer of Common Stock to the Investors in consideration of the February 2024 Series D Preferred Stock redemptions made by the Investors, the Investors would have
beneficially owned or constructively owned an amount of capital stock in excess of the Prior Excepted Holder Limits. On February 5, 2024, the Board of Directors agreed to increase the prior
Excepted Holder Limits to permit this additional ownership and, accordingly, the Company entered into an amendment to the Excepted Holder Agreement with the Investors under which the Company
increased the Capital Stock Excepted Holder Limit granted to Investors under the Excepted Holder Agreement to 60% and the Common Stock Excepted Holder Limit to 90%.
Preferred Dividends
Commencing September 21, 2023, the Series D Preferred Stock holders were entitled to cumulative cash dividends at an annual dividend rate of 12.75% increased by 2% of the liquidation
preference per annum on each subsequent anniversary thereafter, subject to a maximum annual dividend rate of 16%, including the 2% default rate. The total cumulative dividends in arrears for Series
D Preferred Stock is $32.3 million as of December 31, 2023 (per share $12.48).
New Leases and Leasing Renewals
The following table presents selected lease activity statistics for our properties:
15
(1)
:
Renewals
Leases renewed with rate increase (sq feet)
Leases renewed with rate decrease (sq feet)
Leases renewed with no rate change (sq feet)
Total leases renewed (sq feet)
Leases renewed with rate increase (count)
Leases renewed with rate decrease (count)
Leases renewed with no rate change (count)
Total leases renewed (count)
Options exercised (count)
Weighted average on rate increases (per sq foot)
Weighted average on rate decreases (per sq foot)
Weighted average rate (per sq foot)
Weighted average change over prior rates
(1) (2)
:
New Leases
New leases (sq feet)
New leases (count)
Weighted average rate (per sq foot)
Years Ended December 31,
2023
2022
712,873
—
295,173
1,008,046
116
—
20
136
31
0.86
—
0.61
6.54 %
435,099
70
12.42
$
$
$
$
676,814
62,771
284,461
1,024,046
104
11
28
143
18
1.29
(1.17)
0.78
8.29 %
374,149
79
11.27
$
$
$
$
(1) Lease data presented is based on average rate per square foot over the renewed or new lease term.
(2) The Company does not include ground leases entered into for the purposes of new lease sq feet and weighted average rate (per sq foot) on new leases.
Critical Accounting Estimates
The following discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements included in this Form 10-K, which have been
prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of these consolidated financial statements requires us to make estimates,
assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an on-going basis, we evaluate our estimates based on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The critical accounting estimates and policies summarized in this section are discussed in further detail in the notes to the consolidated financial statements appearing elsewhere in this Form
10-K. We believe that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition. The
following accounting estimates are considered critical because they are particularly dependent on management’s judgment about matters that have a significant level of uncertainty at the time the
accounting estimates are made, and changes to those estimates could have a material impact on our financial condition or operating results.
16
Revenue Recognition
Principal components of our total revenues include base and percentage rents and tenant reimbursements. The Company combines lease and nonlease components in lease contracts, which
includes combining base rent and tenant reimbursement revenue. We accrue minimum (base) rent 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. Certain lease agreements contain provisions that grant additional rents based on tenants’ sales volumes (contingent or percentage rent) which
we recognize when the tenants achieve the specified targets as defined in their lease agreements. Although we periodically review the valuation of the asset/liability resulting from the straight-line
accounting treatment of our leases in light of any changes in lease terms, financial condition or other factors concerning our tenants, they are subject to uncertainty. These assessments are inherently
sensitive as they are based on the judgment of management and information available at the time of evaluation.
Rents and Other Tenant Receivables
We record a tenant receivable for amounts due from tenants such as base rents, tenant reimbursements and other charges allowed under the lease terms. We periodically review tenant
receivables for collectability and determine the need for an allowance for the uncollectible portion of accrued rents and other accounts receivable based upon customer creditworthiness (including
expected recovery of a claim with respect to any tenants in bankruptcy), historical bad debt levels and current economic trends. We consider a receivable past due once it becomes delinquent per the
terms of the lease; our 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.
Acquired Properties and Lease Intangibles
We allocate the purchase price of the acquired properties to land, building and improvements, identifiable intangible assets and to the acquired liabilities based on their respective fair values.
Identifiable intangibles include amounts allocated to acquired out-of-market leases, tenant relationships, the value of in-place leases and ground. We determine 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. Management also estimates costs to execute similar leases including leasing commissions, tenant
improvements, legal and other related expenses. Such amounts are based on estimates and forecasts which, by their nature, are highly subjective and may result in future changes in the event forecasts
are not realized.
Impairment of Long-Lived Assets
We periodically review investment properties for impairment on a property-by-property basis or whenever events or changes in circumstances indicate that the carrying value of investment
properties may not be recoverable, with an evaluation performed at least annually. These circumstances include, but are not limited to, declines in the property’s cash flows, occupancy and fair market
value. We measure any impairment of investment property when the estimated undiscounted future 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, we charge to income the excess of carrying value of the property over its estimated fair value. We estimate fair value using
unobservable data such as operating income, estimated capitalization rates or multiples, leasing prospects and local market information. These valuation assumptions are based on the three-level
valuation hierarchy for fair value measurement and represent Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair
value of the assets or liabilities.
The Company may decide to sell properties. Properties classified as held for sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. When the
carrying value exceeds the fair value, less estimated costs to sell, an impairment expense is recognized. The Company estimates fair value, less estimated closing costs, based on similar real estate
sales transactions. These valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 2 and 3 inputs. Level 2 inputs are quoted prices for
similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices. Level 3 inputs are unobservable inputs that
are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
17
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including stock
purchase warrants and convertible notes, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are
accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated
statement of operations. The assumptions used in these fair value estimates are based on the three-level valuation hierarchy for fair value measurement and represent Level 3 inputs. Level 3 inputs are
unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Series D Preferred Stock
The Series D Preferred Stock was initially classified as mezzanine equity because the redemption provisions were conditional upon the occurrence of an event that was not certain. The Series
D Preferred Stock was valued at net proceeds plus accrued and unpaid dividends. In 2023, this event became certain and in accordance with Accounting Standards Codification ("ASC") 480, the
Series D Preferred Stock was revalued at the redemption price which includes undeclared dividends, representing liquidation value. The adjustment to liquidation value was recognized in accumulated
deficit as an adjustment to redemption value. Additionally, in accordance with ASC 480, as holders exercise their redemption rights the Series D Preferred Stock becomes mandatorily redeemable and
the liquidation value of their exercise is classified as a liability.
Liquidity and Capital Resources
At December 31, 2023, our consolidated cash, cash equivalents and restricted cash totaled $39.8 million compared to consolidated cash, cash equivalents and restricted cash of $55.9 million
at December 31, 2022. Cash flows from operating activities, investing activities and financing activities for the years ended December 31, 2023 and 2022 are as follows (in thousands):
Operating activities
Investing activities
Financing activities
Operating Activities
Years Ended December 31,
2023
2022
Year Over Year Change
$
%
$
$
$
20,934 $
(31,521) $
(5,471) $
30,758 $
(133,512) $
118,200 $
(9,824)
101,991
(123,671)
(31.9)%
76.4 %
(104.6)%
Our cash flows from operating activities were $20.9 million and $30.8 million during the years ended December 31, 2023 and 2022, respectively, representing a decrease of 31.9% or $9.8
million primarily due to (1) a $12.5 million decrease in net changes in operating assets and liabilities due to timing of receipts and payments, (2) an $11.1 increase in corporate administrative
expenses, interest expense and other expenses, offset by (3) a $13.5 million increase in net operating income ("NOI") not attributable to same properties a result of the Cedar Acquisition.
Investing Activities
Our cash flows used in investing activities were $31.5 million during the year ended December 31, 2023, compared to cash flows used in investing activities of $133.5 million during the year
ended December 31, 2022, representing a decrease of 76.4% primarily due to (1) $135.5 million costs due to the Cedar Acquisition, described in Note 3 included in the accompanying audited
consolidated financial statements, partially offset by (2) $11.5 million increase in capital expenditures, (3) $10.0 million subscription in SAI, (4) $4.2 million in 2023 acquisitions and (5) $7.8 million
decrease in cash received from disposal of properties.
Financing Activities
Our cash flows used in financing activities were $5.5 million during the year ended December 31, 2023, compared to cash flows from financing activities of $118.2 million for the comparable
period in 2022.
Financing activities during the year ended December 31, 2023 primarily consists of:
18
Cash inflows:
• $16.4 million 2023 loan refinancing activities, net, including the Timpany Plaza Loan Agreement;
Cash outflows:
• $10.8 million for distributions paid on noncontrolling interests;
• $4.4 million payments for deferred financing costs;
• $1.8 million defeasance payments;
• $3.1 million repurchase of debt securities; and
• $1.8 million scheduled loan principal payments on debt.
Financing activities during the year ended December 31, 2022 primarily consisted of:
Cash inflows:
• $19.3 million 2022 loan refinancing activities, net; and
• $130.0 million loan related to the Cedar Acquisition;
Cash outflows:
• $12.7 million payments for deferred financing costs;
• $4.4 million scheduled loan principal payments on debt;
• $5.6 million loan principal payment related to the sale of Butler Square;
• $3.1 million loan principal payment related to the sale of Walnut Hill Plaza;
• $2.7 million for distributions paid on noncontrolling interests; and
• $2.6 million defeasance payments.
The Company continues to endeavor to manage its debt prudently with the objective of achieving a conservative capital structure and minimizing leverage within the Company. Our debt
balances, excluding unamortized debt issuance costs, consisted of the following (in thousands):
Fixed-rate notes
Total debt
December 31,
2023
2022
$
$
495,572 $
495,572 $
482,447
482,447
The weighted average interest rate and term of our fixed-rate debt are 5.42% and 8.2 years, respectively, at December 31, 2023. The weighted average interest rate and term of our fixed-rate
debt was 4.99% and 7.4 years, respectively, at December 31, 2022. We have $7.2 million of debt maturing during the year ending December 31, 2024. While we anticipate being able to refinance all
the loans at reasonable market terms upon maturity, our inability to do so may materially impact our financial position and results of operations. See Note 6 to the accompanying audited consolidated
financial statements for additional mortgage indebtedness details.
Nasdaq Notices
On June 26, 2023, the listing qualifications staff (the "Staff") of Nasdaq notified the Company that based on the Common Stock’s bid price closing below $1.00 per share for 30 consecutive
business days, the Company no longer complied with Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule") and that it had 180 calendar days to regain compliance. This rule requires listed securities
to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a
period of 30 consecutive business days.
In response, the Board of Directors determined that it was advisable to amend the Company’s charter to effect a one-for-ten reverse stock split of the Company’s Common Stock, which
reverse stock split was subsequently effected on August 17, 2023.
19
Primarily as a result of this reverse stock split, the closing bid price of the Company’s Common Stock was at least $1.00 per share for a minimum of ten consecutive business days, and the
Company regained compliance with Nasdaq’s Bid Price Rule on September 1, 2023.
However, the Company’s Common Stock bid price has again come under significant downward pressure primarily as a result of the Company’s Series D Preferred Stock holders having the
right, at each such holder’s option, after September 21, 2023, to require the Company to redeem on a monthly basis any or all of such holder’s shares of Series D Preferred Stock at a redemption price
of $25.00 per share, plus an amount equal to all accrued but unpaid dividends, if any, to and including the Holder Redemption Date. This holder redemption price may be paid in cash or in equal value
of shares of Common Stock, or in any combination thereof, at the Company’s option.
The Company has chosen to pay the monthly redemption price in equal value of shares of Common Stock.
On December 7, 2023, the Staff again notified the Company that based on the Common Stock’s bid price closing below $1.00 per share for 30 consecutive business days, the Company no
longer complied with Nasdaq’s Bid Price Rule and that it had a 180-day compliance period until June 4, 2024 to regain compliance.
Material Cash Requirements, Contractual Obligations and Commitments
Our expected material cash requirements for the year ended December 31, 2024 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, at December 31, 2023 are $7.2 million in principal and regularly scheduled payments due
in the year ended December 31, 2024 as described in Note 6 to the accompanying audited consolidated financial statements.
In addition, the Company has $3.1 million outstanding construction commitments at December 31, 2023.
In addition to liquidity required to fund debt payments and construction commitments, we may incur some level of capital expenditures during the year for our existing properties that cannot
be passed on to our tenants.
To meet these future liquidity needs, the Company:
•
•
•
had $18.4 million in cash and cash equivalents at December 31, 2023;
had $21.4 million held in lender reserves for the purpose of tenant improvements, lease commissions, real estate taxes and insurance at December 31, 2023; and
intends to use cash generated from operations during the year ended December 31, 2024.
Additionally, the Company plans to undertake measures to grow its operations and increase liquidity through delivering space currently leased but not yet occupied, backfilling vacant anchor
spaces, replacing tenants who are in default of their lease terms, increasing future lease revenue through tenant improvements partially funded by restricted cash, disposition of non-core assets in the
ordinary course of business and refinancing properties.
Our success in executing on our strategy will dictate our liquidity needs going forward. If we are unable to execute in these areas, our ability to grow may be limited without additional
capital.
Convertible Notes
The Convertible Notes could have the effect of causing, if interest is paid in the future in shares of Series D Preferred Stock, substantial dilution of the Series D Preferred Stock and reduction
in the value of any Series D Preferred Stock. In addition, depending on the prices at which the ongoing monthly redemptions of Series D Preferred Stock occur, the conversion price for the Convertible
Notes could be repeatedly adjusted downwards which would in turn cause significant pressure on the value of the Company’s Common Stock.
Series D Preferred Stock
20
As of December 31, 2023, the outstanding Series D Preferred Stock had an aggregate liquidation preference of approximately $64.8 million, with aggregate accrued and unpaid dividends in
the amount of approximately $32.3 million, for a total liquidation value of $97.1 million. After September 21, 2023, each holder of Series D Preferred Stock has the right, at such holder’s option, to
request that the Company redeem any or all of such holder’s shares of Series D Preferred Stock on a monthly basis.
As the Series D Preferred Holders’ continue to exercise their redemption rights on a monthly basis, the Company will continue to pay the aggregate redemption price in shares of our
Common Stock. The Company does not believe it is in its interests to liquidate assets or incur indebtedness to fund cash redemptions of the Series D Preferred Stock and, accordingly, it has no
intention of doing so. Therefore, the Company intends to continue to settle redemptions of Series D Preferred Stock in Common Stock. We believe that the issuance of Common Stock to settle
redemptions in Common Stock will continue to result in a substantial dilution of the outstanding Common Stock.
Recent Accounting Pronouncements
See Note 2 to the accompanying audited consolidated financial statements beginning on page 35 of this Annual Report on Form 10-K.
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022
Results of Operations
The following table presents a comparison of the consolidated statements of operations for the years ended December 31, 2023 and 2022, respectively (in thousands).
Revenues
Property operating expense
Property operating income
Depreciation and amortization
Impairment of assets held for sale
Corporate general & administrative
Gain on disposal of properties
Interest income
Gain on investment securities, net
Interest expense
Net changes in fair value of derivative liabilities
Gain on preferred stock redemptions
Other expense
Income tax expense
Net Income (Loss)
Less: Net income attributable to noncontrolling interests
Net Loss Attributable to Wheeler REIT
For the Years Ended December 31,
2022
2023
Changes
Dollars
Percent
$
$
102,325
34,870
67,455
(28,502)
—
(11,750)
2,204
484
685
(32,314)
3,458
9,893
(5,482)
(48)
6,083
10,770
(4,687)
$
$
$
76,645
25,731
50,914
(19,540)
(760)
(8,620)
2,604
65
—
(30,107)
(2,335)
—
(691)
—
(8,470)
3,984
(12,454) $
25,680
9,139
16,541
(8,962)
760
(3,130)
(400)
419
685
(2,207)
5,793
9,893
(4,791)
(48)
14,553
6,786
7,767
33.5 %
35.5 %
45.9 %
36.3 %
(15.4)%
644.6 %
(7.3)%
248.1 %
(693.3)%
170.3 %
n/a
n/a
n/a
n/a
Revenues were higher primarily as a result of (1) an increase in rental revenues of $25.1 million, which is primarily due to a $21.1 million increase in property revenues from the Cedar
Acquisition, partially offset by 2022 property sales, (2) an increase of $2.8 million in market lease amortization and (3) an increase of $1.1 million in same-property revenues. See Same-Property Net
Operating Income for further details about the changes within operating revenue.
21
Property Operating expenses were higher primarily as a result of (1) an increase of $7.6 million in property operating expenses from the Cedar Acquisition, partially offset by 2022 property
sales and (2) an increase of $1.5 million in same-property expenses.
Impairment was lower primarily as a result of the Harbor Point Land Parcel (defined below) held for sale in 2022.
Depreciation and amortization were higher primarily as a result of the Cedar Acquisition.
Corporate general and administrative expenses were higher primarily as a result of (1) an increase of $1.2 million in professional fees primarily a result of the Cedar Acquisition, (2) an
increase of $1.1 million in compensation and benefits primarily driven by hiring more employees due to the Cedar Acquisition and payroll related costs, and (3) an increase of $0.7 million in corporate
administration costs primarily a result of the Cedar Acquisition.
Interest expense was higher primarily as a result of a full year of the Cedar Acquisition. Below is a comparison of the components which make up interest expense (in thousands):
(1)
Property debt interest - excluding Cedar debt
Convertible Notes interest
Defeasance paid
Amortization of deferred financing costs
Property debt interest - Cedar
Total Interest Expense
(1) Includes the fair value adjustment for the paid-in-kind interest.
December 31,
Changes
2023
2022
Dollars
% Change
$
$
16,153 $
3,908
1,758
2,860
7,635
32,314 $
14,717 $
3,739
2,614
6,098
2,939
30,107 $
1,436
169
(856)
(3,238)
4,696
2,207
9.8 %
4.5 %
(32.7)%
(53.1)%
159.8 %
7.3 %
Net changes in the fair value of derivative liabilities increased, which represents a non-cash adjustment from a change in the fair value that includes adjustments in valuation assumptions.
See Note 7 to the accompanying audited consolidated financial statements for additional details.
Gain on preferred stock redemptions is a result of the redemptions of Series D Preferred Stock. The value of the Common Stock issued to holders redeeming their Series D Preferred Stock
is the volume weighted average price per share of our Common Stock for the ten consecutive trading days immediately preceding, but not including, the Holder Redemption Date as reported on
Nasdaq (the "VWAP"). During the year ended December 31, 2023, the Company has realized a gain of $9.9 million in the aggregate due to the closing price of the Common Stock on the last VWAP
date differing from the VWAP used to calculate the shares issued in each redemption round.
Other expense represents expenses which are non-operating in nature. Other expenses were $5.5 million for the year ended December 31, 2023, which consists of capital structure transaction
costs. Other expenses were $0.7 million for the year ended December 31, 2022, which consisted of legal settlement costs.
Same-Property Net Operating Income
NOI is a widely-used non-GAAP financial measure for REITs. The Company believes that NOI is a useful measure of the Company's property operating performance. The Company defines
NOI as property revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Because NOI excludes general and administrative
expenses, depreciation and amortization, interest expense, interest income, provision for income taxes, gain or loss on sale or capital expenditures and leasing costs and impairment charges, it provides
a performance measure, that when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact to
operations from trends in occupancy rates, rental rates and operating costs, providing perspective not immediately apparent from net income. The Company uses NOI to evaluate its operating
performance since NOI allows the Company to evaluate the impact of factors, such as occupancy levels, lease structure, lease rates and tenant base, have on the Company's results, margins and
returns. NOI should not be viewed as a measure of the Company's overall financial performance since it does not reflect general and administrative expenses, depreciation and amortization,
involuntary conversion, interest expense, interest income, provision for income taxes, straight-line rents, market lease amortization, gain or
22
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-property NOI from operating income (the most directly comparable GAAP financial measure). Same-property NOI consists only of those
properties owned during the entirety of all periods presented.
