Wheeler Real Estate Investment Trust, Inc. is a Maryland corporation formed on June 23, 2011 to acquire the entities owning various controlling and noncontrolling interests in real estate assets owned and/or managed by Jon S. Wheeler and/or his affiliates, including certain entities controlled by Plume Street Financial, LLC. In conjunction with acquiring the various entities, the Trust filed a Registration Statement with the SEC in order to complete an initial public offering. On October 23, 2012, the Trust’s Registration Statement became effective and the common stock was priced at $5.25. On November 16, 2012, the Trust closed the offering by selling 3,016,045 shares of common stock at $5.25 per share, generating approximately $15.83 million in gross proceeds.

The Company used approximately $2.54 million to cover offering expenses, approximately $4.18 million to cash-out prior investors in the properties, $1.78 million of the net proceeds of the offering to directly purchase The Shoppes at Eagle Harbor and approximately $322,000 to repay the outstanding indebtedness on the Amscot Building. Additionally, the Company adopted the 2012 Share Incentive Plan which established a pool for share options for the Company’s employees. This pool contains options to purchase 500,000 shares of the Company’s common stock. The options will vest at a rate of 20% per year for five years and have a per share exercise price equal to the fair market value of one of the Company’s common shares on the date of grant. No options have been awarded under this plan.

Wheeler Real Estate Investment Trust, L.P., our Operating Partnership, was formed as a Virginia limited partnership on April 5, 2012. All operations will primarily be carried out through our Operating Partnership. The Trust, as the sole general partner of our Operating Partnership, controls our Operating Partnership. Accordingly, the Trust will consolidate the assets, liabilities and results of operations of our Operating Partnership. The Trust contributed substantially all of the net proceeds from the offering to the Operating Partnership in exchange for Operating Partnership units therein. The Trust’s interest in the Operating Partnership will generally entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to the Trust’s percentage ownership. As the sole general partner of the Operating Partnership, the Trust will generally have the exclusive power under the partnership agreement to manage and conduct the Operating Partnership’s business and affairs, subject to certain limited approval and voting rights of the limited partners.

Wheeler Real Estate Investment Trust, Inc. and Affiliates currently includes the Trust, the Operating Partnership and the entities owned and/or controlled by Mr. Wheeler and/or his affiliates, which in turn own controlling interests in five properties. Accordingly, the contribution of or acquisition by merger of interests in the Controlled Entities was accounted for as a transaction between entities under common control and, therefore, the acquisition of interests in each of the Controlled Entities was recorded at our historical cost. In conjunction with the offering and related formation transactions, the Company acquired the noncontrolling interests in entities owning three properties that are currently controlled by Plume Street Financial, of which Mr. Wheeler is a 50% partner. The value of the consideration paid to each of the PSF Entities’ prior investors was based upon the terms of the applicable contribution agreement among the Operating Partnership, on the one hand, and the PSF Entities’ investor or investors, on the other hand, and was determined based on a relative equity valuation analysis of the PSF Entities. In exchange for contributing their interests in the PSF Entities, the PSF Entities’ investors received an aggregate of $2.98 million and 916,923 common units.

The entities and respective properties party to the transactions are as follows:

Wheeler Real Estate Investment Trust, Inc. and Affiliates (Controlled Entities and Predecessor):

Wheeler Real Estate Investment Trust, Inc.

DF-1 Carrollton, LLC – The Shoppes at Eagle Harbor (Carrollton, VA)

Lynnhaven Parkway Associates, LLC – Monarch Bank Building (Virginia Beach, VA)

North Pointe Investors, LLC – North Pointe Crossing/Amscot Building (Tampa, FL)

Riversedge Office Associates, LLC – Riversedge North (Virginia Beach, VA)

Walnut Hill Plaza Associates, LLC – Walnut Hill Plaza (Petersburg, VA)

PSF Entities (Noncontrolled Entities):

Lumber River Associates, LLC – Lumber River Village (Lumberton, NC)

Perimeter Associates, LLC – Perimeter Square (Tulsa, OK)

Tuckernuck Associates, LLC – Shoppes at TJ Maxx (Richmond, VA)

The combined financial statements of the PSF Entities are included elsewhere in this Form 10-Q.

