PROSPECTUS SUMMARY

You should read the following summary together with the more detailed information regarding our company and the historical and pro forma financial statements appearing elsewhere in this prospectus, including under the caption “Risk Factors.” References in this prospectus to “we,” “our,” “us” and “our company” refer to Wheeler Real Estate Investment Trust, Inc., a Maryland corporation, together with our consolidated subsidiaries, including Wheeler REIT, L.P., a Virginia limited partnership, of which we are the sole general partner (our “Operating Partnership”). Unless otherwise indicated, the information contained in this prospectus is as of June 30, 2014 and assumes: (1) the closing of the 2014 Completed Acquisitions and the Contemplated Acquisitions; and (2) the issuance of (a) 600,000 shares of Series B Preferred Stock for $         per share and (b) the issuance of Warrants to purchase 720,000 shares of our common stock and the application of the proceeds as described herein. We have not assumed the exercise of the underwriters’ over-allotment option or the issuance of shares of common stock upon conversion of the Series B Preferred Stock or exercise of the Warrants. For meanings of all defined terms used herein, please refer to the Glossary.

Overview

We are a Maryland corporation formed with the principal objective of acquiring, financing, developing, leasing, owning and managing income producing assets such as strip centers, neighborhood centers, grocery-anchored centers, community centers and free-standing properties. We have also begun to acquire undeveloped properties that we intend to develop into retail properties. Our strategy is to opportunistically acquire and reinvigorate well-located, potentially dominant retail properties in secondary and tertiary markets that generate attractive risk-adjusted returns. We target competitively protected properties 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 generate regular consumer traffic. We believe our tenants carry goods that are less impacted by fluctuations in the broader U.S. economy and consumers’ disposable income, generating more predictable property-level cash flows.

We currently own a portfolio consisting of 31 properties including 21 retail shopping centers, 6 free-standing retail properties, and one office property, totaling 1,733,848 net rentable square feet of which approximately 94% are leased. Our portfolio also includes three undeveloped properties that we acquired on August 15, 2014 and intend to develop.

We believe the current market environment creates a substantial number of favorable investment opportunities with attractive yields on investment and significant upside potential in terms of income and gain. We believe the markets we plan to pursue in the Northeast, Mid-Atlantic, Southeast and Southwest have strong demographics and dynamic, diversified economies that will continue to generate jobs and future demand for commercial real estate. We anticipate that the depth and breadth of our real estate experience allows us to capitalize on revenue-enhancing opportunities in our portfolio and source and execute new acquisition and development opportunities in our markets, while maintaining stable cash flows throughout various business and economic cycles.

Jon S. Wheeler, our Chairman and President, has 32 years of experience in the real estate sector with particular experience in strategic financial and market analyses and assessments of new or existing properties to maximize returns. We have an integrated team of professionals with experience across all stages of the real estate investment cycle.

We were organized as a Maryland corporation on June 23, 2011 and elected to be taxed as a real estate investment trust (“REIT”) beginning with our taxable year ending December 31, 2012. We conduct substantially all of our business through our Operating Partnership. We are structured as an UPREIT, which means that we will own most of our properties through our Operating Partnership and its subsidiaries. As an UPREIT, we may

 

be able to acquire properties on more attractive terms from sellers who can defer tax obligations by contributing properties to our Operating Partnership in exchange for Operating Partnership units, which will be redeemable for cash or exchangeable for shares of our common stock at our election.

WHLR Management, LLC (our “Administrative Service Company”), which is wholly owned by Mr. Wheeler, provides administrative services to our company. Pursuant to the terms of an administrative services agreement between our Administrative Service Company and us, our Administrative Service Company is responsible for identifying targeted real estate investments; handling the disposition of the real estate investments our board of directors chooses to sell; and administering our day-to-day business operations, including but not limited to, leasing duties, property management, payroll and accounting functions. We also benefit from Mr. Wheeler’s partially or wholly owned related business and platform that specializes in retail real estate investment and management. Mr. Wheeler’s organization includes (i) Wheeler Interests, LLC, an acquisition and asset management firm, (ii) Wheeler Real Estate, LLC, a real estate leasing, management and administration firm, (iii) Wheeler Capital, LLC, a capital investment firm specializing in venture capital, financing, and small business loans, (iv) Site Applications, LLC, a full service facility company equipped to handle all levels of building maintenance and (v) TESR, LLC, a tenant coordination company specializing in tenant relations and community events (collectively, our “Services Companies”). By December 31, 2014, we anticipate that we will acquire the Services Companies to bring these services in-house and become a self-managed REIT. Our headquarters is located at Riversedge North, 2529 Virginia Beach Boulevard, Suite 200, Virginia Beach, Virginia 23452. Our telephone number is (757) 627-9088. Our website is located at WHLR.us. Our Internet website and the information contained therein or connected thereto do not constitute a part of this prospectus or any amendment or supplement hereto.

Business and Growth Strategies

Our strategy is to opportunistically acquire and reinvigorate well-located, potentially dominant retail properties in secondary and tertiary markets that generate attractive risk-adjusted returns. Specifically, we intend to pursue the following strategies to achieve these objectives:

 

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Maximize value through proactive asset management. We believe our market expertise, targeted leasing strategies and proactive approach to asset management will enable us to maximize the operating performance of our portfolio. We will continue to implement an active asset management program to increase the long-term value of each of our properties. This may include expanding existing tenants, re-entitling site plans to allow for additional outparcels, which are small tracts of land used for free-standing development not attached to the main buildings, and repositioning tenant mixes to maximize traffic, tenant sales and percentage rents. As we grow our portfolio, we will seek to maintain a diverse pool of assets with respect to both geographic distribution and tenant mix, helping to minimize our portfolio risk. We will utilize our experience and market knowledge to effectively allocate capital to implement our investment strategy. We continually monitor our markets for opportunities to selectively dispose of properties where returns appear to have been maximized and redeploy proceeds into new acquisitions that have greater return prospects.

 

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Pursue value oriented investment strategy targeting properties fitting within our acquisition profile. We believe the types of retail properties we seek to acquire will provide better risk-adjusted returns compared to other properties in the retail asset class, as well as other property types in general, due to the anticipated improvement in consumer spending habits resulting from a strengthening economy coupled with the long-term nature of the underlying leases and predictability of cash flows. We will acquire and develop retail properties, including development properties, based on identifying market and property characteristics. We will acquire retail properties based on identified market and property characteristics, including:

 

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Property type. We focus our investment strategy on income producing assets such as strip centers, neighborhood centers, grocery-anchored centers, community centers, free-standing retail

 

properties and undeveloped land that can be developed for such purposes. We will target these types of properties because they tend or have the opportunity to be more focused on consumer goods as opposed to enclosed malls, which we believe are more oriented to discretionary spending that is susceptible to cyclical fluctuations.

 

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Strip center. A strip center is an attached row of stores or service outlets managed as a coherent retail entity, with on-site parking usually located in front of the stores. Open canopies may connect the store fronts, but a strip center does not have enclosed walkways linking the stores. A strip center may be configured in a straight line or have an “L” or “U” shape.

 

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Neighborhood centers. A neighborhood center is designed to provide convenience shopping for the day-to-day needs of consumers in the immediate neighborhood. Neighborhood centers are often anchored by a supermarket or drugstore. The anchors are supported by outparcels typically occupied by restaurants, fast food operators, financial institutions and in-line stores offering various products and services ranging from soft goods, healthcare and electronics.

 

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Community centers. A community center typically offers a wider range of apparel and other soft goods relative to a neighborhood center and in addition to supermarkets and drugstores, can include discount department stores as anchor tenants.

 

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Free-standing properties. A free-standing property constitutes any building that is typically occupied by a single tenant. The lease terms are generally structured as triple-net with the tenant agreeing to pay rent as well as all taxes, insurance and maintenance expenses that arise from the use of the property.

 

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Development properties. In acquiring undeveloped land for development, we attempt to select properties in geographic locations that are similar to the markets in which we already operate, which improves our ability to identify the potential tenant pool from a leasing perspective and to manage the property once developed.

 

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Anchor tenant type. We will target properties with anchor tenants that offer consumer goods that are less impacted by fluctuations in consumers’ disposable income. We believe nationally and regionally recognized anchor tenants that offer consumer goods provide more predictable property-level cash flows as they are typically higher credit quality tenants that generate stable revenues. We feel these properties will act as a catalyst for incremental leasing demand through increased property foot traffic. We will identify the credit quality of our anchor tenants by conducting a thorough analysis including, but not limited to, a review of tenant operating performance, liquidity and balance sheet strength.