Operating Income
Adjustments:
Gain on disposal of properties
Corporate general & administrative
Impairment of assets held for sale
Depreciation and amortization
Straight-line rents
Above (below) market lease amortization, net
Other non-property revenue
NOI related to properties not defined as same-property
Same-Property Net Operating Income
Year Ended December 31,
2023
2022
(in thousands )
29,407
$
(2,204)
11,750
—
28,502
(1,370)
(4,849)
(135)
(20,061)
41,040
$
24,598
(2,604)
8,620
760
19,540
(800)
(2,079)
(23)
(6,607)
41,405
$
$
Total same-property NOI was $41.0 million and $41.4 million for the years ended December 31, 2023 and 2022, respectively, representing a decrease of 0.9%. Same-property NOI was
impacted by (1) $1.3 million increase in rental revenue driven by strong leasing activity, (2) $0.3 million increase in other revenues due to termination fees and enterprise zone credits; (3) $0.2 million
savings in rent expense due to the purchase of the Devine Street Land Acquisition, which terminated the Company's ground lease associated with this property, offset by a (4) $1.4 million increase in
property operating expenses necessary as part of financing requirements, (5) $0.3 million demolition of an outparcel building that was placed out of service and (6) an increase in credit losses from
tenants of $0.5 million.
NOI related to properties not defined as same-properties for the year ended December 31, 2023 and 2022 is attributable to the Cedar Acquisition and the 2022 property sales. The Cedar
Acquisition had property revenues of $33.2 million and $11.0 million, respectively, and property expenses of $13.1 million and $5.0 million, respectively, for the years ended December 31, 2023 and
2022.
Funds from Operations
We use funds from operations ("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 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.
23
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.
A reconciliation of net income (loss) to FFO available for common shareholders and AFFO (in thousands):
Net income (loss)
Depreciation and amortization of real estate assets
Impairment of assets held for sale
Gain on disposal of properties
FFO
Preferred stock dividends - undeclared
Dividends on noncontrolling interests preferred stock
Preferred stock accretion adjustments
FFO available to common stockholders and common unitholders
Other non-recurring and non-cash expenses
Gain on investment securities, net
Net changes in fair value of derivative liabilities
Gain on preferred stock redemptions
Straight-line rental revenue, net straight-line expense
Deferred financing cost amortization
Paid-in-kind interest
Above (below) market lease amortization, net
Recurring capital expenditures tenant improvement reserves
AFFO
Years Ended December 31,
2022
2023
$
$
6,083 $
28,502
—
(2,204)
32,381
(9,262)
(10,752)
460
12,827
2,051
(685)
(3,458)
(9,893)
(1,380)
2,860
3,908
(4,849)
(1,628)
(247) $
(8,470)
19,540
760
(2,604)
9,226
(9,056)
(3,913)
584
(3,159)
3,092
—
2,335
—
(768)
6,098
3,739
(2,079)
(1,354)
7,904
Other non-recurring and non-cash expenses are costs of the Company that we believe will not be incurred on a go-forward basis. Other non-recurring expenses of $2.1 million for the year
ended December 31, 2023, were primarily a result of $1.8 million in loan defeasance payments and $0.3 million costs to demolish decommissioned space not included in the Company's gross leasable
area. For the year ended December 31, 2022, other non-recurring expenses totaled $3.1 million, primarily including $2.6 million in loan defeasance payments a result of the 2022 loan refinancing
activities and $0.7 million legal settlement costs and severance, partially offset with $0.4 million nonrecurring revenue related to Cedar's recognition of easement revenue.
Inflation, Deflation and Economic Condition Considerations
The U.S. is experiencing elevated levels of inflation, which could continue or worsen. Substantially all of the Company’s tenant leases contain provisions designed to partially mitigate the
negative impact of inflation in the near term. Such lease provisions include clauses that require tenants to reimburse the Company for inflation-sensitive costs such as real estate taxes, insurance and
many of the operating expenses it incurs. In addition, many of our leases are for terms of less than ten years, which permits us to seek increased rents upon re-rental at market rates. However,
significant inflation rate increases over
24
a prolonged period of time may have a material adverse impact on the Company’s business. Conversely, deflation could lead to downward pressure on rents and other sources of income.
Interest rate increases could result in higher incremental borrowing costs for the Company and our tenants. The duration of the Company's indebtedness and our relatively low exposure to
floating rate debt have mitigated the direct impact of inflation and interest rate increases. The degree and pace of these changes have had and may continue to have impacts on our business.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
Item 8. Financial Statements and Supplementary Data.
The information required by this Item 8 is incorporated by reference to our Financial Statements beginning on page 30 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our principal executive officer and principal financial 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 our management, as appropriate, to allow timely decisions
regarding required disclosure. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of December 31, 2023, such disclosure controls and
procedures were effective to provide reasonable assurance that information required to be disclosed by us 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 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.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in rules promulgated
under the Exchange Act, is a process designed by, or under the supervision of, our CEO and CFO and effected by our Board of Directors, management and other personnel to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Internal control over financial reporting includes
those policies and procedures that:
•
•
•
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and
expenditures are being made only in accordance with authorizations of our management and our Board of Directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial
statements.
25
Our internal control over financial reporting is evaluated on a regular basis by personnel in our organization. The overall goals of these various evaluation activities are to monitor our internal
control over financial reporting and to make modifications as necessary, as disclosure and internal controls are intended to be dynamic systems that change (including improvements and corrections)
as conditions warrant.
Management conducted an assessment of the effectiveness of our company’s internal control over financial reporting as of December 31, 2023, utilizing the framework established in
“INTERNAL CONTROL-INTEGRATED FRAMEWORK” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on this assessment, management has
determined that our internal controls over financial reporting as of December 31, 2023 were effective.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
This Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal controls over financial reporting. Management's report was not
subject to attestation by our independent registered public accounting firm in accordance with SEC rules.
Item 9B. Other Information.
During the three months ended December 31, 2023, none of our officers or directors adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities
that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement," as defined in Item 408 of Regulation S-K.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Except as set forth below, the information required by this Item 10 of Part III will be contained in the Company’s definitive proxy statement for the 2023 Annual Meeting (our “Proxy
Statement”) and is incorporated herein by reference.
The Company has adopted a Code of Business Conduct and Ethics applicable to the directors, officers and employees. A copy of that code is available on the Company’s corporate website,
which does not form a part of this Annual Report on Form 10-K. We intend to post any amendments to such code, or any waivers of its requirements, on our website. The Code of Business Conduct
and Ethics is available at ir.whlr.us under "Governance - Governance Documents".
Item 11. Executive Compensation.
The information required by this Item 11 of Part III will be contained in our Proxy Statement and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Except as set forth below, the information required by this Item 12 of Part III will be contained in the Company’s Proxy Statement and is incorporated herein by reference.
Securities Authorized for Issuance Under Equity Compensation Plans
26
The following table sets forth information as of December 31, 2023 regarding our equity compensation plans and the Common Stock we may issue under the plans.
Plan Category
Equity compensation plans approved by stockholders
(1)
Equity compensation plans not approved by stockholders
Total
Equity Compensation Plan Information Table
Number of securities to be issued upon exercise of
outstanding options, warrants and rights
Weighted-average exercise price of outstanding
options, warrants and rights
Number of securities remaining available for future
issuance under equity compensation plans
(2)
1,500
—
1,500
—
—
—
15,381
—
15,381
(1) Includes our 2015 and 2016 Long-Term Incentive Plans, which authorized a maximum of 12,500 and 62,500 shares, respectively, of our Common Stock for issue. Awards are granted by the Compensation Committee.
(2) Includes 1,500 performance awards assuming maximum payout (as a result, this aggregate reported number may overstate actual dilution). Performance awards are not taken into account in the weighted-average exercise price as
such awards have no exercise price.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 of Part III will be contained in the Company’s Proxy Statement and incorporated herein by reference
Item 14. Principal Accounting Fees and Services.
The information by this Item 14 of Part III will be contained in the Company’s Proxy Statement and is incorporated herein by reference.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a)(1). Financial Statements.
The financial statements filed as a part of this Annual Report on Form 10-K are as follows:
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
(a)(2). Financial Statement Schedules.
•
•
Schedule II- Valuation and Qualifying Accounts
Schedule III- Real Estate and Accumulated Depreciation
(PCAOB ID: 677)
Page
28
30
31
32
33
34
All other financial statement schedules have been omitted because the required information of such schedules is not present, is not present in amounts sufficient to require a schedule or is
included in the consolidated financial statements.
(a)(3). Exhibits.
See the Exhibit Index at the end of this Annual Report on Form 10-K, which is incorporated by reference.
27
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Virginia Beach, Virginia
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Wheeler Real Estate Investment Trust, Inc. and Subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related
consolidated statements of operations, equity, and cash flows for each of the years in the two-year period ended December 31, 2023, and the related notes and schedules (collectively referred to as the
“consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and
2022, and the results of its operations and its cash flows for each of the years in the two-year period ended, December 31, 2023, in conformity with accounting principles generally accepted in the
United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of
the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the
audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of Real Estate for Impairment
Description of Matter
At December 31, 2023, the Company’s net real estate totaled $565.1 million. As more fully described in Note 2 to the consolidated financial statements, the Company evaluates its real estate
investments for impairment whenever events or changes in circumstances indicate that the carrying value of a real estate investment may not be recoverable. Management evaluates various qualitative
factors in determining whether or not events or changes in circumstances indicate that the carrying amount of a real estate investment may not be recoverable.
Auditing the Company’s impairment assessment involved subjectivity due to the estimation required to assess significant assumptions utilized in the recoverability of the real estate based on
undiscounted operating income and residual values, such as assumptions related to renewal and renegotiations of current leases, estimates of new leases on vacant spaces, and estimates of operating
costs.
28
How We Addressed the Matter in Our Audit
To test the Company’s evaluation of net real estate for impairment, we performed audit procedures that included, among others, assessing the methodologies applied, evaluating the significant
assumptions discussed above and testing the completeness and accuracy of the underlying data used in the analysis. We compared the recoverability calculated to the remaining net book value of the
assets to ensure recoverability for the properties’ remaining useful lives. We compared the significant assumptions used by management to relevant market information and other applicable sources. As
part of our evaluation, we performed sensitivity analyses of significant assumptions to evaluate the changes in the undiscounted cash flows of the related property that would result from changes in the
assumptions.
Derivative Liabilities
Description of Matter
At December 31, 2023, the Company had convertible notes with an outstanding principal balance of $31.5 million and 106,171 common stock warrants. Calculations and accounting for the notes
payable and embedded conversion features as well as the warrants require management’s judgments related to initial and subsequent recognition, use of a valuation model, and determination of the
appropriate inputs used in the selected valuation model. As more fully described in Note 7 to the consolidated financial statements, the Company utilizes a multinomial lattice model valuation
technique in measuring the fair value of the notes’ conversion features and the Black-Scholes valuation method in measuring the fair value of the warrants.
Auditing management’s valuations of the derivative liabilities was challenging due to the complexity of valuation model and the inputs that are highly sensitive to changes such as the common stock
market price, volatility, risk free rates, and yields.
How We Addressed the Matter in Our Audit
To test the accounting for the derivative liabilities resulting from the issuance of warrants and convertible notes, our audit procedures included, among others, inspection of the contracts, and testing
completeness and accuracy of the data used as well as management’s application of the relevant accounting guidance. We also involved our valuation specialists to evaluate the Company’s
determination of the fair value of the derivative liabilities, including testing the appropriateness of the methodology used and assessing the reasonableness of the underlying inputs.
/s/ Cherry Bekaert LLP
We have served as the Company’s auditor since 2012.
Virginia Beach, Virginia
March 5, 2024
29
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except par value and share data)
December 31,
2023
2022
ASSETS:
Real estate:
Land and land improvements
Buildings and improvements
Less accumulated depreciation
Real estate, net
Cash and cash equivalents
Restricted cash
Receivables, net
Investment securities - related party
Above market lease intangibles, net
Operating lease right-of-use assets
Deferred costs and other assets, net
Total Assets
LIABILITIES:
Loans payable, net
Below market lease intangible, net
Derivative liabilities
Operating lease liabilities
Series D Preferred Stock redemptions
Accounts payable, accrued expenses and other liabilities
Total Liabilities
Commitments and contingencies (Note 8)
Series D Cumulative Convertible Preferred Stock
EQUITY:
Series A Preferred Stock (no par value, 4,500 shares authorized, 562 shares issued and outstanding; $0.6 million in aggregate liquidation value)
Series B Convertible Preferred Stock (no par value, 5,000,000 authorized, 3,379,142 shares issued and outstanding; $84.5 million aggregate
liquidation preference)
Common Stock ($0.01 par value, 200,000,000 shares authorized, 53,769,787 and 979,396 shares issued and outstanding, respectively)
Additional paid-in capital
Accumulated deficit
Total Stockholders’ Deficit
Noncontrolling interests
Total Equity
Total Liabilities and Equity
See accompanying notes to audited consolidated financial statements.
30
$
$
$
$
149,908 $
510,812
660,720
(95,598)
565,122
18,404
21,403
13,126
10,685
2,114
9,450
28,028
668,332 $
477,574 $
17,814
3,653
10,329
369
17,065
526,804
96,705
453
44,998
538
257,572
(324,854)
(21,293)
66,116
44,823
668,332 $
144,537
494,668
639,205
(78,225)
560,980
28,491
27,374
13,544
—
3,134
15,133
35,880
684,536
466,029
23,968
7,111
16,478
—
18,398
531,984
101,518
453
44,911
10
235,081
(295,617)
(15,162)
66,196
51,034
684,536
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Consolidated Statements of Operations
(in thousands, except share and per share data)
REVENUE:
Rental revenues
Other revenues
Total Revenue
OPERATING EXPENSES:
Property operations
Depreciation and amortization
Impairment of assets held for sale
Corporate general & administrative
Total Operating Expenses
Gain on disposal of properties
Operating Income
Interest income
Gain on investment securities, net
Interest expense
Net changes in fair value of derivative liabilities
Gain on preferred stock redemptions
Other expense
Net Income (Loss) Before Income Taxes
Income tax expense
Net Income (Loss)
Less: Net income attributable to noncontrolling interests
Net Loss Attributable to Wheeler REIT
Preferred Stock dividends - undeclared
Deemed distribution related to preferred stock redemptions
Net Loss Attributable to Wheeler REIT Common Stockholders
Loss per share:
Basic and Diluted
Weighted-average number of shares:
Basic and Diluted
See accompanying notes to audited consolidated financial statements.
31
$
$
$
Years Ended December 31,
2022
2023
100,332 $
1,993
102,325
34,870
28,502
—
11,750
75,122
2,204
29,407
484
685
(32,314)
3,458
9,893
(5,482)
6,131
(48)
6,083
10,770
(4,687)
(9,262)
(15,288)
(29,237) $
75,195
1,450
76,645
25,731
19,540
760
8,620
54,651
2,604
24,598
65
—
(30,107)
(2,335)
—
(691)
(8,470)
—
(8,470)
3,984
(12,454)
(9,056)
—
(21,510)
(4.57) $
(22.04)
6,400,490
976,070
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Consolidated Statements of Equity
(in thousands, except share data)
Series A
Preferred Stock
Series B
Preferred Stock
Common Stock
Shares
Value
Shares
Value
Shares
Value
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders’
(Deficit)
Equity
Noncontrolling Interest
Operating
Partnership
Consolidated
Subsidiary
Total
Total
Equity
562
$
453
1,872,448 $ 41,189
972,053 $
10 $ 234,316 $
(274,107) $
1,861 $
1,941
$
—
$
1,941 $
3,802
—
—
—
—
—
—
—
—
10
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
87
—
(4,847)
(104)
303
—
—
—
—
—
1,511,541
3,739
—
—
—
—
—
—
—
—
—
7,040
—
—
—
—
—
562
453
3,379,142
44,911
979,396
—
104
161
500
—
—
—
—
—
—
—
—
—
—
(9,056)
(12,454)
87
—
—
—
161
(161)
500
(500)
3,739
—
(9,056)
(12,454)
—
—
—
71
—
—
—
—
—
—
—
(161)
(500)
87
—
—
—
—
3,739
64,845
(3,913)
3,913
64,845
(3,913)
3,984
64,845
(12,969)
(8,470)
235,081
(295,617)
(15,162)
1,351
64,845
66,196
51,034
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
87
—
—
—
—
625
1,141
—
—
140
57
41
—
—
—
—
—
87
140
57
41
22,781
—
52,788,687
528
22,253
—
—
—
—
—
(62)
—
—
—
—
—
—
—
—
—
—
(15,288)
(15,288)
—
(9,262)
(4,687)
—
(9,262)
(4,687)
—
—
(57)
(41)
—
—
—
—
18
—
—
—
—
—
—
—
—
(57)
(41)
87
140
—
—
—
22,781
—
(15,288)
—
(10,752)
10,752
—
(10,752)
10,770
—
(20,014)
6,083
562
$
453
3,379,142 $ 44,998
53,769,787 $
538 $ 257,572 $
(324,854) $
(21,293) $
1,271
$
64,845
$ 66,116 $ 44,823
Balance,
December 31, 2021
Accretion of Series B
Preferred
Stock discount
Conversion of Series B
Preferred
Stock to Common Stock
Conversion of Operating
Partnership units to Common
Stock
Adjustment for noncontrolling
interest in operating
partnership
Paid-in-kind interest, Issuance
of
Series B Preferred Stock
Noncontrolling interests
assumed
from the acquisition (1)
Dividends and distributions
Net (Loss) Income
Balance,
December 31, 2022
Accretion of Series B
Preferred
Stock discount
Conversion of Series D
Preferred
Stock to Common Stock
Conversion of Operating
Partnership units to Common
Stock
Adjustment for noncontrolling
interest in operating
partnership
Redemption of Series D
Preferred Stock to Common
Stock
Adjustment of Series D
Preferred
Stock to redemption value
Redemption of fractional units
as a result of reverse stock
split
Dividends and distributions
Net (Loss) Income
Balance,
December 31, 2023
(1) See Notes 1, 2 and 3 of the Notes to the audited consolidated financial statements for further details.
See accompanying notes to audited consolidated financial statements.
32
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the Years Ended
December 31,
2023
2022
OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile consolidated net income (loss) to net cash from operating activities
$
6,083
$
Depreciation and amortization
Deferred financing cost amortization
Changes in fair value of derivative liabilities
Above (below) market lease amortization, net
Paid-in-kind interest
Loss on repurchase of debt securities
Gain on preferred stock redemptions
Unrealized gain on investment securities, net
Straight-line expense
Gain on disposal of properties
Credit losses on operating lease receivables
Impairment of assets held for sale
Net changes in assets and liabilities
Receivables, net
Deferred costs and other assets, net
Accounts payable, accrued expenses and other liabilities
Net cash provided by operating activities
INVESTING ACTIVITIES:
Investment property acquisitions
Expenditures for real estate improvements
Purchase of investment securities
Cash received from disposal of properties
Net cash used in investing activities
FINANCING ACTIVITIES:
Payments for deferred financing costs
Dividends and distributions paid on noncontrolling interests
Loan proceeds
Loan principal payments
Repurchase of debt securities
Loan payment penalty
Net cash (used in) provided by financing activities
(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, end of period
Supplemental Disclosure:
The following table provides a reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash
Cash, cash equivalents, and restricted cash
See accompanying notes to audited consolidated financial statements.
