Medalist Diversified REIT, Inc. (Nasdaq: MDRR) (the “Company”) 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, today reported unaudited operating results for its year and quarter ended December 31, 2019. All financial measures referenced herein are unaudited.
Fourth Quarter Ended December 31, 2019 Financial Results
Net loss attributable to Medalist common shareholders for the quarter ended December 31, 2019 was $663,878, or $0.15 per basic and diluted share, compared to $1,418,849, or $0.67 per basic and diluted share, for the prior year's fourth quarter ended December 31, 2018. For the quarter ended December 31, 2019, the decrease in net loss attributable to Medalist common shareholders was a result of:
- An increase in revenues of 66.8 percent - During the quarter ended December 31, 2019, total revenues were $3,109,627, an increase of $1,244,787 over total revenues of $1,864,840 for the quarter ended December 31, 2018, due to the Company’s three new acquisitions that closed during the year ended December 31, 2019 (see below).
- A decrease in non-recurring expenses – During the quarter ended December 31, 2019, the Company did not incur any non-recurring expenses. During the quarter ended December 31, 2018, the Company recorded $790,340 in share based compensation expenses and a loss on impairment of $191,578.
Net loss for the quarter ended December 31, 2019 was $734,920 compared to $1,532,161 for the quarter ended December 31, 2018.
Adjusted funds from operations ("AFFO") is a supplemental financial measure which the Company considers meaningful in measuring its operating performance. AFFO is not a financial measure recognized by generally accepted accounting principles (“GAAP”). AFFO (non-GAAP) for the quarter ended December 31, 2019 increased by $823,363 to $380,436 from ($442,927) for the quarter ended December 31, 2018. A reconciliation of AFFO to net loss, the most directly comparable GAAP financial measure, is attached to this press release.
Year Ended December 31, 2019 Financial Results
Net loss attributable to Medalist common shareholders for the year ended December 31, 2019 was $3,015,718 or $0.82 per basic and diluted share, compared to $2,743,323, or $1.39 per basic and diluted share, for the year ended December 31, 2018.
Net loss for the year ended December 31, 2019 was $3,804,494 compared to $2,991,153 for the year ended December 31, 2018.
AFFO (non-GAAP) for the year ended December 31, 2019 was ($148,096) compared to ($780,532) for the year ended December 31, 2018.
2019 Acquisitions
As of December 31, 2019, the Company’s total assets were $83,239,242, an increase of $30,132,190 over the Company’s total assets as of December 31, 2018. The increase in assets was a result of the Company’s three acquisitions during the year ended December 31, 2019 that doubled the Company’s portfolio from three properties to six properties.
The Ashley Plaza Property
On August 30, 2019, the Company acquired the Ashley Plaza Property, a 160,356 square foot retail property located in Goldsboro, North Carolina, through a wholly owned subsidiary. The Ashley Plaza Property, built in 1977 and fully renovated in 2018, was 98 percent leased as of December 31, 2019 and is anchored by Hobby Lobby, Harbor Freight and Ashley Home Store. The purchase price for the Ashley Plaza Property was $15,200,000 paid through a combination of cash provided by the Company, the incurrence of new mortgage debt and funds from an unsecured line of credit, short term.
The Clemson Best Western Hotel Property
On September 27, 2019, the Company acquired the Clemson Best Western Hotel Property, a 148-room hotel on 5.92 acres located in Clemson, South Carolina, through a wholly owned subsidiary. The Clemson Best Western Hotel Property was built in 1982 and substantially renovated in 2016 and 2017. The purchase price for the Clemson Best Western Hotel Property was $9,750,000 paid through a combination of cash provided by the Company, the incurrence of new mortgage debt and funds from an unsecured line of credit, short term.
The Brookfield Center Property
On October 3, 2019, the Company acquired the Brookfield Center Property, a 64,880 square foot flex-industrial property located in Greenville, South Carolina, through a wholly owned subsidiary. The Brookfield Center Property, built in 2007, was 93.8 percent leased as of December 31, 2019. Major tenants include Gravitopia Trampoline Park and Summit Church. The purchase price for the Brookfield Center Property was $6,700,000 paid through a combination of cash provided by the Company, the incurrence of new mortgage debt and funds from related party notes payable, short term.
