8-K
Medalist Diversified, Inc. (MDRR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 10, 2023
Medalist Diversified REIT, Inc.
(Exact Name of Registrant as Specified in Its Charter)
| Maryland | 001-38719 | 47-5201540 |
|---|---|---|
| (State or other jurisdiction of incorporation<br>or organization) | (Commission File Number) | (I.R.S. Employer <br>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 ☒
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<br>Which Registered | Trading <br>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<br><br> |
Item 2.02Results of Operations and Financial Condition
On March 10, 2023, Medalist Diversified REIT, Inc., a Maryland corporation (the “Company”), issued a press release announcing its financial results for the fiscal year ended December 31, 2022 (the “Press Release”) and a financial supplement including reconciliations to certain non-GAAP financial measures (the “Financial Supplement”). Copies of the Press Release and the Financial Supplement are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference. In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 shall not be deemed to be “filed” for purposes of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), and shall not be incorporated by reference into any registration statement or other document filed under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.
Item 8.01Other Events
On March 10, 2023, the Company issued a press release announcing that its Board of Directors (the “Board”) has established a Special Committee of the Board comprised solely of independent directors to explore potential strategic alternatives focusing on maximizing stockholder value. A copy of the press release is attached hereto as Exhibit 99.3 and is incorporated herein by reference.
Item 9.01Financial Statements and Exhibits
(d) Exhibits
| Exhibit Number | Description of Exhibit | |
|---|---|---|
| 99.1 | Press Release, dated March 10, 2023 | |
| 99.2 | Financial Supplement to Press Release, dated March 10, 2023 | |
| 99.3 | | Press Release, dated March 10, 2023 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL Document) |
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: March 10, 2023 | By: | /s/ Thomas E. Messier |
| Thomas E. Messier | ||
| Chief Executive Officer, Chairman of the Board, Treasurer and Secretary |
Exhibit 99.1
MEDALIST DIVERSIFIED REIT, INC. REPORTS 2022 RESULTS
RICHMOND, VA, March 10, 2023. Medalist Diversified REIT, Inc. (NASDAQ:MDRR) (the “Company”), a Virginia-based real estate investment trust that specializes in acquiring, owning and managing commercial real estate in the Southeast region of the U.S., today reported financial results for the year ended December 31, 2022 and provided an update on its corporate activities. In addition, the Company released supplemental financial information about its first quarter financial results.
Key Highlights:
| ● | Operating loss was $1,413,626 for the year ended December 31, 2022, compared to operating income of $814,504 for the year ended December 31, 2021. |
|---|
| ● | Net Operating Income (NOI) grew 6.8% to $6,884,918 for the year ended December 31, 2022, compared to NOI of $6,443,860 for the year ended December 31, 2021. |
|---|
| ● | Funds from operations (FFO) increased by $1,971,472 to $997,253 for the year ended December 31, 2022, compared to FFO of ($974,219) for the year ended December 31, 2021. |
|---|
| ● | Same Property NOI growth of 7.9% for the year ended December 31, 2022, compared to the year ended December 31, 2021. |
|---|
| ● | Portfolio occupancy rate of 96.0% as of December 31, 2022, compared 94.7% as of December 31, 2021. |
|---|---|
| o | Weighted average lease term (“WALT”) of 3.9 years on retail and flex / industrial portfolios. |
| --- | --- |
| ● | Weighted average debt maturity of 6.1 years and weighted average interest rate of 4.2% as of December 31, 2022. |
|---|
| ● | On January 27, 2023, the Company paid its fourth quarter 2022 dividend of $0.01 per common share, its seventh consecutive quarter paying a dividend. |
|---|
About Medalist Diversified REIT
Medalist Diversified REIT Inc. is a Virginia-based real estate investment trust that specializes in acquiring, owning and managing commercial real estate in the Southeast region of the U.S. The Company’s strategy is to focus on commercial real estate which is expected to provide an attractive balance of risk and returns. Medalist utilizes a rigorous, consistent and replicable process for sourcing and conducting due diligence of acquisitions. For more information on Medalist, including additional supplemental financial information, please visit the Company website at https://www.medalistreit.com.
Non-GAAP Financial Measures
The foregoing supplemental financial data includes certain non-GAAP financial measures that we believe are helpful in understanding our business and performance, as further described below. Our definition and calculation of these non-GAAP financial measures may differ from those of other REITs, and may, therefore, not be comparable.
NOI
While we believe net income (loss), as defined by accounting principles generally accepted in the United States of America (U.S. GAAP), is the most appropriate measure, we consider NOI, given its wide use by and relevance to investors and analysts, an appropriate supplemental performance measure. NOI provides a measure of rental operations, and does not include depreciation and amortization, interest expense and non-property specific expenses such as corporate-wide interest expense and general and administrative expenses. As used herein, we calculate NOI as follows:
NOI from property operations is calculated as net loss, as defined by U.S. GAAP, plus preferred dividends, legal, accounting and other professional fees, corporate general and administrative expenses, depreciation, amortization of intangible assets and liabilities, net amortization of above and below market leases, interest expense, including amortization of financing costs, share based
compensation expense, loss on impairment, impairment of assets held for sale, loss (gain) on disposition of investment properties, loss on extinguishment of debt, other income and other expenses. The components of NOI consist of recurring rental and reimbursement revenue, less real estate taxes and operating expenses, such as insurance, utilities, and repairs and maintenance.