33
28,502
2,860
(3,458)
(4,849)
3,908
1,647
(9,893)
(685)
(10)
(2,204)
522
—
(103)
(2,745)
1,359
20,934
(4,259)
(20,021)
(10,000)
2,759
(31,521)
(4,440)
(10,752)
123,230
(108,635)
(3,116)
(1,758)
(5,471)
(16,058)
55,865
39,807
18,404
21,403
39,807
$
$
$
$
$
$
(8,470)
19,540
6,098
2,335
(2,079)
3,739
—
—
—
32
(2,604)
361
760
(1,961)
4,381
8,626
30,758
(135,510)
(8,511)
—
10,509
(133,512)
(12,683)
(2,688)
400,000
(263,815)
—
(2,614)
118,200
15,446
40,419
55,865
28,491
27,374
55,865
Table of Contents
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Organization and Basis of Presentation and Consolidation
Wheeler Real Estate Investment Trust, Inc. is a Maryland corporation formed on June 23, 2011. The Trust serves as the general partner of the Operating Partnership, which was formed as a
Virginia limited partnership on April 5, 2012. At December 31, 2023, the Company owned 99.13% of the Operating Partnership. As of December 31, 2023, the Trust, through the Operating
Partnership, owned and operated seventy-five centers and four undeveloped properties. Twenty-one of these properties are located in South Carolina, twelve in Georgia, ten in Virginia, eight in
Pennsylvania, six in North Carolina, four in Massachusetts, four in New Jersey, three in Florida, three in Connecticut, two in Kentucky, two in Tennessee, one in Alabama, one in Maryland, one in
West Virginia, and one in Oklahoma. Accordingly, the use of the word "Company", "we," "our" or "us" refers to the Trust and its consolidated subsidiaries, except where the context otherwise
requires. The Company includes the Trust, the Operating Partnership, the entities included in the REIT formation and the entities acquired since November 2012. The Company prepared the
accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP. All material balances and transactions
between the consolidated entities of the Company have been eliminated.
The Company owns, leases and operates income producing grocery-anchored centers, neighborhood centers, community centers and free-standing retail properties with a strategy to acquire
high quality retail properties that generate attractive risk-adjusted returns. The Company targets properties in communities that have stable demographics. The Company considers properties that are
generally located in the most prominent shopping districts in their respective markets, ideally situated at major “Main and Main” intersections. The Company generally leases its properties to national
and regional supermarket chains and selects retailers that offer necessity and value-oriented services and items, and generate regular consumer traffic. The Company’s tenants carry goods and offer
services that are less impacted by fluctuations in the broader U.S. economy and consumers’ disposable income, which it believes generates more predictable property-level cash flows.
The Trust through the Operating Partnership owns Wheeler Interests, LLC ("WI") and Wheeler Real Estate, LLC ("WRE") (WRE and, together with WI, the "Operating Companies"). The
Operating Companies are Taxable REIT Subsidiaries ("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.
Acquisition of Cedar Realty Trust
On March 2, 2022, the Company entered into an Agreement and Plan of Merger (as amended, the "Merger Agreement") with Cedar, Cedar Realty Trust Partnership, L.P., ("Cedar OP"),
WHLR Merger Sub Inc., a wholly owned subsidiary of the Company, 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 consisting, in accordance with the terms of the Merger Agreement, of a payment to Cedar common
shareholders of merger consideration of $9.48 per common share.
On August 22, 2022, the Company completed the merger transaction with Cedar. As a result of the merger, the Company acquired all of the outstanding shares of the Cedar's common stock,
which ceased to be publicly traded on the NYSE. Cedar’s outstanding 7.25% Series B Preferred Stock and 6.50% Series C Preferred Stock remain outstanding and continue to trade on the NYSE.
Each outstanding share of common stock of Cedar and outstanding common unit of the Cedar OP held by persons other than Cedar immediately prior to the merger were cancelled and converted into
the right to receive a cash payment of $9.48 per share or unit. As a result Cedar became a subsidiary of the REIT.
During the year ended December 31, 2022 the Company incurred acquisition related costs of $5.51 million for the merger. These costs were capitalized as part of the acquisition and are
primarily comprised of professional fees and legal fees, see Note 3 for further details.
The consolidated financial statements included in this Form 10-K include Cedar starting from the date of acquisition. We have determined that this acquisition is not a variable interest entity,
as defined under the consolidation topic of the FASB, Accounting Standards Codification ("ASC"), and we evaluated such entity under the voting model and concluded we should consolidate the
entity. Under the voting model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting rights and that other equity holders do not have substantive
participating rights.
34
Table of Contents
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
2. Summary of Significant Accounting Policies
Real Estate Investments
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 allocates the purchase price of acquisitions to the various components of the asset based upon the fair value of each component which may be derived from various observable
or unobservable inputs and assumptions. Also, the Company may utilize third party valuation specialists. These components typically include buildings, land and any intangible assets related to out-
of-market leases, tenant relationships and in-place leases the Company determines to exist. The Company 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 at fair value 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.
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 or whenever events or changes in circumstances indicate that the carrying value of investment
properties may not be recoverable. 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 future operating income before depreciation and amortization, plus its residual value, is less than the carrying value of the property. Estimated
undiscounted operating income before depreciation and amortization include renewal and renegotiations of current leases, estimates of new leases on vacant spaces, estimates of operating costs and
fluctuating market conditions. The renewal and renegotiations of leases in some cases must be approved by additional third parties outside the control of the Company and the tenant. If such renewed
or renegotiated leases are approved at amounts below current estimates, then impairment adjustments may be necessary in the future. To the extent impairment has occurred, the Company charges to
income the excess of the carrying value of the property over its estimated fair value. The Company estimates fair value using unobservable data such as operating income, estimated capitalization
rates, or multiples, leasing prospects for vacant spaces and local market information. These valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and
represent Level 3 inputs. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets Held For Sale and Discontinued Operations
The Company may decide to sell properties that are held for use. The Company records these properties 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. Properties classified as held for sale are reported at the lower of
35
Table of Contents
2. Summary of Significant Accounting Policies (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
their carrying value or their fair value, less estimated costs to sell. When the carrying value exceeds the fair value, less estimated costs to sell, an impairment expense is recognized. The Company
estimates fair value, less estimated closing costs, based on similar real estate sales transactions. These valuation assumptions are based on the three-level valuation hierarchy for fair value measurement
and represent Level 2 and 3 inputs. Level 2 inputs are quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and
inputs other than quoted prices. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. See Note 3
for additional details on impairment of assets held for sale for the years ended December 31, 2023 and 2022.
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.
Conditional Asset Retirement Obligation
A conditional asset retirement obligation represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement depends on a future event that
may or may not be within the Company’s control. Currently, the Company does not have any conditional asset retirement obligations. However, any such obligations identified in the future would
result in the Company recording a liability if the fair value of the obligation can be reasonably estimated. Environmental studies conducted at the time the Company acquired its properties did not
reveal any material environmental liabilities, and the Company is unaware of any subsequent environmental matters that would have created a material liability. The Company believes that its
properties are currently in material compliance with applicable environmental, as well as non-environmental, statutory and regulatory requirements. The Company did not record any conditional asset
retirement obligation liabilities as of December 31, 2023 and 2022.
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, leasing costs and tenant security deposits.
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 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.
Tenant Receivables
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.
Above and Below Market Lease Intangibles, net
The Company determines the above and below market lease intangibles upon acquiring a property. Above and below market lease intangibles are amortized over the life of the respective
leases. Amortization of above and below market lease intangibles is recorded as a component of rental revenues.
36
Table of Contents
2. Summary of Significant Accounting Policies (continued)
Deferred Costs and Other Assets, net
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The Company’s deferred costs and other assets consist primarily of leasing commissions, leases in place, capitalized legal and marketing costs, tenant relationships and ground lease sandwich
interest intangibles associated with acquisitions. The Company’s lease origination costs consist primarily of the portion of property acquisitions allocated to lease originations and commissions paid to
third parties in connection with lease originations. The Company generally records amortization of lease origination costs on a straight-line basis over the terms of the related leases. Amortization of
deferred costs and other assets represents a component of depreciation and amortization expense.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including stock
purchase warrants and convertible notes, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are
accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated
statements of operations. The assumptions used in these fair value estimates are based on the three-level valuation hierarchy for fair value measurement and represent Level 3 inputs. Level 3 inputs are
unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Debt Issuance Costs
The Company may incur debt issuance costs in connection with raising funds through debt. These costs may be paid in the form of cash, or equity (such as warrants and convertible notes).
These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed. Debt
issuance costs are presented as a direct deduction from the carrying value of the associated debt liability in the consolidated balance sheets.
Series D Preferred Stock
The Series D Preferred Stock was initially classified as mezzanine equity because the redemption provisions were conditional upon the occurrence of an event that was not certain. The Series
D Preferred Stock was valued at net proceeds plus accrued and unpaid dividends. In 2023, this event became certain and in accordance with ASC 480, the Series D Preferred Stock was revalued at the
redemption price which includes undeclared dividends, representing liquidation value. The adjustment to liquidation value was recognized in accumulated deficit as an adjustment to redemption value.
Additionally, in accordance with ASC 480, as holders exercise their redemption rights the Series D Preferred Stock becomes mandatorily redeemable and the liquidation value of their exercise is
classified as a liability.
Operating Partnership Purchase of Stock
The Operating Partnership purchased 71,343 shares of the Series D Preferred Stock on September 22, 2020 from an unaffiliated investor at $15.50 per share. The Company considers the
purchase of the REIT's equity securities to be retired in the consolidated financial statements.
Revenue Recognition
Lease Contract Revenue
The Company has two classes of underlying assets relating to rental revenue activity, retail and office space. The Company retains substantially all of the risks and benefits of ownership of
these underlying assets and accounts for these leases as operating leases. The Company combines lease and nonlease components in lease contracts, which includes combining base rent and tenant
reimbursement revenue.
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. Additionally, certain lease agreements
37
Table of Contents
2. Summary of Significant Accounting Policies (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
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 as variable lease income.
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). This significantly reduces the Company’s exposure to increases in costs and operating
expenses resulting from inflation or other outside factors. These reimbursements are considered nonlease components which the Company combines with the lease component. The Company
calculates the tenant’s share of operating costs by multiplying the total amount of the operating costs by the tenant's pro-rata percentage of square footage to total square footage of the property. The
Company also receives payments for these reimbursements from substantially all its tenants throughout the year. The Company recognizes tenant reimbursements as variable lease income.
Additionally, the Company has tenants who pay real estate taxes directly to the taxing authority. The Company excludes these Company costs paid directly by the tenant to third parties on
the Company’s behalf from both variable revenue payments recognized and the associated property operating expenses. The Company does not evaluate whether certain sales taxes and other similar
taxes are the Company’s costs or tenants' costs. Instead, the Company accounts for these costs as tenant costs.
The Company recognizes lease termination fees, which are included in "other revenues" on the consolidated statements of operations, in the year that the lease is terminated and collection of
the fee is reasonably assured. Upon early lease termination, the Company records losses related to unrecovered intangibles and other assets.
Segment Information
The Company’s primary business is the ownership and operation of grocery-anchored shopping centers. The Company reviews operating and financial information for each property on an
individual basis and, accordingly, each property represents an individual operating segment. The Company evaluates financial performance using property operating income, which consists of rental
income and other property income, less operating expenses and real estate taxes. The Company has no operations outside of the United States of America. Therefore, the Company has aggregated its
properties into one reportable segment as the properties share similar long-term economic characteristics and have other similarities including the fact that they are operated using consistent business
strategies, are typically located in similar markets, and have similar tenant mixes.
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 stockholders and meet certain other asset and income tests, as well as other
requirements. 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 reasonable cause and certain other conditions were satisfied.
Management has evaluated the effect of the guidance provided by generally accepted accounting principles on Accounting for Uncertainty of Income Taxes and has determined that the
Company had no uncertain income tax positions.
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.
Other Expense
38
Table of Contents
2. Summary of Significant Accounting Policies (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Other expense represents expenses which are non-operating in nature. Other expenses were $5.5 million for the year ended December 31, 2023, which consists of capital structure transaction
costs. Other expenses were $0.7 million for the year ended December 31, 2022, which consisted of legal settlement costs.
Lease Commitments
The Company determines if an arrangement is a lease at inception. Operating leases, in which the Company is the lessee, are included in operating lease right-of-use ("ROU") assets and
operating lease liabilities on our consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and the lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, the
Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU assets include
any lease payments made and excludes lease incentives. The Company's lease terms may include options to extend the lease when it is reasonably certain that the company will exercise that option.
Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The Company elects the practical expedient to combine lease and associated nonlease components. The lease components are the majority of its leasing arrangements and the Company
accounts for the combined component as an operating lease. In the event the Company modifies existing ground leases or enters into new ground leases, such leases may be classified as finance leases.
Noncontrolling Interests
Noncontrolling interests is the portion of equity in the Operating Partnership not attributable to the Trust and noncontrolling interest attributable to the acquisition of Cedar. The ownership
interests not held by the parent are considered noncontrolling interests. Accordingly, noncontrolling interests have been reported in equity on the consolidated balance sheets but separate from the
Company’s equity. On the consolidated statements of operations, the subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling
interests. Consolidated statements of equity include beginning balances, activity for the period and ending balances for 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 $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.
The noncontrolling interest attributable to the acquisition of Cedar represents the fair value of Cedar's outstanding 7.25% Series B Preferred Stock ("Cedar Series B Preferred") and 6.50%
Series C Preferred Stock ("Cedar Series C Preferred") as of August 22, 2022, the date of acquisition. The valuation assumption was based on the three-level valuation hierarchy for fair value
measurements and represents Level 1 inputs. Level 1 inputs represent observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. The total cumulative
dividends for the Cedar Series B Preferred and Cedar Series C Preferred were $10.8 million and $3.9 million as of December 31, 2023 and 2022, respectively, and are included as an increase to net
loss attributable to Wheeler REIT Common Stockholders on the consolidated statements of operations.
Reclassifications
The Company has reclassified certain prior period amounts in the accompanying consolidated financial statements in order to be consistent with the current period presentation. These
reclassifications had no effect on net loss. All per share
39
Table of Contents
2. Summary of Significant Accounting Policies (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
amounts, common units and shares outstanding, warrants, and conversion features of the Convertible Notes for all periods presented reflect our one-for-ten Reverse Stock Split, which was effective
August 17, 2023.
Supplemental Consolidated Statements of Cash Flows Information
Non-Cash Transactions:
Conversion of common units to Common Stock
Conversion of Series B Preferred Stock to Common Stock
Conversion of Series D Preferred Stock to Common Stock
Accretion of Preferred Stock discounts
Accretion of Preferred stock to liquidation preference
Redemption of Series D Preferred Stock to Common Stock
Buildings and improvements included in accounts payable, accrued expenses and other liabilities
Other Cash Transactions:
Cash paid for taxes
Cash paid for amounts included in the measurement of operating lease liabilities
Cash paid for interest
Recently Issued Accounting Pronouncements
For the Years
Ended December 31,
2023
2022
(in thousands)
$
$
$
$
$
$
$
$
$
$
57 $
— $
140 $
460 $
15,288 $
(33,044) $
1,047 $
48 $
1,001 $
25,216 $
160
104
—
584
—
—
238
—
956
19,957
In November 2023, the FASB issued guidance which requires disclosure of incremental segment information on both an annual and interim basis. The guidance will require that the
Company continue to disclose existing segment information required by FASB Accounting Standards Codification Topic 280, as well as significant segment expenses and other segment items that are
regularly provided to the chief operating decision maker ("CODM"). The Company will also be required to disclose the title and position of the CODM and how the CODM uses reported measures of
segment profit or loss in assessing segment performance and deciding how to allocate resources. The guidance will be effective for the Company's fiscal year beginning on January 1, 2024 and interim
periods within the Company's fiscal year beginning on January 1, 2025. The Company is currently in the process of evaluating the guidance, but does not believe it will have a material effect on the
Company's consolidated financial statements.
Other accounting standards that have been recently 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.
40
Table of Contents
3. Real Estate
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
A significant portion of the Company’s land, buildings and improvements serve as collateral for its mortgage loans. Accordingly, restrictions exist as to the encumbered property’s
transferability, use and other common rights typically associated with property ownership.
The Company’s depreciation expense on investment properties was $18.1 million and $13.5 million for the years
ended December 31, 2023 and 2022, respectively.
St. George Plaza Land Acquisition
On February 21, 2023, the Company purchased a 2.5 acre land parcel adjacent to St. George Plaza, located in St.
George, South Carolina, for $0.2 million.
Devine Street Land Acquisition
On August 18, 2023, the Company purchased a 3.25 acre land parcel within Devine Street, located in Columbia, South Carolina, for $4.1 million. The Devine Street Land Acquisition
terminated the Company's ground lease associated with this property.
Assets Held for Sale, Impairment and Dispositions
Impairment expenses on assets held for sale are a result of reducing 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. No impairment expense was recorded for the year ended December 31, 2023.
Impairment expense was $0.8 million for the year ended December 31, 2022 resulting from reducing the carrying value of an approximately 5 acre land parcel held by Harbor Point Associates, LLC,
a wholly-owned subsidiary of the Company (the "Harbor Point Land Parcel"). The Harbor Point Land Parcel did not meet the requirements to be classified as held for sale at December 31, 2023 or
2022.
The following properties were sold during the years ended December 31, 2023 and 2022 (in thousands):
Disposal
July 11, 2023
December 9, 2022
January 11, 2022
Cedar Acquisition
Property
Contract Price
Gain (Loss)
Net Proceeds
Carll's Corner Outparcel
Butler Square
Walnut Hill Plaza
$
3,000 $
9,250
1,986
2,204 $
2,619
(15)
2,759
8,723
1,786
On August 22, 2022, the Company acquired Cedar, a 2.9 million square foot shopping center portfolio consisting of 19 properties located primarily in the Northeast from Virginia to
Massachusetts (the "Cedar Portfolio"). The Cedar Portfolio was acquired through the purchase of the issued and outstanding shares of Cedar’s common stock, par value $0.06 per share (the “Cedar
Common Stock”), and the issued and outstanding common units of Cedar OP held by persons other than Cedar for an aggregate of $135.5 million of cash merger consideration and acquisition costs.
The following summarizes the consideration paid and the purchase allocation of assets acquired and liabilities assumed in conjunction with the acquisition described above in accordance with
Accounting Standards Update ("ASU") 2017-01, along with a description of the methods used to determine the purchase price allocation (in thousands, unaudited). In determining the purchase price
allocation, the Company considered many factors including, but not limited to, cash flows, market capitalization rates, location, occupancy rates, appraisals, other acquisitions and management’s
knowledge of the current acquisition market for similar properties. The following table summarizes the purchase price allocation based on the Company's initial valuation, including estimates and
assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed (in thousands):
41
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Table of Contents
3. Real Estate (continued)
Building and building improvements (a)
Land and land improvements (a)
Lease intangibles (b)
Above market lease (c)
Right of use asset adjustment, ground lease (d)
Cash, accounts receivable and other assets
Total assets acquired
Below market lease (c)
Lease Liabilities, ground lease (d)
Accounts payable and other liabilities
Total liabilities acquired
Noncontrolling interest (e)
Purchase price allocation of net assets acquired, excluding noncontrolling interests
Purchase consideration: (f)
Cash merger consideration
Capitalized acquisition costs
$
$
$
$
137,120
47,899
28,215
1,718
2,913
14,242
232,107
(23,622)
(3,552)
(4,578)
(31,752)
(64,845)
135,510
130,000
5,510
135,510
a. Represents the purchase price allocation of the net investment properties acquired, which includes land, buildings, site improvements and tenant improvements. The purchase price allocation
was determined using following approaches:
i.
ii.
the market approach valuation methodology for land by considering similar transactions in the markets;
a combination of the cost approach and income approach valuation methodologies for buildings, including replacement cost evaluations, "go dark" analyses and residual calculations
incorporating the land values; and
iii.
the cost approach valuation methodology for site and tenant improvements, including replacement costs and prevailing quoted market rates.
b. Represents the purchase price allocation of lease intangibles and other assets. Lease intangibles include in place
leases. The income approach was used to determine the allocation of these intangible assets which included estimated market rates and expenses.
c. Represents the purchase price allocation of above and below market leases. The income approach was used to determine the allocation of above/below market leases using market rental rates for
similar properties.
d. Represents the purchase price allocation of the lease liability and corresponding right of use asset associated with a ground lease expiring in 2071. The Company used an incremental borrowing
rate of 5.25% for the purpose of calculating the lease liability.
e. Represents the fair market value of Cedar's outstanding 7.25% Series B Preferred Stock and 6.50% Series C Preferred Stock.
f. Represents merger consideration and capitalized transaction costs.
