WHEELER REAL ESTATE INVESTMENT TRUST, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

You should read the following discussion of our financial condition and results
of operations in conjunction with our unaudited condensed consolidated financial
statements and the notes thereto included in this Form 10-Q, along with the
consolidated financial statements and the notes thereto, and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations”
included in our 2021 Form 10-K for the year ended December 31, 2021. For more
detailed information regarding the basis of presentation for the following
information, you should read the notes to the unaudited condensed consolidated
financial statements included in this Form 10-Q.

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

Important factors that we think could cause our actual results to differ
materially from those expressed or forecasted in
the forward-looking statement are summarized below:

•the ongoing adverse effect and the ultimate duration of the COVID-19 pandemic,
and federal, state, and/or local regulatory guidelines and private business
actions to control it, on the Company’s financial condition, operating results
and cash flows, the Company’s tenants and their customers, the use of and demand
for retail space, the real estate market in which the Company operates, the U.S.
economy, the global economy and the financial markets;

•the level of rental revenue we achieve from our assets and our ability to
collect rents;

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

•consumer spending and confidence trends;

•tenant bankruptcies;

•availability, terms and deployment of capital;

•general volatility of the capital markets and the market price of our common
and preferred stock;

•the degree and nature of our competition;

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

•litigation risks;

•lease-up risks;

•increases in the Company’s financing and other costs as a result of changes in
interest rates and other factors, including the discontinuation of the London
Interbank Offered Rate (“LIBOR”);

•inability to successfully integrate the acquisition of Cedar;

•inability to complete the offer to exchange the Company’s outstanding shares of
Series D Preferred for 6.00% Subordinated Notes due 2027, to be newly issued by
the Company;

•changes in our ability to obtain and maintain financing;

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

•information technology security breaches;

•the Company’s ability and willingness to maintain its qualification as a real
estate investment trust (“REIT”) in light of economic, market, legal, tax and
other considerations;

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

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

We caution that the foregoing list of factors is not all-inclusive. Moreover, we
operate in a very competitive and rapidly
changing environment. New factors emerge from time to time and it is not
possible for management to predict all such factors, nor
can it assess the impact of all such factors on our business or the extent to
which any factor, or combination of factors, may cause
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actual results to differ materially from those contained in any forward-looking
statements. Given these risks and uncertainties,
investors should not place undue reliance on forward-looking statements as a
prediction of actual results. All subsequent written
and oral forward-looking statements concerning us or any person acting on our
behalf are expressly qualified in their entirety by
the cautionary statements above. We caution not to place undue reliance upon any
forward-looking statements, which speak only as of the date made. We do not
undertake or accept any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statement to reflect any change in
our expectations or any change in events, conditions or circumstances on which
any such statement is based.

Company Overview

The Company, a Maryland corporation, is a fully integrated, self-managed
commercial real estate investment trust that owns, leases and operates
income-producing retail properties with a primary focus on grocery-anchored
centers.
As of September 30, 2022, the Trust, through the Operating Partnership, owned
and operated seventy-six retail shopping centers and four undeveloped properties
in Virginia, North Carolina, South Carolina, Georgia, Florida, Alabama,
Oklahoma, Tennessee, Kentucky, New Jersey, Pennsylvania, Massachusetts,
Connecticut, Maryland and West Virginia.

Recent Trends and Activities

Acquisition of Cedar Realty Trust

On March 2, 2022, the Company entered into an Agreement and Plan of Merger (as
amended, the “Merger Agreement”) with Cedar Realty Trust, Inc. (“Cedar”), Cedar
Realty Trust Partnership, L.P., (“Cedar OP”), WHLR Merger Sub Inc., a wholly
owned subsidiary of the Company, and WHLR OP Merger Sub LLC, a wholly owned
subsidiary of Merger Sub I (“Merger Sub II”), pursuant to which the Company
agreed to acquire Cedar, including 19 of its shopping center assets, in an
all-cash merger transaction consisting, in accordance with the terms of the
Merger Agreement, of a payment to Cedar common shareholders of merger
consideration of $9.48 per common share (the “Cedar Acquisition”). Concurrent
with the payment of the merger consideration, Cedar common shareholders received
from Cedar by way of a special dividend $19.52 per common share resulting from
prior sales of various Cedar assets. The Cedar Acquisition closed on August 22,
2022.

