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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
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 | | 45-2681082 |
(State or Other Jurisdiction of Incorporation or Organization) | | (I.R.S. Employer Identification No.) |
| | |
2529 Virginia Beach Blvd. Virginia Beach. Virginia | | 23452 |
(Address of Principal Executive Offices) | | (Zip Code) |
(757) 627-9088
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $0.01 par value per share | | WHLR | Nasdaq Capital Market |
Series B Convertible Preferred Stock | | WHLRP | Nasdaq Capital Market |
Series D Cumulative Convertible Preferred Stock | | WHLRD | Nasdaq Capital Market |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | | | | |
Large accelerated filer | | ¨ | | Accelerated filer | | ¨ |
Non-accelerated filer | | ý | | Smaller reporting company | | ý |
| | | | 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý
As of May 4, 2021, there were 9,706,738 common shares, $0.01 par value per share, outstanding.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
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PART I – FINANCIAL INFORMATION | |
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Item 1. | Financial Statements | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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PART II – OTHER INFORMATION | |
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Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except par value and share data)
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| (unaudited) | | |
ASSETS: | | | |
Investment properties, net | $ | 388,769 | | | $ | 392,664 | |
Cash and cash equivalents | 9,371 | | | 7,660 | |
Restricted cash | 34,838 | | | 35,108 | |
Rents and other tenant receivables, net | 7,585 | | | 9,153 | |
Assets held for sale | 10,859 | | | 13,072 | |
Above market lease intangibles, net | 3,239 | | | 3,547 | |
Operating lease right-of-use assets | 12,673 | | | 12,745 | |
Deferred costs and other assets, net | 15,747 | | | 15,430 | |
Total Assets | $ | 483,081 | | | $ | 489,379 | |
LIABILITIES: | | | |
Loans payable, net | $ | 338,533 | | | $ | 334,266 | |
Liabilities associated with assets held for sale | 10,939 | | | 13,124 | |
| | | |
Below market lease intangibles, net | 4,235 | | | 4,554 | |
Warrant liability | 2,959 | | | 594 | |
Operating lease liabilities | 13,161 | | | 13,200 | |
Accounts payable, accrued expenses and other liabilities | 10,980 | | | 11,229 | |
Total Liabilities | 380,807 | | | 376,967 | |
| | | |
Series D Cumulative Convertible Preferred Stock (no par value, 4,000,000 shares authorized, 3,142,196 and 3,529,293 shares issued and outstanding, respectively; $99.27 million and $109.13 million aggregate liquidation preference, respectively) | 87,321 | | | 95,563 | |
| | | |
EQUITY: | | | |
Series A Preferred Stock (no par value, 4,500 shares authorized, 562 shares issued and outstanding) | 453 | | | 453 | |
Series B Convertible Preferred Stock (no par value, 5,000,000 authorized, 1,875,748 shares issued and outstanding; 46.90 million aggregate liquidation preference) | 41,196 | | | 41,174 | |
Common Stock ($0.01 par value, 18,750,000 shares authorized, 9,706,738 and 9,703,874 shares issued and outstanding, respectively) | 97 | | | 97 | |
Additional paid-in capital | 234,086 | | | 234,061 | |
Accumulated deficit | (262,800) | | | (260,867) | |
Total Stockholders’ Equity | 13,032 | | | 14,918 | |
Noncontrolling interests | 1,921 | | | 1,931 | |
Total Equity | 14,953 | | | 16,849 | |
Total Liabilities and Equity | $ | 483,081 | | | $ | 489,379 | |
See accompanying notes to condensed consolidated financial statements.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(in thousands, except share and per share data)
(Unaudited)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
REVENUE: | | | |
Rental revenues | $ | 14,656 | | | $ | 15,355 | |
Other revenues | 72 | | | 219 | |
Total Revenue | 14,728 | | | 15,574 | |
OPERATING EXPENSES: | | | |
Property operations | 4,884 | | | 4,723 | |
Depreciation and amortization | 3,716 | | | 4,799 | |
Impairment of assets held for sale | — | | | 600 | |
Corporate general & administrative | 1,582 | | | 1,872 | |
Total Operating Expenses | 10,182 | | | 11,994 | |
Gain (loss) on disposal of properties | 176 | | | (26) | |
Operating Income | 4,722 | | | 3,554 | |
