What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-03-18 compared with 2020-02-26 · 214 added, 179 removed, 219 unchanged (64% of the section changed)

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We are a Maryland corporation focused on owning, leasing and operating income producing strip centers, neighborhood centers, grocery-anchored centers, community centers and free-standing retail properties.

Our strategy has been to opportunistically acquire quality retail properties in secondary and tertiary markets that generate attractive risk-adjusted returns.

We have targeted competitively protected properties located within developed areas, commonly referred to as in-fill, that possess minimal competition risk and are surrounded by communities that have strong demographics and dynamic, diversified economies that will continue to generate jobs and future demand for commercial real estate.

Our primary target markets include the Northeast, Mid-Atlantic and Southeast.

Our portfolio is comprised of sixty-one retail shopping centers, our office building and six undeveloped land parcels.

Thirteen of these properties are located in Virginia, three are located in Florida, seven are located in North Carolina, twenty-four are located in South Carolina, twelve are located in Georgia, two are located in Kentucky, two are located in Tennessee, one is located in New Jersey, one is located in Alabama, one is located in West Virginia, one is located in Oklahoma and one is located in Pennsylvania.

Our primary target markets include the Southeast and Mid-Atlantic.

Our portfolio is comprised of sixty retail shopping centers and six undeveloped land parcels.

Twelve of these properties are located in Virginia, three are located in Florida, seven are located in North Carolina, twenty-three are located in South Carolina, twelve are located in Georgia, two are located in Kentucky, two are located in Tennessee, one is located in New Jersey, one is located in Alabama, one is located in West Virginia, one is located in Oklahoma and one is located in Pennsylvania.

The Company’s portfolio had total net rentable space of approximately 5,561,766 square feet and a leased level of approximately 88.9% at December 31, 2020.

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These events are summarized below.

Disposal Date

Contract Price

Impact of COVID-19

The following discussion is intended to provide stockholders with certain information regarding the impacts of the COVID-19 pandemic on the Company’s business and management’s efforts to respond.

Unless otherwise specified, the statistical and other information regarding the Company’s portfolio and tenants are estimates based on information available to the Company.

As a result of the rapid development, fluidity and uncertainty surrounding this situation, the Company expects that such statistical and other information will change, potentially significantly, going forward and may not be indicative of the actual impact of the COVID-19 pandemic on the Company’s business, operations, cash flows and financial condition for future periods.

The United States of America has been subject to significant economic disruption caused by the onset of COVID-19.

Nearly every industry has been impacted directly or indirectly, and the U.S.

retail market has come under severe pressure due to numerous factors, including preventative measures taken by local, state and federal authorities to alleviate the public health crisis such as mandatory business closures, quarantines, restrictions on travel and “shelter-in-place” or “stay-at-home” orders at the state and local levels.

These containment measures, which generally do not apply to businesses designated as “essential”, are affecting the operations of different categories of the Company’s base to varying degrees with, for example, grocery stores and pharmacies generally permitted to remain open and operational, restaurants generally limited to take-out and delivery services only and capacity restrictions while open, and non-essential businesses generally forced to close.

There is uncertainty as to the time, date and extent to which these restrictions will be relaxed or lifted, businesses of tenants that have closed, either voluntarily or by mandate, will reopen or partially reopen.

The properties are geographically located in the Southeast, Mid-Atlantic and Northeast, which markets represented approximately 61%, 35% and 4%, respectively, of the total annualized base rent of the properties in our portfolio.

Our operating portfolio contains retail shopping centers with a particular emphasis on grocery-anchored retail centers;

grocers represent approximately 26% of total annualized base rent as of December 31, 2020.

We generally lease our properties to national and regional retailers.

The Company’s portfolio and tenants have been impacted as follows:

• The Company’s sixty retail shopping centers are open and operating.

As of December 31, 2020, all of the Company’s shopping centers feature necessity-based tenants, with forty-three of the sixty properties anchored by grocery and/or drug stores.

• The Company agreed to lease modifications with nine tenants who declared bankruptcy, resulting in a weighted average rate decrease of 7.54% or $0.86 rate per square foot.

• Nine tenants vacated due to bankruptcy and three of these vacated tenants have been backfilled.

• Beginning in April 2020, the Company received certain rent relief requests, most often in the form of rent deferral requests, as a result of COVID-19.

The Company evaluates each tenant rent relief request on an individual basis, considering a number of factors.

Not all tenant requests ultimately result in concessions or modification of agreements, nor is the Company forgoing its contractual rights under its lease agreements.

As a result, the Company granted 148 concessions as of March 5, 2021 and modified 72 leases as of December 31, 2020, with a weighted average rate increase of 3.53% and 3 year weighted average extension term.

During the three months ended December 31, 2020, the Company modified 4 leases at no rate change and five months weighted average extension term.

• The Company has received payment of 97% of contractual base rent and tenant reimbursements billed for the three months ended December 31, 2020, total 2020 collections were 99%.

• As of December 31, 2020, $257 thousand of accounts receivable relate to short term deferral of rents, a decrease of $132 thousand compared to September 30, 2020.

The Company has taken a number of proactive measures to maintain the strength of its business and manage the impact of COVID-19 on the Company’s operations and liquidity, including the following:

• Along with the Company’s tenants and the communities they serve, the health and safety of the Company’s employees and their families is a top priority.

The Company has adapted its operations to protect employees, including implementing a work from home policy and the Company’s IT systems have enabled its team to work seamlessly.

• The Company is in constant communication with its tenants and sharing resources on how to identify local, state and federal resources that may be available to support their businesses and employees during the pandemic, including stimulus funds that may be available under the Coronavirus Aid, Relief and Economic Security Act of 2020 and the Consolidated Appropriations Act of 2021.

• The Company currently has approximately $7.66 million in cash and cash equivalents and an additional $35.11 million in restricted cash.

• Given the uncertainty of the COVID-19 pandemic’s near and potential long-term impact on the Company’s business, and in order to preserve its liquidity position, the Company has continued its suspension of any dividend distributions.

