Inside Business

Wheeler files IPO for real estate investment trust

Posted: December 19, 2011

 

Jon Wheeler

In a complicated financial arrangement, Jon Wheeler, president and CEO of commercial real estate firm Wheeler Interests in Virginia Beach, has filed an initial public offering for the formation of Wheeler Real Estate Investment Trust.

A prospectus was filed with the Securities and Exchange Commission Oct. 10 creating the firm, a real estate investment trust.

“We can confirm we filed,” Wheeler said. “Unfortunately, we’re in the quiet period and I can’t talk about it. I would love to. But the constraints and restrictions of what we can say and can’t say won’t allow us to.”

REITs are treated differently by the Internal Revenue Service than other corporations. In return for reduced taxes, REITs must distribute at least 90 percent of taxable income to shareholders in the form of dividends every year.

REITs must invest at least 75 percent of total assets in real estate and derive at least 75 percent of gross income as rents from real property or interest from mortgages on real property.

REITs are measured by their net asset value, funds from operations, adjusted funds from operations and cash available for distribution.

Wheeler plans to raise $23.8 million through a sale of 2.5 million to 3.4 million shares priced between $5 and $7 a share. If 2.5 million shares aren’t sold by Feb. 28 of next year, Wheeler will return the money to investors and withdraw its IPO.

Wheeler expects net proceeds from the sale may range from $13.2 million to $18.3 million.The money will be used to pay down debt, for working capital and for reimbursement of the company’s operating partnership. The remainder, which may range from $9.5 million to $14.6 million, depending on the final share price, will be used to buy properties.

Wheeler listed total assets of $32.2 million and total liabilities of $30.8 million for six months of this year, ending June 30.

Wheeler posted a $78, 759 loss for the first six months and a $1,359 gain for the same period in 2010.

For 2010, Wheeler registered a $98,157 gain, down from a $179,000 gain for 2009. Assets for 2010 totaled $32.7 million, up from $30 million in 2009. Liabilities for 2010 totaled $30.8 million, up from $27.8 million for 2009.

Wheeler Real Estate Investment Trust was formed as a Maryland corporation on June 23. Jon Wheeler, chairman and CEO, is the company’s second largest stockholder. WHLR Management LLC, which is wholly owned by Jon Wheeler, will provide administrative support to Wheeler Real Estate Trust.

The REIT will have access to several companies in which Jon Wheeler is owner, including Wheeler Interest Inc., an acquisition and asset management firm; Wheeler Real Estate LLC, a real estate leasing management and administration firm; Wheeler Capital LLC, a capital investment firm specializing in venture capital, financing and small business loans; Site Applications LLC, building maintenance; and Creative Retail Works, a design firm; and TESR LLC, tenant relations and community events.

Wheeler, the new firm’s executive officer, will be paid a minimum of $18,50 a month. Steve Belote, the firm’s chief financial officer, will be paid a minimum of $10,000 a month. The firm will also pay both executives expenses related to company business and benefits.

Wheeler has worked for Harbor Group International, Divaris Real Estate, Total Retail Management in Washington, D.C., and Federal Realty Investment Trust in Rockville, Md. In 1999, he partnered with Harrison Perrine to develop and own commercial properties.

In 2006, Wheeler bought Perrine’s interest in the company and formed Wheeler Interests, which now has a portfolio of 368,865 square feet and includes six retail shopping centers, two free-standing retail properties and one office building in Virginia, Florida, North Carolina and Oklahoma.

- By Philip Newswanger