 

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Lease terms. In the near term, we intend to acquire properties that feature one or more of the following characteristics in their tenants’ lease structure: properties with long-term leases (10 years remaining on the primary lease term) for anchor tenants; properties under triple-net leases, which are leases where the tenant agrees to pay rent as well as all taxes, insurance and maintenance expenses that arise from the use of the property thereby minimizing our expenses; and properties with leases which incorporate gross percentage rent and/or rental escalations that act as an inflation hedge while maximizing operating cash flows. As a longer-term strategy, we will look to acquire properties with shorter-term lease structures (2-3 years) for in-line tenants, which are tenants that rent smaller spaces around the anchor tenants within a property, that have below market rents that can be renewed at higher market rates.

 

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Geographic markets and demographics. We plan to seek investment opportunities throughout the United States; however, we will focus on the Northeast, Mid-Atlantic, Southeast and Southwest, which are characterized by attractive demographic and property fundamental trends. We will target competitively protected properties in communities that have stable demographics and have

 

historically exhibited favorable trends, such as strong population and income growth. These communities will also have a combination of the following characteristics:

 

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established trade areas with high barriers to entry,

 

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high population base with expected annual growth rate higher than the national average,

 

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high retail sales per square foot compared to the national average,

 

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above average household income and expected growth,

 

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above-average household density,

 

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favorable infrastructure such as schools to retain and attract residents, and

 

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below-average unemployment rate.

 

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Capitalize on network of relationships to pursue transactions. We plan to pursue transactions in our target markets through the relationships we have developed. Leveraging these relationships, we will target property owners that our management team has transacted with previously, many of whom, we feel, will consider us a preferred counterparty due to our track record of completing fair and timely transactions. We believe this dynamic gives us a competitive advantage in negotiating and executing favorable acquisitions.

 

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Leverage our experienced property management platform. Our executive officers, together with the management teams of our Services Companies, have over 150 years of combined experience managing, operating, developing and leasing retail properties. We consider our Services Companies to be in the best position to oversee the day-to-day operations of our properties, which in turn helps us service our tenants. We feel this generates higher renewal and occupancy rates, minimizes rent interruptions, reduces renewal costs and helps us achieve stronger operating results. Along with this, a major component of our leasing strategy is to cultivate long-term relationships through consistent tenant dialogue in conjunction with a proactive approach to meeting the space requirements of our tenants.

 

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Grow our platform through a comprehensive financing strategy. We believe our capital structure will provide us with sufficient financial capacity and flexibility to fund future growth. Based on our current capitalization, we believe we will have access to multiple sources of financing that are currently unavailable to many of our private market peers or overleveraged public competitors, which will provide us with a competitive advantage. Over time, these financing alternatives may include follow-on offerings of our common stock, unsecured corporate level debt, preferred equity and credit facilities. We have a ratio of debt to total market capitalization, which includes common stock and Series B preferred stock outstanding, of approximately 59%. Although we are not required by our governing documents to maintain this ratio at any particular level, our board of directors will review our ratio of debt to total capital on a quarterly basis, with the goal of maintaining a reasonable rate consistent with our expected ratio of debt to total market capitalization going forward. We believe this strategy will enable us to continue to grow our asset base well into the future.

Our Competitive Strengths

We believe the following competitive strengths distinguish us from other owners and operators of commercial real estate and will enable us to take advantage of new acquisition and development opportunities, as well as growth opportunities within our portfolio:

 

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Cornerstone Portfolio of Retail Properties. We have acquired and developed a portfolio of properties located in business centers in Virginia, North Carolina, Florida, Georgia, South Carolina, Kentucky, Oklahoma, Tennessee, and New Jersey. We believe many of our properties currently achieve rental and

 

occupancy rates equal to or above those typically prevailing in their respective markets due to their desirable and competitively advantageous locations within their submarkets, as well as our hands-on management approach. The retail properties comprising our portfolio fit within our property acquisition profile of income producing assets such as strip centers, neighborhood centers, grocery-anchored centers, community centers and free-standing retail properties. These properties are located in local markets that exhibit stable demographics and have historically exhibited favorable trends, such as strong population and income growth. These properties represent the initial base of the larger portfolio that we expect to build over time.

 

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Experienced Management Team. Our executive officers and the members of the management teams of our Services Companies have significant experience in all aspects of the commercial real estate industry, specifically in our markets. They have overseen the acquisition or development and operation of more than 65 shopping centers, representing over 4 million rentable square feet of retail property, including all of the properties in our portfolio. Mr. Wheeler and the real estate professionals employed by our Services Companies have in-depth knowledge of our assets, markets and future growth opportunities, as well as substantial expertise in all aspects of leasing, asset and property management, marketing, acquisitions, redevelopment and facility engineering and financing, all of which we believe provides us with a significant competitive advantage.

 

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Access to a Pipeline of Acquisition and Leasing Opportunities. We believe that our market knowledge and our network of relationships with real estate owners, developers, brokers, national and regional lenders and other market participants provides us access to an ongoing pipeline of attractive acquisition and investment opportunities in and near our markets. In addition, we have a network of relationships with numerous national and regional tenants in our markets, many of whom currently are tenants in our retail buildings, which we expect will enhance our ability to retain and attract high quality tenants, facilitate our leasing efforts and provide us with opportunities to increase occupancy rates at our properties, thereby allowing us to maximize cash flows from our properties. We have successfully converted many of our strong relationships with our retail tenants into leasing opportunities at our properties.

 

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Broad Real Estate Expertise with Retail Focus. Our management team has experience and capabilities across the real estate sector with experience and expertise particularly in the retail asset class, which we believe provides for flexibility in pursuing attractive acquisition, development, and repositioning opportunities. Since varying market conditions create opportunities at different times across property types, we believe our expertise enables us to target relatively more attractive investment opportunities throughout economic cycles. In addition, our fully integrated platform with in-house development capabilities allows us to pursue development and redevelopment projects with multiple uses. We believe that our ability to pursue these types of opportunities differentiates us from many competitors in our markets.

 

Our Properties

Our Portfolio

At June 30, 2014, we owned twenty-three properties located in Virginia, North Carolina, South Carolina, Florida, Georgia, Oklahoma, Tennessee and New Jersey containing a total of approximately 1,294,572 rentable square feet of retail space, which we refer to as our portfolio. The following table presents an overview of our portfolio, based on information as of June 30, 2014.

Portfolio

 

Property		Location		Year Built/ Renovated		Number of Tenants				Net Rentable Square Feet				Percentage Leased				Annualized Base Rent				Annualized Base Rent per Leased Square Foot (1)
Amscot Building(2)		Tampa, FL		2004			1				2,500				100.0	%		$	100,738			$	40.30
Bixby Commons		Bixby, OK		2012			1				75,000				100.0				768,500				10.25
Clover Plaza		Clover, SC		1990			10				45,575				100.0				348,327				7.64
Forrest Gallery		Tullahoma, TN		1987			26				214,451				91.2				1,170,467				5.94
Harps At Harbor Point		Grove, OK		2012			1				31,500				100.0				364,432				11.57
Jenks Plaza		Jenks, OK		2007			5				7,800				100.0				140,152				17.97
Jenks Reasors		Jenks, OK		2011			1				81,000				100.0				912,000				11.26
Lumber River Village		Lumberton, NC		1985/1997-98 expansion 2004			12				66,781				100.0				497,466				7.45
Monarch Bank		Virginia Beach, VA		2002			1				3,620				100.0				243,241				67.19
Perimeter Square		Tulsa, OK		1982-1983			8				58,277				95.7				674,973				12.10
Riversedge North		Virginia Beach, VA		2007			1				10,550				100.0				294,056				27.87
Shoppes at T J Maxx		Richmond, VA		1982/1999			15				93,552				88.8				933,555				11.24
South Square		Lancaster, SC		1992			5				44,350				89.9				316,650				7.95
Starbucks/Verizon(2)		Virginia Beach, VA		1985/2012			2				5,600				100.0				185,695				33.16
St. George Plaza		St. George, SC		1982			6				59,279				85.8				353,783				6.96
Surrey Plaza		Hawkinsville, GA		1983			5				42,680				100.0				290,745				6.81
Tampa Festival		Tampa, FL		1965/2009/2012			22				137,987				100.0				1,211,410				8.78
The Shoppes at Eagle Harbor		Carrollton, VA		2009			7				23,303				94.5				445,386				19.11
Twin City Commons		Batesburg- Leesville, SC		1998/2002			5				47,680				100.0				449,194				9.42
Walnut Hill Plaza		Petersburg, VA		1959/2006/2008			12				89,907				87.5				631,969				8.03
Waterway Plaza		Little River, SC		1991			9				49,750				97.6				424,313				8.74
Westland Square		West Columbia, SC		1986/1994			6				62,735				83.1				414,086				7.94
Winslow Plaza		Sicklerville, NJ		1990/2009			16				40,695				94.1				581,003				14.70
Total Portfolio							177				1,294,572				94.7	%		$	11,752,141			$	9.59

 

(1)	Annualized base rent per leased square foot excludes the impact of tenant concessions.