The Company derives revenues primarily from rents received from tenants under leases at the Company’s properties.

The Company’s operating results therefore depend materially on the ability of its tenants to make required rental payments.

The extent to which the COVID-19 pandemic impacts the businesses of the Company’s tenants, and the Company’s operations and financial condition, will depend on future developments which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and such containment measures, among others.

While the extent of the outbreak and its impact on the Company, its tenants and the U.S.

retail market is uncertain, a prolonged crisis could result in continued disruptions in the credit and financial markets, continued high unemployment rates, low consumer confidence and consumer spending levels and overall poor global and U.S.

economic conditions.

The factors described above, as well as additional factors that the Company may not currently be aware of, could materially negatively impact the Company’s ability to collect rent and could lead to 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.

The comparability of the Company’s results of operations for the year ended December 31, 2020 to future periods may be significantly impacted by the effects of the outbreak of the COVID-19 pandemic.

Paycheck Protection Program

The Company received proceeds of $552 thousand (the "PPP funds") pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act.

The PPP funds were received in the form of a promissory note, dated April 24, 2020 (the “Promissory Note”), between the Company and KeyBank as the lender that matures on April 24, 2022 bearing interest at a fixed rate of 1% per annum, payable monthly commencing seven months from the date of the note.

Under the terms of the PPP, the principal may be forgiven if the proceeds are used for qualifying expenses as described in the CARES Act, such as payroll costs, mortgage interest, rent and utilities.

On January 8, 2021, KeyBank notified the Company that the PPP Promissory Note application for forgiveness has been approved.

Assets Held for Sale and Dispositions

At December 31, 2020, assets held for sale included Columbia Fire Station, Berkley Shopping Center, a .75 acre land parcel at Berkley and two outparcels at Rivergate Shopping Center, as the Company has committed to a plan to sell each property.

The Company recorded $600 thousand impairment expense for Columbia Fire Station for the year ended December 31, 2020 reducing the carrying value for the amounts that exceeded the property's fair value less estimated selling costs.

Disposal Date Property Contract Price Gain (Loss) Net Sales Proceeds

(in thousands)

July 12, 2019

Perimeter Square, Tulsa, OK

March 18, 2019

Graystone Crossing, Tega Cay, SC

February 7, 2019

Harbor Pointe Land Parcel (1.28 acres), Grove, OK

January 11, 2019

Jenks Plaza, Jenks, OK

Assets Held for Sale

In 2019, the Company’s management and Board of Directors committed to a plan to sell Perimeter Square, Tulsa, OK and St.

December 31, 2020 Riversedge North - Virginia Beach, VA $ 3,000 $ 49 $ 2,843

January 21, 2020 St.

Matthews - St.

Matthews, SC 1,775 (26) 1,665

The Company recorded a $1.60 million impairment charge for the year ended December 31, 2019.

These impairment charges resulted from reducing the carrying value of Perimeter Square and St.

Matthews during the year ended December 31, 2019, for the amounts that exceeded the properties' fair value less estimated selling costs.

The valuation assumptions for Perimeter and St.

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

Level 2 inputs are quoted prices for similar assets or liabilities in active markets;

quoted prices for identical or similar assets in markets that are not active;

and inputs other than quoted prices.

On December 31, 2020, the Company sold its corporate headquarters in Virginia Beach to an unrelated party and simultaneously leased the building for ten years at an annual base rent of $265 thousand, plus taxes and other operating and maintenance expenses.

The transaction qualified for sale leaseback accounting in accordance with ASC 842.

As a result of this transaction, a gain of $49 thousand was recognized, which is included in "gain on disposal of properties" on the consolidated statements of operations with the remaining gain of $725 thousand deferred over the life of the lease and the net cash proceeds were approximately $1.10 million after transaction costs and repayment of the outstanding mortgage.

Powerscourt Financing Agreement

On December 22, 2020, the Company entered into a financing agreement (the "Powerscourt Financing Agreement") with Powerscourt Investments XXII, LP, as administrative agent and collateral agent.

The Powerscourt Financing Agreement provides for a term loan in the aggregate principal of $25.00 million.

The proceeds of the Powerscourt Financing Agreement are intended for the following:

(i) to paydown the Company’s indebtedness on the KeyBank Credit Agreement, (ii) to redeem certain shares of the Company’s Series D Preferred and (iii) to pay fees and expenses in connection with the transactions contemplated by the Powerscourt Financing Agreement.

The Powerscourt Financing Agreement is at a rate of 13.50% and matures on March 31, 2023 with quarterly interest only payments beginning on January 15, 2021.

In conjunction with the Powerscourt Financing Agreement, the Company issued to Powerscourt XXII, LP a warrant to purchase an aggregate of 496,415 shares of the Company’s Common Stock (see the “Powerscourt Warrant Agreement” below).

Powerscourt Warrant Agreement

Pursuant to Powerscourt Financing Agreement, the Company issued Powerscourt Investments XXII, LP, a warrant (the “Warrant”) to purchase 496,415 shares of Common Stock for $3.12 per share (the “Powerscourt Warrant Agreement”).

The Warrant is exercisable at the option of its holder in whole or in part into shares of Common Stock from time to time on or after December 22, 2020 (the “Effective Date”) and before the date that is the 36-month anniversary of the Effective Date.

The Powerscourt Warrant Agreement contains terms and features that give rise to derivative liability classification.

The Company utilized the Monte Carlo simulation model to calculate the fair value of these warrants at the date of commitment.

Significant observable and unobservable inputs include stock price, conversion price, annual 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 warrants were valued at approximately $594 thousand and the Company recorded a liability included on the consolidated balance sheet.

See Note 6 included in this Form 10-K for additional details.

KeyBank Credit Agreement

On April 25, 2019, the Company entered into the First Amendment to the Amended and Restated Credit Agreement (the "First Amendment to the Amended and Restated Credit Agreement").

In conjunction with the First Amendment to the Amended and Restated Credit Agreement, the Company made a $1.00 million principal payment on the KeyBank Line of Credit and began making monthly principal payments of $250 thousand on May 1, 2019.

