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Item 7. Management’s Discussion and Analysis

2024-03-05 compared with 2023-03-02 · 221 added, 261 removed, 173 unchanged (74% of the section changed)

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You should read the following discussion of our financial condition and results of operations in conjunction with our audited consolidated financial statements and the notes thereto included in this Form 10-K.

All per share amounts, common units and shares outstanding, stock-based compensation, warrants, and conversion features of our Convertible Notes for all periods presented reflect the one-for-ten Reverse Stock Split, which took effect on August 17, 2023.

For more detailed information regarding the basis of presentation for the following information, you should read the notes to the audited consolidated financial statements included in this Form 10-K.

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The Company’s portfolio had total gross rentable space of approximately 8,142,000 square feet and a leased level of approximately 93.7% at December 31, 2023.

Impact of COVID-19

The spread of COVID-19 had a significant impact on the global economy, the U.S.

economy, the economies of the local markets in which the Company’s properties are located, and the broader financial markets.

Local, state and federal authorities took preventative measures to alleviate the public health crisis primarily in 2020 and those preventative measures affected the operations of the Company’s tenant base to varying degrees depending on the category and location of the tenant.

While substantially all of the limitations and restrictions imposed during the onset of the pandemic have been lifted and/or eased and people have largely resumed pre-pandemic activities, economic conditions continue to negatively impact the financial health of certain retail stores.

The COVID-19 pandemic or variants or future outbreaks of other highly infectious diseases could impact the Company’s ability to collect rent and could lead to increases in rent relief requests from tenants, termination of leases by tenants, tenant bankruptcies, decreases in demand for retail space at the Company’s properties, difficulties in accessing capital, impairment of the Company’s long-lived assets and other impacts that could materially and adversely affect the Company’s business, results of operations, financial condition and ability to pay distributions to stockholders.

In August 2022, the Company acquired Cedar, and as a result of such transaction acquired 19 shopping centers (the majority of which are grocery-anchored), which increased the Company’s presence in the Northeast.

The consolidated financial statements included in this Form 10-K 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.

Recent Trends and Activities

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These events are summarized below.

Acquisition of Cedar Realty Trust

On August 22, 2022 (the “Cedar Closing Date”), the Company consummated transactions contemplated by that certain Agreement and Plan of Merger, dated as of March 2, 2022 (as amended, the “Merger Agreement”), by and among the

Company, WHLR Merger Sub Inc., a wholly owned subsidiary of the Company (“Merger Sub I”), WHLR OP Merger Sub LLC, a wholly owned subsidiary of Merger Sub I (“Merger Sub II”), Cedar , and Cedar Realty Trust Partnership, L.P., the operating partnership of Cedar (“Cedar OP”).

Pursuant to the Merger Agreement, on the Cedar Closing Date, Merger Sub II merged with and into Cedar OP, with Cedar OP being the surviving limited partnership resulting from such merger, and immediately following such merger, Merger Sub I merged with and into Cedar, with Cedar being the surviving company resulting from such merger (together, the “Cedar Acquisition”).

Each outstanding share of common stock of Cedar and outstanding common unit of Cedar OP held by persons other than Cedar immediately prior to the merger were cancelled and converted into the right to receive a cash payment of $9.48 per share or unit.

As a result of the Cedar Acquisition, the Company acquired all of the outstanding shares of Cedar’s common stock, which ceased to be publicly traded on the NYSE.

Cedar’s 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, Cedar became a subsidiary of the REIT.

In connection with the consummation of the Cedar Acquisition , the Company entered into a Guaranty of the obligations of Cedar OP under a Loan Agreement (the “ KeyBank-Cedar Loan Agreement ”) by and between the Borrower, KeyBanc Capital Markets, as Lead Arranger and Bookrunner, and KeyBank National Association, as administrative agent and as lender, and under the other loan documents executed in connection with the KeyBank-Cedar Loan Agreement.

By virtue of the Cedar Acquisition, the Company acquired 19 shopping centers (the majority of which are grocery-anchored), consisting of approximately 2.9 million square feet of gross leasable area and increased the Company’s presence in the Northeast.

The consolidated financial statements included in this Form 10-K (the “Form 10-K”) include Cedar starting from the date of acquisition.

KeyBank-Cedar Loan Agreement

On August 22, 2022, Cedar entered into the KeyBank-Cedar Loan Agreement for $130.00 million with interest-only payments due monthly through maturity, August 22, 2023.

The interest rate on this term loan consisted of the Secured Overnight Financing Rate plus 0.10% plus an applicable margin of 2.5% through February 2023, at which time increases to 4.0% and was collateralized by 19 properties.

The obligations under the KeyBank-Cedar Loan Agreement were satisfied in full with the proceeds of the loans under the Guggenheim-Cedar Loan Agreement (as defined below) entered into on October 28, 2022 and the Patuxent Crossing/Coliseum Marketplace Loan Agreement (as defined below) entered into on December 21, 2022.

Exchange Offer and Consent Solicitation

O n 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”).

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.

A ccordingly, 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.

Assets Held for Sale and Dispositions

At December 31, 2022, there were no assets held for sale.

At December 31, 2021, assets held for sale included Walnut Hill Plaza, which was sold in 2022.

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.

Impairment expense was $760 thousand for the year ending December 31, 2022, resulting from reducing the carrying value of Harbor Pointe Land Parcel.

Impairment expense was $2.30 million for the year ending December 31, 2021, resulting from $100 thousand on Walnut Hill Plaza and $2.20 million on Columbia Fire Station reducing the carrying value for the amounts that exceeded the property's fair value less estimated selling costs.

Series D Preferred Stock - Exchange Offer and Consent Solicitation

On November 22, 2022, the Company commenced an exchange offer (the "Exchange Offer"), which, as subsequently amended, provided for the exchange of up to 2,112,103 outstanding shares of Series D Preferred Stock, representing 67% of the outstanding shares of Series D Preferred Stock, for (i) 6.00% Subordinated Convertible Notes due 2028, and (ii) Common Stock, in each case to have been newly issued by the Company.

As of the expiration of the Exchange Offer on January 20, 2023, 864,391 shares of Series D Preferred Stock (representing 26.8% of the total outstanding Series D Preferred Stock) 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 Stock validly tender their Series D Preferred Stock into the Exchange Offer had not been satisfied and the Exchange Offer expired on January 20, 2023.

