Wheeler Real Estate Investment Trust, Inc. - Quarter Report: 2023 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35713

WHEELER REAL ESTATE INVESTMENT TRUST, INC.

(Exact Name of Registrant as Specified in Its Charter)


Maryland						45-2681082
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

2529 Virginia Beach Blvd, Virginia Beach, Virginia						23452
(Address of Principal Executive Offices)						(Zip Code)

(757) 627-9088

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

WHLR

Nasdaq Capital Market

Series B Convertible Preferred Stock

WHLRP

Nasdaq Capital Market

Series D Cumulative Convertible Preferred Stock

WHLRD

Nasdaq Capital Market

7.00% Subordinated Convertible Notes due 2031

WHLRL

Nasdaq Capital Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☒

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of August 4, 2023, there were 9,809,195 common shares, $0.01 par value per share, outstanding.

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries


		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of June 30 , 2023 (unaudited) and December 31, 2022	4
	Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30 , 2023 and 2022	5
	Condensed Consolidated Statements of (Deficit) Equity (unaudited) for the six months ended June 3 0 , 2023 and 2022	6
	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30 , 2023 and 2022	9
	Notes to Condensed Consolidated Financial Statements (unaudited)	10

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	38
	Signatures	39

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except par value and share data)


	June 30, 2023		December 31, 2022
	(unaudited)
ASSETS:
Real estate:
Land and land improvements	$	145,368	$	144,537
Buildings and improvements	499,740		494,668
	645,108		639,205
Less accumulated depreciation	(86,685)		(78,225)
Real estate, net	558,423		560,980

Cash and cash equivalents	28,735		28,491
Restricted cash	22,410		27,374
Receivables, net	11,048		13,544
Assets held for sale	878		—
Investment securities - related party	3,031		—
Above market lease intangibles, net	2,573		3,134
Operating lease right-of-use assets	14,978		15,133
Deferred costs and other assets, net	31,286		35,880
Total Assets	$	673,362	$	684,536

LIABILITIES:
Loans payable, net	$	469,288	$	466,029
Liabilities associated with assets held for sale	297		—
Below market lease intangibles, net	20,479		23,968
Derivative liabilities	2,229		7,111
Operating lease liabilities	16,380		16,478
Accounts payable, accrued expenses and other liabilities	17,209		18,398
Total Liabilities	525,882		531,984

Series D Cumulative Convertible Preferred Stock (no par value, 6,000,000 shares authorized, 3,308,603 and 3,152,392 shares issued and outstanding, respectively; $121.5 million and $113.4 million aggregate liquidation value, respectively)	107,866		101,518

EQUITY:
Series A Preferred Stock (no par value, 4,500 shares authorized, 562 shares issued and outstanding; $0.6 million in aggregate liquidation value)	453		453
Series B Convertible Preferred Stock (no par value, 5,000,000 authorized, 3,379,142 shares issued and outstanding; $84.5 million aggregate liquidation preference)	44,955		44,911
Common Stock ($0.01 par value, 200,000,000 shares authorized, 9,800,211 and 9,793,957 shares issued and outstanding, respectively)	98		98
Additional paid-in capital	235,120		234,993
Accumulated deficit	(307,213)		(295,617)
Total Stockholders’ Deficit	(26,587)		(15,162)
Noncontrolling interests	66,201		66,196
Total Equity	39,614		51,034
Total Liabilities and Equity	$	673,362	$	684,536

See accompanying notes to condensed consolidated financial statements.

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
REVENUE:
Rental revenues	$	24,583	$	15,324	$	50,083	$	30,656
Other revenues	257		155		823		320
Total Revenue	24,840		15,479		50,906		30,976
OPERATING EXPENSES:
Property operations	8,342		4,732		17,297		9,982
Depreciation and amortization	7,301		3,625		14,767		7,241
Impairment of assets held for sale	—		100		—		760
Corporate general & administrative	2,818		1,673		5,889		2,937
Total Operating Expenses	18,461		10,130		37,953		20,920
Loss on disposal of properties	—		—		—		(15)
Operating Income	6,379		5,349		12,953		10,041
Interest income	126		14		173		27
Gain on investment securities, net	31		—		31		—
Interest expense	(10,179)		(7,501)		(16,656)		(12,129)
Net changes in fair value of derivative liabilities	3,030		2,085		4,882		(1,877)
Other expense	(635)		—		(3,040)		(691)
Net Loss Before Income Taxes	(1,248)		(53)		(1,657)		(4,629)
Income tax expense	(46)		—		(46)		—
Net Loss	(1,294)		(53)		(1,703)		(4,629)
Less: Net income (loss) attributable to noncontrolling interests	2,676		(1)		5,368		3
Net Loss Attributable to Wheeler REIT	(3,970)		(52)		(7,071)		(4,632)
Preferred Stock dividends - undeclared	(2,261)		(2,264)		(4,525)		(4,528)

Net Loss Attributable to Wheeler REIT Common Stockholders	$	(6,231)	$	(2,316)	$	(11,596)	$	(9,160)

Loss per share:
Basic and Diluted	$	(0.64)	$	(0.24)	$	(1.18)	$	(0.94)
Weighted average number of shares:
Basic and Diluted	9,800,211		9,734,755		9,797,136		9,727,711

See accompanying notes to condensed consolidated financial statements.

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of (Deficit) Equity

(Unaudited, in thousands, except share data)


	Series A			Series B										Total Stockholders’ (Deficit) Equity
	Preferred Stock			Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit
	Shares	Value		Shares	Value		Shares	Value
Balance, December 31, 2022	562	$	453	3,379,142	$	44,911	9,793,957	$	98	$	234,993	$	(295,617)	$	(15,162)
Accretion of Series B Preferred Stock discount	—	—		—	22		—	—		—		—		22
Conversion of Series D Preferred Stock to Common Stock	—	—		—	—		6,254	—		140		—		140
Adjusted for noncontrolling interest in operating partnership	—	—		—	—		—	—		(13)		—		(13)
Dividends and distributions	—	—		—	—		—	—		—		(2,264)		(2,264)
Net (Loss) Income	—	—		—	—		—	—		—		(3,101)		(3,101)
Balance, March 31, 2023 (Unaudited)	562	453		3,379,142	44,933		9,800,211	98		235,120		(300,982)		(20,378)
Accretion of Series B Preferred Stock discount	—	—		—	22		—	—		—		—		22


Dividends and distributions	—	—		—	—		—	—		—		(2,261)		(2,261)
Net (Loss) Income	—	—		—	—		—	—		—		(3,970)		(3,970)

Balance, June 30, 2023 (Unaudited)	562	$	453	3,379,142	$	44,955	9,800,211	$	98	$	235,120	$	(307,213)	$	(26,587)

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries Condensed Consolidated Statements of (Deficit) Equity (Unaudited, in thousands, except share data) Continued



	Noncontrolling Interests
	Operating Partnership		Consolidated Subsidiary		Total		Total Equity
Balance, December 31, 2022	$	1,351	$	64,845	$	66,196	$	51,034
Accretion of Series B Preferred Stock discount	—		—		—		22
Conversion of Series D Preferred Stock to Common Stock	—		—		—		140
Adjusted for noncontrolling interest in operating partnership	13		—		13		—
Dividends and distributions	—		(2,688)		(2,688)		(4,952)
Net (Loss) Income	4		2,688		2,692		(409)
Balance, March 31, 2023 (Unaudited)	1,368		64,845		66,213		45,835
Accretion of Series B Preferred Stock discount	—		—		—		22


Dividends and distributions	—		(2,688)		(2,688)		(4,949)
Net (Loss) Income	(12)		2,688		2,676		(1,294)

Balance, June 30, 2023 (Unaudited)	$	1,356	$	64,845	$	66,201	$	39,614

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of (Deficit) Equity

(Unaudited, in thousands, except share data)

Continued


	Series A			Series B										Total Stockholders’ (Deficit) Equity		Noncontrolling
	Preferred Stock			Preferred Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit				Interests
	Shares	Value		Shares	Value		Shares	Value								Operating Partnership		Total (Deficit) Equity
Balance, December 31, 2021	562	$	453	1,872,448	$	41,189	9,720,532	$	97	$	234,229	$	(274,107)	$	1,861	$	1,941	$	3,802
Accretion of Series B Preferred Stock discount	—	—		—	22		—	—		—		—		22		—		22
Conversion of Series B Preferred Stock to Common Stock	—	—		(4,105)	(90)		2,561	—		90		—		—		—		—
Dividends and distributions	—	—		—	—		—	—		—		(2,264)		(2,264)		—		(2,264)
Net (Loss) Income	—	—		—	—		—	—		—		(4,580)		(4,580)		4		(4,576)
Balance, March 31, 2022 (Unaudited)	562	453		1,868,343	41,121		9,723,093	97		234,319		(280,951)		(4,961)		1,945		(3,016)
Accretion of Series B Preferred Stock discount	—	—		—	22		—	—		—		—		22		—		22
Conversion of Operating Partnership units to Common Stock	—	—		—	—		69,620	1		158		—		159		(159)		—
Adjustments for noncontrolling interest in operating partnership	—	—		—	—		—	—		470		—		470		(470)		—
Paid-in-kind interest, issuance of Series B Preferred Stock	—	—		432,994	2,099		—	—		—		—		2,099		—		2,099
Dividends and distributions	—	—		—	—		—	—		—		(2,264)		(2,264)		—		(2,264)
Net Loss	—	—		—	—		—	—		—		(52)		(52)		(1)		(53)
Balance, June 30, 2022 (Unaudited)	562	$	453	2,301,337	$	43,242	9,792,713	$	98	$	234,947	$	(283,267)	$	(4,527)	$	1,315	$	(3,212)

See accompanying notes to condensed consolidated financial statements.