Effective December 21, 2019, the Company and KeyBank entered into a Second Amendment to the Amended and Restated Credit Agreement (the "Second Amendment to the Amended and Restated Credit Agreement").

Pursuant to the Second Amendment to the Amended and Restated Credit Agreement, the Company began making monthly principal payments of $350 thousand on November 1, 2019.

The Second Amendment to the Amended and Restated Credit Agreement, among other provisions, requires a pledge of additional collateral of $15.00 million in residual equity interests.

Additionally, the KeyBank Line of Credit shall be reduced to $10.00 million by January 31, 2020, $2.00 million by April 30, 2020 and fully matures on June 30, 2020.

Additionally, the Company has made principal payments of $4.10 million during the year ended December 31, 2019.

The following collateralized portions of the Amended and Restated Credit Agreement had principal paydowns associated with each property’s refinancing as noted below:

$15.46 million paydown from Village of Martinsville refinancing proceeds on June 28, 2019;

$7.55 million paydown from Laburnum Square refinancing proceeds on August 1, 2019;

$7.16 million paydown from Litchfield Market Village refinancing proceeds on November 1, 2019.

As of December 31, 2019, the Amended and Restated Credit Agreement is collateralized by 7 properties, accruing interest at 5.29% with a balance of $17.88 million.

Revere Term Loan

The Revere Term Loan has been paid in full using proceeds from the following:

$323 thousand with proceeds from the sale of Jenks Plaza on January 11, 2019;

$30 thousand with proceeds from the sale of Harbor Pointe on February 7, 2019;

$300 thousand in monthly scheduled principal payments;

$406 thousand, the remaining principal balance and the $20 thousand Exit Fee on March 29, 2019 from operating cash flows.

Sea Turtle Development

In 2016, the Company loaned $11.00 million for the partial funding of Sea Turtle and loaned $1.00 million for the sale of land to be used in the development.

Both promissory notes are subordinated to the construction loans made by BOKF, totaling $20.00 million.

On or about April 9, 2019, BOKF filed a Verified Complaint in state court in Beaufort County, South Carolina for Sea Turtle’s default on payment of the BOKF construction loans, and for the appointment of a receiver, injunctive relief and accounting records.

On May 7, 2019, Sea Turtle filed a Chapter 11 Voluntary Petition for Bankruptcy in the United States Bankruptcy Court for the District of South Carolina in Charleston.

The bankruptcy petition automatically stayed BOKF’s suit.

The pleadings in the state court action and the bankruptcy action state that Sea Turtle has been in default on its payments to BOKF since September, 2018.

The pleadings further state that the project is $8.00 million over budget as of August 8, 2018.

Sea Turtle has retained a broker to try and sell the property.

There is a possibility that a judicially approved sale of the property will not bring a price that exceeds what is owed to BOKF on its construction loans.

If a sale is not approved through the bankruptcy court in 2020, it is expected that the bankruptcy petition will be dismissed and BOKF will resume its suit in South Carolina state court, possibly leading to a foreclosure on the property.

The pending legal proceedings have provided additional uncertainty with regards to the estimated fair market value of the development.

As such, the Company recognized $5.00 million in impairment charges on the notes receivable for the year ended December 31, 2019 as the estimated fair value of Sea Turtle is not expected to provide for the cash required to repay the notes receivable in the event of a judicially approved sale.

The total impairment charge on notes receivable is $12.00 million and the carrying value is zero as of December 31, 2019.

The fair market value of Sea Turtle is based on the three-level valuation hierarchy for fair value measurement and represents Level 3 inputs.

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.

Subsequent to December 31, 2019, the Bankruptcy Court approved BOKF’s credit bid purchase of Sea Turtle in February, 2020, for $18.75 million .

On January 24, 2020, the Company and KeyBank entered into a Second Amendment to the KeyBank Credit Agreement (the "Second Amendment"), effective December 21, 2019.

Pursuant to the Second Amendment, the Company began making monthly principal payments of $350 thousand on November 1, 2019.

The Second Amendment, among other provisions, requires a pledge of additional collateral of $15.00 million in residual equity interests and staggered maturity dates with an ultimate maturity of June 30, 2020.

On July 21, 2020, the Company and KeyBank entered into a Third Amendment to the KeyBank Credit Agreement (the "Third Amendment").

The Third Amendment, among other provisions, reduces the pledge of additional collateral by two properties and extends the maturity to December 31, 2020.

The KeyBank Credit Agreement was paid in full as of December 22, 2020.

The following collateralized portions of the Amended and Restated Credit Agreement had principal paydowns associated with each refinancing as noted below:

• $1.78 million paydown from St.

Matthews sale proceeds on January 21, 2020;

• $5.75 million paydown from Shoppes at Myrtle Park refinancing proceeds on January 23, 2020;

• $2.50 million paydown from cash released to the Company from restricted cash accounts on May 20, 2020;

• $1.00 million paydown on November 12, 2020;

• $3.00 million final paydown from Powerscourt Financing Agreement proceeds on December 22, 2020.

Columbia Fire Station Extension

Effective September 3, 2020, the Company extended the Columbia Fire Station promissory note ("Columbia Fire Station Loan") to December 3, 2020, with the monthly principal payment increasing $20 thousand for a total monthly principal and interest payment of $46 thousand beginning on October 3, 2020.

On December 7, 2020, the Company received a letter demanding payment in full from Pinnacle Bank for all amounts due under Columbia Fire Station Loan and the interest rate increased to 14%, the default rate.

On December 29, 2020, Pinnacle Bank filed a suit against the Company, guarantor.

On January 21, 2021, the Company entered into a Forbearance Agreement (the "Forbearance Agreement") with Pinnacle Bank at an interest rate of 14% and made a $500 thousand principal payment.

The Forbearance Agreement, among other provisions, extends the maturity date of the Columbia Fire Station Loan to July 21, 2021 and waives all defaults and late fees existing prior to the Forbearance Agreement.