Pursuant to the Merger Agreement, Merger Sub II merged with and into Cedar OP
(the “Partnership Merger”), with Cedar OP being the surviving partnership (the
“Surviving Partnership”) in such merger, and, immediately following the
Partnership Merger, Merger Sub I merged with and into Cedar (the “REIT Merger”
and, together with the Partnership Merger, the “Mergers”), with Cedar being the
surviving company in the REIT Merger.

Upon completion of and by virtue of the Mergers, the issued and outstanding
shares of Cedar’s common stock, par value $0.06 per share (“Cedar Common
Stock”), and the issued and outstanding common units of Cedar OP held by persons
other than Cedar, were cancelled and converted into the right to receive an
aggregate of $130.00 million of cash merger consideration, without interest.

Following the REIT Merger, the Cedar Common Stock is held by the Company and is
no longer publicly traded. Pursuant to the terms of the Merger Agreement,
Cedar’s outstanding 7.25% Series B Preferred Stock and 6.50% Series C Preferred
Stock (collectively, the “Cedar Preferred Stock”) remain outstanding as shares
of preferred stock in Cedar following the Mergers.

In connection with the consummation of the Mergers, Cedar entered into the
KeyBank-Cedar Agreement for $130.00 million. The Company has entered into a
guaranty of the obligations of Cedar OP under the KeyBank-Cedar Agreement.

The Cedar Acquisition includes 19 shopping centers (the majority of which are
grocery-anchored), consisting of approximately 2.8 million square feet of gross
leasable area and increases the Company’s presence in the Northeast.

Dispositions

Disposal Date Property Contract Price Gain (loss) Net Proceeds
(in thousands, unaudited)
Walnut Hill Plaza – Petersburg,
January 11, 2022 VA $ 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.
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Assets Held for Sale

At September 30, 2022, assets held for sale included Harbor Pointe Associates,
LLC as the Company had committed to a plan to sell the entity. At December 31
2021, assets held for sale included Walnut Hill Plaza.

Interest Payment of Convertible Notes

The semi-annual June payment was paid with 432,994 shares of Series B Preferred,
which when adjusted to fair value represented an increase of $945 thousand.

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 $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 $1.16 million in defeasance.

KeyBank-Cedar Agreement

On August 22, 2022, Cedar entered into a loan agreement (the “KeyBank-Cedar
Agreement”) with KeyBank
National Association for $130.00 million with interest-only payments due monthly
through maturity, August 22, 2023. The interest rate on this loan consists of
the Secured Overnight Financing Rate plus 0.10% plus an applicable margin of
2.5%. Commencing in February 2023, the applicable margin increases to 4.0%.

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New Leases, Leasing Renewals and Expirations

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

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Renewals(1)(3):
Leases renewed with rate increase (sq feet) 166,594 85,429 382,802 265,231
Leases renewed with rate decrease (sq feet) 47,538 11,920 59,027 66,343
Leases renewed with no rate change (sq feet) 143,060 28,140 217,711 88,493
Total leases renewed (sq feet) 357,192 125,489 659,540 420,067

Leases renewed with rate increase (count) 31 29 75 71
Leases renewed with rate decrease (count) 5 1 10 10
Leases renewed with no rate change (count) 6 6 24 21
Total leases renewed (count) 42 36 109 102

Option exercised (count) 5 8 12 16

Weighted average on rate increases (per sq
foot) $ 1.18 $ 0.94 $ 1.22 $ 0.80
Weighted average on rate decreases (per sq
foot) $ (0.70) $

(2.34) $ (1.15)$ (2.23)
Weighted average rate on all renewals (per sq
foot)

$ 0.46 $ 0.42 $ 0.61 $ 0.15

Weighted average change over prior rates 5.47 % 3.53 % 6.61 % 1.48 %

New Leases(1) (2)(3):
New leases (sq feet) 84,874 91,163 183,064 317,622
New leases (count) 18 25 56 62
Weighted average rate (per sq foot) $ 11.21$ 10.01$ 11.99$ 8.77

(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 three months ended
September 30, 2022.
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Three and Nine Months Ended September 30, 2022 Compared to the Three and Nine
Months Ended September 30, 2021

Results of Operations

Comparison of the three and nine months ended September 30, 2022 and 2021

Results from operations for the three and nine months ended September 30, 2021
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, unlike the results of operations for the
three and nine months ended September 30, 2022, which only reflects the combined
operations for one month. Therefore, our historical financial statements may not
be indicative of future operating results.