(2)

We own the Amscot building and Starbucks/Verizon building, but we do not own the land underneath the buildings and instead lease the land pursuant to ground leases with parties that are affiliates of Jon Wheeler. As disclosed in our Form 10-K for the year ended December 31, 2013, these ground leases require us to make annual rental payments and contain escalation clauses and renewal options.

 

The following properties were acquired subsequent to June 30, 2014 (the “2014 Completed Acquisitions”) or are under contract to be acquired (the “Contemplated Acquisitions”). We used a portion of the proceeds from our April 2014 preferred stock offering to fund the 2014 Completed Acquisitions and we plan to use a portion of the funds remaining from our April 2014 preferred stock offering and those generated in this offering to fund the Contemplated Acquisitions and other future acquisitions.

 

Property		Type(1)		Location		Year Built/ Renovated				Number of Tenants				Net Rentable Square Feet				Percentage Leased				Annualized Base Rent				Annualized Base Rent per Leased Square Foot (3)
Cypress Shopping Center (2)		A		Boiling Springs, SC			1999				14				80,435				94.4	%		$	774,736			$	10.30
Port Crossing (2)		A		Harrisonburg, VA			1999/2009				7				65,365				88.7	(4)			716,226				12.35
Harrodsburg Marketplace (2)		A		Harrodsburg, KY			1995				8				60,048				97.0				438,106				7.52
LaGrange Marketplace (2)		A		LaGrange, GA			1985				12				76,594				92.0				351,382				4.98
DF I-Courtland, LLC (2)		A		Courtland, VA				(5)				(5)				(5)				(5)				(5)				(5)
DF I-Moyock, LLC (2)		A		Moyock, NC				(5)				(5)				(5)				(5)				(5)				(5)
Edenton Commons (2)		A		Edenton, NC				(5)				(5)				(5)				(5)				(5)				(5)
Freeway Junction (2)		A		Stockbridge, GA			1987				18				156,834				97.7				951,114				6.20
Completed Acquisition Total											59				439,276				94.7	%			3,231,564				7.40
Brook Run		B		Richmond, VA			1990				19				147,738				92.1				1,620,235				11.91
Northeast Plaza		B		Lumberton, NC			2000				9				54,511				95.4				474,690				9.13
Contemplated Acquisition Total											28				202,249				93.0	%			2,094,925				11.16
Total											87				641,525				94.1	%			5,326,489				8.58

 

(1)	A= 2014 Completed Acquisition; B= Contemplated Acquisition

(2)	Acquisition closed subsequent to June 30, 2014.

(3)	Annualized base rent per leased square foot includes the impact of tenant concessions.

(4)	Occupancy rate includes the impact of a new lease signed with the Virginia ABC board to lease 2,400 square feet with annual rent of $39,600 beginning November 1, 2014 and a tenant relocation and expansion currently in process.

(5)	This information is not available because the property is undeveloped.

 

Property		Type(1)				Outstanding Balance				Interest Rate				Maturity Date				Amortization Period (Mths)				Annual Debt Service				Balance At Maturity
Cypress Shopping Center			A			$	6,625,000				4.73	%			July 2024				360			$	414,000			$	5,357,900
Port Crossing			A				6,600,000				4.84	%			July 2024				360			$	412,800			$	5,337,700
Harrodsburg Marketplace			A				3,725,000				4.55	%			August 2024				360			$	229,200			$	3,015,800
LaGrange Marketplace			A				2,334,700				5.00	%(2)			February 2020				360			$	193,200			$	2,268,200
DF I-Courtland			A				119,500				6.50	%			January 2019				120			$	16,800			$	73,300
DF I-Moyock			A				564,100				5.00	%			July 2019				60			$	128,400			$	—
Edenton Commons (3)			A				2,150,000				3.75	%			September 2014				240			$	178,800			$	2,127,700
Freeway Junction			A				8,150,000				4.60	%			September 2024				360			$	510,000			$	6,595,300
Brook Run			B				16,704,800				5.00	%			July 2015				360			$	1,159,200			$	15,963,200
Northeast Plaza			B				3,182,900				6.54	%			April 2021				360			$	403,200			$	2,369,600
						$	50,156,000

 

 

(1)	A=2014 Completed Acquisition, B=Contemplated Acquisition

(2)	The interest rate will increase during years 6-10 to between 6.5% to 8% based on a formula tied to the Five Year LIBOR Swap Rate for U.S. Dollars.

(3)	The loan for Edenton Commons has matured and we are in the process of refinancing.

Brook Run

We expect to enter into a contribution and subscription agreement to acquire Brook Run for an aggregate purchase price, including the assumption of debt, of $19,196,850. The contribution and subscription agreement is expected to replace a purchase and sale agreement we previously entered into to acquire the property. Jon Wheeler is the managing member of the entity that currently owns Brook Run and owns 2.1% of such entity. We have not used the proceeds from our last offering to acquire Brook Run because we have not yet completed the loan assumption process.

Brook Run is a 147,738 square foot community shopping center built in 1990 and anchored by a Martin’s grocery store. The property is located in Richmond, Virginia and is occupied by 19 primarily retail and restaurant tenants.

Martin’s

Martin’s leases 58,473 square feet of net rentable square feet, representing 39.58% of the net rentable square feet of Brook Run.

Annual rent under the Martin’s lease is $497,021.

The Martin’s lease expires on August 31, 2015 and has four remaining renewal options for five years.

Fitness Evolution

Fitness Evolution leases 32,000 square feet of net rentable square feet, representing 21.66% of the net rentable square feet of Brook Run.

Annual rent under the Fitness Evolution lease is $316,000.

The Fitness Evolution lease expires on January 31, 2023 and has four remaining renewal option for five years.

The following table sets forth the percentage leased and annualized rent per leased square foot for Brook Run as of the indicated dates:

 

Date		Percent Leased				Annualized Rent Per Leased Square Foot (1)
December 31, 2013			92.06	%		$	11.55
December 31, 2012			95.03				11.79
December 31, 2011			85.01				10.92
December 31, 2010			87.93				12.74
December 31, 2009			96.61				12.77

 

(1)	Annualized rent per leased square foot is calculated by dividing (i) annualized base rent, by (ii) square footage leased.

 

The following table sets forth the lease expirations for leases in place at Brook Run Shopping Center as of June 30, 2014, assuming that tenants do not exercise any renewal options or early termination options:

 

Lease Expiration Year		Number of Expiring Leases				Square Footage of Expiring Leases				Percentage of Property Leased Square Feet				Annualized Base Rent (in 000s) (1)				Percentage of Property Annualized Base Rent
Available			—				11,732				7.94	%		$	—				—	%
2014			3				2,755				1.86				48				2.96
2015			3				61,388				41.56				557				34.38
2016			3				5,240				3.55				97				5.99
2017			4				17,499				11.84				248				15.31
2018			3				3,626				2.45				65				4.01
2019			1				11,979				8.11				220				13.59
2020			1				1,519				1.03				33				2.04
2021			—				—				—				—				—
2022			—				—				—				—				—
2023 and thereafter			1				32,000				21.66				352				21.72
Total			19				147,738				100.00	%		$	1,620				100.00	%

 

(1)	Annualized rent is calculated by multiplying (i) base rental payments for the month ended June 30, 2014 for the leases expiring during the applicable period, by (ii) 12.