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)


	For the Six Months Ended June 30,
	2023		2022
OPERATING ACTIVITIES:
Net Loss	$	(1,703)	$	(4,629)
Adjustments to reconcile consolidated net loss to net cash provided by operating activities:
Depreciation and amortization	14,767		7,241
Deferred financing cost amortization	1,721		1,348
Changes in fair value of derivative liabilities	(4,882)		1,877
Above (below) market lease amortization, net	(2,633)		16
Paid-in-kind interest	2,006		2,099
Loss on repurchase of debt securities	594		—
Unrealized gain on investment securities, net	(31)		—
Straight-line expense	15		16
Loss on disposal of properties	—		15
Credit losses on operating lease receivables	182		190
Impairment of assets held for sale	—		760
Net changes in assets and liabilities:
Receivables, net	2,315		598
Deferred costs and other assets, net	(1,358)		(2,543)
Accounts payable, accrued expenses and other liabilities	514		2,963
Net cash provided by operating activities	11,507		9,951
INVESTING ACTIVITIES:
Investment property acquisitions	(191)		(1,538)
Expenditures for real estate improvements	(6,845)		(3,495)
Purchase of marketable securities	(3,000)		—
Cash received from disposal of properties	—		1,786
Net cash used in investing activities	(10,036)		(3,247)
FINANCING ACTIVITIES:
Payments for deferred financing costs	(4,116)		(3,729)
Dividends and distributions paid on noncontrolling interests	(5,376)		—
Loan proceeds	114,170		75,000
Loan principal payments	(107,922)		(70,384)

Repurchase of debt securities	(1,189)		—
Loan prepayment penalty	(1,758)		(1,458)
Net cash used in financing activities	(6,191)		(571)
(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(4,720)		6,133
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period	55,865		40,419
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period	$	51,145	$	46,552

Supplemental Disclosure:
The following table provides a reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	28,735	$	24,606
Restricted cash	22,410		21,946
Cash, cash equivalents, and restricted cash	$	51,145	$	46,552

See accompanying notes to condensed consolidated financial statements.

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

1. Business and Organization

Wheeler Real Estate Investment Trust, Inc. (the "Trust," the "REIT," the "Company," "we," "our" or "us") is a Maryland corporation formed on June 23, 2011. The Trust serves as the general partner of Wheeler REIT, L.P. (the “Operating Partnership”), which was formed as a Virginia limited partnership on April 5, 2012. At June 30, 2023, the Trust owned 99.05% of the Operating Partnership. As of June 30, 2023, the Trust, 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. These centers and undeveloped properties include the properties acquired through the Cedar Acquisition (described below). Accordingly, the use of the word “Company” refers to the Trust and its consolidated subsidiaries, except where the context otherwise requires.

The Trust through the Operating Partnership owns Wheeler Interests ("WI") and Wheeler Real Estate, LLC ("WRE") (collectively the "Operating Companies"). The Operating Companies are Taxable REIT Subsidiaries ("TRS") to accommodate serving the Non-REIT Properties since applicable REIT regulations consider the income derived from these services to be “bad” income subject to taxation. The regulations allow for costs incurred by the Company commensurate with the services performed for the Non-REIT Properties to be allocated to a TRS.

Acquisition of Cedar Realty Trust

On August 22, 2022, the Company completed a merger transaction (the "Cedar Acquisition") with Cedar Realty Trust, Inc. ("Cedar"). As a result of the merger, the Company acquired all of the outstanding shares of Cedar’s common stock, which ceased to be publicly traded on the New York Stock Exchange ("NYSE"). Through this acquisition, the Company acquired an additional 19 retail shopping centers in the Northeast. Cedar’s outstanding 7.25% Series B Preferred Stock and 6.50% Series C Preferred Stock remain outstanding and continue to trade on the NYSE. As a result of the Cedar Acquisition, Cedar became a subsidiary of the REIT.

2. Summary of Significant Accounting Policies

Principles of Consolidation/Basis of Preparation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and include all of the information and disclosures required by U.S. Generally Accepted Accounting Principles ("GAAP") for interim reporting. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statement disclosures. In the opinion of management, all adjustments necessary for fair presentation (including normal recurring accruals) have been included. All material balances and transactions between the consolidated entities of the Company have been eliminated. The financial statements are prepared on the accrual basis in accordance with GAAP, which requires management to make estimates and assumptions that affect the disclosure of contingent assets and liabilities, the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the periods covered by the financial statements. Actual results could differ from these estimates. The unaudited condensed consolidated financial statements in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the "2022 Form 10-K").

The unaudited condensed consolidated financial statements included in this Form 10-Q include Cedar starting from the date of acquisition. We have determined that this acquisition is not a variable interest entity, as defined under the consolidation topic of the Financial Accounting Standards Board (the "FASB"), Accounting Standards Codification, or ASC, and we evaluated such entity under the voting model and concluded we should consolidate the entity. Under the voting model, we consolidate the entity if we determine that we, directly or indirectly, have greater than 50% of the voting rights and that other equity holders do not have substantive participating rights.

See the Company's audited 2022 Form 10-K for the year ended December 31, 2022 for further disclosure regarding the Cedar Acquisition.

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

2. Summary of Significant Accounting Policies (continued)

Supplemental Condensed Consolidated Statements of Cash Flows Information


	For the Six Months Ended June 30,
	2023		2022
Non-Cash Transactions:


Conversion of common units to common stock	$	—	$	159
Conversion of Series B Preferred Stock to common stock	$	—	$	90
Conversion of Series D Preferred Stock to common stock	$	140	$	—
Accretion of Preferred Stock discounts	$	292	$	292

Buildings and improvements included in accounts payable, accrued expenses and other liabilities	$	101	$	56
Other Cash Transactions:

Cash paid for amounts included in the measurement of operating lease liabilities	$	556	$	452
Cash paid for interest	$	12,700	$	8,937

Other Expense

Other expense represents expenses which are non-operating in nature. Other expenses were $0.6 million and $3.0 million for the three and six months ended June 30, 2023, respectively, which consisted of $0.6 million for the repurchase 23,784 units of the Company's Convertible Notes, described in Note 7 in this Form 10-Q and $2.4 million for an exchange offer for the Company's outstanding shares of Series D Preferred (the "Exchange Offer"). Other expenses were $0.0 million and $0.7 million for the three and six months ended June 30, 2022, respectively, which consisted of legal settlement costs.

Recently Issued and Adopted Accounting Pronouncements

Accounting standards that have been recently issued or proposed by the FASB or other standard-setting bodies are not currently applicable to the Company or are not expected to have a significant impact on the Company’s financial position, results of operations and cash flows.

Reclassifications

The Company has reclassified certain prior period amounts in the accompanying condensed consolidated financial statements in order to be consistent with the current period presentation. These reclassifications had no effect on net loss, total assets, total liabilities or equity.

3. Real Estate

A significant portion of the Company’s land, buildings and improvements serve as collateral for its mortgage loans. Accordingly, restrictions exist as to the encumbered property’s transferability, use and other common rights typically associated with property ownership.

Land Acquisition

On February 21, 2023 the Company purchased a 2.5 acre land parcel adjacent to St. George Plaza, located in St.

George, South Carolina, for $0.2 million.

Assets Held for Sale, Impairment and Dispositions

At June 30, 2023, assets held for sale included an outparcel building adjacent to Carll's Corner, in Bridgeton, New Jersey, as the Company has committed to a plan to sell the outparcel. Assets held for sale on the condensed consolidated

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

3. Real Estate (continued)

balance sheets are primarily real estate, net and deferred costs and other assets, net. Liabilities held for sale on the condensed consolidated balance sheets are primarily below market lease intangibles, net.

Impairment expenses on assets held for sale are a result of reducing the carrying value for the amount that exceeded the property's fair value less estimated selling costs. The valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 2 inputs. No impairment expense was recorded for the three and six months ended June 30, 2023. Impairment expense was $0.1 million and $0.8 million for the three and six months ended June 30, 2022, respectively, resulting from reducing the carrying value of Harbor Pointe Associates, LLC, an approximate 5 acre land parcel ("Harbor Pointe Land Parcel"). The Harbor Pointe Land Parcel did not meet the requirements to be classified as held for sale at June 30, 2023 or December 31, 2022.

There were no property sales during the six months ended June 30, 2023. The following property was sold during the six months ended June 30, 2022 (in thousands, unaudited):


Disposal Date	Property	Contract Price		Gain (Loss)		Net Proceeds

January 11, 2022	Walnut Hill Plaza	$	1,986	$	(15)	$	1,786

4. Investment Securities - Related Party

On June 1, 2023 the Company subscribed for limited partnership interest in Stilwell Activist Investments, L.P. ("SAI"), a Delaware limited partnership in exchange for a $3.0 million capital contribution. The investment objective of SAI is to seek long-term capital appreciation through investing primarily in publicly-traded undervalued financial institutions, or businesses with a strong financial component, or the securities of any of them, and pursuing an activist shareholder agenda with respect to those institutions.

Stilwell Value, LLC ("Value") is the general partner of SAI. Joseph Stilwell, a member of the Company's Board of Directors, is the managing member of Value and a limited partner in funds advised by Value. Additionally, E.J. Borrack, a member of the Company’s Board of Directors, serves as the General Counsel to Value and its affiliated entities, including SAI and related funds, and is a limited partner in one of the funds advised by Value. Megan Parisi, a member of the Company’s Board of Directors, serves as the Director of Communications to Value and its affiliated entities, including SAI and related funds, is a non-managing member of Value and is a limited partner in one of the funds advised by Value.

The Company’s subscription for SAI’s limited partnership interest was approved by the disinterested directors

of the Company.

A portion of SAI's underlying investments are in the Company's own equity and debt securities.

SAI records investment transactions based on trade date. Realized gains and losses from investment transactions are determined on a specific identification basis. Dividend income, net of withholding taxes, and dividend expense are recognized on the ex-dividend date, and interest income and expense are recognized on an accrual basis. Discounts and premiums to the face amount of debt securities are accreted and amortized using the effective interest rate method over the lives of the respective debt securities.

The Company may not withdraw its capital from SAI for a period of one year measured from the date of the Company's initial contribution, subject to certain exceptions.