42
Table of Contents
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
4. Investments Securities - Related Party
On June 1, 2023, the Company subscribed for an investment in the amount of $3.0 million for limited partnership interests in Stilwell Activist Investments, L.P., a Delaware limited partnership
(“SAI”). On September 1, 2023, and November 30, 2023, the Company subscribed for additional investments each in the amount of $3.5 million for limited partnership interests in SAI. The
investment objective of SAI is to seek long-term capital appreciation through investing primarily in publicly-traded undervalued financial institutions or businesses with a strong financial component,
or the securities of any of them, and pursuing an activist shareholder agenda with respect to those institutions.
Stilwell Value LLC ("Value") is the general partner of SAI. Joseph Stilwell, a member of the Company's Board of Directors, is the managing member of Value and a limited partner in funds
advised by Value. Additionally, E.J. Borrack, a member of the Board of Directors, serves as the General Counsel to Value and its affiliated entities, including SAI and related funds, and is a limited
partner in one of the funds advised by Value. Megan Parisi, a member of the Company’s Board of Directors, serves as the Director of Communications to Value and its affiliated entities, including
SAI and related funds, is a non-managing member of Value and is a limited partner in one of the funds advised by Value.
The Company’s initial subscription in SAI was approved by the disinterested directors of the Company, and, after the formation of the Related Person Transactions Committee, the further
subscriptions in SAI were approved by that Committee.
A portion of SAI's underlying investments are in the Company's own equity and debt securities.
SAI records investment transactions based on trade date. Realized gains and losses from investment transactions are determined on a specific identification basis. Dividend income, net of
withholding taxes, and dividend expense are recognized on the ex-dividend date, and interest income and expense are recognized on an accrual basis. Discounts and premiums to the face amount of
debt securities are accreted and amortized using the effective interest rate method over the lives of the respective debt securities.
The Company may not withdraw its capital from SAI for a period of one year measured from the date of the Company's initial investment, subject to certain exceptions.
In consideration for management, administrative and operational services, limited partners of SAI pay a management fee to an affiliate of Value each calendar quarter, in advance, equal to
0.25% (an annualized rate of 1%) of each limited partner’s capital account balance on the first day of such calendar quarter. In addition, as of the last day of each specified performance period, an
incentive allocation of 20% of the amount by which the “positive performance change,” if any, that has been credited to the capital account of a limited partner during such period exceeds any positive
balance in such limited partner’s “carryforward account,” is debited from the limited partner’s capital account and is simultaneously credited to the capital account of Value.
The Company’s SAI investment is accounted for under the equity method and measured at net asset value as a practical expedient and has not been classified within the fair value hierarchy. All
gains and losses, realized and unrealized, and fees are recorded through "gain on investment securities, net" on the consolidated statements of operations. As of December 31, 2023, the fair value of
the Company’s SAI investment was $10.7 million, which includes $10.0 million from subscriptions and $0.2 million in fees. Unrealized gains on investment securities, net of fees were $0.7 million
for the year ended December 31, 2023.
5. Deferred Costs and Other Assets, net
Deferred costs and other assets, net of accumulated amortization are as follows (in thousands):
43
Table of Contents
5. Deferred Costs and Other Assets, net (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
Leases in place, net
Lease origination costs, net
Ground lease sandwich interest, net
Tenant relationships, net
Legal and marketing costs, net
Prepaid expenses
Other
Total deferred costs and other assets, net
December 31,
2023
2022
$
$
16,663 $
7,461
1,119
280
278
2,224
3
28,028 $
24,956
7,165
1,393
500
389
1,456
21
35,880
As of December 31, 2023 and 2022, the Company’s intangible accumulated amortization totaled $69.9 million and $62.4 million, respectively. During the years ended December 31, 2023
and 2022, the Company’s intangible amortization expense totaled $10.4 million and $6.1 million, respectively. Future amortization of leases in place, lease origination costs, ground lease sandwich
interest, tenant relationships, and legal and marketing costs is as follows (in thousands):
For the Years Ended December 31,
2024
2025
2026
2027
2028
Thereafter
Leases in
place, net
Lease
origination
costs, net
Ground lease sandwich
interest, net
Tenant
relationships, net
Legal &
marketing
costs, net
Total
$
$
5,045 $
3,522
2,214
1,782
1,192
2,908
16,663 $
1,293 $
1,161
1,017
908
732
2,350
7,461 $
44
274 $
274
274
274
23
—
1,119 $
124
62
11
11
11
61
280
$
$
82
60
45
31
20
40
278
$
$
6,818
5,079
3,561
3,006
1,978
5,359
25,801
Table of Contents
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
6. Loans Payable, net
The Company’s loans payable consist of the following (in thousands, except monthly payment):
Property/Description
Cypress Shopping Center
Conyers Crossing
Winslow Plaza
Tuckernuck
Chesapeake Square
Sangaree/Tri-County
Timpany Plaza
Village of Martinsville
Laburnum Square
Rivergate (1)
Convertible Notes
Term loan, 22 properties
JANAF (2)
Cedar term loan, 10 properties
Patuxent Crossing/Coliseum Marketplace
Term loan, 12 properties
Term loan, 8 properties
Term loans - fixed interest rate
Total Principal Balance
Unamortized deferred financing cost
Total Loans Payable, net
$
$
$
$
$
$
$
Monthly Payment
34,360
Interest only
24,295
32,202
23,857
32,329
Interest only
89,664
Interest only
100,222
Interest only
Interest only
Interest only
Interest only
Interest only
Interest only
Interest only
various
Interest
Rate
4.70%
4.67%
4.82%
5.00%
4.70%
4.78%
7.27%
4.28%
4.28%
4.25%
7.00%
4.25%
5.31%
5.25%
6.35%
6.19%
6.24%
4.47% (3)
Maturity
December 31, 2023
December 31,
2022
$
July 2024
October 2025
December 2025
March 2026
August 2026
December 2026
September 2028
July 2029
September 2029
September 2031
December 2031
July 2032
July 2032
November 2032
January 2033
June 2033
June 2033
various
$
5,769
5,960
4,331
4,771
4,014
5,990
9,060
14,755
7,665
17,557
31,530
75,000
60,000
110,000
25,000
61,100
53,070
—
495,572
(17,998)
$
477,574
$
5,903
5,960
4,409
4,915
4,106
6,086
—
15,181
7,665
18,003
33,000
75,000
60,000
110,000
25,000
—
—
107,219
482,447
(16,418)
466,029
(1) In October 2026, the interest rate under this loan changes to a variable interest rate equal to the 5 year U.S. Treasury Rate plus 2.70%, with a floor of 4.25%.
(2) Collateralized by JANAF properties.
(3) Contractual interest rate weighted average.
Walnut Hill Plaza Payoff
In conjunction with the Walnut Hill Plaza sale, as detailed in Note 3, the Company made a $1.8 million principal paydown on the Walnut Hill Plaza loan. On February 17, 2022 the Company
paid the remaining loan balance of $1.3 million in full.
Term Loan Agreement, 22 properties
On June 17, 2022, the Company entered into a term loan agreement (the “Term Loan Agreement, 22 properties”) with Guggenheim Real Estate, LLC, for $75.0 million at a fixed rate of
4.25% with interest-only payments due monthly. Commencing on August 10, 2027, until the maturity date of July 10, 2032, monthly principal and interest payments will be made based on a 30-year
amortization schedule calculated based on the principal amount as of that time. The Term Loan Agreement, 22 properties proceeds were used to refinance eleven other loans, including paying
$1.5 million in defeasance.
JANAF Loan Agreement
On July 6, 2022, the Company entered into a loan agreement (the “JANAF Loan Agreement”) with CITI Real Estate Funding Inc. for $60.0 million at a fixed interest rate of 5.31% with
interest-only payments due monthly through maturity, July 6, 2032. The JANAF Loan Agreement proceeds were used to refinance three other loans, including paying $1.2 million in defeasance.
KeyBank-Cedar Loan Agreement
On August 22, 2022, Cedar entered into a loan agreement with KeyBank National Association for $130.0 million (the “KeyBank-Cedar Loan Agreement”) and was collateralized by 19
properties.
The obligations under the KeyBank-Cedar Loan Agreement were satisfied in full with the proceeds of the loans under the Cedar Term Loan Agreement, 10 properties (defined below) and the
Patuxent Crossing/Coliseum Marketplace Loan Agreement (defined below).
45
Table of Contents
6. Loans Payable, net (continued)
Cedar Term Loan Agreement, 10 properties
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
On October 28, 2022, Cedar entered into a loan agreement (the “Cedar Term Loan Agreement, 10 properties”) with Guggenheim Real Estate, LLC, for $110.0 million at a fixed rate of 5.25%
with interest-only payments due monthly. Wheeler REIT, L.P. provided a limited recourse indemnity in connection with the loan. Commencing on December 10, 2027, until the maturity date of
November 10, 2032, monthly principal and interest payments will be made based on a 30-year amortization schedule calculated based on the principal amount as of that time. The Cedar Term Loan
Agreement, 10 properties proceeds were used to refinance a portion of Cedar’s property portfolio that were previously collateralized by the KeyBank-Cedar Loan Agreement.
Butler Square Payoff
On December 9, 2022, the Company made a $5.6 million principal payment on the Butler Square loan in conjunction with the sale of the Butler Square property, as detailed in Note 3.
Patuxent Crossing/Coliseum Marketplace Loan Agreement
On December 21, 2022, Cedar entered into a loan agreement (the "Patuxent Crossing/Coliseum Marketplace Loan Agreement”) with CITI Real Estate Funding, Inc. for $25.0 million at a
fixed rate of 6.35% with interest-only payments due monthly through maturity, January 6, 2033. The Patuxent Crossing/Coliseum Marketplace Loan Agreement proceeds were used to satisfy the
remaining obligations of the KeyBank-Cedar Loan Agreement and released the remaining collateral under that agreement.
Term Loan Agreement, 12 properties
On May 5, 2023, the Company entered into the Term Loan Agreement, 12 properties for $61.1 million at a fixed rate of 6.194% and interest-only payments due monthly through June 2025.
Commencing in July 2025, until the maturity date of June 1, 2033, monthly principal and interest payments will be $0.4 million. Loan proceeds were used to refinance the loans on 12 properties,
including $1.1 million in defeasance.
Term Loan Agreement, 8 properties
On May 18, 2023, the Company entered into the Term Loan Agreement, 8 properties for $53.1 million at a fixed rate of 6.24% and interest-only payments due monthly through June 2028.
Commencing in July 2028, until the maturity date of June 10, 2033, monthly principal and interest payments will be $0.3 million. Loan proceeds were used to refinance the loans on 8 properties,
including $0.7 million in defeasance.
Timpany Plaza Loan Agreement
On September 12, 2023, the Company entered into the Timpany Plaza Loan Agreement for $11.6 million at a fixed rate of 7.27% with interest-only payments due monthly for the first twelve
months. Commencing on September 12, 2024, until the maturity date of September 12, 2028, monthly principal and interest payments will be made based on a 30-year amortization schedule
calculated based on the principal amount as of that time. On the closing date, the Company received $9.1 million of the $11.6 million, and the remaining $2.5 million will be received upon the
satisfaction of certain lease-related contingencies within one year of the agreement date. The Timpany Plaza Loan Agreement is collateralized by the Timpany Plaza shopping center.
Debt Maturities
The Company’s scheduled principal repayments on indebtedness as of December 31, 2023, are as follows (in thousands):
46
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Table of Contents
6. Loans Payable, net (continued)
For the years ended December 31,
2024
2025
2026
2027
2028
Thereafter
Total principal repayments and debt maturities
Convertible Notes
$
$
7,220
12,313
16,261
3,048
12,924
443,806
495,572
The Company’s Convertible Notes bear interest at a rate of 7.00% per annum. Interest on the Convertible Notes is payable semi-annually in arrears on June 30 and December 31 of each year,
at the Company's election: (a) in cash; (b) in shares of Series B Preferred; (c) in shares of Series D Preferred Stock; or (d) in any combination of (a), (b), and/or (c). For purposes of determining the
value of Series B Preferred and Series D Preferred Stock paid as interest on the Convertible Notes, each share of Series B Preferred and Series D Preferred Stock shall be deemed to have a value equal
to the product of (x) the average of the VWAPs (as defined in the Indenture) for the Series B Preferred or the Series D Preferred Stock, as the case may be, for the 15 consecutive trading days ending
on the third business day immediately preceding the relevant interest payment date, and (y) 0.55.
For the years ended December 31,
2023
2022
Interest expense on the Convertible Notes consists of the following (in thousands, except for shares):
Series D Preferred Stock
number of shares
Series B Preferred
(1)
number of shares
(1)
Convertible Note interest
at 7% coupon
Fair value adjustment
Interest expense
—
1,511,541
306,380 $
— $
2,259 $
2,310 $
1,649 $
1,429 $
3,908
3,739
(1) Shares issued as interest payment on Convertible Notes.
On June 8, 2023, the Company paid down $0.6 million of the Convertible Notes through an open market purchase
of 23,784 units totaling $1.2 million. On September 11, 2023, the Company paid down $0.9 million of the Convertible Notes through an open market purchase of 35,000 units totaling $1.9 million.
As a result of these transactions the Company recognized a $1.6 million loss for the year ended December 31, 2023 which represents the fair value of the purchase over principal pay down. The loss is
included in "other expense" on the consolidated statements of operations.
The Convertible Notes are convertible, in whole or in part, at any time, at the option of the holders of the Convertible Notes, into shares of the Company’s Common Stock at a conversion
price of $62.50 per share of the Company’s Common Stock (the “Conversion Price”); provided, however, that if at any time after September 21, 2023, holders of the Series D Preferred Stock have
required the Company to redeem (payable in cash or stock) in the aggregate at least 100,000 shares of Series D Preferred Stock, then the Conversion Price will be adjusted to the lower of (i) 55% of
the Conversion Price or (ii) a 45% discount to the lowest price at which any Series D Preferred Stock was converted into the Common Stock. Upon a change of control, each Convertible Note will
mandatorily convert into shares of the Company’s Common Stock equal to: (i) the principal amount of each Convertible Note divided by (ii) the product of (x) the average of the per share volume-
weighted average prices for the Common Stock for the 15 consecutive trading days ending on the third business day immediately preceding the date of such change of control, and (y) 0.55. After
January 1, 2024, the Company may redeem the Convertible Notes at any time (in whole or in part) at the Company's option at a redemption price equal to 100% of the principal amount thereof plus
accrued and unpaid interest as of the redemption date (the "Note Redemption Price"). The Note Redemption Price may be paid: (a) in cash; (b) in shares of Common Stock; or (c) in any combination
of (a) and (b).
As of December 5, 2023, the Conversion Price for the Convertible Notes was approximately $0.21 per share of the Company’s Common Stock (approximately 116.46 shares of Common
Stock for each $25.00 of principal amount of the Convertible Notes being converted).
47
Table of Contents
6. Loans Payable, net (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The Convertible Notes are subordinate and junior in right of payment to the Company's obligations to the holders of senior indebtedness, and that in the case of any insolvency, receivership,
conservatorship, reorganization, readjustment of debt, marshalling of assets and liabilities or similar proceedings or any liquidation or winding-up of or relating to the Company as a whole, whether
voluntary or involuntary, all obligations to holders of senior indebtedness shall be entitled to be paid in full before any payment shall be made on account of the principal or interest on the Convertible
Notes.
Fair Value Measurements
The fair value of the Company’s fixed rate secured term loans was estimated using available market information and discounted cash flow analyses based on borrowing rates the Company
believes it could obtain with a similar term and maturities. As of December 31, 2023 and December 31, 2022, the fair value of the Company’s fixed rate secured term loans, which were determined to
be Level 3 within the valuation hierarchy, was $420.8 million and $429.1 million, respectively, and the carrying value of such loans, was $451.2 million and $440.2 million, respectively.
The fair value of the Convertible Notes was estimated using available market information. As of December 31, 2023 and December 31, 2022, the fair value of the Convertible Notes, which
were determined to be Level 1 within the valuation hierarchy, was $75.7 million and $40.9 million, respectively, and the carrying value, was $26.4 million and $25.8 million, respectively.
7. Derivative Liabilities
Fair Value of Warrants
The Company utilized the Black-Scholes valuation method to calculate the fair value of the warrants noted below. 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 Black-Scholes valuation method simulation is a Level 3 valuation technique because
it requires the development of significant internal assumptions in addition to observable market indicators. The warrants noted below contain terms and features that give rise to derivative liability
classification.
Warrants to purchase shares of common stock outstanding at December 31, 2023 and 2022 are as follows:
Warrant Name
Warrants
Powerscourt Warrant
Wilmington Warrant Tranche A
Wilmington Warrant Tranche B
Wilmington Warrant Tranche C
49,641
51,020
42,424
12,727
In measuring the warrant liability, the Company used the following inputs:
Common Stock price
Weighted average contractual term to maturity
Range of expected market volatility %
Range of risk-free interest rate
Fair Value of Conversion Features Related to Convertible Notes
Exercise Price
$31.20
$34.30
$41.25
$68.75
Expiration Date
12/22/2023
3/12/2026
3/12/2026
3/12/2026
For the Years Ended December 31,
2022
$13.96
2.5 years
66.00% - 72.88%
4.14% - 4.68%
2023
$0.31
2.2 years
137.71%
4.23%
The Company identified certain embedded derivatives related to the conversion features of the Convertible Notes. In accordance with ASC 815-40, Derivatives and Hedging Activities, the
embedded conversion options contained within the Convertible Notes were 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 binomial lattice model to calculate the fair value of the embedded derivatives.
48
Table of Contents
7. Derivative Liabilities (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Significant observable and unobservable inputs include conversion price, stock price, dividend rate, expected volatility, risk-free rate, optional conversion price and term. The binomial 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 used the following inputs:
Conversion price
Common Stock price
Contractual term to maturity
Expected market volatility %
Risk-free interest rate
Traded WHLRL price % of par
(1) Represents the volume weighted average of the Company's closing Common Stock price for the 10 trading days
preceding the valuation date of December 31, 2023, less a discount of 45%.
December 31, 2023
(1)
$0.16
$0.31
8.0 years
100.00%
3.90%
240.00%
December 31, 2022
$62.50
$13.96
9.0 years
205.00%
3.87%
120.50%
The following table sets forth a summary of the changes in fair value of the Company's derivative liabilities, which include both the warrant and embedded derivative liabilities (in
thousands):
Balance at the beginning of period
Changes in fair value - Warrants
Changes in fair value - Convertible Notes
Balance at ending of period
Year Ended December 31, 2023
Year Ended December 31, 2022
$
$
7,111 $
(495)
(2,963)
3,653 $
4,776
(753)
3,088
7,111
49
Table of Contents
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
8. Commitments and Contingencies
Lease Commitments
The Company is the lessee under several ground leases and for its corporate headquarters; all are accounted for as operating leases. Most leases include one or more options to renew, with
renewal terms that can extend the lease term from 5 to 50 years. As of December 31, 2023 and 2022, the weighted average remaining lease term of our leases was 36 and 34 years, respectively. Rent
expense under the operating lease agreements were $1.1 million and $1.2 million for the years ended December 31, 2023 and 2022, respectively.