Interest expense | (8,961) | | | (4,399) | |
Net changes in fair value of warrant | (347) | | | — | |
Other income | 552 | | | — | |
Other expense | — | | | (1,024) | |
Net Loss Before Income Taxes | (4,034) | | | (1,869) | |
Income tax expense | — | | | (8) | |
Net Loss | (4,034) | | | (1,877) | |
Less: Net income (loss) attributable to noncontrolling interests | 15 | | | (9) | |
Net Loss Attributable to Wheeler REIT | (4,049) | | | (1,868) | |
Preferred Stock dividends - undeclared | (3,341) | | | (3,657) | |
Deemed contribution related to preferred stock redemption | 4,389 | | | — | |
Net Loss Attributable to Wheeler REIT Common Stockholders | $ | (3,001) | | | $ | (5,525) | |
| | | |
| | | |
Loss per share: | | | |
Basic and Diluted | $ | (0.31) | | | $ | (0.57) | |
| | | |
Weighted-average number of shares: | | | |
Basic and Diluted | 9,704,638 | | | 9,694,284 | |
| | | |
See accompanying notes to condensed consolidated financial statements.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Equity
(in thousands, except share data)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A | | Series B | | | | | | | | | | Noncontrolling | | |
| Preferred Stock | | Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Total Stockholders’ Equity | | Interests | | Total |
| Shares | | Value | | Shares | | Value | | Shares | | Value | | | | | Units | | Value | | Equity |
Balance, December 31, 2020 | 562 | | | $ | 453 | | | 1,875,748 | | | $ | 41,174 | | | 9,703,874 | | | $ | 97 | | | $ | 234,061 | | | $ | (260,867) | | | $ | 14,918 | | | 224,429 | | | $ | 1,931 | | | $ | 16,849 | |
Accretion of Series B Preferred Stock discount | — | | | — | | | — | | | 22 | | | — | | | — | | | — | | | — | | | 22 | | | — | | | — | | | 22 | |
Conversion of operating partnership Common Stock | — | | | — | | | — | | | — | | | 2,864 | | | — | | | 9 | | | — | | | 9 | | | (2,864) | | | (9) | | | — | |
Adjustment for noncontrolling interest in operating partnership | — | | | — | | | — | | | — | | | — | | | — | | | 16 | | | — | | | 16 | | | — | | | (16) | | | — | |
Dividends and distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,273) | | | (2,273) | | | — | | | — | | | (2,273) | |
Preferred Stock redemption discount | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,389 | | | 4,389 | | | — | | | — | | | 4,389 | |
Net Loss (Income) | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (4,049) | | | (4,049) | | | — | | | 15 | | | (4,034) | |
Balance, March 31, 2021 (Unaudited) | 562 | | | $ | 453 | | | 1,875,748 | | | $ | 41,196 | | | 9,706,738 | | | $ | 97 | | | $ | 234,086 | | | $ | (262,800) | | | $ | 13,032 | | | 221,565 | | | $ | 1,921 | | | $ | 14,953 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Series A | | Series B | | | | | | | | | | Noncontrolling | | |
| Preferred Stock | | Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Total Stockholders’ Equity | | Interests | | Total |
| Shares | | Value | | Shares | | Value | | Shares | | Value | | | | | Units | | Value | | Equity |
Balance, December 31, 2019 | 562 | | | $ | 453 | | | 1,875,748 | | | $ | 41,087 | | | 9,694,284 | | | $ | 97 | | | $ | 233,870 | | | $ | (251,580) | | | $ | 23,927 | | | 234,019 | | | $ | 2,080 | | | $ | 26,007 | |
Accretion of Series B Preferred Stock discount | — | | | — | | | — | | | 22 | | | — | | | — | | | — | | | — | | | 22 | | | — | | | — | | | 22 | |
Dividends and distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,589) | | | (2,589) | | | — | | | — | | | (2,589) | |
Net Loss | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,868) | | | (1,868) | | | — | | | (9) | | | (1,877) | |
Balance, March 31, 2020 (Unaudited) | 562 | | | $ | 453 | | | 1,875,748 | | | $ | 41,109 | | | 9,694,284 | | | $ | 97 | | | $ | 233,870 | | | $ | (256,037) | | | $ | 19,492 | | | 234,019 | | | $ | 2,071 | | | $ | 21,563 | |
See accompanying notes to condensed consolidated financial statements.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| | | | | | | | | | | |
| For the Three Months Ended March 31, |
| 2021 | | 2020 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net Loss | $ | (4,034) | | | $ | (1,877) | |
Adjustments to reconcile consolidated net loss to net cash provided by operating activities: | | | |
Depreciation | 2,691 | | | 2,938 | |
Amortization | 1,025 | | | 1,861 | |
Loan cost amortization | 3,642 | | | 310 | |
Changes in fair value of warrant | 347 | | | — | |