In consideration for management, administrative and operational services, limited partners of SAI pay a management fee to an affiliate of Value each calendar quarter, in advance, equal to 0.25% (an annualized rate of 1%) of each limited partner’s capital account balance on the first day of such calendar quarter. In addition, as of the last day of each specified performance period, an incentive allocation of 20% of the amount by which the “positive performance change”, if any, that has been credited to the capital account of a limited partner during such period exceeds any positive balance in such limited partner’s “carryforward account”, is debited from the limited partner’s capital account and is simultaneously credited to the capital account of Value.

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Wheeler Real Estate Investment Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

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" on the condensed consolidated statements of operations. As of June 30, 2023, the fair value of the Company’s SAI investment was $3.0 million which includes the $3.0 million subscription, $10 thousand in fees and $41 thousand in unrealized gains.

5. Deferred Costs and Other Assets, Net

Deferred costs and other assets, net of accumulated amortization are as follows (in thousands, unaudited):


	June 30, 2023		December 31, 2022
Leases in place, net	$	20,296	$	24,956
Lease origination costs, net	6,670		7,165
Ground lease sandwich interest, net	1,256		1,393
Tenant relationships, net	379		500
Legal and marketing costs, net	344		389
Prepaid expenses	2,341		1,456
Other	—		21
Total deferred costs and other assets, net	$	31,286	$	35,880

As of June 30, 2023 and December 31, 2022, the Company’s intangible accumulated amortization totaled $66.3 million and $62.4 million, respectively.

6. Rental Revenue and Tenant Receivables

Tenant Receivables

As of June 30, 2023 and December 31, 2022, the Company’s allowance for uncollectible tenant receivables totaled $1.6 million and $3.1 million, respectively.

Lease Contract Revenue

At June 30, 2023 and December 31, 2022, there were $7.2 million and $6.5 million, respectively, in unbilled straight-line rent, which is included in "rents and other tenant receivables, net."

The below table disaggregates the Company’s revenue by type of service (in thousands, unaudited):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Base rent	$	18,117	$	11,907	$	36,126	$	23,816
Tenant reimbursements - variable lease revenue	4,861		3,275		10,437		6,580
Above (below) market lease amortization	1,237		7		2,633		(16)
Straight-line rents	373		156		719		233
Percentage rent - variable lease revenue	152		116		350		233
Lease termination fees	—		32		115		107
Other	257		123		708		213
Total	24,997		15,616		51,088		31,166
Credit losses on operating lease receivables	(157)		(137)		(182)		(190)
Total	$	24,840	$	15,479	$	50,906	$	30,976

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(Unaudited)

7. Loans Payable

The Company’s loans payable consist of the following (in thousands, except monthly payment):


Property/Description	Monthly Payment		Interest Rate	Maturity	June 30, 2023		December 31, 2022
Cypress Shopping Center	$	34,360	4.70%	July 2024	$	5,837	$	5,903
Conyers Crossing	Interest only		4.67%	October 2025	5,960		5,960
Winslow Plaza	$	24,295	4.82%	December 2025	4,370		4,409
Tuckernuck	$	32,202	5.00%	March 2026	4,844		4,915
Chesapeake Square	$	23,857	4.70%	August 2026	4,060		4,106
Sangaree/Tri-County	$	32,329	4.78%	December 2026	6,038		6,086
Village of Martinsville	$	89,664	4.28%	July 2029	14,970		15,181
Laburnum Square	Interest only		4.28%	September 2029	7,665		7,665
Rivergate (1)	$	100,222	4.25%	September 2031	17,782		18,003
Convertible Notes	Interest only		7.00%	December 2031	32,405		33,000
Guggenheim Loan Agreement (2)	Interest only		4.25%	July 2032	75,000		75,000
JANAF Loan Agreement (3)	Interest only		5.31%	July 2032	60,000		60,000
Guggenheim-Cedar Loan Agreement (4)	Interest only		5.25%	November 2032	110,000		110,000
Patuxent Crossing/Coliseum Marketplace Loan Agreement	Interest only		6.35%	January 2033	25,000		25,000
Term loan, 12 properties	Interest only		6.19%	June 2033	61,100		—
Term loan, 8 properties	Interest only		6.24%	June 2033	53,070		—
Term loans - fixed interest rate	various		4.47% (5)	various	—		107,219




Total Principal Balance					488,101		482,447
Unamortized deferred financing cost					(18,813)		(16,418)
Total Loans Payable, net					$	469,288	$	466,029

(1) October 2026 the interest rate changes to variable interest rate equal to the 5 years U.S. Treasury Rate plus 2.70%, with a floor of 4.25%.

(2) Collateralized by 22 properties.

(3) Collateralized by JANAF properties.

(4) Collateralized by 10 Cedar Properties.

(5) Contractual interest rate weighted average.

Debt Maturity

The Company’s scheduled principal repayments on indebtedness as of June 30, 2023 are as follows (in thousands, unaudited):


For the remaining six months ended December 31, 2023	$	713
December 31, 2024	7,146
December 31, 2025	12,007
December 31, 2026	15,931
December 31, 2027	2,695
December 31, 2028	4,928
Thereafter	444,681
Total principal repayments and debt maturities	$	488,101

Term Loan Agreement, 12 properties

On May 5, 2023, the Company entered into a loan agreement (the "Term Loan Agreement, 12 properties") for $61.1 million at a fixed rate of 6.194% and interest-only payments due monthly through June 2025. Commencing in July 2025, until the maturity date of June 1, 2033, monthly principal and interest payments will be $0.4 million. Loan proceeds were used to refinance 12 properties, including $1.1 million in defeasance.

Term Loan Agreement, 8 properties

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(Unaudited)

7. Loans Payable (continued)

2028, until the maturity date of June 10, 2033, monthly principal and interest payments will be $0.3 million. Loan proceeds were used to refinance 8 properties, including $0.7 million in defeasance.

Convertible Notes

Interest payments on the Convertible Notes were made as follows (in thousands, except for shares ):


For the six months ended June 30,	Series B Preferred number of shares	Series D Preferred number of shares	Convertible Note interest at 7% coupon		Fair value adjustment		Paid-in-kind interest expense
2023	—	160,455	$	1,155	$	851	$	2,006
2022	432,994	—	$	1,155	$	944	$	2,099

On June 8, 2023, the Company paid down $0.6 million of the Convertible Notes through an open market purchase of 23,784 units totaling $1.2 million resulting in a $0.6 million loss which represents the fair value of the purchase over principal pay down. The loss is included in "other expense" on the condensed consolidated statements of operations.

Fair Value Measurements

The fair value of the Company’s fixed rate secured term loans was estimated using available market information and discounted cash flow analyses based on borrowing rates the Company believes it could obtain with a similar term and maturities. As of June 30, 2023 and December 31, 2022, the fair value of the Company’s fixed rate secured term loans, which were determined to be Level 3 within the valuation hierarchy, was $439.6 million and $429.1 million, respectively, and the carrying value of such loans, was $455.7 million and $449.4 million, respectively.

The fair value of the Convertible Notes was estimated using available market information. As of June 30, 2023 and December 31, 2022, the fair value of the Convertible Notes, which were determined to be Level 1 within the valuation hierarchy, was $59.9 million and $40.9 million, respectively, and the carrying value, was $32.4 million and $33.0 million, respectively.

8. Derivative Liabilities

Fair Value of Warrants

The Company utilized the Monte Carlo simulation model to calculate the fair value of the two warrant agreements (the "Warrant Agreements") described within the 2022 Form 10-K. Significant observable and unobservable inputs include stock price, conversion price, risk-free rate, term, likelihood of an event of contractual conversion and expected volatility. The Monte Carlo simulation is a Level 3 valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators. The Warrant Agreements contain terms and features that give rise to derivative liability classification.

Warrants to purchase shares of common stock outstanding at June 30, 2023 and December 31, 2022 are as follows:


Warrant Name	Warrants	Exercise Price	Expiration Date
Powerscort Warrant	496,415	$3.120	12/22/2023
Wilmington Warrant Tranche A	510,204	$3.430	3/12/2026
Wilmington Warrant Tranche B	424,242	$4.125	3/12/2026
Wilmington Warrant Tranche C	127,273	$6.875	3/12/2026

In measuring the warrant liabilities, the Company used the following inputs in its Monte Carlo model:

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Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

8. Derivative Liabilities (continued)


	June 30, 2023	December 31, 2022
Common Stock price	$0.62	$1.40
Weighted average contractual term to maturity	2.0 years	2.5 years
Range of expected market volatility %	84.32% - 119.28%	66.00% - 72.88%
Range of risk free interest rate	4.53% - 5.47%	4.14% - 4.68%

Fair Value of Conversion Features Related to Convertible Notes

The Company identified certain embedded derivatives related to the conversion features of the Convertible Notes. In accordance with ASC 815-40, Derivatives and Hedging Activities, the embedded conversion options contained within the Convertible Notes were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair value through each reporting date. The Company utilized a binomial lattice model to calculate the fair value of the embedded derivatives. Significant observable and unobservable inputs include conversion price, stock price, dividend rate, expected volatility, risk-free rate, optional conversion price and term. The binomial lattice model is a Level 3 valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators.

