Wheeler Real Estate Investment Trust Inc
For the period ended Jun 30, 2024. Filed Aug 6, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 6, 2024
WHLRP$12.80-0.4%Stored close · as of Oct 26, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-06.
0001527541-24-000055
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0001527541-24-000152
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 102 previous paragraphs and 130 current paragraphs.
53 unchanged; 45 reworded; 24 added; 4 removed; 0 previous and 8 current paragraphs rearranged.
Tables are not compared: 7 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (24)
Current report
Dispositions
Current report
On June 18, 2024, the Company entered into the Harbor Point Settlement Agreement with the City of Grove, which provided for the transfer of the Harbor Point Land Parcel and a one-time payment of $160 thousand to the City of Grove in exchange for a release of the Company from all increment taxes and other obligations under the Economic Development Agreement the Company had entered into with the City of Grove and the dismissal of the litigation commenced by the City of Grove against the Company. See Note 8 to theaccompanying condensed consolidated financial statements for additional detail.
Current report
Term Loan, Five Properties
Current report
On June 28, 2024, the Company entered the Term Loan Agreement, 5 Properties with Guggenheim Real Estate, LLC, for $25.5 million at a fixed rate of 6.80% with interest-only payments due monthly. Commencing on August 10, 2029, until the maturity date of July 10, 2034, monthly principal and interest payments will be made based on a 30-year amortization schedule calculated based on the principal amount as of that time. The Term Loan Agreement, 5 Properties' proceeds were used to refinance four other loans, including paying $0.4 million in defeasance. The Term Loan Agreement, 5 Properties is collateralized by 5 properties, consisting of Cypress Shopping Center, Conyers Crossing, Chesapeake Square, Sangaree Plaza and Tri-County Plaza.
Current report
On July 9, 2024, the registration statement on Form S-11 (File No. 333-280643) filed by the Company on July 1, 2024 was declared effective by the Securities and Exchange Commission (the "SEC"), and the Company filed with the SEC the related final prospectus pursuant to Rule 424(b) (the "Prospectus"). The Prospectus relates to the issuance from time to time by the Company of up to 20,704,217 shares of our Common Stock upon future redemptions and conversions of Series D Preferred Stock. The Company expects to issue such Common Stock to settle monthly redemptions of Series D Preferred Stock commencing with the August 5, 2024 Holder Redemption Date.
Current report
Interest expense on the Convertible Notes consisted of the following (in thousands, except for shares):
Current report
Quarter-To-Date Comparison
Current report
Property Operating expenses were higher primarily as a result of an increase of $0.3 million in repairs and maintenance.
Current report
(1) Includes the fair value adjustment for the paid-in-kind interest.
Current report
The following table presents a comparison of the condensed consolidated statements of operations for the six months ended June 30, 2024 and 2023:
Current report
Property Operating expenses were higher primarily as a result of (1) increase of $0.2 million in repairs and maintenance, (2) an increase of $0.2 million in insurance, (3) an increase of $0.1 million in utilities and (4) an increase of $0.1 million in grounds and landscaping, partially offset by (5) a decrease of $0.2 million in ground rent expense a result of the 2023 acquisition of a land parcel located on the Company's property, Devine Street.
Current report
(1) Includes the fair value adjustment for the paid-in-kind interest.
Current report
Total Same-Property NOI was $31.7 million and $29.9 million for the six months ended June 30, 2024 and 2023, respectively, representing an increase of 6.0% primarily due to a 4.7% increase in property revenue partially offset by a 2.4% increase in property expenses.
Current report
•$3.9 million 2024 loan refinancing activities, net;
Current report
•$3.6 million payment on Cedar Revolving Credit Agreement;
Current report
•$0.4 million defeasance payments.
Current report
Cash inflows:
Current report
•$7.3 million 2023 loan refinancing activities, net.
Current report
•$1.8 million defeasance payments;
Current report
On June 3, 2024, the Company received a letter from the Staff notifying the Company that it had regained compliance with the Bid Price Rule.
