Wheeler Real Estate Investment Trust Inc

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 our August 2023 Reverse Stock Split, May 2024 Reverse Stock Split, June 2024 Reverse Stock Split and September 2024 Reverse Stock Split, which took effect on August 17, 2023, May 16, 2024, June 27, 2024 and September 19, 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.

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 2024 Form 10-K. All share and share-related information presented reflect our May 2024 Reverse Stock Split, June 2024 Reverse Stock Split, September 2024 Reverse Stock Split, November 2024 Reverse Stock Split, January 2025 Reverse Stock Split and March 2025 Reverse Stock Split which took effect on May 16, 2024, June 27, 2024, September 19, 2024, November 18, 2024, January 27, 2025 and March 26, 2025, 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 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.

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 as further described under the caption above entitled "Cautionary Statement on Forward-Looking Statements." Our actual results or other events and the timing of events may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the caption above 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 September 30, 2024, the Company, through the Operating Partnership, owned and operated seventy-three retail shopping centers and two undeveloped properties in South Carolina, Georgia, Virginia, Pennsylvania, North Carolina, New Jersey, Massachusetts, Florida, Connecticut, Kentucky, Tennessee, Alabama, Maryland and West Virginia. This list includes the properties acquired through the Cedar Acquisition.

Current wording

As of March 31, 2025, the Company, through the Operating Partnership, owned and operated seventy-two properties, including sixty-nine retail shopping centers and three undeveloped properties in South Carolina, Georgia, Virginia, Pennsylvania, North Carolina, New Jersey, Florida, Massachusetts, Connecticut, Kentucky, Tennessee, Alabama, Maryland and West Virginia. This list includes the properties acquired through the Cedar Acquisition.

Previous wording

The Company’s portfolio of properties is dependent upon regional and local economic conditions, and is geographically concentrated in the Mid-Atlantic, Southeast and Northeast, which markets represent approximately 46%, 42% and 12% respectively, of the total annualized base rent of the properties in its portfolio as of September 30, 2024. The Company’s geographic concentration may cause it to be more susceptible to adverse developments in those markets than if it owned a more geographically diverse portfolio. Additionally, the Company’s retail shopping center properties depend on anchor stores or major tenants to attract shoppers and could be adversely affected by the loss of, or a store closure by, one or more of these tenants.

Current wording

The Company’s portfolio of properties is dependent upon regional and local economic conditions, and is geographically concentrated in the Mid-Atlantic, Southeast and Northeast, which markets represent approximately 45%, 44% and 11% respectively, of the total annualized base rent of the properties in its portfolio as of March 31, 2025. The Company’s geographic concentration may cause it to be more susceptible to adverse developments in those markets than if it owned a more geographically diverse portfolio. Additionally, the Company’s retail shopping center properties depend on anchor stores or major tenants to attract shoppers and could be adversely affected by the loss of, or a store closure by, one or more of these tenants.

Previous wording

As of September 30, 2024, South Philadelphia, located in Philadelphia, Pennsylvania has been classified as "assets held for sale" in the accompanying condensed consolidated balance sheet.

Current wording

As of March 31, 2025, Devine Street, located in Columbia, South Carolina has been classified as an "asset held for sale" in the accompanying condensed consolidated balance sheet.

Previous wording

During the nine months ended September 30, 2024, the Company processed redemptions of an aggregate of 232,509 shares of Series D Preferred Stock from the holders thereof. Accordingly, the Company issued 475,361 shares of Common Stock in settlement of an aggregate redemption price of approximately $9.0 million.

Current wording

During the three months ended March 31, 2025, the Company processed redemptions of an aggregate of 193,951 shares of Series D Preferred Stock from the holders thereof. Accordingly, the Company issued 305,626 shares of Common Stock in settlement of an aggregate redemption price of approximately $7.8 million.

Previous wording

As of September 30, 2024, the Conversion Price for the Convertible Notes was approximately $2.37 per share of the Company’s Common Stock (approximately 10.53 shares of Common Stock for each $25.00 of principal amount of the Convertible Notes being converted).

Current wording

As of March 31, 2025, the Conversion Price for the Convertible Notes was approximately $4.56 per share of the Company’s Common Stock (approximately 5.48 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 and nine months ended September 30, 2024, Cedar paid the Company $0.0 million and $0.9 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 months ended March 31, 2025 and 2024, Cedar paid the Company $0.5 million and $0.3 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 $9.4 million and $8.1 million as of September 30, 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 $9.6 million and $9.5 million as of March 31, 2025 and December 31, 2024, respectively, and have been eliminated for consolidation purposes.