Operating Partnership Purchase of Stock

On September 22, 2020, the Operating Partnership purchased 71,343 shares of Series D Preferred from an unaffiliated investor at $15.50 per share.

These shares are deemed to be retired on the consolidated financial statements.

Preferred Dividends

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Weighted average change over prior rates 4.63 % 4.17 %

Weighted average change over prior rates, excluding bankruptcy negotiations 5.58 %

New Leases (1) (2) :

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Gross Leasable Area ("GLA") expiring during the next 12 months, including month-to-month leases 6.97 % 13.10 %

Lease data presented for the years ended December 31, 2019 and 2018 is based on average rate per square foot over the renewed or new lease term.

2018 lease data adjusted to reflect average rate per square foot over the renewed or new lease term for consistency with 2019 presentations.

(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 transactions related to bankruptcy negotiations, unless otherwise noted.

Critical Accounting Policies

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however, those did not impact the Company.

Beginning in April 2020, the Company received certain rent relief requests, most often in the form of rent deferral requests, as a result of COVID-19.

The Company evaluates each tenant rent relief request on an individual basis, considering a number of factors.

Not all tenant requests ultimately result in concessions or modification of agreements, nor is the Company forgoing its contractual rights under its lease agreements.

The Financial Accounting Standards Board (the "FASB") issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19.

The Lease Modification Q&A clarifies that entities may elect to treat qualifying lease concessions as if they were based on enforceable rights and obligations, and may choose to apply or not to apply modification accounting to those qualifying concessions.

Qualifying concessions must be in response to COVID-19 and not have a substantial increase in the lessee’s obligation or the lessor’s rights under the contract.

The Company has elected not to apply ASC 842 modification guidance for concessions that did not increase the lease term, generally these concessions do not impact the overall economics of the lease.

Concessions that extend the lease term are accounted for under ASC 842, lease modification guidance.

Impairment of Long-Lived Assets

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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.

The Company did not recognize any impairment charges to its investment properties for the year ended December 31, 2019 and $3.94 million for the year ended December 31, 2018.

The Company may decide to sell properties.

Properties classified as held for sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell.

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

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.

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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.

The Company recognized $1.60 million of impairment charges to its assets held for sale for the years ended December 31, 2019 and none for the year ended December 31, 2018.

Notes Receivable

Notes receivable represent financing to Sea Turtle Development as discussed in Note 4 of the audited consolidated financial statements for development of the project.

The notes are secured by a second deed of trust on the underlying real estate known as Sea Turtle Development.

The Company evaluates the collectability of both the interest on and principal of the notes receivable based primarily upon the projected fair market value of the project at stabilization and lease up.

The notes receivable are determined to be impaired when, based upon current information, it is no longer probable that the Company will

be able to collect all contractual amounts due from the borrower.

The amount of impairment loss recognized is measured as the difference between the carrying amount of the loan and its estimated realizable value, as of December 31, 2019 the carrying value of the Sea Turtle Development notes were zero.

The impairment charges to the Sea Turtle Development notes for the years ended December 31, 2019 and 2018 were $5.00 million and $1.74 million, respectively.

Adoption of ASC Topic 842, “Leases”

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, “Leases (Topic 842)”, to increase transparency and comparability among organizations by requiring the recognition of ROU assets and lease liabilities on the balance sheet.

The Company adopted ASU 2016-02 as of January 1, 2019 using the modified retrospective approach within ASU 2018-11, which allows for the application date to be the beginning of the reporting period in which the entity first applies the new standard.

The Company did not have a cumulative-effect adjustment as of the adoption date.

The Company elected the package of transition practical expedients where the company is either the lessee or lessor, which among other things, allowed the Company to carry forward the historical lease classifications and use hindsight in determining the lease terms.

The standard had a material impact on the Company's consolidated balance sheets, but did not have a material impact on the consolidated statements of operations.

The most significant impact was the recognition of ROU assets and lease liabilities of approximately $11.90 million and $11.99 million , respectively, for operating leases as of January 1, 2019, calculated based on an incremental borrowing rate of 4.84% .

The difference between the ROU assets and lease liabilities at adoption represents the accrued straight-line rent liability previously recognized under ASC 840.

The standard had no impact on the Company's cash flows.

The Company recognized $600 thousand and $1.60 million of impairment expense to its assets held for sale for the years ended December 31, 2020 and 2019, respectively.

Liquidity and Capital Resources

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Cash flows from operating activities, investing activities and financing activities for the years ended December 31, 2020 and 2019 are as follows (in thousands):

Years Ended December 31,

Year Over Year Change

Years Ended December 31, Year Over Year Change

2020 2019 $ %

Operating activities $ 15,780 $ 15,253 $ 527 3.46 %

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Operating Activities

During the year ended December 31, 2019 , our cash flows from operating activities were $15.25 million , compared to cash flows from operating activities of $22.00 million during the year ended December 31, 2018 , representing a decrease of $6.75 million .

This decrease is primarily a result of a reduction of accounts payable, accrued expenses and other liabilities of $4.29 million, a decrease in property net operating income ("NOI") of $2.49 million and timing of receivables and deferred costs.

During the year ended December 31, 2020, our cash flows from operating activities were $15.78 million, compared to cash flows from operating activities of $15.25 million during the year ended December 31, 2019, representing an increase of 3.46% or $527 thousand.

This increase is primarily a result of the decrease in interest expense and corporate general and administrative expense, partially offset by the increase in accounts receivables due to the impacts of COVID-19 on the portfolio, a decrease in property net operating income ("NOI") of $2.07 million and the timing of accounts payable, accrued expenses and other liabilities and deferred costs and other assets.

