Medalist Diversified REIT, Inc.

Fourth-quarter 2019 revenue was $3.1 million, up 66.8% year over year. Net loss for the quarter was $734,000 versus $1.5 million in the prior-year quarter. AFFO increased by $823,000 to $380,000, or $0.08 per common share, and funds from operations improved from negative $769,000 in Q4 2018 to positive $287,000 in Q4 2019. For the full year, net loss was $3.8 million versus $2.9 million in the prior year. Looking ahead, management said it plans to add 1-2 properties in the near term, expects those to close in the first half of the year, and is targeting cap rates of 7% to 9% on Southeast acquisitions.

CEO Tim Messier emphasized that the company doubled in size in the quarter and now has six properties generating earnings and revenue. He framed the strategy as building a diversified portfolio of 'workforce necessity real estate' across industrial, limited-service hotels, multifamily, and neighborhood retail, with growth centered in the Southeast. His tone was upbeat and confident, and he repeatedly said the company is 'very happy' with its position and 'very excited about the future.'

The financial update focused on the step-up in revenue and the narrowing loss profile as the portfolio expanded. Brent said revenue rose 66.8% to $3.1 million, the quarterly net loss improved to $734,000, and AFFO rose to $380,000, or $0.08 per share, while FFO moved to positive $287,000 from negative $769,000 a year ago. He also said the company expects the new acquisitions to be accretive, that hotel seasonality affected November and December, and that the company aims to add 1-2 properties in the first half of 2020.

Analysts focused on hotel seasonality, possible coronavirus-related demand impacts, dividend coverage, and the company’s diversification and external-management structure. Management said it had not seen any demand change from coronavirus, noted that November and December are seasonally weaker for its limited-service hotels, and said Q1 should be closer to covering the dividend with Q2 expected to be better. When asked about diversification and external management discounts, Messier said he would address the external-management question offline and reiterated that the portfolio strategy is built around four property types.