Series D Preferred Stock - Redemptions

After September 21, 2023, each holder of the Series D Preferred Stock has the right, at such holder’s option, to request that the Company redeem any or all of such holder’s shares on a monthly basis (each redemption date, a “Holder Redemption Date”), at a redemption price of $25.00 per share, plus an amount equal to all accrued and unpaid dividends, if any, to and including the Holder Redemption Date, payable in cash or in shares of Common Stock, or any combination thereof, at the Company's option.

Redemptions commenced on September 22, 2023, and the first Holder Redemption Date was October 5, 2023.

During the year ended December 31, 2023, the Company processed 175 redemption requests, collectively redeeming 864,070 shares of Series D Preferred Stock.

Accordingly, during the year ended December 31, 2023, the Company issued 52,788,687 shares of Common Stock in settlement of an aggregate redemption price of approximately $32.7 million.

At December 31, 2023, the Company had received requests to redeem 9,843 shares of Series D Preferred Stock with

respect to the January 2024 Holder Redemption Date.

As such, the redemption of these Series D Preferred Stock is considered certain at December 31, 2023 and the liquidation value associated with these shares of $0.4 million is presented as a liability.

At December 31, 2023 and 2022, there were no assets held for sale.

The following properties were sold during the year ended December 31, 2023 (in thousands):

Disposal Date Property Contract Price Gain (loss) Net Proceeds

December 9, 2022 Butler Square $ 9,250 $ 2,619 $ 8,723

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

In conjunction with the Walnut Hill Plaza sale, the Company made a $1.79 million principal paydown on the Walnut Hill Plaza loan and on February 17, 2022 the Company paid the remaining loan balance of $1.34 million in full.

On December 9, 2022, the Company made a $5.64 million principal payment on the Butler Square loan in conjunction with the sale of the Butler Square property.

Guggenheim Loan Agreement

On June 17, 2022, the Company entered into a loan agreement (the “Guggenheim Loan Agreement”) with Guggenheim Real Estate, LLC, for $75.00 million at a fixed rate of 4.25% with interest-only payments due monthly.

Commencing on August 10, 2027, until the maturity date of July 10, 2032, monthly principal and interest payments will be made based on a 30-year amortization schedule calculated based on the principal amount as of that time.

The Guggenheim Loan Agreement is collateralized by twenty-two properties and loan proceeds were used to refinance eleven loans including paying $1.46 million in defeasance.

JANAF Loan Agreement

On July 6, 2022, the Company entered into a loan agreement (the “JANAF Loan Agreement”) with CITI Real Estate Funding Inc.

for $60.00 million at a fixed interest rate of 5.31% with interest-only payments due monthly through maturity, July 6, 2032.

The JANAF Loan Agreement proceeds were used to refinance three loans including paying $1.16 million in defeasance.

Guggenheim-Cedar Loan Agreement

On October 28, 2022, Cedar entered into a loan agreement (the “Guggenheim-Cedar Loan Agreement”) with Guggenheim Real Estate, LLC, for $110.00 million at a fixed rate of 5.25% with interest-only payments due monthly through November 2027.

Wheeler REIT, L.P.

provided a guarantee in connection with such loan.

Commencing on December 10, 2027, until the maturity date of November 10, 2032, monthly principal and interest payments will be made based on a 30-year amortization schedule calculated based on the principal amount as of that time.

The Guggenheim-Cedar Loan Agreement

proceeds were used to refinance a portion of Cedar’s property portfolio that were previously collateralized by the KeyBank-Cedar Loan Agreement.

Patuxent Crossing/Coliseum Marketplace Loan Agreement

On December 21, 2022, Cedar entered into a loan agreement (the "Patuxent Crossing/Coliseum Marketplace Loan Agreement”) with CITI Real Estate Funding, Inc.

for $25.00 million at a fixed rate of 6.35% with interest-only payments due monthly through maturity, January 6, 2033.

The Patuxent Crossing/Coliseum Marketplace Loan Agreement proceeds were used to satisfy the remaining obligations of the KeyBank-Cedar Loan Agreement and, accordingly, the remaining collateral was released.

Interest Payments on Convertible Notes

The Company’s 7.00% subordinated convertible notes due 2031 (the “Convertible Notes”) bear interest at a rate of 7.00% per annum.

Interest on the Convertible Notes is payable semi-annually in arrears on June 30 and December 31 of each year, commencing on December 31, 2021.

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

Disposal Date Property Contract Price Gain Net Proceeds

July 11, 2023 Carll's Corner Outparcel - Bridgeton, New Jersey $ 3,000 $ 2,204 $ 2,759

Land Acquisitions

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.

On August 18, 2023, the Company purchased a 3.25 acre land parcel within Devine Street, located in Columbia, South Carolina, for $4.1 million (the "Devine Street Land Acquisition").

The Devine Street Land Acquisition terminated the Company's ground lease associated with this property, a savings of $0.3 million in annual ground rent.

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 loans on 12 properties, including $1.1 million in defeasance.

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 loans on 8 properties, including $0.7 million in defeasance.

Timpany Plaza Loan Agreement

On September 12, 2023, the Company entered into a loan agreement (the "Timpany Plaza Loan Agreement") for $11.6 million at a fixed rate of 7.27% with interest-only payments due monthly for the first twelve months.

Commencing on

September 12, 2024, until the maturity date of September 12, 2028, monthly principal and interest payments will be made based on a 30-year amortization schedule calculated based on the principal amount as of that time.

On the closing date, the Company received $9.1 million of the $11.6 million, and the remaining $2.5 million will be received upon the satisfaction of certain lease-related contingencies within one year of the agreement date.

The Timpany Plaza Loan Agreement is collateralized by the Timpany Plaza shopping center.

Convertible Notes

The Company’s Convertible Notes bear interest at a rate of 7.00% per annum.

Interest on the Convertible Notes is payable semi-annually in arrears on June 30 and December 31 of each year.

