MDRR Medalist Diversified REIT Inc

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.
  • 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

 

 

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Brent Winn Medalist Diversified REIT, Inc. 804-338-7708 brent.winn@medalistprop.com