Northeast Plaza

We expect to enter into a contribution and subscription agreement to acquire Northeast Plaza for an aggregate purchase price, including the assumption of debt, of $4,894,700. The contribution and subscription agreement is expected to replace a purchase and sale agreement we previously entered into to acquire the property. Jon Wheeler is the managing member of the entity that currently owns Northeast Plaza and he owns 4.5% of such entity. We did not use the proceeds from our last offering to acquire Northeast Plaza because we have not yet completed the loan assumption process.

Northeast Plaza is a 54,511 square foot neighborhood shopping center built in 2000 and anchored by a Food Lion. The property is located in Lumberton, North Carolina and is occupied by 9 primarily retail and restaurant tenants.

Food Lion

Food Lion leases 33,000 square feet of net rentable square feet, representing 60.54% of the net rentable square feet of Northeast Plaza.

Annual rent under the Food Lion lease is $292,050.

The Food Lion lease expires on December 12, 2020 and has four remaining renewal options for five years.

Dollar General

Dollar General leases 9,200 square feet of net rentable square feet, representing 16.88% of the net rentable square feet of Northeast Plaza.

Annual rent under the Dollar General lease is $50,000.

The Dollar General lease expires on January 31, 2015 and has one remaining renewal option for five years.

 

The following table sets forth the percentage leased and annualized rent per leased square foot for Northeast Plaza as of the indicated dates:

 

Date		Percent Leased				Annualized Rent Per Leased Square Foot (1)
December 31, 2013			95.35	%		$	9.13
December 31, 2012			92.83				8.92
December 31, 2011			92.83				8.94
December 31, 2010			92.83				8.97
December 31, 2009			92.83				8.94

 

(1)	Annualized rent per leased square foot is calculated by dividing (i) annualized base rent, by (ii) square footage leased.

The following table sets forth the lease expirations for leases in place at Northeast Plaza as of June 30, 2014, assuming that tenants do not exercise any renewal options or early termination options:

 

Lease Expiration Year		Number of Expiring Leases				Square Footage of Expiring Leases				Percentage of Property Leased Square Feet				Annualized Base Rent (in 000s) (1)				Percentage of Property Annualized Base Rent
Available			—				2,535				4.65	%		$	—				—	%
2014			—				—				—				—				—
2015			4				13,400				24.58				105				22.11
2016			1				1,000				1.83				14				2.95
2017			1				1,400				2.57				18				3.79
2018			1				1,376				2.52				21				4.42
2019			—				—				—				—				—
2020			1				33,000				60.54				292				61.47
2021			1				1,800				3.31				25				5.26
2022			—				—				—				—				—
2023 and thereafter			—				—				—				—				—
Total			9				54,511				100.00	%		$	475				100.00	%

 

(1)	Annualized rent is calculated by multiplying (i) base rental payments for the month ended June 30, 2014 for the leases expiring during the applicable period, by (ii) 12.

Freeway Junction

On September 4, 2014, we purchased Freeway Junction for $10,450,000. Freeway Junction is a 156,834 square foot shopping center built in 1987 and anchored by a Goodwill store, a Northern Tool & Equipment store, an Ollie’s Bargain Outlet, a Farmer Home Furniture store and a Grand Furniture store. The property is located in Stockbridge, Georgia and is occupied by 18 primarily retail and restaurant tenants.

Goodwill

Goodwill leases 29,788 square feet of net rentable square feet, representing 18.99% of the net rentable square feet of Freeway Junction.

Annual rent under the Goodwill lease is $223,410.

 

The Goodwill lease expires on July 31, 2021 and has one remaining renewal options for five years.

Northern Tool

Northern Tool leases 29,270 square feet of net rentable square feet, representing 18.66% of the net rentable square feet of Freeway Junction.

Annual rent under the Northern Tool lease is $256,113.

The Northern Tool lease expires on October 31, 2015 and has two remaining renewal options for five years.

Ollie’s

Ollie’s leases 25,575 square feet of net rentable square feet, representing 16.31% of the net rentable square feet of Freeway Junction.

Annual rent under the Ollie’s lease is $84,653.

The Ollie’s lease expires on August 31, 2021 and has three remaining renewal options for five years.

Farmer Home Furniture

Farmer Home Furniture leases 20,152 square feet of net rentable square feet, representing 12.85% of the net rentable square feet of Freeway Junction.

Annual rent under the Farmer Home Furniture lease is $84,034.

The Farmer Home Furniture lease expires on March 31, 2016 and has no remaining renewal options available.

Grand Furniture

Grand Furniture leases 15,730 square feet of net rentable square feet, representing 10.03% of the net rentable square feet of Freeway Junction.

Annual rent under the Grand Furniture lease is $55,000.

The Grand Furniture lease expires on February 28, 2019 and has one remaining renewal option for five years.

The following table sets forth the percentage leased and annualized rent per leased square foot for Freeway Junction as of the indicated dates:

 

Date		Percent Leased				Annualized Rent Per Leased Square Foot (1)
December 31, 2013			93.7	%		$	6.58
December 31, 2012			95.0				6.38
December 31, 2011			97.5				6.28
December 31, 2010(2)			N/A				N/A
December 31, 2009(2)			N/A				N/A

 

(1)	Annualized rent per leased square foot is calculated by dividing (i) annualized base rent, by (ii) square footage leased.

(2)	Information unavailable for these periods.

 

The following table sets forth the lease expirations for leases in place at Freeway Junction as of June 30, 2014, assuming that tenants do not exercise any renewal options or early termination options:

 

Lease Expiration Year		Number of Expiring Leases				Square Footage of Expiring Leases				Percentage of Property Leased Square Feet				Annualized Base Rent (in 000s) (1)				Percentage of Property Annualized Base Rent
Available			—				3,535				2.25	%		$	—				—	%
2014			—				—				—				—				—
2015			5				40,930				26.10				312				32.81
2016			8				67,039				42.75				464				48.79
2017			2				4,025				2.57				32				3.36
2018			1				—				—				14				1.47
2019			1				15,730				10.03				45				4.73
2020			—				—				—				—				—
2021			1				25,575				16.30				84				8.84
2022			—				—				—				—				—
2023 and thereafter			—				—				—				—				—
Total			18				156,834				100.00	%		$	951				100.00	%

 

(1)	Annualized rent is calculated by multiplying (i) base rental payments for the month ended June 30, 2014 for the leases expiring during the applicable period, by (ii) 12.

Port Crossing

On July 3, 2014, we acquired all of the membership interests of PCSC Associates, LLC, the owner of Port Crossing, for a total purchase price consisting of cash and the assumption of debt in the aggregate amount of $8,566,761 and Operating Partnership common units valued at $744,639. Jon Wheeler was the managing member of PCSC Associates, LLC, prior to its acquisition by us. Port Crossing is a 65,365 square foot neighborhood shopping center built in two phases in 1999 and 2009 and anchored by a Food Lion. The property is located in Harrisonburg, Virginia and is occupied by 7 primarily retail and restaurant tenants. The center recently signed a five year lease with the Virginia ABC Board for a new 2,400 square foot location at the property with annual rent of $39,600 beginning November 1, 2014. Occupancy at the property will increase to 88.7% once the ABC store opens and another relocation currently underway is completed.

Food Lion

Food Lion leases 45,000 square feet of net rentable square feet, representing 68.84% of the net rentable square feet of Port Crossing.

Annual rent under the Food Lion lease is $517,500.

The Food Lion lease expires on August 31, 2018 and has four remaining renewal options for five years.

 

The following table sets forth the percentage leased and annualized rent per leased square foot for Port Crossing as of the indicated dates:

 

Date		Percent Leased				Annualized Rent Per Leased Square Foot (1)
December 31, 2013			82.46	%		$	12.55
December 31, 2012			90.57				13.57
December 31, 2011			88.24				13.47
December 31, 2010			90.12				13.45
December 31, 2009			93.68				12.40

 

(1)	Annualized rent per leased square foot is calculated by dividing (i) annualized base rent, by (ii) square footage leased.