In measuring the embedded derivative liability, the Company used the following inputs in its binomial lattice model:


	June 30, 2023	December 31, 2022
Conversion price	$6.25	$6.25
Common Stock price	$0.62	$1.40
Contractual term to maturity	8.5 years	9.0 years
Expected market volatility %	75.00%	205.00%
Risk-free interest rate	3.90%	3.87%
Traded WHLRL price, % of par	184.76%	120.50%

The following table sets forth a summary of the changes in fair value of the Company's derivative liabilities, which include both the warrant liabilities and embedded derivative liability (in thousands, unaudited):


	Six Months Ended June 30, 2023		Year Ended December 31, 2022
Balance at the beginning of period	$	7,111	$	4,776
Changes in fair value - Warrants	(400)		(753)
Changes in fair value - Convertible Notes	(4,482)		3,088
Balance at end of period	$	2,229	$	7,111

9. Equity and Mezzanine Equity

Series D Preferred Stock - Redeemable Preferred Stock

The changes in the carrying value of the Series D Preferred for the six months ended June 30, 2023 and 2022 are as follows (in thousands, unaudited):

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(Unaudited)

9. Equity and Mezzanine Equity (continued)


	Series D Preferred
Balance December 31, 2022	$	101,518
Accretion of Preferred Stock discount	125
Conversion of Series D Preferred Stock to Common Stock	(140)
Undeclared dividends	2,118
Balance March 31, 2023	103,621
Accretion of Preferred Stock discount	124
Undeclared dividends	2,115
Paid-in-kind interest, issuance of Preferred Stock	2,006
Balance June 30, 2023	$	107,866


	Series D Preferred
Balance December 31, 2021	$	92,548
Accretion of Preferred Stock discount	125
Undeclared dividends	2,118
Balance March 31, 2022	94,791
Accretion of Preferred Stock discount	124
Undeclared dividends	2,118
Balance June 30, 2022	$	97,033

Earnings per share

Basic earnings per share for the Company’s common stockholders is calculated by dividing income (loss) from continuing operations, excluding amounts attributable to preferred stockholders and the net income (loss) attributable to noncontrolling interests, by the Company’s weighted average shares of Common Stock outstanding during the period. Diluted earnings per share is computed by dividing the net income (loss) attributable to common stockholders, excluding amounts attributable to preferred stockholders and the net income (loss) attributable to noncontrolling interests, by the weighted average number of common shares including any dilutive shares.

The following table summarizes the potential dilution of conversion of common units, Series B Preferred, Series D Preferred, warrants and Convertible Notes into the Company's Common Stock. These have been excluded from the Company’s diluted earnings per share calculation because their inclusion would be antidilutive.


	June 30, 2023
	Outstanding shares	Potential Dilutive Shares
Common units	144,942	144,942
Series B Preferred Stock	3,379,142	2,111,964
Series D Preferred Stock	3,308,603	7,165,764
Warrants to purchase Common Stock	—	1,558,134
Convertible Notes	—	97,886,504

Dividends

The following table summarizes the Series D Preferred dividends (in thousands except for per share amounts, unaudited):

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Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

9. Equity and Mezzanine Equity (continued)


	Series D Preferred
Arrears Date	Arrears		Per Share
For the six months ended June 30, 2023	$	4,233	$	1.28


For the six months ended June 30, 2022	$	4,236	$	1.34

The total cumulative dividends in arrears for Series D Preferred is $38.8 million as of June 30, 2023 (per share $11.73). There were no dividends declared to holders of Common Stock, Series A Preferred, Series B Preferred or Series D Preferred during the six months ended June 30, 2023 and 2022.

10. Commitments and Contingencies

Lease Commitments

The Company has ground leases and leases its corporate headquarters; both are accounted for as operating leases. Most leases include one or more options to renew, with renewal terms that can extend the lease term from 5 to 50 years. As of June 30, 2023 and 2022, the weighted average remaining lease term of our leases was 34 and 30 years, respectively. Rent expense under the operating lease agreements were $0.3 million and $0.3 million for the three months ended June 30, 2023 and 2022, respectively. Rent expense under the operating lease agreements were $0.6 million and $0.5 million for the six months ended June 30, 2023 and 2022, respectively.

Litigation

The Company is involved in various legal proceedings arising in the ordinary course of its business, including, but not limited to commercial disputes. The Company believes that such litigation, claims and administrative proceedings will not have a material adverse impact on its financial position or its results of operations. The Company records a liability when it considers the loss probable and the amount can be reasonably estimated. In addition, the below legal proceedings are in process:

In Re: Cedar Realty Trust, Inc. Preferred Shareholder Litigation, Case No.: 1:22-cv-1103, in the United States District Court for the District of Maryland. On April 8, 2022, several purported holders of outstanding Cedar preferred stock filed a putative class action complaint against Cedar, Cedar's Board of Directors prior to the Cedar Acquisition and the Company in Montgomery County Circuit Court, Maryland entitled Sydney, et al. v. Cedar Realty Trust, Inc., et al., (Case No. C-15-CV-22-001527). On May 6, 2022, the Plaintiffs in Sydney filed a motion for a preliminary injunction. Also on May, 6, 2022, a purported holder of Cedar’s outstanding preferred stock filed a separate putative class action complaint against Cedar and Cedar's Board of Directors prior to the Cedar Acquisition in the United States District Court for the District of Maryland, entitled Kim v. Cedar Realty Trust, Inc., et al., Civil Action No. 22-cv-01103. On May 11, 2022, Cedar, former Board of Directors of Cedar and the Company removed the Sydney action to the United States District Court for the District of Maryland, Case No. 8:22-cv-01142-GLR. On May 16, 2022, the court ordered that a hearing on the Sydney Plaintiffs’ motion for preliminary injunction be held on June 22, 2022. On June 2, 2022, the Plaintiffs in Kim also filed a motion for a preliminary injunction. The court consolidated the motions for preliminary injunction.

On June 23, 2022, following a hearing, the court issued an order denying both motions for preliminary injunction, holding that the Plaintiffs in both cases were unlikely to succeed on the merits and that Plaintiffs had not established that they would suffer irreparable harm if the injunction was denied.

By order dated July 11, 2022, the court consolidated the Sydney and Kim cases and set an August 24, 2022 deadline for the Plaintiffs in both cases to file a consolidated amended complaint. Plaintiffs filed their amended complaint on August 24, 2022. The amended complaint alleges on behalf of a putative class of holders of Cedar's preferred stock, among other things, claims for breach of contract against Cedar and Cedar's former Board of Directors with respect to the articles supplementary governing the terms of Cedar's preferred stock, breach of fiduciary duty against Cedar's former Board of Directors, and tortious interference and aiding and abetting breach of fiduciary duty against the Company. On October 7, 2022, Defendants moved to dismiss the amended complaint. Plaintiffs opposed the motion to dismiss and filed a motion to certify a question of law to Maryland’s Supreme Court. On August 1, 2023, the court issued a decision and order granting Defendants’ motions to dismiss, without leave to amend, and denying

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Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

10. Commitments and Contingencies (continued)

Plaintiffs’ motion to certify a question of law to the Maryland Supreme Court. The decision becomes final unless Plaintiffs seek reconsideration within 14 days or file an appeal within 30 days.

High Income Securities Fund v. Cedar Realty Trust, Inc., et al., No. 2:22-cv-4031, in the United States District Court for the Eastern District of New York. On July 11, 2022, a purported holder of Cedar's outstanding preferred stock filed a complaint against Cedar and Cedar's Board of Directors prior to the Merger in the United States District Court for the Eastern District of New York, entitled High Income Securities Fund v. Cedar Realty Trust, Inc., et al., No. 2:22-cv-4031. The complaint alleged that the Defendants violated Section 10(b) of the Exchange Act and SEC Rule 10b-5 promulgated thereunder by making false and misleading statements and omissions, and that Cedar's former Board of Directors are control persons under Section 20(a) of the Exchange Act. On August 12, 2022, Defendants requested permission to file a motion to dismiss, and Plaintiff responded opposing Defendants’ request on September 7, 2022. The court granted Defendants’ request to file a motion to dismiss on October 25, 2022. Defendants served their motion to dismiss on December 23, 2022, which Plaintiff opposed on January 27, 2023. Defendants filed a reply brief on the motion to dismiss on February 17, 2023. At this juncture, the outcome of the litigation is uncertain.

Krasner v. Cedar Realty Trust, Inc., et. al., in the United States District Court for the Eastern District of New York, Case No. 2:22-cv-06945. On October 14, 2022, a purported holder of Cedar's outstanding preferred stock filed a putative class action against Cedar, the Board of Directors prior to the Cedar Acquisition, and the Company in Nassau County Supreme Court, New York entitled Krasner v. Cedar Realty Trust, Inc., et al., (Case No. 613985/2022). The complaint alleges on behalf of a putative class of holders of Cedar's preferred stock, among other things, claims for breach of contract against Cedar and the former Board of Directors with respect to the articles supplementary governing the terms of Cedar's preferred stock, breach of fiduciary duty against the former Board of Directors, and tortious interference and aiding and abetting breach of fiduciary duty against the Company. The complaint seeks, among other relief, an award of monetary damages, attorneys' fees, and expert fees. Defendants removed the case to a federal court. On April 24, 2023, the federal court granted Plaintiff’s motion to remand the case to the Nassau County Supreme Court. Defendants have sought leave from the appellate court for permission to appeal the remand decision. Defendants have filed motions in the Nassau County action to dismiss or stay the case based both on the pendency of the lawsuit in Maryland in which the same claims were asserted by other preferred stockholders and on the merits. Plaintiff has opposed the motions. The court has set a hearing on the motions for August 23, 2023. At this juncture, the outcome of the litigation is uncertain.

11. Related Party Transactions

Related Party Transactions with Cedar

The Company performs property management and leasing services for Cedar, a wholly-owned subsidiary of the Company. During the three and six months ended June 30, 2023, Cedar paid the Company $0.0 million and $0.4 million, respectively, for these services. The Operating Partnership and Cedar’s operating partnership, Cedar Realty Trust Partnership, L.P., are party to a cost sharing and reimbursement agreement, pursuant to which the parties agreed to share costs and expenses associated with certain employees, certain facilities and property, and certain arrangements with third parties (the “Cost Sharing Agreement”). Related party amounts due to the Company from Cedar as of June 30, 2023 and December 31, 2022 are comprised of:


	June 30, 2023 (b)		December 31, 2022 (b)
2022 financings and real estate taxes	$	7,166	$	7,166
Management fees	533		110
Leasing commissions	418		85
Cost Sharing Agreement allocations (a)	322		—
Other	117		(33)
Total	$	8,556	$	7,328

(a) Includes allocations for executive compensation and directors' liability insurance. In 2022, the were no allocations made to Cedar for these services due to certain limitations set forth in the Cost Sharing Agreement.

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Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

11. Related Party Transactions (continued)

(b) These related party amounts have been eliminated for consolidation purposes.

Investment securities - related party

The Company has investments held with SAI, a related party. See Note 4 in this Form 10-Q for additional details.