Above (below) market lease amortization, net | (12) | | | (273) | |
Straight-line expense | 9 | | | 46 | |
| | | |
(Gain) loss on disposal of properties | (176) | | | 26 | |
Credit losses on operating lease receivables | 119 | | | 154 | |
Impairment of assets held for sale | — | | | 600 | |
Net changes in assets and liabilities: | | | |
Rents and other tenant receivables, net | 1,987 | | | 639 | |
Unbilled rent | (459) | | | 11 | |
Deferred costs and other assets, net | (1,316) | | | (1,163) | |
Accounts payable, accrued expenses and other liabilities | 916 | | | (49) | |
Net cash provided by operating activities | 4,739 | | | 3,223 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Capital expenditures | (962) | | | (326) | |
Cash received from disposal of properties | 3,937 | | | 1,665 | |
Net cash provided by investing activities | 2,975 | | | 1,339 | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Payments for deferred financing costs | (4,193) | | | (326) | |
Loan proceeds | 40,150 | | | 13,350 | |
Loan principal payments | (35,440) | | | (15,939) | |
Preferred stock redemption | (6,103) | | | — | |
Loan prepayment penalty | (687) | | | — | |
Net cash used in financing activities | (6,273) | | | (2,915) | |
INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 1,441 | | | 1,647 | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | 42,768 | | | 21,591 | |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | 44,209 | | | $ | 23,238 | |
Supplemental Disclosures: | | | |
Non-Cash Transactions: | | | |
Paycheck Protection Program forgiveness | $ | 552 | | | $ | — | |
Initial fair value of warrants | $ | 2,018 | | | $ | — | |
Conversion of common units to common stock | $ | 9 | | | $ | — | |
Accretion of Preferred Stock discounts | $ | 162 | | | $ | 170 | |
| | | |
Deemed contribution related to preferred stock discount | $ | 4,389 | | | $ | — | |
Other Cash Transactions: | | | |
| | | |
Cash paid for interest | $ | 5,301 | | | $ | 4,100 | |
| | | |
The following table provides a reconciliation of cash, cash equivalents and restricted cash: | | | |
Cash and cash equivalents | $ | 9,371 | | | $ | 6,695 | |
Restricted cash | 34,838 | | | 16,543 | |
Cash, cash equivalents, and restricted cash | $ | 44,209 | | | $ | 23,238 | |
See accompanying notes to condensed consolidated financial statements.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Basis of Presentation and Consolidation
Wheeler Real Estate Investment Trust, Inc. (the "Trust", the "REIT", or "Company") is a Maryland corporation formed on June 23, 2011. The Trust serves as the general partner of Wheeler REIT, L.P. (the “Operating Partnership”), which was formed as a Virginia limited partnership on April 5, 2012. As of March 31, 2021, the Trust, through the Operating Partnership, owned and operated fifty-nine centers and five undeveloped properties in Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama, Oklahoma, Tennessee, Kentucky, New Jersey, Pennsylvania and West Virginia. Accordingly, the use of the word “Company” refers to the Trust and its consolidated subsidiaries, except where the context otherwise requires. At March 31, 2021, the Company owned 98.54% of the Operating Partnership.
The Trust through the Operating Partnership owns Wheeler Interests (“WI”) and Wheeler Real Estate, LLC (“WRE”) (collectively 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.
The condensed consolidated financial statements included in this Quarterly Report on Form 10-Q (the “Form 10-Q”) are unaudited and the results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for future periods or the year. However, amounts presented in the condensed consolidated balance sheet as of December 31, 2020 are derived from the Company’s audited consolidated financial statements as of that date, but do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements. The Company prepared the accompanying condensed consolidated financial statements in accordance with GAAP for interim financial statements. The condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods presented, and all such adjustments are of a normal recurring nature. All material balances and transactions between the consolidated entities of the Company have been eliminated. These condensed consolidated financial statements should be read in conjunction with the Company's 2020 Annual Report filed on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”).
