Medalist Diversified, Inc 8-K/A, filed Jun 9, 2021
Medalist Diversified, Inc. (MDRR)
About this 8-K/A
Medalist Diversified, Inc filed this 8-K/A on June 9, 2021, reporting on events of May 14, 2021.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 14, 2021
Medalist Diversified REIT, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Maryland | 001-38719 | 47-5201540 | ||
| (State or other jurisdiction of incorporation or organization) |
(Commission File Number) | (I.R.S. Employer Identification No.) |
1051 E. Cary Street Suite 601
James Center Three
Richmond, VA, 23219
(Address of principal executive offices)
(804) 344-4435
(Registrant’s telephone number, including area code)
None
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging Growth Company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Name of each Exchange on Which Registered |
Trading Symbol(s) | ||
| Common Stock, $0.01 par value | Nasdaq Capital Market | MDRR | ||
| 8.0% Series A Cumulative Redeemable Preferred Stock, $0.01 par value | Nasdaq Capital Market | MDRRP |
Explanatory Note
This Form 8-K/A amends and supplements the Form 8-K filed by Medalist Diversified REIT, Inc. (the “Company”) on May 19, 2021 (the “Original Filing”) to include the unaudited pro forma information required by Item 9.01(a) and (b) of Form 8-K. This Form 8-K/A should be read in conjunction with the Original Filing.
| ITEM 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
(a) Financial Statements of Property Acquired
The following Statements of Revenues and Certain Expenses for the Lancer Center Shopping Center are set forth in Exhibit 99.1, which is incorporated herein by reference.
Report of Independent Auditor.
Statement of Revenues and Certain Operating Expenses for the three months ended March 31, 2021 (unaudited) and year ended December 31, 2020.
Notes to Statement of Revenues and Certain Operating Expenses for the three months ended March 31, 2021 (unaudited) and year ended December 31, 2020.
(b) Unaudited Pro Forma Financial Information
The following unaudited pro forma financial statements for the Lancer Center Shopping Center are set forth in Exhibit 99.2, which is incorporated herein by reference.
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2021.
Notes to Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2020.
Unaudited Pro Forma Consolidated Statements of Operations for the three months ended March 31, 2021.
Notes to Unaudited Pro Forma Consolidated Statements of Operations for the three months ended March 31, 2021.
Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 31, 2020.
Notes to Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 31, 2020.
(c) Not applicable.
(d) Exhibits
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MEDALIST DIVERSIFIED REIT, INC. | ||
| Dated: June 9, 2021 | By: | /s/ Thomas E. Messier |
| Thomas E. Messier | ||
| Chief Executive Officer, Chairman of the Board, Treasurer and Secretary | ||
Exhibit 23.1
Consent of Independent Auditor
To the Board of Directors
Medalist Diversified REIT, Inc.
Richmond, Virginia
We hereby consent to the incorporation by reference in the Registration Statements of Medalist Diversified REIT, Inc. on Form S-8 (Nos. 333-228674 and 333-238483) and use in the Form 8-K/A of Medalist Diversified REIT, Inc. and subsidiaries of our report dated March 9, 2021, with respect to the statement of revenues and certain operating expenses of the Lancer Center Shopping Center for the year ended December, 31, 2020, which appears in Form 8-K/A of Medalist Diversified REIT, Inc. and subsidiaries dated June 9, 2021.
/s/ Cherry Bekaert LLP
Richmond, Virginia
June 9, 2021
Exhibit 99.1
LANCER CENTER SHOPPING CENTER
FINANCIAL STATEMENT
Three Months Ended March 31, 2021 (unaudited) and
Year Ended December 31, 2020
LANCER CENTER SHOPPING CENTER
FINANCIAL STATEMENT
Three Months Ended March 31, 2021 (unaudited) and
Year Ended December 31, 2020
Table of Contents
| Report of Independent Auditor | 1 |
| Statement of Revenues and Certain Operating Expenses | 2 |
| Notes to Statement of Revenues and Certain Operating Expenses | 3 |
Report of Independent Auditor
To the Board of Directors
Medalist Diversified REIT, Inc.