12. Subsequent Events

Sale of Outparcel

On July 11, 2023, the Company sold an outparcel building adjacent to Carll's Corner, located in Bridgeton, New Jersey for $3.0 million.

Common Stock One-for-Ten Reverse Stock Split

On August 7, 2023, the Company announced that its Board of Directors unanimously approved a one-for-ten reverse stock split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split is expected to take effect as of 5:00 p.m. Eastern Time, on August 17, 2023 (the “Effective Time”). At the Effective Time, every ten issued and outstanding shares of common stock of the Company will be converted into one share of common stock of the Company. The par value of each share of common stock will remain unchanged. Trading in the Company's common stock on a split adjusted basis is expected to begin at the market open on August 18, 2023. The Company's common stock will continue trading on the NASDAQ under the symbol “WHLR” but will be assigned a new CUSIP number. No adjustments have been made to the historical financial statements as the reverse split has not been completed.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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 2022 Form 10-K for the year ended December 31, 2022. 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.

When used in this discussion and elsewhere in this Form 10-Q, the words "believes," "should," "estimates," "expects," and similar expressions are intended to identify forward-looking statements within the meaning of that term in Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and in Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 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. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements.

Important factors that we think could cause our actual results to differ materially from those expressed or forecasted in

the forward-looking statement are summarized below:

•the adverse effect any future pandemic, endemic or outbreak of infectious disease, and mitigation efforts to control their spread;

•the use of and demand for retail space;

•general and economic business conditions, including those affecting the ability of individuals to spend in retail shopping centers and/or the rate and other terms on which we are able to lease our properties;

•tenant bankruptcies;

•the state of the U.S. economy generally, or specifically in the Southeast, Mid-Atlantic and Northeast where our properties are geographically concentrated;

•consumer spending and confidence trends;

•availability, terms and deployment of capital;

•anticipated substantial dilution of our common stock, and steep declines in their market value, after September 21, 2023 that may result from the exercise by the holders of our Series D Cumulative Convertible Preferred Stock of their redemption rights;

•the degree and nature of our competition;

•changes in governmental regulations, accounting rules, tax rates and similar matters;

•adverse economic or real estate developments in our markets of South Carolina, Georgia, Virginia, Pennsylvania, North Carolina, Massachusetts, New Jersey, Florida, Connecticut, Kentucky, Tennessee, Alabama, Maryland, West Virginia, and Oklahoma;

•the ability and willingness of the Company’s tenants and other third parties to satisfy their obligations under their respective contractual arrangements with the Company;

•the ability and willingness of the Company’s tenants to renew their leases with the Company upon expiration, the Company’s ability to re-lease its properties on the similar or better terms in the event of nonrenewal or in the event the Company exercises its right to replace an existing tenant, and obligations the Company may incur in connection with the replacement of an existing tenant;

•litigation risks;

•increases in the Company’s financing and other costs as a result of changes in interest rates and other factors;

•The Company’s ability to maintain listing on Nasdaq Capital Market and the effects of the one-for-ten reverse stock split announced on August 7, 2023 on our price per share and the trading market of our common stock;

•inability to successfully integrate the acquisition of Cedar Realty Trust, Inc.;

•changes in our ability to obtain and maintain financing;

•damage to the Company’s properties from catastrophic weather and other natural events, and the physical effects of climate change;

•information technology security breaches;

•the Company’s ability and willingness to maintain its qualification as a REIT;

•the ability of our operating partnership, Wheeler REIT, L.P., and each of our other partnerships and limited liability companies to be classified as partnerships or disregarded entities for federal income tax purposes;

•the impact of e-commerce on our tenants’ business; and

•inability to generate sufficient cash flows due to market conditions, competition, uninsured losses, changes in tax or other applicable laws.

We caution that the foregoing list of factors is not all-inclusive. Moreover, we operate in a very competitive and rapidly

changing environment. New factors emerge from time to time and it is not possible for management to predict all such factors, nor

can it assess the impact of all such factors on our business or the extent to which any factor, or combination of factors, may cause

actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties,

investors should not place undue reliance on forward-looking statements as a prediction of actual results. All subsequent written

and oral forward-looking statements concerning us or any person acting on our behalf are expressly qualified in their entirety by

the cautionary statements above. We caution not to place undue reliance upon any forward-looking statements, which speak only as of the date made. We do not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based.

Company Overview

The Company, a Maryland corporation, is a fully integrated, self-managed commercial real estate investment trust that owns, leases and operates income-producing retail properties with a primary focus on grocery-anchored centers. In August 2022, the REIT acquired Cedar Realty Trust. As a result of that acquisition, Cedar became a subsidiary of the REIT and this Form 10-Q includes Cedar starting from the date of acquisition.

As of June 30, 2023, 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.

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%, 40% and 15% respectively, of the total annualized base rent of the properties in its portfolio as of June 30, 2023. 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.

Recent Trends and Activities

Exchange Offer and Consent Solicitation

On November 22, 2022, the Company commenced an exchange offer for its outstanding shares of Series D Preferred (the "Exchange Offer"). As subsequently amended, the terms of the Exchange Offer provided for the exchange of up to 2,112,103 outstanding shares of Series D Preferred, representing 67% of the outstanding shares of Series D Preferred, for (i) 6.00% Subordinated Convertible Notes due 2028, and (ii) Common Stock, in each case to have been newly issued by the Company, and related consents (the “Consent Solicitation”) from the holders of the Series D Preferred (the "Series D Preferred Holders") to certain amendments to the Company’s charter that would have modified the terms of the Series D Preferred (the "Proposed Amendments").

As of the expiration of the Exchange Offer on January 20, 2023, 864,391 shares of Series D Preferred (representing 26.8% of the total outstanding Series D Preferred) had been validly tendered (and not validly withdrawn) in the Exchange Offer. Accordingly, the condition that the holders of at least 66 2/3% of the outstanding shares of Series D Preferred (i) validly tender their Series D Preferred into the Exchange Offer, and not validly withdraw such Series D Preferred, and (ii) consent to the Proposed Amendments, had not been satisfied, and the Exchange Offer expired on January 20, 2023.

As a result, the Series D Preferred remains outstanding with no changes to its terms.

Land Acquisition

On February 21, 2023 the Company purchased a 2.5 acre land parcel adjacent to St. George Plaza, located in St.

George, South Carolina, (the "St. George Plaza Land Parcel") for $0.2 million.

Term Loan Agreement, 12 properties

Term Loan Agreement, 8 properties

On May 18, 2023, the Company entered into a loan agreement (the "Term Loan Agreement, 8 properties") for $53.1 million at a fixed rate of 6.24% and interest-only payments due monthly through June 2028. Commencing in July 2028, until the maturity date of June 10, 2033, monthly principal and interest payments will be $0.3 million. Loan proceeds were used to refinance 8 properties, including $0.7 million in defeasance.

Convertible Notes

Interest payments on the Convertible Notes were made as follows (in thousands, except for shares ):


For the six months ended June 30,	Series B Preferred number of shares	Series D Preferred number of shares	Convertible Note interest at 7% coupon		Fair value adjustment		Paid-in-kind interest expense
2023	—	160,455	$	1,155	$	851	$	2,006
2022	432,994	—	$	1,155	$	944	$	2,099

Related Party Transactions

The Company’s subscription for SAI’s limited partnership interest was approved by the disinterested directors

of the Company.

A portion of SAI's underlying investments are in the Company's own equity and debt securities.

The Company may not withdraw its capital from SAI for a period of one year measured from the date of the Company's initial contribution, subject to certain exceptions.

Preferred Dividends

At June 30, 2023, the Company had accumulated undeclared dividends of $38.8 million to holders of shares of our Series D Preferred of which $2.1 million and $4.2 million is attributable to the three and six months ended June 30, 2023, respectively.

New Leases and Leasing Renewals

The following table presents selected lease activity statistics for our properties:


	Three Months Ended June 30,						Six Months Ended June 30,
	2023 (3)			2022			2023 (3)			2022
Renewals(1):
Leases renewed with rate increase (sq feet)	175,492			149,860			469,218			216,208
Leases renewed with rate decrease (sq feet)	—			6,161			—			11,489
Leases renewed with no rate change (sq feet)	50,026			54,322			77,258			74,651
Total leases renewed (sq feet)	225,518			210,343			546,476			302,348

Leases renewed with rate increase (count)	19			24			59			44
Leases renewed with rate decrease (count)	—			3			—			5
Leases renewed with no rate change (count)	5			6			9			18
Total leases renewed (count)	24			33			68			67

Option exercised (count)	7			5			16			7

Weighted average on rate increases (per sq foot)	$	0.79		$	1.29		$	0.71		$	1.25
Weighted average on rate decreases (per sq foot)	$	—		$	(3.75)		$	—		$	(3.00)
Weighted average rate on all renewals (per sq foot)	$	0.61		$	0.81		$	0.61		$	0.78

Weighted average change over prior rates	7.3		%	8.8		%	6.7		%	7.7		%

New Leases(1) (2):
New leases (sq feet)	52,162			29,271			143,782			98,190
New leases (count)	16			15			28			38
Weighted average rate (per sq foot)	$	13.37		$	13.05		$	14.23		$	13.08

(1) Lease data presented is based on average rate per square foot over the renewed or new lease term.

(2) The Company does not include ground leases entered into for the purposes of new lease sq feet and weighted average rate (per sq foot) on new leases.

(3) Includes lease data for the Cedar Portfolio.

Three and Six Months Ended June 30, 2023 Compared to the Three and Six Months Ended June 30, 2022

Results of Operations

Comparison of the three months ended June 30, 2023 and 2022

Results from operations for the three months ended June 30, 2023 reflect the results of the Company’s acquisition of Cedar on August 22, 2022. Accordingly, our results of operations will reflect the combined operations for future quarters subsequent to the acquisition date. Therefore, our historical financial statements will not be indicative of future operating results.

