Reported Earnings • Aug 05
Second quarter 2022 earnings released: US$2.57 loss per share (vs US$3.67 profit in 2Q 2021) Second quarter 2022 results: US$2.57 loss per share (down from US$3.67 profit in 2Q 2021). Revenue: US$8.50m (down 74% from 2Q 2021). Net loss: US$34.2m (down 171% from profit in 2Q 2021). Over the last 3 years on average, the company's share price growth rate has exceeded its earnings growth rate by 103 percentage points per year, which is a significant difference in performance. Seeking Alpha • Jul 21
Wheeler Real Estate Investment Trust Transformed By Cedar Deal Wheeler recently cut a deal to take over the less-desirable properties from the Cedar Realty Trust liquidation.
Despite the lower quality of these locations, they are actually well in line with the broader Wheeler portfolio and provide cash flow the business desperately needs.
The opportunity exists to invest alongside Management in the senior notes, which appear poised to profit the most from an eventual sale of the business.
The current situation at Wheeler Real Estate Investment Trust (WHLR) merits further consideration by investors willing to stomach some volatility and fully apprised of the risks. A brief summary follows:
The Players
Jon Wheeler - namesake of the business - was ousted after two ugly proxy battles.
Joseph Stillwell - at the helm after winning his second proxy attempt. He had the initial misfortune of gaining control as Covid lockdowns began.
Steamboat Capital Partners - owns portions of the WHLR capital stack, and has sued over treatment of preferred shareholders.
Cedar Reality Trust (CDR) - winding down REIT that has agreed to sell WHLR a portfolio of properties for $130m cash and the assumption of CDR preferred shares. The sale is expected to close in the coming 2-4 weeks.
Legacy WHLR Overview
The legacy business had the following results in FY21:
WHLR Investor Presentation
$41.7m NOI, $6.8m Adjusted Funds from Operations (AFFO)
Cap structure summary and new CDR acquisition pieces: $130m KeyBank bridge loan to WHLR, CDR B/C preferred ($161m face)
Base rent has averaged ~77.5% of WHLR revenues over the past five fiscal years, and with 94% of properties rented at $9.62 for FY21, I therefore estimate Wheeler will earn ~$64m of FY22 revenue vs $60.4m in FY21. Support below:
Author calculations from WHLR 10-K's
Q1-22 results were $15.5m of revenue (vs $14.7 in Q1-21), $10.2m NOI (vs $9.8m), and $2.3m of AFFO (vs $1.2m), so results appear on track.
WHLR Investor Presentation
CDR Acquisition Overview
CDR Transaction Proxy
Author summary from CDR FY21 10-K
New WHLR Pro-Forma
So how does this transaction change the complexion of Wheeler? Prior to the deal, WHLR has 5.5m leasable square feet with $9.62 average base rent. The acquisition will increase their square footage by around 50% and add slightly higher rents on a lower occupancy base. The CDR properties included in the transaction were about 28% of total CDR base rents and 38% of square footage. This equates to ~$36m of FY22 revenues on the acquired properties (28% of CDR's $127.6m FY21 total revenues) and doesn't assume any new leases for FY22.