The following table sets forth the lease expirations for leases in place at Port Crossing as of June 30, 2014, assuming that tenants do not exercise any renewal options or early termination options:

 

Lease Expiration Year		Number of Expiring Leases				Square Footage of Expiring Leases				Percentage of Property Leased Square Feet				Annualized Base Rent (in 000s) (1)				Percentage of Property Annualized Base Rent
Available			—				7,365				11.27	%		$	—				—	%
2014			1				250				0.38				5				0.70
2015			—				—				—				—				—
2016			1				1,160				1.77				22				3.07
2017			1				2,690				4.12				39				5.45
2018			1				45,000				68.84				518				72.35
2019			1				2,400				3.67				40				5.59
2020			1				1,200				1.84				20				2.79
2021			—				—				—				—				—
2022			2				5,300				8.11				72				10.05
2023 and thereafter			—				—				—				—				—
Total			8				65,365				100.00	%		$	716				100.00	%

 

(1)	Annualized rent is calculated by multiplying (i) base rental payments for the month ended June 30, 2014 for the leases expiring during the applicable period, by (ii) 12.

Cypress Shopping Center

On July 1, 2014, we purchased Cypress Shopping Center for $8,300,000. Cypress Shopping Center is an 80,435 square foot shopping center built in 1999 and anchored by a Bi-Lo grocery store. The property is located in Boiling Springs, South Carolina and is occupied by 14 primarily retail and restaurant tenants.

Bi-Lo

Bi-Lo leases 47,260 square feet of net rentable square feet, representing 58.76% of the net rentable square feet of Cypress.

Annual rent under the Bi-Lo lease is $453,714.

The Bi-Lo lease expires on March 31, 2018 and has six remaining renewal options for five years.

 

The following table sets forth the percentage leased and annualized rent per leased square foot for Cypress Shopping Center as of the indicated dates:

 

Date		Percent Leased				Annualized Rent Per Leased Square Foot (1)
December 31, 2013			91.7	%		$	10.40
December 31, 2012 (2)			N/A				N/A
December 31, 2011 (2)			N/A				N/A
December 31, 2010 (2)			N/A				N/A
December 31, 2009 (2)			N/A				N/A

 

(1)	Annualized rent per leased square foot is calculated by dividing (i) annualized base rent, by (ii) square footage leased.

(2)	Information unavailable for these periods.

The following table sets forth the lease expirations for leases in place at Cypress Shopping Center as of June 30, 2014, assuming that tenants do not exercise any renewal options or early termination options:

 

Lease Expiration Year		Number of Expiring Leases				Square Footage of Expiring Leases				Percentage of Property Leased Square Feet				Annualized Base Rent (in 000s) (1)				Percentage of Property Annualized Base Rent
Available			—				5,250				6.53	%		$	—				—	%
2014			1				1,400				1.74				19				2.45
2015			3				4,200				5.22				45				5.81
2016			2				9,400				11.69				72				9.29
2017			1				1,400				1.74				18				2.32
2018			5				55,310				68.76				569				73.42
2019			2				3,475				4.32				52				6.71
2020			—				—				—				—				—
2021			—				—				—				—				—
2022			—				—				—				—				—
2023 and thereafter			—				—				—				—				—
Total			14				80,435				100.00	%		$	775				100.00	%

 

(1)	Annualized rent is calculated by multiplying (i) base rental payments for the month ended June 30, 2014 for the leases expiring during the applicable period, by (ii) 12.

Harrodsburg Marketplace

On July 1, 2014, we purchased Harrodsburg Marketplace for $5,000,000. Harrodsburg Marketplace is a 60,048 square foot shopping center built in 1995 and anchored by a Kroger grocery store. The property is located in Harrodsburg, Kentucky and is occupied by 8 primarily retail and restaurant tenants.

Kroger

Kroger leases 36,158 square feet of net rentable square feet, representing 60.22% of the net rentable square feet of Harrodsburg Marketplace.

Annual rent under the Kroger lease is $255,036.

The Kroger lease expires on September 30, 2023 and has four remaining renewal options for five years.

 

The following table sets forth the percentage leased and annualized rent per leased square foot for Harrodsburg Marketplace as of the indicated dates:

 

Date		Percent Leased				Annualized Rent Per Leased Square Foot (1)
December 31, 2013			97.0	%		$	7.52
December 31, 2012 (2)			N/A				N/A
December 31, 2011 (2)			N/A				N/A
December 31, 2010 (2)			N/A				N/A
December 31, 2009 (2)			N/A				N/A

 

(1)	Annualized rent per leased square foot is calculated by dividing (i) annualized base rent, by (ii) square footage leased.

(2)	Information unavailable for these periods.

The following table sets forth the lease expirations for leases in place at Harrodsburg Marketplace as of June 30, 2014, assuming that tenants do not exercise any renewal options or early termination options:

 

Lease Expiration Year		Number of Expiring Leases				Square Footage of Expiring Leases				Percentage of Property Leased Square Feet				Annualized Base Rent (in 000s) (1)				Percentage of Property Annualized Base Rent
Available			—				1,800				3.00	%		$	—				—	%
2014			—				—				—				—				—
2015			1				1,800				3.00				13				2.88
2016			1				1,800				3.00				23				5.14
2017			—				—				—				—				—
2018			2				7,200				11.99				20				4.79
2019			—				—				—				—				—
2020			1				3,600				5.99				26				5.82
2021			—				—				—				—				—
2022			—				—				—				—				—
2023 and thereafter			3				43,848				73.02				356				81.37
Total			8				60,048				100.00	%		$	438				100.00	%

 

(1)	Annualized rent is calculated by multiplying (i) base rental payments for the month ended June 30, 2014 for the leases expiring during the applicable period, by (ii) 12.

LaGrange Marketplace

On July 25, 2014, we acquired all of the membership interests of LaGrange Associates, LLC, the owner of LaGrange Marketplace for a total purchase price consisting of cash and the assumption of debt in the aggregate amount of $3,202,830.28 and Operating Partnership common units valued at $492,169.72. Jon Wheeler was the Managing member of LaGrange Associates, LLC, prior to its acquisition by us.

LaGrange Marketplace is a 76,594 square foot shopping center built in 1985 and anchored by a Food Depot grocery store. The property is located in LaGrange, Georgia and is occupied by 12 primarily retail and restaurant tenants.

Food Depot

Food Depot leases 46,700 square feet of net rentable square feet, representing 60.97% of the net rentable square feet of LaGrange Marketplace.

 

Annual rent under the Food Depot lease is $140,100.

The Food Depot lease expires on April 30, 2018 and has three remaining renewal options for five years.

Rite Aid

Rite Aid leases 9,594 square feet of net rentable square feet, representing 12.53% of the net rentable square feet of LaGrange Marketplace.

Annual rent under the Rite Aid lease is $62,361.

The Rite Aid lease expires on January 28, 2022 and has two remaining renewal options for five years.

The following table sets forth the percentage leased and annualized rent per leased square foot for LaGrange Marketplace as of the indicated dates:

 

Date		Percent Leased				Annualized Rent Per Leased Square Foot (1)
December 31, 2013			92.0	%		$	4.96
December 31, 2012			86.6				4.56
December 31, 2011			84.6				4.41
December 31, 2010			84.6				4.38
December 31, 2009			82.6				4.19

 

(1)	Annualized rent per leased square foot is calculated by dividing (i) annualized base rent, by (ii) square footage leased.

The following table sets forth the lease expirations for leases in place at LaGrange Marketplace as of June 30, 2014, assuming that tenants do not exercise any renewal options or early termination options:

 

Lease Expiration Year		Number of Expiring Leases				Square Footage of Expiring Leases				Percentage of Property Leased Square Feet				Annualized Base Rent (in 000s) (1)				Percentage of Property Annualized Base Rent
Available			—				6,100				7.96	%		$	—				—	%
2014			1				2,400				3.13				23				6.55
2015			—				—				—				—				—
2016			3				6,000				7.83				56				15.95
2017			1				1,200				1.57				15				4.28
2018			3				47,900				62.54				158				45.02
2019			3				3,400				4.44				37				10.54
2020			—				—				—				—				—
2021			—				—				—				—				—
2022			1				9,594				12.53				62				17.66
2023 and thereafter			—				—				—				—				—
Total			12				76,594				100.00	%		$	351				100.00	%

 

(1)	Annualized rent is calculated by multiplying (i) base rental payments for the month ended June 30, 2014 for the leases expiring during the applicable period, by (ii) 12.