The following table represents a reconciliation of the Company’s undiscounted future minimum lease payments for its ground lease and corporate headquarters lease agreements applicable to
lease liabilities as of December 31, 2023 (in thousands):
For the years ended December 31,
2024
2025
2026
2027
2028
Thereafter
Total undiscounted future minimum lease payments
Future minimum lease payments, discount
Operating lease liabilities
Insurance
$
$
815
819
823
827
829
19,591
23,704
(13,375)
10,329
The Company carries comprehensive liability, property, fire, flood, wind, extended coverage, business interruption and rental loss insurance covering all of the properties in its portfolio
under an 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 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 located in the Mid-Atlantic, Southeast, and Northeast, which markets
represented approximately 45%, 40% and 15%, respectively, of the total annualized base rent of the properties in its portfolio as of December 31, 2023. 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
50
Table of Contents
8. Commitments and Contingencies (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
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:
On April 8, 2022, several purported holders of Cedar’s outstanding preferred stock filed a putative class action complaint against Cedar, Cedar's of Directors prior to the Merger, and WHLR in
Montgomery County Circuit Court, Maryland entitled Sydney, et al. v. Cedar Realty Trust, Inc., et al., (Case No. C-15-CV-22-001527).
On May 6, 2022, the Plaintiffs in Sydney filed a motion for a preliminary injunction. Also on May, 6, 2022, a purported holder of Cedar’s outstanding preferred stock filed a separate putative
class action complaint against Cedar and Cedar's Board of Directors prior to the Cedar Acquisition in the United States District Court for the District of Maryland, entitled Kim v. Cedar Realty
Trust, Inc., et al., Civil Action No. 22-cv-01103. On May 11, 2022, Cedar, former Board of Directors of Cedar and the Company removed the Sydney action to the United States District Court
for the District of Maryland, Case No. 8:22-cv-01142-GLR. On May 16, 2022, the court ordered that a hearing on the Sydney Plaintiffs’ motion for preliminary injunction be held on June 22,
2022. On June 2, 2022, the Plaintiffs in Kim also filed a motion for a preliminary injunction. The court consolidated the motions for preliminary injunction.
On June 23, 2022, following a hearing, the court issued an order denying both motions for preliminary injunction, holding that the Plaintiffs in both cases were unlikely to succeed on the merits
and that Plaintiffs had not established that they would suffer irreparable harm if the injunction was denied.
By order dated July 11, 2022, the court consolidated the Sydney and Kim cases and set an August 24, 2022 deadline for the Plaintiffs in both cases to file a consolidated amended complaint.
Plaintiffs filed their amended complaint on August 24, 2022. The amended complaint alleges on behalf of a putative class of holders of Cedar's preferred stock, among other things, claims for
breach of contract against Cedar and Cedar's former Board of Directors with respect to the articles supplementary governing the terms of Cedar's preferred stock, breach of fiduciary duty
against Cedar's former Board of Directors, and tortious interference and aiding and abetting breach of fiduciary duty against the Company. On October 7, 2022, Defendants moved to dismiss
the amended complaint. Plaintiffs opposed the motion to dismiss and filed a motion to certify a question of law to Maryland’s Supreme Court. On August 1, 2023, the court issued a decision
and order granting Defendants’ motions to dismiss, without leave to amend, and denying Plaintiffs’ motion to certify a question of law to the Maryland Supreme Court. The Plaintiffs appealed
the dismissal to the United States Court of Appeals for the Fourth Circuit, Case No. 23-1905, docketed on August 30, 2023. The Court has set a briefing schedule. The appeal has been fully
briefed. At this juncture, the outcome of the litigation remains uncertain.
On July 11, 2022, a purported holder of Cedar's outstanding preferred stock filed a complaint against Cedar and Cedar's Board of Directors prior to the Merger in the United States District
Court for the Eastern District of New York, entitled High Income Securities Fund v. Cedar Realty Trust, Inc., et al., No. 2:22-cv-4031. The complaint alleged that the Defendants violated
Section 10(b) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions, and that Cedar's former Board of Directors are
control persons under Section 20(a) of the Exchange Act. On September 25, 2023, the Court granted Defendants’ motion to dismiss the complaint with prejudice, and the time within which the
Plaintiff could have appealed such decision has passed.
51
Table of Contents
8. Commitments and Contingencies (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
On October 14, 2022, a purported holder of the Company's outstanding preferred stock filed a putative class action against Cedar, Cedar's Board of Directors prior to the Merger, and WHLR in
Nassau County Supreme Court, New York entitled Krasner v. Cedar Realty Trust, Inc., et al., Case No. 613985/2022. The complaint alleges on behalf of a putative class of holders of Cedar's
preferred stock, among other things, claims for 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, breach of fiduciary duty against Cedar's former Board of Directors, and tortious interference and aiding and abetting breach of fiduciary duty against WHLR. The complaint
seeks, among other relief, an award of monetary damages, attorneys' fees, and expert fees. The Defendants filed motions in the Nassau County action to dismiss or stay the case based both on
the pendency of the lawsuit in Maryland in which the same claims were asserted by other preferred stockholders and on the merits. The court held a hearing on the motions on October 27, 2023,
and on December 4, 2023 granted the motions to dismiss based on the pendency of the lawsuit in Maryland without addressing the merits.
Harbor Point 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 Point, 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 Point would reimburse the Grove Economic Development Authority (the “Harbor Point Agreement”). In 2014, Harbor Point 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 Point Agreement will be no more than $2.0 million, the principal amount of the bonds, as of December 31, 2023.
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. The Company funded approximately $41
thousand and $42 thousand, during the years ended December 31, 2023 and 2022, respectively, in debt service shortfalls. As of December 31, 2023, $78 thousand was accrued for the December 2023
debt service payment shortfall. Future debt service shortfalls cannot be determined based on the variables noted above, as such have not been accrued.
9. Rental Revenue and Tenant Receivables
Tenant Receivables
As of December 31, 2023 and 2022, the Company’s allowance for uncollectible tenant receivables totaled $0.9 million and $3.1 million, respectively. At December 31, 2023 and 2022, there
were $7.9 million and $6.5 million, respectively, in unbilled straight-line rent, which is included in "receivables, net."
Lease Contract Revenue
The below table disaggregates the Company’s revenue by type of service (in thousands):
52
Table of Contents
9. Rental Revenue and Tenant Receivables ( continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Base rent
Tenant reimbursements - variable lease revenue
Above (below) market lease amortization, net
Straight-line rents
Percentage rent - variable lease revenue
Lease termination fees
Other
Total
Credit losses on operating lease receivables
Total
Years ended December 31,
2023
2022
$
$
72,621
21,240
4,849
1,370
774
325
1,668
102,847
(522)
102,325
$
$
55,454
16,665
2,079
800
558
134
1,316
77,006
(361)
76,645
Future minimum rents to be received under noncancelable tenant operating leases, excluding rents on assets held for sale, for each of the next five years and thereafter, excluding tenant
reimbursements and percentage rent based on tenant sales volume, as of December 31, 2023 are as follows (in thousands):
For the years ended December 31,
2024
2025
2026
2027
2028
Thereafter
Total minimum rents
10. Equity and Mezzanine Equity
$
$
72,501
67,049
58,314
49,013
37,215
100,113
384,205
The Company has authority to issue 215,000,000 shares of stock, consisting of 200,000,000 shares of $0.01 par value Common Stock and 15,000,000 shares of preferred stock of which
5,000,000 shares have been classified as no par value Series B Preferred, 6,000,000 shares as Series D Preferred Stock and 4,500 shares of Series A Preferred.
Substantially all of our business is conducted through the Company’s Operating Partnership. The Trust is the sole general partner of the Operating Partnership and owned a 99.13% and
99.05% interest in the Operating Partnership as of December 31, 2023 and 2022, respectively. Limited partners in the Operating Partnership have the right to redeem their common units for cash or
Common Stock, at our option. Distributions to common unit holders are paid at the same rate per unit as dividends per share to the Trust’s common stockholders.
Common Stock One-for-Ten Reverse Stock Split
On August 7, 2023, we announced that our Board of Directors had approved the Reverse Stock Split. The Reverse Stock Split took effect as of 5:00 p.m., Eastern Standard Time, on August
17, 2023 (the “Effective Time”). At the Effective Time, every ten 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 9,809,195 to approximately 980,919. The par value of each share of Common Stock remained unchanged. No fractional shares
were issued in connection with the Reverse Stock Split. Stockholders who would have otherwise been issued a fractional share of the Company’s Common Stock as a result of the Reverse Stock Split
instead received a cash payment in lieu of such fractional share in an amount equal to the applicable fraction multiplied by the closing price of the Company’s Common Stock on the Nasdaq on August
17, 2023 (as adjusted for the Reverse Stock Split), without any interest. All share and share-related information
53
Table of Contents
10. Equity and Mezzanine Equity (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
presented in this Annual Report on Form 10-K, 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
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.
Series B Preferred Stock
Holders of Series B Preferred shares have the right to receive, only when and as authorized by the Board of Directors and declared by the Company, out of funds legally available for the
payment of dividends, cash dividends, at a rate of 9% per annum of the $25 liquidation preference per share. 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 $580 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 $400.00 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 $400.00 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. The Series B Preferred has no maturity date and will remain outstanding indefinitely unless subject to a mandatory or voluntary conversion as described above.
Series D Preferred Stock - Redeemable Preferred Stock
At December 31, 2023 and 2022, the Company had 2,590,458 and 3,152,392 issued shares, respectively and 6,000,000 authorized shares of Series D Preferred Stock, without par value with a
$25.00 liquidation preference per share, or $97.1 million and $113.4 million in aggregate liquidation value, respectively.
Until September 21, 2023, the holders of the Series D Preferred Stock were entitled to receive cumulative cash dividends at a rate of 8.75% per annum of the $25.00 liquidation preference
per share (the “Initial Rate”). Commencing September 21, 2023, the holders were entitled to cumulative cash dividends at an annual dividend rate of the Initial Rate increased by 2% of the liquidation
th
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 15 , April 15 ,
July 15 and October 15 of each year.
th
th
th
Dividends on the Series D Preferred Stock cumulate from the end of the most recent dividend period for which dividends have been paid. Dividends on the Series D Preferred Stock cumulate
whether or not (i) we have earnings, (ii) there are funds legally available for the payment of such dividends and (iii) such dividends are authorized by our Board of Directors or declared by us.
Dividends on the Series D Preferred Stock do not bear interest. If the Company fails to pay any dividend within three (3) business days after the payment date for such dividend, the then-current
dividend rate increases following the payment date by an additional 2.0% of the $25.00 stated liquidation preference per share until we pay the dividend, subject to our ability to cure the failure. On
December 20, 2018, the Company suspended the Series D Preferred dividend. As such, the Series D Preferred Stock shares began accumulating dividends at 10.75% beginning January 1, 2019 and
will continue to accumulate dividends at this rate until all accumulated dividends have been paid. Commencing September 21, 2023, the Series D Preferred Stock holders were entitled to cumulative
cash dividends at an annual dividend rate of 12.75%, subject to a maximum annual dividend rate of 16%, including the 2% default rate.
Holders of shares of the Series D Preferred Stock have no voting rights. Pursuant to the Company's Articles Supplementary, if dividends on the Series D Preferred are in arrears for six or
more consecutive quarterly periods (a "Preferred Dividend Default"), holders of shares of the Series D Preferred Stock and the holders of Series A Preferred and Series B Preferred upon which like
voting rights have been conferred and are exercisable (such the Series A Preferred and Series B Preferred together, being the "Parity Preferred Stock"), shall be entitled to vote for the election of two
additional directors to serve on the Board of Directors (the "Series D Preferred Directors"). A Preferred Dividend Default occurred on April 15, 2020. The election of the Series D Preferred Directors
will take place upon the written request of the holders of record of at least 20% of the Series D Preferred Stock and Parity Preferred Stock. The Board of Directors is not permitted to fill the vacancies
on the Board of Directors as a result of the failure of the holders of 20% of the Series D Preferred Stock and Parity Preferred Stock to
54
Table of Contents
10. Equity and Mezzanine Equity (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
deliver such written request for the election of the Series D Preferred Directors. The Series D Preferred Directors may serve on our Board of Directors, until all unpaid dividends on such Series D
Preferred Stock and Parity Preferred Stock, if any, have been paid or declared and a sum sufficient for the payment thereof is set apart for payment.
The Series D Preferred Stock requires the Company maintain asset coverage of at least 200%. If we fail to maintain asset coverage of at least 200% calculated by determining the percentage
value of (i) our total assets plus accumulated depreciation and accumulated amortization minus our total liabilities and indebtedness as reported in our financial statements prepared in accordance with
GAAP (exclusive of the book value of any Redeemable and Term Preferred Stock (defined below)) over (ii) the aggregate liquidation preference, plus an amount equal to all accrued and unpaid
dividends, of outstanding shares of our Series D Preferred Stock and any outstanding shares of term preferred stock or preferred stock providing for a fixed mandatory redemption date or maturity
date (collectively referred to as “Redeemable and Term Preferred Stock”) on the last business day of any calendar quarter (“Asset Coverage Ratio”), and such failure is not cured by the close of
business on the date that is 30 calendar days following the filing date of our Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as applicable, for that quarter, or the “Asset Coverage
Cure Date,” then we will be required to redeem, within 90 calendar days of the Asset Coverage Cure Date, shares of Redeemable and Term Preferred Stock, which may include Series D Preferred
Stock, at least equal to the lesser of (i) the minimum number of shares of Redeemable and Term Preferred Stock that will result in us having a coverage ratio of at least 200% and (ii) the maximum
number of shares of Redeemable and Term Preferred Stock that can be redeemed solely out of funds legally available for such redemption. In connection with any redemption for failure to maintain
the Asset Coverage Ratio, we may, in our sole option, redeem any shares of Redeemable and Term Preferred Stock we select, including on a non-pro rata basis. We may elect not to redeem any Series
D Preferred Stock to cure such failure as long as we cure our failure to meet the Asset Coverage Ratio by or on the Asset Coverage Cure Date. If shares of Series D Preferred Stock are to be redeemed
for failure to maintain the Asset Coverage Ratio, such shares will be redeemed solely in cash at a redemption price equal to $25.00 per share plus an amount equal to all accrued but unpaid dividends,
if any, on such shares (whether or not declared) to and including the redemption date.
On or after September 21, 2021, the Company may, at its option, redeem the Series D Preferred Stock, for cash at a redemption price of $25.00 per share, plus an amount equal to all accrued
and unpaid dividends, if any, to and including the redemption date. The holder of the Series D Preferred Stock may convert shares at any time into shares of the Company’s Common Stock at an initial
conversion rate of $169.60 per share of Common Stock. After September 21, 2023, each holder of the Series D Preferred Stock may, at their option, request that the Company redeem any or all of
their shares on a monthly basis 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 Holder Redemption Date, payable in
cash or in shares of Common Stock, or any combination thereof, at the Company's option. Redemptions commenced on September 22, 2023, and the first Holder Redemption Date was October 5,
2023.
During the year ended December 31, 2023, the Company processed 175 redemption requests, collectively redeeming 864,070 shares of Series D Preferred Stock. Accordingly, the Company
issued 52,788,687 shares of Common Stock in settlement of an aggregate Redemption Price of approximately $32.7 million.
The value of the Common Stock issued to holders redeeming their Series D Preferred Stock is the volume weighted average price per share of our Common Stock for the ten consecutive
trading days immediately preceding, but not including, the Holder Redemption Date as reported on Nasdaq (the "VWAP"). As of December 31, 2023, the Company has realized a gain of $9.9 million
in the aggregate due to the closing price of the Common Stock on the last VWAP date differing from the VWAP used to calculate the shares issued in each redemption round.
At December 31, 2023, the Company had received requests to redeem 9,843 shares of Series D Preferred Stock with
respect to the January 2024 Holder Redemption Date. As such, the redemption of these Series D Preferred Stock is considered certain at December 31, 2023 and the liquidation value associated with
these shares of $0.4 million is presented as a liability.
The changes in the carrying value of the Series D Preferred Stock for the years ended December 31, 2023 and 2022 is as follows (in thousands, except per share data):
55
Table of Contents
10. Equity and Mezzanine Equity (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
Balance December 31, 2021
Accretion of Preferred Stock discount
Undeclared dividends
Balance December 31, 2022
Accretion of Preferred Stock discount
Conversion of Series D Preferred Stock to Common Stock
Paid-in-kind interest, issuance of Preferred Stock
Accretion to liquidation preference
Series D Preferred Stock redemptions
Undeclared dividends
(2)
(1)
(3)
Balance December 31, 2023
Series D Preferred Stock
Shares
Value
3,152,392 $
—
—
3,152,392
—
(4,244)
306,380
—
(864,070)
—
2,590,458 $
92,548
498
8,472
101,518
373
(140)
3,908
15,288
(33,044)
8,802
96,705
(1) The Series D Preferred Stock was adjusted to $ 25.00 liquidation preference plus accrued and unpaid dividends, representing a $ 13.5 million adjustment to its carrying value at September 21, 2023, the commencement of the
holder redemptions.
(2) See Note 6 for additional details.
(3) The value is net of the January 2024 Holder Redemption Date redemption liquidation value of $ 0.4 million, which is represented as a liability; however, the corresponding 9,843 shares has not been adjusted for as they
remained outstanding at December 31, 2023.
Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to the Company’s common shareholders by the weighted average number of common shares
outstanding for the period including participating securities.
Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into shares of common stock.
The following table summarizes the potential dilution of conversion of Operating Partnership common units ("Common Units"), Series B Preferred, Series D Preferred Stock, warrants and
Convertible Notes into the Company's Common Stock. These have been excluded from the Company’s diluted earnings per share calculation because their inclusion would be antidilutive.
Common units
Series B Preferred Stock
Series D Preferred Stock
Warrants to purchase Common Stock
Convertible Notes
Dividends
December 31, 2023
December 31, 2022
Outstanding
Shares
Potential Dilutive
Shares
Outstanding Shares
Potential Dilutive
Shares
13,323
3,379,142
2,590,458
—
—
13,323
211,196
248,750,708
106,171
146,876,617
14,494
3,379,142
3,152,392
—
—
14,494
211,196
668,890
155,813
3,856,259
The following table summarizes the Series D Preferred Stock dividends (in thousands, except for per share amounts):
For the year ended December 31, 2023
For the year ended December 31, 2022
Arrears Date
Series D Preferred Stock
Undeclared Dividends
Per Share
$
$
8,802
8,472
$
$
3.40
2.69
56
Table of Contents
10. Equity and Mezzanine Equity (continued)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
The total cumulative dividends in arrears for Series D Preferred Stock is $32.3 million as of December 31, 2023 (per share $12.48). There were no dividends declared to holders of Common
Stock, Series A Preferred, Series B Preferred or Series D Preferred Stock during years ended December 31, 2023 or 2022.
2015 Long-Term Incentive Plan
On June 4, 2015, the Company's stockholders approved the 2015 Long-Term Incentive Plan (the "2015 Incentive Plan"). The 2015 Incentive Plan allows for issuance of up to 12,500 shares of
the Company's Common Stock to employees, directors, officers and consultants for services rendered to the Company. The 2015 Incentive Plan replaced the 2012 Stock Incentive Plan.
As of December 31, 2023, there are 4,110 shares available for issuance under the Company’s 2015 Incentive Plan and there were no shares issued in 2023 or 2022.
2016 Long-Term Incentive Plan
On June 15, 2016, the Company's stockholders approved the 2016 Long-Term Incentive Plan (the "2016 Incentive Plan"). The 2016 Incentive Plan allows for issuance of up to 62,500 shares
of the Company's Common Stock to employees, directors, officers and consultants for services rendered to the Company.
As of December 31, 2023, there are 12,770 shares available for issuance under the Company’s 2016 Incentive Plan and there were no shares issued in 2023 or 2022.