Investing Activities

During the year ended December 31, 2019 , our cash flows from investing activities were $868 thousand , compared to cash flows used in investing activities of $22.45 million during the year ended December 31, 2018 , representing an increase of $23.32 million due to the following:

$23.15 million in cash outflows used for the acquisition of JANAF in 2018;

$2.86 million decrease in cash outflows used for capital expenditures primarily a result of the redevelopment of Columbia Fire House as well as Perimeter Square and Shoppes at Myrtle Park tenant improvements in 2018;

and offset by

$2.67 million decrease in cash received as a result of the 2019 sales of Jenks Plaza, Graystone Crossing, Perimeter Square and Harbor Pointe land parcel, compared to the 2018 sales of the Chipotle ground lease at Conyers Crossing, Shoppes at Eagle Harbor, the Laskin Road land parcel and the Monarch Bank Building.

During the year ended December 31, 2020, our cash flows from investing activities were $2.24 million, compared to cash flows from investing activities of $868 thousand during the year ended December 31, 2019, representing an increase of 157.72% or $1.37 million primarily due to the 2020 sales of St.

Matthews and Riversedge North compared to the three properties sold in 2019, sale of Harbor Pointe land parcel and a decrease in capital expenditures of $440 thousand primarily related to fewer tenant improvement projects in 2020.

Financing Activities

During the year ended December 31, 2019 , our cash flows used in financing activities were $12.53 million , compared to $6.16 million of cash flows provided by financing activities during the year ended December 31, 2018 , representing a decrease of $18.69 million due to the following:

$21.16 million decrease in proceeds from sale of preferred stock due to the 2018 Series D Preferred offering;

$14.44 million increase in loan principal payments primarily a result of the payoff of the Revere Term Loan and Senior Convertible Notes, in addition to the Village of Martinsville, Laburnum Square and Litchfield Market Village refinances and pay-down of the KeyBank Line of Credit;

and offset by

$1.13 million increase in loan proceeds due to the 2019 Village of Martinsville, Laburnum Square and Litchfield Market Village refinances offset by the 2018 JANAF Bravo Loan, Columbia Fire House Construction Loan advances, refinance of LaGrange and refinancing of six properties off the KeyBank Line of Credit;

$14.59 million decrease in cash outflows for dividends and distributions primarily as a result of the suspended Preferred Stock dividends.

During the year ended December 31, 2020, our cash flows from financing activities were $3.16 million, compared to $12.53 million of cash flows used in financing activities during the year ended December 31, 2019, representing an increase of 125.22% or $15.69 million due to the following:

• $11.92 million decrease in loan principal payments primarily as a result of the 2020 Shoppes at Myrtle Park and Folly Road refinances, the St.

Matthews sale and pay-down of the KeyBank Credit Agreement, offset by the three properties sold in 2019 and the 2019 payoff of the Revere Term Loan and Senior Convertible Notes in addition to the Village of Martinsville, Laburnum Square and Litchfield Market Village refinances;

• $6.69 million increase in loan proceeds due to the Shoppes at Myrtle Park and Folly Road refinances and Powerscourt Financing Agreement occurring in 2020 offset by the 2019 Village of Martinsville, Laburnum Square and Litchfield Market Village refinances;

• $552 thousand increase in proceeds from PPP funds as detailed in Note 2;

partially offset by

• $2.36 million increase in deferred financing costs primarily related to the Powerscourt Financing Agreement;

• $1.11 million increase in preferred stock redemption.

We intend to continue managing our debt prudently so as to maintain a conservative capital structure and minimize leverage within our company.

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Adjustable-rate mortgages (1)

23,576 24,163

Fixed-rate notes, assets held for sale 6,472 —

Floating-rate line of credit (1)

Total debt $ 353,916 $ 347,059

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

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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 the Note 7 included in the audited consolidated financial statements for additional mortgage indebtedness details.

See Note 6 included in this Form 10-K for additional mortgage indebtedness details.

Future Liquidity Needs

The primary liquidity needs of the Company, in addition to the funding of our ongoing operations, at December 31, 2019 are $62.07 million in debt maturities and principal payments due in the year ended December 31, 2020 and covenant requirements as detailed in our Amended and Restated Credit Agreement as described in Note 7.

Included in the $62.07 million is $17.88 million on the KeyBank Line of Credit.

The KeyBank Line of Credit is collateralized by 7 properties within our portfolio.

Subsequent to December 31, 2019, the Company reduced the line to $10.00 million in accordance with the Second Amendment to the KeyBank Line of Credit through the sale of St.

Matthews and refinancing of Shoppes of Myrtle Park.

Additionally, the $21.55 million Rivergate loan was extended to March 20, 2020.

The Company plans to meet the remaining deadlines described in the Second Amendment through monthly principal payments, refinances and dispositions.

The primary liquidity needs of the Company, in addition to the funding of our ongoing operations, at December 31, 2020 are $43.93 million in debt maturities and principal payments due in the year ended December 31, 2021 as described in Note 6 on this Form 10-K.

Included in the $43.93 million are 6 loans collateralized by 7 properties within our portfolio.

The Company plans to pay these obligations through a combination of refinances, dispositions and operating cash.

Management intends to refinance or extend the remaining maturing debt as it comes due.

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 majority of these expenditures occur subsequent to acquiring a new property that requires significant improvements to maximize occupancy and lease rates, with an existing property that needs a facelift to improve its marketability or when tenant improvements are required to make a space fit a particular tenant’s needs.

To meet these future liquidity needs, the Company had $5.45 million in cash and cash equivalents, $16.14 million held in lender reserves for the purpose of tenant improvements, lease commissions, real estate taxes and insurance at December 31, 2019 and intends to use cash generated from operations during the year ending December 31, 2020.

As discussed above, the continuing COVID-19 pandemic outbreak has adversely impacted states and cities where the Company’s tenants operate their businesses and where the Company’s properties are located.

The COVID-19 pandemic could have a material adverse effect on the Company’s financial condition, results of operations and cash flows as the reduced economic activity severely impacts certain of the Company’s tenants’ businesses, financial condition and liquidity and may cause certain tenants to be unable to meet their obligations to the Company in full.

Closures of stores operated by the Company’s tenants could reduce the Company’s cash flows.