Interest expense on the Convertible Notes consists of the following (in thousands, except for shares):

For the years ended December 31, Series B Preferred

number of shares Series D Preferred

number of shares Convertible Note Interest at 7% Fair value adjustment Paid-in-kind Interest Expense

number of shares (1)

Series D Preferred Stock

number of shares (1)

Convertible Note interest at 7% coupon

Fair value adjustment Interest expense

2023 — 306,380 $ 2,259 $ 1,649 $ 3,908

2022 1,511,541 — $ 2,310 $ 1,429 $ 3,739

(1) Shares issued as interest payment on Convertible Notes.

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.

On September 11, 2023, the Company paid down $0.9 million of the Convertible Notes through an open market purchase of 35,000 units totaling $1.9 million.

As a result of these transactions the Company recognized a $1.6 million loss for the year ended December 31, 2023 which represents the fair value of the purchase over principal pay down.

The loss is included in "other expense" on the consolidated statements of operations.

As of December 5, 2023, the Conversion Price (as defined below) for the Convertible Notes was approximately $0.21 per share of the Company’s Common Stock (approximately 116.46 shares of Common Stock for each $25.00 of principal amount of the Convertible Notes being converted).

As of February 5, 2024, the Conversion Price for the Convertible Notes was approximately $0.12 per share of the Company’s Common Stock (approximately 209.84 shares of Common Stock for each $25.00 of principal amount of the Convertible Notes being converted).

Related Party Transactions

Management and Leasing Services for Cedar

The Company performs property management and leasing services for Cedar, a subsidiary of the Company.

During the years ended December 31, 2023 and 2022, Cedar paid the Company $2.1 million and $1.0 million, respectively, for these services.

Related party amounts due to the Company from Cedar were $8.1 million and $7.3 million as of December 31, 2023 and 2022, respectively, and have been eliminated for consolidation purposes.

Investment in Stilwell Activist Investments, L.P

On June 1, 2023, the Company subscribed for an investment in the amount of $3.0 million for limited partnership interests in Stilwell Activist Investments, L.P., a Delaware limited partnership (“SAI”).

On September 1, 2023 and November 30, 2023, the Company subscribed for additional investments each in the amount of $3.5 million for limited partnership interests in SAI.

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 consolidated statements of operations.

As of December 31, 2023, the fair value of the Company’s SAI investment was $10.7 million, which includes $10.0 million from subscriptions and $0.2 million in fees.

Unrealized gains on investment securities , net of fees wer e $0.7 million for the year ended December 31, 2023.

See Note 4 to the accompanying audited consolidated financial statements for additional details.

The Company’s initial subscription in SAI was approved by the disinterested directors of the Company, and, after the formation of the Related Person Transactions Committee, the further subscriptions in SAI were approved by that Committee.

Excepted Holder Limits

On December 4, 2023, the Board of Directors, under the terms of the Charter, created a Capital Stock Excepted Holder Limit of 55% and a Common Stock Excepted Holder Limit of 86% for each of SAI, Stilwell Activist Fund, L.P., Stilwell Value Partners VII, L.P., and Stilwell Associates, L.P.

(collectively, the “Investors”).

Joseph Stilwell, a member of our Board of Directors, is the managing member and owner of Stilwell Value LLC, which is the general partner of each of the Investors.

On December 5, 2023, the Company entered into an Excepted Holder Agreement with the Investors with respect to such limits.

The Capital Stock Excepted Holder Limit provides that the Investors are exempted from the Charter’s aggregate stock ownership limit of not more than 9.8% in value of the aggregate of the outstanding shares of all classes of the Company's capital stock (as calculated under the definitions of “Aggregate Stock Ownership Limit” and “Beneficial Ownership” in the Charter) and are instead subject to the percentage limit established by the Board of Directors.

The Common Stock Excepted Holder Limit provides that the Investors are exempted from the Charter’s common stock ownership limit of not more than 9.8% in value of the aggregate of the outstanding shares of the Company's Common Stock (as calculated under the definitions of “Common Stock Ownership Limit” and “Beneficial Ownership” in the Charter) and is instead subject to the percentage limit established by the Board of Directors.

The Capital Stock Excepted Holder Limit and Common Stock Excepted Holder Limit will automatically terminate upon reduction of the Investors’ capital stock and Common Stock ownership below 9.8%, respectively.

In consideration of the grant of these Excepted Holder Limits, the Investors concurrently entered into a one-year letter agreement with the Company whereby each Investor agreed that it will not exercise its right to convert the Convertible Notes into shares of Common Stock to the extent that such conversion would result in such Investor, whether on its own or as part of a “group” within the meaning of Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), becoming the direct or indirect “beneficial owner”, as defined in Rule 13d-3 under the Exchange Act, of common equity of the Company representing 50% or more of the total voting power of all outstanding shares of common equity of the Company that is entitled to vote generally in the election of directors.

Following the transfer of Common Stock to the Investors in consideration of the February 2024 Series D Preferred Stock redemptions made by the Investors, the Investors would have beneficially owned or constructively owned an amount of capital stock in excess of the Prior Excepted Holder Limits.

On February 5, 2024, the Board of Directors agreed to increase the prior Excepted Holder Limits to permit this additional ownership and, accordingly, the Company entered into an amendment to the Excepted Holder Agreement with the Investors under which the Company increased the Capital Stock Excepted Holder Limit granted to Investors under the Excepted Holder Agreement to 60% and the Common Stock Excepted Holder Limit to 90%.

Preferred Dividends

At December 31, 2022, the Company had accumulated undeclared dividends of $34.63 million to holders of shares of our Series D Preferred of which $8.47 million is attributable to the year ended December 31, 2022.

New Leases, Leasing Renewals and Expirations

Commencing September 21, 2023, the Series D Preferred Stock holders were entitled to cumulative cash dividends at an annual dividend rate of 12.75% increased by 2% of the liquidation preference per annum on each subsequent anniversary thereafter, subject to a maximum annual dividend rate of 16%, including the 2% default rate.

The total cumulative dividends in arrears for Series D Preferred Stock is $32.3 million as of December 31, 2023 (per share $12.48).

New Leases and Leasing Renewals

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

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Total leases renewed (count) 136 143

Option exercised (count) 18 22

Options exercised (count) 31 18

Weighted average on rate increases (per sq foot) $ 0.86 $ 1.29

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Weighted average rate (per sq foot) $ 12.42 $ 11.27

Gross Leasable Area ("GLA") expiring during the next 12 months, including month-to-month leases 6.77 % 6.16 %

(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 for the six months ended December 31, 2022.