11. Related Party Transactions
Related Party Transactions with Cedar
The Company performs property management and leasing services for Cedar, a subsidiary of the Company, pursuant to the Wheeler Real Estate Company Management Agreement. During the
years ended December 31, 2023 and 2022, Cedar paid the Company $2.1 million and $1.0 million, respectively, for these services. The Operating Partnership and Cedar’s operating partnership, Cedar
Realty Trust Partnership, L.P., are party to a cost sharing and reimbursement agreement, pursuant to which the parties agreed to share costs and expenses associated with certain employees, certain
facilities and property, and certain arrangements with third parties (the “Cost Sharing Agreement”). Related party amounts due to the Company from Cedar as of December 31, 2023 and 2022 are
comprised of (in thousands):
Financings and real estate taxes
Management fees
Leasing commissions
Cost Sharing Agreement allocations (a)
Other
Total
December 31, 2023
(b)
December 31, 2022 (b)
$
$
7,166 $
225
161
548
(6)
8,094 $
7,166
110
85
—
(33)
7,328
(a) Includes allocations for executive compensation and directors' liability insurance. In 2022, the were no allocations made to Cedar for these services due to certain limitations set forth in the Cost
Sharing Agreement.
(b) These related party amounts have been eliminated for consolidation purposes.
Investment securities - related party
The Company has investments held with SAI, a related party. See Note 4 for additional details.
57
Table of Contents
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
12. Subsequent Events
Convertible Notes - open market purchase
On January 17, 2024, the Company paid down $0.6 million of the Convertible Notes through an open market purchase of 23,280 units at a total purchase price of $1.3 million.
Adjustment to Conversion Price of Convertible Notes
For the February 2024 Series D Preferred Stock redemptions, the lowest price at which any Series D Preferred Stock was converted by a holder into Common Stock was approximately $0.22.
Accordingly, pursuant to Section 14.02 (Optional Conversion) of the indenture governing the Convertible Notes, the Conversion Price for the Convertible Notes was further adjusted to
approximately $0.12 per share of Common Stock (approximately 209.84 shares of Common Stock for each $25.00 of principal amount of the Convertible Notes being converted), representing a 45%
discount to $0.22.
Cumulative Series D Preferred Stock Redemption Information
The Company has processed 84,561 shares of Series D Preferred Stock. Accordingly, the Company has issued 14,253,931 shares of Common Stock in settlement of an aggregate Redemption
Price of approximately $3.2 million.
Cedar Revolving Credit Agreement
On February 29, 2024, the Company entered into a revolving credit agreement with KeyBank National Association to draw up to $9.5 million (the "Cedar Revolving Credit Agreement"). The
interest rate under the Cedar Revolving Credit Agreement is the daily SOFR, plus applicable margins of 0.10% plus 2.75%. Interest payments are due monthly, and principal is due at maturity on
February 28, 2025. The Cedar Revolving Credit Agreement may be extended, at the Company's option, for up to two additional three-month periods, subject to customary conditions. The Cedar
Revolving Credit Agreement is collateralized by 6 properties, consisting of Carll's Corner, Fieldstone Marketplace, Oakland Commons, Kings Plaza, Oregon Avenue and South Philadelphia, and
proceeds will be used for capital expenditures and tenant improvements for such properties.
58
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Schedule II-Valuation and Qualifying Accounts
December 31, 2023
Description
Allowance for doubtful accounts:
Year Ended December 31, 2023
Year Ended December 31, 2022
Balance at
Beginning
of Year
Charged to
Costs and
Expense
Deductions
from
Reserves
(in thousands)
Balance at
End of
Year
$
$
3,146
4,262
$
(1) $
522
361
$
$
(2,765) $
(1,477) $
903
3,146
(1) The Cedar Acquisition purchase price allocation related to allowance for doubtful accounts of $3.63 million is included within the beginning year ended December 31, 2022 column.
59
$
December 31, 2023
(2)
Property Name
WHLR
Amscot Building
Lumber River Village
Surrey Plaza
Tuckernuck
Twin City Commons
Tampa Festival
Forrest Gallery
Winslow Plaza
Clover Plaza
St. George Plaza
South Square
Westland Square
Waterway Plaza
Cypress Shopping Center
Harrodsburg Marketplace
Port Crossing Shopping Center
LaGrange Marketplace
DF I-Courtland
DF I-Edenton
(2)
Freeway Junction
Bryan Station
Crockett Square
Harbor Point
(2)
Pierpont Centre
Brook Run Properties
Alex City Marketplace
Brook Run Shopping Center
Beaver Ruin Village
Beaver Ruin Village II
Chesapeake Square
Sunshine Plaza
Cardinal Plaza
Frankilton Square LLC
Nashville Commons
Grove Park
Parkway Plaza
Fort Howard Square
Conyers Crossing
Darien Shopping Center
Devine Street
Folly Road
Georgetown
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Schedule III-Real Estate and Accumulated Depreciation
Initial Cost
Costs Capitalized
Subsequent
to Acquisition
(1)
Land
Building and
Improvements
Improvements
(net)
$
—
800
381
2,115
800
4,653
3,015
1,325
356
897
353
887
1,280
2,064
1,431
792
390
196
746
1,521
1,658
1,546
778
484
300
454
2,209
2,604
1,153
895
1,183
994
1,022
1,091
722
772
1,890
2,034
188
3,895
5,992
742
$
462
4,487
1,857
6,719
3,041
6,691
7,455
3,684
1,197
1,264
1,911
1,710
1,248
4,579
2,485
6,921
2,648
—
—
6,755
2,756
6,834
—
9,221
—
7,837
12,919
8,284
2,809
4,112
6,368
2,476
2,933
3,503
4,590
4,230
7,350
6,820
1,054
1,941
4,527
1,917
31
221
451
1,338
143
1,756
3,395
468
25
2,549
328
216
425
1,506
296
220
438
—
—
244
329
233
(359)
521
8
2,303
1,327
258
5
1,097
612
106
345
220
605
441
848
476
(17)
(4)
73
154
60
Carrying
Costs
(in thousands)
$
Land
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Gross Amount at which Carried
at end of Period
Building and
Improvements
Total
$
—
1,005
701
2,171
809
4,713
3,192
1,566
356
1,389
480
901
1,488
2,064
1,515
800
451
196
746
1,544
1,807
1,565
419
905
300
744
2,377
2,619
1,153
1,269
1,268
1,033
1,126
1,150
1,084
778
2,157
2,138
188
3,895
6,050
753
$
493
4,503
1,988
8,001
3,175
8,387
10,673
3,911
1,222
3,321
2,112
1,912
1,465
6,085
2,697
7,133
3,025
—
—
6,976
2,936
7,048
—
9,321
8
9,850
14,078
8,527
2,814
4,835
6,895
2,543
3,174
3,664
4,833
4,665
7,931
7,192
1,037
1,937
4,542
2,060
493
5,508
2,689
10,172
3,984
13,100
13,865
5,477
1,578
4,710
2,592
2,813
2,953
8,149
4,212
7,933
3,476
196
746
8,520
4,743
8,613
419
10,226
308
10,594
16,455
11,146
3,967
6,104
8,163
3,576
4,300
4,814
5,917
5,443
10,088
9,330
1,225
5,832
10,592
2,813
Property Name
Ladson Crossing
Lake Greenwood Crossing
Lake Murray
Litchfield I
Litchfield II
Litchfield Market Village
Moncks Corner
Ridgeland
Shoppes at Myrtle Park
South Lake
South Park
Sangaree
Tri-County
Riverbridge
Laburnum Square
Franklin Village
Village at Martinsville
New Market Crossing
Rivergate Shopping Center
JANAF
WHLR Total
CDR
Brickyard Plaza
Carll's Corner
Coliseum Marketplace
Fairview Commons
Fieldstone Marketplace
Gold Star Plaza
Golden Triangle
Hamburg Square
Kings Plaza
Oakland Commons
Oregon Avenue
Patuxent Crossing
Pine Grove Plaza
South Philadelphia
Southington Center
Timpany Plaza
Trexler Mall
Washington Center Shoppes
Webster Commons
CDR Total
Combined Total
Land
$
$
$
$
$
Initial Cost
Costs Capitalized
Subsequent
to Acquisition
(1)
Building and
Improvements
Improvements
(net)
Carrying
Costs
2,981
550
447
568
568
2,970
—
203
3,182
804
943
2,302
411
774
3,735
2,608
5,208
993
1,537
8,267
95,659
1,989
1,955
1,226
948
2,359
1,403
3,322
932
2,192
825
3,158
2,999
1,292
11,996
358
1,778
3,746
3,618
1,565
47,661
143,320
$
$
$
$
$
3,920
2,499
1,537
929
936
4,716
1,109
376
5,360
2,025
2,967
2,922
3,421
5,384
5,929
9,426
12,879
5,216
29,177
66,549
334,872
13,119
2,574
3,172
2,083
2,279
3,223
13,388
4,967
3,961
3,080
—
15,145
3,832
11,137
8,429
5,754
22,979
11,354
6,207
136,683
471,555
$
$
$
$
$
221
17
74
84
146
640
9
79
1,119
940
131
905
400
283
848
1,221
2,174
1,040
1,206
3,489
38,657
—
—
1,972
—
133
24
(36)
—
709
—
674
493
(7)
937
—
1,045
19
306
113
6,382
45,039
$
$
$
$
$
Gross Amount at which Carried
at end of Period
Building and
Improvements
Total
3,146
550
470
572
572
3,125
—
282
3,182
804
1,022
2,582
635
820
4,050
2,696
5,228
1,324
1,732
8,591
102,248
1,989
1,955
1,227
948
2,359
1,403
3,322
932
2,192
825
3,158
2,999
1,292
11,996
358
1,778
3,746
3,618
1,565
47,662
149,910
$
$
$
$
$
3,976
2,516
1,588
1,009
1,078
5,201
1,118
376
6,479
2,965
3,019
3,547
3,597
5,621
6,462
10,559
15,033
5,925
30,188
69,714
366,940
13,119
2,574
5,143
2,083
2,412
3,247
13,352
4,967
4,670
3,080
674
15,638
3,825
12,074
8,429
6,799
22,998
11,660
6,320
143,064
510,004
$
$
$
$
$
7,122
3,066
2,058
1,581
1,650
8,326
1,118
658
9,661
3,769
4,041
6,129
4,232
6,441
10,512
13,255
20,261
7,249
31,920
78,305
469,188
15,108
4,529
6,370
3,031
4,771
4,650
16,674
5,899
6,862
3,905
3,832
18,637
5,117
24,070
8,787
8,577
26,744
15,278
7,885
190,726
659,914
Land
$
$
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(1) Negative amounts represent write-offs of fully depreciated assets.
(2) Net of impairment.
As of December 31, 2023, the aggregate cost for federal income tax purposes was approximately $926 million.
61
(5)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(5)
(2)
(2)
Property Name
WHLR
Amscot Building
Lumber River Village
Surrey Plaza
Tuckernuck
Twin City Commons
Tampa Festival
Forrest Gallery
Winslow Plaza
Clover Plaza
(2)
St. George Plaza
South Square
Westland Square
Waterway Plaza
Cypress Shopping Center
Harrodsburg Marketplace
Port Crossing Shopping Center
LaGrange Marketplace
DF I-Courtland (undeveloped land)
Edenton Commons (undeveloped land)
Freeway Junction
(6)
Bryan Station
Crockett Square
Harbor Point (undeveloped land)
Pierpont Centre
(5)
Brook Run Properties (undeveloped land)
Alex City Marketplace
Brook Run Shopping Center
Beaver Ruin Village
Beaver Ruin Village II
Chesapeake Square
Sunshine Plaza
Cardinal Plaza
Frankilton Square LLC
Nashville Commons
(5)
Grove Park
Parkway Plaza
Fort Howard Square
Conyers Crossing
Darien Shopping Center
Devine Street
(5)
(5)
(5)
(6)
(6)
(6)
(5)
(6)
(6)
(5)
(5)
(2)
(6)
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Schedule III-Real Estate and Accumulated Depreciation
Encumbrances
Accumulated
Depreciation
(in thousands)
Date of
Construction
Date
Acquired
Depreciation
Life
$
$
4,771
4,331
5,769
4,014
5,960
275
1,556
664
2,963
1,070
2,670
3,307
1,313
340
405
542
517
416
1,350
707
2,431
818
—
—
1,830
945
1,982
—
2,441
—
2,749
3,792
1,963
663
1,504
1,790
658
816
869
1,179
1,062
1,846
1,866
206
404
62
5/15/2004
11/16/2012
12/21/2012
11/16/2012
12/18/2012
8/26/2013
8/29/2013
12/19/2013
12/23/2013
12/23/2013
12/23/2013
12/23/2013
12/23/2013
7/1/2014
7/1/2014
7/3/2014
7/25/2014
8/15/2014
8/15/2014
9/4/2014
10/2/2014
11/5/2014
11/21/2014
1/14/2015
3/27/2015
4/1/2015
6/2/2015
7/1/2015
7/1/2015
7/10/2015
7/21/2015
8/21/2015
8/21/2015
8/21/2015
9/9/2015
9/15/2015
9/30/2015
9/30/2015
4/12/2016
4/12/2016
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
N/A
N/A
5-40 years
5-40 years
5-40 years
N/A
5-40 years
N/A
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
Property Name
Encumbrances
Accumulated
Depreciation
(in thousands)
Date of
Construction
Date
Acquired
Depreciation
Life
(2)
(2)
(2)
(2)
(2)
(2)
(2)
Folly Road
Georgetown
Ladson Crossing
Lake Greenwood Crossing
Lake Murray
(2)
Litchfield I
(2)
Litchfield II
Litchfield Market Village
Moncks Corner
Ridgeland
Shoppes at Myrtle Park
South Lake
(2)
South Park
Sangaree
(1)
Tri-County
Riverbridge
Laburnum Square
Franklin Village
(5)
Village at Martinsville
New Market Crossing
Rivergate Shopping Center
JANAF Shopping Center
WHLR Totals
(2)
(1)
(2)
(6)
(5)
(3)
(3)
(4)
(3)
(3)
CDR
Brickyard Plaza
Carll's Corner
Coliseum Marketplace
Fairview Commons
(3)
Fieldstone Marketplace
Gold Star Plaza
Golden Triangle
Hamburg Square
Kings Plaza
Oakland Commons
Oregon Avenue
Patuxent Crossing
Pine Grove Plaza
South Philadelphia
Southington Center
Timpany Plaza
Trexler Mall
(3)
Washington Center Shoppes
Webster Commons
(3)
(4)
(3)
(3)
(3)
CDR Total
Combined Total
980
442
893
563
338
240
225
1,108
253
106
1,629
867
655
1,191
867
1,095
1,353
1,909
3,165
1,215
5,893
11,551
86,447
741
157
214
169
285
277
819
332
314
214
—
973
251
623
507
409
1,262
653
405
8,605
95,052
$
$
$
$
$
63
7,665
14,755
17,557
60,000
9,060
4/12/2016
4/12/2016
4/12/2016
4/12/2016
4/12/2016
4/12/2016
4/12/2016
4/12/2016
4/12/2016
4/12/2016
4/12/2016
4/12/2016
4/12/2016
11/10/2016
11/10/2016
11/15/2016
12/7/2016
12/12/2016
12/16/2016
12/20/2016
12/21/2016
1/18/2018
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
8/22/2022
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
N/A
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
5-40 years
(1) Properties secure a $6.0 million mortgage note.
(2) Properties secure a $75.0 million mortgage note.
(3) Properties secure a $110.0 million mortgage note.
(4) Properties secure a $25.0 million mortgage note.
(5) Properties secure a $61.1 million mortgage note.
(6) Properties secure a $53.1 million mortgage note.
The changes in total real estate assets for the years ended December 31, 2023 and 2022 are as follows:
Balance at beginning of period
Acquisitions
Improvements
Impairments
Disposals
Balance at end of period
2023
2022
(in thousands)
$
$
637,871
3,720
18,999
—
(676)
659,914
$
$
458,214
185,019
6,777
(760)
(11,379)
637,871
64
Item
2.1
2.2
2.3
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
3.13
3.14
3.15
3.16
3.17
3.18
3.19
3.20
Title of Description
Incorporated by Reference
Form
Filing Date
Current Report on Form 8-
K
Agreement and Plan of Merger, dated as of March 2, 2022, by and among Wheeler Real Estate Investment
Trust, Inc., WHLR Merger Sub Inc., WHLR OP Merger Sub LLC, Cedar Realty Trust, Inc., and Cedar
Realty Trust Partnership, L.P
First Amendment to Merger Agreement, dated as of April 19, 2022, by and among Wheeler Real Estate
Investment Trust, Inc., WHLR Merger Sub Inc., WHLR OP Merger Sub LLC, Cedar Realty Trust, Inc., and
Cedar Realty Trust Partnership, L.P.
Second Amendment to Merger Agreement, entered into as of August 9, 2022 by and among Wheeler Real
Estate Investment Trust, Inc., WHLR Merger Sub Inc., WHLR OP Merger Sub LLC, Cedar Realty Trust,
Inc. and Cedar Realty Trust Partnership, L.P.
Articles of Amendment and Restatement of Wheeler Real Estate Investment Trust, Inc. filed with SDAT on
August 5, 2016
Articles Supplementary of Wheeler Real Estate Investment Trust, Inc. filed with SDAT on September 16,
2016
Articles Supplementary of Wheeler Real Estate Investment Trust, Inc. filed with SDAT on December 1,
2016
Articles of Amendment of Wheeler Real Estate Investment Trust, Inc., filed with SDAT on March 31, 2017 Current Report on Form 8-
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 10-
Q
K
Articles of Amendment of Wheeler Real Estate Investment Trust, Inc., filed with SDAT on March 31, 2017 Current Report on Form 8-
Articles of Amendment of Wheeler Real Estate Investment Trust, Inc. filed with SDAT on May 29, 2016
Certificate of Correction of Articles Supplementary of Wheeler Real Estate Investment Trust, Inc. filed with
SDAT on May 3, 2018
Articles Supplementary of Wheeler Real Estate Investment Trust, Inc. filed with SDAT on July 8, 2021
Articles of Amendment of Wheeler Real Estate Investment Trust, Inc. filed with SDAT on November 5,
2021
Articles of Amendment of Wheeler Real Estate Investment Trust, Inc. filed with SDAT on November 29,
2021
Bylaws of Wheeler Real Estate Investment Trust, Inc., as amended
Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P.
Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P.
Designation of Series A Convertible Preferred Units
Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P.
Amended Designation of Series B Convertible Preferred Units
Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P.
Designation of Series D Cumulative Convertible Preferred Units
Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P.
Amended Designation of Additional Series D Cumulative Convertible Preferred Units
Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P.
Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P., dated
December 22, 2020
Amendment to the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P, dated
March 12, 2021
Articles of Amendment of Wheeler Real Estate Investment Trust, Inc. filed with SDAT on August 17, 2023 Current Report on Form 8-
65
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Registration Statement on
Form S-11
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
K
March 7, 2022
May 11, 2022
August 25, 2022
August 8, 2016
September 20, 2016
December 5, 2016
April 3, 2017
April 3, 2017
May 29, 2020
May 4, 2018
July 8, 2021
November 5, 2021
November 29, 2021
May 29, 2020
August 20, 2014
April 15, 2015
July 15, 2016
September 20, 2016
December 5, 2016
September 5, 2019
December 23, 2020
March 12, 2021
August 17, 2023
3.21
4.1
4.2
4.3
4.4†
4.5
4.6
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
14.1
21.1†
23.1†
Articles of Amendment of Wheeler Real Estate Investment Trust, Inc. filed with SDAT on August 17, 2023 Current Report on Form 8-
Form of Certificate of Common Stock of Wheeler Real Estate Investment Trust, Inc.
Form of Certificate of Series B Preferred Stock of Wheeler Real Estate Investment Trust, Inc.
Form of Certificate of Series D Preferred Stock of Wheeler Real Estate Investment Trust, Inc.
Description of Securities.
Form of Common Stock Purchase Warrant, dated March 12, 2021
Indenture, dated as of August 13, 2021 between Wheeler Real Estate Investment Trust Inc. and Wilmington
Savings Fund Society, FSB., as trustee (including form of Note)
Wheeler Real Estate Investment Trust, Inc. 2015 Long-Term Incentive Plan
Wheeler Real Estate Investment Trust, Inc. 2016 Long-Term Incentive Plan
Employment Agreement with M. Andrew Franklin
Amended and Restated Employment Agreement, by and between Wheeler Real Estate Investment Trust,
Inc. and Crystal Plum, dated as of August 13, 2021
Registration Rights Agreement dated March 12, 2021,
Term Loan Agreement dated June 17, 2022, between Guggenheim Real Estate, LLC and the Borrowers
party thereto.