2. Summary of Significant Accounting Policies
Tenant Receivables and Unbilled Rent
Tenant receivables include base rents, tenant reimbursements and receivables attributable to recording rents on a straight-line basis. The Company determines an allowance for the uncollectible portion of accrued rents and accounts receivable based upon customer credit-worthiness (including expected recovery of a claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. The Company considers a receivable past due once it becomes delinquent per the terms of the lease. The Company’s standard lease form considers a rent charge past due after five days. A past due receivable triggers certain events such as notices, fees and other allowable and required actions per the lease. As of March 31, 2021 and December 31, 2020, the Company’s allowance for uncollectible tenant receivables totaled $991 thousand and $994 thousand, respectively.
Paycheck Protection Program
The Company received proceeds of $552 thousand (the "PPP funds") pursuant to the Paycheck Protection Program (the "PPP") under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.
The PPP funds were received in the form of a promissory note, dated April 24, 2020 (the “Promissory Note”), between the Company and KeyBank as the lender that matures on April 24, 2022 bearing interest at a fixed rate of 1% per annum, payable monthly commencing seven months from the date of the note. Under the terms of the PPP, the principal may be forgiven if the proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, mortgage
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
interest, rent and utilities. The full amount of the Promissory Note was forgiven during the three months ended March 31, 2021 and is included in "other income" on the condensed consolidated statements of operations as non-operating activity.
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. At March 31, 2021 and December 31, 2020, there were $4.95 million and $4.48 million, respectively, in unbilled rent which is included in "rents and other tenant receivables, net."
The below table disaggregates the Company’s revenue by type of service for the three months ended March 31, 2021 and 2020 (in thousands, unaudited):
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
| | | |
Minimum rent | $ | 11,330 | | | $ | 12,062 | |
Tenant reimbursements - variable lease revenue | 3,093 | | | 3,288 | |
Percentage rent - variable lease revenue | 129 | | | 108 | |
Straight-line rents | 223 | | | 51 | |
Lease termination fees | 4 | | | 62 | |
Other | 68 | | | 157 | |
Total | 14,847 | | | 15,728 | |
Credit losses on operating lease receivables | (119) | | | (154) | |
Total | $ | 14,728 | | | $ | 15,574 | |
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.
Corporate General and Administrative Expense
A detail for the "corporate general & administrative" line item from the condensed consolidated statements of operations is presented below (in thousands, unaudited):
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
| | | | | | | | | | | |
| Three Months Ended March 31, |
| 2021 | | 2020 |
| | | |
Professional fees | $ | 764 | | | $ | 1,026 | |
Corporate administration | 380 | | | 331 | |
Compensation and benefits | 237 | | | 407 | |
Advertising costs for leasing activities | 20 | | | 31 | |
Other corporate general & administrative | 181 | | | 77 | |
Total | $ | 1,582 | | | $ | 1,872 | |
Other Expense
Other expense represents expenses which are non-operating in nature. Other expenses were $0 and $1.02 million for the three months ended March 31, 2021 and 2020, respectively and consist of legal settlement costs and reimbursement of 2019 proxy costs.
Noncontrolling Interests
Noncontrolling interests is the portion of equity in the Operating Partnership not attributable to the Trust. The ownership interests not held by the parent are considered noncontrolling interests. Accordingly, noncontrolling interests have been reported in equity on the condensed consolidated balance sheets but separate from the Company’s equity. On the condensed consolidated statements of operations, the subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling interests. Condensed consolidated 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.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." This update enhances the methodology of measuring expected credit losses to include the use of forward-looking information to better calculate credit loss estimates. The guidance will apply to most financial assets measured at amortized cost and certain other instruments, such as accounts receivable and loans. The guidance will require that the Company estimate the lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the net amounts expected to be collected. The Company will also be required to disclose information about how it developed the allowances, including changes in the factors that influenced the Company’s estimate of expected credit losses and the reasons for those changes. The guidance would be effective for interim and annual reporting periods beginning after December 15, 2022, per FASB's issuance of ASU 2019-10, "Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates". The Company is currently in the process of evaluating the impact the adoption of the guidance will have on its consolidated financial statements.