We have audited the accompanying statement of revenues and certain operating expenses (the “Statement”) of Lancer Center shopping center (the “Property”), as defined in Note 1 of the Statement, for the year ended December 31, 2020.
Management’s Responsibility for the Statement
Management is responsible for the preparation and fair presentation of this Statement, in accordance with accounting principles generally accepted in the United States of America that is free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on this Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statement.
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Statement referred to above presents fairly, in all material respects, the revenues and certain operating expenses of the Property for the year ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter
The accompanying Statement was prepared as described in Note 1, for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to this matter.
/s/ Cherry Bekaert LLP
Richmond, Virginia
March 9, 2021
LANCER CENTER SHOPPING CENTER
STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES
Three Months Ended March 31, 2021 (unaudited) and
Year Ended December 31, 2020
| Three months ended | ||||||||
| March 31, 2021 | 2020 | |||||||
| Unaudited | ||||||||
| REVENUE | ||||||||
| Retail center property revenues | $ | 255,313 | $ | 1,016,010 | ||||
| Retail center property tenant reimbursements | 22,053 | 129,905 | ||||||
| Total revenues | 277,366 | 1,145,915 | ||||||
| CERTAIN OPERATING EXPENSES | ||||||||
| Real estate taxes and insurance | 44,529 | 178,116 | ||||||
| Operating and maintenance | 14,577 | 70,279 | ||||||
| Management fee | 8,279 | 34,850 | ||||||
| Bad debt expense | - | 16,077 | ||||||
| Total certain operating expenses | 67,385 | 299,322 | ||||||
| Revenues in excess of certain operating expenses | $ | 209,981 | $ | 846,593 | ||||
See accompanying notes to statement of revenues and certain operating expenses.
Notes to Statement of Revenues and Certain Operating Expenses
Note 1. Basis of Presentation
The accompanying statement of revenues and certain operating expenses (the “Statement”) includes the operations of Lancer Center shopping center (the “Property”).
The Statement has been prepared for the purpose of complying with Rule 8-06 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the Statement is not representative of the actual operations for the periods presented, as revenues and certain operating expenses, which may not be directly attributable to the revenues and expenses expected to be incurred in the future operations of the Property, have been excluded. Such excluded items include certain legal, accounting, maintenance and repair and interest expenses, non-cash expenses such as depreciation, amortization, and amortization of above-market and below-market leases, and interest income. Management is not aware of any material factors during the year ended December 31, 2020 that would cause the reported financial information not to be indicative of future operating results.
Note 2. Nature of Business and Summary of Significant Accounting Policies
Basis of accounting:
The Statement has been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“GAAP”) as determined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).
Revenue recognition:
The Property recognizes rental revenue from tenants on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased asset. Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred. Tenant recoveries and reimbursable expenses are recognized and presented gross, as the Property is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk.
Income taxes:
As a limited liability company, the Property’s taxable income or loss is allocated to its members. Therefore, no provision or liability for income taxes has been included in the financial statement.
Use of estimates:
Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenues and certain operating expenses during the reporting period to present the Statement in conformity with GAAP. Actual results could differ from those estimates.
Note 3. Minimum Future Lease Rentals
There are various lease agreements in place with tenants to lease space in the Property. As of December 31, 2020, the minimum future cash rents receivable under noncancelable operating leases in each of the next five years and thereafter are as follows:
| (Unaudited) | |||||
| 2021 | $ | 969,687 | |||
| 2022 | 975,710 | ||||
| 2023 | 890,931 | ||||
| 2024 | 632,272 | ||||
| 2025 | 548,676 | ||||
| Thereafter | 630,351 | ||||
| Total future rents | $ | 4,647,627 | |||
Note 4. Tenant Concentrations
As of the December 31, 2020, the Property’s occupancy rate is 97.25%. For the year ended December 31, 2020, four tenants combine to represent approximately 50% of the Property’s rental revenues.
Note 5. Commitments and Contingencies
The Property is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management believes that the ultimate settlement of these actions will not have a material adverse effect on the Property’s results of operations.