The following table presents a comparison of the condensed consolidated
statements of operations for the three and nine months ended September 30, 2022
and 2021, respectively.

Three Months Ended September 30, Nine Months Ended September 30, Three Months Ended Changes

Nine Months Ended Changes

2022 2021 2022 2021 Change % Change Change % Change
PROPERTY DATA:
Number of properties owned and leased at period end (1) 76 59 76 59 17 an increase 28.81 % 17 an increase 28.81 %
Aggregate gross leasable area at period end (1) 8,183,345 5,500,233 8,183,345 5,500,233 2,683,112 an increase 48.78 % 2,683,112 an increase 48.78 %
Ending leased rate at period end (1) 92.1 % 92.2 % 92.1 % 92.2 % (0.1) % a decrease (0.11) % (0.1) % a decrease (0.11) %
FINANCIAL DATA:
Rental revenues $ 18,486$ 15,000$ 49,142$ 44,946$ 3,486 an increase 23.24 % $ 4,196 an increase 9.34 %
Other revenues 232 508 552 780 (276) a decrease (54.33) % (228) a decrease (29.23) %
Total Revenue 18,718 15,508 49,694 45,726 3,210 an increase 20.70 % 3,968 an increase 8.68 %
OPERATING EXPENSES:
Property operations 6,655 5,029 16,637 14,573 1,626 an increase 32.33 % 2,064 an increase 14.16 %
Depreciation and amortization 4,981 3,678 12,222 11,033 1,303 an increase 35.43 % 1,189 an increase 10.78 %
Impairment of assets held for sale – – 760 2,200 – an increase – % (1,440) a decrease (65.45) %
Corporate general & administrative 2,498 1,756 5,434 4,945 742 an increase 42.26 % 489 an increase 9.89 %
Total Operating Expenses 14,134 10,463 35,053 32,751 3,671 an increase 35.09 % 2,302 an increase 7.03 %
(Loss) gain on disposal of properties – 1,967 (15) 2,143 (1,967) a decrease (100.00) % (2,158) a decrease (100.70) %
Operating Income 4,584 7,012 14,626 15,118 (2,428) a decrease (34.63) % (492) a decrease (3.25) %
Interest income 15 9 42 9 6 an increase 66.67 % 33 an increase 366.67 %
Interest expense (6,949) (5,637) (19,079) (19,813) (1,312) a decrease (23.27) % 734 an increase 3.70 %
Net changes in fair value of derivative liabilities (656) 1,884 (2,533) 303 (2,540) a decrease (134.82) % (2,836) a decrease (935.97) %
Other income – – – 552 – an increase – % (552) a decrease (100.00) %
Other expense – (185) (691) (185) 185 an increase 100.00 % (506) a decrease (273.51) %
Net (Loss) Income Before Income Taxes (3,006) 3,083 (7,635) (4,016) (6,089) a decrease (197.50) % (3,619) a decrease (90.11) %
Income tax expense – – – (2) – an increase – % 2 an increase 100.00 %
Net (Loss) Income (3,006) 3,083 (7,635) (4,018) (6,089) a decrease (197.50) % (3,617) a decrease (90.02) %
Less: Net Income attributable to noncontrolling interests 1,234 57 1,237 72 1,177 an increase 2,064.91 % 1,165 an increase 1,618.06 %
Net (Loss) Income Attributable to Wheeler REIT $ (4,240)$ 3,026$ (8,872)$ (4,090)$ (7,266) a decrease (240.12) % $ (4,782) a decrease (116.92) %

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

Total Revenue

Total revenues were $18.72 million and $49.69 million for the three and nine
months ended September 30, 2022, respectively, compared to $15.51 million and
$45.73 million for the three and nine months ended September 30, 2021,
respectively, representing an increase of 20.70% and an increase of 8.68%,
respectively. The increase in rental revenues of $3.49 million and $4.20 million
for the three and nine months ended September 30, 2022 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.

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Total Operating Expenses

Total operating expenses were $14.13 million and $35.05 million for the three
and nine months ended September 30, 2022, respectively, compared to $10.46
million and $32.75 million for the three and nine months ended September 30,
2021, respectively, representing an increase of 35.09% and 7.03%, respectively.
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 $0 and $760 thousand for the three and
nine months ended September 30, 2022, respectively, as a result of Harbor Pointe
Land Parcel. Impairment of assets held for sale was $0 and $2.20 million for the
three and nine months ended September 30, 2021, respectively, as a result of
Columbia Fire Station.

