Wheeler Real Estate Investment Trust, Inc. Quarterly report pursuant to Section 13 or 15(d)



	September 30, 2019			December 31, 2018
	(unaudited)
Land and land improvements	$	100,135		$	101,696
Buildings and improvements	365,686			374,499
Investment properties at cost	465,821			476,195
Less accumulated depreciation	(47,483		)	(40,189		)
Investment properties, net	$	418,338		$	436,006

The Company’s depreciation expense on investment properties was $2.92 million and $8.99 million for the three and nine months ended September 30, 2019, respectively. The Company’s depreciation expense on investment properties was $3.05 million and $9.55 million for the three and nine months ended September 30, 2018, respectively.

A significant portion of the Company’s land, buildings and improvements serve 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.

Assets Held for Sale

At December 31, 2018, assets held for sale included a 1.28 acre undeveloped land parcel at Harbor Pointe ("Harbor Pointe land parcel"), Graystone Crossing and Jenks Plaza. All three were sold during the nine months ended September 30, 2019. Additionally, in 2019 the Board committed to a plan to sell Perimeter Square and St. Matthews. Perimeter Square sold in July 2019. St. Matthews is classified as assets held for sale as of September 30, 2019.

The Harbor Pointe land parcel sale represents discontinued operations as it is a strategic shift that has a major effect on the Company's financial position or results of operations. Accordingly, the assets and liabilities associated with the Harbor Pointe land parcel have been reclassified for all periods presented.

The impairment charge on assets held for sale was $400 thousand and $1.55 million for the three and nine months ended September 30, 2019, respectively. These impairment charges resulted from reducing the carrying value of St. Matthews during the three months ended September 30, 2019 and Perimeter Square and St. Matthews during the nine months ended September 30, 2019, for the amounts that exceeded the properties' fair value less estimated selling costs. These valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 2 inputs.

As of September 30, 2019 and December 31, 2018, assets held for sale and associated liabilities, excluding discontinued operations, consisted of the following (in thousands):



	September 30, 2019		December 31, 2018
	(unaudited)
Investment properties, net	$	1,702	$	4,912
Rents and other tenant receivables, net	52		72
Above market leases, net	—		420
Deferred costs and other assets, net	2		228
Total assets held for sale, excluding discontinued operations	$	1,756	$	5,632



	September 30, 2019		December 31, 2018
	(unaudited)
Loans payable	$	1,974	$	3,818
Accounts payable	86		240
Total liabilities associated with assets held for sale, excluding discontinued operations	$	2,060	$	4,058

As of September 30, 2019 and December 31, 2018, assets held for sale and associated liabilities for discontinued operations, consisted of the following (in thousands):



	September 30, 2019		December 31, 2018
	(unaudited)
Investment properties, net	$	—	$	486
Total assets held for sale, discontinued operations	$	—	$	486



	September 30, 2019		December 31, 2018
	(unaudited)
Loans payable	$	—	$	460
Accounts payable	—		2
Total liabilities associated with assets held for sale, discontinued operations	$	—	$	462

Dispositions

In May 2019, an approximate 10,000 square foot outparcel at the JANAF property was demolished resulting in a $331 thousand write-off to make way for a new approximate 20,000 square foot building constructed by a new grocer tenant.

The following properties were sold during the nine months ended September 30, 2019 and 2018:



Disposal Date	Property	Contract Price		Gain (loss)			Net Proceeds
		(in thousands, unaudited)
July 12, 2019	Perimeter Square	$	7,200	$	(81	)	$	—
March 18, 2019	Graystone Crossing	6,000		1,452			1,744
February 7, 2019	Harbor Pointe Land Parcel (1.28 acres)	550		—			19
January 11, 2019	Jenks Plaza	2,200		387			1,840
September 27, 2018	Shoppes at Eagle Harbor	5,705		1,270			2,071
June 19, 2018	Laskin Road Land Parcel (1.5 acres)	2,858		903			2,747
January 12, 2018	Chipotle Ground Lease at Conyers Crossing	1,270		1,042			1,160

The sale of the Chipotle ground lease at Conyers Crossing, Shoppes at Eagle Harbor, Jenks Plaza, Graystone Crossing and Perimeter Square did not represent a strategic shift that has a major effect on the Company's financial position or results of operations. Accordingly, the operating results of these properties remains classified within continuing operations for all periods presented.

JANAF Executive Building

In April 2019, the Company absorbed an approximate 25,000 square foot outparcel at JANAF as a result of an unlawful detainer with a delinquent tenant, Mariner Investments, LTD.

ASU 2016-02