The following table presents a comparison of the condensed consolidated statements of operations for the three months ended June 30, 2023 and 2022:


	Three Months Ended June 30,						Three Months Ended Changes
	2023			2022				Change				% Change
PROPERTY DATA:
Number of properties owned and leased at period end (1)	75			57				18			an increase	31.6	%
Aggregate gross leasable area at period end (1)	8,172,535			5,391,432				2,781,103			an increase	51.6	%
Ending leased rate at period end (1)	92.6		%	95.7		%		(3.1)		%	a decrease	(3.2)	%
FINANCIAL DATA:
Rental revenues	$	24,583		$	15,324			$	9,259		an increase	60.4	%
Other revenues	257			155				102			an increase	65.8	%
Total Revenue	24,840			15,479				9,361			an increase	60.5	%
OPERATING EXPENSES:
Property operations	8,342			4,732				3,610			an increase	76.3	%
Depreciation and amortization	7,301			3,625				3,676			an increase	101.4	%
Impairment of assets held for sale	—			100				(100)			a decrease	(100.0)	%
Corporate general & administrative	2,818			1,673				1,145			an increase	68.4	%
Total Operating Expenses	18,461			10,130				8,331			an increase	82.2	%

Operating Income	6,379			5,349				1,030			an increase	19.3	%
Interest income	126			14				112			an increase	800.0	%
Gain on investment securities, net	31			—				31			an increase	100.0	%
Interest expense	(10,179)			(7,501)				(2,678)			a decrease	(35.7)	%
Net changes in fair value of derivative liabilities	3,030			2,085				945			an increase	45.3	%

Other expense	(635)			—				(635)			a decrease	(100.0)	%
Net Loss Before Income Taxes	(1,248)			(53)				(1,195)			an increase	2,254.7	%
Income tax expense	(46)			—				(46)			a decrease	(100.0)	%
Net Loss	(1,294)			(53)				(1,241)			a decrease	(2,341.5)	%
Less: Net Income (Loss) attributable to noncontrolling interests	2,676			(1)				2,677			an increase	267,700.0	%
Net Loss Attributable to Wheeler REIT	$	(3,970)		$	(52)			$	(3,918)		a decrease	(7,534.6)	%

(1) Excludes the undeveloped land parcels. Includes assets held for sale.

Total Revenue

Total revenues were $24.8 million and $15.5 million for the three months ended June 30, 2023 and 2022, respectively, representing an increase of 60.5%. The increase in rental revenues of $9.3 million is primarily a result of the $7.7 million increase in non-same store property revenues due to the Cedar Acquisition, $0.3 million increase in same store revenues and a $1.2 million increase in market lease amortization.

Total Operating Expenses

Total operating expenses were $18.5 million and $10.1 million for the three months ended June 30, 2023 and 2022, respectively, representing an increase of 82.2%. Property operations increased $3.6 million, primarily a result of the $3.1 million increase in non-same store property operating expenses due to the Cedar Acquisition and a $0.5 million increase in same store property operating expenses.

Impairment of assets held for sale was $0.0 million and $0.1 million for the three months ended June 30, 2023 and 2022, respectively, as a result of Harbor Pointe Land Parcel impairment.

Depreciation and amortization increased 101.4% for the three months ended June 30, 2023, as a result of the Cedar Acquisition.

Corporate general and administrative expenses were $2.8 million and $1.7 million for the three months ended June 30, 2023 and 2022, respectively, representing an increase of 68.4%, primarily a result of the following:

•$1.0 million increase in professional fees; and

•$0.2 million increase in corporate administration costs.

Interest Expense

Interest expense was $10.2 million and $7.5 million for the three months ended June 30, 2023 and 2022, respectively, representing an increase of 35.7%. Below is a comparison of the components which make up interest expense (in thousands, unaudited):


	Three Months Ended June 30,				Three Months Ended Changes
	2023		2022			Change		% Change
Property debt interest - excluding Cedar debt	$	3,890	$	3,594		$	296	8.2	%
Convertible Notes interest (1)	1,428		1,521			(93)		(6.1)	%
Defeasance paid	1,758		1,458			300		20.6	%
Amortization of deferred financing costs	1,242		928			314		33.8	%
Property debt interest - Cedar	1,861		—			1,861		100.0	%
Total Interest Expense	$	10,179	$	7,501		$	2,678	35.7	%

(1) Includes the fair value adjustment for the paid-in-kind interest.

Net Change in Fair Value of Derivative Liabilities

The net changes in the fair value of derivative liabilities was a gain of $3.0 million and a gain of $2.1 million for the three months ended June 30, 2023 and 2022, respectively, which represents a non-cash adjustment from a change in the fair value that includes adjustments in valuation assumptions. See Note 8 in this Form 10-Q for additional details.

Other Expense

Other expense represents expenses which are non-operating in nature. Other expenses were $0.6 million for the three months ended June 30, 2023, which consisted the loss on repurchase of Convertible Notes. Other expenses were $0.0 million for the three months ended June 30, 2022.

Comparison of the six months ended June 30, 2023 and 2022

Results from operations for the six months ended June 30, 2023 reflect the results of the Company’s acquisition of Cedar on August 22, 2022. Accordingly, our results of operations will reflect the combined operations for future quarters subsequent to the acquisition date. Therefore, our historical financial statements will not be indicative of future operating results.

The following table presents a comparison of the condensed consolidated statements of operations for the six months ended June 30, 2023 and 2022:


	Six Months Ended June 30,						Six Months Ended Changes
	2023			2022			Change				% Change
PROPERTY DATA:
Number of properties owned and leased at period end (1)	75			57			18			an increase	31.6	%
Aggregate gross leasable area at period end (1)	8,172,535			5,391,432			2,781,103			an increase	51.6	%
Ending leased rate at period end (1)	92.6		%	95.7		%	(3.1)		%	a decrease	(3.2)	%
FINANCIAL DATA:
Rental revenues	$	50,083		$	30,656		$	19,427		an increase	63.4	%
Other revenues	823			320			503			an increase	157.2	%
Total Revenue	50,906			30,976			19,930			an increase	64.3	%
OPERATING EXPENSES:
Property operations	17,297			9,982			7,315			an increase	73.3	%
Depreciation and amortization	14,767			7,241			7,526			an increase	103.9	%
Impairment of assets held for sale	—			760			(760)			a decrease	(100.0)	%
Corporate general & administrative	5,889			2,937			2,952			an increase	100.5	%
Total Operating Expenses	37,953			20,920			17,033			an increase	81.4	%
Loss on disposal of properties	—			(15)			15			a decrease	(100.0)	%
Operating Income	12,953			10,041			2,912			an increase	29.0	%
Interest income	173			27			146			an increase	540.7	%
Gain on investment securities, net	31			—			31			an increase	100.0	%
Interest expense	(16,656)			(12,129)			(4,527)			a decrease	(37.3)	%
Net changes in fair value of derivative liabilities	4,882			(1,877)			6,759			an increase	360.1	%
Other expense	(3,040)			(691)			(2,349)			a decrease	(339.9)	%
Net Loss Before Income Taxes	(1,657)			(4,629)			2,972			an increase	64.2	%
Income tax expense	(46)			—			(46)			a decrease	(100.0)	%
Net Loss	(1,703)			(4,629)			2,926			an increase	63.2	%
Less: Net Income attributable to noncontrolling interests	5,368			3			5,365			an increase	178,833.3	%
Net Loss Attributable to Wheeler REIT	$	(7,071)		$	(4,632)		$	(2,439)		a decrease	(52.7)	%

Total Revenue

Total revenues were $50.9 million and $31.0 million for the six months ended June 30, 2023 and 2022, respectively, representing an increase of 64.3%. The increase in rental revenues of $19.4 million is primarily a result of the $15.9 million increase in non-same store property revenues due to the Cedar Acquisition, $0.7 million increase in same store revenues and a $2.7 million increase in market lease amortization.

Total Operating Expenses

Total operating expenses were $38.0 million and $20.9 million for the six months ended June 30, 2023 and 2022, respectively, representing an increase of 81.4%. Property operations increased $7.3 million, primarily a result of the $6.8 million increase in non-same store property operating expenses due to the Cedar Acquisition and a $0.5 million increase in same store property operating expenses.

Impairment of assets held for sale was $0.0 million and $0.8 million for the six months ended June 30, 2023 and 2022, respectively, as a result of Harbor Pointe Land Parcel impairment.

Depreciation and amortization increased 103.9% for the six months ended June 30, 2023, as a result of the Cedar Acquisition.

Corporate general and administrative expenses were $5.9 million and $2.9 million for the six months ended June 30, 2023 and 2022, respectively, representing an increase of 100.5%, primarily a result of the following:

•$2.1 million increase in professional fees;

•$0.4 million increase in compensation and benefits primarily driven by hiring more employees due to the Cedar Acquisition and payroll related costs; and

•$0.4 million increase in corporate administration costs.

Interest Expense

Interest expense was $16.7 million and $12.1 million for the six months ended June 30, 2023 and 2022, respectively, representing an increase of 37.3%. Below is a comparison of the components which make up interest expense (in thousands, unaudited):


	Six Months Ended June 30,					Six Months Ended Changes
		2023		2022			Change		% Change
Property debt interest - excluding Cedar debt		$	7,496	$	7,224		$	272	3.8	%
Convertible Notes interest (1)		2,006		2,099			(93)		(4.4)	%
Defeasance paid		1,758		1,458			300		20.6	%
Amortization of deferred financing costs		1,721		1,348			373		27.7	%
Property debt interest - Cedar		3,675		—			3,675		100.0	%
Total Interest Expense		$	16,656	$	12,129		$	4,527	37.3	%

(1) Includes the fair value adjustment for the paid-in-kind interest.

Net Change in Fair Value of Derivative Liabilities

The net changes in the fair value of derivative liabilities was a gain of $4.9 million and a loss of $1.9 million for the six months ended June 30, 2023 and 2022, respectively, which represents a non-cash adjustment from a change in the fair value that includes adjustments in valuation assumptions. See Note 8 in this Form 10-Q for additional details.

Other Expense

Other expense represents expenses which are non-operating in nature. Other expenses were $3.0 million for the six months ended June 30, 2023, which consisted of $2.4 million costs for an exchange offer for the Company's outstanding shares of Series D Preferred (the "Exchange Offer") and $0.6 million loss on repurchase of Convertible Notes. Other expenses were $0.7 million for the six months ended June 30, 2022, which consisted of legal settlement costs.