Previous wording

At September 30, 2024, the Company had accumulated undeclared dividends of $35.2 million ($14.28 per share) to holders of shares of our Series D Preferred Stock of which $2.0 million ($0.83 per share) and $6.1 million ($2.46 per share) is attributable to the three and nine months ended September 30, 2024, respectively.

Current wording

At March 31, 2025, the Company had accumulated undeclared dividends of $29.6 million ($15.57 per share) to holders of shares of our Series D Preferred Stock of which $1.9 million ($0.97 per share) is attributable to the three months ended March 31, 2025.

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 nine months ended September 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.

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 2024 Form 10-K under "Management’s Discussion and Analysis of Financial Condition and Results of Operations." During the three months ended March 31, 2025, there have been no significant changes to these estimates and policies previously disclosed in our 2024 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

The following table presents a comparison of the condensed consolidated statements of operations for the nine months ended September 30, 2024 and 2023:

Current wording

The following table presents a comparison of the condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024:

Previous wording

Revenues were lower primarily as a result of (1) a decrease in market lease amortization of $0.4 million, (2) an increase in credit adjustments on operating lease receivables of $0.3 million primarily due to the Big Lots bankruptcy and (3) a decrease in other income of $0.1 million, partially offset by (4) an increase in tenant reimbursements of $0.4 million.

Current wording

Revenues were lower primarily as a result of (1) a decrease of $1.6 million in rental revenues and expense recoveries, net of credit adjustments on operating lease receivables, attributable to properties that were sold in 2024 and 2025 and (2) a decrease of $0.1 million in market lease amortization and straight line rent, partially offset by (3) an increase of $0.2 million in rental revenues and expense recoveries, net of credit adjustments on operating lease receivables, attributable to same center properties.

Previous wording

Property Operating expenses were higher primarily as a result of (1) an increase in insurance of $0.2 million and (2) an increase in grounds and landscaping of $0.2 million, partially offset by (3) 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 and (4) a decrease of $0.1 million in real estate tax expense a result of a successful real estate tax appeal at a property.

Current wording

Property Operating expenses were lower primarily as a result of (1) a decrease of $0.3 million in real estate taxes, and (2) a decrease of $0.1 million in repairs and maintenance, partially offset by (3) an increase of $0.3 million in grounds and landscaping primarily due to an increase in snow removal.

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 and sold properties in 2024.

Current 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 and properties sold in 2024 and 2025.

Previous wording

Corporate general and administrative expenses were lower primarily as a result of (1) a decrease in legal fees of $0.2 million and (2) a decrease in salaries of $0.2 million.

Current wording

Corporate general and administrative expenses were relatively flat.

Previous wording

Interest expense increased 5.1%. Below is a comparison of the components which make up interest expense (in thousands):

Current wording

Interest expense increased 9.3%. Below is a comparison of the components which make up interest expense (in thousands):

Previous wording

The above increase in property debt interest inclusive of Cedar debt was $1.5 million a result of (1) an increase of $1.0 million due to an increase in the overall average interest rate and (2) an increase of $0.5 million in the average principal debt balance.

Current wording

The above increase in property debt interest inclusive of Cedar debt was $0.1 million a result of (1) an increase of $0.1 million due to an increase in the overall average interest rate, partially offset by (2) a decrease in the average principal debt balance.

Previous wording

Net changes in the fair value of derivative liabilitieswas a $39.3 million loss for the three months ended September 30, 2024, which represents a non-cash adjustment from a change in the fair value, primarily related to the conversion rate on the Convertible Notes which can only be adjusted downward based on the redemption price(s) of the Series D Preferred Stock relative to market trade prices of the Convertible Notes and Common Stock. 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 $2.3 million loss for the three months ended March 31, 2025, which represents a non-cash adjustment from a change in the fair value, primarily related to the conversion rate on the Convertible Notes, which can only be adjusted downward based on the redemption price(s) of the Series D Preferred Stock

Previous wording

Other expense represents expenses which are non-operating in nature. Other expenses were $0.3 million for the three months ended September 30, 2024, which primarily consisted of capital structure costs, including legal and other expenses incurred in connection with the 2024 Reverse Stock Splits, the registration of our Common Stock to issue in settlement of the Series D Preferred Stock redemptions and redemptions of the Series D Preferred Stock by holders thereof. Other expenses were $2.2 million for the three months ended September 30, 2023, which primarily consisted of capital structure costs including repurchase Convertible Notes and legal and other expenses incurred in connection with redemptions by holders of the Series D Preferred Stock and August 2023 Reverse Stock Split.