Depreciation and amortization increased $1.30 million and $1.19 million for the
three and nine months ended September 30, 2022, respectively, as a result of the
Cedar Acquisition.

Corporate general and administrative expenses were $2.50 million and $1.76
million for the three months ended September 30, 2022 and 2021, respectively,
representing an increase of 42.26%, primarily a result of the following:

•$538 thousand increase in compensation and benefits primarily driven by hiring
more employees due to the Cedar Acquisition and payroll related costs;
•$229 thousand increase in professional fees;
•$56 thousand increase in corporate administration costs; and partially offset
by
•$14 thousand decrease in advertising related costs;
•$67 thousand decrease in other expenses, primarily related to lower fees
associated with capital, debt and financing activities.

Corporate general and administrative expenses were $5.43 million and $4.95
million for the nine months ended September 30, 2022 and 2021, respectively,
representing an increase of 9.89%, primarily a result of the following:

•$654 thousand increase in compensation and benefits primarily driven by hiring
more employees due to the Cedar Acquisition and payroll related costs;
•$198 thousand increase in corporate administration costs related to the Cedar
Acquisition; and
•$155 thousand increase in advertising related costs; partially offset by
•$303 thousand decrease in other expenses, primarily related to lower fees
associated with capital, debt and financing activities; and
•$215 thousand decrease in professional fees.

Disposal of Properties

The net (loss) gain on disposal of properties decrease of $1.97 million and
$2.16 million for the three and nine months ended September 30, 2022 is a result
of the 2022 sale of Walnut Hill Plaza compared to the 2021 sale of the Rivergate
Shopping Center Out Parcel, Berkley Shopping Center and Berkley Land Parcel and
Tulls Creek Land Parcel.

Interest Expense

Interest expense was $6.95 million and $5.64 million for the three months ended
September 30, 2022 and 2021, respectively, representing an increase of 23.27%.
Interest expense was $19.08 million and $19.81 million for the nine months ended
September 30, 2022 and 2021, respectively, representing a decrease of 3.70%.
Below is a comparison of the components which make up interest expense (in
thousands, unaudited):

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Three Months Ended September Nine

Months Ended September

30, 30, Three Months Ended Changes Nine Months Ended Changes
2022 2021 2022 2021 Change % Change Change % Change
Property debt interest –
excluding KeyBank-Cedar
Agreement $ 3,715$ 3,751$ 10,940$ 11,413 $ (36) (0.96) % $ (473) (4.14) %
Convertible Notes interest (1) 578 286 2,677 286 292 102.10 % 2,391 836.01 %
Defeasance paid 1,156 – 2,614 687 1,156 100.00 % 1,927 280.49 %
Amortization of deferred
financing costs 806 884 2,154 5,200 (78) (8.82) % (3,046) (58.58) %
Interest on corporate debt – 716 – 2,227 (716) (100.00) % (2,227) (100.00) %
Property debt interest –
KeyBank-Cedar Agreement 694 – 694 – 694 100.00 % 694 100.00 %
Total Interest Expense $ 6,949$ 5,637$ 19,079$ 19,813$ 1,312 23.27 % $ (734) (3.70) %

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

Net Change in Fair Value of Derivative Liabilities

The change in net change in fair value of derivative liabilities of ($2.54)
million and $(2.84) million for the three and nine months ended September 30,
2022 and 2021, respectively, represents a non-cash adjustment from 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-Q.

Other Income and Expense

Other expense was $0 and $691 thousand for the three and nine months ended
September 30, 2022, respectively, relating to legal settlement costs. There was
no other expense recognized in 2021. No other income was recognized in 2022.
Other income was $0 and $552 thousand for three and nine months ended September
30, 2021, respectively, relating to Paycheck Protection Program (“PPP”)
Promissory Note forgiveness. Other income and other expense are non-operating in
nature.

Preferred Dividends

The Company had accumulated undeclared dividends of $32.52 million to holders of
shares of our Series D Preferred, of which $2.12 million and $6.35 million are
attributable to the three months and nine months ended September 30, 2022,
respectively.

Noncontrolling Interest

Net (loss) income attributable to noncontrolling interest was $1.23 million and
$57 thousand for the three months ended September 30, 2022 and 2021,
respectively, and $1.24 million and $72 thousand for the nine months ended
September 30, 2022 and 2021, respectively representing a change of $1.17 million
which is primarily attributable to dividends on the outstanding Cedar Series B
Preferred and Cedar Series C Preferred as of September 30, 2022.