Dividends
On November 27, 2019, our Board of Directors declared a quarterly dividend of $0.125 per common share, payable on March 10, 2020 to shareholders of record as of February 11, 2020.
About Medalist Diversified REIT
Medalist Diversified REIT Inc. is 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. The Company's strategy is to focus on value-add and opportunistic 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. The Company seeks to maximize operating performance of current properties by utilizing a hands-on approach to property management while monitoring the middle market real estate markets in the southeast for acquisition opportunities and disposal of properties as considered appropriate. For more information on Medalist, please visit the Company website at https://www.medalistreit.com.
DEFINITIONS
FFO and AFFO are non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission. The Company considers FFO and AFFO to be important supplemental measures of its operating performance and believes these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of REITs, many of which present FFO and AFFO when reporting their results. FFO is intended to exclude GAAP historical cost depreciation and amortization of real estate and related assets, which assumes that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions. Because FFO excludes depreciation and amortization unique to real estate and gains and losses from property dispositions, the Company believes that it provides a performance measure that, when compared year-over-year, reflects the impact to operations from trends in occupancy rates, rental rates, operating costs, development activities and interest costs, providing perspective not immediately apparent from the closest GAAP measurement, net income.
Management believes that the computation of FFO in accordance with NAREIT’s definition includes certain items that are not indicative of the operating performance of the Company’s real estate assets. These items include, but are not limited to, nonrecurring expenses, legal settlements, legal and professional fees, and acquisition costs. Management uses AFFO, which is a non-GAAP financial measure, to exclude such items. Management believes that reporting AFFO in addition to FFO is a useful supplemental measure for the investment community to use when evaluating the operating performance of the Company on a comparative basis.
Safe Harbor Disclosure
This press release contains statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and other federal securities laws. Forward looking statements are statements that are not historical, including statements regarding management’s intentions, beliefs, expectations, representations, plans or predictions of the future, and are typically identified by such words as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “may,” “will,” “should” and “could.” Because such statements include risks, uncertainties and contingencies, actual results may differ materially from those expressed or implied by such forward looking statements. These forward-looking statements are based upon the Company’s present expectations, but these statements are not guaranteed to occur. Furthermore, the Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Investors should not place undue reliance upon forward-looking statements. For further discussion of the factors that could affect outcomes, please refer to the “Risk Factors” section of the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2019, and in the Company’s other documents filed with the SEC, copies of which are available on the SEC’s website, www.sec.gov.