Same Store Operating Income

Net operating income ("NOI") is a widely-used non-GAAP financial measure for REITs. The Company believes that NOI is a useful measure of the Company's property operating performance. The Company defines NOI as property revenues (rental and other revenues) less property and related expenses (property operation and maintenance and real estate taxes). Because 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 NOI to evaluate its operating performance since 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. NOI should not be viewed as a measure of the Company's overall financial performance since it does not reflect general and administrative expenses, depreciation and amortization, involuntary conversion, interest expense, interest income, provision for income taxes, market lease amortization, gain or loss on sale or disposition of assets, and the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company's properties. Other REITs may use different methodologies for calculating NOI, and accordingly, the Company's NOI may not be comparable to that of other REITs.

The following table is a reconciliation of same store NOI from operating income (the most directly comparable GAAP financial measure). Same stores consist only of those properties owned during all periods presented in their entirety.


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

	(in thousands, unaudited)
Operating Income	$	6,379	$	5,349	$	12,953	$	10,041
Adjustments:
Loss on disposal of properties	—		—		—		15
Corporate general & administrative	2,818		1,673		5,889		2,937
Impairment of assets held for sale	—		100		—		760
Depreciation and amortization	7,301		3,625		14,767		7,241
Straight-line rents	(373)		(156)		(719)		(233)
Above (below) market lease amortization	(1,237)		(7)		(2,633)		16
Other non-property revenue	114		(9)		(131)		(16)
NOI related to non-same store properties	(4,875)		(210)		(9,610)		(428)
Same Store Property Net Operating Income	$	10,127	$	10,365	$	20,516	$	20,333

Property revenues	$	15,341	$	15,026	$	30,903	$	30,169
Property expenses	5,214		4,661		10,387		9,836
Same Store Property Net Operating Income	$	10,127	$	10,365	$	20,516	$	20,333

Total same store property NOI was $10.1 million and $10.4 million for the three months ended June 30, 2023 and 2022, respectively, representing a decrease of 2.3% primarily due to a 11.9 % increase in property expenses. Total same store property NOI was $20.5 million and $20.3 million for the six months ended June 30, 2023 and 2022, respectively, representing an increase of 0.9% primarily due to strong leasing activity, partially offset by increases in property expenses.

Funds from Operations (FFO)

We use 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.

Below is a reconciliation of net loss to FFO, a non-GAAP measurement (in thousands, unaudited):


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended Changes				Six Months Ended Changes
	2023		2022		2023		2022		Change		% Change		Change		% Change

Net Loss	$	(1,294)	$	(53)	$	(1,703)	$	(4,629)	$	(1,241)	(2,341.5)	%	$	2,926	63.2	%
Depreciation and amortization of real estate assets	7,301		3,625		14,767		7,241		3,676		101.4	%	7,526		103.9	%
Impairment of assets held for sale	—		100		—		760		(100)		(100.0)	%	(760)		(100.0)	%
Loss on disposal of properties	—		—		—		15		—		—	%	(15)		(100.0)	%
FFO	$	6,007	$	3,672	$	13,064	$	3,387	$	2,335	63.6	%	$	9,677	285.7	%

During the three months ended June 30, 2023, FFO increased $2.3 million. During the six months ended June 30, 2023, FFO increased $9.7 million.

We believe the computation of FFO in accordance with NAREIT's definition includes certain items that are not indicative of the results provided by our operating portfolio and affect the comparability of our period-over-period performance. These items include, but are not limited to, legal settlements, non-cash share-based compensation expense, non-cash amortization on loans and acquisition costs. Therefore, in addition to FFO, management uses Adjusted FFO ("AFFO"), which we define to exclude such items. Management believes that these adjustments are appropriate in determining AFFO as they are not indicative of the operating performance of our assets. In addition, we believe that AFFO is a useful supplemental measure for the investing community to use in comparing us to other REITs as many REITs provide some form of adjusted or modified FFO. However, there can be no assurance that AFFO presented by us is comparable to the adjusted or modified FFO of other REITs.

Total AFFO is shown in the table below:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

FFO	$	6,007	$	3,672	$	13,064	$	3,387
Preferred Stock dividends - undeclared	(2,261)		(2,264)		(4,525)		(4,528)
Dividends on noncontrolling interests preferred stock	(2,688)		—		(5,376)		—
Preferred stock accretion adjustments	145		146		292		292
FFO available to common stockholders and common unitholders	1,203		1,554		3,455		(849)

Other non-recurring and non-cash expense	2,402		1,470		5,075		2,147
Gain on investment securities, net	(31)		—		(31)		—
Net changes in fair value of derivative liabilities	(3,030)		(2,085)		(4,882)		1,877
Straight-line rental revenue, net straight-line expense	(301)		(148)		(704)		(217)
Deferred financing cost amortization	1,242		928		1,721		1,348
Paid-in-kind interest	1,428		1,521		2,006		2,099
Above (below) market lease amortization	(1,237)		(7)		(2,633)		16
Recurring capital expenditures and tenant improvement reserves	(408)		(269)		(817)		(539)
AFFO	$	1,268	$	2,964	$	3,190	$	5,882

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 nonrecurring expenses of $2.4 million and $5.1 million for the three and six months ended June 30, 2023, respectively, were primarily a result of $2.4 million costs related to the Exchange Offer, $1.8 million in loan defeasance payments, $0.6 million loss on repurchase of Convertible Notes and $0.3 million costs to demolish decommissioned space not included in the Company's gross leasable area. Other nonrecurring expenses of $1.5 million and $2.1 million for the three and six months ended June 30, 2022, respectively, primarily include $1.5 million in loan defeasance payments, a result of the 2022 loan refinancing activities, and $0.7 million legal settlement costs.

Liquidity and Capital Resources

At June 30, 2023, our consolidated cash, cash equivalents and restricted cash totaled $51.1 million compared to consolidated cash, cash equivalents and restricted cash of $46.6 million at June 30, 2022. Cash flows from operating activities, investing activities and financing activities were as follows (in thousands, unaudited):


	Six Months Ended June 30,
	2023		2022
Operating activities	$	11,507	$	9,951
Investing activities	$	(10,036)	$	(3,247)
Financing activities	$	(6,191)	$	(571)

Operating Activities

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 $10.0 million and $8.9 million for 2023 and 2022, respectively. The increase was

primarily a result of the Cedar Acquisition and an increase in same store NOI of $0.2 million, partially offset by an increase in cash paid for interest expense and corporate general and administrative expenses.

Investing Activities

Our cash flows used in investing activities increased $6.8 million primarily due to the investment purchase of $3.0 million subscription with SAI, increase in capital expenditures paid of $2.0 million, including the purchase of the St. George Plaza Land Parcel and the proceeds from the Walnut Hill Plaza property sale in 2022.

Financing Activities

Our cash flows used in financing activities were $6.2 million for the six months ended June 30, 2023, compared to $0.6 million for the comparable period in 2022.

Financing activities during the six months ended June 30, 2023 primarily consisted of:

Cash inflows:

•$7.3 million 2023 loan refinancing activities, net;

Cash outflows:

•$5.4 million for distributions paid on noncontrolling interests;

•$4.1 million payments for deferred financing costs;

•$1.8 million defeasance payments;

•$1.2 million repurchase of debt securities; and

•$1.1 million scheduled loan principal payments on debt.

Financing activities during the six months ended June 30, 2022 primarily consisted of:

Cash inflows:

•$10.8 million 2022 loan refinancing activities, net;

Cash outflows:

•$3.7 million payments for deferred financing costs;

•$3.1 million scheduled loan principal payments on debt;

•$3.1 million loan principal payment related to the sale of Walnut Hill Plaza; and

•$1.5 million defeasance payments.

The Company continues to endeavor to manage its debt prudently with the objective of achieving a conservative capital structure and minimizing leverage within the Company. Our debt balances, excluding unamortized debt issuance costs, consisted of the following (in thousands):


	June 30, 2023		December 31, 2022
	(unaudited)
Fixed-rate notes	$	488,101	$	482,447
Total debt	$	488,101	$	482,447

The weighted average interest rate and term of our fixed-rate debt are 5.39% and 8.97 years, respectively, at June 30, 2023. We have no debt maturing during the twelve months ending June 30, 2024. 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 7 included in this Form 10-Q for additional mortgage indebtedness details.

NASDAQ Notices

On June 26, 2023, we received a letter from the listing qualifications staff (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it is not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule") for continued listing standards. 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.

In accordance with Nasdaq’s rules, we have 180 calendar days to regain compliance. If, at any time before the end of this first 180-day period, or through December 26, 2023, the closing bid price of the common stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, subject to the Staff’s discretion to extend this period, the Staff will provide written notification that the Company has achieved compliance with Nasdaq’s bid price rule. If we do not regain compliance during the first 180-day compliance period, then the Staff may grant the Company a second 180 calendar day period to regain compliance, subject to certain requirements. On August 7, 2023, the Company announced that its Board of Directors approved a reverse stock split of one-for-ten to be effective August 17, 2023. The Company and the Board of Directors believe the Reverse Stock Split will help the Company regain compliance with the Bid Price Rule. However, there can be no assurance that the Company will be able to regain compliance with such requirement or maintain its listing on The Nasdaq Capital Market.

In addition, effective as of June 2, 2023, one of our directors, Michelle D. Bergman, tendered her resignation, for personal reasons, as a member of the Board of Directors, including her membership on the Audit Committee (the “Audit Committee”) and Compensation Committee of the Board of Directors. The effect of this resignation caused the Audit Committee to consist of two members. On July 12, 2023, we received a letter from the Staff of Nasdaq notifying the Company that because the Audit Committee now only has two members, the Company no longer complies with the requirement set forth in the Nasdaq Listing Rule 5605 that the Audit Committee consist of at least three members. The Company is required to appoint a third member to its Audit Committee by the earlier of the Company’s next annual stockholders’ meeting or June 2, 2024. The Company expects to make the appointment within the time period required.

