Quarterly report pursuant to Section 13 or 15(d)

Summary of Significant Accounting Policies

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Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2022
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
Tenant Receivables

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 September 30, 2022 and December 31, 2021, the Company’s allowance for uncollectible tenant receivables totaled $3.81 million and $633 thousand, respectively.

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 September 30, 2022 and December 31, 2021, there were $6.32 million and $5.77 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 (in thousands, unaudited):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 2021
Minimum rent $ 14,285  $ 11,487  $ 38,085  $ 34,149 
Tenant reimbursements - variable lease revenue 3,875  3,178  10,455  9,604 
Percentage rent - variable lease revenue 89  177  322  463 
Straight-line rents 314  290  547  898 
Other 232  508  552  780 
     Total 18,795  15,640  49,961  45,894 
Credit losses on operating lease receivables (77) (132) (267) (168)
     Total $ 18,718  $ 15,508  $ 49,694  $ 45,726 

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
    
Corporate general & administrative expenses consist of the following (in thousands, unaudited):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2022 2021 2022 2021
Professional fees $ 946  $ 717  $ 1,918  $ 2,133 
Compensation and benefits 863  325  1,554  900 
Corporate administration 598  542  1,512  1,314 
Advertising costs for leasing activities 22  36  232  77 
Other 69  136  218  521 
    Total $ 2,498  $ 1,756  $ 5,434  $ 4,945 

Other Expense

Other expense represents expenses which are non-operating in nature. Other expenses were $0 and $691 thousand for the three months and nine months ended September 30, 2022, respectively, which consist of legal settlement costs. Other expenses were $185 thousand for the three and nine months ended September 30, 2021, and consist of legal settlement costs.

Noncontrolling Interests

Noncontrolling interests is the portion of equity in the Operating Partnership not attributable to the Trust and noncontrolling interest attributable to the acquisition of Cedar. 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.
    
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.

The noncontrolling interest attributable to the acquisition of Cedar represents the fair market value of Cedar's outstanding 7.25% Series B Preferred Stock ("Cedar Series B Preferred") and 6.50% Series C Preferred Stock ("Cedar Series C Preferred") as of August 22, 2022, the date of acquisition. The valuation assumption was based on the three-level valuation hierarchy for fair value measurements and represents Level 1 inputs. Level 1 inputs represent observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. The total cumulative dividends accrued for the Cedar Series B Preferred and Cedar Series C Preferred is $1.22 million as of September 30, 2022 and is included as a reduction to net loss attributable to Wheeler REIT Common Stockholders on the condensed consolidated statements of operations during the nine months ended September 30, 2022.

Recently Adopted Accounting Standards

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. This guidance is effective for fiscal years, and for interim reporting periods within those fiscal years, beginning after December 15, 2022, however the Company is early adopting as of January 1, 2022. In November 2018, the FASB issued ASU 2018-19 to clarify that operating lease receivables, including straight-line rent receivables, recorded by lessors are explicitly excluded from the scope of Topic 326. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.
Recent Accounting Pronouncements 

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.

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. On November 3, 2021, common stockholders of the Company voted to amend the Company’s Charter to remove the cumulative dividend rights of the Series A Preferred and Series B Preferred.

As a result, the condensed consolidated statements of operations were adjusted as shown below:

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021
As Previously Reported Adjustment of Series A Preferred and Series B Preferred undeclared Dividends As Adjusted As Previously Reported Adjustment of Series A Preferred and Series B Preferred undeclared Dividends As Adjusted
Preferred Stock dividends - undeclared $ (3,260) $ 1,062  $ (2,198) $ (9,852) $ 3,203  $ (6,649)
Net (Loss) Income Attributable to Wheeler REIT Common Stockholders $ (234) $ 1,062  $ 828  $ (8,902) $ 3,203  $ (5,699)
(Loss) Income per share, Basic and Diluted $ (0.02) $ 0.11  $ 0.09  $ (0.92) $ 0.33  $ (0.59)

No other reclassifications had an effect on net income, total assets, total liabilities or equity.