Current report
On June 28, 2024, the Staff notified the Company that it was not in compliance with Nasdaq Listing Rule 5550(a)(4), which requires the Company to have a minimum of 500,000 "Publicly Held Shares" (defined in Nasdaq Listing Rule 5005(a)(35) as "shares not held directly or indirectly by an officer, director or any person who is the beneficial owner of more than 10 percent of the total shares outstanding") (the "Publicly Held Shares Rule"). Per the Staff's notice, the Company had until July 12, 2024 to submit to Nasdaq a specific plan to achieve and sustain compliance.
Current report
On July 12, 2024, the Company timely submitted its plan of compliance to the Staff (the "Compliance Plan"). The Compliance Plan provided, among other things, that the Company believes that, following its registration of approximately 20 million shares of its Common Stock with the SEC under the Prospectus, it will issue Common Stock in settlement of Series D Preferred Stock redemptions commencing with the August 5, 2024 Holder Redemption Date in such an amount that, within the next couple of months and certainly by December 25, 2024 (which is 180 days from the date of the Staff's letter, June 28, 2024), it will have achieved compliance with the Publicly Held Shares Rule.
Current report
On July 30, 2024, the Staff provided the Company with written notice of an extension through December 25, 2024 (the "Compliance Deadline") to regain compliance with the Publicly Held Shares Rule. Per such notice, on or before the Compliance Deadline, the Company must file with the SEC and Nasdaq a public document containing its current total shares of Common Stock outstanding and a beneficial ownership table in accordance with SEC proxy rules demonstrating compliance with the Publicly Held Shares Rule.
Current report
On August 5, 2024, the Company issued 657,671 shares of its Common Stock in settlement of 124,043 shares of Series D Preferred Stock tendered for the August 2024 monthly redemptions. The Company believes that, following such issuance, it is now in compliance with the Publicly Held Shares Rule because all such shares of Common Stock so issued are Publicly Held Shares and, when added to the Company's previously outstanding 284,209 Publicly Held Shares of Common Stock, the Company has 941,880 Publicly Held Shares outstanding, which number exceeds the 500,000 required by Nasdaq Listing Rule 5550(a)(4).
Removed paragraphs (4)
Previous report
Interest related to the Convertible Notes was $0.5 million and $0.6 million during the three months ended March 31, 2024 and 2023, respectively.
Previous report
Excepted Holder Limits
Previous report
On February 5, 2024, the Board of Directors agreed to increase the prior Excepted Holder Limits granted to the Stilwell Investors to permit additional stock ownership and, accordingly, the Company entered into an amendment to the Excepted Holder Agreement with the Investors under which the Company increased the Capital Stock Excepted Holder Limit granted to Investors under the Excepted Holder Agreement to 60% and the Common Stock Excepted Holder Limit to 90%. See Note 11 to theaccompanying condensed consolidated financial statements for additional detail.
Previous report
Property Operating expenses were higher primarily as a result of (1) an increase of $0.2 million in insurance, partially offset by (2) a decrease of $0.1 million in marketing expense for non-recurring rebrand signage due to the Cedar Acquisition.
Reworded paragraphs (45)
Previous wording
You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Form 10-Q, along with the consolidated financial statements and the notes thereto, and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our 2023 Form 10-K. All per share amounts, common units and shares outstanding, warrants, and conversion features of the Convertible Notes for all periods presented reflect the one-for-ten Reverse Stock Split, which took effect on August 17, 2023. For more detailed information regarding the basis of presentation for the following information, you should read the notes to the unaudited condensed consolidated financial statements included in this Form 10-Q.
Current wording
You should read the following discussion of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Form 10-Q, along with the consolidated financial statements and the notes thereto, and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" included in our 2023 Form 10-K. All per share amounts, common units and shares outstanding, warrants, and conversion features of the Convertible Notes for all periods presented reflect our August 2023 Reverse Stock Split, May 2024 Reverse Stock Split and June 2024 Reverse Stock Split, which took effect on August 17, 2023, May 16, 2024 and June 27, 2024, respectively. For more detailed information regarding the basis of presentation for the following information, you should read the notes to the unaudited condensed consolidated financial statements included in this Form 10-Q.
Previous wording
In addition to historical information, this discussion and analysis contains forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations and intentions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, including those discussed under the section entitled "Cautionary Note on Forward-Looking Statements." These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on its knowledge and understanding of our business and industry.