The following tables reflect net loss attributable to common shareholders with a reconciliation to NOI, as computed in accordance with GAAP for the periods presented:
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Net Operating Income | | | | | | |
| Net Loss | | $ | (4,732,214) | | $ | (4,358,282) |
| Plus: Preferred dividends, including amortization of capitalized issuance costs | | 622,881 | | 604,383 | ||
| Plus: Legal, accounting and other professional fees | | 1,627,881 | | 1,465,199 | ||
| Plus: Corporate general and administrative expenses | | | 457,653 | | 654,137 | |
| Plus: Depreciation expense | | | 3,381,249 | | 2,415,139 | |
| Plus: Amortization of intangible assets | | | 1,325,574 | | 1,093,565 | |
| Less: Net amortization of above and below market leases | | | (226,721) | | (24,024) | |
| Plus: Interest expense, including amortization of capitalized loan issuance costs | | | 2,932,207 | | 4,929,872 | |
| Plus: Share based compensation expense | | | 483,100 | | 149,981 | |
| Plus: Loss on impairment | | 36,670 | | - | ||
| Plus: Impairment of assets held for sale | | | 175,671 | | - | |
| Plus: Loss on extinguishment of debt | | | 389,207 | | - | |
| Less: Other income | | | (236,500) | | (361,469) | |
| Plus: Other expense | | | 227,164 | | - | |
| Less: Realized loss (gain) on disposal of investment properties | | | 421,096 | | (124,641) | |
| Net Operating Income - NOI | | $ | 6,884,918 | | $ | 6,443,860 |
Same Property NOI
Same property NOI is calculated as the NOI of all properties owned during the entire periods presented with the exclusion of any properties acquired or sold during the periods presented. The following table reconciles same property retail and flex NOI, NOI of newly acquired retail and flex properties, same hotel property NOI, and NOI of disposed hotel properties with total NOI.
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| All Properties | | | | | | |
| Same property NOI | | $ | 4,386,329 | | $ | 4,063,845 |
| NOI of acquired properties (1) | | 2,326,741 | | 847,635 | ||
| NOI of disposed properties (2) | | | 171,848 | | | 1,532,380 |
| Total NOI (3) | | $ | 6,884,918 | | $ | 6,443,860 |
EBITDA
EBITDA is net income, as defined by U.S. GAAP, plus preferred dividends, interest expense, including amortization of financing costs, depreciation and amortization, net amortization of acquired above and below market lease revenue, loss on impairment, impairment of assets held for sale, loss (gain) on disposition of investment properties, and loss on extinguishment of debt.
The following tables reflect net loss with a reconciliation to EBITDA, as computed in accordance with GAAP for the periods presented:
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| EBITDA | | | | | | |
| Net Loss | | $ | (4,732,214) | | $ | (4,358,282) |
| Plus: Preferred dividends, including amortization of capitalized issuance costs | | 622,881 | | 604,383 | ||
| Plus: Interest expense, including amortization of capitalized loan issuance costs | | 2,932,207 | | 4,929,872 | ||
| Plus: Depreciation expense | | 3,381,249 | | 2,415,139 | ||
| Plus: Amortization of intangible assets | | | 1,325,574 | | 1,093,565 | |
| Less: Net amortization of above and below market leases | | | (226,721) | | (24,024) | |
| Less: Realized loss (gain) on disposal of investment properties | | | 421,096 | | (124,641) | |
| Plus: Loss on impairment | | | 36,670 | | - | |
| Plus: Impairment of assets held for sale | | | 175,671 | | - | |
| Plus: Loss on extinguishment of debt | | | 389,207 | | - | |
| EBITDA | | $ | 4,325,620 | | $ | 4,536,012 |
FFO and AFFO
Funds from operations (“FFO”), a non-GAAP measure, is an alternative measure of operating performance, specifically as it relates to results of operations and liquidity. FFO is computed in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts (“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 and losses on extinguishment of debt, plus real estate related depreciation and amortization (excluding amortization of loan origination costs and above and below market leases). In addition to FFO, Adjusted FFO (“AFFO”), excludes non-cash items such as amortization of loans and above and below market leases, unbilled rent arising from applying straight line rent revenue recognition and share-based compensation expenses. Additionally, the impact of capital expenditures, including tenant improvement and leasing commissions, net of reimbursements of such expenditures by property escrow funds, is included in the calculation of AFFO.