Since March 2020, retail properties such as the Property have been significantly impacted by measures taken by local, state and federal authorities to mitigate the impact of COVID-19, such as mandatory business closures, quarantines, restrictions on travel and “shelter-in-place” or “stay-at-home” orders. While some of these measures have been relaxed by the respective governmental authorities, with the uncertainty resulting from the continued spread of COVID-19, delays in delivering vaccines to the public, and its new variants and the possibility of the re-imposition of mandatory business closures, quarantines, restrictions on travel and “shelter-in-place” or “stay-at-home” orders by some governmental authorities, the negative impact on demand for the goods and services of the retail tenants in the Property could continue to be significant in the coming months.
Note 6. Subsequent Events
Management has evaluated subsequent events through March 9, 2021, the date the financial statement was available to be issued and there are no subsequent events for disclosure in the accompanying financial statement.
Exhibit 99.2
MEDALIST DIVERSIFIED REIT, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Three months ended March 31, 2021
and
Year Ended December 31, 2020
Summary of Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated financial statements and accompanying notes should be read in conjunction with the unaudited condensed consolidated balance sheet of Medalist Diversified REIT, Inc. and Subsidiaries (collectively, the “Company”) as of March 31, 2021, the related unaudited condensed consolidated statement of operations for the three months ended March 31, 2021, and the audited consolidated statement of operations for the year ended December 31, 2020.
The following unaudited pro forma consolidated balance sheet as of March 31, 2021 has been prepared to give effect to (i) the acquisition of Lancer Center as if the acquisition occurred on March 31, 2021 and (ii) the sale of 8,000,000 common shares at an offering price of $1.50 per share that closed on April 13, 2021 as if the sale had closed on March 31, 2021.
The following unaudited pro forma consolidated statements of operation for the three months ended March 31, 2021 has been prepared to give effect to the acquisition of Lancer Center as if the acquisition occurred on January 1, 2021.
The following unaudited pro forma consolidated statements of operation for the year ended December 31, 2020 has been prepared to give effect to the acquisition of Lancer Center as if the acquisition occurred on January 1, 2020.
These unaudited pro forma consolidated financial statements are prepared for informational purposes only and are not necessarily indicative of future results or of actual results that would have been achieved had the acquisition of Lancer Center been consummated as of the date indicated.
Medalist Diversified REIT, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
As of March 31, 2021
| Pro Forma | Pro Forma | |||||||||||||||
| Adjustments | Adjustments | |||||||||||||||
| Historical | Lancer Center | Equity | Pro Forma | |||||||||||||
| March 31, 2020 (a) | Acquisition (b) | Raise (c) | March 31, 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
| ASSETS | ||||||||||||||||
| Investment properties, net | $ | 46,962,683 | $ | 9,902,876 | (d) | $ | - | $ | 56,865,559 | |||||||
| Cash | 3,681,292 | (3,783,515 | )(e) | 10,932,172 | 10,829,949 | |||||||||||
| Restricted cash | 2,669,952 | - | - | 2,669,952 | ||||||||||||
| Rent and other receivables, net of allowance | 347,957 | - | - | 347,957 | ||||||||||||
| Assets held for sale | 22,093,805 | - | - | 22,093,805 | ||||||||||||
| Unbilled rent | 761,820 | - | - | 761,820 | ||||||||||||
| Intangible assets, net | 3,004,290 | 1,181,191 | (f) | - | 4,185,481 | |||||||||||
| Other assets | 608,414 | - | - | 608,414 | ||||||||||||
| Total Assets | $ | 80,130,213 | $ | 7,300,552 | $ | 10,932,172 | $ | 98,362,937 | ||||||||
| 10,205,385 | ||||||||||||||||
| LIABILITIES | ||||||||||||||||