Other accounting standards that have been issued or proposed by the FASB or other standard-setting bodies are not currently applicable to the Company or are not expected to have a significant impact on the Company’s financial position, results of operations and cash flows.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (continued)
Reclassifications
The Company has reclassified certain prior period amounts in the accompanying condensed consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on net income, total assets, total liabilities or equity.
3. Real Estate
Investment properties consist of the following (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| (unaudited) | | |
Land and land improvements | $ | 96,758 | | | $ | 97,117 | |
Buildings and improvements | 353,264 | | | 354,738 | |
Investment properties at cost | 450,022 | | | 451,855 | |
Less accumulated depreciation | (61,253) | | | (59,191) | |
Investment properties, net | $ | 388,769 | | | $ | 392,664 | |
The Company’s depreciation expense on investment properties was $2.69 million and $2.94 million for the three months ended March 31, 2021 and 2020, respectively.
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.
Assets Held for Sale and Dispositions
At March 31, 2021, assets held for sale included Columbia Fire Station, Surrey Plaza and two outparcels at Rivergate Shopping Center, as the Company has committed to a plan to sell each property. At December 31, 2020, assets held for sale included Columbia Fire Station, Berkley Shopping Center, a .75 acre land parcel at Berkley (the "Berkley Land Parcel") and two outparcels at Rivergate Shopping Center.
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 expenses were recorded for the three months ended March 31, 2021. The Company recorded $600 thousand impairment expense for the three months ended March 31, 2020 resulting from reducing the carrying value of Columbia Fire Station.
As of March 31, 2021 and December 31, 2020, assets held for sale and associated liabilities consisted of the following (in thousands):
| | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 |
| | (unaudited) | | |
Investment properties, net | | $ | 10,547 | | | $ | 12,593 | |
Rents and other tenant receivables, net | | 32 | | | 132 | |
Above market leases, net | | 153 | | | 153 | |
Deferred costs and other assets, net | | 127 | | | 194 | |
Total assets held for sale | $ | 10,859 | | | $ | 13,072 | |
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
3. Real Estate (continued)
| | | | | | | | | | | | | | |
| | March 31, 2021 | | December 31, 2020 |
| | (unaudited) | | |
Loans payable | | $ | 10,745 | | | $ | 12,838 | |
Below market leases, net | | — | | | 25 | |
Accounts payable, accrued expenses and other liabilities | | 194 | | | 261 | |
Total liabilities associated with assets held for sale | $ | 10,939 | | | $ | 13,124 | |
The following properties were sold during the three months ended March 31, 2021 and 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Disposal Date | | Property | | Contract Price | | Gain (loss) | | Net Proceeds |
| | | | (in thousands, unaudited) |
March 25, 2021 | | Berkley Shopping Center and Berkley Land Parcel (0.75 acres) | | $ | 4,150 | | | $ | 176 | | | $ | 3,937 | |
January 21, 2020 | | St. Matthews | | 1,775 | | | (26) | | | 1,665 | |
4. Deferred Costs and Other Assets, Net
Deferred costs and other assets, net of amortization are as follows (in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
| (unaudited) | | |
Leases in place, net | $ | 9,491 | | | $ | 10,233 | |
Ground lease sandwich interest, net | 1,872 | | | 1,941 | |
Lease origination costs, net | 1,336 | | | 1,334 | |