The following tables reflect net loss with a reconciliation to FFO and AFFO for the periods presented:
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Funds from operations | | | | | | |
| Net loss | | $ | (4,732,214) | | $ | (4,358,282) |
| Depreciation of tangible real property assets | | 2,561,843 | | 1,912,353 | ||
| Depreciation of tenant improvements | | 718,704 | | 437,372 | ||
| Amortization of leasing commissions | | 100,702 | | 65,414 | ||
| Amortization of intangible assets | | 1,325,574 | | 1,093,565 | ||
| Loss (gain) on sale of investment properties | | | 421,096 | | | (124,641) |
| Loss on impairment | | 36,670 | | - | ||
| Impairment of assets held for sale | | 175,671 | | - | ||
| Loss on extinguishment of debt | | | 389,207 | | | - |
| Funds from operations | | $ | 997,253 | | $ | (974,219) |
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Adjusted funds from operations | | | | | | |
| Funds from operations | | $ | 997,253 | | $ | (974,219) |
| Amortization of above market leases | | 188,903 | | 250,504 | ||
| Amortization of below market leases | | (415,624) | | (274,528) | ||
| Straight line rent | | (149,831) | | (198,594) | ||
| Capital expenditures | | | (1,019,304) | | (536,685) | |
| (Increase) decrease in fair value of interest rate cap | | | (220,881) | | 27,281 | |
| Amortization of loan issuance costs | | | 107,595 | | 103,180 | |
| Amortization of preferred stock discount and offering costs | | | 222,881 | | 204,383 | |
| Amortization of convertible debenture discount, offering costs and beneficial conversion feature | | | — | | 1,718,487 | |
| Share-based compensation | | 483,100 | | 149,981 | ||
| Bad debt expense | | 46,932 | | 39,024 | ||
| Debt forgiveness | | | — | | (176,300) | |
| Adjusted Funds from operations (AFFO) | | $ | 241,024 | | $ | 332,514 |
Brent Winn Medalist Diversified REIT, Inc. brent.winn@medalistprop.com
Exhibit 99.2
Financial Supplement
Table of Contents
Definitions
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the years ended December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021
Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) for the years ended December 31, 2022 and 2021
NOI Reconciliations for the years ended December 31, 2022 and 2021
Same Property NOI Reconciliation for the years ended December 31, 2022 and 2021
EBITDA Reconciliations for the years ended December 31, 2022 and 2021
Same Property Revenues
Same Property Statistics – Retail and Flex Properties
Weighted Average Lease Term
Weighted Average Mortgage Payable Maturity
Weighted Average Mortgage Payable Interest Rate
Definitions
Investors and analysts following the real estate industry utilize certain financial measures as supplemental performance measures, including net operating income ("NOI"), Same Property NOI, and earnings before interest, taxes, depreciation and amortization for real estate ("EBITDA").
While we believe net income available to common stockholders, as defined by accounting principles generally accepted in the United States of America (U.S. GAAP), is the most appropriate measure, we consider NOI, Same Property NOI, and EBITDA, given their wide use by and relevance to investors and analysts, appropriate supplemental performance measures. NOI provides a measure of rental operations, and does not include depreciation and amortization, interest expense and non-property specific expenses such as corporate-wide interest expense and general and administrative expenses. As used herein, we calculate the following non-U.S. GAAP measures as follows:
• NOI from property operations is calculated as net loss, as defined by U.S. GAAP, plus preferred dividends, legal, accounting and other professional fees, corporate general and administrative expenses, depreciation, amortization of intangible assets and liabilities, net amortization of above and below market leases, interest expense, including amortization of financing costs, share based compensation expense, loss on impairment, impairment of assets held for sale, loss (gain) on disposition of investment properties, loss on extinguishment of debt, other income and other expenses. The components of NOI consist of recurring rental and reimbursement revenue, less real estate taxes and operating expenses, such as insurance, utilities, and repairs and maintenance. NOI presented in this financial supplement includes an adjustment to the Company’s net loss for amortization of above and below market leases and, as a result, varies from NOI presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
• Same Property NOI is calculated as the NOI of all properties owned during the entire periods presented with the exclusion of any properties acquired or sold during the periods presented.
• EBITDA is net income, as defined by U.S. GAAP, plus preferred dividends, interest expense, including amortization of financing costs, depreciation and amortization, net amortization of acquired above and below market lease revenue, loss on impairment, impairment of assets held for sale, loss (gain) on disposition of investment properties, and loss on extinguishment of debt.
NOI, Same Property NOI, Same Property Revenues, and EBITDA, do not represent cash generated from operating activities in accordance with U.S. GAAP and are not necessarily indicative of cash available to fund cash needs, including the repayment of principal on debt, capital expenditures and payment of dividends and distributions. NOI, Same Property NOI, and EBITDA should not be considered as substitutes for net income applicable to common stockholders (calculated in accordance with U.S. GAAP) as a measure of results of operations or cash flows (calculated in accordance with U.S. GAAP) as a measure of liquidity. NOI, Same Property NOI, and Adjusted EBITDA, as currently calculated by us, may not be comparable to similarly titled, but variously calculated, measures of other REITs.
FFO and AFFO Funds from operations (“FFO”), a non-GAAP measure, is an alternative measure of operating performance, specifically as it relates to results of operations and liquidity. FFO is computed in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts (“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 and losses on extinguishment of debt, plus real estate related depreciation and amortization (excluding amortization of loan origination costs and above and below market leases). In addition to FFO, Adjusted FFO (“AFFO”), excludes non-cash items such as amortization of loans and above and below market leases, unbilled rent arising from applying straight line rent revenue recognition and share-based compensation expenses. Additionally, the impact of capital expenditures, including tenant improvement and leasing commissions, net of reimbursements of such expenditures by property escrow funds, is included in the calculation of AFFO.