 

DF I-Courtland, LLC

DF I-Courtland, LLC owns a 1.03 acre parcel of undeveloped real estate referred to as Courtland Commons that is located in Courtland, Virginia. We believe this parcel will accommodate a 8,400 square foot facility. We acquired the property on August 15, 2014 for approximately $893,900 from Development Fund I, LLC, an entity managed by Jon Wheeler. The property was acquired for future development purposes. No specific development plans exist at this time because we are considering numerous retail opportunities; however, the property is suitable for a retail center that is similar to our existing portfolio, and we intend to emphasize the development of this property for such purposes.

DF I-Moyock, LLC

DF I-Moyock, LLC owns a 1.28 acre parcel of undeveloped real estate referred to as Tulls Creek that is located in Moyock, North Carolina. We believe this parcel will accommodate a 9,000 square foot facility. We acquired the property on August 15, 2014 for approximately $908,100 from Development Fund I, LLC, an entity managed by Jon Wheeler. The property was acquired for future development purposes. No specific development plans exist at this time because we are considering numerous retail opportunities; however, the property is suitable for a retail center that is similar to our existing portfolio, and we intend to emphasize the development of this property for such purposes.

Edenton Commons

Edenton Commons is a 53.82 acre parcel of undeveloped real estate located in Edenton, North Carolina. We believe this parcel will accommodate a 225,000 square foot facility. We acquired the property on August 15, 2014 for approximately $2.40 million from Development Fund I, LLC, an entity managed by Jon Wheeler. The property was acquired for future development purposes. No specific development plans exist at this time because we are considering numerous retail opportunities; however, the property is suitable for a retail center that is similar to our existing portfolio, and we intend to emphasize the development of this property for such purposes.

Structure of Our Company

Our Operating Entities

Our Operating Partnership

Substantially all of our assets are held by, and our operations are conducted through, the Operating Partnership. As the sole general partner of the Operating Partnership, we generally have the exclusive power under the Amended and Restated Agreement of Limited Partnership of Wheeler REIT, L.P. (the “Partnership Agreement”) to manage and conduct the business and affairs of the Operating Partnership, subject to certain limited approval and voting rights of the limited partners. Our board of directors will manage our business and affairs.

Because we conduct substantially all of our operations through the Operating Partnership, we are considered an UPREIT. UPREIT stands for “Umbrella Partnership Real Estate Investment Trust.” An UPREIT is a REIT that holds all or substantially all of its properties through a partnership in which the REIT holds a general partner and/or limited partner interest generally based on the value of capital raised by the REIT through sales of its capital stock. Using an UPREIT structure may give us an advantage in acquiring properties from persons who may not otherwise sell their properties because of unfavorable tax results. Generally, a sale or contribution of property directly to a REIT is a taxable transaction to the selling property owner. In an UPREIT structure, a seller of a property who desires to defer taxable gain on the sale of his property may contribute the property to the UPREIT in exchange for limited partnership units in the partnership and defer taxation of gain until the seller later exchanges his limited partnership units on a one-for-one basis for REIT shares or for cash pursuant to the terms of the Partnership Agreement or the UPREIT sells the property.

 

Our Administrative Service Company

We entered into an Administrative Services Agreement with our Administrative Service Company, pursuant to which, our Administrative Service Company provides us with appropriate support personnel to assist our executive management team and performs certain services for us, subject to the oversight of our board of directors and our executive officers. We anticipate acquiring our Administrative Services Company and other Services Companies by December 31, 2014. Currently, our Administrative Service Company is responsible for, among other duties (1) performing and administering our day-to-day operations, (2) determining investment criteria in conjunction with our board of directors, (3) sourcing, analyzing and executing asset acquisitions approved by our board of directors, sales and financings, (4) performing asset management duties, (5) performing property management duties, (6) performing leasing duties, and (7) performing financial and accounting management. Our Administrative Service Company currently receives an administrative services fee of $740,000 per year plus $20,000 per year for each additional property we acquire subsequent to the completion of this offering. Additionally, Wheeler Real Estate, LLC receives a property management fee at a rate of 3% of each of our properties’ annual gross revenue and Wheeler Interests, LLC receives an asset management fee at a rate of 2% of each of our properties’ annual gross revenue. Additionally, we reimburse our Administrative Service Company for all reasonable out-of-pocket expenses incurred on our behalf, including but not limited to travel and general office expenses, such as copying and telephone usage. Our executive management team consists of our Chairman/Chief Executive Officer, Chief Financial Officer, and Secretary. Our Administrative Service Company pays the salaries of such officers. They are also eligible to receive additional compensation in the form of stock incentive awards granted under our 2012 Share Incentive Plan.

Our Development Company

We acquired Wheeler Development, LLC (“Wheeler Development”) in January 2014 for nominal consideration from Jon Wheeler. Wheeler Development specializes in ground up development, redevelopment of mature centers, phase two developments for existing centers and build to suit projects for selecting tenants. Wheeler Development allows us to bring a wide range of development services in-house to support the expansion of our investment strategy to develop properties. We expect to fully integrate Wheeler Development into our operations by January 2015.

 

Our Structure

The following diagram depicts the ownership structure of Wheeler Real Estate Investment Trust, Inc. upon the completion of the offering contemplated hereby.

 

 

(1)	We expect to acquire WHLR Management, LLC by December 31, 2014.

(2)

Some of the owners of properties we acquired received limited partnership units in Wheeler REIT, L.P. in exchange for the contribution of their membership interests in the entities previously acquired by our company. Of the 2,067,014 limited partnership units outstanding, 394,697 are owned by Jon S. Wheeler, 3,185 are owned by Robin Hanisch, our Secretary, and 14,620 are owned by Ann L. McKinney, one of our directors.

(3)	Our Operating Partnership owns 100% of the membership interests of each of the entities that own the properties in our portfolio.

Restrictions on Transfer

Under the Partnership Agreement, holders of common units do not have redemption or exchange rights, except under limited circumstances, for a period of 12 months, and may not otherwise transfer their units, except under certain limited circumstances, for a period of 12 months following issuance. After the expiration of this 12-month period, transfers of units by limited partners and their assignees are subject to various conditions, including our right of first refusal. In addition, each of our officers, directors and their affiliates, have agreed not to sell or otherwise transfer or encumber any shares of our common stock or securities convertible or exchangeable into our common stock (including common units) owned by them at the completion of this offering or thereafter acquired by them for a period of six months after the date of this prospectus.

Restrictions on Ownership of our Stock

Due to limitations on the concentration of ownership of REIT stock imposed by the Internal Revenue Code of 1986, as amended (the “Code”), our charter generally prohibits any person from actually, beneficially or constructively

 

owning more than 9.8% in value or number of shares, whichever is more restrictive, of the outstanding shares of our common stock or more than 9.8% in value of the aggregate outstanding shares of all classes and series of our stock (the “Ownership Limits”). See “Description of Securities—Restrictions on Ownership and Transfer.”

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We take advantage of these exemptions. We do not know if some investors will find our common stock less attractive as a result. The result may be a less active trading market for our common stock and our stock price may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we elected to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Conflicts of Interest

Following the completion of this offering, conflicts of interest may arise between the holders of units and our stockholders with respect to certain transactions, such as the sale of any properties or a reduction of indebtedness, which could have adverse tax consequences to holders of units, including Mr. Wheeler, thereby making those transactions less desirable to such holders. Conflicts of interest may also arise with our Administrative Services Company, Wheeler Interests, LLC and Wheeler Real Estate, LLC due to the fees they receive from us for their services. Further, conflicts of interest may arise when we purchase properties from entities controlled by Mr. Wheeler because we will not have the benefit of arm’s length negotiations of the type normally conducted between unrelated parties. Lastly, conflicts of interest may arise with Mr. Wheeler and the Administrative Services Company because they are not prohibited from pursuing real estate programs and investment strategies similar to ours. In the event of such a conflict, we are under no obligation to give priority to the separate interests of our company or our stockholders. However, we have adopted conflict of interest policies aimed at minimizing these conflicts.

 

Distribution Policy

We intend to pay cash dividends to holders of our common stock on a monthly basis and holders of our preferred stock on a quarterly basis. We intend to make dividend distributions that will enable us to meet the distribution requirements applicable to REITs and to eliminate or minimize our obligation to pay income and excise taxes. We will be required to use a portion of the net proceeds from this offering to make such distributions. We may in the future also choose to pay dividends in shares of our common stock. See “Material U.S. Federal Income Tax Considerations—Federal Income Tax Considerations for Holders of Our Common Stock—Taxation of Taxable U.S. Stockholders” and “Risk Factors—Risks Related to Our Status as a REIT—We may in the future choose to pay dividends in shares of our common stock, in which case you may be required to pay tax in excess of the cash you receive.”

