Business Context and Reporting Period
Company: Wheeler Real Estate Investment Trust, Inc. (Wheeler REIT)
Filing Type: Form 8-K (Current Report)
Date of Report: June 1, 2015 (Transaction closed June 2, 2015)
Event: Acquisition of the Brook Run Shopping Center in Richmond, Virginia, via a Contribution and Subscription Agreement with 19 investors.
Key Financial Metrics and Transaction Details
- Acquisition Value: $18,496,159.00 for the Brook Run Shopping Center.
- Equity Issuance: 574,743 Common Units of limited partnership interests issued to Contributors.
- Valuation of Issued Units: $1,327,655.61 (based on Nasdaq closing price on June 1, 2015).
- Dilution: Issued units represent 14.09% of total issued and outstanding Common Units.
- Ownership Structure: The transaction acquired 81% of the legal and economic interest in Brook Run Associates, LLC; the remaining 19% was acquired with cash.
- Proceeds: Wheeler REIT received no cash proceeds from the exchange of units.
- Redemption Terms: Units are redeemable for cash or common stock starting June 2, 2016.
Material Changes and Related Party Transactions
The filing discloses a material change in the company's asset base through the acquisition of the Brook Run Shopping Center. A significant related party transaction occurred as Jon Wheeler (Chairman and CEO) and Ann McKinney (Director) were two of the 19 Contributors. Jon Wheeler is also the managing member of Brook Run Associates, LLC. The remaining Contributors are not affiliated with the Registrant.
Guidance, Outlook, and Risks
- Financial Statements: Pro forma financial information is not applicable. Financial statements for the acquired business will be filed within 71 calendar days of this report.
- Regulatory Status: The issuance of Common Units was exempt from registration under Rule 506 of Regulation D.
- Contingencies: The description of the agreement is qualified by reference to the full text of the Contribution and Subscription Agreement (Exhibit 10.1).
Investor Verification Checklist
- Verify the full terms of the Contribution and Subscription Agreement in Exhibit 10.1.
- Review the upcoming financial statements for the acquired property (due within 71 days) to assess the property's historical performance.
- Confirm the cash portion used to acquire the remaining 19% interest in Brook Run and its impact on liquidity.
- Monitor the redemption option exercisable by Contributors beginning June 2, 2016.
- Assess the impact of the 14.09% dilution on existing shareholders.