Same Store and Non-same Store Operating Income

Net operating income (“NOI”) is a widely-used non-GAAP financial measure for
REITs. The Company believes that NOI is a useful measure of the Company’s
property operating performance. The Company defines NOI as property revenues
(rental and other revenues) less property and related expenses (property
operation and maintenance and real estate taxes). Because NOI excludes general
and administrative expenses, depreciation and amortization, interest expense,
interest income, provision for income taxes, gain or loss on sale or capital
expenditures and leasing costs and impairment of assets held for sale and held
for use, 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, gain or loss on sale or disposition of assets, and the level of capital
expenditures and leasing costs necessary to maintain the operating performance
of the Company’s properties. Other REITs may use different methodologies for
calculating NOI, and accordingly, the Company’s NOI may not be comparable to
that of other REITs.

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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 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); and
•Cedar Portfolio, 19 properties (acquired August 22, 2022).

Three Months Ended September 30,
Same Store Non-same Store Total
2022 2021 2022 2021 2022 2021

(in thousands, unaudited)

Net (Loss) Income $ (1,389)$ 1,178$ (1,617)$ 1,905$ (3,006)$ 3,083
Adjustments:

Other expense – 185 – – – 185
Net changes in fair value of derivative
liabilities 656 (1,884) – – 656 (1,884)
Interest expense 5,850 5,543 1,099 94 6,949 5,637
Interest income (15) (9) – – (15) (9)
Gain on disposal of properties – – – (1,967) – (1,967)
Corporate general & administrative 1,899 1,751 599 5 2,498 1,756

Depreciation and amortization 3,679 3,623 1,302 55 4,981 3,678
Other non-property revenue (2) (6) – – (2) (6)
Property Net Operating Income $ 10,678$ 10,381$ 1,383$ 92$ 12,061$ 10,473

Property revenues $ 15,875$ 15,328$ 2,841$ 174$ 18,716$ 15,502
Property expenses 5,197 4,947 1,458 82 6,655 5,029
Property Net Operating Income $ 10,678$ 10,381$ 1,383$ 92$ 12,061$ 10,473

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Nine Months Ended September 30,
Same Store Non-same Store Total
2022 2021 2022 2021 2022 2021

(in thousands, unaudited)
Net Loss $ (5,981)$ (2,736)$ (1,654)$ (1,282)$ (7,635)$ (4,018)
Adjustments:
Income tax expense – 2 – – – 2
Other expense 691 185 – – 691 185
Net changes in fair value of derivative
liabilities 2,533 (303) – – 2,533 (303)
Interest expense 17,968 18,616 1,111 1,197 19,079 19,813
Interest income (42) (9) – – (42) (9)
Loss (gain) on disposal of properties – – 15 (2,143) 15 (2,143)
Corporate general & administrative 4,828 4,892 606 53 5,434 4,945
Impairment of assets held for sale 760 – – 2,200 760 2,200
Depreciation and amortization 10,920 10,867 1,302 166 12,222 11,033
Other non-property revenue (18) (580) – – (18) (580)
Property Net Operating Income $ 31,659$ 30,934$ 1,380$ 191$ 33,039$ 31,125

Property revenues $ 46,832$ 45,202$ 2,844$ 496$ 49,676$ 45,698
Property expenses 15,173 14,268 1,464 305 16,637 14,573
Property Net Operating Income $ 31,659$ 30,934$ 1,380$ 191$ 33,039$ 31,125

Property Revenues

Total same store property revenues were $15.88 million and $15.33 million for
the three months ended September 30, 2022 and 2021, respectively, representing
an increase of 3.57%. Total same store property revenues were $46.83 million and
$45.20 million for the nine months ended September 30, 2022 and 2021,
respectively, representing an increase of 3.61%. The same store property revenue
increases are primarily related to the consistent occupancy growth since
December 31, 2020.

Property Expenses

Total same store property expenses were $5.20 million and $4.95 million for the
three months ended September 30, 2022 and 2021, respectively, an increase of
5.05%. Total same store property expenses were $15.17 million and $14.27 million
for the nine months ended September 30, 2022 and 2021, respectively, an increase
of 6.34%. Same store property expense increases were primarily due to expense
increases in grounds and landscaping, insurance and repairs and maintenance.

