Quarterly report pursuant to Section 13 or 15(d)

Investment Properties

v3.5.0.2
Investment Properties
 9 Months Ended
Sep. 30, 2016
Real Estate [Abstract]  
Investment properties
Investment Properties
Investment properties consist of the following:
 
September 30, 2016
 
December 31, 2015
 
(unaudited)
 
 
Land and land improvements
$
71,835,953

 
$
50,777,143

Land held for improvement
11,370,497

 
12,353,963

Buildings and improvements
227,405,802

 
188,338,469

Investment properties at cost
310,612,252

 
251,469,575

Less accumulated depreciation and amortization
(18,399,995
)
 
(12,704,944
)
Investment properties, net
$
292,212,257

 
$
238,764,631


The Company’s depreciation expense on investment properties was $1,997,732 and $5,751,164 for the three and nine months ended September 30, 2016, respectively. The Company's depreciation expense on investment properties was $1,478,698 and $3,600,673 for the three and nine months ended September 30, 2015, respectively.
A significant portion of the Company’s land, buildings and improvements serves as collateral for its mortgage loans payable portfolio. Accordingly, restrictions exist as to the encumbered property’s transferability, use and other common rights typically associated with property ownership.
Acquisitions
        
On April 12, 2016, the Company completed its acquisition of 14 retail shopping centers located in Georgia and South Carolina (collectively the “A-C Portfolio”) for an aggregate purchase price of $71 million, paid through a combination of cash, debt and the issuance of 888,889 common units in the Operating Partnership. Collectively, the A-C Portfolio properties total 605,358 square feet in leaseable space, and were 92% leased as of the acquisition date by 77 primarily retail tenants. Each property is anchored by either a Bi-Lo, Harris Teeter or Piggly Wiggly grocery store.

The A-C Portfolio consists of the following properties:
Property Name
Location
Square Feet

Darien Shopping Center
Darien, GA
26,001

Devine Street
Columbia, SC
38,464

Folly Road
Charleston, SC
47,794

Georgetown
Georgetown, SC
29,572

Ladson Crossing
Ladson, SC
52,607

Lake Greenwood Crossing
Greenwood, SC
47,546

Lake Murray
Lexington, SC
39,218

Litchfield Market Village
Pawleys Island, SC
86,740

Moncks Corner
Moncks Corner, SC
26,800

Ridgeland
Ridgeland, SC
20,029

Shoppes at Myrtle Park
Bluffton, SC
56,380

South Lake
Lexington, SC
44,318

South Park
Mullins, SC
60,874

St. Matthews
St. Matthews, SC
29,015



The following summarizes the consideration paid and the preliminary fair values of assets acquired and liabilities assumed in conjunction with the acquisitions described above, along with a description of the methods used to determine fair value. In determining fair values, the Company considered many factors including, but not limited to, cash flows, market cap rates, location, occupancy rates, appraisals, other acquisitions and management’s knowledge of the current acquisition market for similar properties. The valuation and purchase price allocation for this acquisition are preliminary, but are expected to be finalized by March 31, 2017.
 
 
 
 
A-C Portfolio
Preliminary fair value of assets acquired and liabilities assumed:
 
 
Investment property (a)
$
58,595,869

 
Lease intangibles and other assets (b)
12,124,143

 
Above market leases (c)
2,942,219

 
Below market leases (c)
(2,662,231
)
 
 
 
 
 
 
Preliminary fair value of net assets acquired:
$
71,000,000

 
 
 
 
 
Purchase consideration:
 
 
 
Consideration paid with cash and debt
$
69,000,000

 
Consideration paid with common units
2,000,000

 
 
 
 
 
 
Total consideration (d)
$
71,000,000

a.
Represents the preliminary fair value of the net investment properties acquired which includes land, buildings, site improvements and tenant improvements. The preliminary fair value was determined using following approaches:
i. the market approach valuation methodology for land by considering similar transactions in the markets;
ii. a combination of the cost approach and income approach valuation methodologies for buildings, including replacement cost evaluations, “go dark” analyses and residual calculations incorporating the land values; and
iii.
the cost approach valuation methodology for site and tenant improvements, including replacement costs and prevailing quoted market rates.
b.
Represents the preliminary fair value of lease intangibles and other assets. Lease intangibles include leasing commissions, in place leases and tenant relationships associated with replacing existing leases. The income approach was used to determine the fair value of these intangible assets which included estimated market rates and expenses. It was determined that carrying value approximated fair value for other asset amounts.
c.
Represents the fair value of above/below market leases. The income approach was used to determine the fair value of above/below market leases using market rental rates for similar properties.
d.
Represents the components of purchase consideration paid.
Unaudited pro forma financial information in the aggregate is presented below for the acquisitions of the A-C Portfolio. The unaudited pro forma information presented below includes the effects of the acquisition as if it had been consummated as of the beginning of the prior fiscal year. The pro forma results include adjustments for depreciation and amortization associated with acquired tangible and intangible assets, straight-line rent adjustments, interest expense related to debt incurred and adjustments attributable to the increase in noncontrolling interests relating to the incremental common units used as consideration in the acquisition of the A-C Portfolio.
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2016
 
2015
 
2016
 
2015
Rental revenue
 
$
8,589,194

 
$
7,350,934

 
$
25,685,635

 
$
18,879,018

Net loss from continuing operations
$
(1,597,272
)
 
$
(7,865,805
)
 
$
(9,210,053
)
 
$
(18,495,390
)
Net loss attributable to Wheeler REIT
$
(1,441,117
)
 
$
(7,105,404
)
 
$
(7,572,955
)
 
$
(16,420,232
)
Net loss attributable to Wheeler REIT common shareholders
$
(2,681,928
)
 
$
(22,509,817
)
 
$
(9,836,365
)
 
$
(102,180,970
)
Basic loss per share
 
$
(0.04
)
 
$
(0.36
)
 
$
(0.15
)
 
$
(3.43
)
Diluted loss per share
 
$
(0.04
)
 
$
(0.36
)
 
$
(0.15
)
 
$
(3.43
)