Critical Accounting Estimates

The following discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements included in this Form 10-K, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

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Impairment of Long-Lived Assets

We periodically review investment properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable, with an evaluation performed at least annually.

We periodically review investment properties for impairment on a property-by-property basis or whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable, with an evaluation performed at least annually.

These circumstances include, but are not limited to, declines in the property’s cash flows, occupancy and fair market value.

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When the carrying value exceeds the fair value, less estimated costs to sell, an impairment expense is recognized.

The Company estimates fair value, less estimated closing costs, based on

similar real estate sales transactions.

The Company estimates fair value, less estimated closing costs, based on similar real estate sales transactions.

These valuation assumptions are based on the three-level valuation hierarchy for fair value measurement and represent Level 2 and 3 inputs.

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Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Series D Preferred Stock

The Series D Preferred Stock was initially classified as mezzanine equity because the redemption provisions were conditional upon the occurrence of an event that was not certain.

The Series D Preferred Stock was valued at net proceeds plus accrued and unpaid dividends.

In 2023, this event became certain and in accordance with Accounting Standards Codification ("ASC") 480, the Series D Preferred Stock was revalued at the redemption price which includes undeclared dividends, representing liquidation value.

The adjustment to liquidation value was recognized in accumulated deficit as an adjustment to redemption value.

Additionally, in accordance with ASC 480, as holders exercise their redemption rights the Series D Preferred Stock becomes mandatorily redeemable and the liquidation value of their exercise is classified as a liability.

Liquidity and Capital Resources

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Operating Activities

Our cash flows from operating activities were $30.76 million and $17.04 million during the year ended December 31, 2022 and 2021, representing an increase of 80.49% or $13.72 million.

Net cash provided by operating activities, before net changes in operating assets and liabilities, was $19.71 million and $16.54 million for 2022 and 2021, respectively.

The increase was primarily a result of an increase in non-same store net operating income ("NOI") of $5.91 million, primarily a result of the Cedar Acquisition and an increase in same store NOI of $1.23 million, partially offset by an increase in cash paid for interest expense and corporate general and administrative expenses.

Our cash flows from operating activities were $20.9 million and $30.8 million during the years ended December 31, 2023 and 2022, respectively, representing a decrease of 31.9% or $9.8 million primarily due to (1) a $12.5 million decrease in net changes in operating assets and liabilities due to timing of receipts and payments, (2) an $11.1 increase in corporate administrative expenses, interest expense and other expenses, offset by (3) a $13.5 million increase in net operating income ("NOI") not attributable to same properties a result of the Cedar Acquisition.

Investing Activities

Our cash flows used in investing activities were $133.51 million during the year ended December 31, 2022, compared to cash flows from investing activities of $5.10 million during the year ended December 31, 2021, representing a decrease of (2,717.37)% or $138.61 million primarily due to costs related to the Cedar Acquisition described in Note 3 included in this Form 10-K and an increase in capital expenditures paid of $2.10 million.

Our cash flows used in investing activities were $31.5 million during the year ended December 31, 2023, compared to cash flows used in investing activities of $133.5 million during the year ended December 31, 2022, representing a decrease of 76.4% primarily due to (1) $135.5 million costs due to the Cedar Acquisition, described in Note 3 included in the accompanying audited consolidated financial statements, partially offset by (2) $11.5 million increase in capital expenditures, (3) $10.0 million subscription in SAI, (4) $4.2 million in 2023 acquisitions and (5) $7.8 million decrease in cash received from disposal of properties.

Financing Activities

Our cash flows from financing activities were $118.20 million during the year ended December 31, 2022, compared to cash flows used in financing activities of $24.49 million for the year ended December 31, 2021, respectively, representing an increase of 582.63% or $142.69 million due to the following:

• $302.35 million increase in loan proceeds a result of the KeyBank-Cedar Loan Agreement, Guggenheim-Cedar Loan Agreement, Guggenheim Loan Agreement, JANAF Loan Agreement and Patuxent Crossing/Coliseum Marketplace Loan Agreement, partially offset by the 2021 refinancing activity including the Wilmington Financing Agreement;

• $8.34 million decrease as a result of 2021 preferred stock redemptions made in the Company's tender offers;

partially offset by

• $4.87 million increase in deferred financing costs primarily related to the KeyBank-Cedar Loan Agreement, Guggenheim-Cedar Loan Agreement, Guggenheim Loan Agreement JANAF Loan Agreement and Patuxent Crossing/Coliseum Marketplace Loan Agreement, partially offset by 2021 refinancing activity including the Wilmington Financing Agreement;

• $158.51 million increase in loan principal payments primarily a result of the KeyBank-Cedar Loan Agreement payoff, eleven loans paid associated with the Guggenheim Loan Agreement, the three loans paid associated with the JANAF Loan Agreement and the 2022 Walnut Hill Plaza and Butler Square payoffs, partially offset by the 2021 Powerscourt Financing Agreement payoff, the 2021 refinancing activities and the loans paid down as a result of 2021 property sales;

• $1.93 million increase in prepayment penalties related to defeasance associated with the Guggenheim Loan Agreement and JANAF Loan Agreement, partially offset by the Berkley/Sangaree/Tri-County loan payoff;

• $2.69 million increase in dividend and distributions paid on noncontrolling interests.

Our cash flows used in financing activities were $5.5 million during the year ended December 31, 2023, compared to cash flows from financing activities of $118.2 million for the comparable period in 2022.

Financing activities during the year ended December 31, 2023 primarily consists of:

Cash inflows:

• $16.4 million 2023 loan refinancing activities, net, including the Timpany Plaza Loan Agreement;

Cash outflows:

• $10.8 million for distributions paid on noncontrolling interests;

• $4.4 million payments for deferred financing costs;

• $1.8 million defeasance payments;

• $3.1 million repurchase of debt securities;

• $1.8 million scheduled loan principal payments on debt.

Financing activities during the year ended December 31, 2022 primarily consisted of:

Cash inflows:

• $19.3 million 2022 loan refinancing activities, net;

• $130.0 million loan related to the Cedar Acquisition;

Cash outflows:

• $12.7 million payments for deferred financing costs;

• $4.4 million scheduled loan principal payments on debt;

• $5.6 million loan principal payment related to the sale of Butler Square;

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

• $2.7 million for distributions paid on noncontrolling interests;

• $2.6 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.