The pro-forma combined cashflow could look something like this:
~$100m revenue
$33m property operations ($13m from CDR's 28% of operating expenses, $20m run rate for WHLR)
$10m corporate overhead (~$6m run rate for WHLR, assume $4m increase from CDR, some could be non-cash and synergies could improve this number)
$23m cash interest expense (5% estimate on $452m pro-forma debt below)
$10m Capex ($28m total FY21 for CDR of which 28% is ~$8m, $1.1m for WHLR for "recurring Capex" in FY21)
No Taxes Reported Earnings • May 06
First quarter 2022 earnings: EPS and revenues miss analyst expectations First quarter 2022 results: US$0.08 loss per share (up from US$0.12 loss in 1Q 2021). Revenue: US$30.5m (down 9.2% from 1Q 2021). Net loss: US$1.06m (loss narrowed 34% from 1Q 2021). Revenue missed analyst estimates by 1.9%. Earnings per share (EPS) also missed analyst estimates by 833%. Over the last 3 years on average, earnings per share has fallen by 61% per year but the company’s share price has increased by 11% per year, which means it is well ahead of earnings. Price Target Changed • Apr 27
Price target increased to US$29.00 Up from US$25.50, the current price target is an average from 2 analysts. New target price is approximately in line with last closing price of US$28.44. The company is forecast to post a net loss per share of US$0.07 next year compared to a net loss per share of US$4.24 last year. Recent Insider Transactions • Apr 09
President recently sold US$700k worth of stock On the 5th of April, Bruce Schanzer sold around 25k shares on-market at roughly US$28.00 per share. This was the largest sale by an insider in the last 3 months. This was Bruce's only on-market trade for the last 12 months. Reported Earnings • Mar 11
Full year 2021 earnings: EPS exceeds analyst expectations Full year 2021 results: US$4.23 loss per share (down from US$0.92 loss in FY 2020). Revenue: US$127.6m (down 5.9% from FY 2020). Net loss: US$55.9m (loss widened 363% from FY 2020). Revenue was in line with analyst estimates. Earnings per share (EPS) surpassed analyst estimates by 54%. Over the next year, revenue is expected to shrink by 3.2% compared to a 11% growth forecast for the reits industry in the US. Over the last 3 years on average, earnings per share has fallen by 40% per year but the company’s share price has increased by 9% per year, which means it is well ahead of earnings. Price Target Changed • Mar 08
Price target increased to US$29.00 Up from US$25.50, the current price target is an average from 2 analysts. New target price is approximately in line with last closing price of US$28.31. The company is forecast to post a net loss per share of US$2.76 next year compared to a net loss per share of US$0.92 last year. Upcoming Dividend • Feb 03
Upcoming dividend of US$0.066 per share Eligible shareholders must have bought the stock before 10 February 2022. Payment date: 22 February 2022. Trailing yield: 1.1%. Lower than top quartile of American dividend payers (3.6%). Lower than average of industry peers (2.9%). Breakeven Date Change • Nov 25
No longer forecast to breakeven The 2 analysts covering Cedar Realty Trust no longer expect the company to break even during the foreseeable future. The company was expected to make a profit of US$42.3m in 2021. New consensus forecast suggests the company will make a loss of US$2.45m in 2022. Reported Earnings • Nov 06
Third quarter 2021 earnings released: US$6.28 loss per share (vs US$0.11 loss in 3Q 2020) The company reported a poor third quarter result with increased losses, weaker revenues and weaker control over costs. Third quarter 2021 results: Revenue: US$30.6m (down 2.0% from 3Q 2020). Net loss: US$83.2m (loss widened US$81.8m from 3Q 2020). Over the last 3 years on average, earnings per share has fallen by 9% per year but the company’s share price has only fallen by 3% per year, which means it has not declined as severely as earnings. Breakeven Date Change • Nov 06
Forecast to breakeven in 2021 The 2 analysts covering Cedar Realty Trust expect the company to break even for the first time. New consensus forecast suggests the company will make a profit of US$42.3m in 2021. Upcoming Dividend • Nov 03
Upcoming dividend of US$0.066 per share Eligible shareholders must have bought the stock before 10 November 2021. Payment date: 22 November 2021. Trailing yield: 1.1%. Lower than top quartile of American dividend payers (3.5%). Lower than average of industry peers (2.8%). Price Target Changed • Sep 17
Price target increased to US$22.33 Up from US$19.17, the current price target is an average from 2 analysts. New target price is approximately in line with last closing price of US$23.19. Stock is up 339% over the past year. Valuation Update With 7 Day Price Move • Sep 13
Investor sentiment improved over the past week After last week's 16% share price gain to US$20.00, the stock trades at a forward P/E ratio of 63x. Average forward P/E is 47x in the REITs industry in the US. Total loss to shareholders of 24% over the past three years. Simply Wall St's valuation model estimates the intrinsic value at US$20.75 per share. Price Target Changed • Sep 10