Current wording
In addition to historical information, this discussion and analysis contains forward-looking statements based on current expectations that involve risks, uncertainties and assumptions, such as our plans, objectives, expectations and intentions. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, including those discussed under the section entitled "Cautionary Statement on Forward-Looking Statements." These forward-looking statements are not historical facts but are the intent, belief or current expectations of our management based on its knowledge and understanding of our business and industry.
Previous wording
As of March 31, 2024, the Company, through the Operating Partnership, owned and operated seventy-five retail shopping centers and four undeveloped properties in South Carolina, Georgia, Virginia, Pennsylvania, North Carolina, Massachusetts, New Jersey, Florida, Connecticut, Kentucky, Tennessee, Alabama, Maryland, West Virginia, and Oklahoma. This list includes the properties acquired through the Cedar Acquisition.
Current wording
As of June 30, 2024, the Company, through the Operating Partnership, owned and operated seventy-four retail shopping centers and three undeveloped properties in South Carolina, Georgia, Virginia, Pennsylvania, North Carolina, Massachusetts, New Jersey, Florida, Connecticut, Kentucky, Tennessee, Alabama, Maryland and West Virginia. This list includes the properties acquired through the Cedar Acquisition.
Previous wording
On February 29, 2024, the Company entered into a revolving credit agreement with KeyBank National Association to draw up to $9.5 million (the "Cedar Revolving Credit Agreement"). The interest rate under the Cedar Revolving Credit Agreement is the daily SOFR, plus applicable margins of 0.10% plus 2.75%. Interest payments are due monthly, and any outstanding principal is due at maturity on February 28, 2025. The Cedar Revolving Credit Agreement may be extended, at the Company's option, for up to two additional three-month periods, subject to customary conditions. The Cedar Revolving Credit Agreement is collateralized by 6 properties, consisting of Carll's Corner, Fieldstone Marketplace, Oakland Commons, Kings Plaza, Oregon Avenue and South Philadelphia, and proceeds will be used for capital expenditures and tenant improvements for such properties.
Current wording
On February 29, 2024, the Company entered into the Revolving Credit Agreement. The interest rate under the Revolving Credit Agreement is the daily SOFR, plus applicable margins of 0.10% plus 2.75%. Interest payments are due monthly, and any outstanding principal is due at maturity on February 28, 2025. The Revolving Credit Agreement may be extended, at the Company's option, for up to two additional three-month periods, subject to customary conditions. The Revolving Credit Agreement is collateralized by 6 properties, consisting of Carll's Corner, Fieldstone Marketplace, Oakland Commons, Kings Plaza, Oregon Avenue and South Philadelphia, and proceeds will be used for capital expenditures and tenant improvements for such properties. Upon the disposition of Oakland Commons, that property was released from collateral and the outstanding borrowings were repaid.
Previous wording
On March 28, 2024, the Company received $1.0 million of $2.5 million in deferred loan proceeds under the Timpany Plaza Loan Agreement following the Company's satisfaction of certain lease-related contingencies. The Company anticipates receiving the $1.5 million balance of the deferred loan proceeds upon the satisfaction of certain other lease-related contingencies.
Current wording
On March 28, 2024, the Company received $1.0 million of $2.5 million in deferred loan proceeds under the Timpany Plaza Loan Agreement following the Company's satisfaction of certain lease-related contingencies. The Company anticipates receiving the $1.5 million balance of the deferred loan proceeds upon the satisfaction of other certain lease-related contingencies.
Previous wording
During the three months ended March 31, 2024, the Company processed redemptions of an aggregate of 84,561 shares of Series D Preferred Stock from the holders thereof. Accordingly, the Company issued 14,253,931 shares of Common Stock in settlement of an aggregate Redemption Price of approximately $3.2 million.
Current wording
During the six months ended June 30, 2024, the Company processed redemptions of an aggregate of 84,561 shares of Series D Preferred Stock from the holders thereof. Accordingly, the Company issued 118,783 shares of Common Stock in settlement of an aggregate Redemption Price of approximately $3.2 million.