| Accounts payable and accrued liabilities | $ | 1,683,755 | $ | - | $ | - | $ | 1,683,755 | ||||||||
| Intangible liabilities, net | 972,121 | 878,682 | (f) | - | 1,850,803 | |||||||||||
| Line of credit, short term, net | 325,000 | - | - | 325,000 | ||||||||||||
| Notes payable | 176,300 | - | - | 176,300 | ||||||||||||
| Convertible debentures, net | 986,837 | - | - | 986,837 | ||||||||||||
| Mortgages payable, net | 40,380,026 | 6,421,870 | (g) | - | 46,801,896 | |||||||||||
| Mortgages payable, net, associated with assets held for sale | 17,976,368 | - | - | 17,976,368 | ||||||||||||
| Mandatorily redeemable preferred stock, net | 4,072,706 | - | - | 4,072,706 | ||||||||||||
| Total Liabilities | $ | 66,573,113 | $ | 7,300,552 | $ | - | $ | 73,873,665 | ||||||||
| EQUITY | ||||||||||||||||
| Common stock | $ | 69,453 | $ | - | $ | 80,000 | $ | 149,453 | ||||||||
| Additional paid-in capital | 37,316,979 | - | 11,080,000 | 48,396,979 | ||||||||||||
| Offering costs | (3,058,559 | ) | - | (227,828 | ) | (3,286,387 | ) | |||||||||
| Accumulated deficit | (21,576,511 | ) | - | - | (21,576,511 | ) | ||||||||||
| Total Shareholders' Equity | 12,751,362 | - | 10,932,172 | 23,683,534 | ||||||||||||
| Noncontrolling interests - Hampton Inn Property | (249,621 | ) | - | - | (249,621 | ) | ||||||||||
| Noncontrolling interests - Hanover Square Property | 170,764 | - | - | 170,764 | ||||||||||||
| Noncontrolling interests - Operating Partnership | 884,595 | - | - | 884,595 | ||||||||||||
| Total Equity | $ | 13,557,100 | $ | - | $ | 10,932,172 | $ | 24,489,272 | ||||||||
| Total Liabilities and Equity | $ | 80,130,213 | $ | 7,300,552 | $ | 10,932,172 | $ | 98,362,937 | ||||||||
See the accompanying notes to unaudited pro forma consolidated balance sheet
MEDALIST DIVERSIFIED REIT, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2021
Notes to unaudited pro forma consolidated balance sheet as of March 31, 2021
| (a) | Historical financial information was derived from the unaudited condensed consolidated financial statements of the Company as of March 31, 2021. |
| (b) | Represents the acquisition of Lancer Center as if it had occurred on March 31, 2021. Lancer Center was acquired by MDR Lancer, LLC, a wholly owned subsidiary of Medalist Diversified Holdings, LP (the “Operating Partnership”), of which the Company is the General Partner, on May 14, 2021. The net purchase price of the property was $9,900,000 ($10,100,000 with a $200,000 credit to the Company for major repairs) plus actual capitalized closing and acquisition costs of $305,385. |
| (c) | Represents the sale of 8,000,000 common shares at an offering price of $1.50 per share that closed on April 13, 2021, as if the closing occurred on March 31, 2021. Under this transaction, the Company raised $12,000,000 in gross proceeds. Fees to its lead underwriter were seven percent of the amount raised, or $840,000. During the three months ended March 31, 2021, the Company incurred actual issuance costs of $66,202, which are recorded as Offering Costs on the Company’s condensed consolidated balance sheet as of March 31, 2021. In addition, the Company estimates that it will incur an additional $227,828 in issuance costs subsequent to March 31, 2021 to close the transaction, for a total of $294,030 in actual and estimated issuance costs associated with this capital raise. |
| (d) | Amounts recorded to investment properties include tangible assets acquired at closing, including land, site improvements, building and tenant improvements and are recorded at fair value in accordance with Accounting Standards Codification (“ASC”) 805. |
| (e) | The acquisition cost, net of debt, was funded with $3,783,515 in cash from the Company. Pro forma cash from the Company has been adjusted over the actual cash investment made to reflect the impact of removing prepaid expenses, accrued liabilities and prorated revenues and expenses arising from the acquisition from the unaudited pro forma consolidated balance sheet. |
