Wheeler Real Estate Investment Trust(WHLR) - 2022 Q1 - Quarterly Report

Part I Financial Statements The company reported increased Q1 2022 revenue but a wider net loss, with total assets decreasing and equity turning negative Condensed Consolidated Balance Sheets Total assets decreased to $460.0 million, while total equity turned negative to -$3.0 million as of March 31, 2022 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $460,036 | $465,281 | | Investment properties, net | $384,327 | $386,730 | | Cash and cash equivalents | $21,109 | $22,898 | | Total Liabilities | $368,261 | $368,931 | | Loans payable, net | $331,143 | $333,283 | | Total Equity | ($3,016) | $3,802 | Condensed Consolidated Statements of Operations Q1 2022 total revenue increased to $15.5 million, but net loss widened to $4.6 million due to non-cash charges Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Account | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Total Revenue | $15,497 | $14,728 | | Rental revenues | $15,332 | $14,656 | | Operating Income | $4,692 | $4,722 | | Interest expense | $(4,628) | $(8,961) | | Net changes in fair value of derivative liabilities | $(3,962) | $(347) | | Net Loss | $(4,576) | $(4,034) | | Loss per share (Basic and Diluted) | $(0.70) | $(0.20) | Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $3.4 million, with overall cash, equivalents, and restricted cash declining by $3.6 million Cash Flow Summary (in thousands) | Activity | For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $3,374 | $4,739 | | Net cash (used in) provided by investing activities | $(1,269) | $2,975 | | Net cash used in financing activities | $(5,706) | $(6,273) | | (Decrease) Increase in Cash | $(3,601) | $1,441 | | Cash, cash equivalents, and restricted cash, end of period | $36,818 | $44,209 | Notes to Condensed Consolidated Financial Statements Notes detail company structure, accounting policies, real estate assets, debt, preferred stock, and ongoing litigation - As of March 31, 2022, the company owned and operated 57 centers and four undeveloped properties across 12 states[21] - An impairment expense of $660 thousand was recorded for the three months ended March 31, 2022, related to reducing the carrying value of the Harbor Pointe Land Parcel, which is held for sale[43] - As of March 31, 2022, the company has $28.28 million in cumulative dividends in arrears for its Series D Preferred Stock[75] - The company is involved in several legal proceedings, including a class action by preferred stockholders related to a rights offering and a lawsuit concerning the pending acquisition of Cedar Realty Trust[89][90][91] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Cedar Realty Trust acquisition, Q1 2022 operational results, and liquidity risks from Series D Preferred Stock Recent Trends and Activities Recent activities include the pending Cedar Realty Trust acquisition, a property sale, and positive leasing momentum - On March 2, 2022, the Company entered into an agreement to acquire Cedar Realty Trust, Inc. in an all-cash merger transaction, which is expected to increase the total operating portfolio to 76 shopping centers[104][113] Leasing Activity - Q1 2022 vs Q1 2021 | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Leases Renewed (sq ft) | 92,005 | 188,005 | | Weighted Avg. Rate Change on Renewals | 5.86% | 4.22% | | New Leases (sq ft) | 68,919 | 112,594 | | New Leases Weighted Avg. Rate (per sq ft) | $13.09 | $8.25 | Results of Operations Q1 2022 total revenue increased by 5.22% to $15.5 million, but net loss widened to $4.58 million due to non-cash charges Results of Operations Comparison (in thousands) | Line Item | Q1 2022 | Q1 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $15,497 | $14,728 | 5.22% | | Total Operating Expenses | $10,790 | $10,182 | 5.97% | | Operating Income | $4,692 | $4,722 | (0.64)% | | Interest Expense | $(4,628) | $(8,961) | 48.35% | | Net Loss Attributable to Wheeler REIT | $(4,580) | $(4,049) | (13.11)% | - The ending leased rate increased to 95.8% at the end of Q1 2022 from 91.1% at the end of Q1 2021[119] Funds from Operations (FFO) Q1 2022 FFO improved to a loss of $285 thousand, while AFFO significantly increased to $2.34 million FFO and AFFO Reconciliation (in thousands) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | FFO | $(285) | $(494) | | Adjustments: | | | | Net changes in fair value of derivative liabilities | 3,962 | 347 | | Loan cost amortization | 420 | 3,642 | | Other non-recurring and non-cash expense | 701 | 145 | | AFFO | $2,340 | $1,155 | Liquidity and Capital Resources The company faces significant liquidity challenges, including debt maturities and a critical Series D Preferred Stock redemption - As of March 31, 2022, the company had $21.11 million in cash and cash equivalents and $15.71 million in restricted cash[154] - The company has $16.20 million of debt maturing, including scheduled principal repayments, during the twelve months ending March 31, 2023[147] - A significant financial risk exists with the Series D Preferred Stock, which holders can redeem starting September 21, 2023. As of March 31, 2022, the aggregate liquidation preference and accrued dividends totaled approximately $107.1 million. The company believes it is unlikely to have sufficient cash for this redemption[155][157] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as per the company's filing status - The company has not provided quantitative and qualitative disclosures about market risk, stating it is not applicable[167] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no reported changes - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[168] - There were no changes in the company's internal control over financial reporting during the period covered by this report[169] Part II Legal Proceedings The company refers to Note 10 for details on legal proceedings, including preferred stock and acquisition-related disputes - For details on legal proceedings, the report directs readers to Note 10, Commitments and Contingencies, in the financial statements[171] Risk Factors As a smaller reporting company, the company is not required to provide risk factor disclosures in this filing - The company is a smaller reporting company and is not required to provide risk factor disclosures in this filing[172] Defaults Upon Senior Securities The company reports a default on senior securities due to $28.28 million in undeclared Series D Preferred Stock dividends - As of May 11, 2022, the company had accumulated undeclared dividends of $28.28 million for its Series D Preferred Stock[173] Exhibits This section lists filed exhibits, including the Cedar Realty Trust merger agreement and officer certifications - Filed exhibits include the Agreement and Plan of Merger with Cedar Realty Trust, Inc. and related amendments[177] - Certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are included as exhibits[177]