Previous wording
The value of the Common Stock issued to holders redeeming their Series D Preferred Stock is the volume weighted average price per share of our Common Stock for the ten consecutive trading days immediately preceding, but not including, the Holder Redemption Date as reported on Nasdaq (the "VWAP"). As of March 31, 2024, the Company has realized a gain of $0.2 million in the aggregate due to the closing price of the Common Stock on the last VWAP date differing from the VWAP used to calculate the shares issued in each redemption round.
Current wording
The value of the Common Stock issued to holders redeeming their Series D Preferred Stock is the volume weighted average price per share of our Common Stock for the ten consecutive trading days immediately preceding, but not including, the Holder Redemption Date as reported on Nasdaq. During the three and six months ended June 30, 2024, the Company has realized a gain of $0 million and $0.2 million in the aggregate, respectively, due to the closing price of the Common Stock on the last VWAP date differing from the VWAP used to calculate the shares issued in each redemption round.
Previous wording
On January 17, 2024, the Company paid down $0.6 million of the Convertible Notes through an open market purchase of 23,280 units at a total purchase price of $1.3 million. As a result of these transactions the Company recognized a $0.7 million loss for the three months ended March 31, 2024 which represents the fair value of the purchase over principal pay down. The loss is included in "other expense" in the condensed consolidated statements of operations.
Current wording
On January 17, 2024, the Company paid down $0.6 million of the Convertible Notes through an open market purchase of 23,280 units at a total purchase price of $1.3 million. As a result of that transaction, the Company recognized a $0.7 million loss which represents the fair value of the purchase price over the amount of principal reduction. The loss is included in "other expense" in the condensed consolidated statements of operations.
Previous wording
As of March 31, 2024, the Conversion Price for the Convertible Notes was approximately $0.12 per share of the Company’s Common Stock (approximately 209.84 shares of Common Stock for each $25.00 of principal amount of the Convertible Notes being converted).
Current wording
As of June 30, 2024, the Conversion Price for the Convertible Notes was approximately $14.30 per share of the Company’s Common Stock (approximately 1.75 shares of Common Stock for each $25.00 of principal amount of the Convertible Notes being converted).
Previous wording
The Company performs property management and leasing services for Cedar, a subsidiary of the Company. During the three months ended March 31, 2024 and 2023, Cedar paid the Company $0.3 million and $0.4 million, respectively, for these services.
Current wording
The Company performs property management and leasing services for Cedar, a subsidiary of the Company. During the three and six months ended June 30, 2024, Cedar paid the Company $0.6 million and $0.9 million, respectively, for these services.
Previous wording
Related party amounts due to the Company from Cedar for financing and real estate taxes, management fees, leasing commissions and Cost Sharing Agreement allocations were $8.4 million and $8.1 million as of March 31, 2024 and December 31, 2023, respectively, and have been eliminated for consolidation purposes.
Current wording
Related party amounts due to the Company from Cedar for financing and real estate taxes, management fees, leasing commissions and Cost Sharing Agreement allocations were $8.5 million and $8.1 million as of June 30, 2024 and December 31, 2023, respectively, and have been eliminated for consolidation purposes.
Previous wording
The Company’s SAI investment is accounted for under the equity method and measured at net asset value as a practical expedient and has not been classified within the fair value hierarchy. All gains and losses, realized and unrealized, and fees are recorded through "gains (losses) on investment securities, net" in the condensed consolidated statements of operations. As of March 31, 2024, the fair value of the Company’s SAI investment was $10.6 million which includes $10.0 million from the 2023 subscriptions. For the three months ended March 31, 2024 the Company recognized $27 thousand in fees and an unrealized loss of $79 thousand for a loss on investment securities, net of $106 thousand. See Note 4 to theaccompanying condensed consolidated financial statements for additional detail.
Current wording
The Company’s SAI investment is accounted for under the equity method and measured at net asset value as a practical expedient and has not been classified within the fair value hierarchy. All gains and losses, realized and unrealized, and fees are recorded through "gains (losses) on investment securities, net" in the condensed consolidated statements of operations. As of June 30, 2024, the fair value of the Company’s SAI investment was $11.4 million which includes $10.0 million from the 2023 subscriptions and $0.5 million from the 2024 subscription. For the three and six months ended June 30, 2024, the Company recognized $73 thousand and $100 thousand in fees, respectively. For the three and six months ended June 30, 2023, the Company recognized $10 thousand in fees. See Note 4 to theaccompanying condensed consolidated financial statements for additional detail.