Current wording

Other expense represents expenses which are non-operating in nature. Other expenses were $0.4 million for the three months ended March 31, 2025,which primarily consisted of capital structure costs, including the registration of our Common Stock to issue in settlement of Series D Preferred Stock redemptions, expenses incurred in connection with the Reverse Stock Splits and redemptions of the Series D Preferred Stock by holders thereof. 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.

Previous wording

Same-property net operating income ("Same-Property NOI") is a widely-used non-GAAP financial measure for REITs. The Company believes that Same-Property NOI is a useful measure of the Company's property operating performance. The Company defines Same-Property NOI as property revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Because Same-Property NOI excludes general and administrative expenses, depreciation and amortization, interest expense, interest income, provision for income taxes, gain or loss on sale or capital expenditures and leasing costs and impairment charges, it provides a performance measure, that when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing perspective not immediately apparent from net income. The Company uses Same-Property NOI to evaluate its operating performance since Same-Property NOI allows the Company to evaluate the impact of factors, such as occupancy levels, lease structure, lease rates and tenant base, have on the Company's results, margins and returns. Properties are included in Same-Property NOI if they are owned and operated for the entirety of both periods being compared. Consistent with the capital treatment of such costs under GAAP, tenant improvements, leasing commissions and other direct leasing costs are excluded from Same-Property NOI.

Current wording

Same-property net operating income ("Same-Property NOI") is a widely-used non-GAAP financial measure for REITs. The Company believes that Same-Property NOI is a useful measure of the Company's property operating performance. The Company defines Same-Property NOI as property revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Because Same-Property NOI excludes general and administrative expenses, depreciation and amortization, gain or loss on sale or capital expenditures and leasing costs and impairment charges, it provides a performance measure, that when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact to operations from trends in occupancy rates, rental rates and operating costs, providing perspective not immediately apparent from operating income. The Company uses Same-Property NOI to evaluate its operating performance since Same-Property NOI allows the Company to evaluate the impact of factors, such as occupancy levels, lease structure, lease rates and tenant base, have on the Company's results, margins and returns. Properties are included in Same-Property NOI if they are owned and operated for the entirety of both periods being compared. Consistent with the capital treatment of such costs under GAAP, tenant improvements, leasing commissions and other direct leasing costs are excluded from Same-Property NOI.

Previous wording

Total Same-Property NOI was $14.9 million and $14.5 million for the three months ended September 30, 2024 and 2023, respectively, representing an increase of 3.1% due to a 1.1% increase in property revenue and a 2.4% decrease in property expenses.

Current wording

Total Same-Property NOI was $14.3 million and $14.6 million for the three months ended March 31, 2025 and 2024, respectively, representing a decrease of 2.2% due to a 6.9% increase in property expenses, partially offset by a 1.0% increase in property revenue.

Previous wording

A reconciliation of net loss to FFO available to common stockholders and AFFO is shown in the table below (in thousands):

Current wording

A reconciliation of net income (loss) to FFO available to common stockholders and AFFO is shown in the table below (in thousands):

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 were $0.0 million and $0.4 million for the three and nine months ended September 30, 2024, respectively, a result of loan defeasance payments. Other non-recurring expenses were $0.0 million and $2.0 million for the three and nine months ended September 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.

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 $0.5 million for the three months ended March 31, 2025, a result of loan prepayment premiums. There were no other non-recurring expenses for the three months ended March 31, 2024.

Previous wording

Interest rate increases could result in higher incremental borrowing costs for the Company and our tenants. The duration of the Company's indebtedness and our relatively low exposure to floating rate debt have mitigated the direct impact of inflation and interest rate increases. The degree and pace of these changes have had and may continue to have impacts on our business.

Current wording

Fluctuations in interest rates and recent governmental tariff-related measures could significantly impact our operating portfolio and overall financial performance. Interest rate increases could result in higher incremental borrowing costs for the Company and our tenants. The duration of the Company's indebtedness and our relatively low exposure to floating rate debt have mitigated the direct impact of inflation and interest rate increases. In a low or stable interest rate environment, we may benefit from lower borrowing costs, enabling strategic investments, acquisitions, or capital returns to shareholders. Additionally, we monitor market conditions to adjust our capital allocation accordingly, maintain a disciplined financial approach and seek to optimize returns while managing exposure to interest rate volatility. The degree and pace of inflation and interest rate changes have had and may continue to have impacts on our business. Changes in tariffs could lead to construction cost variances for the Company, additional tenant costs, which may affect rental rates, and shifts in tenant mix that may impact the Company's operating income.