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Fixed-rate notes $ 495,572 $ 482,447

$ 482,447 $ 344,177

Adjustable-rate mortgages — 2,085

Total debt $ 495,572 $ 482,447

(1) Includes portion attributable to liabilities held for sale, see Note 3 included in this Form 10-K.

The weighted average interest rate and term of our fixed-rate debt including liabilities held for sale are 4.99% and 7.43 years, respectively, at December 31, 2022.

We have no debt maturing during the year ending December 31, 2023.

The weighted average interest rate and term of our fixed-rate debt are 5.42% and 8.2 years, respectively, at December 31, 2023.

The weighted average interest rate and term of our fixed-rate debt was 4.99% and 7.4 years, respectively, at December 31, 2022.

We have $7.2 million of debt maturing during the year ending December 31, 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 5 included in this Form 10-K for additional mortgage indebtedness details.

See Note 6 to the accompanying audited consolidated financial statements for additional mortgage indebtedness details.

Nasdaq Notices

On June 26, 2023, the listing qualifications staff (the "Staff") of Nasdaq notified the Company that based on the Common Stock’s bid price closing below $1.00 per share for 30 consecutive business days, the Company no longer complied with Nasdaq Listing Rule 5550(a)(2) (the "Bid Price Rule") and that it had 180 calendar days to regain compliance.

This rule requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days.

In response, the Board of Directors determined that it was advisable to amend the Company’s charter to effect a one-for-ten reverse stock split of the Company’s Common Stock, which reverse stock split was subsequently effected on August 17, 2023.

Primarily as a result of this reverse stock split, the closing bid price of the Company’s Common Stock was at least $1.00 per share for a minimum of ten consecutive business days, and the Company regained compliance with Nasdaq’s Bid Price Rule on September 1, 2023.

However, the Company’s Common Stock bid price has again come under significant downward pressure primarily as a result of the Company’s Series D Preferred Stock holders having the right, at each such holder’s option, after September 21, 2023, to require the Company to redeem on a monthly basis any or all of such holder’s shares of Series D Preferred Stock at a redemption price of $25.00 per share, plus an amount equal to all accrued but unpaid dividends, if any, to and including the Holder Redemption Date.

This holder redemption price may be paid in cash or in equal value of shares of Common Stock, or in any combination thereof, at the Company’s option.

The Company has chosen to pay the monthly redemption price in equal value of shares of Common Stock.

On December 7, 2023, the Staff again notified the Company that based on the Common Stock’s bid price closing below $1.00 per share for 30 consecutive business days, the Company no longer complied with Nasdaq’s Bid Price Rule and that it had a 180-day compliance period until June 4, 2024 to regain compliance.

Material Cash Requirements, Contractual Obligations and Commitments

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and (iii) opportunistic expenditures.

The primary liquidity needs of the Company, in addition to the funding of our ongoing operations, at December 31, 2022 are $2.34 million in principal and regularly scheduled payments due in the year ended December 31, 2023 as described in Note 5 on this Form 10-K.

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.

The primary liquidity needs of the Company, in addition to the funding of our ongoing operations, at December 31, 2023 are $7.2 million in principal and regularly scheduled payments due in the year ended December 31, 2024 as described in Note 6 to the accompanying audited consolidated financial statements.

In addition, the Company has $3.1 million outstanding construction commitments at December 31, 2023.

In addition to liquidity required to fund debt payments and construction commitments, 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:

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• intends to use cash generated from operations during the year ended December 31, 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 assets 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.

In addition, the Board of Directors suspended Series A Preferred, Series B Preferred and Series D Preferred dividend payments beginning with the fourth quarter 2018 dividend.

On November 3, 2021, common stockholders of the Company approved amendments to the Company’s Charter to remove the cumulative dividend of the Series A Preferred and the Series B Preferred.

The Company believes that these actions support the Company's liquidity needs and improve the Company's capital structure.

Convertible Notes

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

In addition, depending on the prices at which the ongoing monthly redemptions of Series D Preferred Stock occur, the conversion price for the Convertible Notes could be repeatedly adjusted downwards which would in turn cause significant pressure on the value of the Company’s Common Stock.

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 (of which there are approximately 3.15 million shares outstanding at December 31, 2022) 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 .

As of December 31, 2022, the outstanding Series D Preferred had an aggregate liquidation preference of approximately $78.81 million, with aggregate accrued and unpaid dividends in the amount of approximately $34.63 million, for a total liquidation value of $113.44 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 3,152,392 shares outstanding as of December 31, 2022) would be approximately $78.81 million, with aggregate accrued and unpaid dividends in the amount of approximately $40.99 million, for a total liquidation value of $119.80 million.

As of December 31, 2022, 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 February 28, 2023 of $1.58 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 $19.00 million (subsequently reduced to $6.00 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 $6.00 million.

We subsequently launched a second modified Dutch auction tender offer in April 2021 for up to $12.00 million of our Series D Preferred, in which 103,513 shares were tendered and accepted for purchase for an aggregate cost of $1.86 million.

In July 2021, we raised additional capital for the Company through a rights offering pursuant to which the Common Stock holders purchased $30.00 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.

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.

On June 30, 2022, interest on the Convertible Notes was paid in the form of Series B Preferred.

For purposes of determining the value of the Series B Preferred paid as interest on the Convertible Notes, each share of Series B 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 B Preferred for the 15 consecutive trading days ending on the third business day immediately preceding the interest payment date, and (y) 0.55.

On January 3, 2023 (the next succeeding Business Day after December 31, 2022), interest was paid on the Convertible Notes in the form of Series B Preferred.

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 H olders, 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, o n November 22, 2022, the Company commenced an Exchange Offer and related Consent Solicitation.

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.

As of December 31, 2023, the outstanding Series D Preferred Stock had an aggregate liquidation preference of approximately $64.8 million, with aggregate accrued and unpaid dividends in the amount of approximately $32.3 million, for a total liquidation value of $97.1 million.

After September 21, 2023, each holder of Series D Preferred Stock has the right, at such holder’s option, to request that the Company redeem any or all of such holder’s shares of Series D Preferred Stock on a monthly basis.