Previous wording
At March 31, 2024, the Company had accumulated undeclared dividends of $33.3 million ($13.28 per share) to holders of shares of our Series D Preferred Stock of which $2.0 million (per share $0.81) is attributable to the three months ended March 31, 2024.
Current wording
At June 30, 2024, the Company had accumulated undeclared dividends of $35.3 million ( $13.48 per share) to holders of shares of our Series D Preferred Stock of which $2.0 million ($0.76 per share) and $4.0 million ( $1.54 per share) is attributable to the three and six months ended June 30, 2024, respectively.
Previous wording
In preparing the condensed consolidated financial statements, we have made estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results may differ from these estimates. A summary of our critical accounting estimates and policies is included in our 2023 Form 10-K under "Management’s Discussion and Analysis of Financial Condition and Results of Operations." During the three months ended March 31, 2024, there have been no significant changes to these estimates and policies previously disclosed in our 2023 Form 10-K. For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 of the condensed consolidated financial statements included in this Form 10-Q.
Current wording
In preparing the condensed consolidated financial statements, we have made estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. Actual results may differ from these estimates. A summary of our critical accounting estimates and policies is included in our 2023 Form 10-K under "Management’s Discussion and Analysis of Financial Condition and Results of Operations." During the six months ended June 30, 2024, there have been no significant changes to these estimates and policies previously disclosed in our 2023 Form 10-K. For disclosure regarding recent accounting pronouncements and the anticipated impact they will have on our operations, please refer to Note 2 of the condensed consolidated financial statements included in this Form 10-Q.
Previous wording
Revenues were lower primarily as a result of (1) a decrease in market lease amortization of $0.5 million and (2) a decrease in non-property revenue of $0.2 million, partially offset by (3) an increase in base rent of $0.3 million and (4) an increase in tenant reimbursements of $0.2 million.
Current wording
Revenues were higher primarily as a result of (1) an increase in tenant reimbursements of $1.1 million, (2) an increase in base rent of $0.5 million and (3) an increase in termination fee income of $0.2 million, partially offset by (4) a decrease in market lease amortization of $0.4 million.
Previous wording
Depreciation and amortization were lower primarily as a result of the purchase price allocation of lease intangibles due to the timing of the Cedar Acquisition.
Current wording
Depreciation and amortization was lower primarily as a result of the purchase price allocation of lease intangibles due to the timing of the Cedar Acquisition.
Previous wording
Interest expense increased 14.3%. Below is a comparison of the components which make up interest expense (in thousands):
Current wording
Interest expense decreased 13.8%. Below is a comparison of the components which make up interest expense (in thousands):
Previous wording
Net changes in the fair value of derivative liabilities decreased, which represents a non-cash adjustment from a change in the fair value that includes adjustments in valuation assumptions. See Note 7 to the accompanying condensed consolidated financial statements for additional details.
Current wording
Net changes in the fair value of derivative liabilitieswas a $5.0 million loss for the three months ended June 30, 2024, which represents a non-cash adjustment from a change in the fair value that includes adjustments in valuation assumptions. See Note 7 to the accompanying condensed consolidated financial statements for additional details.
Previous wording
Other expense represents expenses which are non-operating in nature. Other expenses were $0.7 million for the three months ended March 31, 2024, which primarily consisted of capital structure costs to repurchase Convertible Notes, see Note 6 to the accompanying condensed consolidated financial statements for additional details. Other expenses were $2.4 million for the three months ended March 31, 2023, which primarily consisted of capital structure costs for an exchange offer for the Company's outstanding shares of Series D Preferred Stock.
Current wording
Other expense represents expenses which are non-operating in nature. Other expenses were $0.5 million for the three months ended June 30, 2024, which primarily consisted of capital structure costs, including legal and other expenses incurred for the 2024 Reverse Stock Splits and the registration of our Common Stock to issue in settlement of Series D redemption. Other expenses were $0.6 million for the three months ended June 30, 2023,which primarily consisted of capital structure costs to repurchase Convertible Notes.
Previous wording
Corporate general and administrative expenses were lower primarily as a result of (1) a decrease of $0.2 million in legal fees due to bringing certain legal services in-house and (2) a decrease of $0.1 million in agent commissions.