Price target increased to US$19.83 Up from US$18.17, the current price target is an average from 2 analysts. New target price is approximately in line with last closing price of US$18.93. Stock is up 254% over the past year. Upcoming Dividend • Aug 02
Upcoming dividend of US$0.066 per share Eligible shareholders must have bought the stock before 09 August 2021. Payment date: 20 August 2021. Trailing yield: 1.6%. Lower than top quartile of American dividend payers (3.6%). Lower than average of industry peers (2.9%). Board Change • Jul 31
High number of new directors Independent Director Darcy Morris was the last director to join the board, commencing their role in 2021. Reported Earnings • Jul 30
Second quarter 2021 earnings released: EPS US$3.67 (vs US$0.67 loss in 2Q 2020) Second quarter 2021 results: Revenue: US$32.2m (up 13% from 2Q 2020). Net income: US$48.4m (up US$57.2m from 2Q 2020). Over the last 3 years on average, earnings per share has increased by 27% per year but the company’s share price has fallen by 18% per year, which means it is significantly lagging earnings. Major Estimate Revision • Jul 03
Consensus forecasts updated The consensus outlook for 2021 has been updated. 2021 expected loss increased from -US$0.51 to -US$0.57 per share. Revenue forecast of US$133.0m unchanged since last update. REITs industry in the US expected to see average net income growth of 12% next year. Consensus price target up from US$17.67 to US$18.17. Share price fell 5.1% to US$16.46 over the past week. Executive Departure • Jun 09
Chairman Emeritus Roger Widmann has left the company On the 3rd of June, Roger Widmann's tenure as Chairman Emeritus ended after less than a year in the role. As of March 2021, Roger still personally held 31.52k shares (US$470k worth at the time). A total of 2 executives have left over the last 12 months. The current median tenure of the management team is 7.17 years. Executive Departure • Jun 09
Independent Director Pamela Hootkin has left the company On the 3rd of June, Pamela Hootkin's tenure as Independent Director ended after 13.0 years in the role. As of March 2021, Pamela still personally held 26.86k shares (US$400k worth at the time). A total of 2 executives have left over the last 12 months. The current median tenure of the management team is 7.17 years. Recent Insider Transactions • Jun 04
Independent Director recently bought US$50k worth of stock On the 27th of May, Sharon Stern bought around 4k shares on-market at roughly US$14.02 per share. This was the largest purchase by an insider in the last 3 months. Insiders have collectively bought US$226k more in shares than they have sold in the last 12 months. Recent Insider Transactions • Jun 02
Independent Director recently bought US$50k worth of stock On the 27th of May, Sharon Stern bought around 4k shares on-market at roughly US$14.02 per share. This was the largest purchase by an insider in the last 3 months. Insiders have collectively bought US$226k more in shares than they have sold in the last 12 months. Major Estimate Revision • May 14
Consensus forecasts updated The consensus outlook for 2021 has been updated. 2021 losses of -US$0.28 per share expected, vs -US$0.23 per share profit forecast previously. Revenue forecast reaffirmed at US$129.0m. REITs industry in the US expected to see average net income growth of 11% next year. Consensus price target up from US$17.67 to US$19.92. Share price fell 11% to US$14.26 over the past week. Reported Earnings • May 09
First quarter 2021 earnings released: US$0.12 loss per share (vs US$0.39 loss in 1Q 2020) The company reported a decent first quarter result with reduced losses and improved control over expenses, although revenues were weaker. First quarter 2021 results: Revenue: US$33.6m (down 21% from 1Q 2020). Net loss: US$1.58m (loss narrowed 69% from 1Q 2020). Over the last 3 years on average, earnings per share has remained flat but the company’s share price has fallen by 15% per year, which means it is significantly lagging earnings. Upcoming Dividend • May 01
Upcoming dividend of US$0.066 per share Eligible shareholders must have bought the stock before 07 May 2021. Payment date: 20 May 2021. Trailing yield: 1.7%. Lower than top quartile of American dividend payers (3.5%). Lower than average of industry peers (3.2%). Is New 90 Day High Low • Feb 25
New 90-day high: US$14.13 The company is up 55% from its price of US$9.11 on 25 November 2020. The American market is up 5.0% over the last 90 days, indicating the company outperformed over that time. It also outperformed the REITs industry, which is up 5.0% over the same period. According to the Simply Wall St valuation model, the estimated intrinsic value of the company is US$13.79 per share. Reported Earnings • Feb 13
