MDRR — Medalist Diversified REIT, Inc.

MDRR Q4 2019 Earnings Call Summary

1. Key Financial Results and Metrics:

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

2. Strategic Updates and Business Highlights:

• The company is focused on acquiring additional properties, with plans to add one to two more in the near term, specifically targeting the southeastern U.S. where cap rates are between 7% and 9%.
• Current properties include a shopping center, a hotel in Clemson, and a flex property in Greenville, SC.
• Management expressed confidence in the fundamentals of the business and the potential for future growth.

3. Forward Guidance and Outlook:

• Management anticipates improved performance in Q1 2020, expecting hotels to perform better than in Q4 due to seasonal factors.
• The company is actively exploring opportunities to lock in favorable long-term debt, with rates currently under 4%.
• There is an optimistic outlook for revenue growth in the first and second quarters of 2020, supported by upcoming local events.

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

• The company reported a significant net loss, primarily attributed to non-recurring expenses and heavy depreciation and amortization.
• Concerns were raised regarding the sustainability of the dividend payout, as it was noted that the current payout exceeds earnings.
• The potential impact of the coronavirus on hotel demand was discussed, although management indicated no immediate effects had been observed.

5. Notable Q&A Insights:

• Analysts inquired about the seasonality of hotel performance, with management acknowledging lower business travel in late 2019 but expecting a rebound.
• Questions regarding lease expirations revealed that management typically engages tenants six months prior to lease maturity.
• The discussion touched on the company's diversified REIT structure and its perceived market discount due to external management, with management expressing confidence in their strategy and fundamentals.

Overall, while Medalist Diversified REIT showed strong revenue growth and strategic expansion, concerns about net losses, dividend sustainability, and potential impacts from external factors like the coronavirus were notable points of discussion.