Tenant relationships, net | 1,182 | | | 1,308 | |
Legal and marketing costs, net | 20 | | | 22 | |
Other | 1,846 | | | 592 | |
Total deferred costs and other assets, net | $ | 15,747 | | | $ | 15,430 | |
As of March 31, 2021 and December 31, 2020, the Company’s intangible accumulated amortization totaled $60.86 million and $60.33 million, respectively. During the three months ended March 31, 2021 and 2020, the Company’s intangible amortization expense totaled $1.03 million and $1.86 million, respectively. Future amortization of leases in place, ground lease sandwich interest, lease origination costs, tenant relationships, and legal and marketing costs is as follows (in thousands, unaudited):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Leases In Place, net | | Ground Lease Sandwich Interest, net | | Lease Origination Costs, net | | Tenant Relationships, net | | Legal & Marketing Costs, net | | Total |
For the remaining nine months ending December 31, 2021 | $ | 1,925 | | | $ | 205 | | | $ | 173 | | | $ | 318 | | | $ | 6 | | | $ | 2,627 | |
December 31, 2022 | 2,109 | | | 274 | | | 188 | | | 354 | | | 6 | | | 2,931 | |
December 31, 2023 | 1,632 | | | 274 | | | 170 | | | 227 | | | 5 | | | 2,308 | |
December 31, 2024 | 1,119 | | | 274 | | | 152 | | | 128 | | | 3 | | | 1,676 | |
December 31, 2025 | 794 | | | 274 | | | 120 | | | 62 | | | — | | | 1,250 | |
December 31, 2026 | 422 | | | 274 | | | 102 | | | 11 | | | — | | | 809 | |
Thereafter | 1,490 | | | 297 | | | 431 | | | 82 | | | — | | | 2,300 | |
| $ | 9,491 | | | $ | 1,872 | | | $ | 1,336 | | | $ | 1,182 | | | $ | 20 | | | $ | 13,901 | |
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
5. Loans Payable
The Company’s loans payable consist of the following (in thousands, except monthly payment):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Property/Description | | Monthly Payment | | Interest Rate | | Maturity | | March 31, 2021 | | December 31, 2020 |
First National Bank (7) | | $ | 24,656 | | | LIBOR + 350 basis points | | March 2021 | | $ | 982 | | | $ | 1,045 | |
Lumber River | | $ | 10,723 | | | LIBOR + 350 basis points | | April 2021 | | 1,349 | | | 1,367 | |
Rivergate | | $ | 103,167 | | | LIBOR + 295 basis points | | April 2021 | | 21,021 | | | 21,164 | |
JANAF Bravo | | $ | 36,935 | | | 4.65 | % | | April 2021 | | 6,225 | | | 6,263 | |
Columbia Fire Station | | Interest only | | 14.00 | % | | July 2021 | | 3,363 | | | 3,893 | |
Litchfield Market Village | | $ | 46,057 | | | 5.50 | % | | November 2022 | | 7,417 | | | 7,418 | |
Twin City Commons | | $ | 17,827 | | | 4.86 | % | | January 2023 | | 2,897 | | | 2,915 | |
Walnut Hill Plaza | | $ | 26,850 | | | 5.50 | % | | March 2023 | | 3,252 | | | 3,287 | |
Powerscourt Financing Agreement (6) | | Interest only | | 13.50 | % | | March 2023 | | — | | | 25,000 | |
New Market | | $ | 48,747 | | | 5.65 | % | | June 2023 | | 6,454 | | | 6,508 | |
Benefit Street Note (3) | | $ | 53,185 | | | 5.71 | % | | June 2023 | | 7,088 | | | 7,145 | |
Deutsche Bank Note (2) | | $ | 33,340 | | | 5.71 | % | | July 2023 | | 5,547 | | | 5,567 | |
JANAF | | $ | 333,159 | | | 4.49 | % | | July 2023 | | 48,423 | | | 48,875 | |
Tampa Festival | | $ | 50,797 | | | 5.56 | % | | September 2023 | | 7,878 | | | 7,920 | |
Forrest Gallery | | $ | 50,973 | | | 5.40 | % | | September 2023 | | 8,184 | | | 8,226 | |
South Carolina Food Lions Note (5) | | $ | 68,320 | | | 5.25 | % | | January 2024 | | 11,418 | | | 11,473 | |
Cypress Shopping Center | | $ | 34,360 | | | 4.70 | % | | July 2024 | | 6,134 | | | 6,163 | |
Port Crossing | | $ | 34,788 | | | 4.84 | % | | August 2024 | | 5,876 | | | 5,909 | |
Freeway Junction | | $ | 41,798 | | | 4.60 | % | | September 2024 | | 7,544 | | | 7,582 | |
