MDRR — Medalist Diversified REIT, Inc.

MDRR Q4 2019 Earnings Call Summary

1. Key Financial Results and Metrics:

• Portfolio Growth: The company doubled its portfolio from three to six properties, increasing total assets by $30 million compared to December 31, 2018.
• Revenue: Q4 2019 revenues rose 66.8% year-over-year to $3.1 million, driven by the three new acquisitions.
• Net Loss: Reported a net loss of $734,000 for Q4 2019, an improvement from a $1.5 million loss in Q4 2018.
• Adjusted Funds from Operations (AFFO): Increased to $380,000 in Q4 2019 from a negative $769,000 in Q4 2018, equating to $0.08 per common share.
• Full Year Net Loss: For the full year 2019, the net loss was $3.8 million, compared to $2.9 million in 2018.

2. Strategic Updates and Business Highlights:

• The company plans to acquire one to two additional properties in the near term, focusing on the Southeast U.S. where cap rates are between 7% to 9%.
• Current properties include a shopping center, a hotel in Clemson, and a flex property in Greenville, SC.
• Management emphasized a strategy to build a diversified portfolio that includes industrial, limited service hotels, multifamily, and neighborhood retail properties.

3. Forward Guidance and Outlook:

• Management expects revenue to improve in Q1 2020 as hotel performance typically increases after the slower November and December months.
• They anticipate closing on additional properties in the first half of 2020, although specific timelines were not provided.
• The company is optimistic about maintaining strong fundamentals and cash flow as they grow their portfolio.

4. Bad News, Challenges, or Points of Concern:

• The company reported a significant net loss, which is attributed to non-recurring expenses and heavy depreciation costs.
• Concerns were raised regarding the sustainability of the dividend payout, as it currently exceeds earnings based on Q4 results.
• The potential impact of the coronavirus on hotel demand was discussed, although management indicated no immediate effects had been observed at the time of the call.

5. Notable Q&A Insights:

• Analysts inquired about seasonality impacts on hotel performance and the company's strategy for lease expirations, with management indicating a cautious approach to tenant negotiations.
• There was a discussion on the company's diversified REIT structure and its potential market perception, with management acknowledging that diversified REITs often face valuation discounts.
• Management reassured investors about their ability to cover dividends in upcoming quarters, citing expected improvements in hotel performance.

Overall, while Medalist Diversified REIT showed strong revenue growth and strategic expansion, concerns about net losses and dividend sustainability were highlighted, alongside potential risks from external market factors like the coronavirus.