Medalist Diversified REIT, Inc. and Subsidiaries | ||||||||
Consolidated Balance Sheets | ||||||||
December 31, 2019 and 2018 | ||||||||
2019 | 2018 | |||||||
Unaudited | ||||||||
ASSETS | ||||||||
Investment properties, net | $ | 75,791,825 | $ | 45,323,497 | ||||
Cash | 613,675 | 1,327,424 | ||||||
Restricted cash | 1,458,515 | 2,793,372 | ||||||
Rent and other receivables, net of allowance of $8,615 and $15,194, as of December 31, 2019 and 2018, respectively | 149,382 | 108,478 | ||||||
Unbilled rent | 460,888 | 259,216 | ||||||
Advance deposits | - | 423,747 | ||||||
Intangible assets, net | 4,458,071 | 2,585,834 | ||||||
Other assets | 306,886 | 285,484 | ||||||
Total Assets | $ | 83,239,242 | $ | 53,107,052 | ||||
LIABILITIES | ||||||||
Accounts payable and accrued liabilities | $ | 1,565,145 | $ | 826,336 | ||||
Intangible liabilities, net | 1,277,960 | 439,726 | ||||||
Line of credit, short term, net | 1,990,000 | - | ||||||
Related party notes payable, short term | 852,000 | - | ||||||
Mortgages payable, net | 56,700,902 | 33,236,397 | ||||||
Total Liabilities | $ | 62,386,007 | $ | 34,502,459 | ||||
EQUITY | ||||||||
Preferred stock, $.01 par value, 250,000,000 shares authorized, none issued and outstanding | $ | - | $ | - | ||||
Common stock, $.01 par value, 750,000,000 shares authorized, 4,500,144 and 2,321,582 shares issued and outstanding at December 31, 2019 and 2018, respectively | 45,001 | 23,216 | ||||||
Additional paid-in capital | 31,702,347 | 22,077,827 | ||||||
Offering costs | (2,992,357 | ) | (1,835,291 | ) | ||||
Accumulated deficit | (10,555,841 | ) | (5,229,760 | ) | ||||
Total Stockholders' Equity | 18,199,150 | 15,035,992 | ||||||
Noncontrolling interests - Hampton Inn Property | 1,282,782 | 2,009,031 | ||||||
Noncontrolling interests - Hanover Square Property | 540,791 | 608,943 | ||||||
Noncontrolling interests - Operating Partnership | 830,512 | 950,627 | ||||||
Total Equity | $ | 20,853,235 | $ | 18,604,593 | ||||
Total Liabilities and Equity | $ | 83,239,242 | $ | 53,107,052 | ||||
Medalist Diversified REIT, Inc. and Subsidiaries | ||||||||||||||||
Consolidated Statements of Operations | ||||||||||||||||
For the quarter ended | For the year ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Unaudited | Unaudited | Unaudited | ||||||||||||||
REVENUE | ||||||||||||||||
Retail center property revenues | $ | 1,118,019 | $ | 733,724 | $ | 3,495,396 | $ | 2,372,666 | ||||||||
Retail center property tenant reimbursements | 240,995 | 175,459 | 691,349 | 541,116 | ||||||||||||
Flex center property revenues | 138,607 | - | 138,607 | - | ||||||||||||
Flex center property tenant reimbursements | 45,162 | - | 45,162 | - | ||||||||||||
Hotel property room revenues | 1,446,633 | 949,421 | 3,723,173 | 3,636,485 | ||||||||||||
Hotel property other revenues | 120,211 | 6,236 | 175,081 | 39,684 | ||||||||||||
Total Revenue | $ | 3,109,627 | $ | 1,864,840 | $ | 8,268,768 | $ | 6,589,951 | ||||||||
OPERATING EXPENSES | ||||||||||||||||
Retail center property operating expenses | 329,467 | 306,077 | $ | 1,134,718 | $ | 976,468 | ||||||||||
Flex center property operating expenses | 55,266 | - | 55,266 | - | ||||||||||||
Hotel property operating expenses | 1,239,010 | 670,279 | 3,156,664 | 2,608,825 | ||||||||||||
Share based compensation expenses | - | 790,340 | 61,600 | 790,340 | ||||||||||||
Legal, accounting and other professional fees | 261,457 | 142,563 | 1,089,246 | 924,651 | ||||||||||||
Corporate general and administrative expenses | 54,740 | 83,349 | 261,934 | 119,679 | ||||||||||||
Loss on impairment | - | 191,578 | - | 191,578 | ||||||||||||