Loan Agreement dated July 6, 2022 between CITI REAL ESTATE FUNDING INC and the Borrowers
party thereto.
Guaranty, dated August 22,2022, made by Wheeler Real Estate Investment Trust, Inc.
Environmental Compliance and Indemnity Agreement, dated as of August 22, 2022, made by Wheeler Real
Estate Investment Trust, Inc., Cedar Realty Trust, Inc., Cedar Realty Trust Partnership, L.P., and certain
subsidiaries of Cedar Realty Trust Partnership, L.P.
Limited Recourse Indemnity Agreement made by Wheeler REIT, L.P. in favor of Guggenheim Real Estate,
LLC as of October 28, 2022
Term Loan Agreement, dated as of October 28, 2022, between Guggenheim Real Estate, LLC and the
Borrowers party thereto
Term Loan Agreement dated May 5, 2023, between Insurance Strategy Funding XXVIII, LLC and the
Borrowers party thereto.
Term Loan Agreement dated May 18, 2023, between Guggenheim Real Estate, LLC and the Borrowers
party thereto.
Letter Agreement, by and among Wheeler Real Estate Investment Trust, Inc., Stilwell Activist Investments,
L.P., Stilwell Activist Fund, L.P., Stilwell Value Partners VII, L.P. and Stilwell Associates, L.P., dated as
of December 5, 2023
Excepted Holder Agreement, by and among Wheeler Real Estate Investment Trust, Inc., Stilwell Activist
Investments, L.P., Stilwell Activist Fund, L.P., Stilwell Value Partners VII, L.P. and Stilwell
Excepted Holder Amendment, by and among Wheeler Real Estate Investment Trust, Inc., Stilwell Activist
Investments, L.P., Stilwell Activist Fund, L.P., Stilwell Value Partners VII, L.P. and Stilwell Associates,
L.P., dated as of February 5, 2024
Code of Business Conduct and Ethics
Subsidiaries of Registrant.
Consent of Cherry Bekaert LLP.
66
K
Current Report on Form 8-
K
Registration Statement on
Form S-11/A
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 10-
Q
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
Current Report on Form 8-
K
August 17, 2023
April 3, 2017
April 23, 2014
September 20, 2016
March 12, 2021
August 16, 2021
June 8, 2015
June 16, 2016
February 20, 2018.
August 17, 2021
March 12, 2021
June 21, 2022
July 8, 2022
August 25, 2022
August 25, 2022
October 31, 2022
October 31, 2022
May 9, 2023
May 19, 2023
December 6, 2023
December 6, 2023
February 6, 2024
September 1, 2023
31.1†
31.2†
32.1†
32.2†
97.1†
101.INS XBRL
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
Certification of the Chief Executive Officer of Wheeler Real Estate Investment Trust, Inc. pursuant to Rule 13a-
14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of the Chief Financial Officer of Wheeler Real Estate Investment Trust, Inc. pursuant to Rule 13a-
14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002.
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
Wheeler Real Estate Investment Trust, Inc. Incentive Clawback Policy.
Instance Document (Filed herewith).
XBRL Taxonomy Extension Schema Document (Filed herewith).
XBRL Taxonomy Extension Calculation Linkbase (Filed herewith).
XBRL Taxonomy Extension Definition Linkbase (Filed herewith).
XBRL Taxonomy Extension Labels Linkbase (Filed herewith).
XBRL Taxonomy Extension Presentation Linkbase (Filed herewith).
† Filed or furnished herewith.
67
Item 16. Form 10-K Summary
Not applicable.
68
Pursuant to the requirements Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended the Registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SIGNATURES
WHEELER REAL ESTATE INVESTMENT TRUST, INC.
By:
/s/ M. Andrew Franklin
M. Andrew Franklin
Chief Executive Officer and President
(Principal Executive Officer)
By:
/s/ Crystal Plum
Crystal Plum
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Date: March 5, 2024
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the capacity
and on the dates indicated. Each person whose signature appears below hereby constitutes and appoints each of M. Andrew Franklin and Crystal Plum as his or her attorney-in-fact and agent, with full
power of substitution and resubstitution for him or her in any and all capacities, to sign any or all amendments to this Report and to file same, with exhibits thereto and other documents in connection
therewith, granting unto such attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary in connection with such matters and hereby
ratifying and confirming all that such attorney-in-fact and agent or his or her substitutes may do or cause to be done by virtue hereof.
Signature
/S/ M. ANDREW FRANKLIN
M. Andrew Franklin
/S/ CRYSTAL PLUM
Crystal Plum
/S/ STEFANI D. CARTER
Stefani D. Carter
/S/ SAVERIO M FLEMMA
Saverio M Flemma
/S/ DENNIS POLLACK
Dennis Pollack
/S/ JOSEPH D. STILWELL
Joseph D. Stilwell
/S/ MEGAN PARISI
Megan Parisi
Title
CEO and President
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Chair of Board
Director
Director
Director
Director
69
Date
March 5, 2024
March 5, 2024
March 5, 2024
March 5, 2024
March 5, 2024
March 5, 2024
March 5, 2024
/S/ KERRY G. CAMPBELL
Kerry G. Campbell
/S/ E.J. BORRACK
E.J. Borrack
Director
Director
March 5, 2024
March 5, 2024
70
Exhibit 4.4
Description of Securities
Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
As of December 31, 2023, Wheeler Real Estate Investment Trust, Inc. (“WHLR”, the “Company” or “our”) had five classes of securities: our common stock, par value
$0.01 per share (“Common Stock”), Series A Preferred Stock, no par value per share (“Series A Preferred”); Series B Convertible Preferred Stock, no par value per share
(“Series B Preferred”); Series D Cumulative Convertible Preferred Stock, no par value per share (“Series D Preferred” or "Series D Preferred Stock") and 7.00% Subordinated
Convertible Notes due 2031 (the “Notes”). Series A Preferred, Series B Preferred and Series D Preferred are collectively referred to “Preferred Stock” hereinafter. As of
December 31, 2023, the Company had authority to issue 215,000,000 shares of stock consisting of the following:
•
•
•
•
200,000,000 Common Stock authorized, 53,769,787 of which were issued and outstanding;
4,500 Series A Preferred authorized, 562 of which were issued and outstanding;
5,000,000 Series B Preferred authorized, 3,379,142 of which were issued and outstanding; and
6,000,000 Series D Preferred authorized, 2,590,458 of which were issued and outstanding.
Our Common Stock, Series B Preferred, Series D Preferred, and the Notes are registered under Section 12 of the Securities Exchange Act of 1934, as amended (the
“Act”) on the Nasdaq Capital Market exchange. The following is a summary of each class of our securities registered under the Act and is subject to, and qualified in its entirety
by reference to the provisions of our Amended and Restated Articles of Incorporation (the “Charter”), Supplementary Articles, as amended and restated and our by-laws, as
amended and restated (the “By-Laws”), copies of which are incorporated by reference within the Exhibits to our Annual Report on Form 10-K for the year ended December 31,
2023 of which this Exhibit 4.4 is a part. Our Series A Preferred stock is not registered on an exchange for trading and is not included in the following description.
Common Stock
Pursuant to Article V of our Charter, each share of Common Stock shall entitle the holder thereof to one vote. The Board of Directors of the Company (the “Board”) may
reclassify any unissued shares of Common Stock from time to time in one or more classes or series of stock.
With respect to dividend payments and distribution of the Company’s assets upon redemption and upon the voluntary or involuntary liquidation, dissolution or winding
up of the Company, the holders of shares of our Common Stock are subject to the prior rights of the holders of any shares of our Preferred Stock.
When and if declared by the Board, the holders of shares of Common Stock are subject to prior rights of the holders of any shares of our Preferred Stock for any
dividends declared, paid upon or set aside for the Common Stock in any such year, dividends in cash, stock or otherwise. Any dividends on our Series D Preferred declared, but
not paid shall be cumulative. No deposit, payment, dividend or distribution of any kind shall be made with respect to the Common Stock unless all dividends payable on the
Preferred Stock have been paid.
Preferred Stock
In the event of (i) any voluntary or involuntary liquidation, winding up or dissolution of the Company or (ii) any sale or transfer by the Company of all or substantially all
of its assets, the holders of Preferred Stock shall be entitled to receive, prior to and in preference of any distribution or payment upon the Common Stock, an amount per share
of Preferred Stock equal to the sum of the Preferred Stock purchase price plus any accrued but unpaid dividends thereon. To the extent the assets and funds available for
distribution after payment of all required obligations of the Company are insufficient to make such payment, then the entire assets and funds available for distribution shall be
distributed ratably among the holders of the Preferred Stock. Any amounts remaining after payment in full of the holders of the Preferred Stock shall be distributed ratably
among the holders of the Common Stock.
Series B Preferred
Holders of Series B Preferred shares have the right to receive, only when and as authorized by the Board of Directors and declared by the Corporation, out of funds
legally available for the payment of dividends, cash dividends, at a rate of 9% per annum of the $25 liquidation preference per share. 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, $0.01 par
value per share, exceeds $580 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 $400.00 per share. 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 $400.00 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. The Series
Preferred B has no maturity date and will remain outstanding indefinitely unless subject to a mandatory or voluntary conversion as described above. Holders of Series B
Preferred Stock have no voting rights except as provided by law.
Series D Preferred
The Series D Preferred has a $25.00 liquidation preference per share. Until September 21, 2023, the holders of the Series D Preferred were entitled to receive cumulative
cash dividends at a rate of 8.75% per annum of the $25.00 liquidation preference per share (the “Initial Rate”). Commencing September 21, 2023, the holders were 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 15 , April 15 , July 15 and October 15 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 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 $169.60 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.
th
th
th
th
The Series D Preferred requires the Company maintain asset coverage of at least 200%. If we fail to maintain asset coverage of at least 200% calculated by determining
the percentage value of (i) our total assets plus accumulated depreciation and accumulated amortization minus our total liabilities and indebtedness as reported in our financial
statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) (exclusive of the book value of any Redeemable and Term
Preferred Stock (defined below)) over (ii) the aggregate liquidation preference, plus an amount equal to all accrued and unpaid dividends, of outstanding shares of our Series D
Preferred Stock and any outstanding shares of term preferred stock or preferred stock providing for a fixed mandatory redemption date or maturity date (collectively referred to
as “Redeemable and Term Preferred Stock”) on the last business day of any calendar quarter (“Asset Coverage Ratio”), and such failure is not cured by the close of business on
the date that is 30 calendar days following the filing date of our Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as applicable, for that quarter, or the “Asset
Coverage Cure Date,” then we will be required to redeem, within 90 calendar days of the Asset Coverage Cure Date, shares of Redeemable and Term Preferred Stock, which
may include Series D Preferred Stock, at least equal to the lesser of (i) the minimum number of shares of Redeemable and Term Preferred Stock that will result in us having a
coverage ratio of at least 200% and (ii) the maximum number of shares of Redeemable and Term Preferred Stock that can be redeemed solely out of funds legally available for
such redemption. In connection with any redemption for failure to maintain the Asset Coverage Ratio, we may, in our sole option, redeem any shares of Redeemable and Term
Preferred Stock we select, including on a non-pro rata basis. We may elect not to redeem any Series D Preferred Stock to cure such failure as long as we cure our failure to meet
the Asset Coverage Ratio by or on the Asset Coverage Cure Date. If shares of Series D Preferred Stock are to be redeemed for failure to maintain the Asset Coverage Ratio,
such shares
will be redeemed solely in cash at a redemption price equal to $25.00 per share plus an amount equal to all accrued but unpaid dividends, if any, on such shares (whether or not
declared) to and including the redemption date.
Dividends on the Series D Preferred cumulate from the end of the most recent dividend period for which dividends have been paid. Dividends on the Series D Preferred
cumulate whether or not (i) we have earnings, (ii) there are funds legally available for the payment of such dividends and (iii) such dividends are authorized by the Board or
declared by us. Dividends on the Series D Preferred Stock do not bear interest. If the Company, fails to pay any dividend within three (3) business days after the payment date
for such dividend, the then-current dividend rate increases following the payment date by an additional 2.0% of the $25.00 stated liquidation preference per share until we pay
the dividend, subject to our ability to cure the failure. On December 20, 2018, the Company suspended the Series D Preferred dividend. As such, the Series D Preferred shares
began accumulating dividends at 10.75% beginning January 1, 2019 and will continue to accumulate dividends at this rate until all accumulated dividends have been paid.
Commencing September 21, 2023, the Series D Preferred Stock holders were entitled to cumulative cash dividends at an annual dividend rate of 12.75%, subject to a maximum
annual dividend rate of 16%, including the 2% default rate.
Holders of shares of the Series D Preferred have no voting rights. However, if dividends on the Series D Preferred are in arrears for six or more consecutive quarterly
periods, the number of directors on the Board will automatically be increased by two, and holders of shares of the Series D Preferred and the holders of shares of Parity
Preferred Stock upon which like voting rights have been conferred and are exercisable (voting together as a single class) will be entitled to vote, at a special meeting called upon
the written request of the holders of at least 20% of such stock or at our next annual meeting and at each subsequent annual meeting of stockholders, for the election of two
additional directors to serve on the Board, until all unpaid dividends on such Series D Preferred and Parity Preferred Stock, if any, have been paid or declared and a sum
sufficient for the payment thereof set apart for payment. The Series D Preferred Directors will be elected by a plurality of the votes cast in the election. The Board of Directors is
not permitted to fill the vacancies on the Board of Directors as a result of the failure of the holders of 20% of the Series D Preferred and Parity Preferred Stock to deliver such
written request for the election of the Series D Preferred Directors. In addition, holders of shares of the Series D Preferred shall have the right to vote to approve any
amendment to the terms of the Series D Preferred Stock. Any such amendment of the terms of the Series D Preferred Stock requires the affirmative vote of two-thirds of the
shares of Series D Preferred Stock issued and outstanding.
7.00% Subordinated Convertible Notes due 2031
This section includes a description of the material terms of the Notes and the indenture, dated as of August 13, 2021, among the Company, as Issuer, and Wilmington
Savings Fund Society, FSB, as Trustee (the “Indenture”). Because this section is a summary, however, it does not describe every aspect of the Notes and the Indenture. The
Indenture, and not this Exhibit, defines a holder’s rights as a holder of the Notes. The Indenture has been incorporated by reference as an exhibit to our Annual Report on Form
10-K for the year ended December 31, 2023 of which this Exhibit 4.4 is a part. All capitalized terms used herein shall have the meaning set forth in the Indenture.
General
On August 13, 2021, we issued $30,000,000 in aggregate principal amount of Notes under the Indenture and on October 12, 2021 and an additional $3,000,000 in
aggregate principal amount of the Notes were issued pursuant to an exemption under Section 4(a)(2) of the Securities Act of 1933, as amended. We have listed the Notes on
Nasdaq Capital Market under the trading symbol “WHLRL”. The Notes were issued under the Indenture.
The stated maturity of the Notes is December 31, 2031. Interest on the Notes is payable semi-annually on June 30 and December 31 of each year starting on December 31, 2021
to holders of record at the close of business on the preceding June 1 and December 1, respectively. Interest will accrue on the Notes at a rate of 7.0% per annum. Interest will
accrue on the Notes from and including the issuance date or from, and including, the last date in respect of which interest has been paid or provided for, as the case may be, to,
but excluding, the next interest payment date or the maturity date, as the case may be. Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months, until the principal thereof is paid or duly provided for. Interest on any overdue principal, interest (to the extent lawful) or premium, if any, shall be
payable on demand in the form as provided in Article Fourteen the Indenture. We issued the Notes in denominations of $25. The holders of the Notes will not have the option to
have the Notes repaid prior to the stated maturity date.
Covenants
The Indenture contains standard covenants relating to, among other things, payment of principal and interest, maintaining an office where payments may be made or
securities can be surrendered for payment and related matters, holding money for note payments in trust, maintenance of existence, maintenance of properties, payment of taxes,
compliance with laws, notices to the trustee regarding certain matters and delivery of certain reports to the holders.
Trustee
The Trustee for the Notes is Wilmington Savings Fund Society, FSB, and we have initially appointed the Trustee as the paying agent, conversion agent and registrar with regard
to the Notes. Except during the continuance of an event of default, the Trustee will perform only such duties as are specifically set forth in the Indenture.
The Trustee is not obligated to exercise any of its rights or powers at the request or demand of the holders of the Notes, unless the holders of the Notes have offered to the
Trustee security or indemnity that is satisfactory to the Trustee against the costs, expenses and liabilities that the Trustee may incur to comply with the request or demand.
Subject to applicable law and the Trustee’s rights to indemnification, the holders of a majority in aggregate principal amount of the outstanding Notes will have the right to
direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee.
Optional Redemption
After January 1, 2024, the Company may redeem the Notes, in whole or from time to time in part, at the Company’s option at a redemption price equal to 100% of the principal
amount thereof plus accrued and unpaid interest as of the redemption date (the “Redemption Price”). The Redemption Price may be paid: (a) in cash; (b) in shares of Common
Stock; or (c) in any combination of (a) and (b). For purposes of determining the value of Common Stock paid as all or part of the Redemption Price, each share of Common
Stock shall be deemed to have a value equal to the product of (x) the average of the per share volume-weighted average prices for the Common Stock for the 15 consecutive
trading days ending on the third business day immediately preceding the relevant redemption date and (y) 0.55.
Conversion and Exchange
Upon a change of control, each Note will mandatorily convert into shares of the Common Stock equal to: (i) the principal amount of each Note divided by (ii) the product of (x)
the average of the per share volume-weighted average prices for Common Stock for the 15 consecutive trading days ending on the third business day immediately preceding the
date of such change of control, and (y) 0.55. On the maturity date, in lieu of paying the principal of the Note in cash, the Company may elect to pay such principal: (a) in cash;
(b) in shares of Common Stock; or (c) in any combination of (a) or (b). To the extent principal is paid in shares of Common Stock each share of Common Stock shall be
deemed to have a value equal to the product of (x) the average of the per share volume-weighted average prices for Common Stock for the 15 consecutive trading days ending
on the third business day preceding the maturity date and (y) 0.55.
The Notes are convertible, in whole or in part, at any time, at the option of the holders of the Notes, into shares of Common Stock at a conversion price of $6.25 per share of
Common Stock (the “Conversion Price”); provided, however, that if at any time after September 21, 2023, holders of the Series D Preferred Stock have required the Company
to redeem (payable in cash or stock) in the aggregate at least 100,000 shares of Series D Preferred Stock, then the Conversion Price will be adjusted to the lower of (i) 55% of
the Conversion Price or (ii) a 45% discount to the lowest price at which any Series D Preferred Stock was converted into Common Stock.
Adjustment to Conversion Price of Convertible Notes
Because at least 100,000 shares of the Series D Preferred Stock have been redeemed, pursuant to Section 14.02 (Optional Conversion) of the indenture governing the
Company’s Convertible Notes (the "Convertible Notes Indenture"), effective October 5, 2023, the conversion price for the Convertible Notes was adjusted to $1.59 per share of
the Company’s Common Stock, (15.72 shares of Common Stock for each $25.00 of principal amount of the Convertible Notes being converted).
For the February 2024 redemptions, the lowest price at which any Series D Preferred Stock was converted by a holder into Common Stock was approximately $0.22.
Accordingly, pursuant to Section 14.02 (Optional Conversion) of the indenture governing the Notes, the Conversion Price for the Notes was further adjusted to
approximately $0.12 per share of Common Stock (approximately 209.84 shares of Common Stock for each $25.00 of principal amount of the Notes being converted),
representing a 45% discount to $0.22.