We determined that Walnut Hill Plaza Associates, LLC is the acquirer for accounting purposes as it represents the largest of the five entities in both asset size and total revenues and the exchange of equity interests related to this entity results in the largest number of common units being received by Mr. Wheeler and its other investors. Since Mr. Wheeler does not own a controlling interest in the PSF Entities, the acquisition of the Noncontrolled Entities listed above were accounted for as an acquisition under the purchase accounting method and recognized at the estimated fair value of acquired assets and assumed liabilities on the date of such contribution or acquisition. The fair value of these assets and liabilities has been allocated in accordance with ASC section 805-10, Business Combinations. Our methodology of allocating the cost of acquisitions to assets acquired and liabilities assumed is based on estimated fair values, replacement cost and appraised values. We estimated the fair value of acquired tangible assets (consisting of land, building and improvements), identified intangible lease assets and liabilities (consisting of acquired above-market leases, acquired in-place lease value, and acquired below-market leases) and assumed debt.

The Company prepared the accompanying combined financial statements in accordance with accounting principles generally accepted in the United States of America, or GAAP. Accordingly, the Company relied on GAAP applicable to transactions between entities under common control when preparing the accompanying combined financial statements. In accordance with these principles, the Company prepared the accompanying combined financial statements using historical accounting records and has included the historical financial position, results of operations and cash flows applicable under GAAP. All material balances and transactions between the combined entities of the Company have been eliminated.

The Company was formed with the principle objective of acquiring, financing, developing, leasing, owning and managing income producing, strip centers, neighborhood, grocery-anchored, community and free-standing retail properties. Its strategy is to acquire high quality, well-located, dominant retail properties that generate attractive risk-adjusted returns. The Company will target competitively protected properties in communities that have stable demographics and have historically exhibited favorable trends, such as strong population and income growth. The Company considers competitively protected properties to be located in the most prominent shopping districts in their respective markets, ideally situated at major “Main and Main” intersections. The Company generally leases its properties to national and regional supermarket chains and select retailers that offer necessity and value oriented items and generate regular consumer traffic. The Company’s tenants carry goods that are less impacted by fluctuations in the broader U.S. economy and consumers’ disposable income, which it believes generates more predictable property-level cash flows.

Upon consummation of the offering and formation transactions, the Company’s portfolio was comprised of five retail shopping centers, two free-standing retail properties, and one office building. Five of these properties are located in Virginia, one is located in Florida, one is located in North Carolina and one is located in Oklahoma. The Company’s portfolio when combined with the PSF Entities had total net rentable space of 348,490 square feet and an occupancy level of approximately 92%.

The accompanying combined financial statements include the accounts and operations of the following entities and their respective properties on a combined basis:

The above entities are controlled by Plume Street Financial, LLC, an entity in which Jon S. Wheeler and Harrison J. Perrine each maintain a 50% ownership. The accompanying combined financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. All material balances and transactions between the combined entities of the PSF Entities have been eliminated.

On November 16, 2012, the PSF Entities were acquired by Wheeler Real Estate Investment Trust, Inc. as contemplated in the Trust’s Registration Statement filed with the SEC. The operations of the PSF Entities will be carried on through Wheeler Real Estate Investment Trust, L.P. The Trust is the sole general partner and has control of the Operating Partnership. Accordingly, the assets, liabilities and results of operations of the PSF Entities will be consolidated with the Operating Partnership. Mr. Wheeler and his affiliates will continue to manage the properties and maintain significant influence over the operations and strategic direction of the PSF Entities. See Note 7 “Related Party Transactions” for further information regarding the relationships and transactions between the PSF Entities and its related parties.

The value of the consideration paid to each of the PSF Entities’ prior investors in the formation transactions, in each case, was based upon the terms of the applicable contribution agreement among the Operating Partnership, on the one hand, and the prior investor or investors, on the other hand, and was determined based on a relative equity valuation analysis of the PSF Entities. The prior investors received cash or common units in exchange for their interests in the PSF Entities.