Medalist Diversified REIT, Inc. and Subsidiaries
Consolidated Balance Sheets
| | | | | | | |
|---|---|---|---|---|---|---|
| | **** | December 31, | ||||
| | | 2022 | **** | 2021 | ||
| ASSETS | | | | |||
| Investment properties, net | | $ | 76,514,952 | | $ | 69,407,915 |
| Cash | | 3,922,136 | | 4,370,405 | ||
| Restricted cash | | | 1,740,717 | | | 3,013,572 |
| Rent and other receivables, net of allowance of $47,109 and $13,010, as of December 31, 2022 and December 31, 2021, respectively | | 402,434 | | 466,141 | ||
| Assets held for sale | | | — | | | 9,846,208 |
| Unbilled rent | | 1,022,153 | | 872,322 | ||
| Intangible assets, net | | 3,748,706 | | 4,200,392 | ||
| Other assets | | 564,306 | | 370,133 | ||
| Total Assets | | $ | 87,915,404 | | $ | 92,547,088 |
| | | | | | | |
| LIABILITIES | | | | | ||
| Accounts payable and accrued liabilities | | $ | 1,198,072 | | $ | 1,307,257 |
| Intangible liabilities, net | | 2,234,113 | | 1,880,612 | ||
| Mortgages payable, net | | | 61,340,259 | | | 54,517,822 |
| Mortgages payable, net, associated with assets held for sale | | | — | | | 7,615,368 |
| Mandatorily redeemable preferred stock, net | | 4,450,521 | | 4,227,640 | ||
| Total Liabilities | | $ | 69,222,965 | | $ | 69,548,699 |
| | | | | | | |
| EQUITY | | | ||||
| Common stock, 17,758,421 and 16,052,617 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively | | $ | 177,584 | | 160,526 | |
| Additional paid-in capital | | 51,363,812 | | 49,645,426 | ||
| Offering costs | | (3,350,946) | | (3,350,946) | ||
| Accumulated deficit | | (30,939,020) | | (24,981,346) | ||
| Total Stockholders' Equity | | 17,251,430 | | 21,473,660 | ||
| Noncontrolling interests - Hanover Square Property | | 127,426 | | 146,603 | ||
| Noncontrolling interests - Parkway Property | | | 470,685 | | | 500,209 |
| Noncontrolling interests - Operating Partnership | | 842,898 | | 877,917 | ||
| Total Equity | | $ | 18,692,439 | | $ | 22,998,389 |
| Total Liabilities and Equity | | $ | 87,915,404 | | $ | 92,547,088 |
See notes to consolidated financial statements
Medalist Diversified REIT, Inc. and Subsidiaries
Consolidated Statements of Operations
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ending December 31, | ||||
| | **** | 2022 | **** | 2021 | ||
| | | | | | | |
| REVENUE | | | | |||
| Retail center property revenues | | $ | 7,053,757 | | $ | 5,634,396 |
| Flex center property revenues | | | 2,529,919 | | | 1,202,822 |
| Hotel property room revenues | | 1,494,836 | | 4,590,372 | ||
| Hotel property other revenues | | 12,813 | | 44,959 | ||
| Total Revenue | | $ | 11,091,325 | | $ | 11,472,549 |
| | | | | | | |
| OPERATING EXPENSES | | | ||||
| Retail center property operating expenses | | $ | 1,912,110 | | $ | 1,518,973 |
| Flex center property operating expenses | | | 684,843 | | | 343,717 |
| Hotel property operating expenses | | 1,335,801 | | 3,102,951 | ||
| Bad debt expense | | | 46,932 | | | 39,024 |
| Share based compensation expenses | | 483,100 | | 149,981 | ||
| Legal, accounting and other professional fees | | 1,627,881 | | 1,465,199 | ||
| Corporate general and administrative expenses | | 457,653 | | 654,137 | ||
| Loss on impairment | | 36,670 | | — | ||
| Impairment of assets held for sale | | | 175,671 | | | — |
| Other expense | | 227,164 | | — | ||
| Depreciation and amortization | | 4,706,823 | | | 3,508,704 | |
| Total Operating Expenses | | **** | 11,694,648 | | **** | 10,782,686 |
| (Loss) gain on disposal of investment properties | | | (421,096) | | | 124,641 |
| Loss on extinguishment of debt | | | (389,207) | | | — |
| Operating (loss) income | | **** | (1,413,626) | | **** | 814,504 |
| Interest expense | | 3,555,088 | | 5,534,255 | ||
| Net Loss from Operations | | **** | (4,968,714) | | **** | (4,719,751) |
| Other income | | 236,500 | | 361,469 | ||
| Net Loss | | **** | (4,732,214) | | **** | (4,358,282) |
| Less: Net income attributable to Hampton Inn Property noncontrolling interests | | — | | 14,651 | ||
| Less: Net income (loss) attributable to Hanover Square Property noncontrolling interests | | | 38,023 | | | (8,781) |
| Less: Net income (loss) attributable to Parkway Property noncontrolling interests | | 19,076 | | (3,791) | ||
| Less: Net (loss) income attributable to Operating Partnership noncontrolling interests | | (20,072) | | 3,903 | ||
| Net Loss Attributable to Medalist Common Shareholders | | $ | (4,769,241) | | $ | (4,364,264) |
| | | | | | | |
| Loss per share from operations - basic and diluted | | $ | (0.28) | | $ | (0.33) |
| | | | | | | |
| Weighted-average number of shares - basic and diluted | | 17,122,617 | | 13,092,937 | ||