| (f) | Represents the fair value of lease intangibles, including leasing commissions, leases in place, above market leases, below market leases and legal and marketing costs associated with replacing existing leases, recorded at fair value in accordance with ASC 805. |
| (g) | The Company obtained a mortgage payable totaling $6,565,000 with deferred financing costs totaling $143,130, which are presented as a direct reduction of the associated debt. |
Medalist Diversified REIT, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
For the three months ended March 31, 2021
| Pro Forma | ||||||||||||
| Historical | Adjustments | Pro Forma | ||||||||||
| Three Months Ended | Lancer Center | Three Months Ended | ||||||||||
| March 31, 2021 (a) | Acquisition | March 31, 2021 | ||||||||||
| (unaudited) | (unaudited) | (unaudited) | ||||||||||
| REVENUE | ||||||||||||
| Retail center property revenues | $ | 1,010,293 | $ | 255,313 | (b) | $ | 1,265,606 | |||||
| Retail center property tenant reimbursements | 183,348 | 22,053 | (c) | 205,401 | ||||||||
| Flex center property revenues | 139,704 | - | 139,704 | |||||||||
| Flex center property tenant reimbursements | 43,123 | - | 43,123 | |||||||||
| Hotel property room revenues | 1,286,748 | - | 1,286,748 | |||||||||
| Hotel property other revenues | 8,637 | - | 8,637 | |||||||||
| Total Revenue | $ | 2,671,853 | $ | 277,366 | $ | 2,949,219 | ||||||
| OPERATING EXPENSES | ||||||||||||
| Retail center property operating expenses | $ | 327,930 | $ | 67,385 | (d) | $ | 395,315 | |||||
| Flex center property operating expenses | 54,088 | - | 54,088 | |||||||||
| Hotel property operating expenses | 797,395 | - | 797,395 | |||||||||
| Bad debt expense | 3,196 | - | 3,196 | |||||||||
| Share based compensation expenses | 149,981 | - | 149,981 | |||||||||
| Legal, accounting and other professional fees | 498,612 | - | 498,612 | |||||||||
| Corporate general and administrative expenses | 62,380 | - | 62,380 | |||||||||
| Depreciation and amortization | 653,233 | 230,583 | (e) | 883,816 | ||||||||
| Total Operating Expenses | 2,546,815 | 297,968 | 2,844,783 | |||||||||
| Operating Income (loss) | 125,038 | (20,602 | ) | 104,436 | ||||||||
| Interest expense | 2,434,132 | 72,680 | (f) | 2,506,812 | ||||||||
| Net Loss from Operations | (2,309,094 | ) | (93,282 | ) | (2,402,376 | ) | ||||||
| Other income | 1,352 | - | 1,352 | |||||||||
| Net Loss | (2,307,742 | ) | (93,282 | ) | (2,401,024 | ) | ||||||
| Less: Net loss attributable to Hampton Inn Property noncontrolling interests | (25,238 | ) | - | (25,238 | ) | |||||||
| Less: Net loss attributable to Hanover Square Property noncontrolling interests | (7,020 | ) | - | (7,020 | ) | |||||||
| Less: Net income (loss) attributable to Operating Partnership noncontrolling interests | 2,040 | (1,418 | )(g) | 622 | ||||||||
| Net Loss Attributable to Medalist Common Shareholders | $ | (2,277,524 | ) | $ | (91,864 | ) | $ | (2,369,388 | ) | |||
| Loss per share from operations - basic and diluted | $ | (0.39 | ) | $ | (0.17 | ) | ||||||
| Weighted-average number of shares - basic and diluted | 5,856,365 | 13,856,365 | (h) | |||||||||
| Dividends declared per common share | $ | - | $ | - | ||||||||
See notes to unaudited pro forma consolidated financial statements
MEDALIST DIVERSIFIED REIT, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2021
Notes to unaudited pro forma consolidated statement of operations for the three months ended March 31, 2021
| (a) | Historical financial information was derived from the unaudited condensed consolidated financial statements of the Company for the three months ended March 31, 2021. |
| (b) | Represents rental revenues for Lancer Center that would have been recognized for the three months ended March 31, 2021 based on the terms of leases for tenants that are currently in place. Rental revenues are presented on a straight-line basis and include an adjustment of $5,994 in estimated net amortization of above and below market leases. |
| (c) | Represents tenant reimbursement revenues for Lancer Center that would have been recognized for the three months ended March 31, 2021. |