Current wording
Corporate general and administrative expenses were lower primarily as a result of (1) a decrease in legal fees due to bringing certain legal services in-house of $0.6 million, partially offset by (2) an increase in dues and fees of $0.1 million.
Previous wording
The above increase in property debt interest inclusive of Cedar debt was $0.8 million a result of (1) an increase of $0.6 million due to an increase in the overall average interest rate and (2) an increase of $0.2 million in the average principal balance.
Current wording
The above increase in property debt interest inclusive of Cedar debt was $1.3 million a result of (1) an increase of $0.9 million due to an increase in the overall average interest rate and (2) an increase of $0.4 million in the average principal debt balance.
Previous wording
Total Same-Property NOI was $15.5 million and $15.1 million for the three months ended March 31, 2024 and 2023, respectively, representing an increase of 2.7% primarily due to a 2.1% increase in property revenue partially offset by a 1.1% increase in property expenses.
Current wording
Total Same-Property NOI was $16.2 million and $14.9 million for the three months ended June 30, 2024 and 2023, respectively, representing an increase of 9.3% due to a 7.3% increase in property revenue partially offset by a 3.9% increase in property expenses.
Previous wording
We use funds from operations ("FFO"), a non-GAAP measure, as an alternative measure of our operating performance, specifically as it relates to results of operations and liquidity. We compute FFO in accordance with standards established by the Board of Governors of Nareit in its March 1995 White Paper (as amended in November 1999, April 2002 and December 2018). As defined by Nareit, FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate-related depreciation and amortization (excluding amortization of loan origination costs), plus impairment of real estate related long-lived assets and after adjustments for unconsolidated partnerships and joint ventures. Most industry analysts and equity REITs, including us, consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions and excluding depreciation, FFO is a helpful tool that can assist in the comparison of the operating performance of a company’s real estate between periods, or as compared to different companies. Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income alone as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time, while historically real estate values have risen or fallen with market conditions. Accordingly, we believe FFO provides a valuable alternative measurement tool to GAAP when presenting our operating results.
Current wording
We use funds from operations ("FFO"), a non-GAAP measure, as an alternative measure of our operating performance, specifically as it relates to results of operations and liquidity. We compute FFO in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts ("Nareit") in its March 1995 White Paper (as amended in November 1999, April 2002 and December 2018). As defined by Nareit, FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate-related depreciation and amortization (excluding amortization of loan origination costs), plus impairment of real estate related long-lived assets and after adjustments for unconsolidated partnerships and joint ventures. Most industry analysts and equity REITs, including us, consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions and excluding depreciation, FFO is a helpful tool that can assist in the comparison of the operating performance of a company’s real estate between periods, or as compared to different companies. Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income alone as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time, while historically real estate values have risen or fallen with market conditions. Accordingly, we believe FFO provides a valuable alternative measurement tool to GAAP when presenting our operating results.
Previous wording
Other non-recurring and non-cash expenses are costs of the Company that we believe will not be incurred on a go-forward basis. Other non-recurring expenses of $0.0 million for the three months ended March 31, 2024. Other non-recurring expenses of $0.3 million for the three months ended March 31, 2023, a result of cost to demolish decommissioned space not included in the Company's gross leasable area.
Current wording
Other non-recurring and non-cash expenses are costs of the Company that we believe will not be incurred on a go-forward basis. Other non-recurring expenses were $0.4 million and $0.4 million for the three and six months ended June 30, 2024, respectively, a result of loan defeasance payments. Other non-recurring expenses were $1.8 million and $2.0 million for the three and six months ended June 30, 2023, respectively, a result of $1.8 million in loan defeasance payments and $0.2 million costs to demolish a decommissioned space not included in the Company's gross leasable area.
Previous wording
The U.S. continues to experience elevated levels of inflation, which could improve or worsen. Substantially all of the Company’s tenant leases contain provisions designed to partially mitigate the negative impact of inflation in the near term. Such lease provisions include clauses that require tenants to reimburse the Company for inflation-sensitive costs such as real estate taxes, insurance and many of the operating expenses it incurs. In addition, many of our leases are for terms of less than ten years, which permits us to seek increased rents upon re-rental at market rates. However, significant inflation rate increases over a prolonged period of time may have a material adverse impact on the Company’s business. Conversely, deflation could lead to downward pressure on rents and other sources of income.