| | | | | | | |
| Dividends paid per common share | | $ | 0.07 | | $ | 0.04 |
See notes to consolidated financial statements
Medalist Diversified REIT, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year ended December 31, | ||||
| | **** | 2022 | **** | 2021 | ||
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| | | | | | | |
| Net Loss | | $ | (4,732,214) | | $ | (4,358,282) |
| | | | | | | |
| Adjustments to reconcile consolidated net loss to net cash flows from operating activities | | | | | ||
| Depreciation | | 3,381,249 | | 2,415,139 | ||
| Amortization | | 1,325,574 | | 1,093,565 | ||
| Loan cost amortization | | 107,595 | | 103,180 | ||
| Mandatorily redeemable preferred stock issuance cost and discount amortization | | | 222,881 | | | 204,383 |
| Convertible debenture issuance cost, discount and beneficial conversion feature amortization | | | — | | | 1,718,487 |
| Above (below) market lease amortization, net | | (226,721) | | (24,024) | ||
| Bad debt expense | | | 46,932 | | | 39,024 |
| Note payable forgiveness | | | — | | | (176,300) |
| Share-based compensation | | | 483,100 | | | 149,981 |
| Impairment of assets held for sale | | 175,671 | | — | ||
| Loss on impairment | | | 36,670 | | | — |
| Loss on extinguishment of debt | | | 389,207 | | | — |
| Loss (gain) on sale of investment property | | 421,096 | | (124,641) | ||
| | | | | | | |
| Changes in assets and liabilities | | | | | ||
| Rent and other receivables, net | | 16,775 | | (46,413) | ||
| Unbilled rent | | (149,831) | | (198,594) | ||
| Other assets | | (194,173) | | (50,243) | ||
| Accounts payable and accrued liabilities | | (109,185) | | 87,351 | ||
| Net cash flows from operating activities | | 1,194,626 | | 832,613 | ||
| | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | ||
| | | | | | | |
| Investment property acquisitions | | (10,279,714) | | (20,750,571) | ||
| Capital expenditures | | | (1,019,304) | | | (536,685) |
| Cash received from disposal of investment properties | | 1,979,837 | | 2,144,529 | ||
| Net cash flows from investing activities | | (9,319,181) | | (19,142,727) | ||
| | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | ||||
| | | | | | | |
| Dividends and distributions paid | | (1,309,180) | | (1,151,304) | ||
| Investment of noncontrolling interests | | | — | | | 504,000 |
| Cash paid for lender fees associated with Clemson Best Western sale | | | (84,900) | | | — |
| Repayment of line of credit, short term | | | — | | | (325,000) |
| Proceeds from mortgages payable, net | | | 18,477,304 | | | 24,377,886 |
| Repayment of mortgages payable | | | (11,932,137) | | | (14,914,830) |
| Proceeds from sale of convertible debentures, net of capitalized offering costs | | — | | 1,305,000 | ||
| Proceeds from sales of common stock, net of capitalized offering costs | | | 1,538,887 | | | 10,801,411 |
| Repurchases of common stock, including costs and fees | | (286,543) | | — | ||
| Net cash flows from financing activities | | 6,403,431 | | 20,597,163 | ||
| | | | | | | |
| (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | | (1,721,124) | | 2,287,049 | ||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period | | 7,383,977 | | 5,096,928 | ||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | | $ | 5,662,853 | | $ | 7,383,977 |
| | | | | | | |
| CASH AND CASH EQUIVALENTS, end of period, shown in consolidated balance sheets | | | 3,922,136 | | | 4,370,405 |
| RESTRICTED CASH including assets restricted for capital and operating reserves and tenant deposits, end of period, shown in consolidated balance sheets | | | 1,740,717 | | | 3,013,572 |
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period shown in the consolidated statements of cash flows | | $ | 5,662,853 | | $ | 7,383,977 |
| | | | | | | |
| Supplemental Disclosures and Non-Cash Activities: | | | | | ||
| | | | | | | |
| Other cash transactions: | | | ||||
| Interest paid | | $ | 3,237,728 | | $ | 4,065,121 |
| | | | | | | |
| Non-cash transactions: | | | | |||
| Release of restricted cash related to sale of Clemson Best Western Property | | $ | 1,455,777 | | $ | — |
| Conversion of convertible debentures and accrued interest to common stock | | | — | | | 5,058,788 |
| Transfer of investment properties, net to assets held for sale, net | | | — | | | 9,683,555 |
| Transfer of mortgages payable, net to mortgages payable associated with assets held for sale, net | | | — | | | 7,592,931 |
| Assumption of mortgage debt, net | | | — | | | 4,481,600 |
| Forgiveness of note payable | | — | | 176,300 | ||
| | | | | | | |
See notes to consolidated financial statements
