8-K: Wheeler Real Estate Investment Trust Reports Mixed Results for Q4 and Full Year 2023

Wheeler Real Estate Investment Trust announced its financial and operating results for the fourth quarter and full year of 2023, showing improvements in some areas but also significant losses.

Summary

• Wheeler Real Estate Investment Trust (WHLR) released its financial results for the three and twelve months ending December 31, 2023.
• The company reported a net income of $12.377 million for the quarter, or $0.55 per basic share, a significant improvement compared to a loss of $5.97 per share in the same quarter of the previous year.
• However, for the full year, WHLR reported a net loss of $29.237 million, or $4.57 per share, although this is an improvement from the $22.04 loss per share in 2022.
• Funds from operations (FFO) for the quarter were $21.026 million, or $0.93 per share, while adjusted FFO (AFFO) was $1.428 million, or $0.06 per share.
• The company's portfolio occupancy rate increased to 91.1%, and the leased rate was 93.7%.
• Total revenue for the quarter was $26.2 million, a decrease of 2.7% year-over-year, while full-year revenue increased by 33.5% to $102.3 million.
• Same-property net operating income (NOI) increased by 1.6% for the quarter but decreased by 0.9% for the full year.
• The company completed several loan agreements during the year, including a $61.1 million loan at 6.194% and a $53.1 million loan at 6.24%.
• WHLR also repurchased $1.5 million of its convertible notes and sold a property for $3.0 million, generating a gain of $2.2 million.
• The company's debt totaled $495.6 million, with a weighted average interest rate of 5.42%.

Sentiment

Score: 4

Explanation: The document presents a mixed picture with some positive developments in leasing and quarterly income, but significant losses for the full year and ongoing financial challenges. The high debt levels and Nasdaq non-compliance notice are concerning.

Positives

• The company achieved a significant increase in net income for the quarter, turning a loss into a profit.
• Occupancy and leased rates for the portfolio improved year-over-year.
• Leasing activity was strong, with both renewals and new leases showing positive rental rate increases.
• The company reduced interest expense for the quarter by 25.7%.
• The company recognized a non-operating gain of $9.7 million due to changes in fair value of derivative liabilities.
• The purchase of the Devine Street land parcel will result in annual savings of $0.3 million in ground rent.
• The company successfully refinanced loans on multiple properties.

Negatives

• The company reported a net loss for the full year, despite improvements in the fourth quarter.
• Adjusted Funds from Operations (AFFO) was only $0.06 per share for the quarter and negative for the full year.
• Total revenue decreased by 2.7% for the quarter compared to the same period last year.
• Same-property net operating income (NOI) decreased by 0.9% for the full year.
• Interest expense increased by 7.3% for the full year.
• The company's cash and cash equivalents decreased from $28.5 million to $18.4 million year-over-year.
• The company's debt increased from $482.4 million to $495.6 million year-over-year.
• The company received a notice from Nasdaq regarding non-compliance with the bid price rule.

Risks

• The company faces risks related to the use of and demand for retail space.
• The company is exposed to general and economic business conditions, including those affecting consumer spending.
• The company is at risk of tenant loss or bankruptcy.
• The company is exposed to risks related to the market for retail space generally, including reductions in consumer spending and the impact of e-commerce.
• The company faces financing risks, such as the inability to obtain new financing or refinancing on favorable terms.
• The company is subject to risks related to the geographic concentration of its properties.
• The company is at risk of not maintaining its listing on Nasdaq.
• The company is exposed to risks related to the redemption of Series D Preferred Stock and the potential dilution of common stock.
• The company is exposed to risks related to the market for retail space generally, including reductions in consumer spending, variability in retailer demand for leased space, adverse impact of e-commerce, ongoing consolidation in the retail sector and changes in economic conditions and consumer confidence.

Future Outlook

The document contains forward-looking statements that are subject to risks and uncertainties, and there is no assurance that future developments will be as anticipated. The company undertakes no obligation to release publicly any revisions to any forward-looking statements.

Management Comments

• The company announced that it has reported its financial and operating results for the year ended December 31, 2023 on Form 10-K.
• The company has posted supplemental information to its website regarding Wheeler Real Estate Investment Trust's financial and operating results for the three and twelve months ended December 31, 2023.

Industry Context

The announcement reflects the challenges and opportunities faced by REITs in the current economic environment, including the impact of e-commerce, interest rate fluctuations, and consumer spending trends. The company's focus on grocery-anchored centers is a common strategy in the retail REIT sector, aiming to provide stable income streams.

Comparison to Industry Standards

• WHLR's occupancy rate of 91.1% is below the average for well-performing retail REITs, which often see rates above 93%.
• The company's same-property NOI growth of 1.6% for the quarter is below the average for well-performing retail REITs, which often see rates above 2%.
• The company's debt to total assets ratio of 74.15% is high compared to some of its peers, indicating a higher level of financial risk.
• Companies like Regency Centers (REG) and Federal Realty Investment Trust (FRT) are often used as benchmarks in the retail REIT sector, and they typically exhibit stronger financial metrics and lower leverage.
• The company's FFO per share of $0.93 for the quarter is below the average for well-performing retail REITs, which often see rates above $1.00 per share.
• The company's AFFO per share of $0.06 for the quarter is significantly below the average for well-performing retail REITs, which often see rates above $0.50 per share.

Related Party Transactions

• The company subscribed for an investment in Stilwell Activist Investments, L.P., a related party.

Stakeholder Impact

• Shareholders are impacted by the company's net loss for the year and the potential dilution from the redemption of Series D Preferred Stock.
• Employees are impacted by the company's overall financial performance.
• Tenants are impacted by the company's leasing activities and property management.
• Creditors are impacted by the company's debt levels and ability to service its obligations.

Next Steps

• The company needs to regain compliance with Nasdaq's bid price rule by June 4, 2024.
• The company will continue to manage its debt and lease portfolio.
• The company will continue to process redemptions of Series D Preferred Stock.
• The company will continue to monitor the impact of economic conditions on its business.

Key Dates

Keywords

Real Estate Investment Trust, REIT, Retail Properties, Grocery-Anchored Centers, Leasing, Occupancy Rate, Financial Results, Funds from Operations, FFO, Net Operating Income, NOI, Debt, Convertible Notes, Preferred Stock, Reverse Stock Split