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

Quarterly report pursuant to Section 13 or 15(d)

Real Estate

Real Estate

9 Months Ended

Sep. 30, 2020

Investment properties consist of the following (in thousands):


	September 30, 2020		December 31, 2019
	(unaudited)
Land and land improvements	$	96,934	$	100,599
Buildings and improvements	353,943		366,082
Investment properties at cost	450,877		466,681
Less accumulated depreciation	(56,499)		(50,466)
Investment properties, net	$	394,378	$	416,215

The Company’s depreciation expense on investment properties was $2.79 million and $8.59 million for the three and nine months ended September 30, 2020, respectively. 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.

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 September 30, 2020 assets held for sale included Columbia Fire Station, Riversedge North, Berkley Shopping Center, a .75 acre land parcel at Berkley and two outparcels at Rivergate Shopping Center, as the Company has committed to a plan to sell each property. At September 30, 2019 assets held for sale included St. Matthews.

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. The impairment expenses during the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(unaudited)
Columbia Fire Station	$	—	$	—	$	600	$	—
St. Matthews	—		400		—		400
Perimeter Square	—		—		—		1,147
Total	$	—	$	400	$	600	$	1,547

As of September 30, 2020 and December 31, 2019, assets held for sale and associated liabilities consisted of the following (in thousands):


	September 30, 2020		December 31, 2019
	(unaudited)
Investment properties, net	$	14,695	$	1,651
Rents and other tenant receivables, net	45		77
Above market leases, net	152		—
Deferred costs and other assets, net	172		9
Total assets held for sale	$	15,064	$	1,737


	September 30, 2020		December 31, 2019
	(unaudited)
Loans payable	$	14,620	$	1,974
Below market leases, net	24		—
Accounts payable, accrued expenses and other liabilities	268		52
Total liabilities associated with assets held for sale	$	14,912	$	2,026

The following properties were sold during the nine months ended September 30, 2020 and 2019:


Disposal Date	Property	Contract Price		Gain (loss)		Net Proceeds
		(in thousands, unaudited)
January 21, 2020	St. Matthews	$	1,775	$	(26)	$	1,665
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

The Harbor Pointe land parcel sale represents discontinued operations as it was a strategic shift that had a major effect on the Company's financial position or results of operations.

All other assets held for sale do 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 remain classified within continuing operations for all periods presented.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, Aldi.