Previous wording

At September 30, 2024, our consolidated cash, cash equivalents and restricted cash totaled $55.0 million compared to consolidated cash, cash equivalents and restricted cash of $48.9 million at September 30, 2023. Cash flows from operating activities, investing activities and financing activities were as follows (in thousands, unaudited):

Current wording

At March 31, 2025, our consolidated cash, cash equivalents and restricted cash totaled $47.0 million compared to consolidated cash, cash equivalents and restricted cash of $38.5 million at March 31, 2024. 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 $5.6 million. Net cash provided by operating activities, before net changes in operating assets and liabilities, was $20.8 million and $15.2 million for 2024 and 2023, respectively, primarily due to (1) a $4.7 million decrease in corporate administrative expenses and other expenses and (2) a $2.3 million increase in Same-Property NOI, partially offset by (3) $1.0 million of Cedar Series C Preferred Stock repurchases and (4) a $0.4 million increase in cash paid for interest.

Current wording

Net cash provided by operating activities, before net changes in operating assets and liabilities, was $4.8 million and $6.3 million for 2025 and 2024, respectively, primarily due to (1) a $0.9 million decrease in NOI related to properties not defined as same-property, (2) a $0.3 million decrease in Same-Property NOI and (3) a $0.1 increase in cash paid for interest expense, (4) a $0.5 increase in loan prepayment premium, partially offset by (5) a $0.3 decrease in other expense.

Previous wording

Our cash flows used in financing activities were $6.9 million for the nine months ended September 30, 2024, compared to cash flows used in financing activities of $2.4 million for the comparable period in 2023.

Current wording

Our cash flows used in financing activities were $34.4 million for the three months ended March 31, 2025, compared to cash flows used in financing activities of $2.4 million for the comparable period in 2024.

Previous wording

Financing activities during the nine months ended September 30, 2024 primarily consisted of:

Current wording

Financing activities during the three months ended March 31, 2025 primarily consisted of:

Previous wording

•$1.0 million repurchase of noncontrolling interests; and

Current wording

•$21.2 million repurchase of noncontrolling interests;

Previous wording

•$8.1 million for distributions paid on noncontrolling interests;

Current wording

•$2.1 million for distributions paid on noncontrolling interests;

Previous wording

•$1.0 million scheduled loan principal payments on debt;

Current wording

•$0.4 million scheduled loan principal payments on debt.

Previous wording

Financing activities during the nine months ended September 30, 2023 primarily consisted of:

Current wording

Financing activities during the three months ended March 31, 2024 primarily consisted of:

Previous wording

•$5.2 million draw on Cedar Revolving Credit Agreement; and

Current wording

•$1.4 million draw on Cedar Revolving Credit Agreement; and

Previous wording

•$2.5 million draw on Timpany Plaza Loan Agreement.

Current wording

•$1.0 million draw on Timpany Plaza loan.

Previous wording

•$8.1 million for distributions paid on noncontrolling interests;

Current wording

•$2.7 million for distributions paid on noncontrolling interests;

Previous wording

•$1.6 million payments for deferred financing costs;

Current wording

•$0.4 million payments for deferred financing costs; and

Previous wording

•$1.4 million scheduled loan principal payments on debt.

Current wording

•$0.4 million scheduled loan principal payments on debt.

Previous wording

The weighted average interest rate and term of our fixed-rate debt were 5.53% and 7.8 years, respectively, at September 30, 2024. The weighted average interest rate and term of our fixed-rate debt were 5.42% and 8.4 years, respectively, at September 30, 2023. We have $1.6 million of debt maturing during the twelve months ending September 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.

Current wording

The weighted average interest rate and term of our fixed-rate debt were 5.54% and 7.3 years, respectively, at March 31, 2025. The weighted average interest rate and term of our fixed-rate debt were 5.43% and 7.9 years, respectively, at March 31, 2024. As of March 31, 2025, the Company has $10.5 million of debt maturing during the twelve months ending March 31, 2026. On April 4, 2025, Cedar entered into the April 2025 Bridge Loan for $10.0 million with a maturity date of January 4, 2026. 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

Our expected material cash requirements for the twelve months ended September 30, 2025 and thereafter are comprised of (i) contractually obligated expenditures; (ii) other essential expenditures; (iii) other investments; and (iv) repurchases of noncontrolling interests (Cedar securities, including the Cedar Tender Offer).

Current wording

Our expected material cash requirements for the twelve months ended March 31, 2026 and thereafter are comprised of (i) contractually obligated expenditures; (ii) other essential expenditures; (iii) other investments; and (iv) repurchases of noncontrolling interests, including through the February 2025 Cedar Series B Offer.