To meet these future liquidity needs:

• $7.66 million in cash and cash equivalents at December 31, 2020;

• $35.11 million held in lender reserves for the purpose of tenant improvements, lease commissions, real estate taxes, insurance and funds held for the 2020 tender offer at December 31, 2020;

• intends to use cash generated from operations during the year ended December 31, 2021.

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

The Board plans to revisit the dividend payment policy with respect to the Series A Preferred, Series B Preferred and Series D Preferred on an ongoing basis.

The Board believes that the dividend suspension will provide the Company with additional funds to meet its ongoing liquidity needs, approximately $3.49 million a quarter.

The Board believes that the dividend suspension will provide the Company approximately $3.44 million of additional funds per quarter to help meet its ongoing liquidity needs.

Additionally, the Company plans to undertake measures to grow its operations and increase liquidity through 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.

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The proceeds of the bonds were to provide funding for the construction of public infrastructure and other site improvements and to be repaid by incremental additional property taxes generated by development.

Harbor Pointe Associates, LLC, then owned by an affiliate of former CEO, Jon Wheeler, entered into the Harbor Pointe Agreement.

Harbor Pointe Associates, LLC, then owned by an affiliate of former CEO, Jon Wheeler, entered into an Economic Development Agreement with the Grove Economic Development Authority for this infrastructure development and in the event the ad valorem taxes were insufficient to cover annual debt service, Harbor Pointe Associates, LLC would reimburse the Grove Economic Development Authority (the “Harbor Pointe Agreement”).

In 2014, Harbor Pointe Associates, LLC was acquired by the Company.

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In addition, the Company may have an interest obligation on the note based on the principal balance and LIBOR rates in effect at future payment dates.

During the years ended December 31, 2019 and 2018, the Company funded approximately $79 thousand and $73 thousand, respectively, in debt service shortfalls.

In 2020 and 2019, we funded approximately $0 thousand and $79 thousand, respectively in debt service shortfalls.

No amounts have been accrued for this as of December 31, 2020 as a reasonable estimate of future debt service shortfalls cannot be determined based on variables noted above.

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The following table presents a comparison of the consolidated statements of operations for the years ended December 31, 2020 and 2019, respectively (in thousands, except Property Data).

For the Years Ended December 31,

Year over Year Changes

For the Years Ended December 31, Year over Year Changes

2020 2019 $/# %

PROPERTY DATA:

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

60 61 (1) (1.64) %

Aggregate gross leasable area at period end (1)

5,561,766 5,618,877 (57,111) (1.02) %

Ending leased rate at period end (1)

88.9 % 89.8 % (0.9) % (1.00) %

FINANCIAL DATA:

Rental revenues $ 60,039 $ 62,442 $ (2,403) (3.85) %

Asset management fees

Other revenues 964 720 244 33.89 %

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Depreciation and amortization 17,291 21,319 (4,028) (18.89) %

Impairment of goodwill

Impairment of notes receivable — 5,000 (5,000) (100.00) %

Impairment of real estate

Impairment of assets held for sale 600 1,598 (998) (62.45) %

Corporate general & administrative 5,831 6,633 (802) (12.09) %

Other operating expense

Total Operating Expenses 42,608 53,702 (11,094) (20.66) %

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Operating Income 18,418 10,854 7,564 69.69 %

Interest income

Interest expense (17,092) (18,983) 1,891 9.96 %

Net Loss from Continuing Operations Before Income Taxes

Other expense (1,039) — (1,039) (100.00) %

Net Income (Loss) Before Income Taxes 287 (8,129) 8,416 103.53 %

Income tax expense — (15) 15 100.00 %

Net Loss from Continuing Operations

Net Income from Discontinued Operations

Net Income (Loss) 287 (8,144) 8,431 103.52 %

Net loss attributable to noncontrolling interests 42 (105) 147 140.00 %

Net Loss Attributable to Wheeler REIT

(1) Excludes the undeveloped land parcels and Riversedge North, our corporate headquarters.

Net Income (Loss) Attributable to Wheeler REIT $ 245 $ (8,039) $ 8,284 103.05 %

(1) Excludes the undeveloped land parcels.

Includes assets held for sale.

Total Revenue

Total revenue was $63.16 million for the year ended December 31, 2019 compared to $65.28 million for the year ended December 31, 2018, a $2.11 million decrease.

The decrease in other revenues is primarily a result of early lease termination fees associated with Berkley Center Shopping Center Farm Fresh and Southeastern Grocers ("SEG") recaptures during 2018.

The rent adjustments for certain SEG leases, sold properties and additional vacant anchor spaces attributed to the

decrease in rental revenues which was partially offset by a full period of JANAF operations and increased tenant reimbursement recoveries.

Total revenue was $61.00 million for the year ended December 31, 2020 compared to $63.16 million for the year ended December 31, 2019, representing a decrease of 3.42% primarily due to sold properties, three new anchor vacancies of which two were backfilled with rent commencing in 2021 and an increase in the credit loss on operating receivables driven by higher accounts receivable due to impacts of COVID-19 on the portfolio.

These negative impacts were partially offset by increases in straight-line rental revenues resulting from long-term lease extensions.

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

Total Operating Expenses

Total operating expenses for the year ended December 31, 2019 were $53.70 million , representing a decrease of $11.58 million over the year ended December 31, 2018.

For the year ended December 31, 2019, the Company recorded impairment charges of $5.00 million on Sea Turtle notes receivable and $1.60 million impairment charges on assets held for sale, which were offset by the 2018 impairment charge of $5.49 million on goodwill, $1.74 million on the Sea Turtle Development notes receivable and $3.94 million on land held for use.

After consideration of all impairment charges, total operating expenses decreased for the year ended December 31, 2019 by $7.02 million.

The decrease of $5.78 million noted in depreciation and amortization is a result of the write-off of lease intangibles from early terminations of leases in 2018 and properties either sold or classified as held for sale.

Corporate general and administrative expenses for the year ended December 31, 2019 decreased $1.60 million, as a result of the following:

$682 thousand decrease in compensation and benefits primarily driven by the decrease in employee share based compensation and severance;

$432 thousand decrease in capital and debt financing costs as a result of costs incurred on refinancing of properties which the Company opted to stop pursuing in 2018.