There were no significant unusual or non-recurring items included in non-same
store property expenses for the three and nine months ended September 30, 2022
and 2021.

Property Net Operating Income

Total property net operating income was $12.06 million and $33.04 million for
the three and nine ended September 30, 2022, compared to $10.47 million and
$31.13 million for the three and nine month ended September 30, 2021,
respectively, representing an increase of $1.59 million and $1.91 million,
respectively.

Funds from Operations (FFO)

We use FFO, a non-GAAP measure, as an alternative measure of our operating
performance, specifically as it relates to results of operations and liquidity.
We compute FFO in accordance with standards established by the Board of
Governors of NAREIT in its March 1995 White Paper (as amended in November 1999,
April 2002 and December 2018). As defined by NAREIT, FFO represents net income
(computed in accordance with GAAP), excluding gains (or losses) from sales of
property, plus real estate related depreciation and amortization (excluding
amortization of loan origination costs), plus impairment of real estate related
long-lived assets and after adjustments for unconsolidated partnerships and
joint ventures. Most industry analysts and equity REITs, including us, consider
FFO to be an appropriate supplemental measure of operating performance because,
by
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excluding gains or losses on dispositions and excluding depreciation, FFO is a
helpful tool that can assist in the comparison of the operating performance of a
company’s real estate between periods, or as compared to different companies.
Management uses FFO as a supplemental measure to conduct and evaluate our
business because there are certain limitations associated with using GAAP net
income alone as the primary measure of our operating performance. Historical
cost accounting for real estate assets in accordance with GAAP implicitly
assumes that the value of real estate assets diminishes predictably over time,
while historically real estate values have risen or fallen with market
conditions. Accordingly, we believe FFO provides a valuable alternative
measurement tool to GAAP when presenting our operating results.

Below is a comparison of same and non-same store FFO, which is a non-GAAP
measurement (in thousands, unaudited):

Three Months Ended September 30,
Same Store Non-same Store Total Period Over Period Changes
2022 2021 2022 2021 2022 2021 $ %

Net (Loss) Income $ (1,389)$ 1,178$ (1,617)$ 1,905$ (3,006)$ 3,083 $ (6,089) (197.50) %
Depreciation and amortization
of real estate assets 3,679 3,623 1,302 55 4,981 3,678 1,303 35.43 %
Impairment of assets held for
sale – –
Gain on disposal of properties – – – (1,967) – (1,967) 1,967 100.00 %
FFO $ 2,290$ 4,801$ (315)$ (7)$ 1,975$ 4,794 $ (2,819) (58.80) %

Nine Months Ended September 30,
Same Store Non-same Store Total Period Over Period Changes
2022 2021 2022 2021 2022 2021 $ %

Net Loss $ (5,981)$ (2,736)$ (1,654)$ (1,282)$ (7,635)$ (4,018) $ (3,617) (90.02) %
Depreciation and amortization
of real estate assets 10,920 10,867 1,302 166 12,222 11,033 1,189 10.78 %
Impairment of assets held for
sale 760 – – 2,200 760 2,200 (1,440) (65.45) %
Loss (gain) on disposal of
properties – – 15 (2,143) 15 (2,143) 2,158 100.70 %
FFO $ 5,699$ 8,131$ (337)$ (1,059)$ 5,362$ 7,072 $ (1,710) (24.18) %

During the three months ended September 30, 2022, same store FFO decreased $2.51
million. During the nine months ended September 30, 2022, same store FFO
decreased $2.43 million.

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

Total AFFO is shown in the table below:

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Three Months Ended September
30, Nine Months Ended September 30,
2022 2021 2022 2021

FFO $ 1,975$ 4,794$ 5,362$ 7,072
Preferred Stock dividends – undeclared (2,264) (2,198) (6,792) (6,649)
Dividends on noncontrolling interests preferred
stock (1,225) – (1,225) –
Preferred stock accretion adjustments 146 145 438 454
FFO available to common stockholders and common
unitholders (1,368) 2,741 (2,217) 877
Capital related costs 1 59 (21) 343
Other non-recurring and non-cash expense 1,240 209 3,409 365
Net changes in fair value of derivative liabilities 656 (1,884) 2,533 (303)
Straight-line rental revenue, net straight-line
expense (228) (281) (445) (871)
Loan cost amortization 806 884 2,154 5,200
Paid-in-kind interest – – 2,099 –
Above (below) market lease amortization 543 23 559 28
Recurring capital expenditures and tenant
improvement reserves (409) 1 (948) (550)
AFFO $ 1,241$ 1,752$ 7,123$ 5,089