Current wording
The U.S. continues to experience inflation, which could improve or worsen. Substantially all of the Company’s leases contain provisions designed to partially mitigate the negative impact of inflation in the near term. Such lease provisions include clauses that require tenants to reimburse the Company for inflation-sensitive costs such as real estate taxes, insurance and many of the operating expenses it incurs. In addition, many of our leases are for terms of less than ten years, which permits us to seek increased rents upon re-rental at market rates. However, significant inflation rate increases over a prolonged period of time may have a material adverse impact on the Company’s business. Conversely, deflation could lead to downward pressure on rents and other sources of income.
Previous wording
At March 31, 2024, our consolidated cash, cash equivalents and restricted cash totaled $38.5 million compared to consolidated cash, cash equivalents and restricted cash of $52.1 million at March 31, 2023. Cash flows from operating activities, investing activities and financing activities were as follows (in thousands, unaudited):
Current wording
At June 30, 2024, our consolidated cash, cash equivalents and restricted cash totaled $41.8 million compared to consolidated cash, cash equivalents and restricted cash of $51.1 million at June 30, 2023. Cash flows from operating activities, investing activities and financing activities were as follows (in thousands, unaudited):
Previous wording
Our cash flows from operating activities increased $1.5 million. Net cash provided by operating activities, before net changes in operating assets and liabilities, was $6.3 million and $4.3 million for 2024 and 2023, respectively, primarily due to (1) a $2.7 million decrease in corporate administrative expenses and other expenses and (2) a $0.4 million increase in Same-Property NOI, partially offset by (3) an $0.9 increase in interest expense and (4) $0.2 million decrease in NOI related to properties not defined as same-property.
Current wording
Our cash flows from operating activities increased $1.6 million. Net cash provided by operating activities, before net changes in operating assets and liabilities, was $14.0 million and $10.0 million for 2024 and 2023, respectively, primarily due to (1) a $2.3 million decrease in corporate administrative expenses and other expenses and (2) a $1.8 million increase in Same-Property NOI, partially offset by (3) an $0.2 million increase increase in cash paid for interest.
Previous wording
Our cash flows used in investing activities remained relatively flat.
Current wording
Our cash flows used in investing activities decreased $3.3 million, primarily due to (1) the proceeds from the sale of Oakland Commons, (2) the investment subscription with SAI of $0.5 million and $3.0 million during the six months ended June 30, 2024 and 2023, respectively and (3) the 2023 acquisition of the St. George Plaza Land Parcel, partially offset by (4) the increase in capital expenditures of $5.1 million .
Previous wording
Our cash flows used in financing activities were $2.4 million for the three months ended March 31, 2024, compared to cash flows used in financing activities of $3.3 million for the comparable period in 2023.
Current wording
Our cash flows used in financing activities were $4.4 million for the six months ended June 30, 2024, compared to cash flows used in financing activities of $6.2 million for the comparable period in 2023.
Previous wording
Financing activities during the three months ended March 31, 2024 primarily consisted of:
Current wording
Financing activities during the six months ended June 30, 2024 primarily consisted of:
Previous wording
•$1.4 million draw on Cedar Revolving Credit Agreement; and
Current wording
•$3.6 million draw on Cedar Revolving Credit Agreement; and
Previous wording
•$2.7 million for distributions paid on noncontrolling interests;
Current wording
•$5.4 million for distributions paid on noncontrolling interests;
Previous wording
•$0.4 million payments for deferred financing costs; and
Current wording
•$1.6 million payments for deferred financing costs;
Previous wording
•$0.6 million scheduled loan principal payments on debt.
Current wording
•$0.6 million scheduled loan principal payments on debt; and
Previous wording
Financing activities during the three months ended March 31, 2023 primarily consisted of:
Current wording
Financing activities during the six months ended June 30, 2023 primarily consisted of:
Previous wording
•$2.7 million for distributions paid on noncontrolling interests; and
Current wording
•$5.4 million for distributions paid on noncontrolling interests;
Previous wording
•$0.4 million scheduled loan principal payments on debt.