Medalist Diversified REIT
Funds from Operations and Adjusted Funds from Operations
For the years ended December 31, 2022 and 2021
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Funds from operations | | | | | | |
| Net loss | | $ | (4,732,214) | | $ | (4,358,282) |
| Depreciation of tangible real property assets | | 2,561,843 | | 1,912,353 | ||
| Depreciation of tenant improvements | | 718,704 | | 437,372 | ||
| Amortization of leasing commissions | | 100,702 | | 65,414 | ||
| Amortization of intangible assets | | 1,325,574 | | 1,093,565 | ||
| Loss (gain) on sale of investment properties | | | 421,096 | | | (124,641) |
| Loss on impairment | | 36,670 | | - | ||
| Impairment of assets held for sale | | 175,671 | | - | ||
| Loss on extinguishment of debt | | | 389,207 | | | - |
| Funds from operations | | $ | 997,253 | | $ | (974,219) |
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Adjusted funds from operations | | | | | | |
| Funds from operations | | $ | 997,253 | | $ | (974,219) |
| Amortization of above market leases | | 188,903 | | 250,504 | ||
| Amortization of below market leases | | (415,624) | | (274,528) | ||
| Straight line rent | | (149,831) | | (198,594) | ||
| Capital expenditures | | | (1,019,304) | | (536,685) | |
| (Increase) decrease in fair value of interest rate cap | | | (220,881) | | 27,281 | |
| Amortization of loan issuance costs | | | 107,595 | | 103,180 | |
| Amortization of preferred stock discount and offering costs | | | 222,881 | | 204,383 | |
| Amortization of convertible debenture discount, offering costs and beneficial conversion feature | | | — | | 1,718,487 | |
| Share-based compensation | | 483,100 | | 149,981 | ||
| Bad debt expense | | 46,932 | | 39,024 | ||
| Debt forgiveness | | | — | | (176,300) | |
| Adjusted Funds from operations (AFFO) | | $ | 241,024 | | $ | 332,514 |
NOI Reconciliation
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Net Operating Income | | | | | | |
| Net Loss | | $ | (4,732,214) | | $ | (4,358,282) |
| Plus: Preferred dividends, including amortization of capitalized issuance costs | | 622,881 | | 604,383 | ||
| Plus: Legal, accounting and other professional fees | | 1,627,881 | | 1,465,199 | ||
| Plus: Corporate general and administrative expenses | | | 457,653 | | 654,137 | |
| Plus: Depreciation expense | | | 3,381,249 | | 2,415,139 | |
| Plus: Amortization of intangible assets | | | 1,325,574 | | 1,093,565 | |
| Less: Net amortization of above and below market leases | | | (226,721) | | (24,024) | |
| Plus: Interest expense, including amortization of capitalized loan issuance costs | | | 2,932,207 | | 4,929,872 | |
| Plus: Share based compensation expense | | | 483,100 | | 149,981 | |
| Plus: Loss on impairment | | 36,670 | | - | ||
| Plus: Impairment of assets held for sale | | | 175,671 | | - | |
| Plus: Loss on extinguishment of debt | | | 389,207 | | - | |
| Less: Other income | | | (236,500) | | (361,469) | |
| Plus: Other expense | | | 227,164 | | - | |
| Less: Realized loss (gain) on disposal of investment properties | | | 421,096 | | (124,641) | |
| Net Operating Income - NOI | | $ | 6,884,918 | | $ | 6,443,860 |
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Components of Net Operating Income | | | | | | |
| Revenues: | | | | | | |
| Retail and flex property rental revenues (1) | | $ | 7,663,746 | | $ | 5,629,495 |
| Retail and flex property tenant reimbursement revenues | | 1,693,209 | | 1,183,699 | ||
| Hotel property revenues | | | 1,507,649 | | | 4,635,331 |
| Total revenues | | | 10,864,604 | | | 11,448,525 |
| | | | | | | |
| Operating expenses: | | | | | | |
| Retail and flex property operating expenses | | | 2,596,953 | | | 1,862,690 |
| Hotel property operating expenses | | 1,335,801 | | 3,102,951 | ||
| Bad debt expense | | | 46,932 | | | 39,024 |
| Total operating expenses | | | 3,979,686 | | | 5,004,665 |
| | | | | | | |
| Net Operating Income - NOI | | $ | 6,884,918 | | $ | 6,443,860 |
| (1) | Excludes amortization of above and below market leases. |
|---|
Same Property NOI Reconciliation
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| All Properties | | | | | | |
| Same property NOI | | $ | 4,386,329 | | $ | 4,063,845 |
| NOI of acquired properties (1) | | 2,326,741 | | 847,635 | ||
| NOI of disposed properties (2) | | | 171,848 | | | 1,532,380 |
| Total NOI (3) | | $ | 6,884,918 | | $ | 6,443,860 |
| (1) | Lancer Center, Greenbrier Business Center, Parkway and Salisbury Marketplace |
|---|---|
| (2) | Greensboro Hampton Inn and Clemson Hotel |
| --- | --- |
| (3) | Excludes net amortization of above and below market leases. |
| --- | --- |