Full year 2020 earnings released: FFO US$3.04 per share (vs US$3.22 in FY 2019) The company reported a poor full year result with weaker earnings and revenues, although profit margins were flat. Full year 2020 results: Revenue: US$135.5m (down 5.9% from FY 2019). Funds from operations (FFO): US$39.8m (down 5.3% from FY 2019). FFO margin: 29% (in line with FY 2019). Over the last 3 years on average, earnings per share has fallen by 11% per year but the company’s share price has fallen by 23% per year, which means it is performing significantly worse than earnings. Analyst Estimate Surprise Post Earnings • Feb 13
Revenue beats expectations, earnings disappoint Revenue exceeded analyst estimates by 3.9%. Earnings per share (EPS) missed analyst estimates by 39%. Over the next year, revenue is expected to shrink by 2.6% compared to a 2.8% growth forecast for the REITs industry in the US. Is New 90 Day High Low • Feb 09
New 90-day high: US$12.17 The company is up 59% from its price of US$7.66 on 10 November 2020. The American market is up 16% over the last 90 days, indicating the company outperformed over that time. It also outperformed the REITs industry, which is up 5.0% over the same period. According to the Simply Wall St valuation model, the estimated intrinsic value of the company is US$11.18 per share. Major Estimate Revision • Feb 07
Analysts update estimates The company's losses in 2021 are expected to improve with analysts raising their consensus EPS forecasts from -US$0.72 to -US$0.20. No change was made to the revenue estimate which at the last update was US$132.0m. The REITs industry in the US is expected to see a 7.1% decline in net income next year. The consensus price target increased from US$11.10 to US$13.10. Share price is up 11% to US$11.85 over the past week. Price Target Changed • Feb 06
Price target raised to US$13.10 Up from US$11.10, the current price target is an average from 3 analysts. The new target price is 11% above the current share price of US$11.85. As of last close, the stock is down 36% over the past year. Upcoming Dividend • Feb 02
Upcoming Dividend of US$0.066 Per Share Will be paid on the 22nd of February to those who are registered shareholders by the 9th of February. The trailing yield of 2.5% is below the top quartile of American dividend payers (3.9%), and is lower than industry peers (3.4%). Is New 90 Day High Low • Jan 20
New 90-day high: US$11.38 The company is up 81% from its price of US$6.27 on 22 October 2020. The American market is up 14% over the last 90 days, indicating the company outperformed over that time. It also outperformed the REITs industry, which is up 5.0% over the same period. According to the Simply Wall St valuation model, the estimated intrinsic value of the company is US$15.17 per share. Is New 90 Day High Low • Dec 31
New 90-day high: US$10.13 The company is up 87% from its price of US$5.43 on 02 October 2020. The American market is up 13% over the last 90 days, indicating the company outperformed over that time. It also outperformed the REITs industry, which is up 4.0% over the same period. According to the Simply Wall St valuation model, the estimated intrinsic value of the company is US$15.17 per share. Is New 90 Day High Low • Dec 15
New 90-day high: US$9.53 The company is up 68% from its price of US$5.68 on 15 September 2020. The American market is up 10.0% over the last 90 days, indicating the company outperformed over that time. It also outperformed the REITs industry, which is flat over the same period. According to the Simply Wall St valuation model, the estimated intrinsic value of the company is US$15.17 per share. Is New 90 Day High Low • Nov 10
New 90-day high: US$1.22 The company is up 22% from its price of US$1.00 on 12 August 2020. The American market is up 7.0% over the last 90 days, indicating the company outperformed over that time. It also outperformed the REITs industry, which is flat over the same period. According to the Simply Wall St valuation model, the estimated intrinsic value of the company is US$2.05 per share. Reported Earnings • Oct 30
Third quarter earnings released Over the last 12 months the company has reported total funds from operations (FFO) of US$42.1m, down 1.6% from the prior year. Total revenue was US$137.9m over the last 12 months, down 5.1% from the prior year. Analyst Estimate Surprise Post Earnings • Oct 30
Third-quarter earnings released: Earnings beat expectations, revenue disappoints Third-quarter revenue missed analyst estimates by 1.8% at US$31.2m. Earnings per share (EPS) exceeded analyst estimates by 73% at -US$0.02. Revenue is expected to shrink by 2.8% over the next year, compared to a 1.8% growth forecast for the REITs industry in the US. Is New 90 Day High Low • Oct 24
New 90-day high: US$1.02 The company is up 16% from its price of US$0.88 on 24 July 2020. The American market is up 9.0% over the last 90 days, indicating the company outperformed over that time. It also outperformed the REITs industry, which is up 3.0% over the same period. According to the Simply Wall St valuation model, the estimated intrinsic value of the company is US$1.78 per share.