Current wording
•$1.1 million scheduled loan principal payments on debt.
Previous wording
The weighted average interest rate and term of our fixed-rate debt were 5.43% and 7.9 years, respectively, at March 31, 2024. The weighted average interest rate and term of our fixed-rate debt was 4.99% and 7.2 years, respectively, at March 31, 2023. We have $8.7 million of debt maturing during the twelve months ending March 31, 2025. While we anticipate being able to refinance all the loans at reasonable market terms upon maturity, our inability to do so may materially impact our financial position and results of operations. See Note 6 to the accompanying condensed consolidated financial statements for additional mortgage indebtedness details.
Current wording
The weighted average interest rate and term of our fixed-rate debt were 5.53% and 8.1 years, respectively, at June 30, 2024. The weighted average interest rate and term of our fixed-rate debt were 5.39% and 9.0 years, respectively, at June 30, 2023. We have $1.4 million of debt maturing during the twelve months ending June 30, 2025. While we anticipate being able to refinance all the loans at reasonable market terms upon maturity, our inability to do so may materially impact our financial position and results of operations. See Note 6 to the accompanying condensed consolidated financial statements for additional mortgage indebtedness details.
Previous wording
On December 7, 2023, the listing qualifications staff (the "Staff") of Nasdaq notified the Company that based on the Common Stock’s bid price closing below $1.00 per share for 30 consecutive business days, the Company no longer complied with Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule") and that Company has a 180-day compliance period until June 4, 2024 to regain compliance. This rule requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days.
Current wording
On December 7, 2023, the listing qualifications staff (the "Staff") of Nasdaq notified the Company that based on the Common Stock’s bid price closing below $1.00 per share for 30 consecutive business days, the Company no longer complied with Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule") and that Company had a 180-day compliance period. This rule requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days.
Previous wording
The primary liquidity needs of the Company, in addition to the funding of our ongoing operations, at March 31, 2024 are $8.7 million in principal and regularly scheduled payments due in the twelve months ended March 31, 2025 as described in Note 6 in the accompanying condensed consolidated financial statements.
Current wording
The primary liquidity needs of the Company, in addition to the funding of our ongoing operations, at June 30, 2024 are $1.4 million in principal and regularly scheduled payments due in the twelve months ended June 30, 2025 as described in Note 6 in the condensed consolidated financial statements.
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Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
Corporate general and administrative expenses were lower primarily as a result of (1) a decrease in legal fees due to bringing certain legal services in-house of $0.4 million, partially offset by (2) an increase in salaries of $0.2 million.
Current report — wording carried from elsewhere
Revenues were higher primarily as a result of (1) an increase in tenant reimbursements of $1.3 million and (2) an increase in base rent of $0.9 million, partially offset by (3) a decrease in market lease amortization of $0.9 million.
Current report — wording carried from elsewhere
Depreciation and amortization was lower primarily as a result of the purchase price allocation of lease intangibles due to the timing of the Cedar Acquisition.
Current report — wording carried from elsewhere
Interest expense decreased 2.8%. Below is a comparison of the components which make up interest expense (in thousands):
Current report — wording carried from elsewhere
Net changes in the fair value of derivative liabilitieswas a $10.5 million loss for the six months ended June 30, 2024, which represents a non-cash adjustment from a change in the fair value that includes adjustments in valuation assumptions. See Note 7 to the accompanying condensed consolidated financial statements for additional details.
Current report — wording carried from elsewhere
Other expense represents expenses which are non-operating in nature. Other expenses were $1.2 million for the six months ended June 30, 2024, which primarily consisted of capital structure costs, including repurchase of Convertible Notes and legal and other expenses incurred for the 2024 Reverse Stock Splits and the registration of our Common Stock to issue in settlement of Series D redemption. Other expenses were $3.0 million for the six months ended June 30, 2023, which primarily consisted of capital structure costs to repurchase Convertible Notes and the Exchange Offer for the Company's outstanding shares of Series D Preferred.
Current report — wording carried from elsewhere
•$4.1 million payments for deferred financing costs;
Current report — wording carried from elsewhere
•$1.2 million repurchase of debt securities; and