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Retail Properties | | | | | | |
| Same retail property NOI | | $ | 3,797,954 | | $ | 3,548,150 |
| NOI of acquired retail properties (1) | | 1,168,041 | | 525,992 | ||
| Total retail property NOI (2) | | $ | 4,965,995 | | $ | 4,074,142 |
| (1) | Lancer Center and Salisbury Marketplace |
|---|---|
| (2) | Excludes net amortization of above and below market leases. |
| --- | --- |
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Flex Properties | | | | | | |
| Same flex property NOI | | $ | 588,375 | | $ | 515,695 |
| NOI of acquired flex properties (1) | | 1,158,700 | | 321,643 | ||
| Total flex property NOI (2) | | $ | 1,747,075 | | $ | 837,338 |
| (1) | Greenbrier Business Center and Parkway |
|---|---|
| (2) | Excludes net amortization of above and below market leases. |
| --- | --- |
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Hotel Properties | | | | | | |
| NOI of disposed hotel properties (1) | | $ | 171,848 | | $ | 1,532,380 |
| Total hotel property NOI | | $ | 171,848 | | $ | 1,532,380 |
| (1) | Greensboro Hampton Inn and Clemson Hotel |
|---|
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| Same Property Retail & Flex NOI Reconciliation | | | | | | |
| Same property retail and flex NOI | | $ | 4,386,329 | | $ | 4,063,845 |
| NOI of newly acquired retail and flex properties (1) | | 2,326,741 | | 847,635 | ||
| Total NOI (3) | | $ | 6,713,070 | | $ | 4,911,480 |
| (1) | Lancer Center, Greenbrier Business Center, Parkway and Salisbury Marketplace |
|---|---|
| (2) | Greensboro Hampton Inn and Clemson Hotel |
| --- | --- |
| (3) | Excludes net amortization of above and below market leases. |
| --- | --- |
EBITDA Reconciliation
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Year Ended | ||||
| | **** | December 31, | ||||
| | | 2022 | | 2021 | ||
| EBITDA | | | | | | |
| Net Loss | | $ | (4,732,214) | | $ | (4,358,282) |
| Plus: Preferred dividends, including amortization of capitalized issuance costs | | 622,881 | | 604,383 | ||
| Plus: Interest expense, including amortization of capitalized loan issuance costs | | 2,932,207 | | 4,929,872 | ||
| Plus: Depreciation expense | | 3,381,249 | | 2,415,139 | ||
| Plus: Amortization of intangible assets | | | 1,325,574 | | 1,093,565 | |
| Less: Net amortization of above and below market leases | | | (226,721) | | (24,024) | |
| Less: Realized loss (gain) on disposal of investment properties | | | 421,096 | | (124,641) | |
| Plus: Loss on impairment | | | 36,670 | | - | |
| Plus: Impairment of assets held for sale | | | 175,671 | | - | |
| Plus: Loss on extinguishment of debt | | | 389,207 | | - | |
| EBITDA | | $ | 4,325,620 | | $ | 4,536,012 |
Same Property Revenues
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | |||||||
| | **** | December 31, | **** | | |||||||
| | | 2022 | | 2021 | | Change () | | Change (%) | |||
| All Properties | | | | | | | | | | | |
| Same property revenues | $ | 6,059,078 | | $ | 5,620,808 | | | | 7.8% | ||
| Revenues of acquired properties (1) | | 3,524,598 | | 1,216,410 | | | | ||||
| Revenues of disposed properties (2) | | | 1,507,649 | | | 4,635,331 | | | | | |
| Total revenues (3) | | $ | 11,091,325 | | $ | 11,472,549 | | | | (3.3)% |
All values are in US Dollars.
| (1) | Lancer Center, Greenbrier Business Center, Parkway and Salisbury Marketplace |
|---|---|
| (2) | Greensboro Hampton Inn and Clemson Hotel |
| --- | --- |
| (3) | Includes net amortization of above and below market leases. |
| --- | --- |
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | |||||||
| | **** | December 31, | **** | | |||||||
| | | 2022 | | 2021 | | Change () | | Change (%) | |||
| Retail Properties | | | | | | | | | | | |
| Same retail property revenues | $ | 5,223,236 | | $ | 4,865,232 | | | | 7.4% | ||
| Revenues of acquired retail properties (1) | | 1,830,521 | | 769,164 | | | | ||||
| Total retail property revenues (2) | | $ | 7,053,757 | | $ | 5,634,396 | | | | 25.2% |
All values are in US Dollars.
| (1) | Lancer Center and Salisbury Marketplace |
|---|---|
| (2) | Includes net amortization of above and below market leases. |
| --- | --- |
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | |||||||
| | **** | December 31, | **** | | |||||||
| | | 2022 | | 2021 | | Change () | | Change (%) | |||
| Flex Properties | | | | | | | | | | | |
| Same flex property revenues | $ | 835,842 | | $ | 755,576 | | | | 10.6% | ||
| Revenues of acquired flex properties (1) | | 1,694,077 | | 447,246 | | | | ||||
| Total flex property revenues (2) | | $ | 2,529,919 | | $ | 1,202,822 | | | | 110.3% |
All values are in US Dollars.