Other non-recurring and non-cash expenses are costs we believe will not be
incurred on a go forward basis. Other nonrecurring expenses of $1.24 million and
$3.41 million for the three and nine months ended September 30, 2022 primarily
include $1.16 million and $2.61 million in loan prepayment penalty,
respectively, a result of the 2022 loan refinancing activities, $0 and $691
thousand legal settlement costs, respectively and severance. Other nonrecurring
expenses of $209 thousand and $365 thousand for the three and nine months ended
September 30, 2021 include $185 thousand in legal settlement costs and $0 and
$687 thousand, respectively, in loan prepayment penalty on sale of the Berkley
Shopping Center, partially offset with $0 and $552 thousand, respectively, in
PPP Promissory Note forgiveness.

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-Q.

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

Liquidity and Capital Resources

At September 30, 2022, our consolidated cash, cash equivalents and restricted
cash totaled $54.30 million compared to consolidated cash, cash equivalents and
restricted cash of $71.90 million at September 30, 2021. Cash flows from
operating activities, investing activities and financing activities were as
follows (in thousands, unaudited):

Nine Months Ended September 30, Period Over Period Change
2022 2021 $ %
Operating activities $ 27,954$ 14,513 $ 13,441 92.61 %
Investing activities $ (140,106)$ 3,819 $ (143,925) (3,768.66) %
Financing activities $ 126,035$ 10,800 $ 115,235 1,066.99 %

Operating Activities

Our cash flows from operating activities were $27.95 million and $14.51 million
for the nine months ended September 30, 2022 and 2021, respectively,
representing an increase of 92.61% or $13.44 million. This increase is primarily
a result of the an increase in property NOI of $1.91 million and the timing of
accounts payable, accrued expenses and other liabilities and deferred costs and
other assets partially offset by the increase in corporate general and
administrative expenses and other non-operating expenses and the timing of
receivables.

Investing Activities

Our cash flows used in investing activities were $140.11 million for the nine
months ended September 30, 2022, compared to $3.82 million of cash flows
provided by investing activities for the nine months ended September 30, 2021,
representing a decrease of 3,768.66% or $143.93 million due to costs related to
the Cedar Acquisition described in Note 3 included in this Form 10-Q and an
increase in capital expenditures paid of $2.59 million.
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Financing Activities

Our cash flows from financing activities were $126,035 million and $10.80
million for the nine months ended September 30, 2022 and 2021, respectively,
representing an increased of 1,066.99% or $115.24 million due to the following:
•$170.35 million increase in loan proceeds a result of the KeyBank-Cedar
Agreement, Guggenheim Loan Agreement and JANAF 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;partially offset by
•$2.72 million increase in deferred financing costs primarily related to the
KeyBank-Cedar Agreement, Guggenheim Loan Agreement and JANAF Loan Agreement,
partially offset by 2021 refinancing activity including the Wilmington Financing
Agreement;
•$58.80 million increase in loan principal payments primarily a result of the
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
payoff, 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; and
•$1.93 million thousand 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.

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

September 30, 2022 December 31, 2021
(unaudited)
Fixed-rate notes (1) $ 353,659 $ 344,177
Adjustable-rate mortgages 130,000 2,085
Total debt $ 483,659 $ 346,262

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

The weighted-average interest rate and term of our fixed-rate debt including
assets held for sale are 4.80% and 6.65 years, respectively, at September 30,
2022. We have $123.32 million of debt maturing, including scheduled principal
repayments, during the twelve months ending September 30, 2023. 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-Q for additional
mortgage indebtedness details.

Material Cash Requirements, Contractual Obligations and Commitments

Our expected material cash requirements for the twelve months ended September
30, 2023 and thereafter are comprised of (i) contractually obligated
expenditures; (ii) other essential expenditures; and (iii) opportunistic
expenditures.

The primary liquidity needs of the Company, in addition to the funding of our
ongoing operations, at September 30, 2022 are $123.32 million in principal and
regularly scheduled payments due in the twelve months ended September 30, 2023
as described in Note 5 on this Form 10-Q. 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.