Harrodsburg Marketplace | | $ | 19,112 | | | 4.55 | % | | September 2024 | | 3,324 | | | 3,343 | |
Bryan Station | | $ | 23,489 | | | 4.52 | % | | November 2024 | | 4,290 | | | 4,312 | |
Crockett Square | | Interest only | | 4.47 | % | | December 2024 | | 6,338 | | | 6,338 | |
Pierpont Centre | | $ | 39,435 | | | 4.15 | % | | February 2025 | | 7,965 | | | 8,001 | |
Shoppes at Myrtle Park | | $ | 33,180 | | | 4.45 | % | | February 2025 | | 5,858 | | | 5,892 | |
Folly Road | | $ | 41,482 | | | 4.65 | % | | March 2025 | | 7,183 | | | 7,223 | |
Alex City Marketplace | | Interest only | | 3.95 | % | | April 2025 | | 5,750 | | | 5,750 | |
Butler Square | | Interest only | | 3.90 | % | | May 2025 | | 5,640 | | | 5,640 | |
Brook Run Shopping Center | | Interest only | | 4.08 | % | | June 2025 | | 10,950 | | | 10,950 | |
Beaver Ruin Village I and II | | Interest only | | 4.73 | % | | July 2025 | | 9,400 | | | 9,400 | |
Sunshine Shopping Plaza | | Interest only | | 4.57 | % | | August 2025 | | 5,900 | | | 5,900 | |
Barnett Portfolio (4) | | Interest only | | 4.30 | % | | September 2025 | | 8,770 | | | 8,770 | |
Fort Howard Shopping Center | | Interest only | | 4.57 | % | | October 2025 | | 7,100 | | | 7,100 | |
Conyers Crossing | | Interest only | | 4.67 | % | | October 2025 | | 5,960 | | | 5,960 | |
Grove Park Shopping Center | | Interest only | | 4.52 | % | | October 2025 | | 3,800 | | | 3,800 | |
Parkway Plaza | | Interest only | | 4.57 | % | | October 2025 | | 3,500 | | | 3,500 | |
Winslow Plaza | | $ | 24,295 | | | 4.82 | % | | December 2025 | | 4,535 | | | 4,553 | |
JANAF BJ's | | $ | 29,964 | | | 4.95 | % | | January 2026 | | 4,814 | | | 4,844 | |
Tuckernuck | | $ | 32,202 | | | 5.00 | % | | March 2026 | | 5,150 | | | 5,193 | |
Wilmington Financing Agreement (6) | | Interest only | | 8.00 | % | | March 2026 | | 35,000 | | | — | |
Chesapeake Square | | $ | 23,857 | | | 4.70 | % | | August 2026 | | 4,254 | | | 4,279 | |
Berkley/Sangaree/Tri-County | | Interest only | | 4.78 | % | | December 2026 | | 6,176 | | | 9,400 | |
Riverbridge | | Interest only | | 4.48 | % | | December 2026 | | 4,000 | | | 4,000 | |
Franklin Village | | $ | 45,336 | | | 4.93 | % | | January 2027 | | 8,372 | | | 8,404 | |
Village of Martinsville | | $ | 89,664 | | | 4.28 | % | | July 2029 | | 15,881 | | | 15,979 | |
Laburnum Square | | Interest only | | 4.28 | % | | September 2029 | | 7,665 | | | 7,665 | |
Total Principal Balance (1) | | | | | | | | 358,627 | | | 353,916 | |
Unamortized debt issuance cost (1) | | | | | | | | (9,349) | | | (6,812) | |
Total Loans Payable, including assets held for sale | | | | | | | | 349,278 | | | 347,104 | |
Less loans payable on assets held for sale, net loan amortization costs | | | | | 10,745 | | | 12,838 | |
Total Loans Payable, net | | | | | | | | $ | 338,533 | | | $ | 334,266 | |
(1) Includes loans payable on assets held for sale, see Note 3.
(2) Collateralized by LaGrange Marketplace, Ridgeland and Georgetown.
(3) Collateralized by Ladson Crossing, Lake Greenwood Crossing and South Park.
(4) Collateralized by Cardinal Plaza, Franklinton Square, and Nashville Commons.
(5) Collateralized by Clover Plaza, South Square, St. George, Waterway Plaza and Westland Square.
(6) Collateralized by Darien Shopping Center, Devine Street, Lake Murray, Moncks Corner and South Lake.
(7) Collateralized by Surrey Plaza and Amscot Building.
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
5. Loans Payable (continued)
Powerscourt Financing Agreement Payoff
On March 12, 2021, the Company paid in full the $25.00 million Powerscourt Financing Agreement. The Powerscourt Warrant Agreement and the Powerscourt Registration Rights Agreement remain.