| (1) | Greenbrier Business Center and Parkway |
|---|---|
| (2) | Includes net amortization of above and below market leases. |
| --- | --- |
| | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Year Ended | | | |||||||
| | **** | December 31, | **** | | |||||||
| | | 2022 | | 2021 | | Change () | | Change (%) | |||
| Hotel Properties | | | | | | | | | | | |
| Revenues of disposed hotel properties (1) | | $ | 1,507,649 | | $ | 4,635,331 | | | $ | (67.5)% | |
| Total hotel property revenues | | $ | 1,507,649 | | $ | 4,635,331 | | | | (67.5)% |
All values are in US Dollars.
| (1) | Greensboro Hampton Inn and Clemson Hotel |
|---|
Same Property Statistics – Retail and Flex Properties
Total Retail and Flex Properties
| | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | Number of Properties | **** | Total Square Feet | **** | Percent Leased | ||||||||||||
| | | As of December 31, | | As of December 31, | | As of December 31, | ||||||||||||
| | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | ||||||
| Retail | | 5 | | | 4 | | | 633,013 | | | 553,281 | | | 97.4% | | | 94.8% | |
| Flex | | | 3 | | | 3 | | | 218,269 | | | 218,279 | | | 91.8% | | | 94.6% |
| Total | | | 8 | | | 7 | | | 851,282 | | | 771,560 | | | 96.0% | | | 94.7% |
Retail and Flex - Same Properties
| | | | | | | | | | | | | | | | | | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | **** | Number of Properties | **** | Total Square Feet | **** | Percent Leased | ||||||||||||
| | | As of December 31, | | As of December 31, | | As of December 31, | ||||||||||||
| | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | ||||||
| Retail | | 4 | | | 4 | | | 553,281 | | | 553,281 | | | 98.3% | | | 94.8% | |
| Flex | | | 3 | | | 3 | | | 218,279 | | | 218,279 | | | 91.8% | | | 94.6% |
| Total | | | 7 | | | 7 | | | 771,560 | | | 771,560 | | | 96.5% | | | 94.7% |
Weighted Average Lease Term
| | | | |
|---|---|---|---|
| Retail Properties | **** | | |
| Ashley Plaza | | | 6.25 |
| Franklin Square | | | 4.47 |
| Hanover Square | | 3.49 | |
| Lancer Center | | | 4.00 |
| Salisbury Marketplace | | | 2.52 |
| Retail Property Average | | | 4.44 |
| | | | |
| Flex Properties | | | |
| Brookfield | | | 3.01 |
| Greenbrier Business Center | | | 1.72 |
| Parkway | | | 2.61 |
| Flex Property Average | | | 2.37 |
| | | | |
| Retail and Flex Property Average | | | 3.91 |
Weighted Average Debt Data
| | | | |
|---|---|---|---|
| Weighted Average Mortgage Maturity (Years) | **** | | 6.08 |
| | | | |
| Weighted Average Mortgage Payable Interest Rate | | | 4.2% |
Exhibit 99.3
Medalist Diversified REIT, Inc. Announces Establishment of a Special Committee of the Board and Exploration of Strategic Alternatives
RICHMOND, VA, March 10, 2023. Medalist Diversified REIT, Inc. (NASDAQ: MDRR) (the “Company” or “Medalist”), a Virginia-based real estate investment trust that specializes in acquiring, owning and managing value-add commercial real estate in the Mid-Atlantic and Southeast regions of the United States, today announced that its Board of Directors (the “Board”) has established a Special Committee of the Board (the “Special Committee”) to explore potential strategic alternatives focusing on maximizing stockholder value.
The Special Committee is comprised solely of independent directors and is charged with exploring potential strategic alternatives, including, without limitation, a business combination involving the Company, a sale of all or part of the Company’s assets, joint venture arrangements and/or restructurings, and determining whether a strategic transaction is in the best interests of the Company. The Special Committee has retained Jones Lang LaSalle Securities, LLC to act as its financial advisor and Troutman Pepper Hamilton Sanders LLP as its legal counsel.
There can be no assurance that the strategic alternatives exploration process will result in any transaction being pursued or consummated. There is no formal timetable for the Special Committee’s completion of its exploration of potential strategic alternatives, and the Company does not intend to disclose any developments with respect to the Special Committee’s activities unless and until the Company determines that further disclosure is appropriate or required by law or regulation.
Forward Looking Statements
This press release contains statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Forward looking statements are not historical and are typically identified by such words as “believe,” “expect,” “anticipate,” “intend,” “estimate, “may,” “will,” “should” and “could” and include statements about the Special Committee’s exploration of potential strategic alternatives and the impact, if any, of such explorations and results from such explorations on the Company and stockholder value. Forward-looking statements are based upon the Company’s present expectations, but are not guarantees or assurances as to future developments or results. Factors that may cause actual developments or results to differ from those reflected in forward-looking statements include, without limitation, those included in the Company’s most recent Annual Report on Form 10-K and in the Company’s other filings with the SEC. Investors should not place undue reliance upon forward-looking statements. The Company disclaims any obligation to publicly update or revise any forward-looking statements to reflect changes and new developments except as required by law or regulation.
Brent Winn Medalist Diversified REIT, Inc. brent.winn@medalistprop.com