To meet these future liquidity needs, at September 30, 2022 the Company had:
•$24.06 million in cash and cash equivalents;
•$30.25 million held in lender reserves for the purpose of tenant improvements,
lease commissions, real estate taxes and insurance; and
•intends to use cash generated from operations during the twelve months ended
September 30, 2023.

In addition, our 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

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approved amendments to the Company’s Articles Supplementary to remove the
cumulative dividend of the Series A Preferred and the Series B Preferred. These
amendments had the effect of significantly reducing the Company’s financial
obligation to its preferred stockholders, which the Company believes impeded the
potential growth and strategic opportunities available to it.

Additionally, the Company plans to undertake measures to grow its operations and
increase liquidity through delivering space currently leased but not yet
occupied, 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.

Series D Preferred Stock

Beginning on September 21, 2023 (the “Series D Redemption Date”), holders of the
Series D Preferred (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 the
Company’s Common Stock, or a combination of cash and shares of the Company’s
Common Stock. Since January 2019, the Company’s Series D Preferred (of which
there are approximately 3.15 million shares outstanding at September 30, 2022)
have been accruing unpaid dividends at a rate of 10.75% per annum of the $25.00
liquidation preference per share of Series D Preferred, or at $2.6875 per share
per annum. As of September 30, 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 $32.52 million.

As of September 30, 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 November 7,
2022 of $1.65 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 on or after the Series D Redemption Date.

The Company further believes that it is unlikely that on the Series D Redemption
Date the Company will have sufficient available cash to pay the aggregate
redemption price in cash. Accordingly, the Company would not be able to meet our
redemption obligation without either liquidating assets or issuing significant
additional amounts of Common Stock.

The Company does not believe it is in its interests to liquidate assets to fund
redemptions. The Company further believes that issuing Common Stock to either
(i) fund cash redemptions or (ii) directly settle redemptions in Common Stock
could result in a substantial dilution of our Common Stock, which would be
detrimental both to holders of Common Stock and to Series D Preferred Holders,
who would likely see a significant reduction in the value of any Common Stock
paid to settle the Series D Preferred redemption amount.

In an effort to address this risk of a significant reduction to the value of a
holder’s investment in Series D Preferred and Common Stock following the Series
D Redemption Date, the Company executed a modified Dutch auction tender offer in
March 2021 for up to $6.00 million of our Series D Preferred, in which 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
accepted for purchase for an aggregate cost of $1.86 million.

In July 2021, we raised additional capital for the Company through the rights
offering (the “Rights Offering”) pursuant to which the common stockholders
purchased $30.00 million in aggregate principal amount (the “Rights Offering”)
of our 7.00% senior subordinated convertible notes due 2031 (“Convertible
Notes”). These Convertible Notes were fully subscribed in the Rights Offering
and interest is payable on the Convertible Notes 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.

As the Company’s final attempt 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, the Company will offer to exchange any and all outstanding
shares of Series D Preferred for 6.00% Subordinated Notes due 2027 (the
“Exchange Offer”), to be newly issued by the Company. The Exchange Offer will be
made upon the terms and subject to the conditions set forth in the preliminary
prospectus/consent solicitation (the “Prospectus/Consent Solicitation”) that is
part of a registration statement on Form S-4 filed by the Company with the
Securities and Exchange Commission on November 1, 2022.

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Inflation

Prior to 2021, inflation was relatively low and did not have a significant
detrimental impact on the Company’s results of operations. If inflation rates
continue to increase, substantially all of the Company’s tenant leases contain
provisions designed to partially mitigate the negative impact of inflation in
the near term. Such lease provisions include clauses that require tenants to
reimburse the Company for inflation-sensitive costs such as real estate taxes
and many of the operating expenses it incurs. Significant inflation rate
increases over a prolonged period of time may have a material adverse impact on
the Company’s business.

Recent Accounting Pronouncements

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

Critical Accounting Policies

In preparing the condensed consolidated financial statements, we have made
estimates, assumptions and judgements that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities as of
the date of the financial statements and the reported amounts of revenue and
expenses during the reported periods. Actual results may differ from these
estimates. A summary of our critical accounting estimates and policies is
included in our 2021 Form 10-K under “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.” During the nine months ended
September 30, 2022, there have been no significant changes to these estimates
and policies previously disclosed in our 2021 Form 10-K. For disclosure
regarding recent accounting pronouncements and the anticipated impact they will
have on our operations, please refer to Note 2 of the condensed consolidated
financial statements included in this Form 10-Q.

Available Information

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

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