As the Series D Preferred Holders’ continue to exercise their redemption rights on a monthly basis, the Company will continue to pay the aggregate redemption price in shares of our 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 will likely be required 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 either (i) fund cash redemptions or (ii) directly settle redemptions in Common Stock, will result in a substantial dilution of Common Stock.

Inflation, Deflation and Economic Condition Considerations

Prior to 2021, inflation was relatively low and did not have a significant detrimental impact on the Company’s results of operations.

However, inflation substantially increased in 2022.

In addition, 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.

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 our 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.

Therefore, the Company intends to continue to settle redemptions of Series D Preferred Stock in Common Stock.

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

Recent Accounting Pronouncements

See Note 2 to the consolidated financial statements beginning on page 38 of this Annual Report on Form 10-K.

See Note 2 to the accompanying audited consolidated financial statements beginning on page 35 of this Annual Report on Form 10-K.

Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022

Results of Operations

Results from operations for the year ended December 31, 2022 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 the entire period for future quarters.

Therefore, our historical financial statements may not be indicative of future operating results.

The following table presents a comparison of the consolidated statements of operations for the years ended December 31, 2022 and 2021, respectively (in thousands, except Property Data).

For the Years Ended December 31, Year over Year Changes

2022 2021 $/# %

PROPERTY DATA:

Number of properties owned and leased at period end (1)

75 58 17 29.31 %

Aggregate gross leasable area at period end (1)

8,172,527 5,478,855 2,693,672 49.16 %

Ending leased rate at period end (1)

92.9 % 94.2 % (1.3) % (1.38) %

FINANCIAL DATA:

Rental revenues $ 75,195 $ 60,368 $ 14,827 24.56 %

Other revenues 1,450 942 508 53.93 %

Total Revenue 76,645 61,310 15,335 25.01 %

Property operations 25,731 19,618 6,113 31.16 %

The following table presents a comparison of the consolidated statements of operations for the years ended December 31, 2023 and 2022, respectively (in thousands).

For the Years Ended December 31, Changes

2023 2022 Dollars Percent

Revenues $ 102,325 $ 76,645 $ 25,680 33.5 %

Property operating expense 34,870 25,731 9,139 35.5 %

Property operating income 67,455 50,914 16,541

Depreciation and amortization (28,502) (19,540) (8,962) 45.9 %

Impairment of assets held for sale 760 2,300 (1,540) (66.96) %

Impairment of assets held for sale — (760) 760 n/a

Corporate general & administrative (11,750) (8,620) (3,130) 36.3 %

Total Operating Expenses 54,651 43,855 10,796 24.62 %

Gain on disposal of properties 2,204 2,604 (400) (15.4) %

Operating Income 24,598 19,510 5,088 26.08 %

Interest income 484 65 419 644.6 %

Gain on investment securities, net 685 — 685 n/a

Interest expense (32,314) (30,107) (2,207) (7.3) %

Net changes in fair value of derivative liabilities 3,458 (2,335) 5,793 248.1 %

Other income — 552 (552) (100.00) %

Gain on preferred stock redemptions 9,893 — 9,893 n/a

Other expense (5,482) (691) (4,791) (693.3) %

Net Loss Before Income Taxes (8,470) (9,349) 879 9.40 %

Income tax expense — (2) 2 100.00 %

Net Loss (8,470) (9,351) 881 9.42 %

Net loss attributable to noncontrolling interests 3,984 92 3,892 4,230.43 %

Income tax expense (48) — (48) n/a

Net Income (Loss) 6,083 (8,470) 14,553

Net income attributable to noncontrolling interests 10,770 3,984 6,786 170.3 %

Net Loss Attributable to Wheeler REIT $ (4,687) $ (12,454) $ 7,767

(1) Excludes the undeveloped land parcels.

Includes assets held for sale.

Total Revenue

Total revenue was $76.65 million and $61.31 million for the years ended December 31, 2022 and December 31, 2021, respectively, representing an increase of 25.01%.

The increase in rental revenues of $14.83 million is primarily a result of the Cedar Acquisition, partially offset by the decrease from sold properties.

See Same Store and Non-same Store Operating Income for further details about the changes within operating revenue.

Total Operating Expenses

Total operating expenses were $54.65 and $43.86 million for the years ended December 31, 2022 and 2021, respectively, representing an increase of 24.62%.

The increases are primarily a result of the Cedar Acquisition.

See Same Store and Non-same Store Operating Income for further details about the changes within property operations expense.

Impairment of assets held for sale was $760 thousand and $2.30 million for the years ended December 31, 2022 and 2021 respectively, as a result of Harbor Pointe Land Parcel and Columbia Fire Station, respectively.

Depreciation and amortization increased 32.05% for the year ended December 31, 2022 primarily as a result of the Cedar Acquisition.

Corporate general and administrative expenses were $8.62 million and $7.14 million for the years ended December 31, 2022 and 2021, respectively, representing an increase of 20.73%, primarily a result of the following:

• $811 thousand increase in compensation and benefits primarily driven by hiring more employees due to the Cedar Acquisition and payroll related costs;

• $694 thousand increase in professional fees primarily a result of the Cedar preferred litigation;

• $200 thousand increase in advertising related costs;

• $130 thousand increase in corporate administration costs;

and partially offset by

• $355 thousand decrease in other expenses, primarily related to lower fees associated with capital, debt and financing activities.

Disposal of Properties

The net gain on disposal of properties increase of $549 thousand for the year ended December 31, 2022 is a result of the 2022 sale of Walnut Hill Plaza and Butler Square compared to the 2021 sale of the Rivergate Shopping Center Out Parcel, Berkley Shopping Center and Berkley Land Parcel, Columbia Fire Station and Tulls Creek Land Parcel.

Interest Expense

Interest expense was $30.11 million and $33.03 million for the year ended December 31, 2022 and 2021, respectively, representing a decrease of 8.84%.

Revenues were higher primarily as a result of (1) an increase in rental revenues of $25.1 million, which is primarily due to a $21.1 million increase in property revenues from the Cedar Acquisition, partially offset by 2022 property sales, (2) an increase of $2.8 million in market lease amortization and (3) an increase of $1.1 million in same-property revenues.

See Same-Property Net Operating Income for further details about the changes within operating revenue.