Material Cash Requirements, Contractual Obligations and Commitments

Our expected material cash requirements for the twelve months ended June 30, 2024 and thereafter are comprised of (i) contractually obligated expenditures; (ii) other essential expenditures; and (iii) opportunistic expenditures.

The primary liquidity needs of the Company, in addition to the funding of our ongoing operations, at June 30, 2023 are $1.4 million in principal and regularly scheduled payments due in the twelve months ended June 30, 2024 as described in Note 7 in this Form 10-Q.

In addition to liquidity required to fund debt payments we may incur some level of capital expenditures during the year for our existing properties that cannot be passed on to our tenants.

To meet these future liquidity needs, the Company:

•had $28.7 million in cash and cash equivalents at June 30, 2023;

•had $22.4 million held in lender reserves for the purpose of tenant improvements, lease commissions, real estate taxes and insurance at June 30, 2023; and

•intends to use cash generated from operations during the twelve months ended June 30, 2024.

Additionally, the Company plans to undertake measures to grow its operations and increase liquidity through delivering space currently leased but not yet occupied, backfilling vacant anchor spaces, replacing tenants who are in default of their lease terms, increasing future lease revenue through tenant improvements partially funded by restricted cash, disposition of non-core assets in the ordinary course and refinancing properties.

Our success in executing on our strategy will dictate our liquidity needs going forward. If we are unable to execute in these areas, our ability to grow may be limited without additional capital.

Series D Preferred Stock

After September 21, 2023 (the "Series D Redemption Date"), the Series D Preferred Holders will have the right to cause the Company to redeem their Series D Preferred at a price of $25.00 per share plus the amount of all accrued and unpaid dividends. This redemption price is payable by the Company, at the Company’s election, in cash or shares of our common stock, $0.01 par value per share ("Common Stock"), or a combination of cash and shares of Common Stock.

Since January 2019, Series D Preferred has been accruing unpaid dividends at a rate of 10.75% per annum of the $25.00 liquidation preference per share, or at $2.6875 per share per annum. Commencing September 21, 2023, the holders will be entitled to cumulative cash dividends at an annual dividend rate of the initial rate increased by 2.0% of the liquidation preference per annum on each subsequent anniversary thereafter, subject to a maximum annual dividend rate of 14.0%.

As of June 30, 2023, the outstanding Series D Preferred had an aggregate liquidation preference of approximately $82.7 million, with aggregate accrued and unpaid dividends in the amount of approximately $38.8 million, for a total liquidation value of $121.5 million. Assuming dividends continue to accrue and remain unpaid on the Series D Preferred, then on the Series D Redemption Date we estimate that the aggregate liquidation preference (based on the 3,308,603 shares outstanding as of June 30, 2023) would be approximately $82.7 million, with aggregate accrued and unpaid dividends in the amount of approximately $41.1 million, for a total liquidation value of $123.8 million.

As of June 30, 2023, the Series D Preferred is convertible, in whole or in part, at any time, at the option of the Series D Preferred Holders, into previously unissued Common Stock at a conversion price of $16.96 per share of Common Stock. Based upon the closing price of our Common Stock on Aug 4, 2023 of $0.60 per share, we believe it unlikely that Series D Preferred Holders would convert their shares of Series D Preferred into Common Stock in advance of the Series D Redemption Date, and likely that they would instead choose to exercise their redemption rights after the Series D Redemption Date.

In an effort to address the risk of a significant reduction to the value of a Series D Preferred Holder’s investment in Series D Preferred and Common Stock following the Series D Redemption Date, the Company launched a modified Dutch auction tender offer in December 2020 for up to $19.0 million (subsequently reduced to $6.0 million) of Series D Preferred, in which 1,467,162 shares were tendered and 387,097 shares were accepted for purchase for an aggregate cost of $6.0 million. We subsequently launched a second modified Dutch auction tender offer in April 2021 for up to $12.0 million of our Series D Preferred, in which 103,513 shares were tendered and accepted for purchase for an aggregate cost of $1.9 million.

In July 2021, we raised additional capital for the Company through a rights offering pursuant to which the Common Stock holders purchased $30.0 million in aggregate principal amount of our Convertible Notes. Interest on the Convertible Notes is payable at the Company’s option in cash, Series B Preferred and/or Series D Preferred.

On December 31, 2021, the first interest payment date on the Convertible Notes, interest was paid in the form of Series D Preferred. On June 30, 2023, interest was paid in the form of Series D Preferred; which was the second instance when interest on the Convertible Notes was paid in the form of Series D Preferred. For purposes of determining the value of the Series D Preferred paid as interest on the Convertible Notes, each share of Series D Preferred was deemed to have a value equal to the product of (x) the average of the per share volume-weighted average prices of the Series D Preferred for the 15 consecutive trading days ending on the third business day immediately preceding the interest payment date, and (y) 0.55.

The Convertible Notes could have the effect of causing, if interest is paid in the future in shares of Series D Preferred, substantial dilution of the Series D Preferred and reduction in the value of any Series D Preferred.

In an effort to address the risk associated with the significant and growing financial obligation to the Series D Preferred Holders, and to provide the Series D Preferred Holders with an opportunity to receive value for their Series D Preferred prior to the Series D Redemption Date, on November 22, 2022, the Company commenced an Exchange Offer and related Consent Solicitation.

The consummation of the Exchange Offer and Consent Solicitation was subject to, and was conditional upon, the satisfaction of certain conditions, including the condition that the holders of at least 66 2/3% of the outstanding shares of Series D Preferred (i) validly tender their Series D Preferred into the Exchange Offer, and do not validly withdraw such Series D Preferred, on or prior to the expiration date of the Exchange Offer, and (ii) consent to the Proposed Amendments. As of the expiration of the Exchange Offer on January 20, 2023, 864,391 shares of Series D Preferred (representing 26.8% of the total outstanding Series D Preferred) had been validly tendered (and not validly withdrawn) in the Exchange Offer. Accordingly, the condition that the holders of at least 66 2/3% of the outstanding shares of Series D Preferred (i) validly tender their Series D Preferred into the Exchange Offer, and not validly withdraw such Series D Preferred, and (ii) consent to the Proposed Amendments, had not been satisfied, and the Exchange Offer expired on January 20, 2023. As a result, the Series D Preferred remains outstanding with no change to its terms, including its redemption rights.

We anticipate that, in the event of the Series D Preferred Holders’ exercise of such redemption rights after the Series D Redemption Date, the Company will not have sufficient available cash to pay the aggregate redemption price. Accordingly, in such event, we will not be able to meet our redemption obligation without either liquidating assets or issuing significant additional amounts of Common Stock.

The Company does not believe it is in its interests to liquidate assets or incur indebtedness to fund cash redemptions of the Series D Preferred Stock and, accordingly, it has no intention of doing so. Therefore, the Company intends to settle redemptions of Series D Preferred following the Series D Redemption Date in Common Stock.

We believe that the issuance of Common Stock to settle redemptions in Common Stock will result in a substantial dilution of the outstanding Common Stock.

Inflation

If inflation rates increase, 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.

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.

Recent Accounting Pronouncements

See Note 2 to the condensed consolidated financial statements beginning on page 10 of this Current Report on Form 10-Q.

Critical Accounting Policies

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 2022 Form 10-K under "Management’s Discussion and Analysis of Financial Condition and Results of Operations." During the six months ended June 30, 2023, there have been no significant changes to these estimates and policies previously disclosed in our 2022 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.

Available Information

The Company’s website address is www.whlr.us. We make available free of charge through our website our most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the SEC. In addition, we have posted the Charters of our Asset Liability Committee, Audit Committee, Compensation Committee, Governance, and Nominating Committee, Executive Committee, and Series D Redemption Facilitation Committee, as well as our Code of Business Conduct and Ethics for Board Members, Code of Business Conduct and Ethics for Employees, Officers, Agents and Representatives, Corporate Governance Principles, and Insider Trading Policy, all under separate headings. The content of our website is not incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file with the SEC, and any references to our website is intended to be inactive textual references only.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The management of the Company, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures in ensuring that the information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, including ensuring that such information is accumulated and communicated to the Company’s management, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and financial officers have concluded that such disclosure controls

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and procedures were effective as of June 30, 2023 (the end of the period covered by this Form 10-Q) to provide reasonable assurance that information required to be disclosed by us in our filings under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

None.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

See Note 10, Commitments and Contingencies, to our condensed consolidated financial statements included in this Form 10-Q.

Item 1A. Risk Factors.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Not applicable.

(b) Not applicable.

Item 3. Defaults Upon Senior Securities.

As of August 8, 2023, the Company had accumulated undeclared dividends of $38.8 million to holders of shares of our Series D Preferred, of which $2.1 million and $4.2 million are attributable to the three and six months ended June 30, 2023, respectively.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.



Exhibit

10.1						Term Loan Agreement dated May 5, 2023, between Insurance Strategy Funding XXVIII, LLC and the Borrowers party thereto. (Filed herewith).

10.2						Term Loan Agreement dated May 18, 2023, between Guggenheim Real Estate, LLC and the Borrowers party thereto. (Filed as an exhibit to Form 8-K , filed on May 19, 2023).

31.1						Certification of the Chief Executive Officer of Wheeler Real Estate Investment Trust, Inc. pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith).

31.2						Certification of the Chief Financial Officer of Wheeler Real Estate Investment Trust, Inc. pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith).

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith).

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith).


101.INS XBRL						Instance Document (Filed herewith).

101.SCH						XBRL Taxonomy Extension Schema Document (Filed herewith).

101.CAL						XBRL Taxonomy Extension Calculation Linkbase (Filed herewith).

101.DEF						XBRL Taxonomy Extension Definition Linkbase (Filed herewith).

101.LAB						XBRL Taxonomy Extension Labels Linkbase (Filed herewith).

101.PRE						XBRL Taxonomy Extension Presentation Linkbase (Filed herewith).

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

WHEELER REAL ESTATE INVESTMENT TRUST, INC.

By:

/s/ Crystal Plum

CRYSTAL PLUM

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

Date:

August 8, 2023