Loss on disposition of furniture, fixtures and equipment | - | - | 983,855 | - | ||||||||||||
Depreciation and amortization | 1,018,311 | 563,621 | 2,773,805 | 2,043,323 | ||||||||||||
Total Operating Expenses | 2,958,251 | 2,747,807 | 9,517,088 | 7,654,864 | ||||||||||||
Operating Loss | 151,376 | (882,967 | ) | (1,248,320 | ) | (1,064,913 | ) | |||||||||
Interest expense | 882,677 | 519,510 | 2,472,628 | 1,917,183 | ||||||||||||
Net Loss from Operations | (731,301 | ) | (1,402,477 | ) | (3,720,948 | ) | (2,982,096 | ) | ||||||||
Other (loss) income | (3,619 | ) | (76,533 | ) | (83,546 | ) | 44,094 | |||||||||
Net Loss before Income Taxes | (734,920 | ) | (1,479,010 | ) | (3,804,494 | ) | (2,938,002 | ) | ||||||||
Income tax expense | - | 53,151 | - | 53,151 | ||||||||||||
Net Loss | (734,920 | ) | (1,532,161 | ) | (3,804,494 | ) | (2,991,153 | ) | ||||||||
Less: Net loss attributable to Hampton Inn Property noncontrolling interests | (62,880 | ) | (83,134 | ) | (726,249 | ) | (166,314 | ) | ||||||||
Less: Net loss attributable to Hanover Square Property noncontrolling interests | 468 | (5,778 | ) | (8,037 | ) | (15,177 | ) | |||||||||
Less: Net loss attributable to Operating Partnership noncontrolling interests | (8,630 | ) | (24,400 | ) | (54,490 | ) | (66,339 | ) | ||||||||
Net Loss Attributable to Medalist Common Shareholders | $ | (663,878 | ) | $ | (1,418,849 | ) | $ | (3,015,718 | ) | $ | (2,743,323 | ) | ||||
Loss per share from operations - basic and diluted | $ | (0.15 | ) | $ | (0.67 | ) | $ | (0.82 | ) | $ | (1.39 | ) | ||||
Weighted-average number of shares - basic and diluted | 4,500,144 | 2,108,550 | 3,683,171 | 1,967,980 | ||||||||||||
Dividends paid per common share | $ | 0.175 | $ | 0.175 | $ | 0.525 | $ | 0.525 | ||||||||
A reconciliation of AFFO (non-GAAP) to net income is as follows:
For the Three Months Ended | For the Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2019
| 2018
| 2019
| 2018
| |||||||||||||
Net income (loss) | $ | (734,920 | ) | $ | (1,532,161 | ) | $ | (3,804,494 | ) | $ | (2,991,153 | ) | ||||
Depreciation of tangible real property assets | 670,445 | 333,201 | 1,715,274 | 1,243,385 | ||||||||||||
Depreciation of tenant improvements | 83,223 | 57,246 | 270,203 | 193,170 | ||||||||||||
Amortization of leasing commissions | 10,497 | 15,140 | 40,067 | 25,075 | ||||||||||||
Amortization of tenant inducements | 4,260 | - | 17,040 | 11,360 | ||||||||||||
Amortization of intangible assets | 254,146 | 165,134 | 748,261 | 581,693 | ||||||||||||
Loss on disposition of FF&E | - | - | 983,855 | - | ||||||||||||
Loss on impairment | - | 191,578 | - | 191,578 | ||||||||||||
Funds from operations | $ | 287,651 | $ | (769,862 | ) | $ | (29,794 | ) | $ | (744,892 | ) | |||||
Funds from operations | $ | 287,651 | $ | (769,862 | ) | $ | (29,794 | ) | $ | (744,892 | ) | |||||
Amortization of above market leases | 60,552 | 49,810 | 226,251 | 214,415 | ||||||||||||
Amortization of below market leases | (58,338 | ) | (23,511 | ) | (140,481 | ) | (78,045 | ) | ||||||||
Straight line rent | (15,845 | ) | (79,370 | ) | (195,374 | ) | (207,432 | ) | ||||||||
Capital expenditures, net of reimbursements from property reserve accounts | 12,617 | (530,311 | ) | (428,787 | ) | (878,157 | ) | |||||||||
Decrease (Increase) in fair value of interest rate cap | 6,454 | 77,266 | 136,558 | (43,361 | ) | |||||||||||
Amortization of loan issuance costs | 87,345 | 42,711 | 221,931 | 166,600 | ||||||||||||
Share-based compensation | - | 790,340 | 61,600 | 790,340 | ||||||||||||
Adjusted funds from operations (AFFO) | $ | 380,436 | $ | (442,927 | ) | $ | (148,096 | ) | $ | (780,532 | ) | |||||
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