Ranking
The Notes are subordinate and junior in right of payment to the Company’s obligations to the holders of senior indebtedness, and that in the case of any insolvency,
receivership, conservatorship, reorganization, readjustment of debt, marshalling of assets and liabilities or similar proceedings or any liquidation or winding-up of or relating to
the Company as a whole, whether voluntary or involuntary, all obligations to holders of senior indebtedness shall be entitled to be paid in full before any payment shall be made
on account of the principal or interest on the Notes.
Events of Default
The Indenture provides that an Event of Default means that one or more of the following events has occurred and is continuing with respect to the Notes:
a.
b.
c.
d.
e.
f.
failure to pay the principal of or premium, if any, on any Note;
failure to pay an installment of interest on any Note when due, if the failure continues for 30 days after the date when due;
failure to timely provide notice with respect to any conversion or redemption of the Notes or failure to timely provide shares of Common Stock upon conversion of the
Notes
failure to comply with any other term, covenant or agreement contained in the Notes or the Indenture, if the failure is not cured within 60 days after notice to the
Company by the Trustee or to the Trustee and the Company by holders of at least 25% in aggregate principal amount of the applicable Notes then outstanding, in
accordance with the Indenture;
voluntary insolvency of the Company or any of its material subsidiaries;
involuntary insolvency of the Company or any of its material subsidiaries if unstayed for at least 60 days.
If an Event of Default shall occur and be continuing with respect to the Notes, except for the events of default relating to bankruptcy proceedings, either the Trustee, by notice to
the Company, or the holders of at least 25% in aggregate principal amount of the Notes outstanding, by notice to the Company and the Trustee, may declare the principal of,
(and premium, if any) accrued and unpaid interest on, all the then outstanding Notes to be immediately due and payable in cash.
Modification and Waiver
With the written consent of the holders of at least a majority in aggregate principal amount of the outstanding Notes delivered to the Company and the Trustee , the Company
and the Trustee may amend or supplement the Indenture or the Notes for the purpose of adding any provisions hereto or thereto, changing in any
manner or eliminating any of the provisions thereunder or of modifying in any manner the rights of the holders thereunder and any existing Default or Event of Default or
compliance with any provision of the Indenture or the Notes may be waived with the consent of the holders of not less than a majority in aggregate principal amount of the
outstanding Notes, other than Notes beneficially owned by the Company or its affiliates; provided, however, that no such amendment, supplement or waiver shall, without the
consent of the holder of each outstanding Note affected thereby (with respect to any Notes held by a nonconsenting holder):
change the stated maturity of the principal of, or the payment date of any installment of interest on, or any additional amounts with respect to, any Note;
reduce the principal amount of, or any premium or interest on, any Note;
change the manner, consideration or currency of payment of principal of, or any premium or interest on, any Note;
impair the right to institute a suit for the enforcement of any payment on, or with respect to, or of the conversion of, any Note;
a.
b.
c.
d.
e. modify, in a manner adverse to the holders, the provisions of the Indenture relating to the Redemption Price or the Company’s obligation to pay the Redemption Price
when due;
f. modify the ranking provisions of the Indenture, relative to other indebtedness of the Company in a manner adverse to the holders;
g.
h.
reduce the percentage in aggregate principal amount of Outstanding Notes whose holders must consent to a modification or amendment of the Indenture or the Notes;
reduce the percentage in aggregate principal amount of Outstanding Notes whose holders must consent to a waiver of compliance with any provision of the Indenture or
the Notes or a waiver of any Default or Event of Default; or
i. modify the provisions of the Indenture with respect to modification and waiver (including waiver of a Default or Event of Default), except to increase the percentage
required for modification or waiver or to provide for the consent of each affected holder.
SUBSIDIARIES OF THE REGISTRANT
Exhibit 21.1
Wheeler Interests, LLC,
Wheeler Real Estate, LLC
Brook Run Associates, LLC
Chesapeake Square Associates, LLC
DF I - Courtland, LLC
Harbor Point Associates, LLC
LaGrange Associates, LLC
Lumber River Associates, LLC
Northpointe Investors, LLC
PCSC Associates, LLC
Riversedge Office Associates, LLC
Tuckernuck Associates, LLC
WD III Associates, LLC
WHLR - Alex City Marketplace, LLC
WHLR - Beaver Ruin Village II, LLC
WHLR - Beaver Ruin Village, LLC
WHLR - Brook Run Property, LLC
WHLR - Bryan Station LLC
WHLR - Butler Square, LLC
WHLR - Cardinal Plaza, LLC
WHLR - Carolina Place, LLC
WHLR - Clover LLC
WHLR - Conyers Crossing, LLC
WHLR - Crockett Square, LLC
WHLR - Cypress LLC
WHLR - Darien, LLC
WHLR - Devine Street, LLC
WHLR - Folly Road Crossing, LLC
WHLR - Ft. Howard Square, LLC
WHLR - Franklinton Square, LLC
WHLR - Freeway Junction LLC
WHLR - Georgetown, LLC
WHLR - Grove Park, LLC
WHLR - Harrodsburg Marketplace LLC
WHLR - Ladson Crossing, LLC
WHLR - Lake Greenwood Crossing, LLC
WHLR - Lake Murray, LLC
WHLR - Litchfield Market Village, LLC
WHLR - Moncks Corner, LLC
WHLR - Mullins South Park, LLC
WHLR - Nashville Commons, LLC
WHLR - Parkway Plaza, LLC
WHLR - Pierpont Center, LLC
WHLR - Ridgeland, LLC
WHLR - Shoppes at Myrtle Park, LLC
WHLR - South Lake Pointe, LLC
WHLR - South Square LLC
WHLR - St. George LLC
WHLR - Sunshine Shopping Plaza, LLC
WHLR - Waterway LLC
WHLR - Westland LLC
WHLR - Winslow LLC
WHLR - Forrest Gallery, LLC
Surrey Plaza Associates, LLC
WHLR - Tampa Festival, LLC
WHLR - Twin City Associates, LLC
WHLR - Sangaree Associates, LLC
WHLR - TriCounty Associates, LLC
WHLR - LaGrange, LLC
WHLR - Riverbridge Shopping Center, LLC
WHLR - Rivergate, LLC
WHLR - Franklin Village, LLC
WHLR - Laburnum Square, LLC
WHLR - Village of Martinsville, LLC
WHLR - New Market Crossing, LLC
WHLR - JANAF, LLC
WHLR - JANAF BRAVO, LLC
WHLR - JANAF BJ’s, LLC
WHLR - JANAF OFFICE, LLC
WHLR – Pierpont Center, LLC
Cedar 2129 Oregon Avenue, LLC
Cedar Brickyard, LLC
Cedar Brickyard II, LLC
Cedar-Bristol, LLC
Cedar-Carll’s Corner, LLC
Cedar Center Holdings L.L.C. 3
Cedar-Fairview Commons, LLC
Cedar-Fieldstone SPE, LLC
Cedar-Fieldstone Marketplace, LP
Cedar Golden Triangle, LLC
Cedar Hamburg, LLC
Cedar-Kings, LLC
Cedar Lender LLC
Cedar-PC Annex, LLC
Cedar-PC Plaza, LLC
Cedar PCP-San Souci, LLC
Cedar-San Souci SPE, LLC
Cedar-Second Member LLC
Cedar Realty Trust Partnership, L.P.
Cedar Southington Plaza, LLC
Cedar-South Philadelphia II, LLC
Cedar-South Philadelphia I, LLC
Cedar-Timpany, LLC
Cedar-Trexler, LLC
Cedar-Trexler SPE, LLC
CIF Loyal Plaza Associates Corp.
CIF-Pine Grove Pad Associates LLC
CIF-Pine Grove Plaza Associates LLC
Cedar-Coliseum FF, LLC
EE SERVICES, LLC
Cedar-Gold Star Plaza, LLC
Gold Star Realty, Inc.
Greentree Road L.L.C. 1
Greentree Road L.L.C. 2
Pine Grove Pad Associates, LLC
Pine Grove Plaza Associates, LLC
Washington Center L.L.C. 1
Washington Center L.L.C. 2
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Virginia Beach, Virginia
We hereby consent to the incorporation by reference in the Registration Statements of Wheeler Real Estate Investment Trust, Inc. (the “Company”), on Form S-11 (Nos. 333-
189363, 333-256015, 333-177262, 333‑194831, 333-198245, 333-256699 and 333-274329), Form S-11 MEF (Nos. 333-190740, 333-195492, and 333-198696), Form S-3
(Nos. 333-194252, 333-189887, 333-203563, 333‑207241, 333-212426, 333-206014, 333-213294, 333-211506, 333-193563, 333-221877, and 333-222971), Form S-4 (No.
333-204957 and 333-268080), and Form S-8 (Nos. 333-205845, 333-213102, and 333-191568) of our report dated March 5, 2024, relating to the consolidated financial
statements and consolidated financial statement schedules as of December 31, 2023 and 2022 and for each of the years in the two-year period ended December 31, 2023, which
appears in the Company’s annual report on Form 10-K.
/s/ Cherry Bekaert LLP
Virginia Beach, Virginia
March 5, 2024
Exhibit 31.1
I, M. Andrew Franklin, certify that:
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
1.
2.
3.
4.
(a)
(b)
(c)
(d)
5.
(a)
I have reviewed this annual report on Form 10-K of Wheeler Real Estate Investment Trust, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: March 5, 2024
/s/ M. Andrew Franklin
M. Andrew Franklin
Chief Executive Officer
Exhibit 31.2
I, Crystal Plum, certify that:
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
1.
2.
3.
4.
(a)
(b)
(c)
(d)
5.
(a)
I have reviewed this annual report on Form 10-K of Wheeler Real Estate Investment Trust, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which
this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect
the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: March 5, 2024
/s/ Crystal Plum
Crystal Plum
Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
The undersigned, M. Andrew Franklin, Chief Executive Officer of Wheeler Real Estate Investment Trust, Inc. (the “Company”), certifies, pursuant to 18 U.S.C.
§1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
1. The Annual Report on Form 10-K of the Company for the year ended December 31, 2023 (“the Report”) fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ M. Andrew Franklin
M. Andrew Franklin
Chief Executive Officer
Date: March 5, 2024
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
The undersigned, Crystal Plum, Chief Financial Officer of Wheeler Real Estate Investment Trust, Inc. (the “Company”), certifies, pursuant to 18 U.S.C. §1350, as
adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:
1. The Annual Report on Form 10-K of the Company for the year ended December 31, 2023 (“the Report”) fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Crystal Plum
Crystal Plum
Chief Financial Officer
Date: March 5, 2024
Exhibit 97.1
This Incentive Compensation Clawback Policy (the “Policy”), which provides for the recovery of certain incentive compensation in the event of an Accounting Restatement (as
defined below), is designed to comply with, and shall be interpreted to be consistent with, Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), Rule 10D-1 promulgated under the Exchange Act (“Rule 10D-1”) and Listing Rule 5608 (the “Listing Standard”) of The NASDAQ Stock Market LLC (“NASDAQ”).
INCENTIVE COMPENSATION CLAWBACK POLICY
1.
Administration
Except as specifically set forth herein, this Policy shall be administered by the Compensation Committee (the “Administrator”) of the Board of Directors (the “Board”).
The Administrator is authorized to interpret and construe this Policy and to make all determinations necessary, appropriate or advisable for the administration of this Policy. Any
determinations made by the Administrator shall be final and binding on all affected individuals and need not be uniform with respect to each individual covered by the Policy.
In the administration of this Policy, the Administrator is authorized to consult with the full Board or such other committees of the Board as may be necessary or appropriate as to
matters within the scope of such other committee’s responsibility and authority.
Subject to any limitation at applicable law, the Administrator may authorize and empower any officer or employee of Wheeler Real Estate Investment Trust, Inc. (the
“Company”) to take any and all actions necessary or appropriate to carry out the purpose and intent of this Policy (other than with respect to any recovery under this Policy
involving such officer or employee).
2.
Definitions
As used in this Policy, the following definitions shall apply:
•
•
•
“Accounting Restatement” means an accounting restatement of the Company’s financial statements due to the Company’s material noncompliance with any
financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial
statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current
period or left uncorrected in the current period.
“Administrator” has the meaning set forth in Section 1 hereof.
“Applicable Period” means the three completed fiscal years immediately preceding the date on which the Company is required to prepare an Accounting
Restatement, as well as any transition period (that results from a change in the Company’s fiscal year) within or immediately following those three completed
fiscal years (except that a transition period that comprises a period of at least nine months shall count as a completed fiscal year). The “date on which the
Company is required to prepare an Accounting Restatement” is the earlier to occur of (a) the date the Board, a committee of the Board, or an officer of the
Company concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement or (b) the date a court,
regulator or other legally authorized body directs the Company to prepare an Accounting Restatement, in each case regardless of if or when the restated
financial statements are filed.
•
•
•
•
“Covered Executives” means the Company’s current and former executive officers, as determined by the Administrator in accordance with the definition of
executive officer set forth in Rule 10D-1 and the Listing Standard.
“Erroneously Awarded Compensation” has the meaning set forth in Section 5 of this Policy.
A “Financial Reporting Measure” is any measure that is determined and presented in accordance with the accounting principles used in preparing the
Company’s financial statements, and any measure that is derived wholly or in part from such measure. Financial Reporting Measures include, but are not
limited to, the following (and any measures derived from the following): Company stock price; total shareholder return (“TSR”); revenues; net income;
operating income; profitability of one or more reportable segments; financial ratios (e.g., accounts receivable turnover and inventory turnover rates); earnings
before interest, taxes, depreciation and amortization; funds from operations and adjusted funds from operations; liquidity measures (e.g., working capital,
operating cash flow); return measures (e.g., return on invested capital, return on assets); earnings measures (e.g., earnings per share); any of such financial
reporting measures relative to a peer group, where the Company’s financial reporting measure is subject to an Accounting Restatement; and tax basis income.
A Financial Reporting Measure need not be presented within the Company’s financial statements or included in a filing with the Securities Exchange
Commission (the “SEC”).
“Incentive-Based Compensation” means any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial
Reporting Measure. Incentive-Based Compensation is “received” for purposes of this Policy in the Company’s fiscal period during which the Financial
Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of such Incentive-Based Compensation
occurs after the end of that period.
3.
Covered Executives; Incentive-Based Compensation
This Policy applies to Incentive-Based Compensation received by a Covered Executive (a) after beginning services as a Covered Executive; (b) if that person served as a
Covered Executive at any time during the performance period for such Incentive-Based Compensation; and (c) while the Company had a listed class of securities on a national
securities exchange.
4.
Required Recoupment of Erroneously Awarded Compensation in the Event of an Accounting Restatement
In the event the Company is required to prepare an Accounting Restatement, the Company shall promptly recoup the amount of any Erroneously Awarded Compensation
received by any Covered Executive, as calculated pursuant to Section 5 hereof, during the Applicable Period.
5.
Erroneously Awarded Compensation: Amount Subject to Recovery
The amount of “Erroneously Awarded Compensation ” subject to recovery under the Policy, as determined by the Administrator, is the amount of Incentive-Based
Compensation received by the Covered Executive that exceeds the amount of Incentive-Based Compensation that would have been received by the Covered Executive had it
been determined based on the restated amounts.
Erroneously Awarded Compensation shall be computed by the Administrator without regard to any taxes paid by the Covered Executive in respect of the Erroneously Awarded
Compensation.
By way of example, with respect to any compensation plans or programs that take into account Incentive-Based Compensation, the amount of Erroneously Awarded
Compensation subject to recovery hereunder includes, but is not limited to, the amount contributed to any notional account based on Erroneously Awarded Compensation and
any earnings accrued to date on that notional amount.
For Incentive-Based Compensation based on stock price or TSR: (a) the Administrator shall determine the amount of Erroneously Awarded Compensation based on a
reasonable estimate of the effect of the Accounting Restatement on the stock price or TSR upon which the Incentive-Based Compensation was received; and (b) the Company
shall maintain documentation of the determination of that reasonable estimate and provide such documentation to NASDAQ.
2
6.
Method of Recoupment
The Administrator shall determine, in its sole discretion, the timing and method for promptly recouping Erroneously Awarded Compensation hereunder, which may include,
without limitation, (a) seeking reimbursement of all or part of any cash or equity-based award, (b) cancelling prior cash or equity-based awards, whether vested or unvested, or
paid or unpaid, (c) cancelling or offsetting against any planned future cash or equity-based awards, (d) forfeiture of deferred compensation, subject to compliance with Section
409A of the Internal Revenue Code and the regulations promulgated thereunder, and (e) any other method authorized by applicable law or contract. Subject to compliance with
any applicable law, the Administrator may effect recovery under this Policy by setting off against any amount otherwise payable to the Covered Executive, including amounts
payable to such individual under any otherwise applicable Company plan or program, including base salary, bonuses or commissions and compensation previously deferred by
the Covered Executive.
The Administrator shall determine the repayment schedule for any Erroneously Awarded Compensation. Such determination shall be consistent with any applicable legal
guidance, by the SEC, judicial opinion or otherwise.
The Company is authorized and directed pursuant to this Policy to recoup Erroneously Awarded Compensation in compliance with this Policy unless the Administrator has
determined that recovery would be impracticable solely for the following limited reasons, and subject to the following procedural and disclosure requirements:
•
•
The direct expense paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered. Before concluding that it would be
impracticable to recover any amount of Erroneously Awarded Compensation based on expense of enforcement, the Administrator must make a reasonable
attempt to recover such erroneously awarded compensation, document such reasonable attempt(s) to recover and provide that documentation to NASDAQ; or
Recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to
meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
7.
No Indemnification of Covered Executives
Notwithstanding the terms of any indemnification or insurance policy or any contractual arrangement with any Covered Executive that may be interpreted to the contrary, the
Company shall not indemnify any Covered Executives against the loss of any Erroneously Awarded Compensation, including any payment or reimbursement for the cost of
third-party insurance purchased by any Covered Executives to fund potential clawback obligations under this Policy.
8.
Administrator Indemnification
Any members of the Administrator, and any other members of the Board who assist in the administration of this Policy, shall not be personally liable for any action,
determination or interpretation made with respect to this Policy and shall be fully indemnified by the Company to the fullest extent under applicable law and Company policy
with respect to any such action, determination or interpretation. The foregoing sentence shall not limit any other rights to indemnification of the members of the Board under
applicable law or Company policy.
9.
Effective Date; Retroactive Application
This Policy shall be effective as of October 2, 2023 (the “Effective Date”). The terms of this Policy shall apply to any Incentive-Based Compensation that is received by
Covered Executives on or after the Effective Date, even if such Incentive-Based Compensation was approved, awarded, granted or paid to Covered Executives prior to the
Effective Date. Without limiting the generality of Section 6 hereof, and subject to applicable law, the Administrator may effect recovery under this Policy from any amount of
compensation approved, awarded, granted, payable or paid to the Covered Executive prior to, on or after the Effective Date.
10.
Amendment; Termination
The Board may amend, modify, supplement, rescind or replace all or any portion of this Policy at any time and from time to time in its discretion, and shall amend this Policy as
it deems necessary to comply with applicable law or any rules or standards adopted by a national securities exchange on which the Company’s securities are listed.
3
11.
Other Recoupment Rights; Company Claims
The Board intends that this Policy shall be applied to the fullest extent of the law. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other
remedies or rights of recoupment that may be available to the Company under applicable law or pursuant to the terms of any similar policy in any employment agreement,
equity award agreement, or similar agreement and any other legal remedies available to the Company.
Nothing contained in this Policy, and no recoupment or recovery as contemplated by this Policy, shall limit any claims, damages or other legal remedies the Company or any of
its affiliates may have against a Covered Executive arising out of or resulting from any actions or omissions by the Covered Executive.
12.
Successors
This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives.
13.
Exhibit Filing Requirement
A copy of this Policy and any amendments thereto shall be posted on the Company’s website and filed as an exhibit to the Company’s annual report on Form 10-K.
DATE: November 14, 2023
4