These costs did not reoccur in 2019;

$310 thousand decrease in professional fees associated with hiring of KeyBanc Advisors in 2018 and SOX internal audit compliance;

$274 thousand decrease in acquisition and development costs as a result of costs associated with the development of an outparcel at Folly Road which the Company chose to no longer pursue in 2018.

Other operating expenses decreased $250 thousand for the year ended December 31, 2019 as a result of the 2018 lease termination expense to allow the space to be available for a high credit grocery store tenant.

Total operating expenses for the year ended December 31, 2020 were $42.61 million compared to $53.70 million for the year ended December 31, 2019, representing a decrease of 20.66%.

The decrease are primarily a result of decreases in impairments, depreciation and amortization and corporate general and administrative expense.

Impairments decreased as a

result of the $5.00 million impairment of the Sea Turtle notes receivable and $1.00 million decrease in impairment of assets held for sale, Perimeter Square and St.

Matthews impaired in 2019 compared to Columbia Fire Station impairment in 2020.

Depreciation and amortization decreased $4.03 million primarily as a result of lease intangibles becoming fully amortized and ceasing of depreciation and amortization as properties were classified as available held for sale.

Corporate general and administrative expenses for the year ended December 31, 2020 decreased 12.09% or $802 thousand, as a result of the following:

• $402 thousand decrease in compensation and benefits primarily driven by a reduction in personnel and decrease in director's compensation;

• $159 thousand decrease in advertising costs for leasing activities related to cancellation of conferences due to COVID-19;

• $154 thousand decrease in other expenses primarily associated with a reduction in taxes and licenses and travel expenses, partially offset by an increase in debt financing costs associated with short term loan extensions.

Gain on Disposal of Properties

The gain on disposal of properties decrease of $1.07 million for the year ended December, 2019 is a result of the demolition of an approximate 10,000 square foot building at the JANAF property in 2019 to make space available for a new approximate 20,000 square foot building constructed by a new grocer tenant and the 2019 sales of Jenks Plaza, Graystone Crossing and Perimeter Square, net of the 2018 sales of the Chipotle ground lease at Conyers Crossing, Shoppes at Eagle Harbor and Monarch Bank Building.

The gain on disposal of properties decrease of $1.37 million for the year months ended December 31, 2020 is a result of the 2020 sales of St.

Matthews and Riversedge North, net of the 2019 demolition of an approximate 10,000 square foot outparcel at the JANAF property to make way for a new approximate 20,000 square foot building constructed by a grocer tenant, Aldi, and sales of Jenks Plaza, Graystone Crossing and Perimeter Square.

Interest Expense

Interest expense decreased $1.89 million or 9.96% for the year ended December 31, 2020, compared to $18.98 million for the year ended December 31, 2019.

The decrease is primarily attributable to lower loan cost amortization due to 2018 loan modifications and reduction of loans payable by $22.55 million from December 31, 2018, partially offset by a full twelve months of interest expense on JANAF.

The decrease is primarily attributable to a $12.86 reduction in loans payable from December 31, 2019 absent the Powerscourt Financing Agreement combined with lower loan cost amortization due to loan modifications and sold properties.

Other Expenses

Other expenses were $1.04 million for the year ended December 31, 2020.

Other expenses include $600 thousand in legal settlement costs and $439 thousand for reimbursement of the Stilwell Group's proxy solicitation expenses incurred in connection with the Company's 2019 annual meeting of stockholders.

These expenses are non-operating in nature.

Same Store and Non-same Store Operating Income

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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 of assets held for sale and held for use, impairment of goodwill and impairment of notes receivable, 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, impairment of assets held for sale and held for use and impairment of notes receivable, 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.

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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 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, while non-same stores consist of those properties acquired or disposed of during the periods presented.

The non-same store category represents the JANAF acquisition that occurred in January 2018, the absorption of the JANAF Executive Building in April 2019 and the below properties sold:

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, while non-same stores consist of those properties acquired or disposed of during the periods presented.

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

• Discontinued operations

Laskin Road land parcel (sold June 19, 2018);

◦ Harbor Pointe land parcel (sold February 7, 2019);

• Continuing operations

Chipotle Ground Lease at Conyers Crossing (sold January 12, 2018)

Shoppes at Eagle Harbor (sold September 27, 2018);

Monarch Bank Building (sold October 22, 2018);

◦ Jenks Plaza (sold January 11, 2019);

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◦ Perimeter Square (sold July 12, 2019);

Matthews (sold January 21, 2020).

Years Ended December 31,

Non-same Store

Same Store Non-same Store Total

2020 2019 2020 2019 2020 2019

(in thousands)

Net (Loss) Income

Income from Discontinued Operations

Net Income (Loss) $ 285 $ (8,100) $ 2 $ (44) $ 287 $ (8,144)

Income tax expense — 15 — — — 15

Other expense 1,039 — — — 1,039 —

Interest expense 17,092 18,693 — 290 17,092 18,983

Interest income

Gain on disposal of properties — — (23) (1,394) (23) (1,394)

Other operating expenses

Corporate general & administrative 5,829 6,613 2 20 5,831 6,633

Impairment of assets held for sale 600 — — 1,598 600 1,598

Impairment of real estate

Impairment of notes receivable — 5,000 — — — 5,000

Impairment of goodwill

Depreciation and amortization 17,290 21,241 1 78 17,291 21,319

Non-REIT management and leasing services — 25 — — — 25

Asset management and commission revenues

Other non-property revenue (272) (125) — — (272) (125)

Property Net Operating Income $ 41,863 $ 43,362 $ (18) $ 548 $ 41,845 $ 43,910

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Property Revenues

Total same store property revenues for the year ended December 31, 2019 decreased to $51.36 million compared to $52.43 million for the year ended December 31, 2018.

The decrease is primarily a result of the 2018 early termination fees associated with Farm Fresh at Berkley Center Shopping Center, rent modifications to certain 2018 SEG leases, reduced rent at the SEG recaptured properties and backfilled locations and incremental vacancies.