| (d) | Represents operating expenses for Lancer Center for the three months ended March 31, 2021, based on historical operations of the previous owner, but excluding asset management fees which are already included as an expense in the historical financial information referenced in (a), above. Property management fees have been adjusted to reflect the Company’s management agreement with the property manager who will manage Lancer Center after its acquisition. |
| (e) | Represents depreciation and amortization expense for Lancer Center for the three months ended March 31, 2021 as if the Company had acquired Lancer Center on January 1, 2021. Depreciation expense is calculated using the straight-line method over the estimated remaining useful life of 14.2 years for the building and 7.5 years for land improvements. Tenant improvements are amortized utilizing the straight-line method over the term of the related lease or occupancy term of the tenant, if shorter. Intangible assets such as in-place lease value and other lease-related intangibles are recorded at fair value and are amortized over the remaining terms of the underlying leases. |
| (f) | Represents interest expense on the mortgage payable for the three months ended March 31, 2021 as if the mortgage payable was outstanding for the full three months ending March 31, 2021. Interest expense on the mortgage payable is based on the principal amount of $6,565,000 and is calculated based on an amortization period of 25 years at the stated annual rate of 4.0%. Interest expense includes amortization of deferred financing costs using the straight-line method, which approximates to the effective interest method, over the term of the loan (five years). |
| (g) | Represents the Operating Partnership’s 1.52 percent weighted average noncontrolling ownership interest’s share of the Lancer Center net loss for the three months ended March 31, 2021 calculated as if the 8,000,000 shares of common stock issued on April 13, 2021 had been issued on January 1, 2021. |
| (h) | Weighted-average number of shares outstanding is calculated assuming the sale of 8,000,000 shares of common stock which closed on April 13, 2021 had closed on January 1, 2021. |
Medalist Diversified REIT, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Operations
For the year ended December 31, 2020
| Pro Forma | ||||||||||||
| Historical | Adjustments | Pro Forma | ||||||||||
| Year Ended | Lancer Center | Year Ended | ||||||||||
| December 31, 2020 (a) | Acquisition | December 31, 2020 | ||||||||||
| (unaudited) | (unaudited) | |||||||||||
| REVENUE | ||||||||||||
| Retail center property revenues | $ | 4,284,779 | $ | 1,040,376 | (b) | $ | 5,325,155 | |||||
| Retail center property tenant reimbursements | 867,371 | 129,905 | (c) | 997,276 | ||||||||
| Flex center property revenues | 559,641 | - | 559,641 | |||||||||
| Flex center property tenant reimbursements | 227,193 | - | 227,193 | |||||||||
| Hotel property room revenues | 3,207,405 | - | 3,207,405 | |||||||||
| Hotel property other revenues | 129,771 | - | 129,771 | |||||||||
| Total Revenue | $ | 9,276,160 | $ | 1,170,281 | $ | 10,446,441 | ||||||
| OPERATING EXPENSES | ||||||||||||
| Retail center property operating expenses | $ | 1,362,532 | $ | 299,322 | (d) | $ | 1,661,854 | |||||
| Flex center property operating expenses | 231,209 | - | 231,209 | |||||||||
| Hotel property operating expenses | 3,164,646 | - | 3,164,646 | |||||||||
| Bad debt expense | 431,143 | - | 431,143 | |||||||||
| Share based compensation expenses | 569,995 | - | 569,995 | |||||||||
| Legal, accounting and other professional fees | 1,258,863 | - | 1,258,863 | |||||||||
| Corporate general and administrative expenses | 300,641 | - | 300,641 | |||||||||
| Loss on impairment | 223,097 | - | 223,097 | |||||||||
| Impairment of assets held for sale | 3,494,058 | - | 3,494,058 | |||||||||
| Depreciation and amortization | 3,981,874 | 919,024 | (e) | 4,900,898 | ||||||||
| Total Operating Expenses | 15,018,058 | 1,218,346 | 16,236,404 | |||||||||
| Operating Loss | (5,741,898 | ) | (48,065 | ) | (5,789,963 | ) | ||||||