Additionally, we agreed with our underwriters in our initial public offering that any common units held by Jon S. Wheeler, directly or indirectly or through his spouse, children or affiliated entities, are contractually subordinated to the remaining common units and common stock as it relates to dividend payments to be received by the holders of common units and the holders of common stock.

Our Tax Status

We elected to be taxed and to operate in a manner that will allow us to qualify as a REIT for federal income tax purposes. We believe that our organization and proposed method of operation will continue to enable us to meet the requirements for qualification and taxation as a REIT. To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute at least 90% of our REIT taxable income to our stockholders.

Corporate Information

Our principal executive office is located at Riversedge North, 2529 Virginia Beach Boulevard, Suite 200, Virginia Beach, Virginia 23452. Our telephone number is 757-627-9088. Our website is located at www.WHLR.us. The information on, or accessible through, our website is not incorporated into and does not constitute a part of this prospectus or any other report or document we file with or furnish to the Securities and Exchange Commission (the “SEC”).

The Offering

 

Series B Preferred Stock

600,000 shares of Series B Preferred Stock will be offered as part of the Units through our underwriters in this offering on a firm commitment basis.

 

Ranking. The Series B Preferred Stock ranks senior to our common stock and on parity with our Series A Preferred Stock with respect to payment of dividends and rights upon liquidation, dissolution or winding up.

 

Stated Value. Each share of Series B Preferred Stock will have an initial “Stated Value” of $25.00, subject to appropriate adjustment in relation to certain events, such as recapitalizations, stock dividends, stock splits, stock combinations, reclassifications or similar events affecting our Series B Preferred Stock, as set forth in the sections of our charter that set forth the rights, preferences and limitations of the Series B Preferred Stock.

 

 

Dividends. Holders of Series B Preferred Stock are entitled to receive, when and as authorized by our board of directors and declared by us out of legally available funds, cumulative cash dividends on each share of Series B Preferred Stock at an annual rate of nine percent (9%) of the Stated Value. Dividends on each share of Series B Preferred Stock will begin accruing on, and will be cumulative from, the date of issuance. We expect to continue to pay dividends on the Series B Preferred Stock quarterly, unless our results of operations, our general financing conditions, general economic conditions, applicable provisions of Maryland law or other factors make it imprudent to do so. We also expect to continue to authorize and declare dividends on the shares of Series B Preferred Stock on a quarterly basis payable quarterly in arrears on or before the fifteenth day of each January, April, July and October of each year (or the next business day if such day is not a business day). The timing and amount of such dividends will be determined by our board of directors, in its sole discretion, and may vary from time to time.

 

Voluntary Conversion. The holder of a share of Series B Preferred Stock may convert such share of Series B Preferred Stock at any time into shares of our common stock at an initial conversion rate of $5.00 per share. Such conversion shall occur on the date following the record date for our next dividend payment.

 

Mandatory Conversion. To the extent the 20-trading day volume-weighted average closing price of our common stock exceeds $7.25 per share, each share of Series B Preferred Stock will, on the date following the record date for our next dividend payment, automatically convert into shares of common stock at an initial conversion price equal to $5.00 per share.

 

Liquidation. Upon any voluntary or involuntary liquidation, dissolution or winding-up of our affairs, before any distribution or payment shall be made to holders of our common stock or any other class or series of capital stock ranking junior to our shares of Series B Preferred Stock, the holders of shares of Series B Preferred Stock will be entitled to be paid out of our assets legally available for distribution to our stockholders, after payment or provision for our debts and other liabilities, a liquidation preference equal to the Stated Value per share, plus accrued but unpaid dividends.

 

Voting Rights. The Series B Preferred Stock have no voting rights, except as required by law.

 

Warrants

Warrants to purchase up to 720,000 shares of common stock will be offered as part of the Units. The Warrants will be exercisable upon issuance for a term ending on April 29, 2019. The initial exercise price will be $5.50 per share.

 

Capital stock to be outstanding after this offering

1,428,000 shares of Series B Preferred Stock

1,809 shares of Series A Preferred Stock

7,428,208 shares of common stock ⁽¹⁾

 

Estimated use of proceeds

We estimate that we will receive net proceeds from the sale of the Units in this offering of approximately $             million after deducting estimated offering expenses, including underwriters commissions, payable by us of approximately $            . We intend to invest the net proceeds of this offering in connection with the Contemplated Acquisitions, in connection with future acquisitions and for general working capital purposes, including using a portion of the proceeds to pay future dividends.

 

NASDAQ Symbol for Common Stock

WHLR

 

NASDAQ Symbol for Series B Preferred Stock

WHLRP

 

NASDAQ Symbol for Warrants

WHLRW

Capital Structure

The Series B Preferred Stock ranks (i) on parity with our Series A Preferred Stock and (ii) senior to our common stock with respect to both payment of dividends and distribution of amounts upon liquidation. Our board of directors has the authority to issue shares of additional series of preferred stock that could be senior in priority to the Series B Preferred Stock.

 

  

 

(1)	The number of shares of common stock to be outstanding immediately after this offering as shown above reflects only the 7,428,208 shares of common stock outstanding as of September 8, 2014 and does not reflect the impact of securities convertible into shares of our common stock.

 

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Financial Statements

The following unaudited pro forma condensed consolidated financial statements set forth on a pro forma basis for our company giving effect to this offering (the “Proposed Offering”), the 2014 Completed Acquisitions and the Contemplated Acquisitions as described elsewhere in this Prospectus and the pro forma impact of acquisitions completed during 2013. You should read the following unaudited pro forma condensed consolidated financial statements in conjunction with our financial statements and the related notes and with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our December 31, 2013 Annual Report on Form 10-K (“2013 Form 10-K”) filed with the SEC on March 21, 2014 and in our June 30, 2014 Quarterly Report on Form 10-Q (“June 2014 Form 10-Q”) filed with the SEC on August 14, 2014. Additionally, you should refer to financial information filed in relation to the property acquisitions as required under Rule 3-14 of Regulation S-X as promulgated by the SEC that are included within this Prospectus or have been incorporated by reference herein.

The following summarizes those properties that make up the 2014 Completed Acquisitions and the Contemplated Acquisitions which are described in more detail elsewhere in this Prospectus.

2014 Completed Acquisitions:

 

•

Cypress Shopping Center (Boiling Springs, SC)—acquired July 1, 2014

 

•

Harrodsburg Marketplace Shopping Center (Harrodsburg, KY)—acquired July 1, 2014

 

•

Port Crossing Shopping Center (Harrisonburg, VA)—acquired July 3, 2014

 

•

LaGrange Marketplace Shopping Center (LaGrange, GA)—acquired July 25, 2014

 

•

DF 1-Courtland, LLC (Courtland, VA) (1)—acquired on August 15, 2014

 

•

DF 1-Moyock, LLC (Moyock, NC) (1)—acquired on August 15, 2014

 

•

Edenton Commons (Edenton, NC) (1)—acquired on August 15, 2014

 

•

Freeway Junction Shopping Center (Stockbridge, GA)—acquired on September 4, 2014

Contemplated Acquisitions:

 

•

Brook Run Shopping Center (Richmond, VA)

 

•

Northeast Plaza Shopping Center (Lumberton, NC)

 

(1)	Represents undeveloped real estate.