Total same store property revenues for the year ended December 31, 2020 decreased to $60.72 million compared to $62.19 million for the year ended December 31, 2019, representing a decrease of 2.37% primarily due to:

• $1.33 million decrease in rental revenues due to three new anchor vacancies of which two were backfilled with rent commencing in 2021;

• $602 thousand increase in the credit loss on operating receivables driven by higher accounts receivable due to the impacts of COVID-19 on the portfolio;

• $267 thousand decrease in above (below) market lease amortization related to leases becoming fully amortized;

partially offset by

• $783 thousand increase in straight-line rental revenues resulting from long-term lease extensions.

Property Expenses

Total same store property expenses for the year ended December 31, 2019 increased to $15.59 million , compared to $15.06 million for the year ended December 31, 2018, representing an increase of $524 thousand due to increased repairs and maintenance expenses related to buildings and parking lots.

There were no significant unusual or non-recurring items included in non-same store property expenses for the year ended December 31, 2019.

Total same store property expenses for the year ended December 31, 2020 remained relatively consistent at $18.86 million, compared to $18.83 million for the year ended December 31, 2019.

Property expenses had an increase of $400

thousand in insurance that was, partially offset by a decrease of $326 thousand in common area maintenance expenses and real estate taxes.

There were no significant unusual or non-recurring items included in non-same store property expenses for the years ended December 31, 2020 and 2019.

Property Net Operating Income

Total property net operating income was $43.91 million for the year ended December 31, 2019, compared to $46.40 million for the year ended December 31, 2018 representing a decrease of $2.49 million over 2018.

Same stores accounted for a decrease of $1.60 million, while non-same stores had a decrease of $891 thousand, resulting from the loss of NOI associated with sold properties.

Total property net operating income was $41.85 million for the year ended December 31, 2020, compared to $43.91 million for the year ended December 31, 2019 representing a decrease of 4.70%.

Same stores accounted for decreases of $1.50 million, while non-same stores had a decrease of $566 thousand, resulting from the loss of NOI associated with sold properties.

Funds from Operations (FFO)

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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 goodwill, 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), 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.

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Accordingly, we believe FFO provides a valuable alternative measurement tool to GAAP when presenting our operating results.

Below is a comparison of same store and non-same store FFO, which is a non-GAAP measurement, for the years ended December 31, 2019 and 2018:

Below is a comparison of same and non-same store FFO, which is a non-GAAP measurement, for the years ended December 31, 2020 and 2019:

Years Ended December 31,

Non-same Store

Year Over Year Changes

Net (loss) income

Same Store Non-same Store Total Year Over Year Changes

2020 2019 2020 2019 2020 2019 $ %

Net Income (loss) $ 285 $ (8,100) $ 2 $ (44) $ 287 $ (8,144) $ 8,431 103.52 %

Depreciation and amortization of real estate assets 17,290 21,241 1 78 17,291 21,319 (4,028) (18.89) %

Impairment of goodwill

Impairment of real estate

Impairment of assets held for sale 600 — — 1,598 600 1,598 (998) (62.45) %

Gain on disposal of properties — — (23) (1,394) (23) (1,394) 1,371 98.35 %

Gain on disposal of properties-discontinued operations

During the year ended December 31, 2019, same store FFO decreased $2.67 million primarily due to the following:

$3.26 million increase in impairment charges on notes receivable related to Sea Turtle Development, which is not indicative of our core portfolio of properties and future operations;

FFO $ 18,175 $ 13,141 $ (20) $ 238 $ 18,155 $ 13,379 $ 4,776 35.70 %

During the year ended December 31, 2020, same store FFO increased $5.03 million primarily due to the following:

• $5.00 million decrease in impairment of notes receivable;

• $1.60 million decrease in interest expense

• $784 thousand decrease in corporate general and administrative expenses;

partially offset by

• $1.04 million increase in other expense for legal settlements and reimbursement of 2019 proxy costs;

• $1.50 million decrease in property net operating income.

$1.60 million decrease in corporate general and administrative expenses;

$793 thousand decrease in interest expense.

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.

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.

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Years Ended December 31,

Preferred Stock dividends - declared

FFO $ 18,155 $ 13,379

Preferred stock dividends - undeclared (14,528) (14,629)

Preferred stock redemption 96 —

Preferred stock accretion adjustments 677 680

FFO available to common shareholders and common unitholders

FFO available to common stockholders and common unitholders 4,400 (570)

Impairment of notes receivable — 5,000

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Recurring capital expenditures and tenant improvement reserves (1,112) (1,126)

Impairment on notes receivable during the years ended December 31, 2019 and 2018 is due to the impairment of the notes receivable related to Sea Turtle Development and is not indicative of our core portfolio of properties and future operations.

Acquisition and development costs at December 31, 2018 are related to the write-off of costs associated with the construction contract for the development of an outparcel at Folly Road and Light Bridge joint venture, both of which the Company is no longer pursuing.

Other nonrecurring and non-cash expenses are severance costs, vacation accrual and one time fees we believe will not be incurred on a go forward basis.

AFFO $ 4,329 $ 3,970

Impairment on notes receivable during the year ended December 31, 2019 is due to the impairment of the notes receivable related to Sea Turtle and is not indicative of our core portfolio of properties and future operations.

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

Other non-recurring expenses during year ended December 31, 2020 include $600 thousand in legal settlement costs, $439 thousand for reimbursement of the Stilwell Group's proxy solicitation expenses incurred in connection with the Company's 2019 annual meeting of stockholders and $51 thousand for severance.

During the year ended December 31, 2019, other non-recurring expenses were for severance, vacation accrual and one-time fees we believe will not be incurred on a go forward basis.

The preferred stock redemption represents the retirement of the undeclared dividends during the year ended December 31, 2020 associated with the Operating Partnership purchasing 71,343 shares of the Series D Preferred Stock from an unaffiliated investor.

These shares are considered retired on the consolidated financial statements.

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

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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