| Interest expense | 3,960,626 | 288,390 | (f) | 4,249,016 | ||||||||
| Net Loss from Operations | (9,702,524 | ) | (336,455 | ) | (10,038,979 | ) | ||||||
| Other income | 120,982 | - | 120,982 | |||||||||
| Net Loss | (9,581,542 | ) | (336,455 | ) | (9,917,997 | ) | ||||||
| Less: Net loss attributable to Hampton Inn Property noncontrolling interests | (1,131,765 | ) | - | (1,131,765 | ) | |||||||
| Less: Net loss attributable to Hanover Square Property noncontrolling interests | (23,167 | ) | - | (23,167 | ) | |||||||
| Less: Net loss attributable to Operating Partnership noncontrolling interests | (246,001 | ) | (5,652 | )(g) | (251,653 | ) | ||||||
| Net Loss Attributable to Medalist Common Shareholders | $ | (8,180,609 | ) | $ | (330,803 | ) | $ | (8,511,412 | ) | |||
| Loss per share from operations - basic and diluted | $ | (1.74 | ) | $ | (0.67 | ) | ||||||
| Weighted-average number of shares - basic and diluted | 4,709,980 | 12,684,718 | (h) | |||||||||
| Dividends declared per common share | $ | 0.125 | $ | 0.125 | ||||||||
See notes to unaudited pro forma consolidated financial statements
MEDALIST DIVERSIFIED REIT, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2020
Notes to unaudited pro forma consolidated statement of operations for the year ended December 31, 2020
| (a) | Historical financial information was derived from the audited condensed consolidated financial statements of the Company for the year ended December 31, 2020. |
| (b) | Represents rental revenues for Lancer Center that would have been recognized for the year ended December 31, 2020 based on the terms of leases for tenants that are currently in place. Rental revenues are presented on a straight-line basis and include an adjustment of $24,366 in estimated net amortization of above and below market leases. |
| (c) | Represents tenant reimbursement revenues for Lancer Center that would have been recognized for the year ended December 31, 2020. |
| (d) | Represents operating expenses for Lancer Center for the year ended December 31, 2020, based on historical operations of the previous owner, but excluding asset management fees which are already included as an expense in the historical financial information referenced in (a), above. Property management fees have been adjusted to reflect the Company’s management agreement with the property manager who will manage Lancer Center after its acquisition. |
| (e) | Represents depreciation and amortization expense for Lancer Center for the year ended December 31, 2020 as if the Company had acquired Lancer Center on January 1, 2020. Depreciation expense is calculated using the straight-line method over the estimated remaining useful life of 14.2 years for the building and 7.5 years for land improvements. Tenant improvements are amortized utilizing the straight-line method over the term of the related lease or occupancy term of the tenant, if shorter. Intangible assets such as in-place lease value and other lease-related intangibles are recorded at fair value and are amortized over the remaining terms of the underlying leases. |
| (f) | Represents interest expense on the mortgage payable for the year ended December 31, 2020 as if the mortgage payable was outstanding for the full 12 months of 2020. Interest expense on the mortgage payable is based on the principal amount of $6,565,000 and is calculated based on an amortization period of 25 years at the stated annual rate of 4.0%. Interest expense includes amortization of deferred financing costs using the straight-line method, which approximates to the effective interest method, over the term of the loan (five years). |
| (g) | Represents the Operating Partnership’s 1.68 percent weighted average noncontrolling ownership interest’s share of the Lancer Center net loss for 2020 calculated as if the 8,000,000 shares of common stock issued on April 13, 2021 had been issued on January 1, 2020. |
| (h) | Weighted-average number of shares outstanding is calculated assuming the sale of 8,000,000 shares of common stock which closed on April 13, 2021 had closed on January 1, 2020. |