Powerscourt Warrant Agreement
Pursuant to the Powerscourt Financing Agreement, the Company issued Powerscourt Investments XXII, LP, a warrant (the “Powerscourt Warrant”) to purchase 496,415 shares of Common Stock for $3.12 per share (the “Powerscourt Warrant Agreement”). The Powerscourt Warrant is exercisable at the option of its holder in whole or in part into shares of Common Stock from time to time on or after December 22, 2020 (the “Effective Date”) and before the date that is the 36-month anniversary of the Effective Date.
Wilmington Financing Agreement
On March 12, 2021, the Company entered into a financing agreement (the "Wilmington Financing Agreement") as borrower, certain subsidiaries of the Company from time to time party thereto, as guarantors (together with the Company, the “Loan Parties”), the lenders from time to time party thereto, and Wilmington Savings Fund Society, FSB, as administrative agent and collateral agent. The Wilmington Financing Agreement provides for a term loan in the aggregate principal of $35.00 million. The proceeds of the Wilmington Financing Agreement are intended for the following: (i) to paydown the Company’s indebtedness on the Powerscourt Financing Agreement, (ii) to fund the redemption of certain shares of the Company’s 8.75% Series D Preferred and (iii) to pay fees and expenses in connection with the transactions contemplated by the Wilmington Financing Agreement. The Wilmington Financing Agreement is at a rate of 8.00% and matures in March 2026 with quarterly interest only payments beginning on April 15, 2021. Any payment or repayment of principal will be made with a premium equal to 5% of the amount repaid or prepaid.
The obligations of the Company under the Wilmington Financing Agreement are secured by liens on certain assets of the Company and certain of the Company’s subsidiaries, including mortgages on the properties within the Company’s portfolio. The Wilmington Financing Agreement also contains covenants that restrict, among other things the ability of the Company and its subsidiaries to create liens, incur indebtedness, make certain investments, merge or consolidate, dispose of assets, pay certain dividends and make certain other restricted payments or certain equity issuances, change the nature of their businesses, enter into certain transactions with affiliates and change their governing documents.
Wilmington Warrant Agreement
Pursuant to Wilmington Financing Agreement, the Company issued to the holders from time to time party thereto a warrant (the “Wilmington Warrant”) to purchase in the aggregate, 1,061,719 shares of Common Stock in three tranches: warrants to purchase an aggregate of 510,204 shares at an exercise price of $3.430 per share ("Tranche A"); warrants to purchase an aggregate of 424,242 shares at an exercise price of $4.125 per share ("Tranche B"); and warrants to purchase an aggregate of 127,273 shares at an exercise price of $6.875 per share ("Tranche C") (the “Wilmington Warrant Agreement”). The Wilmington Warrant is exercisable at the option of its holder in whole or in part into shares of Common Stock from time to time on or after March 12, 2021 (the “Effective Date”) and before the maturity date of the Wilmington Financing Agreement.
Wilmington Registration Rights Agreement
In connection with the Wilmington Financing Agreement, the Company entered into a registration rights agreement with the holders from time to time of the Wilmington Warrants, dated as of March 12, 2021 (the “Wilmington Registration Rights Agreement”), pursuant to which the Company shall register the resale of the registrable securities on a Registration Statement on Form S-3 or Form S-11 within 60 days following the Effective Date.
Columbia Fire Station Forbearance Agreement
On January 21, 2021, the Company entered into a Forbearance Agreement (the "Forbearance Agreement") with Pinnacle Bank at an interest rate of 14% and made a $500 thousand principal payment. The Forbearance Agreement, among
Wheeler Real Estate Investment Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Unaudited)
5. Loans Payable (continued)
other provisions, extends the maturity date of the Columbia Fire Station Loan to July 21, 2021 and waives all defaults and late fees existing prior to the Forbearance Agreement.
Tuckernuck Refinance
On February 2, 2021, the Company refinanced the Tuckernuck Loan for $5.15 million at a rate of 5.00%. The loan matures on March 1, 2026 with monthly principal and interest payments of $32 thousand.
Berkley/Sangaree/Tri-County Paydown
On March 25, 2021, the Company made a $3.22 million principal payment on the Berkley/Sangaree/Tri-County loan with the sale of the Berkley Shopping Center, as detailed in Note 3, and paid $687 thousand in defeasance.
Debt Maturity
The Company’s scheduled principal repayments on indebtedness as of March 31, 2021, including assets held for sale, are as follows (in thousands, unaudited):
| | | | | |
For the remaining nine months ended December 31, 2021 | $ | 36,815 | |