Property Operating expenses were higher primarily as a result of (1) an increase of $7.6 million in property operating expenses from the Cedar Acquisition, partially offset by 2022 property sales and (2) an increase of $1.5 million in same-property expenses.

Impairment was lower primarily as a result of the Harbor Point Land Parcel (defined below) held for sale in 2022.

Depreciation and amortization were higher primarily as a result of the Cedar Acquisition.

Corporate general and administrative expenses were higher primarily as a result of (1) an increase of $1.2 million in professional fees primarily a result of the Cedar Acquisition, (2) an increase of $1.1 million in compensation and benefits primarily driven by hiring more employees due to the Cedar Acquisition and payroll related costs, and (3) an increase of $0.7 million in corporate administration costs primarily a result of the Cedar Acquisition.

Interest expense was higher primarily as a result of a full year of the Cedar Acquisition.

Below is a comparison of the components which make up interest expense (in thousands):

December 31, Changes

2022 2021 Change % Change

2023 2022 Dollars % Change

Property debt interest - excluding Cedar debt $ 16,153 $ 14,717 $ 1,436 9.8 %

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Amortization of deferred financing costs 2,860 6,098 (3,238) (53.1) %

Interest on corporate debt — 3,410 (3,410) (100.00) %

Property debt interest - Cedar 7,635 2,939 4,696 159.8 %

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(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 loss of $2.34 million and a gain of $3.77 million for the years ended December 31, 2022 and 2021, respectively, which represents a non-cash adjustment from a change in the fair value.

The largest impact on the derivative liabilities' valuation is a result of the change in fair market value of the Company's securities described at Note 6 on this Form 10-K.

Other Income and Expense

Other income was $0 and $552 thousand for the years ended December 31, 2022 and 2021, respectively, relating to Paycheck Protection Program (the "PPP") Promissory Note forgiveness.

Other expense was $691 thousand and $185 thousand

for the years ended December 31, 2022, respectively, relating to legal settlement costs.

Other income and other expense are non-operating in nature.

Same Store and Non-same Store Operating Income

Net changes in the fair value of derivative liabilities increased, which represents a non-cash adjustment from a change in the fair value that includes adjustments in valuation assumptions.

See Note 7 to the accompanying audited consolidated financial statements for additional details.

Gain on preferred stock redemptions is a result of the redemptions of Series D Preferred Stock.

The value of the Common Stock issued to holders redeeming their Series D Preferred Stock is the volume weighted average price per share of our Common Stock for the ten consecutive trading days immediately preceding, but not including, the Holder Redemption Date as reported on Nasdaq (the "VWAP").

During the year ended December 31, 2023, the Company has realized a gain of $9.9 million in the aggregate due to the closing price of the Common Stock on the last VWAP date differing from the VWAP used to calculate the shares issued in each redemption round.

Other expense represents expenses which are non-operating in nature.

Other expenses were $5.5 million for the year ended December 31, 2023, which consists of capital structure transaction costs.

Other expenses were $0.7 million for the year ended December 31, 2022, which consisted of legal settlement costs.

Same-Property Net Operating Income

NOI is a widely-used non-GAAP financial measure for REITs.

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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, 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.

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.

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 and non-same store NOI from the most directly comparable GAAP financial measure of net income (loss).

Same stores consist of those properties owned during all periods presented in their entirety, non-same stores consist of those properties acquired or disposed of during the periods presented.

The non-same store category consists of the following properties:

• Continuing operations

◦ Berkley Shopping Center and Berkley Land Parcel (sold March 25, 2021);

◦ Tulls Creek Land Parcel (sold July 9, 2021);

◦ Rivergate Shopping Center Out Parcel (sold August 31, 2021);

◦ Columbia Fire Station (sold November 17, 2021);

◦ Walnut Hill Plaza (sold January 11, 2022);

◦ Butler Square (sold December 9, 2022);

◦ Cedar Portfolio, 19 properties (acquired August 22, 2022).

Years Ended December 31,

Same Store Non-same Store Total

2022 2021 2022 2021 2022 2021

The following table is a reconciliation of same-property NOI from operating income (the most directly comparable GAAP financial measure).

Same-property NOI consists only of those properties owned during the entirety of all periods presented.

Year Ended December 31,

(in thousands )

Net (Loss) Income $ (5,926) $ (8,179) $ (2,544) $ (1,172) $ (8,470) $ (9,351)

Income tax expense — 2 — — — 2

Other expense 691 185 — — 691 185

Net changes in fair value of derivative liabilities 2,335 (3,768) — — 2,335 (3,768)

Interest expense 23,067 31,551 7,040 1,477 30,107 33,028

Interest Income (65) (34) — — (65) (34)

Operating Income $ 29,407 $ 24,598

Gain on disposal of properties (2,204) (2,604)

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Depreciation and amortization 28,502 19,540

Straight-line rents (1,370) (800)

Above (below) market lease amortization, net

(4,849) (2,079)

Other non-property revenue (135) (23)

Property Net Operating Income $ 41,872 $ 40,639 $ 6,940 $ 1,030 $ 48,812 $ 41,669

Property revenues $ 62,150 $ 59,594 $ 12,393 $ 1,693 $ 74,543 $ 61,287

Property expenses 20,278 18,955 5,453 663 25,731 19,618

Property Net Operating Income $ 41,872 $ 40,639 $ 6,940 $ 1,030 $ 48,812 $ 41,669

Property Revenues

Total same store property revenues were $62.15 million and $59.59 million for the years ended December 31, 2022 and 2021, respectively, representing an increase of 4.29%.

The same store property revenue increases are primarily related to the occupancy growth since December 31, 2020.

Property Expenses

Total same store property expenses were $20.28 million and $18.96 million for the years ended December 31, 2022 and 2021, respectively, an increase of 6.98% .

Same store property expense increase was primarily due to expense increases in insurance, grounds and landscaping and repairs and maintenance.

Property Net Operating Income

Total property net operating income were $48.81 million and $41.67 million for the years ended December 31, 2022 and 2021, respectively, representing a increase of 17.14%, primarily as a result of the Cedar Acquisition.

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.

NOI related to properties not defined as same-property

(20,061) (6,607)

Same-Property Net Operating Income $ 41,040 $ 41,405

Total same-property NOI was $41.0 million and $41.4 million for the years ended December 31, 2023 and 2022, respectively, representing a decrease of 0.9%.