The following properties were acquired during 2013 (“2013 Acquisitions”) and are described in more detail in our 2013 Form 10-K:

 

•

Bixby Commons Shopping Center (Bixby, OK)—acquired June 11, 2013

 

•

Tampa Festival (Tampa, FL)—acquired August 27, 2013

 

•

Forrest Gallery (Tullahoma, TN)—acquired August 29, 2013

 

•

Jenks Reasor’s Shopping Center (Jenks, OK)—acquired September 24, 2013

 

•

Starbucks/Verizon Retail Center (Virginia Beach, VA)—acquired October 21, 2013

 

•

Jenks Plaza (Jenks, OK)—acquired December 17, 2013

 

•

Winslow Plaza (Sicklerville, NJ)—acquired December 19, 2013

 

•

Clover Plaza (Clover, SC)—acquired December 23, 2013

 

•

St. George Plaza (St. George, SC)—acquired December 23, 2013

 

•

South Square (Lancaster, SC)—acquired December 23, 2013

 

•

Waterway Plaza (Little River, SC)—acquired December 23, 2013

 

•

Westland Square (West Columbia, SC)—acquired December 23, 2013

The 2014 Completed Acquisitions, the Contemplated Acquisitions and the 2013 Acquisitions, as defined above, have been accounted for as an acquisition under the purchase accounting method and recognized at the estimated preliminary fair value of acquired assets and assumed liabilities on the date of such contribution or acquisition. The preliminary estimated fair value of these assets and liabilities has been allocated in accordance with Accounting Standards Codification (“ASC”) section 805-10, Business Combinations. Our methodology of allocating the cost of acquisitions to assets acquired and liabilities assumed is based on estimated fair values, replacement cost and appraised values. We estimated the fair value of acquired tangible assets (consisting of land, building and improvements), identified intangible lease assets and liabilities (consisting of acquired above-market leases, acquired in-place lease value and acquired below-market leases) and assumed debt.

The values allocated to leasing commissions, legal and marketing fees associated with replacing existing leases, tenant relationships and in-place leases are amortized over the related lease term and reflected as depreciation and amortization. The value of above- and below-market in place leases are amortized over the related lease term and reflected as either an increase (for below-market leases) or a decrease (for above-market leases) to rental income. The fair value of the debt assumed is determined using current market interest rates for comparable debt financings. The estimated purchase price of the acquired properties for pro forma purposes is based on a relative equity evaluation analysis of the properties which incorporates cash flows and outstanding mortgage debt of the properties.

The following unaudited pro forma condensed consolidated financial information sets forth:

 

•

the condensed consolidated financial information of our company as of and for the six months ended June 30, 2014 as provided in our financial statements included in our June 2014 Form 10-Q;

 

•

the condensed consolidated financial information of our company as of and for the year ended December 31, 2013 as provided in our financial statements included in our 2013 Form 10-K;

 

•

pro forma adjustments related to the Proposed Offering as if the transactions were completed as of June 30, 2014 for purposes of the unaudited pro forma condensed consolidated balance sheet and as of January 1, 2013 for purposes of the unaudited pro forma condensed consolidated statement of operations;

 

•

the estimated preliminary fair value balance sheet for the 2014 Completed Acquisitions and the Contemplated Acquisitions as of June 30, 2014 and their estimated pro forma results of operations for the six months ended June 30, 2014 and the year ended December 31, 2013 (audited, if applicable); and

 

•

the estimated pro forma results of operations for the year ended December 31, 2013 (audited, if applicable) of the 2013 Acquisitions.

The Bixby Commons, Jenks Reasor’s and Starbucks/Verizon acquisitions have been reflected in the pro forma balance sheet and the estimated pro forma results of operations for the six months ended June 30, 2014. However, the incremental pro forma impact of these acquisitions on operations has been excluded from the pro forma statement of operations for the year ended December 31, 2013 due to the limited operating history for these properties as discussed below.

 

The Bixby Commons Shopping Center, a 75,000 square foot shopping center located in Bixby, Oklahoma, was purchased by us on June 11, 2013 for approximately $10.6 million. In conjunction with this acquisition, we raised $4.16 million in net proceeds in a preferred stock offering. The property is leased to Associated Wholesale Grocers (AWG) who in turn subleases 100% of the property to a Reasor’s Foods grocery store. The property was originally leased to AWG pursuant to a Build and Lease Agreement between AWG and the seller, a wholly-owned subsidiary of AWG. Construction of the property was completed during late 2012 and Reasor’s Foods opened their store during November 2012. Accordingly, there is limited third party operating history for the property.

We acquired Jenks Reasor’s, an 81,000 square foot free-standing retail property located in Jenks, Oklahoma, on September 24, 2013 for a purchase price of approximately $11.4 million through a sales-leaseback transaction with AWG. The property was built in 2011. The property is subleased to a Reasor’s Foods grocery store under a 20 year, triple-net operating lease expiring in 2033 and subject to annual rental payments of $912,000. Under the lease agreement, Reasor’s is responsible for all expenses associated with the property, including taxes, insurance, roof and structure. Due the nature of the relationship between AWG and Reasor’s, there is limited third party operating history available.

We acquired Starbucks/Verizon, a 5,600 square foot free standing retail property located in Virginia Beach, Virginia, on October 21, 2013 for a purchase price of approximately $1.4 million. The property was built in 1985 and underwent significant renovations in 2012. The property is 100% leased by Starbucks Coffee and Verizon Wireless, who occupy 2,165 square feet and 3,435 square feet, respectively. Under the initial terms, Starbucks’ lease will expire in 2023 with three five-year options to renew, while Verizon Wireless’ lease will expire in 2022 and will also offer three five-year options to renew. Since the property was significantly renovated in late 2012 and the Starbucks and Verizon leases did not begin until October 2012, there is limited operating history available.

The unaudited pro forma condensed consolidated balance sheet is presented for illustrative purposes only and is not necessarily indicative of what the actual financial position would have been had the transactions referred to above occurred on June 30, 2014, nor does it purport to represent the future financial position of the company. The unaudited pro forma condensed consolidated statement of operations is presented for illustrative purposes only and is not necessarily indicative of what the actual results of operations would have been had the transactions referred to above occurred on January 1, 2013, nor does it purport to represent the future results of operations of the company.

The properties making up the 2014 Completed Acquisitions, the Contemplated Acquisitions and the 2013 Acquisitions (including Bixby Commons, Jenks Reasor’s and Starbucks/Verizon) may be reassessed for property tax purposes. Therefore, the amount of property taxes we pay in the future may increase from what we have paid in the past. Given the uncertainty of the amounts involved, we have not included any property tax increase in our pro forma financial statements.

 

Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Unaudited Pro Forma Condensed Consolidated Balance Sheet

June 30, 2014

 

						Pro Forma Transactions
		WHLR, Inc. & Subsidiaries				Proposed Offering				2014 Completed Acquisitions				Contemplated Acquisitions				Other Pro Forma Transactions				WHLR, Inc. & Subsidiaries Consolidated Pro Forma
		(1)				(2)				(3)				(3)				(4)
ASSETS:
Investment properties, net at cost		$	100,553,283			$	—			$	34,520,600			$	20,759,200			$	—			$	155,833,083
Cash and cash equivalents			16,243,867				13,500,000				(9,310,500	)			(3,397,000	)			—				17,036,067
Rents and other tenant receivables, net			1,663,027				—				255,700				935,000				—				2,853,727
Deferred costs and other assets			21,692,120				—				5,781,700				2,663,100				—				30,136,920
Total Assets		$	140,152,297			$	13,500,000			$	31,247,200			$	20,960,300			$	—			$	205,859,797
LIABILITIES:
Mortgages and other indebtedness		$	95,236,145			$	—			$	30,419,500			$	19,887,700			$	—			$	145,543,345
(Above)/Below market lease intangible, net			2,610,379				—				(849,400	)			(54,200	)			—				1,706,779
Accounts payable, accrued expenses and other liabilities			3,361,048				—				440,300				1,126,800				—				4,928,148
Total Liabilities			101,207,572				—				30,010,400				20,960,300				—				152,178,272
EQUITY:
Series A convertible preferred stock (no par value, 4,500 shares authorized, 1,809 shares issued and outstanding)			1,458,050				—				—				—				—				1,458,050
Series B convertible preferred stock (no par value, 3,000,000 shares authorized, 1,428,000 shares issued and outstanding)			18,738,515				13,500,000				—				—				—				32,238,515
Common stock ($0.01 par value, 75,000,000 shares authorized, 7,421,852 shares issued and outstanding)			74,218				—				—				—				—				74,218
Additional paid-in capital			28,092,906				—				—				—				(1,209,853	)			26,883,053
Accumulated deficit			(16,274,152	)			—				—				—				—				(16,274,152	)
Total Shareholders’ Equity			32,089,537				13,500,000				—				—				(1,209,853	)			44,379,684
Noncontrolling interests			6,855,188				—				1,236,800				—				1,209,853				9,301,841
Total Equity			38,944,725				13,500,000				1,236,800				—				—				53,681,525
Total Liabilities and Equity		$	140,152,297			$	13,500,000			$	31,247,200			$	20,960,300			$	—			$	205,859,797

See accompanying notes and management’s assumptions to unaudited pro forma condensed consolidated financial statements.