Same-property NOI was impacted by (1) $1.3 million increase in rental revenue driven by strong leasing activity, (2) $0.3 million increase in other revenues due to termination fees and enterprise zone credits;

(3) $0.2 million savings in rent expense due to the purchase of the Devine Street Land Acquisition, which terminated the Company's ground lease associated with this property, offset by a (4) $1.4 million increase in property operating expenses necessary as part of financing requirements, (5) $0.3 million demolition of an outparcel building that was placed out of service and (6) an increase in credit losses from tenants of $0.5 million.

NOI related to properties not defined as same-properties for the year ended December 31, 2023 and 2022 is attributable to the Cedar Acquisition and the 2022 property sales.

The Cedar Acquisition had property revenues of $33.2 million and $11.0 million, respectively, and property expenses of $13.1 million and $5.0 million, respectively, for the years ended December 31, 2023 and 2022.

Funds from Operations

We use funds from operations ("FFO"), a non-GAAP measure, as an alternative measure of our operating performance, specifically as it relates to results of operations and liquidity.

We compute FFO in accordance with standards established by the Board of Governors of Nareit in its March 1995 White Paper (as amended in November 1999, April 2002 and December 2018).

As defined by NAREIT, FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization (excluding amortization of loan origination costs), impairment of real estate related long-lived assets and after adjustments for unconsolidated partnerships and joint ventures.

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.

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 comparison of same and non-same store FFO, which is a non-GAAP measurement, for the years ended December 31, 2022 and 2021:

Years Ended December 31,

Same Store Non-same Store Total Year Over Year Changes

2022 2021 2022 2021 2022 2021 $ %

Net Loss $ (5,926) $ (8,179) $ (2,544) $ (1,172) $ (8,470) $ (9,351) $ 881 9.42 %

Depreciation and amortization of real estate assets 14,193 14,404 5,347 393 19,540 14,797 4,743 32.05 %

Impairment of assets held for sale 760 — — 2,300 760 2,300 (1,540) (66.96) %

Gain on disposal of properties — — (2,604) (2,055) (2,604) (2,055) (549) (26.72) %

FFO $ 9,027 $ 6,225 $ 199 $ (534) $ 9,226 $ 5,691 $ 3,535 62.12 %

During the year ended December 31, 2022, same store FFO increased $2.80 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.

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However, there can be no assurance that AFFO presented by us is comparable to the adjusted or modified FFO of other REITs.

Total AFFO for the years ended December 31, 2022 and 2021 is shown in the table below (in thousands):

A reconciliation of net income (loss) to FFO available for common shareholders and AFFO (in thousands):

Years Ended December 31,

Net income (loss) $ 6,083 $ (8,470)

Depreciation and amortization of real estate assets 28,502 19,540

Impairment of assets held for sale — 760

Gain on disposal of properties (2,204) (2,604)

FFO 32,381 9,226

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Dividends on noncontrolling interests preferred stock (10,752) (3,913)

Preferred stock redemption — 70

Preferred stock accretion adjustments 460 584

FFO available to common stockholders and common unitholders 12,827 (3,159)

Capital related costs 27 438

Other non-recurring and non-cash expenses 2,051 3,092

Gain on investment securities, net (685) —

Net changes in fair value of derivative liabilities (3,458) 2,335

Share-based compensation — 14

Gain on preferred stock redemptions (9,893) —

Straight-line rental revenue, net straight-line expense (1,380) (768)

Loan cost amortization 6,098 12,710

Deferred financing cost amortization 2,860 6,098

Paid-in-kind interest 3,908 3,739

Above (below) market lease amortization (2,079) 13

Recurring capital expenditures and tenant improvement reserves (1,354) (1,096)

Above (below) market lease amortization, net

(4,849) (2,079)

Recurring capital expenditures tenant improvement reserves (1,628) (1,354)

AFFO $ (247) $ 7,904

Other non-recurring and non-cash expenses are costs we believe will not be incurred on a go forward basis.

Other nonrecurring expenses of $3.07 million for the year ended December 31, 2022 primarily include $2.61 million in loan defeasance payments, a result of the 2022 loan refinancing activities, $691 thousand legal settlement costs and severance partially offset with $353 thousand nonrecurring revenue related to Cedar's recognition of easement revenue.

Other nonrecurring expenses of $352 thousand for the year ended December 31, 2021 include $185 thousand in legal settlement costs, $687 thousand in loan prepayment penalty on sale of the Berkley Shopping Center, partially offset with $552 thousand in PPP Promissory Note forgiveness.

The preferred stock redemption of $0 and $70 thousand for the years ended December 31, 2022 and

2021, respectively, represents the undeclared dividends on the stock retirement for the months preceding their retirement.

Net changes in fair value of derivative liabilities is the result of the non-cash loss or gain from adjusting the warrant liabilities and embedded derivative liabilities to their fair market value, further details are described at Note 6 on this Form 10-K.

The preferred stock accretion adjustments represent the amortization of offering costs associated with raising the Series B Preferred and Series D Preferred.

Other non-recurring and non-cash expenses are costs of the Company that we believe will not be incurred on a go-forward basis.

Other non-recurring expenses of $2.1 million for the year ended December 31, 2023, were primarily a result of $1.8 million in loan defeasance payments and $0.3 million costs to demolish decommissioned space not included in the Company's gross leasable area.

For the year ended December 31, 2022, other non-recurring expenses totaled $3.1 million, primarily including $2.6 million in loan defeasance payments a result of the 2022 loan refinancing activities and $0.7 million legal settlement costs and severance, partially offset with $0.4 million nonrecurring revenue related to Cedar's recognition of easement revenue.

Inflation, Deflation and Economic Condition Considerations

is experiencing elevated levels of inflation, which could continue or worsen.

Substantially all of the Company’s tenant leases contain provisions designed to partially mitigate the negative impact of inflation in the near term.

Such lease provisions include clauses that require tenants to reimburse the Company for inflation-sensitive costs such as real estate taxes, insurance and many of the operating expenses it incurs.

In addition, many of our leases are for terms of less than ten years, which permits us to seek increased rents upon re-rental at market rates.

However, s ignificant 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.

Quantitative and Qualitative Disclosures About Market Risk.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis