[10-Q] Medalist Diversified REIT, Inc. Quarterly Earnings Report
Medalist Diversified REIT, Inc. (MDRR) reported Q2 2025 revenue of $2.47 million, a 7 % YoY increase. Operating expenses rose 5 % to $2.20 million, but interest expense fell 23 % to $0.56 million. The REIT recorded a net loss attributable to common shareholders of $(0.46) million, or $(0.34)/share, improving from $(0.52) million ($(0.47)/share) a year earlier. For the first half, however, MDRR swung to a $(1.53) million loss (-$1.13/sh) versus a $0.84 million profit in 1H 2024 as the prior-year period benefited from a $2.8 million property-sale gain.
Investment property, net decreased 7 % to $59.9 million, reflecting transfer of the Salisbury Marketplace ($9.4 million) to held-for-sale. Mortgages payable dropped 13 % to $43.5 million and the company redeemed its $1.5 million mandatorily redeemable preferred stock. Equity rose to $25.3 million (vs. $21.0 million) after issuing $5.8 million of OP units for STNL acquisitions.
Cash declined to $2.0 million from $4.8 million as operating cash flow fell to $0.70 million and the REIT funded $0.56 million of cap-ex, $0.28 million of dividends and $0.14 million of share buybacks. The quarterly dividend was increased to $0.0675/share (up 69 % YoY). Leverage improved, with mortgages representing 56 % of total assets versus 67 % year-end.
Medalist Diversified REIT, Inc. (MDRR) ha riportato per il secondo trimestre 2025 un fatturato di 2,47 milioni di dollari, con un aumento del 7% rispetto all'anno precedente. Le spese operative sono salite del 5% a 2,20 milioni di dollari, mentre gli interessi passivi sono diminuiti del 23% a 0,56 milioni di dollari. La società ha registrato una perdita netta attribuibile agli azionisti comuni di 0,46 milioni di dollari (0,34 dollari per azione), migliorando rispetto alla perdita di 0,52 milioni di dollari (0,47 dollari per azione) dello stesso periodo dell'anno precedente. Tuttavia, nel primo semestre MDRR ha riportato una perdita di 1,53 milioni di dollari (-1,13 dollari per azione) rispetto a un utile di 0,84 milioni di dollari nel primo semestre 2024, periodo che aveva beneficiato di una plusvalenza di 2,8 milioni di dollari dalla vendita di un immobile.
Il valore netto degli immobili per investimento è diminuito del 7% a 59,9 milioni di dollari, a seguito del trasferimento del Salisbury Marketplace (9,4 milioni di dollari) alla categoria "disponibile per la vendita". I mutui passivi sono scesi del 13% a 43,5 milioni di dollari e la società ha rimborsato le azioni privilegiate con obbligo di rimborso per un valore di 1,5 milioni di dollari. Il patrimonio netto è aumentato a 25,3 milioni di dollari (rispetto a 21,0 milioni) dopo l'emissione di unità operative per 5,8 milioni di dollari finalizzate all'acquisizione di immobili STNL.
La liquidità è diminuita a 2,0 milioni di dollari da 4,8 milioni, poiché il flusso di cassa operativo è sceso a 0,70 milioni di dollari e il REIT ha finanziato 0,56 milioni di dollari per spese in conto capitale, 0,28 milioni di dollari in dividendi e 0,14 milioni di dollari per riacquisto di azioni. Il dividendo trimestrale è stato aumentato a 0,0675 dollari per azione (in crescita del 69% su base annua). La leva finanziaria è migliorata, con i mutui che rappresentano il 56% del totale degli attivi rispetto al 67% di fine anno.
Medalist Diversified REIT, Inc. (MDRR) reportó ingresos en el segundo trimestre de 2025 por 2.47 millones de dólares, un aumento interanual del 7%. Los gastos operativos aumentaron un 5% hasta 2.20 millones de dólares, pero los gastos por intereses cayeron un 23% a 0.56 millones de dólares. El REIT registró una pérdida neta atribuible a los accionistas comunes de 0.46 millones de dólares, o 0.34 dólares por acción, mejorando desde una pérdida de 0.52 millones (0.47 dólares por acción) un año antes. Sin embargo, en el primer semestre MDRR registró una pérdida de 1.53 millones de dólares (-1.13 dólares por acción) frente a una ganancia de 0.84 millones en el primer semestre de 2024, periodo que se benefició de una ganancia de 2.8 millones por venta de propiedades.
El valor neto de las propiedades de inversión disminuyó un 7% hasta 59.9 millones de dólares, reflejando la transferencia del Salisbury Marketplace (9.4 millones) a activos mantenidos para la venta. Las hipotecas por pagar bajaron un 13% a 43.5 millones y la compañía redimió sus acciones preferentes con redención obligatoria por 1.5 millones. El patrimonio aumentó a 25.3 millones (frente a 21.0 millones) tras emitir unidades operativas por 5.8 millones para adquisiciones STNL.
El efectivo disminuyó a 2.0 millones desde 4.8 millones debido a que el flujo de caja operativo cayó a 0.70 millones y el REIT financió 0.56 millones en gastos de capital, 0.28 millones en dividendos y 0.14 millones en recompra de acciones. El dividendo trimestral se incrementó a 0.0675 dólares por acción (un 69% más interanual). El apalancamiento mejoró, con hipotecas representando el 56% del total de activos frente al 67% a fin de año.
Medalist Diversified REIT, Inc. (MDRR)는 2025년 2분기 매출액이 247만 달러로 전년 대비 7% 증가했다고 보고했습니다. 영업비용은 220만 달러로 5% 증가했으나, 이자 비용은 56만 달러로 23% 감소했습니다. REIT는 보통주 주주 귀속 순손실이 46만 달러(주당 0.34달러)로, 전년 동기 52만 달러(주당 0.47달러) 손실에서 개선되었습니다. 하지만 상반기 기준으로는 153만 달러(주당 -1.13달러) 손실을 기록해, 전년 상반기 84만 달러 이익에서 전환되었는데, 이는 전년 동기 280만 달러의 부동산 매각 이익이 반영된 결과입니다.
투자 부동산 순자산은 7% 감소한 5990만 달러로, Salisbury Marketplace(940만 달러)를 매각예정자산으로 이전한 영향입니다. 지급할 모기지는 13% 감소한 4350만 달러이며, 회사는 150만 달러 규모의 강제 상환 우선주를 상환했습니다. 자본은 2100만 달러에서 2530만 달러로 증가했으며, STNL 인수를 위해 580만 달러 규모의 OP 유닛을 발행했습니다.
현금은 480만 달러에서 200만 달러로 감소했으며, 영업 현금 흐름은 70만 달러로 줄었습니다. REIT는 56만 달러의 자본적 지출, 28만 달러의 배당금, 14만 달러의 자사주 매입을 자금 조달했습니다. 분기 배당금은 주당 0.0675달러로 69% 증가했습니다. 레버리지는 개선되어 모기지가 총자산의 56%를 차지하며 연말 67%에서 낮아졌습니다.
Medalist Diversified REIT, Inc. (MDRR) a annoncé un chiffre d'affaires de 2,47 millions de dollars pour le deuxième trimestre 2025, soit une hausse de 7 % en glissement annuel. Les charges d'exploitation ont augmenté de 5 % pour atteindre 2,20 millions de dollars, tandis que les charges d'intérêts ont diminué de 23 % à 0,56 million de dollars. Le REIT a enregistré une perte nette attribuable aux actionnaires ordinaires de 0,46 million de dollars, soit 0,34 dollar par action, une amélioration par rapport à une perte de 0,52 million (0,47 dollar par action) un an plus tôt. Cependant, pour le premier semestre, MDRR a enregistré une perte de 1,53 million de dollars (-1,13 dollar par action) contre un bénéfice de 0,84 million au premier semestre 2024, période qui avait bénéficié d'un gain de 2,8 millions sur la vente d'un bien immobilier.
La valeur nette des immeubles de placement a diminué de 7 % pour s'établir à 59,9 millions de dollars, reflétant le transfert du Salisbury Marketplace (9,4 millions) dans les actifs destinés à la vente. Les hypothèques à payer ont chuté de 13 % à 43,5 millions et la société a racheté ses actions privilégiées remboursables obligatoirement pour 1,5 million. Les capitaux propres sont passés à 25,3 millions (contre 21,0 millions) après l'émission de 5,8 millions de dollars d'unités OP pour des acquisitions STNL.
La trésorerie a diminué à 2,0 millions contre 4,8 millions, le flux de trésorerie d'exploitation étant tombé à 0,70 million. Le REIT a financé 0,56 million de dépenses d'investissement, 0,28 million de dividendes et 0,14 million de rachats d'actions. Le dividende trimestriel a été augmenté à 0,0675 dollar par action (en hausse de 69 % en glissement annuel). L'effet de levier s'est amélioré, les hypothèques représentant 56 % du total des actifs contre 67 % en fin d'année.
Medalist Diversified REIT, Inc. (MDRR) meldete für das zweite Quartal 2025 einen Umsatz von 2,47 Millionen US-Dollar, was einem Anstieg von 7 % im Jahresvergleich entspricht. Die Betriebskosten stiegen um 5 % auf 2,20 Millionen US-Dollar, während die Zinsaufwendungen um 23 % auf 0,56 Millionen US-Dollar sanken. Der REIT verzeichnete einen auf die Stammaktionäre entfallenden Nettoverlust von 0,46 Millionen US-Dollar bzw. 0,34 US-Dollar je Aktie, was eine Verbesserung gegenüber einem Verlust von 0,52 Millionen US-Dollar (0,47 US-Dollar je Aktie) im Vorjahr darstellt. Für das erste Halbjahr hingegen verzeichnete MDRR einen Verlust von 1,53 Millionen US-Dollar (-1,13 US-Dollar je Aktie) im Vergleich zu einem Gewinn von 0,84 Millionen US-Dollar im ersten Halbjahr 2024, da der Vorjahreszeitraum von einem Immobilienverkaufsgewinn von 2,8 Millionen US-Dollar profitierte.
Das Netto-Investitionsimmobilienvermögen sank um 7 % auf 59,9 Millionen US-Dollar, was die Übertragung des Salisbury Marketplace (9,4 Millionen US-Dollar) in den Bereich „zur Veräußerung gehalten“ widerspiegelt. Die Hypothekenschulden verringerten sich um 13 % auf 43,5 Millionen US-Dollar, und das Unternehmen löste seine 1,5 Millionen US-Dollar an zwingend rückzahlbaren Vorzugsaktien ein. Das Eigenkapital stieg auf 25,3 Millionen US-Dollar (gegenüber 21,0 Millionen US-Dollar), nachdem 5,8 Millionen US-Dollar an OP-Einheiten für STNL-Akquisitionen ausgegeben wurden.
Barmittel sanken von 4,8 Millionen auf 2,0 Millionen US-Dollar, da der operative Cashflow auf 0,70 Millionen US-Dollar zurückging und der REIT 0,56 Millionen US-Dollar für Investitionsausgaben, 0,28 Millionen US-Dollar für Dividenden und 0,14 Millionen US-Dollar für Aktienrückkäufe aufwendete. Die Quartalsdividende wurde auf 0,0675 US-Dollar je Aktie erhöht (ein Anstieg von 69 % im Jahresvergleich). Die Verschuldung verbesserte sich, wobei Hypotheken 56 % der Gesamtaktiva gegenüber 67 % zum Jahresende ausmachten.
- None.
- None.
Insights
TL;DR: Mixed quarter; modest revenue growth and lower interest, but YTD swings to loss.
The quarterly figures show incremental rent growth and successful cost containment on interest, yet operating costs continue to pressure margins. The absence of 2024’s $2.8 million gain on sale was the primary driver of the year-to-date earnings swing. Debt reduction and redemption of the preferred shares improve the balance-sheet profile, and leverage has meaningfully eased. Marketing Salisbury Marketplace for sale should unlock capital, but cash levels are tight and operating cash flow has softened, limiting near-term flexibility. Dividend coverage remains weak given the current loss trajectory.
TL;DR: Slightly negative—earnings deterioration offsets leverage gains.
While management reduced mortgage debt and eliminated high-cost preferred equity, the REIT still posted a sizeable YTD loss and burned cash. Share repurchases at 0.14 million dollars signal undervaluation but also consume scarce liquidity. The enlarged OP-unit base dilutes common shareholders yet boosted total equity. Rising dividend, despite losses, raises sustainability questions. Overall impact skews negative until asset sale proceeds or STNL ramp-up translate into stable FFO generation.
Medalist Diversified REIT, Inc. (MDRR) ha riportato per il secondo trimestre 2025 un fatturato di 2,47 milioni di dollari, con un aumento del 7% rispetto all'anno precedente. Le spese operative sono salite del 5% a 2,20 milioni di dollari, mentre gli interessi passivi sono diminuiti del 23% a 0,56 milioni di dollari. La società ha registrato una perdita netta attribuibile agli azionisti comuni di 0,46 milioni di dollari (0,34 dollari per azione), migliorando rispetto alla perdita di 0,52 milioni di dollari (0,47 dollari per azione) dello stesso periodo dell'anno precedente. Tuttavia, nel primo semestre MDRR ha riportato una perdita di 1,53 milioni di dollari (-1,13 dollari per azione) rispetto a un utile di 0,84 milioni di dollari nel primo semestre 2024, periodo che aveva beneficiato di una plusvalenza di 2,8 milioni di dollari dalla vendita di un immobile.
Il valore netto degli immobili per investimento è diminuito del 7% a 59,9 milioni di dollari, a seguito del trasferimento del Salisbury Marketplace (9,4 milioni di dollari) alla categoria "disponibile per la vendita". I mutui passivi sono scesi del 13% a 43,5 milioni di dollari e la società ha rimborsato le azioni privilegiate con obbligo di rimborso per un valore di 1,5 milioni di dollari. Il patrimonio netto è aumentato a 25,3 milioni di dollari (rispetto a 21,0 milioni) dopo l'emissione di unità operative per 5,8 milioni di dollari finalizzate all'acquisizione di immobili STNL.
La liquidità è diminuita a 2,0 milioni di dollari da 4,8 milioni, poiché il flusso di cassa operativo è sceso a 0,70 milioni di dollari e il REIT ha finanziato 0,56 milioni di dollari per spese in conto capitale, 0,28 milioni di dollari in dividendi e 0,14 milioni di dollari per riacquisto di azioni. Il dividendo trimestrale è stato aumentato a 0,0675 dollari per azione (in crescita del 69% su base annua). La leva finanziaria è migliorata, con i mutui che rappresentano il 56% del totale degli attivi rispetto al 67% di fine anno.
Medalist Diversified REIT, Inc. (MDRR) reportó ingresos en el segundo trimestre de 2025 por 2.47 millones de dólares, un aumento interanual del 7%. Los gastos operativos aumentaron un 5% hasta 2.20 millones de dólares, pero los gastos por intereses cayeron un 23% a 0.56 millones de dólares. El REIT registró una pérdida neta atribuible a los accionistas comunes de 0.46 millones de dólares, o 0.34 dólares por acción, mejorando desde una pérdida de 0.52 millones (0.47 dólares por acción) un año antes. Sin embargo, en el primer semestre MDRR registró una pérdida de 1.53 millones de dólares (-1.13 dólares por acción) frente a una ganancia de 0.84 millones en el primer semestre de 2024, periodo que se benefició de una ganancia de 2.8 millones por venta de propiedades.
El valor neto de las propiedades de inversión disminuyó un 7% hasta 59.9 millones de dólares, reflejando la transferencia del Salisbury Marketplace (9.4 millones) a activos mantenidos para la venta. Las hipotecas por pagar bajaron un 13% a 43.5 millones y la compañía redimió sus acciones preferentes con redención obligatoria por 1.5 millones. El patrimonio aumentó a 25.3 millones (frente a 21.0 millones) tras emitir unidades operativas por 5.8 millones para adquisiciones STNL.
El efectivo disminuyó a 2.0 millones desde 4.8 millones debido a que el flujo de caja operativo cayó a 0.70 millones y el REIT financió 0.56 millones en gastos de capital, 0.28 millones en dividendos y 0.14 millones en recompra de acciones. El dividendo trimestral se incrementó a 0.0675 dólares por acción (un 69% más interanual). El apalancamiento mejoró, con hipotecas representando el 56% del total de activos frente al 67% a fin de año.
Medalist Diversified REIT, Inc. (MDRR)는 2025년 2분기 매출액이 247만 달러로 전년 대비 7% 증가했다고 보고했습니다. 영업비용은 220만 달러로 5% 증가했으나, 이자 비용은 56만 달러로 23% 감소했습니다. REIT는 보통주 주주 귀속 순손실이 46만 달러(주당 0.34달러)로, 전년 동기 52만 달러(주당 0.47달러) 손실에서 개선되었습니다. 하지만 상반기 기준으로는 153만 달러(주당 -1.13달러) 손실을 기록해, 전년 상반기 84만 달러 이익에서 전환되었는데, 이는 전년 동기 280만 달러의 부동산 매각 이익이 반영된 결과입니다.
투자 부동산 순자산은 7% 감소한 5990만 달러로, Salisbury Marketplace(940만 달러)를 매각예정자산으로 이전한 영향입니다. 지급할 모기지는 13% 감소한 4350만 달러이며, 회사는 150만 달러 규모의 강제 상환 우선주를 상환했습니다. 자본은 2100만 달러에서 2530만 달러로 증가했으며, STNL 인수를 위해 580만 달러 규모의 OP 유닛을 발행했습니다.
현금은 480만 달러에서 200만 달러로 감소했으며, 영업 현금 흐름은 70만 달러로 줄었습니다. REIT는 56만 달러의 자본적 지출, 28만 달러의 배당금, 14만 달러의 자사주 매입을 자금 조달했습니다. 분기 배당금은 주당 0.0675달러로 69% 증가했습니다. 레버리지는 개선되어 모기지가 총자산의 56%를 차지하며 연말 67%에서 낮아졌습니다.
Medalist Diversified REIT, Inc. (MDRR) a annoncé un chiffre d'affaires de 2,47 millions de dollars pour le deuxième trimestre 2025, soit une hausse de 7 % en glissement annuel. Les charges d'exploitation ont augmenté de 5 % pour atteindre 2,20 millions de dollars, tandis que les charges d'intérêts ont diminué de 23 % à 0,56 million de dollars. Le REIT a enregistré une perte nette attribuable aux actionnaires ordinaires de 0,46 million de dollars, soit 0,34 dollar par action, une amélioration par rapport à une perte de 0,52 million (0,47 dollar par action) un an plus tôt. Cependant, pour le premier semestre, MDRR a enregistré une perte de 1,53 million de dollars (-1,13 dollar par action) contre un bénéfice de 0,84 million au premier semestre 2024, période qui avait bénéficié d'un gain de 2,8 millions sur la vente d'un bien immobilier.
La valeur nette des immeubles de placement a diminué de 7 % pour s'établir à 59,9 millions de dollars, reflétant le transfert du Salisbury Marketplace (9,4 millions) dans les actifs destinés à la vente. Les hypothèques à payer ont chuté de 13 % à 43,5 millions et la société a racheté ses actions privilégiées remboursables obligatoirement pour 1,5 million. Les capitaux propres sont passés à 25,3 millions (contre 21,0 millions) après l'émission de 5,8 millions de dollars d'unités OP pour des acquisitions STNL.
La trésorerie a diminué à 2,0 millions contre 4,8 millions, le flux de trésorerie d'exploitation étant tombé à 0,70 million. Le REIT a financé 0,56 million de dépenses d'investissement, 0,28 million de dividendes et 0,14 million de rachats d'actions. Le dividende trimestriel a été augmenté à 0,0675 dollar par action (en hausse de 69 % en glissement annuel). L'effet de levier s'est amélioré, les hypothèques représentant 56 % du total des actifs contre 67 % en fin d'année.
Medalist Diversified REIT, Inc. (MDRR) meldete für das zweite Quartal 2025 einen Umsatz von 2,47 Millionen US-Dollar, was einem Anstieg von 7 % im Jahresvergleich entspricht. Die Betriebskosten stiegen um 5 % auf 2,20 Millionen US-Dollar, während die Zinsaufwendungen um 23 % auf 0,56 Millionen US-Dollar sanken. Der REIT verzeichnete einen auf die Stammaktionäre entfallenden Nettoverlust von 0,46 Millionen US-Dollar bzw. 0,34 US-Dollar je Aktie, was eine Verbesserung gegenüber einem Verlust von 0,52 Millionen US-Dollar (0,47 US-Dollar je Aktie) im Vorjahr darstellt. Für das erste Halbjahr hingegen verzeichnete MDRR einen Verlust von 1,53 Millionen US-Dollar (-1,13 US-Dollar je Aktie) im Vergleich zu einem Gewinn von 0,84 Millionen US-Dollar im ersten Halbjahr 2024, da der Vorjahreszeitraum von einem Immobilienverkaufsgewinn von 2,8 Millionen US-Dollar profitierte.
Das Netto-Investitionsimmobilienvermögen sank um 7 % auf 59,9 Millionen US-Dollar, was die Übertragung des Salisbury Marketplace (9,4 Millionen US-Dollar) in den Bereich „zur Veräußerung gehalten“ widerspiegelt. Die Hypothekenschulden verringerten sich um 13 % auf 43,5 Millionen US-Dollar, und das Unternehmen löste seine 1,5 Millionen US-Dollar an zwingend rückzahlbaren Vorzugsaktien ein. Das Eigenkapital stieg auf 25,3 Millionen US-Dollar (gegenüber 21,0 Millionen US-Dollar), nachdem 5,8 Millionen US-Dollar an OP-Einheiten für STNL-Akquisitionen ausgegeben wurden.
Barmittel sanken von 4,8 Millionen auf 2,0 Millionen US-Dollar, da der operative Cashflow auf 0,70 Millionen US-Dollar zurückging und der REIT 0,56 Millionen US-Dollar für Investitionsausgaben, 0,28 Millionen US-Dollar für Dividenden und 0,14 Millionen US-Dollar für Aktienrückkäufe aufwendete. Die Quartalsdividende wurde auf 0,0675 US-Dollar je Aktie erhöht (ein Anstieg von 69 % im Jahresvergleich). Die Verschuldung verbesserte sich, wobei Hypotheken 56 % der Gesamtaktiva gegenüber 67 % zum Jahresende ausmachten.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the quarterly period ended | |
OR | |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File No:
(Exact name of registrant as specified in its charter)
| ||
(State or other jurisdiction of incorporation or organization) |
| (IRS Employer Identification No.) |
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
|
| Trading | Name of each Exchange |
|
| The |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ⌧
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ◻ | Accelerated filer | ◻ |
|
|
|
|
☒ | Smaller reporting company | ||
|
|
|
|
|
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
The number of shares of Common Stock, $0.01 par value per share, of the registrant outstanding at August 7, 2025 was
Table of Contents
Medalist Diversified REIT, Inc.
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2025
Table of Contents
PART I. FINANCIAL INFORMATION | 3 | |
Item 1. | Financial Statements | 3 |
Condensed Consolidated Balance Sheets as of June 30, 2025 (unaudited) and December 31, 2024 | 3 | |
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited) | 4 | |
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2025 and 2024 (unaudited) | 5 | |
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2025 and 2024 (unaudited) | 7 | |
Notes to Condensed Consolidated Financial Statements (unaudited) | 8 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 38 |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 60 |
Item 4. | Controls and Procedures | 60 |
PART II. OTHER INFORMATION | 61 | |
Item 1. | Legal Proceedings | 61 |
Item 1A. | Risk Factors | 61 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 62 |
Item 3. | Defaults Upon Senior Securities | 63 |
Item 4. | Mine Safety Disclosures | 63 |
Item 5. | Other Information | 63 |
Item 6. | Exhibits | 63 |
Signatures | 64 | |
2
Table of Contents
PART I.FINANCIAL INFORMATION
Item 1. Financial Statements
Medalist Diversified REIT, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
| June 30, 2025 | December 31, 2024 |
| ||||
(Unaudited) |
| ||||||
ASSETS |
|
|
|
| |||
Investment properties, net | $ | | $ | | |||
Cash |
| |
| | |||
Restricted cash | | | |||||
Rent and other receivables, net of allowance of $ |
| |
| | |||
Assets held for sale | | — | |||||
Unbilled rent |
| |
| | |||
Intangible assets, net |
| |
| | |||
Other intangible assets | | — | |||||
Other assets |
| |
| | |||
Total Assets | $ | | $ | | |||
LIABILITIES |
|
| |||||
Accounts payable and accrued liabilities | $ | | $ | | |||
Liabilities associated with assets held for sale | | — | |||||
Intangible liabilities, net |
| |
| | |||
Mortgages payable, net | | | |||||
Mandatorily redeemable preferred stock, net |
| — |
| | |||
Total Liabilities | $ | | $ | | |||
EQUITY |
|
|
|
| |||
Common stock, $ | $ | | $ | | |||
Additional paid-in capital |
| |
| | |||
Offering costs |
| ( |
| ( | |||
Accumulated deficit |
| ( |
| ( | |||
Total Stockholders' Equity |
| |
| | |||
Noncontrolling interests - Parkway Property | | | |||||
Noncontrolling interests - Operating Partnership |
| |
| | |||
Total Equity | $ | | $ | | |||
Total Liabilities and Equity | $ | | $ | | |||
See notes to unaudited condensed consolidated financial statements
3
Table of Contents
Medalist Diversified REIT, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended | Six Months Ended | ||||||||||||
June 30, | June 30, | ||||||||||||
| 2025 |
| 2024 |
| 2025 |
| 2024 |
| |||||
REVENUE |
|
|
|
|
|
|
|
| |||||
Retail center property revenues | $ | | $ | | $ | | $ | | |||||
Flex center property revenues | | | | | |||||||||
Single tenant net lease property revenues | | | | | |||||||||
Total Revenue | $ | | $ | | $ | | $ | | |||||
OPERATING EXPENSES |
|
|
|
|
|
|
| ||||||
Retail center property operating expenses | $ | | $ | | $ | | $ | | |||||
Flex center property operating expenses | | | | | |||||||||
Single tenant net lease property operating expenses |
| |
| |
| |
| | |||||
Bad debt expense | — | | | | |||||||||
Share based compensation expenses |
| — |
| — |
| |
| | |||||
Legal, accounting and other professional fees |
| |
| |
| |
| | |||||
Corporate general and administrative expenses |
| |
| |
| |
| | |||||
Loss on impairment |
| |
| — |
| |
| — | |||||
Depreciation and amortization |
| | |
| | | |||||||
Total Operating Expenses |
| |
| |
| |
| | |||||
Gain on disposal of investment property | — | — | — | | |||||||||
Loss on extinguishment of debt | ( | — | ( | ( | |||||||||
Loss on redemption of mandatorily redeemable preferred stock | — | — | ( | — | |||||||||
Operating Income (Loss) |
| |
| |
| ( |
| | |||||
Interest expense |
| |
| |
| |
| | |||||
Net (Loss) Income from Operations |
| ( |
| ( |
| ( |
| | |||||
Other income |
| |
| |
| |
| | |||||
Other expense |
| ( |
| ( |
| ( |
| — | |||||
Net (Loss) Income |
| ( |
| ( |
| ( |
| | |||||
Less: Net (loss) income attributable to Hanover Square Property noncontrolling interests | — | ( | — | | |||||||||
Less: Net (loss) income attributable to Parkway Property noncontrolling interests |
| ( |
| |
| ( |
| | |||||
Less: Net income attributable to Operating Partnership noncontrolling interests |
| |
| |
| |
| | |||||
Net (Loss) Income Attributable to Medalist Common Stockholders | $ | ( | $ | ( | $ | ( | $ | | |||||
Loss per common share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | — | |||||
Weighted-average number of shares - basic and diluted | | | | — | |||||||||
Earnings per common share - basic | $ | — | $ | — | $ | — | $ | | |||||
Weighted-average number of shares - basic | — | — | — | | |||||||||
Earnings per common share - diluted | $ | — | $ | — | $ | — | $ | | |||||
Weighted-average number of shares - diluted | — | — | — | | |||||||||
Dividends paid per common share | $ | | $ | | $ | | $ | | |||||
See notes to unaudited condensed consolidated financial statements
4
Table of Contents
Medalist Diversified REIT, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the six months ended June 30, 2025 and 2024
(Unaudited)
For the six months ended June 30, 2025 | ||||||||||||||||||||||||||
| Common Stock | Noncontrolling Interests | ||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||
Additional | Offering | Accumulated | Stockholders' | Parkway | Operating |
| ||||||||||||||||||||
Shares |
| Par Value |
| Paid in Capital |
|
| Costs |
| Deficit |
| Equity |
| Property |
| Partnership |
| Total Equity | |||||||||
Balance, January 1, 2025 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | |||||||||
| ||||||||||||||||||||||||||
Share based compensation | | $ | | $ | | $ | — | $ | — | $ | | $ | — | $ | | $ | | |||||||||
Common stock repurchases |
| ( | ( | ( | — | — | ( | — | — | ( | ||||||||||||||||
Net (loss) income |
| — | — | — | — | ( | ( | ( | | ( | ||||||||||||||||
Dividends and distributions |
| — | — | — | — | ( | ( | ( | ( | ( | ||||||||||||||||
Noncontrolling interests |
| — | — | — | — | — | — | — | | | ||||||||||||||||
Balance, June 30, 2025 |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
| $ | |
| $ | |
| $ | |
For the six months ended June 30, 2024 | |||||||||||||||||||||||||||||
| Common Stock | Noncontrolling Interests | |||||||||||||||||||||||||||
Total | Hanover | ||||||||||||||||||||||||||||
Additional | Offering | Accumulated | Stockholders' | Square | Parkway | Operating | |||||||||||||||||||||||
Shares |
| Par Value |
| Paid in Capital |
|
| Costs |
| Deficit |
| Equity |
| Property |
| Property |
| Partnership |
| Total Equity | ||||||||||
Balance, January 1, 2024 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | $ | | ||||||||||
| |||||||||||||||||||||||||||||
Common stock repurchases | | $ | | $ | | $ | — | $ | — | $ | | $ | — | $ | — | $ | | $ | | ||||||||||
Redemption of operating partnership units |
| — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
Net income |
| — | — | — | — | | | | | | | ||||||||||||||||||
Dividends and distributions |
| — | — | — | — | ( | ( | ( | ( | ( | ( | ||||||||||||||||||
Noncontrolling interests |
| — | — | — | — | — | — | ( | — | | | ||||||||||||||||||
Balance, June 30, 2024 |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
5
Table of Contents
Medalist Diversified REIT, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
For the three months ended June 30, 2025 and 2024
(Unaudited)
For the three months ended June 30, 2025 | ||||||||||||||||||||||||||
| Common Stock | Noncontrolling Interests | ||||||||||||||||||||||||
Total | ||||||||||||||||||||||||||
Additional | Offering | Accumulated | Stockholders' | Parkway | Operating |
| ||||||||||||||||||||
Shares |
| Par Value |
| Paid in Capital |
|
| Costs |
| Deficit |
| Equity |
| Property |
| Partnership |
| Total Equity | |||||||||
Balance, April 1, 2025 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | |||||||||
| ||||||||||||||||||||||||||
Common stock repurchases | ( | $ | ( | $ | ( | $ | — | $ | — | $ | ( | $ | — | $ | — | $ | ( | |||||||||
Net (loss) income |
| — | — | — | — | ( | ( | ( | | ( | ||||||||||||||||
Dividends and distributions |
| — | — | — | — | ( | ( | ( | ( | ( | ||||||||||||||||
Balance, June 30, 2025 |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
| $ | |
| $ | |
| $ | |
For the three months ended June 30, 2024 | |||||||||||||||||||||||||||||
| Common Stock | Noncontrolling Interests | |||||||||||||||||||||||||||
Total | Hanover | ||||||||||||||||||||||||||||
Additional | Offering | Accumulated | Stockholders' | Square | Parkway | Operating |
| ||||||||||||||||||||||
Shares |
| Par Value |
| Paid in Capital |
|
| Costs |
| Deficit |
| Equity |
| Property |
| Property |
| Partnership |
| Total Equity | ||||||||||
Balance, April 1, 2024 | | $ | | $ | | $ | ( | $ | ( | $ | | $ | | $ | | $ | | $ | | ||||||||||
| |||||||||||||||||||||||||||||
Redemption of operating partnership units | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | ( | $ | ( | ||||||||||
Net (loss) income |
| — | — | — | — | ( | ( | ( | | | ( | ||||||||||||||||||
Dividends and distributions | — | — | — | — | ( | ( | ( | ( | ( | ( | |||||||||||||||||||
Balance, June 30, 2024 |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
| $ | |
| $ | |
| $ | |
| $ | |
See notes to unaudited condensed consolidated financial statements
6
Table of Contents
Medalist Diversified REIT, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended June 30, | ||||||
| 2025 |
| 2024 | |||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
Net (Loss) Income | $ | ( | $ | | ||
Adjustments to reconcile consolidated net (loss) income to net cash flows from operating activities |
|
| ||||
Depreciation |
| |
| | ||
Amortization |
| |
| | ||
Loan cost amortization |
| |
| | ||
Mandatorily redeemable preferred stock issuance cost and discount amortization | | | ||||
Amortization of lease incentives | |
| | |||
Above (below) market lease amortization, net |
| ( |
| ( | ||
Bad debt expense | |
| | |||
Share-based compensation | |
| | |||
Loss on impairment | |
| — | |||
Loss on extinguishment of debt | |
| | |||
Loss on redemption of mandatorily redeemable preferred stock |
| |
| — | ||
Gain on disposal of investment property |
| — |
| ( | ||
Changes in assets and liabilities |
| |||||
Rent and other receivables |
| |
| | ||
Unbilled rent |
| ( |
| ( | ||
Other assets |
| ( |
| | ||
Accounts payable and accrued liabilities |
| |
| | ||
Net cash flows from operating activities |
| |
| | ||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
| ||||
Investment property acquisitions |
| ( |
| ( | ||
Capital expenditures | ( |
| ( | |||
Cash received from disposal of investment property, net | — |
| | |||
Purchase of digital assets | ( | — | ||||
Net cash flows from investing activities |
| ( |
| | ||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
| ||
Dividends and distributions paid |
| ( |
| ( | ||
Repayment of line of credit, short term | — |
| ( | |||
Operating partnership unit redemption | — |
| ( | |||
Repayment of mortgages payable | ( |
| ( | |||
Redemption of mandatorily redeemable preferred stock |
| ( |
| — | ||
Repurchases of common stock, including costs and fees | ( |
| — | |||
Net cash flows from financing activities |
| ( |
| ( | ||
(DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
| ( |
| | ||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period |
| |
| | ||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period | $ | | $ | | ||
CASH AND CASH EQUIVALENTS, end of period, shown in condensed consolidated balance sheets | | | ||||
RESTRICTED CASH including assets restricted for capital and operating reserves and tenant deposits, end of period, shown in condensed consolidated balance sheets | | | ||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, end of period shown in the condensed consolidated statements of cash flows | $ | | $ | | ||
Supplemental Disclosures and Non-Cash Activities: |
|
| ||||
Other cash transactions: |
|
|
|
| ||
Interest paid | $ | | $ | | ||
Non-cash transactions: | ||||||
Issuance of operating partnership units for Citibank Acquisition | $ | — | $ | | ||
Issuance of operating partnership units for Buffalo Wild Wings and United Rentals Acquisitions | | — | ||||
Transfer of investment properties, net, to assets held for sale | | — | ||||
Transfer of intangible assets, net, to assets held for sale | | — | ||||
Transfer of mortgages payable, net, to mortgages payable, net, associated with assets held for sale | | — | ||||
Transfer of intangible liabilities, net, to intangible liabilities, net, associated with assets held for sale | | — | ||||
Capital expenditures accrued as of June 30, 2025 | | — | ||||
See notes to unaudited condensed consolidated financial statements
7
Table of Contents
Medalist Diversified REIT, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
1. Organization and Basis of Presentation and Consolidation
Medalist Diversified Real Estate Investment Trust, Inc. (the “REIT”) is a Maryland corporation formed on September 28, 2015. Beginning with the taxable year ended December 31, 2017, the REIT has elected to be taxed as a real estate investment trust for federal income tax purposes. The REIT serves as the general partner of Medalist Diversified Holdings, LP (the “Operating Partnership”) which was formed as a Delaware limited partnership on September 29, 2015. As of June 30, 2025, the REIT, through the Operating Partnership, owned and operated
The use of the word “Company” refers to the REIT and its consolidated subsidiaries, except where the context otherwise requires. The Company includes the REIT, the Operating Partnership, wholly owned limited liability companies which own or operate the properties and the
8
Table of Contents
The Company owns
The Company previously owned
The Company owns
The Company owns
The Company also owns
The Company prepared the accompanying condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). References to the condensed consolidated financial statements and references to individual financial statements included herein, reference the condensed consolidated financial statements or the respective individual financial statement. All material balances and transactions between the consolidated entities of the Company have been eliminated. The unaudited condensed consolidated financial statements in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024.
The Company was formed to acquire, reposition, renovate, lease and manage income-producing properties. The Company’s current primary focus is on (i) managing its legacy portfolio consisting of retail and flex-industrial properties in secondary and tertiary markets in Virginia, North Carolina, and South Carolina, (ii) managing and expanding its STNL portfolio in geographic markets across the United States, and (iii) implementing a program by which the Company will act as a sponsor of DST investment offerings. The Company may also pursue, in an opportunistic manner, other real estate-related and non-real estate related investments, including, among other things, equity or other ownership interests in entities that are the direct or indirect owners of real property, indirect investments in real property, such as those that may be obtained in a joint venture and ownership of digital assets. While these types of investments are not intended to be a primary focus, the Company may make such investments at the discretion of the Company’s Board of Directors (the “Board”).
9
Table of Contents
2.Summary of Significant Accounting Policies
Investment Properties
The Company has adopted Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805), which clarifies the framework for determining whether an integrated set of assets and activities meets the definition of a business. The revised framework establishes a screen for determining whether an integrated set of assets and activities is a business and narrows the definition of a business, which is expected to result in fewer transactions being accounted for as business combinations. Acquisitions of integrated sets of assets and activities that do not meet the definition of a business are accounted for as asset acquisitions. As a result, all of the Company’s acquisitions to date qualified as asset acquisitions and the Company expects future acquisitions of operating properties to qualify as asset acquisitions. Accordingly, third-party transaction costs associated with these acquisitions have been and will be capitalized, while internal acquisition costs will continue to be expensed.
Accounting Standards Codification (“ASC”) 805 mandates that “an acquiring entity shall allocate the cost of an acquired entity to the assets acquired and liabilities assumed based on their estimated fair values at date of acquisition.” ASC 805 results in an allocation of acquisition costs to both tangible and intangible assets associated with income producing real estate. Tangible assets include land, buildings, site improvements, tenant improvements and furniture, fixtures and equipment, while intangible assets include the value of in-place leases, lease origination costs (leasing commissions and tenant improvements), legal and marketing costs and leasehold assets and liabilities (above or below market leases), among others.
The Company uses independent, third-party consultants to assist management with its ASC 805 evaluations. The Company determines fair value based on accepted valuation methodologies including the cost, market, and income capitalization approaches. The purchase price is allocated to the tangible and intangible assets identified in the evaluation.
The Company records depreciation on buildings and improvements utilizing the straight-line method over the estimated useful life of the asset, generally
Acquisition and closing costs are capitalized as part of each tangible asset on a pro rata basis. Improvements and major repairs and maintenance are capitalized when the repair and maintenance substantially extend the useful life, increase capacity or improve the efficiency of the asset. All other repair and maintenance costs are expensed as incurred.
Assets Held for Sale
The Company may decide to sell properties that are held as investment properties. The accounting treatment for the disposal of long-lived assets is covered by ASC 360. Under this guidance, the Company records the assets associated with these properties, and any associated mortgages payable, as held for sale when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year. Delays in the time required to complete a sale do not preclude a long-lived asset from continuing to be classified as held for sale beyond the initial one-year period if the delay is caused by events or circumstances beyond an entity’s control and there is sufficient evidence that the entity remains committed to a qualifying plan to sell the long-lived asset.
Properties classified as held for sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. When the carrying value exceeds the fair value, less estimated costs to sell, an impairment charge is recognized. The Company determines fair value based on the three-level valuation hierarchy for fair value measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets in markets that are not active; and inputs other than quoted prices. Level 3 inputs are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
As of June 30, 2025, the Company had committed to a plan to sell the Salisbury Marketplace Property. The Company’s plan is for an asset group that includes the land, site improvements, building, building improvements, tenant improvements, capitalized leasing commissions, and intangible assets associated with the Salisbury Marketplace Property. As of June 30, 2025, the Company determined
10
Table of Contents
that the fair value, less estimated costs to sell, of the Salisbury Marketplace Property exceeded its carrying value. The Company based its estimate of the fair value of the Salisbury Marketplace Property on the proposed purchase prices included in written offers received from potential purchasers, less estimated closing costs, a level 2 input. The fair value measurement date was as of June 30, 2025 (see Note 3, below).
Intangible Assets and Liabilities, net
The Company determines, through the ASC 805 evaluation, the above and below market lease intangibles upon acquiring a property. Intangible assets (or liabilities) such as above or below-market leases and in-place lease value are recorded at fair value and are amortized as an adjustment to rental revenue or amortization expense, as appropriate, over the remaining terms of the underlying leases. The Company amortizes amounts allocated to tenant improvements, in-place lease assets and other lease-related intangibles over the remaining life of the underlying leases. The analysis is conducted on a lease-by-lease basis.
Details of the deferred costs, net of amortization, arising from the Company’s purchases of its investment properties are as follows:
June 30, 2025 |
| ||||||
| (unaudited) |
| December 31, 2024 |
| |||
Intangible assets, net | |||||||
Leasing commissions | $ | | $ | | |||
Legal and marketing costs |
| |
| | |||
Above market leases |
| |
| | |||
Leases in place |
| |
| | |||
$ | | $ | | ||||
Intangible liabilities, net |
|
| |||||
Below market leases | $ | ( | $ | ( | |||
As of June 30, 2025, the Company transferred intangible assets and liabilities, respectively, associated with the Salisbury Marketplace Property to assets held for sale and intangible liabilities held for sale, as follows:
June 30, 2025 | ||||||
| (unaudited) |
| December 31, 2024 | |||
Intangible assets, net, transferred to assets held for sale | ||||||
Leasing commissions | $ | | $ | — | ||
Legal and marketing costs |
| |
| — | ||
Above market leases |
| |
| — | ||
Leases in place |
| |
| — | ||
$ | | $ | — | |||
Intangible liabilities, net, transferred to liabilities held for sale |
|
| ||||
Below market leases | $ | ( | $ | — | ||
Capitalized above-market lease values are amortized as a reduction of rental income over the remaining terms of the respective leases. Capitalized below-market lease values are amortized as an increase to rental income over the remaining terms of the respective leases. Adjustments to rental revenue related to the above and below market leases during three and six months ended June 30, 2025 and 2024, respectively, were as follows:
For the three months ended | For the six months ended |
| |||||||||||
June 30, | June 30, | ||||||||||||
2025 | 2024 | 2025 | 2024 | ||||||||||
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) |
| |||||
Amortization of above market leases | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Amortization of below market leases |
| |
| |
| |
| | |||||
$ | | $ | | $ | | $ | | ||||||
11
Table of Contents
Amortization of lease origination costs, leases in place and legal and marketing costs represent a component of depreciation and amortization expense. Amortization related to these intangible assets during the three and six months ended June 30, 2025 and 2024, respectively, were as follows:
For the three months ended | For the six months ended |
| |||||||||||
June 30, | June 30, | ||||||||||||
2025 | 2024 | 2025 | 2024 | ||||||||||
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) |
| |||||
Leasing commissions | $ | ( | $ | ( | $ | ( | $ | ( | |||||
Legal and marketing costs |
| ( |
| ( |
| ( |
| ( | |||||
Leases in place |
| ( |
| ( |
| ( |
| ( | |||||
$ | ( | $ | ( | $ | ( | $ | ( | ||||||
As of June 30, 2025 and December 31, 2024, the Company’s accumulated amortization of leasing commissions, leases in place and legal and marketing costs totaled $
Future amortization of above and below market leases, lease origination costs, leases in place, legal and marketing costs and tenant relationships is as follows:
| For the | ||||||||||||||||||||
remaining six | |||||||||||||||||||||
months ending | |||||||||||||||||||||
December 31, | |||||||||||||||||||||
2025 |
| 2026 |
| 2027 |
| 2028 |
| 2029 |
| 2030-2041 |
| Total | |||||||||
Intangible Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Leasing commissions | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||
Legal and marketing costs |
| |
| |
| |
| |
| |
| |
| | |||||||
Above market leases |
| |
| |
| |
| |
| |
| |
| | |||||||
Leases in place |
| |
| |
| |
| |
| |
| |
| | |||||||
$ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Intangible Liabilities |
|
|
|
|
|
|
| ||||||||||||||
Below market leases | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||
Impairment
The Company reviews its investment properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable, but at least annually. These circumstances include, but are not limited to, declines in the property’s cash flows, occupancy and fair market value. The Company measures any impairment of investment property when the estimated undiscounted cash flows plus its residual value, is less than the carrying value of the property. To the extent impairment has occurred, the Company charges against income the excess of the carrying value of the property over its estimated fair value. The Company estimates fair value using unobservable data such as projected future operating income, estimated capitalization rates, or multiples, leasing prospects and local market information. The Company may decide to sell properties that are held for use and the sale prices of these properties may differ from their carrying values. The Company did not record any impairment adjustments to its investment properties resulting from events or changes in circumstances during the three and six months ended June 30, 2025 and 2024, that would result in the projected value of the Company’s investment properties being below their carrying value.
However, tenant defaults and early lease terminations can also result in the recognition of impairment. As a result of certain tenant-specific events (as described below) during the three and six months ended June 30, 2025, the Company recorded a loss on impairment of $
12
Table of Contents
Investment Properties
During the three months ended June 30, 2025, a tenant notified the Company of its intent to terminate its lease early. The Company determined that the carrying value of capitalized leasing commissions associated with this lease, which was recorded as a component of investment properties on the Company’s condensed consolidated balance sheets, should be written off and recorded a loss on impairment of $
Intangible Assets
The Company also reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of its intangible assets may not be recoverable, but at least annually.
Unbilled Rent
The Company also reviews the unbilled rent asset recorded on the Company’s condensed consolidated balance sheets for impairment to determine if any amounts may not be recoverable. During the three months ended June 30, 2025, the Company recorded a loss on impairment of $
Conditional Asset Retirement Obligation
A conditional asset retirement obligation represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement depends on a future event that may or may not be within the Company’s control. Currently, the Company does not have any conditional asset retirement obligations. However, any such obligations identified in the future would result in the Company recording a liability if the fair value of the obligation can be reasonably estimated. Environmental studies conducted at the time the Company acquired its properties did not reveal any material environmental liabilities, and the Company is unaware of any subsequent environmental matters that would have created a material liability.
The Company believes that its properties are currently in material compliance with applicable environmental, as well as non-environmental, statutory and regulatory requirements. The Company did not record any conditional asset retirement obligation liabilities during the three and six months ended June 30, 2025 and 2024, respectively.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments purchased with an original maturity of 90 days or less to be cash and cash equivalents. Cash equivalents are carried at cost, which approximates fair value. Cash equivalents consist primarily of bank operating accounts and money markets. Financial instruments that potentially subject the Company to concentrations of credit risk include its cash and equivalents and its trade accounts receivable.
The Company places its cash and cash equivalents and any restricted cash held by the Company on deposit with financial institutions in the United States which are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
13
Table of Contents
institution with combined balances that exceeded the FDIC limit by $
Restricted cash represents amounts held by the Company for tenant security deposits, escrow deposits held by lenders for real estate taxes and insurance premiums, and capital reserves held by lenders for investment property capital improvements.
Tenant security deposits are restricted cash balances held by the Company to offset potential damages, unpaid rent or other unmet conditions of its tenant leases. As of June 30, 2025 and December 31, 2024, the Company reported $
Escrow deposits are restricted cash balances held by lenders for real estate taxes and insurance premiums. As of June 30, 2025 and December 31, 2024, the Company reported $
Capital reserves are restricted cash balances held by lenders for capital improvements, leasing commissions and tenant improvements. As of June 30, 2025 and December 31, 2024, the Company reported $
June 30, 2025 | December 31, | ||||||
Property and Purpose of Reserve |
| (unaudited) |
| 2024 | |||
Ashley Plaza Property – maintenance and leasing cost reserve | | | |||||
Brookfield Center Property – maintenance and leasing cost reserve | | | |||||
Franklin Square Property – leasing costs |
| |
| | |||
Total | $ | | $ | | |||
Crypto Assets (Bitcoin)
The Company accounts for its crypto asset holdings in accordance with Accounting Standards Update (ASU) 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). Under ASU 2023-08, crypto assets are measured at fair value, with realized and unrealized changes in fair value recognized in net income each reporting period. Fair value is determined using Level 1 inputs based on quoted prices in active markets. Crypto assets are classified as other intangible assets on the Company’s condensed consolidated balance sheet. The Company does not amortize crypto assets and does not assess crypto assets for impairment under this standard, as gains and losses are recorded through the income statement. Gains and losses are recorded under other income or other expense, as appropriate, on the Company’s condensed consolidated statements of operations.
A reconciliation of the Company’s crypto asset activity for the three and six months ended June 30, 2025 and 2024 is as follows:
For the three months ended | For the six months ended | |||||||||||
June 30, | June 30, | |||||||||||
2025 | 2024 | 2025 | 2024 | |||||||||
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) | |||||
Beginning balance | $ | — | $ | — | $ | — | $ | — | ||||
Purchases (1) | | — | | — | ||||||||
Sales | — | — | — | — | ||||||||
Realized gain (loss) | — | — | — | — | ||||||||
Unrealized loss | ( | — | ( | — | ||||||||
Ending Balance | $ | | $ | — | $ | | $ | — | ||||
(1)
Share Retirement
ASC 505-30-30-8 provides guidance on accounting for share retirement and establishes two alternative methods for accounting for the purchase price paid in excess of par value. The Company has elected the method by which the excess between par value and the purchase price, including costs and fees, is recorded to additional paid in capital on the Company’s condensed consolidated balance sheets. During the three and six months ended June 30, 2025, the Company repurchased
14
Table of Contents
at a total cost of $
The total repurchase price was recorded to Common Shares and additional paid in capital on the Company’s condensed consolidated balance sheets. For the three and six months ended June 30, 2025, $
Revenue Recognition
Retail, Flex, and Single Tenant Net Lease Property Revenues
The Company recognizes minimum rents from its retail center properties, flex center properties and STNL properties on a straight-line basis over the terms of the respective leases which results in an unbilled rent asset being recorded on the condensed consolidated balance sheets. As of June 30, 2025 and December 31, 2024, the Company reported $
The Company’s leases generally require the tenant to reimburse the Company for a substantial portion of its expenses incurred in operating, maintaining, repairing, insuring and managing the shopping center and common areas (collectively defined as Common Area Maintenance or “CAM” expenses). The Company includes these reimbursements, along with other revenue derived from late fees and seasonal events, on the condensed consolidated statements of operations under the captions "Retail center property revenues”, “Flex center property revenues,” and “Single tenant net lease property revenues.” This significantly reduces the Company’s exposure to increases in costs and operating expenses resulting from inflation or other outside factors. The Company accrues reimbursements from tenants for recoverable portions of all these expenses as revenue in the period the applicable expenditures are incurred. The Company calculates the tenant’s share of operating costs by multiplying the total amount of the operating costs allowable under each Tenant’s lease by a fraction, the numerator of which is the total number of square feet being leased by the tenant, and the denominator of which is the average total square footage of all leasable buildings at the property. The Company also receives payments for these reimbursements from substantially all its tenants on a monthly basis throughout the year.
The Company recognizes differences between previously estimated recoveries and the estimated final billed amounts in the year in which the amounts become final. Since these differences are determined annually under the leases and accrued as of December 31 in the year earned,
The Company recognizes lease termination fees in the period that the lease is terminated and collection of the fees is reasonably assured. Upon early lease termination, any unrecovered intangibles and other assets are written off as a loss on impairment. (See Impairment, above.). During the six months ended June 30, 2025, the Company received a $
Rent and Other Receivables
Rent and other receivables include tenant receivables related to base rents and tenant reimbursements. Rent and other receivables do not include receivables attributable to recording rents on a straight-line basis, which are included in unbilled rent, discussed above. The Company determines an allowance for the uncollectible portion of accrued rents and accounts receivable based upon customer credit worthiness (including expected recovery of a claim with respect to any tenants in bankruptcy), historical bad debt levels, and current economic trends. The Company considers a receivable past due once it becomes delinquent per the terms of the lease. A past due receivable triggers certain events such as notices, fees and other allowable and required actions per the lease. As of June 30, 2025 and December 31, 2024, the Company’s allowance for uncollectible rent totaled $
15
Table of Contents
Income Taxes
Beginning with the Company’s taxable year ended December 31, 2017, the REIT has elected to be taxed as a real estate investment trust for federal income tax purposes under Sections 856 through 860 of the Internal Revenue Code and applicable Treasury regulations relating to REIT qualification. In order to maintain this REIT status, the regulations require the Company to distribute at least
During the three and six months ended June 30, 2025, neither of the Company’s TRS entities (Own Digital Treasury TRS, LLC, and MDRR XXV Sponsor, LLC) generated taxable income, so
Management has evaluated the effect of the guidance provided by GAAP on Accounting for Uncertainty of Income Taxes and has determined that the Company had no uncertain income tax positions.
Use of Estimates
The Company has made estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and revenues and expenses during the reported period. The Company’s actual results could differ from these estimates.
Noncontrolling Interests
The ownership interests not held by the REIT are considered noncontrolling interests. There are three elements of noncontrolling interests in the capital structure of the Company. These noncontrolling interests have been reported in equity on the condensed consolidated balance sheets but separate from the Company’s equity. On the condensed consolidated statements of operations, the subsidiaries are reported at the consolidated amount, including both the amount attributable to the Company and noncontrolling interests. The Company’s condensed consolidated statements of changes in stockholders’ equity includes beginning balances, activity for the period and ending balances for stockholders’ equity, noncontrolling interests and total equity.
Prior to the Hanover Square Transactions, an outside party held a noncontrolling interest in the Hanover Square Property (consisting of both the Hanover Square Shopping Center and the Hanover Square Outparcel) in which the Company owned an
The second noncontrolling interest is in the Parkway Property in which the Company owns an
The third noncontrolling ownership interest consists of the common units of the Operating Partnership (the “OP Units”) that are not held by the REIT. On January 15, 2025, the Company issued
16
Table of Contents
As of June 30, 2025 and December 31, 2024, there were
The OP Units not held by the REIT represent
During the three and six months ended June 30, 2025, a weighted average of
Reclassifications
Offering Costs
The Company has reclassified certain prior period amounts in the accompanying condensed consolidated financial statements in order to be consistent with the current period presentation. As a result of the reclassification, $
Outstanding Shares
All per share amounts, Common Shares outstanding, OP Units outstanding, and stock-based compensation amounts for all periods presented reflect the Company’s reverse stock split (the “Reverse Stock Split”) and
Evaluation of the Company’s Ability to Continue as a Going Concern
Under the accounting guidance related to the presentation of financial statements, the Company is required to evaluate, on a quarterly basis, whether or not the entity’s current financial condition, including its sources of liquidity at the date that the condensed consolidated financial statements are issued, will enable the entity to meet its obligations as they come due arising within one year of the date of the issuance of the Company’s condensed consolidated financial statements and to make a determination as to whether or not it is probable, under the application of this accounting guidance, that the entity will be able to continue as a going concern. The Company’s condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
In applying applicable accounting guidance, management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows, the Company’s obligations due over the next twelve months as well as the Company’s recurring business operating expenses. The Company concludes that it is probable that the Company will be able to meet its obligations arising within one year of the date of issuance of these condensed consolidated financial statements within the parameters set forth in the accounting guidance.
17
Table of Contents
3. Investment Properties
Investment properties consist of the following:
June 30, 2025 | December 31, | ||||||
| (unaudited) |
| 2024 | ||||
Land | $ | | $ | | |||
Site improvements |
| |
| | |||
Buildings and improvements (1) |
| |
| | |||
Investment properties at cost (2) |
| |
| | |||
Less accumulated depreciation |
| |
| | |||
Investment properties, net | $ | | $ | |
| (1) | Includes tenant improvements (both those acquired as part of the acquisition of the properties and those constructed after the properties’ acquisition), capitalized leasing commissions and other capital costs incurred post-acquisition. |
| (2) | Excludes intangible assets and liabilities (see Note 2, above, for a discussion of the Company’s accounting treatment of intangible assets), escrow deposits and property reserves. |
The Company’s depreciation expense on investment properties was $
Capitalized Tenant Improvements
The Company carries three categories of capitalized tenant improvements on its condensed consolidated balance sheets, all of which are recorded under investment properties, net, on the Company’s condensed consolidated balance sheets. The first category is the allocation of acquisition costs to tenant improvements that is recorded on the Company’s condensed consolidated balance sheets as of the date of the Company’s acquisition of the investment property. The second category is tenant improvement costs incurred and paid by the Company subsequent to the acquisition of the investment property. The third category is tenant improvement costs incurred and paid by the Company subsequent to the acquisition of the investment property that are considered to be lease incentives under ASC 842. All three categories are recorded as a component of investment properties on the Company’s condensed consolidated balance sheets.
Depreciation expense on the allocation of acquisition costs to tenant improvements and tenant improvement costs incurred and paid by the Company subsequent to the acquisition of the investment property are depreciated on a straight-line basis as a component of depreciation expense on the Company’s condensed consolidated statement of operations. Capitalized lease incentives are amortized as a reduction of rental income on a straight-line basis over the term of the respective lease.
Details of these deferred costs, net of depreciation are as follows:
June 30, 2025 | December 31, | |||||
| (unaudited) |
| 2024 | |||
Capitalized tenant improvements – acquisition cost allocation, net | $ | | $ | | ||
Capitalized tenant improvements incurred subsequent to acquisition, net |
| |
| | ||
Capitalized tenant improvements considered to be lease incentives | — | | ||||
Depreciation of capitalized tenant improvements arising from the acquisition cost allocation was $
18
Table of Contents
During the three and six months ended June 30, 2025, the Company recorded $
Amortization of capitalized tenant improvements considered to be lease incentives was $
Capitalized Leasing Commissions
The Company carries two categories of capitalized leasing commissions on its condensed consolidated balance sheets. The first category is the allocation of acquisition costs to leasing commissions that is recorded as an intangible asset (see Note 2, above, for a discussion of the Company’s accounting treatment for intangible assets) on the Company’s condensed consolidated balance sheet as of the date of the Company’s acquisition of the investment property. The second category is leasing commissions incurred and paid by the Company subsequent to the acquisition of the investment property. These costs are carried on the Company’s condensed consolidated balance sheets under investment properties.
The Company generally records depreciation of capitalized leasing commissions incurred and paid by the Company subsequent to the acquisition of an investment property on a straight-line basis over the terms of the related leases. Details of these deferred costs, net of depreciation are as follows:
June 30, 2025 | December 31, | ||||||
(unaudited) | 2024 | ||||||
Capitalized leasing commissions, net |
| $ | |
| $ | | |
During the three and six months ended June 30, 2025, the Company recorded $
Assets Held for Sale
The Company records properties, including the related intangible assets, as assets held for sale, any related intangible liabilities as intangible liabilities held for sale, and any associated mortgages payable, net, as mortgages payable, net, associated with assets held for sale, on the Company's condensed consolidated balance sheets, when management has committed to a plan to sell the assets, actively seeks a buyer for the assets, and the consummation of the sale is considered probable and is expected within one year.
During February 2025, the Company committed to a plan to sell the Hanover Square Outparcel. As a result, as of March 31, 2025, the Company reclassified the assets associated with the Hanover Square Outparcel as assets held for sale. The Company believed that the fair value, less estimated costs to sell, exceeded the Company’s carrying cost, so the Company did not record any impairment of assets held for sale related to the Hanover Square Outparcel for the three and six months ended June 30, 2025.
19
Table of Contents
During June 2025, the Company committed to a plan to sell the Salisbury Marketplace Property. As a result, as of June 30, 2025, the Company reclassified the assets associated with the Salisbury Marketplace Property as assets held for sale. The Company believes that the fair value, less estimated costs to sell, exceeded the Company’s carrying cost, so the Company did not record any impairment of assets held for sale related to the Salisbury Marketplace Property for the three and six months ended June 30, 2025.
As of June 30, 2025 and December 31, 2024, assets held for sale and liabilities associated with assets held for sale consisted of the following:
June 30, 2025 | December 31, | ||||||
Assets Held for Sale |
| (unaudited) |
| 2024 | |||
Investment properties, net, held for sale, associated with the Salisbury Marketplace Property | $ | | $ | — | |||
Intangible assets, net, held for sale, associated with the Salisbury Marketplace Property | | — | |||||
Investment properties, net, held for sale, associated with the Hanover Square Outparcel | | — | |||||
Total assets held for sale | $ | | $ | — | |||
June 30, 2025 | December 31, | |||||
Liabilities Held for Sale |
| (unaudited) |
| 2024 | ||
Mortgages payable, net, associated with the Salisbury Marketplace Property | $ | | $ | — | ||
Intangible liabilities, net, held for sale associated with the Salisbury Marketplace Property | | — | ||||
Total liabilities held for sale | $ | | $ | — | ||
Sale of Investment Property
On March 13, 2024, the Company sold the Hanover Square Shopping Center Property to an unrelated third party for a sale price of $
The Company reports properties that either were previously disposed of or are currently held for sale in continuing operations in the Company’s condensed consolidated statements of operations if the disposition, or anticipated disposition, of the assets does not represent a shift in the Company’s investment strategy. The Company’s sale of the Hanover Square Shopping Center Property does not constitute a change in the Company’s investment strategy, which continues to include retail center properties as a targeted asset class.
Operating results of the Hanover Square Shopping Center Property which are included in continuing operations, are as follows:
For the three months ended |
| For the six months ended | ||||||||||
June 30, | June 30, | |||||||||||
2025 | 2024 | 2025 | 2024 | |||||||||
| (unaudited) |
| (unaudited) |
| (unaudited) |
| (unaudited) | |||||
Revenue | ||||||||||||
Retail center property revenues | $ | — | $ | — | $ | — | $ | | ||||
Total Revenue | — | — | — | | ||||||||
Operating Expenses | ||||||||||||
Retail center property operating expenses | — | | — | | ||||||||
Bad debt expense | — | | — | | ||||||||
Total Operating Expenses | — | | — | | ||||||||
Gain on disposal of investment properties | — | — | — | | ||||||||
Loss on extinguishment of debt | — | — | — | ( | ||||||||
Operating (Loss) Income | — | ( | — | | ||||||||
Interest expense |
| — | — | — | | |||||||
Net (Loss) Income | — | ( | — | | ||||||||
Less: Net (loss) income attributable to Hanover Square Property noncontrolling interests | — | ( | — | | ||||||||
Less: Net (loss) income attributable to Operating Partnership noncontrolling interests |
| — | ( | — | | |||||||
Net (Loss) Income Attributable to Medalist Common Stockholders | $ | — | $ | ( | $ | — | $ | | ||||
20
Table of Contents
2025 Property Acquisitions
Buffalo Wild Wings Property
On January 24, 2025, the Company completed its acquisition of the Buffalo Wild Wings Property, a
United Rentals Property
On February 21, 2025, the Company completed its acquisition of the United Rentals Property, a
Buffalo | United | |||||||||||
Wild Wings | Rentals | |||||||||||
Property |
| Property | Total | |||||||||
Fair value of assets acquired: | ||||||||||||
Investment property (a) | $ | | $ | | $ | | ||||||
Lease intangibles (b) | | | | |||||||||
Below market lease (b) | ( | — | ( | |||||||||
Fair value of net assets acquired (c) | $ | | $ | | $ | | ||||||
Purchase consideration: | ||||||||||||
Consideration paid with cash (d) | $ | | $ | | $ | | ||||||
Consideration paid with OP Units |
| | (e) |
| | (f) |
| | ||||
Total consideration (g) | $ | | $ | | $ | |
| a. | Represents the fair value of the investment property acquired which includes land, buildings, site improvements and tenant improvements. The fair value was determined using the market approach, the cost approach, the income approach or a combination thereof. Closing costs were allocated and added to the fair value of the tangible assets acquired. |
| b. | Represents the fair value of lease intangibles. Lease intangibles include leasing commissions, leases in place, below market leases and legal and marketing costs associated with replacing existing leases. |
| c. | Represents the total fair value of assets and liabilities acquired at closing. |
| d. | Represents cash paid for closing costs paid at closing or directly by the Company outside of closing. |
| e. | Represents issuance of |
| f. | Represents issuance of |
21
Table of Contents
| g. | Represents the consideration paid for the fair value of the assets and liabilities acquired. |
2024 Property Acquisitions
Acquisition of 16% noncontrolling interest in the Hanover Square Outparcel
On March 25, 2024, the Company completed the acquisition of its tenant in common partner’s
Citibank Property
On March 28, 2024, the Company completed its acquisition of the Citibank Property, a
NCI Interest in | ||||||||||||
Hanover Square | Citibank | |||||||||||
Outparcel (a) |
| Property | Total | |||||||||
Fair value of assets acquired: | ||||||||||||
Investment property | $ | | $ | | (a) | $ | | |||||
Lease intangibles | — | | (b) | | ||||||||
Below market leases | — | ( | (b) | ( | ||||||||
Fair value of net assets acquired | $ | | $ | | (c) | $ | | |||||
Purchase consideration: | ||||||||||||
Consideration paid with cash | $ | | $ | | (d) | $ | | |||||
Consideration paid with OP Units |
| — |
| | (e) |
| | |||||
Total consideration | $ | | $ | | (f) | $ | |
NCI Interest in Hanover Square Outparcel
| a. | Represents the total acquisition cost of the land acquired. Closing costs were allocated and added to the fair value of the tangible assets acquired. |
Citibank Property
| a. | Represents the fair value of the investment property acquired which includes land, buildings, site improvements and tenant improvements. The fair value was determined using the market approach, the cost approach, the income approach or a combination thereof. Closing costs were allocated and added to the fair value of the tangible assets acquired. |
| b. | Represents the fair value of lease intangibles. Lease intangibles include leasing commissions, leases in place, above market leases and legal and marketing costs associated with replacing existing leases. |
| c. | Represents the total fair value of assets and liabilities acquired at closing. |
22
Table of Contents
| d. | Represents cash paid for closing costs paid at closing or directly by the Company outside of closing. |
| e. | Represents issuance of |
| f. | Represents the consideration paid for the fair value of the assets and liabilities acquired. |
4. Mandatorily Redeemable Preferred Stock
On February 19, 2020, the Company issued and sold
The mandatorily redeemable preferred stock was issued at $
The Company classified the mandatorily redeemable preferred stock as a liability in accordance with ASC Topic No. 480, “Distinguishing Liabilities from Equity,” which states that mandatorily redeemable financial instruments should be classified as liabilities and therefore the related dividend payments are treated as a component of interest expense in the accompanying condensed consolidated statements of operations (see Note 5, below, for a discussion of interest expense associated with the mandatorily redeemable preferred stock).
For all periods during which the mandatorily redeemable preferred stock was outstanding, the Company paid a cash dividend on the stock equal to
Amortization of the discount and deferred financing costs related to the mandatorily redeemable preferred stock totaling $
As of June 30, 2025 and December 31, 2024, the Company recorded $
On November 25, 2024, the Company completed a partial redemption of
On January 10, 2025, the Company completed the final redemption of the remaining
23
Table of Contents
5. Loans Payable
Mortgages Payable
The Company’s mortgages payable, net consists of the following:
June 30, | |||||||||||||||
Monthly | Interest | 2025 | December 31, | ||||||||||||
Property |
| Payment |
| Rate |
| Maturity |
| (unaudited) |
| 2024 | |||||
Franklin Square (a) |
| $ | |
| | % | $ | | $ | | |||||
Ashley Plaza (b) | |
| | % |
| |
| | |||||||
Brookfield Center (c) | | | % | | | ||||||||||
Parkway Center (d) | | Variable | | | |||||||||||
Wells Fargo Mortgage Facility (e) | | | % | | | ||||||||||
Unamortized issuance costs, net | ( | ( | |||||||||||||
Total mortgages payable, net |
|
|
|
| $ | | $ | | |||||||
| (a) | The mortgage loan for the Franklin Square Property in the original principal amount of $ |
| (b) | The mortgage loan for the Ashley Plaza Property bears interest at a fixed rate of |
| (c) | The mortgage loan for the Brookfield Property bears interest at a fixed rate of |
| (d) | The interest rate for the mortgage loan for the Parkway Property was originally based on ICE LIBOR plus |
| (e) | On June 13, 2022, the Company entered into a mortgage loan facility with Wells Fargo Bank (the “Wells Fargo Mortgage Facility”) in the principal amount of $ |
24
Table of Contents
| is $ |
As of June 30, 2025, the outstanding balance, monthly payment and unamortized loan issuance costs related to the Wells Fargo Mortgage Facility are allocated, for reporting purposes, among the Salisbury Marketplace Property, Lancer Center Property, and Greenbrier Business Center Property based on each property's proportionate share of the total combined appraised value at the time the Wells Fargo Mortgage Facility was originated. The portions allocated to the Lancer Center Property and Greenbrier Property are reported in Mortgages payable, net, on the Company’s condensed consolidated balance sheets, while the portion allocated to the Salisbury Marketplace Property, representing the estimated paydown amount upon its anticipated sale, is included in mortgages payable, net, associated with assets held for sale on the Company’s condensed consolidated balance sheets.
The Company’s mortgages payables, net, associated with assets held for sale, consists of the following:
Balance | |||||||||||||||
June 30, | |||||||||||||||
Monthly | Interest | 2025 | December 31, | ||||||||||||
Property | Payment |
| Rate | Maturity |
| (unaudited) |
| 2024 | |||||||
Salisbury Marketplace (see note (e), above) | $ | |
| | % | June 2027 | $ | | $ | — | |||||
Unamortized issuance costs, net |
|
|
|
|
|
|
| ( |
| — | |||||
Total mortgages payable, net, associated with assets held for sale |
|
| $ | | $ | — | |||||||||
Interest rate protection transaction
On October 28, 2021, the Company entered into an interest rate protection transaction to limit its exposure to increases in interest rates on the variable rate mortgage loan on the Parkway Property (the “Interest Rate Protection Transaction”). Under this agreement, the Company’s interest rate exposure is
For the period from September 1, 2022 through June 30, 2023, LIBOR, and for the period from July 1, 2023 through June 30, 2025, SOFR, exceeded the
Wells Fargo Line of Credit
On June 13, 2022, the Company, through its wholly-owned subsidiaries, entered into a loan agreement with Wells Fargo Bank, National Association for a $
25
Table of Contents
National Association entered into the Second Amended to the Revolving Line of Credit Note which further extended the maturity date of the Original Wells Fargo Line of Credit to October 7, 2024. Outstanding balances on the Original Wells Fargo Line of Credit bore interest at a floating rate of
On October 2, 2024, the Company, through its wholly-owned subsidiaries, entered into an amended and restated Revolving Line of Credit Note with Wells Fargo Bank, National Association that increased the line of credit from $
On April 28, 2025 the Company terminated the Expanded Wells Fargo Line of Credit and Wells Fargo Bank released its security interest in the Citibank Property.
Loss on Extinguishment of Debt
On April 28, 2025, the Company terminated the Expanded Wells Fargo Line of Credit. The Company accounted for the termination under debt extinguishment accounting in accordance with ASC 470. During the three and six months ended June 30, 2025, the Company recorded a loss on extinguishment of debt of $
On March 13, 2024, the Company sold the Hanover Square Shopping Center Property and repaid the mortgage loan for the Hanover Square Property. The Company accounted for the repayment of the mortgage payable under debt extinguishment accounting in accordance with ASC 470. During the six months ended June 30, 2024, the Company recorded a loss on extinguishment of debt of $
Interest Expense
Interest expense, including amortization of capitalized issuance costs consists of the following:
For the three months ended June 30, 2025 | |||||||||||||||
(unaudited) | |||||||||||||||
|
| Amortization |
| Interest rate |
|
| |||||||||
Mortgage | of discounts and | protection | Other | ||||||||||||
Interest | capitalized | transaction | interest | ||||||||||||
| Expense |
| issuance costs |
| payments |
| expense |
| Total | ||||||
Franklin Square | $ | |
| $ | |
| $ | — |
| $ | — |
| $ | | |
Ashley Plaza |
| |
| |
| — |
| — |
| | |||||
Brookfield Center |
| |
| |
| — |
| — |
| | |||||
Parkway Center | | | ( | — | | ||||||||||
Wells Fargo Mortgage Facility | | | — | — | | ||||||||||
Other interest | — | — | — | | | ||||||||||
Total interest expense | $ | | $ | | $ | ( | $ | | $ | | |||||
26
Table of Contents
For the three months ended June 30, 2024 | |||||||||||||||
(unaudited) | |||||||||||||||
|
| Amortization |
| Interest rate |
|
| |||||||||
Mortgage | of discounts and | protection | Other | ||||||||||||
Interest | capitalized | transaction | interest | ||||||||||||
| Expense |
| issuance costs |
| payments |
| expense |
| Total | ||||||
Franklin Square | $ | |
| $ | |
| $ | — |
| $ | — |
| $ | | |
Ashley Plaza |
| |
| |
| — |
| — |
| | |||||
Brookfield Center |
| |
| |
| — | — |
| | ||||||
Parkway Center | |
| |
| ( | — |
| | |||||||
Wells Fargo Mortgage Facility | |
| |
| — | — |
| | |||||||
Amortization and preferred stock dividends on mandatorily redeemable preferred stock | — |
| |
| — | |
| | |||||||
Other interest |
| — |
| — |
| — |
| | | ||||||
Total interest expense | $ | | $ | | $ | ( | $ | | $ | | |||||
| For the six months ended June 30, 2025 | ||||||||||||||
(unaudited) | |||||||||||||||
|
| Amortization |
| Interest rate |
|
| |||||||||
| Mortgage | of discounts and | protection | Other | |||||||||||
| Interest | capitalized | transaction | interest | |||||||||||
| Expense |
| issuance costs |
| payments |
| expense |
| Total | ||||||
Franklin Square | $ | |
| $ | |
| $ | — |
| $ | — |
| $ | | |
Ashley Plaza |
| |
| |
| — |
| — |
| | |||||
Brookfield Center |
| |
| |
| — |
| — |
| | |||||
Parkway Center | | | ( | — | | ||||||||||
Wells Fargo Mortgage Facility | | | — | — | | ||||||||||
Wells Fargo Line of Credit | — | — | — | | | ||||||||||
Amortization and preferred stock dividends on mandatorily redeemable preferred stock | — | | — | | | ||||||||||
Other interest | — | — | — | | | ||||||||||
Total interest expense | $ | | $ | | $ | ( | $ | | $ | | |||||
For the six months ended June 30, 2024 | |||||||||||||||
(unaudited) | |||||||||||||||
|
| Amortization |
| Interest rate |
|
| |||||||||
| Mortgage | of discounts and | protection | Other | |||||||||||
| Interest | capitalized | transaction | interest | |||||||||||
| Expense | issuance costs | payments |
| expense | Total | |||||||||
Franklin Square | $ | | $ | | $ | — |
| $ | — | $ | | ||||
Hanover Square |
| | — | — |
| — | | ||||||||
Ashley Plaza |
| | | — |
| — | | ||||||||
Brookfield Center |
| | | — | — | | |||||||||
Parkway Center | | | ( | — | | ||||||||||
Wells Fargo Mortgage Facility | | | — | — | | ||||||||||
Wells Fargo Line of Credit | — | — | — | | | ||||||||||
Amortization and preferred stock dividends on mandatorily redeemable preferred stock | — | | — | | | ||||||||||
Other interest |
| — | — |
| — |
| |
| | ||||||
Total interest expense | $ | | $ | | $ | ( | $ | | $ | | |||||
27
Table of Contents
Interest accrued and accumulated amortization of capitalized issuance costs consist of the following:
As of June 30, 2025 | As of December 31, 2024 | |||||||||||
|
| Accumulated |
|
| Accumulated | |||||||
amortization of | amortization | |||||||||||
Accrued | capitalized | Accrued | of capitalized | |||||||||
interest | issuance costs | interest | issuance costs | |||||||||
Franklin Square | $ | | $ | | $ | | $ | | ||||
Ashley Plaza |
| — |
| |
| — |
| | ||||
Brookfield Center |
| — |
| |
| — |
| | ||||
Parkway Center | | | | | ||||||||
Wells Fargo Mortgage Facility | | | — | | ||||||||
Amortization and accrued preferred stock dividends on mandatorily redeemable preferred stock | — | — | | (1) | | |||||||
Total | $ | | $ | | $ | | $ | | ||||
(1) | Recorded as accrued interest under accounts payable and accrued liabilities on the Company’s condensed consolidated balance sheets as of December 31, 2024. |
Debt Maturity
The Company’s scheduled principal repayments on indebtedness as of June 30, 2025 are as follows:
Mortgages Payable | Mortgages Payable Associated with Assets Held for Sale | Total | |||||||
For the remaining six months ending December 31, 2025 |
| $ | |
| $ | |
| $ | |
2026 |
| | | | |||||
2027 |
| | | | |||||
2028 |
| | — | | |||||
2029 |
| | — | | |||||
Thereafter |
| | — | | |||||
Total principal payments and debt maturities | | | | ||||||
Less unamortized issuance costs |
| ( | ( | ( | |||||
Net principal payments and debt maturities | $ | | $ | | $ | |
6. Rentals under Operating Leases
Future minimum rents (based on recognizing future rents on the straight-line basis) to be received under noncancelable tenant operating leases for each of the next five years and thereafter, excluding common area maintenance and other expense pass-throughs, as of June 30, 2025 are as follows:
For the remaining six months ending December 31, 2025 |
| $ | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
2029 |
| | |
Thereafter |
| | |
Total minimum rents | $ | |
28
Table of Contents
7. Equity
The Company has authority to issue
Private Placement of Common Shares
On December 13, 2024, the Company entered into a series of subscription agreements with certain investors, including the Company’s Chief Financial Officer and two directors, for the issuance and sale of
Completion of 1-for-10 Reverse Stock Split and 5-for-1 Forward Stock Split
On July 2, 2024, the Company completed a reverse stock split of its Common Shares, and a corresponding adjustment to the outstanding common units of the Operating Partnership at a ratio of -for-10 (the “Reverse Stock Split”). The Reverse Stock Split took effect at 5:00 p.m. Eastern Time on July 2, 2024 (the “Reverse Stock Split Effective Time”) and automatically converted every ten Common Shares outstanding at that time into Common Share.
The Reverse Stock Split affected all holders of Common Shares uniformly and did not affect any common stockholder’s percentage ownership interest in the Company, except for de minimis changes as a result of the elimination of fractional shares, as described below. Holders of Common Shares were not required to take any action as a result of the Reverse Stock Split. Their accounts were automatically adjusted to reflect the number of shares owned.
Also on July 2, 2024, and immediately following the Reverse Stock Split, the Company completed a forward stock split of its Common Shares, and a corresponding adjustment to the outstanding common units of the Operating Partnership, at a ratio of
As a result of the Stock Splits, the number of Common Shares outstanding was reduced from
For stockholders of record,
29
Table of Contents
At the Reverse Stock Split Effective Time and the Forward Stock Split Effective Time, the aggregate number of Common Shares available for awards under the Company’s 2018 Equity Incentive Plan and the terms of outstanding awards were ratably adjusted to reflect the Reverse Stock Split and the Forward Stock Split, respectively.
Trading of the Common Shares on Nasdaq commenced on a split-adjusted basis on July 3, 2024 under the existing trading symbol “MDRR.” The new CUSIP number for the Common Shares following the Stock Splits is 58403P402.
Charter Amendments
In connection with the Stock Splits, on June 20, 2024, the Company filed three Articles of Amendment to its charter with the State Department of Assessments and Taxation of Maryland that provided for:
| (i) | a -for-10 Reverse Stock Split of the Common Stock, effective at 5:00 p.m. Eastern Time on July 2, 2024; |
| (ii) | a |
| (iii) | the par value of the Common Stock to be decreased from $ |
The foregoing descriptions of the Articles of Amendment do not purport to be complete and are qualified in their entirety by reference to each amendment, copies of which are filed as Exhibit 3.6, Exhibit 3.7 and Exhibit 3.8, respectively, to the Annual Report on Form 10-K for the year ended December 31, 2024.
Common Stock Repurchase Plan
In December 2021, the Board approved a program to purchase up to
Purchase (Trade) Date |
| Shares Purchased |
| Price Per Share |
| Total Cost (1) | ||
August 6, 2024 | | $ | | $ | | |||
February 3, 2025 | | | | |||||
February 10, 2025 | | | | |||||
March 19, 2025 | | | | |||||
April 23, 2025 | | | | |||||
Total | | $ | | $ | | |||
(1) | Total cost including transaction fees. |
Common Shares and Operating Partnership Units Outstanding
As of June 30, 2025 and December 31, 2024, respectively, there were
30
Table of Contents
were
2018 Equity Incentive Plan
The Company’s 2018 Equity Incentive Plan (the “Equity Incentive Plan”) was adopted by the Board on July 27, 2018 and approved by the Company’s stockholders on August 23, 2018. The Equity Incentive Plan permits the grant of stock options, stock appreciation rights, stock awards, performance units, incentive awards and other equity-based awards (including LTIP units of the Company’s Operating Partnership) to its employees or an affiliate (as defined in the Equity Incentive Plan) of the Company and for up to the greater of (i)
On January 18, 2024, the Compensation Committee approved a grant of
On January 15, 2025, the Company's Compensation Committee approved a grant of
On each January 1 during the term of the Equity Incentive Plan, the maximum number of Common Shares that may be issued under the Equity Incentive Plan will increase by eight percent (
Earnings per Share
Basic earnings per share for the Company’s Common Shares is calculated by dividing income (loss) from continuing operations, excluding the net income (loss) attributable to noncontrolling interests, by the Company’s weighted-average number of Common Shares outstanding during the period. Diluted earnings per share is computed by dividing the net income attributable to common stockholders, excluding the net loss attributable to noncontrolling interests, by the weighted average number of Common Shares, including any dilutive shares. As of June 30, 2025 and 2024, there were
31
Table of Contents
The Company's income (loss) per common share is determined as follows:
Three months ended June 30, |
| Six months ended June 30, | ||||||||||
| 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
| (unaudited) |
| (unaudited) | (unaudited) |
| (unaudited) | ||||||
Basic and diluted shares outstanding | ||||||||||||
Weighted average Common Shares – basic |
| |
| | |
| | |||||
Effect of conversion of Operating Partnership Units |
| |
| | |
| | |||||
Weighted average Common Shares – diluted |
| |
| | |
| | |||||
Calculation of loss per share – basic and diluted |
|
|
| |||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | ( | |||||||
Weighted average Common Shares – basic and diluted |
| |
| |
| | ||||||
Loss per share – basic and diluted | $ | ( | $ | ( | $ | ( | ||||||
Calculation of earnings per share – basic | ||||||||||||
Net income attributable to common stockholders | $ | | ||||||||||
Weighted average Common Shares – basic |
| | ||||||||||
Earnings per share – basic | $ | | ||||||||||
Calculation of earnings per share – diluted | ||||||||||||
Net income attributable to common stockholders | $ | | ||||||||||
Weighted average Common Shares – diluted |
| | ||||||||||
Earnings per share – diluted | $ | | ||||||||||
Dividends and Distributions
During the three and six months ended June 30, 2025, dividends in the amount of $
| Three months ended June 30, |
| Six months ended June 30, | |||||||||
| 2025 |
| 2024 |
| 2025 |
| 2024 | |||||
| (unaudited) |
| (unaudited) | (unaudited) |
| (unaudited) | ||||||
Common stockholders (dividends) | $ | | $ | | $ | | $ | | ||||
Hanover Square Property noncontrolling interest (distributions) |
| — |
| |
| — |
| | ||||
Parkway Property noncontrolling interest (distributions) |
| |
| |
| |
| | ||||
Operating Partnership Unit holders (distributions) |
| |
| |
| |
| | ||||
Total dividends and distributions | $ | | $ | | $ | | $ | | ||||
8. Commitments and Contingencies
Insurance
The Company carries comprehensive liability, fire, extended coverage, business interruption and rental loss insurance covering all of the properties in its portfolio, in addition to other coverages that may be appropriate for certain of its properties. Additionally, the Company carries a directors and officers liability insurance policy that covers such claims made against the Company and its directors and officers. The Company believes the policy specifications and insured limits are appropriate and adequate for its properties given the
32
Table of Contents
relative risk of loss, the cost of the coverage and industry practice; however, its insurance coverage may not be sufficient to fully cover its losses.
Concentration of Credit Risk
The Company is subject to risks incidental to the ownership and operation of commercial real estate. These risks include, among others, the risks normally associated with changes in the general economic climate, trends in the retail industry, creditworthiness of tenants, competition for tenants and customers, changes in tax laws, interest rates, the availability of financing and potential liability under environmental and other laws. The Company’s portfolio of properties is dependent upon regional and local economic conditions and is geographically concentrated in the Mid-Atlantic, specifically in North Carolina, South Carolina and Virginia, which represented approximately
Interest Rate Risk
As of June 30, 2025, the interest rate environment remains elevated, significantly impacting the Company’s operations. The Federal Reserve has maintained a higher federal funds rate as part of its ongoing strategy to combat inflation. This situation has several implications for the Company, which is sensitive to a higher interest rate environment due to the Company’s reliance on debt financing. Higher interest rates increase the cost of borrowing for the Company, raising the expense associated with financing property acquisitions and developments. This could limit the ability to pursue new investments or expansions, potentially slowing growth. Additionally, refinancing existing debt in a high-rate environment could lead to increased costs. Elevated interest rates typically lead to higher capitalization rates, which can reduce property valuations. A decline in asset values may impact the net asset value (NAV) calculations, affecting investors’ perceptions and overall market confidence in the Company. The ongoing interest rate volatility may affect investor sentiment towards the Company, potentially leading to capital outflows as investors seek alternative investment opportunities with better risk-adjusted returns.
The Company is exposed to the impact of interest rate changes primarily through its borrowing activities. To limit this exposure, the Company attempts to obtain mortgage financing on a long-term, fixed-rate basis. However, from time to time, the Company may obtain variable-rate mortgage loans and, as a result, may enter into interest rate cap agreements that limit the effective borrowing rate of variable-rate debt obligations while allowing participants to share in downward shifts in interest rates. These interest rate caps are derivative instruments designated as cash flow hedges on the forecasted interest payments on the debt obligation. Our objective in using interest rate caps is to limit our exposure to interest rate movements.
As of June 30, 2025 and December 31, 2024, all of the Company’s long-term debt either bore interest at fixed rates or was capped to a fixed rate. The Company’s debt obligations are more fully described in Note 5, Loans Payable, above.
Potential Impact of Tariffs and Trade Restrictions on Tenants and Our Business
Changes in international trade policies, including the imposition of tariffs, duties, import taxes, or other trade restrictions by the United States or foreign governments, could adversely impact the operations of our retail tenants. Our tenants could source a substantial portion of their merchandise, raw materials, or manufacturing services from foreign countries. The imposition of new or increased tariffs on these goods, or retaliatory measures from trading partners, could increase costs for these tenants, potentially reducing their profitability and operational flexibility. Increased costs may not be fully passed on to consumers, which could lead to lower sales volumes, compressed margins, and in some cases, store closures or bankruptcy filings. If a significant number of our tenants experience financial distress or reduce their physical retail presence, this could negatively affect our occupancy rates, rental income, and cash flows.
33
Table of Contents
Regulatory and Environmental
As the owner of the buildings on its properties, the Company could face liability for the presence of hazardous materials (e.g., asbestos or lead) or other adverse conditions (e.g., poor indoor air quality) in its buildings. Environmental laws govern the presence, maintenance, and removal of hazardous materials in buildings, and if the Company does not comply with such laws, it could face fines for such noncompliance. Also, the Company could be liable to third parties (e.g., occupants of the buildings) for damages related to exposure to hazardous materials or adverse conditions in its buildings, and the Company could incur material expenses with respect to abatement or remediation of hazardous materials or other adverse conditions in its buildings. In addition, some of the Company’s tenants routinely handle and use hazardous or regulated substances and wastes as part of their operations at the Company’s properties, which are subject to regulation. Such environmental and health and safety laws and regulations could subject the Company or its tenants to liability resulting from these activities. Environmental liabilities could affect a tenant’s ability to make rental payments to the Company, and changes in laws could increase the potential liability for noncompliance. This may result in significant unanticipated expenditures or may otherwise materially and adversely affect the Company’s operations. The Company is not aware of any material contingent liabilities, regulatory matters or environmental matters that may exist.
Litigation
The Company and its subsidiaries are, from time to time, parties to litigation arising from the ordinary course of their business. The Company is not presently subject to any material litigation nor, to its knowledge, is any other litigation threatened against the Company, including routine actions for negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which would be covered by liability insurance and any of which collectively would not be expected to have a material adverse effect on the Company’s liquidity, results of operations or business or financial condition.
9. Related Party Transactions
Citibank Property Acquisition
On March 28, 2024, the Company acquired the Citibank Property (see Note 3, above) from RMP 3535 N. Central Ave., LLC. The sole manager and member of RMP 3535 N. Central Ave., LLC is CWS BET Seattle, LP, a Delaware limited partnership, a company controlled and owned by Frank Kavanaugh, the Company’s President and Chief Executive Officer and Chairman of the Board. Pursuant to the Company’s Related Person Transaction Policy, the Company’s Audit Committee determined that the terms of the acquisition were those that would normally be agreed upon in an arms-length transaction.
Buffalo Wild Wings Property Acquisition
On January 24, 2025, the Company acquired the Buffalo Wild Wings Property (see Note 3, above) from Fort Ashford Funds, LLC. The sole manager and member of Fort Ashford Funds, LLC is CWS BET Seattle, LP, a Delaware limited partnership, a company controlled and owned by Frank Kavanaugh, the Company’s President and Chief Executive Officer and Chairman of the Board. Pursuant to the Company’s Related Person Transaction Policy, the Company’s Audit Committee determined that the terms of the acquisition were those that would normally be agreed upon in an arms-length transaction.
United Rentals Property Acquisition
On February 21, 2025, the Company acquired the United Rentals Property (see Note 3, above) from Dionysus Investments, LLC, a California limited liability company. Dionysus Investments, LLC is controlled and owned by Frank Kavanaugh, the Company’s President and Chief Executive Officer and Chairman of the Board. Pursuant to the Company’s Related Person Transaction Policy, the Company’s Audit Committee determined that the terms of the acquisition were those that would normally be agreed upon in an arms-length transaction.
Private Placement of Operating Partnership Units
On October 11, 2024, the Company issued
34
Table of Contents
determined that the terms of the transaction were those that would normally be agreed upon in an arms-length transaction and approved this transaction.
Private Placement of Common Shares
On December 13, 2024, the Company completed the Private Placement of
Staffing Agreement
The Company has entered into a staffing agreement dated November 13, 2023 (the “Staffing Agreement”) with Gunston Consulting, LLC (the “Consultant”) the Consultant to employ staff on behalf of the Company. The Consultant’s sole member is C. Brent Winn, Jr., the Company’s Chief Financial Officer. Under the Staffing Agreement, the Company reimburses the Consultant for any approved employee’s salary, payroll taxes and benefits, including health insurance and retirement benefits, and related expenses. All expenses are reimbursed at cost and without a markup.
Other Related Parties
The Company paid Shockoe Properties, LLC, a subsidiary of Dodson Properties, LLC, (collectively, “Dodson Properties”), an entity in which William R. Elliott, one of the owners of the Company’s former Manager, held a
10. Segment Information
The Company establishes operating segments at the property level and aggregates individual properties into reportable segments based on product types in which the Company has investments. During the three and six months ended June 30, 2025 and 2024, the Company’s reportable segments consisted of retail center properties, flex center properties and STNL properties. These segments align with how the CODM evaluates performance and allocates resources. During the periods presented, there have been no material intersegment transactions.
Although the Company’s flex center properties have tenants that are similar to tenants in its retail center properties, the Company considers its flex center properties as a separate reportable segment. Flex properties are considered by the real estate industry as a distinct subset of the industrial market segment. Flex properties contain a mix of industrial/warehouse and office spaces. Warehouse space that is not air conditioned can be used flexibly by building office or showroom space that is air conditioned, depending on tenants’ needs. Further, although the Company’s STNL properties have tenants that are similar to tenants in its retail center properties, the Company considers its STNL properties as a separate reportable segment. STNL properties are also considered by the real estate industry as a separate asset class.
The Company's CODM consists of the President and Chief Executive Officer, and the Chief Financial Officer, who are responsible for assessing performance and allocating resources. The CODM primarily evaluates the Company's overall performance and operating segment performance based on net operating income adjusted for interest expense and considers additional metrics such as adjusted funds from operations (“AFFO”). The CODM receives financial information monthly.
35
Table of Contents
Pursuant to ASU 2023-07, the Company has identified and disclosed (i) property operating expenses (retail property operating expenses, flex center property operating expenses, and single tenant net lease property operating expenses) and (ii) interest expense as significant expense categories by segment. These expense categories are regularly provided to the CODM and included in the reported measure of segment profit or loss. The CODM does not evaluate property operating expenses at a more detailed level because many property operating expenses are non-controllable and are not considered to be a useful measure of operating performance.
Certain expenses are not allocated to individual segments, including share-based compensation, legal, accounting and other professional fees, and corporate general and administrative expenses. These expenses are reviewed at the corporate level and are not included in segment-level profitability measures. In addition, depreciation and amortization are not allocated among segments and are not used by the CODM to assess performance or allocate resources. Asset information by segment is not reported as the CODM does not use this measure to assess segment performance or to make resource allocation decisions.
Net operating income (“NOI”) is a non-GAAP financial measure and is not considered a measure of operating results or cash flows from operations under GAAP. NOI reflects, occupancy levels, rental rate increases or decreases, and the recoverability of operating expenses. NOI, as the Company calculates it, may not be directly comparable to similarly titled, but differently calculated, measures for other REITs. NOI is calculated by deducting operating expenses from operating revenues.
NOI adjusted for interest expense is the primary performance measure reviewed by management to assess operating performance of properties and is calculated by deducting operating expenses and interest expense from operating revenues. Operating revenues include rental income, tenant reimbursements, and other property income; and operating expenses include retail center property, flex center property and single tenant net lease property operating costs. Interest expense includes mortgage interest expense, only, and excludes non-mortgage interest expense. The NOI adjusted for interest expense performance metric consists of only revenues and expenses directly related to real estate rental operations.
The following tables presents property operating revenues, operating expenses and interest expense by operating segment:
For the three months ended June 30, (unaudited) | ||||||||||||||||||||||||
Retail center properties |
| Flex center properties |
| STNL properties | Total | |||||||||||||||||||
| 2025 |
| 2024 | 2025 |
| 2024 |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||||||
Revenues | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Operating expenses |
| |
| | | |
| |
| |
| |
| | ||||||||||
Property related interest expense (1) | |
| | | |
| — |
| — |
| |
| | |||||||||||
Adjusted net operating income | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Reconciliation to net loss from operations (2) | ||||||||||||||||||||||||
Less: Bad debt expense (recoveries) | — | | — | ( | — | — | — | | ||||||||||||||||
Less: Legal, accounting and other professional fees | | | ||||||||||||||||||||||
Less: Corporate general and administrative expenses | | | ||||||||||||||||||||||
Less: Loss on impairment | | — | ||||||||||||||||||||||
Less: Depreciation and amortization | | | ||||||||||||||||||||||
Less: Non-mortgage interest expense (3) | | | ||||||||||||||||||||||
Less: Loss on extinguishment of debt | | — | ||||||||||||||||||||||
Net loss income from operations | $ | ( | $ | ( | ||||||||||||||||||||
| (1) | Includes mortgage interest expense and amortization of issuance costs related to mortgages payable. For a reconciliation to interest expense as reported on the Company’s condensed consolidated statement of operations, see Note 5, above. |
| (2) | Certain expenses that are not allocated to individual segments which are either reviewed at the corporate level or which are not included in segment-level profitability measures used by the CODM are added to or subtracted from net operating income measure used by the CODM to reconcile this measure to net (loss) income from operations on the Company’s condensed consolidated statement of operations for the three months ended June 30, 2025 and 2024. |
| (3) | Non-mortgage interest expense includes dividends paid and amortization of issuance costs and discounts on the Company’s mandatorily redeemable preferred stock which are recorded as interest expense (see note 4, above), and other interest expense, |
36
Table of Contents
| all of which are not allocated to individual segments. For a reconciliation to interest expense as reported on the Company’s condensed consolidated statement of operations, see Note 5, above. |
For the six months ended June 30, (unaudited) | ||||||||||||||||||||||||
Retail center properties |
| Flex center properties |
| STNL properties | Total | |||||||||||||||||||
| 2025 |
| 2024 | 2025 |
| 2024 |
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||||||||
Revenues | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Operating expenses |
| |
| | | |
| |
| |
| |
| | ||||||||||
Property related interest expense (1) | |
| | | |
| — |
| — |
| |
| | |||||||||||
Adjusted net operating income | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Reconciliation to net (loss) income from operations (2) | ||||||||||||||||||||||||
Less: Bad debt expense | — | | | | — | — | | | ||||||||||||||||
Less: Share-based compensation expenses | | | ||||||||||||||||||||||
Less: Legal, accounting and other professional fees | | | ||||||||||||||||||||||
Less: Corporate general and administrative expenses | | | ||||||||||||||||||||||
Less: Loss on impairment | | — | ||||||||||||||||||||||
Less: Depreciation and amortization | | | ||||||||||||||||||||||
Less: Non-mortgage interest expense (3) | | | ||||||||||||||||||||||
Plus: Gain on disposal of investment properties | — | | ||||||||||||||||||||||
Less: Loss on redemption of mandatorily redeemable preferred stock | | — | ||||||||||||||||||||||
Less: Loss on extinguishment of debt | | | ||||||||||||||||||||||
Net (loss) income from operations | $ | ( | $ | | ||||||||||||||||||||
| (1) | Includes mortgage interest expense and amortization of issuance costs related to mortgages payable. For a reconciliation to interest expense as reported on the Company’s condensed consolidated statement of operations, see Note 5, above. |
| (2) | Certain expenses that are not allocated to individual segments which are either reviewed at the corporate level or which are not included in segment-level profitability measures used by the CODM are added to or subtracted from net operating income measure used by the CODM to reconcile this measure to net (loss) income from operations on the Company’s condensed consolidated statement of operations for the six months ended June 30, 2025 and 2024. |
| (3) | Non-mortgage interest expense includes dividends paid and amortization of issuance costs and discounts on the Company’s mandatorily redeemable preferred stock which are recorded as interest expense (see note 4, above), and other interest expense, all of which are not allocated to individual segments. For a reconciliation to interest expense as reported on the Company’s condensed consolidated statement of operations, see Note 5, above. |
The following table presents assets by operating segment:
Retail center properties |
| Flex center properties |
| STNL properties | Total | |||||||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||
2025 | December 31, | 2025 | December 31, | 2025 | December 31, | 2025 | December 31, | |||||||||||||||||
| (unaudited) | 2024 | (unaudited) | 2024 |
| (unaudited) | 2024 |
| (unaudited) | 2024 | ||||||||||||||
Segment assets | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||
Reconciliation to total assets on condensed consolidated balance sheet | ||||||||||||||||||||||||
Plus: Other assets | $ | | — | |||||||||||||||||||||
Plus: Assets held by operating partnership | | | ||||||||||||||||||||||
Plus: Assets held by parent company | | | ||||||||||||||||||||||
Total assets recorded | $ | | $ | | ||||||||||||||||||||
11. Subsequent Events
As of August 7, 2025, the following events have occurred subsequent to the June 30, 2025 effective date of the condensed consolidated financial statements:
Common Stock Dividend
On July 16, 2025, a dividend in the amount of $
37
Table of Contents
Tesla Service, Sales and Distribution Property Acquisition
On July 18, 2025, a wholly owned subsidiary of the Company closed on the acquisition of a Tesla sales, service and delivery facility consisting of a
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is based on, and should be read in conjunction with, the condensed consolidated financial statements and the related notes thereto of Medalist Diversified REIT, Inc. contained in this Quarterly Report.
This following discussion and analysis of financial condition and results of operations contains forward-looking statements that involve risks, uncertainties and assumptions. See “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of the risks, uncertainties and assumptions associated with those statements. Our actual results may differ materially from those expressed or implied in the forward-looking statements as a result of various factors.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The U.S. Private Securities Litigation Reform Act of 1995 (the “1995 Act”) provides a “safe harbor” for forward-looking statements. This Quarterly Report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws, including, but not limited to, statements relating to our business activities, financing sources, liquidity, redemption of our mandatorily redeemable preferred stock and strategy. We have used the words “approximately,” “anticipate,” “assume,” “believe,” “budget,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases to identify forward-looking statements in this Quarterly Report.
The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:
| ● | the competitive environment in which we operate; |
| ● | local, regional, national and international economic and geopolitical conditions, including recent trade tensions; |
| ● | capital expenditures; |
| ● | the availability, terms and deployment of capital; |
| ● | financing risks; |
| ● | inflation; |
| ● | the general level of interest rates; |
| ● | changes in our business or strategy; |
38
Table of Contents
| ● | fluctuations in interest rates and increased operating costs; |
| ● | our incurrence of impairment charges; |
| ● | the implementation of our DST Program (as defined below); |
| ● | the degree and nature of our competition; |
| ● | our dependence upon our key personnel; |
| ● | defaults on or non-renewal of leases by tenants; |
| ● | decreased rental rates or increased vacancy rates; |
| ● | our ability to make distributions on shares of our common stock; |
| ● | difficulties in identifying properties to acquire and completing acquisitions; |
| ● | our ability to operate as a public company; |
| ● | natural disasters such as hurricanes, floods or tornadoes; |
| ● | the impact of epidemics, pandemics, or other outbreaks of illness, disease or virus and measures intended to prevent the spread or address the effects thereof; |
| ● | our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; |
| ● | our ability to maintain an active trading market for our common stock on The Nasdaq Capital Market (“Nasdaq”) and maintain continued listing on Nasdaq and the likelihood that a delisting of our common stock from Nasdaq could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell our common stock; |
| ● | potential changes in the law or governmental regulations that affect us and interpretations of those laws and regulations, including changes in real estate and zoning or tax laws, and potential increases in real property tax rates; |
| ● | potential disruption to or compromise of our information technology networks or data, or those of third parties upon which we rely; and |
| ● | related industry developments, including trends affecting our business, financial condition and results of operations. |
The forward-looking statements contained in this Quarterly Report are based on historical performance and management’s current plans, estimates and expectations in light of information currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may differ materially from these expectations due to the factors, risks and uncertainties described above, changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove to be incorrect, our actual results may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any forward-looking statement made by us in this Quarterly Report speaks only as of the date of this Quarterly Report. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by applicable laws.
39
Table of Contents
Overview
Company
Medalist Diversified REIT, Inc. is a Maryland corporation formed on September 28, 2015. Beginning with our taxable year ended December 31, 2017, we believe that we have operated in a manner qualifying us as a real estate investment trust (“REIT”), and we have elected to be taxed as a REIT for federal income tax purposes. Medalist Diversified REIT, Inc. serves as the general partner of Medalist Diversified Holdings, LP which was formed as a Delaware limited partnership on September 29, 2015.
We were formed to acquire, reposition, renovate, lease and manage income-producing properties. Our current primary focus is on (i) managing our legacy portfolio consisting of retail and flex-industrial properties in secondary and tertiary markets in Virginia, North Carolina, and South Carolina, (ii) managing and expanding our STNL property portfolio in geographic markets across the United States and (iii) implementing a program by which we will act as a sponsor of Delaware Statutory Trust (“DST”) investment offerings. We may also pursue, in an opportunistic manner, other real estate-related and non-real estate-related investments, including, among other things, equity or other ownership interests in entities that are the direct or indirect owners of real property, indirect investments in real property, such as those that may be obtained in a joint venture, and ownership of crypto assets. While these types of investments are not intended to be a primary focus, we may make such investments in our discretion.
As of June 30, 2025, our portfolio consisted of the following properties:
Name |
| Type |
| Location |
| SQ FT | Date Acquired | |
Ashley Plaza Property |
| Retail |
| Goldsboro, North Carolina |
| 156,012 |
| August 30, 2019 |
Franklin Square Property |
| Retail |
| Gastonia, North Carolina |
| 134,239 |
| April 28, 2017 |
Lancer Center Property |
| Retail |
| Lancaster, South Carolina |
| 181,590 |
| May 14, 2021 |
Salisbury Marketplace Property |
| Retail |
| Salisbury, North Carolina |
| 79,732 |
| June 13, 2022 |
Brookfield Center Property | Flex | Greenville, South Carolina | 64,880 | October 3, 2019 | ||||
Greenbrier Business Center Property |
| Flex |
| Chesapeake, Virginia |
| 89,280 |
| August 27, 2021 |
Parkway Property | Flex | Virginia Beach, Virginia | 64,109 | November 1, 2021 | ||||
Citibank Property | Single Tenant Net Lease | Chicago, Illinois | 4,350 | March 28, 2024 | ||||
Buffalo Wild Wings Property | Single Tenant Net Lease | Bowling Green, Kentucky | 5,933 | January 24, 2025 | ||||
United Rentals Property | Single Tenant Net Lease | Huntsville, Alabama | 7,529 | February 21, 2025 | ||||
East Coast Wings Property | Single Tenant Net Lease | Goldsboro, North Carolina | 5,000 | August 30, 2019 | ||||
T-Mobile Property | Single Tenant Net Lease | Goldsboro, North Carolina | 3,000 | August 30, 2019 |
In addition, as of June 30, 2025, we also owned three undeveloped parcels which are currently being marketed for use as STNL properties including (i) an outparcel at our Lancer Center Property consisting of approximately 1.80 acres (the “Lancer Outparcel”), (ii) an outparcel at our Salisbury Marketplace Property consisting of approximately 1.20 acres (the “Salisbury Outparcel”) (the exact size
40
Table of Contents
of the Lancer Outparcel and Salisbury Outparcel will not be determined until a user is identified), and (iii) the Hanover Square Outparcel consisting of 0.86 acres located adjacent to the Hanover Square Shopping Center.
Reporting Segments
We establish operating segments at the property level and aggregate individual properties into reportable segments based on product types in which we have investments. As of June 30, 2025, our reportable segments were retail center properties, flex center properties and STNL properties.
Recent Highlights
Acquisition of the Tesla Pensacola Property, Commencement of DST Program
On July 18, 2025, we, through a wholly-owned subsidiary, completed the acquisition of a Tesla service, sales and delivery facility consisting of a 45,461 square foot, single story building on 3.498 acres of land located at 312 E. 9 Mile Road, Pensacola, Florida (the “Tesla Pensacola Property”). The total purchase price paid for the Tesla Pensacola Property was $14,544,504 and was purchased from an unaffiliated seller. The acquisition was funded using a line of credit from Farmers and Merchants Bank of Long Beach in the amount of $14,700,000 (the “Farmers Line of Credit”).
We intend to contribute the Tesla Pensacola Property to a newly formed Delaware Statutory Trust (“DST”). Following the contribution, the Company plans to launch a program (the “DST Program”) to raise capital, through the Operating Partnership, through private placement offerings exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by selling beneficial interests (the “DST Interests”) in specific DSTs holding real properties (the “DST Properties”). We expect that the DST Program will provide us with the opportunity to expand and diversify our capital-raising strategies by offering what we believe to be an attractive investment product for investors who may be seeking like-kind replacement properties to complete tax-deferred exchange transactions under Section 1031 of the Internal Revenue Code (the “Code”). We intend to use the net offering proceeds from the DST Program to make investments in accordance with our investment strategy and policies, reduce our borrowings, repay indebtedness, fund the repurchase of shares under our share repurchase plan and for other corporate purposes. In addition, we expect to generate fee-based income, such as acquisition fees, asset management fees, disposition fees, and financing coordination fees, among others, from the DST Program. However, there can be no assurance that we will be successful in our efforts to sell the DST Interests or to generate fee-based income. As of August 7, 2025, we have not initiated our efforts to raise gross offering proceeds through the DST Program.
Farmers Line of Credit
On July 18, 2025, we, through our wholly-owned subsidiaries, entered into the new Farmers Line of Credit in the amount of $14,700,000 in connection with the acquisition of the Tesla Pensacola Property as discussed above. On April 28, 2025, we terminated the prior $4,000,000 line of credit with Wells Fargo Bank, National Association, in anticipation of the Farmers Line of Credit.
S-3 “Shelf” Registration Statement
On April 9, 2025, we filed a new shelf registration statement with the SEC, which is effective for a term of three years and will expire in April 2028. Pursuant to this shelf registration statement, we may issue up to $100,000,000 of Common Shares. The securities covered by this registration statement are limited to our Common Shares. We may periodically offer Common Shares in amounts, prices and on terms to be announced when and if these securities are offered. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
41
Table of Contents
Financing Activities
Mortgages Payable
We have historically financed acquisitions of our investment properties through mortgages. The following table is presented as of June 30, 2025.
Balance | |||||||||||||||||
June 30, | |||||||||||||||||
Monthly | Interest | 2025 | December 31, | ||||||||||||||
Property |
| Payment |
| Rate |
| Maturity |
| (unaudited) |
| 2024 | |||||||
Franklin Square (a) |
| $ | 61,800 |
| 3.808 | % | December 2031 | $ | 13,133,353 | $ | 13,250,000 | ||||||
Ashley Plaza (b) | 52,795 |
| 3.75 | % | September 2029 |
| 10,339,848 |
| 10,460,350 | ||||||||
Brookfield Center (c) | 22,876 |
| 3.90 | % | November 2029 |
| 4,426,539 |
| 4,476,429 | ||||||||
Parkway Center (d) | 28,161 | Variable | November 2031 | 4,782,250 | 4,814,563 | ||||||||||||
Wells Fargo Mortgage Facility (e) | 67,020 | 4.50 | % | June 2027 | 11,222,766 | 17,509,420 | |||||||||||
Total mortgages payable | $ | 43,904,756 | $ | 50,510,762 | |||||||||||||
Amounts presented do not reflect unamortized loan issuance costs.
| (a) | The mortgage loan for the Franklin Square Property in the original principal amount of $13,250,000 has a ten-year term and matures on December 6, 2031. The mortgage loan bears interest at a fixed rate of 3.808% and was interest only until January 6, 2025, at which time the monthly payment became $61,800, which includes interest and principal based on a thirty-year amortization schedule. The mortgage includes covenants that we maintain (i) a net worth of $13,250,000, excluding the assets and liabilities associated with the Franklin Square Property, and (ii) liquid assets of no less than $1,000,000. As of June 30, 2025 and December 31, 2024, respectively, we believe that we are compliant with these covenants. We have guaranteed the payment and performance of the obligations of the mortgage loan. |
(b) | The mortgage loan for the Ashley Plaza Property bears interest at a fixed rate of 3.75% and was interest only for the first twelve months. Beginning on October 1, 2020, the monthly payment became $52,795 for the remaining term of the loan, which includes interest at the fixed rate, and principal, based on a thirty-year amortization schedule. Effective on December 26, 2023, we assumed certain guaranty obligations under the Ashley Plaza mortgage loan. These obligations include covenants that we maintain (i) a net worth of $11,400,000, excluding the liabilities associated with the mortgage loan for the Ashley Plaza Property and (ii) liquid assets of no less than $1,140,000. As of June 30, 2025 and December 31, 2024, respectively, we believe that we are compliant with these covenants. |
(c) | The mortgage loan for the Brookfield Property bears interest at a fixed rate of 3.90% and is interest only for the first twelve months. Beginning on November 1, 2020, the monthly payment became $22,876 for the remaining term of the loan, which includes interest at the fixed rate, and principal, based on a thirty-year amortization schedule. Effective on December 26, 2023, we assumed certain guaranty obligations under the Brookfield Property mortgage loan. These obligations include covenants that we maintain (i) a net worth of $4,850,000, excluding the liabilities associated with the mortgage loan for the Brookfield Property and (ii) liquid assets of no less than $485,000. As of June 30, 2025 and December 31, 2024, respectively, we believe that we are compliant with these covenants. |
(d) | The interest rate for the mortgage loan for the Parkway Property was originally based on ICE LIBOR plus 225 basis points, with a minimum rate of 2.25%. After the discontinuation of LIBOR on June 30, 2023, the ICE LIBOR index was replaced by Term SOFR, with an adjusted margin of 236.44 basis points. Under the terms of the mortgage, the interest rate payable each month may not change by greater than 1% during any six-month period and 2% during any 12-month period. As of June 30, 2025 and December 31, 2024 the rate in effect for the Parkway Property mortgage was 6.69% and 6.92%, respectively. The monthly payment, which varies based on the interest rate in effect each month, includes interest at the variable rate, and principal based on a thirty-year amortization schedule. The mortgage loan for the Parkway Property includes a covenant to maintain a debt service coverage ratio of not less than 1.30 to 1.00 on an annual basis. As of June 30, 2025 and December 31, 2024, respectively, we believe that we are compliant with this covenant. |
On October 28, 2021, we entered into the Interest Rate Protection Transaction to limit our exposure to increases in interest rates on the variable rate mortgage loan on the Parkway Property. Under this agreement, our interest rate exposure is capped at
42
Table of Contents
5.25% if USD 1-Month ICE LIBOR exceeds 3%. Effective on July 1, 2023, the interest rate index under the Interest Rate Protection Transaction automatically converted to SOFR. For the period from September 1, 2022 through June 30, 2025, the applicable index (LIBOR or SOFR), exceeded the 3% cap, and payments from the Interest Rate Protection Transaction reduced our net interest expense. Payments to us from the Interest Rate Protection Transaction are recorded as an offset to interest expense on our condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024, respectively.
| (e) | On June 13, 2022, we entered into a mortgage loan facility with Wells Fargo Bank (the “Wells Fargo Mortgage Facility”) in the principal amount of $18,609,500. The proceeds of this mortgage were used to finance the acquisition of the Salisbury Marketplace Property and to refinance the mortgages payable on the Lancer Center Property and the Greenbrier Business Center Property. The Wells Fargo Mortgage Facility bears interest at a fixed rate of 4.50% for a five-year term. The monthly payment, which includes interest at the fixed rate, and principal, based on a twenty-five -year amortization schedule, is $103,438. We have provided an unconditional guaranty of the payment of and performance under the terms of the Wells Fargo Mortgage Facility. The Wells Fargo Mortgage Facility credit agreement includes covenants to maintain a debt service coverage ratio of not less than 1.50 to 1.00 on an annual basis, a combined minimum debt yield of 9.5% on the Salisbury Marketplace Property, the Lancer Center Property, and the Greenbrier Business Center Property, and the maintenance of liquid assets of not less than $1,500,000. As of June 30, 2025 and December 31, 2024, respectively, we believe that we are compliant with these covenants. |
As of June 30, 2025, the outstanding balance, monthly payment and unamortized loan issuance costs related to the Wells Fargo Mortgage Facility are allocated, for reporting purposes, among the Salisbury Marketplace Property, Lancer Center Property, and Greenbrier Business Center Property, based on each property's proportionate share of the total combined appraised value at the time the Wells Fargo Mortgage Facility was originated. The portions allocated to the Lancer Center Property and Greenbrier Property are reported in Mortgages payable, net, on our condensed consolidated balance sheets, while the portion allocated to the Salisbury Marketplace Property, representing the estimated paydown amount upon its anticipated sale, is included in mortgages payable, net, associated with assets held for sale on our condensed consolidated balance sheets.
We financed acquisitions of our assets held for sale through mortgages, which as of June 30, 2025, are recorded as mortgages payable, net, associated with assets held for sale, on our consolidated balance sheets, as follows:
Balance | ||||||||||||||
June 30, | ||||||||||||||
Monthly | Interest | 2025 | December 31, | |||||||||||
Property | Payment |
| Rate | Maturity |
| (unaudited) |
| 2024 | ||||||
Salisbury Marketplace (see note (e), above) | $ | 36,418 |
| 4.5 | % | June 2027 | $ | 6,098,409 | $ | — | ||||
Total mortgages payable associated with assets held for sale |
|
| $ | 6,098,409 | $ | — | ||||||||
Summary of Critical Accounting Policies
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to use judgment in the application of accounting policies, including making estimates and assumptions. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, or different assumptions were made, it is possible that different accounting policies would have been applied, resulting in different financial results or a different presentation of our financial statements. Below is a discussion of the accounting policies that we consider critical to an understanding of our financial condition and operating results that may require complex or significant judgment in their application or require estimates about matters which are inherently uncertain. A discussion of our significant accounting policies, including further discussion of the accounting policies described below, can be found in Note 2, “Summary of Significant Accounting Policies,” of our Condensed Consolidated Financial Statements. We believe that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
Revenue Recognition
Principal components of our total revenues for our retail center properties, flex center properties and STNL revenues include base rents and tenant reimbursements. We accrue minimum (base) rent on a straight-line basis over the terms of the respective leases which results in an unbilled rent asset or deferred rent liability being recorded on the balance sheet. Certain lease agreements contain
43
Table of Contents
provisions that grant additional rents based on tenants’ sales volumes (contingent or percentage rent) which we recognize when the tenants achieve the specified targets as defined in their lease agreements. We periodically review the valuation of the asset/liability resulting from the straight-line accounting treatment of our leases in light of any changes in lease terms, financial condition or other factors concerning our tenants.
Rents and Other Tenant Receivables
We record a tenant receivable for amounts due from tenants such as base rents, tenant reimbursements and other charges allowed under the lease terms. We periodically review tenant receivables for collectability and determine the need for an allowance for the uncollectible portion of accrued rents and other accounts receivable based upon customer creditworthiness (including expected recovery of a claim with respect to any tenants in bankruptcy), historical bad debt levels and current economic trends. We consider a receivable past due once it becomes delinquent per the terms of the lease. A past due receivable triggers certain events such as notices, fees and other actions per the lease.
Acquisition of Investments in Real Estate
The adoption of Accounting Standards Update (“ASU”) 2017-01, Business Combinations (Topic 805), as discussed in Note 2, “Summary of Significant Accounting Policies” of the condensed consolidated financial statements included in this report, has impacted our accounting framework for the acquisition of investment properties. Upon acquisition of investment properties, we estimate the fair value of acquired tangible assets (consisting of land, buildings and improvements, and furniture, fixtures and equipment) and identified intangible assets and liabilities, including in-place leases, above- and below-market leases, tenant relationships and assumed debt based on evaluation of information and estimates available at that date. Fair values for these assets are not directly observable and estimates are based on comparable market data and other information which is subjective in nature, including estimated cash flow projections that utilize appropriate discount and capitalization rates and available market information.
Impairment of Long-Lived Assets
We periodically review investment properties for impairment on a property-by-property basis to identify any events or changes in circumstances that indicate that the carrying value of investment properties may not be recoverable. These circumstances include, but are not limited to, declines in the property’s cash flows, occupancy and fair market value. If any such events or changes in circumstances are identified, we perform a formal impairment analysis. We measure any impairment of investment property when the estimated undiscounted operating income before depreciation and amortization, is less than the carrying value of the property. To the extent impairment has occurred, we charge to income the excess of carrying value of the property over its estimated fair value. We estimate fair value using data such as operating income, estimated capitalization rates or multiples, leasing prospects and local market information. We also review our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of our intangible assets may not be recoverable, but at least annually.
REIT Status
We are a Maryland corporation that has elected to be treated, for U.S. federal income tax purposes, as a REIT. We elected to be taxed as a REIT under the Code for the year ended December 31, 2017 and have not revoked such election. A REIT is a corporate entity which holds real estate interests and must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted taxable income to stockholders. As a REIT, we generally will not be subject to corporate level federal income tax on our taxable income if we annually distribute 100% of our taxable income to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to regular federal and state corporate income taxes and may not be able to elect to qualify as a REIT for five taxable years including the year during which we ceased to qualify as a REIT. Our qualification as a REIT requires management to exercise significant judgment and consideration with respect to operational matters and accounting treatment. Therefore, we believe our REIT status is a critical accounting estimate.
Evaluation of Our Ability to Continue as a Going Concern
Under the accounting guidance related to the presentation of financial statements, we are required to evaluate, on a quarterly basis, whether or not our current financial condition, including our sources of liquidity at the date that the condensed consolidated financial statements are issued, will enable us to meet our obligations as they come due arising within one year of the date of the issuance of our condensed consolidated financial statements and to make a determination as to whether or not it is probable, under the application
44
Table of Contents
of this accounting guidance, that we will be able to continue as a going concern. Our condensed consolidated financial statements have been presented on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In applying applicable accounting guidance, management considered our current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our obligations due over the next twelve months, as well as our recurring business operating expenses.
We have concluded that it is probable that we will be able to meet our obligations arising within one year of the date of issuance of these condensed consolidated financial statements within the parameters set forth in the accounting guidance. For additional information regarding our liquidity, see Note 5 – Loans Payable and Note 8 – Commitments and Contingencies in the notes to our condensed consolidated financial statements.
Liquidity and Capital Resources
Our business model is intended to drive growth through acquisitions. Access to the capital markets is an important factor for our continued growth and success. Our primary liquidity needs are funding for (1) operations, including operating expenses, corporate and administrative costs, payment of principal of, and interest on, outstanding indebtedness, and escrow and reserve payments associated with long-term debt financing for our properties; (2) investing needs, including property acquisitions and recurring capital expenditures; and (3) financing needs, including cash dividends and debt repayments.
Internal liquidity to fund operating needs is expected to be provided primarily by the rental receipts from our investment properties. The Farmers Line of Credit will not be a continuing source of liquidity for us. Upon repayment of the Farmers Line of Credit, no further advances will be available.
Cash Flows
At June 30, 2025, our consolidated cash and restricted cash on hand totaled $3,637,782 compared to consolidated cash on hand of $6,072,736 at December 31, 2024. Cash from operating activities, investing activities and financing activities for the three and six months ended June 30, 2025 are as follows:
Operating Activities
During the six months ended June 30, 2025, our cash provided by operating activities was $704,098 compared to cash provided by operating activities of $1,271,084 for the six months ended June 30, 2024, a decrease in cash provided by operating activities of $566,986.
Cash flows from operating activities has two components. The first component consists of net operating (loss) income adjusted for non-cash operating activities. During the six months ended June 30, 2025, operating activities adjusted for non-cash items resulted in net cash provided by operating activities of $950,746. During the six months ended June 30, 2024, operating activities adjusted for non-cash items resulted in net cash provided in operating activities of $1,021,497. The decrease of $70,751 in cash flows from operating activities for the six months ended June 30, 2025 was primarily the result of increased corporate general and administrative expenses and legal, professional and other fees, offset by increased net operating income from our investment properties.
The second component consists of changes in assets and liabilities. Increases in assets and decreases in liabilities result in cash used in operations. Decreases in assets and increases in liabilities result in cash provided by operations. During the six months ended June 30, 2025, net changes in asset and liability accounts resulted in $246,648 in cash used in operations. During the six months ended June 30, 2024, net changes in asset and liability accounts resulted in $249,587 in cash provided in operations. This increase of $496,235 in cash used in operations resulting from changes in assets and liabilities is a result of increased changes in rent and other receivables, net, of $15,485, increased changes in other assets of $592,495, and increased changes in unbilled rent of $23,166, all of which used cash, offset by increased accounts payable and accrued liabilities of $103,941, which is a source of cash.
The net of (i) the $70,751 decrease in cash provided by operations from the first category and (ii) the $496,235 decrease in cash provided by operations from the second category results in a total decrease of cash provided in operations of $566,986 for the six months ended June 30, 2025.
45
Table of Contents
Management believes that separately evaluating these two components of our cash provided by operating activities provides management with additional insight into this GAAP measure. Management believes that separating changes in assets and liabilities, the second component, from net operating (loss) income adjusted for non-cash operating activities, the first component, is a meaningful measure of our operating performance, along with adjusted net operating income and adjusted funds from operations, presented below.
Investing Activities
During the six months ended June 30, 2025, our cash used by investing activities was $708,098, compared to cash provided in investing activities of $2,605,078 during the six months ended June 30, 2024, a decrease in cash provided by investing activities of $3,313,176.
During the six months ended June 30, 2025, cash used by investing activities consisted of $563,219 in capitalized expenditures, including $152,604 in building improvements, $126,011 in leasing commissions and $267,140 in tenant improvements, $89,875 in investment property acquisitions for closing costs related to the Buffalo Wild Wings Property and United Rentals Property acquisitions, and $55,004 for the purchase of crypto assets. During the six months ended June 30, 2024, cash provided by investing activities consisted of $3,110,149 in cash received from the disposal of the Hanover Square Shopping Center Property, offset by cash used in investing activities consisting of $145,345 in investment property acquisitions, including $100,891 in cash paid for the acquisition of the noncontrolling owner’s 16% interest in the Hanover Square Outparcel and $44,454 paid in cash for closing costs related to the Citibank Property acquisition, and $359,726 in capitalized expenditures, including $68,500 in building improvements, $2,300 in site improvements, $80,329 in leasing commissions, $178,952 in capitalized tenant improvements, and $29,645 in capitalized tenant improvements considered to be lease incentives.
The non-cash investing activity for the six months ended June 30, 2025, that did not affect our cash provided by investing activities was the issuance of $5,765,000 of OP Units, $2,620,000 of OP Units for the acquisitions of the Buffalo Wild Wings Property and $3,145,000 of OP Units for the United Rentals Property, the transfer of $8,951,336 of investment properties, net, to assets held for sale, the transfer of $481,568 of intangible assets, net, to assets held for sale, the transfer of $476,656 of intangible liabilities, net, to liabilities held for sale and $87,017 of capital expenditures accrued as of June 30, 2025. The non-cash investing activity for the six months ended June 30, 2024, that did not affect our cash provided by investing activities, was the issuance of $2,400,000 of OP Units for the acquisition of the Citibank Property.
Financing Activities
During the six months ended June 30, 2025, our cash used by financing activities was $2,430,954 compared to cash used by financing activities of $2,221,225 during the six months ended June 30, 2024, an increase in cash used by financing activities of $209,729. During the six months ended June 30, 2025 our cash used by financing activities consisted of $1,500,000 for the final redemption of our mandatorily redeemable preferred stock, $507,597 in principal payments for our mortgages, $282,569 in dividends and distributions, and $140,788 to repurchase Common Shares. During the six months ended June 30, 2024, our cash used by financing activities consisted of $1,000,000 to repay the line of credit, short term, $533,894 in principal payments for our mortgages, $610,105 in dividends and distributions and $77,226 for the Operating Partnership Unit redemption.
Future Liquidity Needs
Liquidity for general operating needs and our investment properties is generally provided by the rental receipts from our retail properties, flex center properties and STNL properties, if any. We expect to provide any liquidity for growth (acquisition of new investment properties) by raising additional investment capital. In addition, we continually review and evaluate our outstanding mortgages payable for refinancing opportunities. While some of our mortgages payable are not pre-payable, some mortgages payable may present opportunities for refinancing.
Our primary, non-operating liquidity needs are $149,919 to pay the dividends to common stockholders and distributions to OP Unit holders that were declared on June 26, 2025 and payable July 16, 2025 to holders of record on July 11, 2025, $542,381 in principal payments due on its mortgages payable during the remaining six months ending December 31, 2025 and $14,544,504 for the acquisition of the Tesla Pensacola Property, which closed on July 18, 2025. In addition to liquidity required to fund these dividends and principal payments, we may also incur some level of capital expenditures for our existing properties that cannot be passed on to our tenants. We plan to pay these obligations through a combination of cash on hand, potential dispositions and operating cash.
46
Table of Contents
To meet these future liquidity needs, we have the following resources:
| ● | $1,950,829 in unrestricted cash as of June 30, 2025; |
| ● | $1,686,953 held in lender reserves for the purposes of tenant improvements, leasing commissions, real estate taxes and insurance premiums; |
| ● | $14,700,000 commitment for a line of credit to fund the acquisition of the Tesla Pensacola Property, which line of credit closed on July 18, 2025; |
· | Cash generated from operations during the remaining six months ending December 31, 2025, if any. |
We expect these resources will be sufficient to meet our anticipated liquidity needs for business operations for the next twelve
months and beyond. There can be no assurance that we will continue to generate cash flows at or above current levels.
Factors That May Influence Our Results of Operations
Economic Conditions
Rental revenues from our investment properties are our only source of income and are directly affected by a number of factors, including occupancy rates, lease structures, and tenant credit quality, as well as broader economic and policy developments that affect consumer sentiment. Our revenues can be significantly impacted by trends in consumer spending, interest rates, and market confidence, all of which shape demand for our tenants’ goods and services and, in turn, for occupancy in our investment properties.
The ability to lease space to creditworthy tenants and maintain high occupancy levels directly impacts rental income. Changes in tenant demand, property competitiveness, or local economic conditions can influence occupancy rates. Upon the expiration or early termination of leases, we may face difficulties in re-leasing spaces on terms as favorable as previous agreements. Lease terminations and defaults or terminations by significant tenants can reduce revenues, especially if suitable replacements are not found promptly. Concentration risk from large tenants or tenants in financially stressed sectors may further impact revenue reliability.
The economy continues to face several issues including inflation risk, high interest rates, and potentially worsening economic conditions, which presents risks for our business and our tenants. Rising interest rates can increase borrowing costs and affect property valuations, influencing investment decisions and profitability. Broader economic factors, including inflation and employment rates, can influence consumer spending and tenant performance.
Potential Impact of Tariffs and Trade Restrictions on Tenants and Our Business
Changes in international trade policies, including the imposition of tariffs, duties, import taxes, or other trade restrictions by the United States government or foreign governments, could adversely impact the operations of our retail tenants. Our tenants could source a substantial portion of their merchandise, raw materials, or manufacturing services from foreign countries. The imposition of new or increased tariffs on these goods, or retaliatory measures from trading partners, could increase costs for these tenants, potentially reducing their profitability and operational flexibility. Increased costs may not be fully passed on to consumers, which could lead to lower sales volumes, compressed margins, and in some cases, store closures or bankruptcy filings. If a significant number of our tenants experience financial distress or reduce their physical retail presence, this could negatively affect our occupancy rates, rental income, and cash flows.
47
Table of Contents
Results of Operations
Three months ended June 30, 2025
Revenues
Revenues for the three months ended June 30, 2025 and 2024 are as follows:
For the three months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
Retail center property revenues | $ | 1,613,945 | $ | 1,539,792 | $ | 74,153 | |||
Flex center property revenues |
| 662,420 |
| 667,235 |
| (4,815) | |||
STNL property revenues |
| 188,808 |
| 94,129 |
| 94,679 | |||
Total Revenues | $ | 2,465,173 | $ | 2,301,156 | $ | 164,017 | |||
Total revenue was $2,465,173 for the three months ended June 30, 2025, an increase of $164,017 from the three months ended June 30, 2024. Increases in retail center property revenues due to leasing activity in our Franklin Square, Salisbury Marketplace and Ashley Plaza properties, which were offset by decreased revenues from continuing vacancies in the Lancer Center Property, and increased STNL property revenues resulting from the acquisition of the Buffalo Wild Wings Property and the United Rentals Property, were offset by slightly decreased flex center property revenues due to vacancies in our Brookfield Property.
Adjusted Net Operating Income
We establish operating segments at the property level and aggregates individual properties into reportable segments based on product types in which we have investments. During the three and six months ended June 30, 2025 and 2024, our reportable segments consisted of retail center properties, flex center properties and STNL properties. We base our evaluation of our results of operations on the net operating income adjusted for interest expense of each reportable segment and, in some cases, of each property.
Net operating income (“NOI”) is a non-GAAP financial measure and is not considered a measure of operating results or cash flows from operations under GAAP. NOI is calculated by deducting operating expenses from operating revenues. NOI reflects occupancy levels, rental rate increases or decreases, and the recoverability of operating expenses. NOI, as we calculate it, may not be directly comparable to similarly titled, but differently calculated, measures for other REITs.
NOI adjusted for interest expense (“Adjusted Net Operating Income”), also a non-GAAP financial measure, is calculated by deducting operating expenses and interest expense from investment property rental revenues. Operating revenues include rental income, tenant reimbursements, other property income and non-cash revenues such as straight line rent and amortization of above and below market leases. Operating expenses include retail center property, flex center property and single tenant net lease property operating costs. Interest expense includes mortgage interest expense, only, and excludes non-mortgage interest expense and non-cash interest expense such as amortization of loan issuance costs.
Because Adjusted Net Operating Income consists of only revenues, operating expenses, and interest expense directly related to our real estate rental operations, management believes that the use of Adjusted Net Operating Income to evaluate the financial performance of its operating segments and individual investment properties is a useful tool that can assist in the comparison of the operating performance of our real estate assets between periods, or as compared to other companies and other investment opportunities we may consider from time to time. Management uses Adjusted Net Operating Income as a supplemental measure to evaluate our business because there are certain limitations associated with using GAAP net income alone as the primary measure of our operating performance.
Adjusted Net Operating Income is a non-GAAP financial measure and is not considered a measure of operating results or cash flows from operations under GAAP.
48
Table of Contents
Please see below for the reconciliation of revenue and Adjusted Net Operating Income for each property.
Retail Center Property Revenues and Adjusted Net Operating Income
The following tables present property revenues, operating expenses and interest expense for our retail center properties for the three months ended June 30, 2025 and 2024:
For the three months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
Ashley Plaza |
|
|
|
|
|
| |||
Retail center property revenues | $ | 378,098 | $ | 367,040 | $ | 11,058 | |||
Retail center property operating expenses | 84,724 | 79,924 | 4,800 | ||||||
Interest expense | 98,392 | 100,610 | (2,218) | ||||||
Adjusted net operating income | $ | 194,982 | $ | 186,506 | $ | 8,476 | |||
Franklin Square |
|
|
|
|
|
| |||
Retail center property revenues | $ | 682,083 | $ | 621,315 | $ | 60,768 | |||
Retail center property operating expenses | 166,828 | 172,343 | (5,515) | ||||||
Interest expense | 126,603 | 127,542 | (939) | ||||||
Adjusted net operating income | $ | 388,652 | $ | 321,430 | $ | 67,222 | |||
Hanover Square |
|
|
|
|
|
| |||
Retail center property operating expenses | $ | — | $ | 4,194 | $ | (4,194) | |||
Adjusted net operating income | $ | — | $ | 4,194 | $ | (4,194) | |||
Lancer Center |
|
|
|
|
|
| |||
Retail center property revenues | $ | 289,534 | $ | 327,622 | $ | (38,088) | |||
Retail center property operating expenses | 100,427 | 91,469 | 8,958 | ||||||
Interest expense | 70,269 | 72,041 | (1,772) | ||||||
Adjusted net operating income | $ | 118,838 | $ | 164,112 | $ | (45,274) | |||
Salisbury Marketplace |
|
|
|
|
|
| |||
Retail center property revenues | $ | 264,230 | $ | 223,815 | $ | 40,415 | |||
Retail center property operating expenses | 55,842 | 43,633 | 12,209 | ||||||
Interest expense | 69,480 | 71,231 | (1,751) | ||||||
Adjusted net operating income | $ | 138,908 | $ | 108,951 | $ | 29,957 | |||
Total Retail Center Properties |
|
|
|
|
|
| |||
Retail center property revenues | $ | 1,613,945 | $ | 1,539,792 | $ | 74,153 | |||
Retail center property operating expenses | 407,821 | 391,563 | 16,258 | ||||||
Interest expense | 364,744 | 371,424 | (6,680) | ||||||
Adjusted net operating income | $ | 841,380 | $ | 776,805 | $ | 64,575 | |||
Retail center property revenues were $1,613,945 for the three months ended June 30, 2025, a $74,153 increase from the three months ended June 30, 2024, Increased revenues from the Franklin Square, which is fully occupied as of June 30, 2025, the Ashley Plaza Property which is 99.0% leased as of June 30, 2025 and the Salisbury Marketplace Property from increased tenant CAM reimbursements, were offset by decreased revenues from continued vacancies at the Lancer Center Property.
Adjusted Net Operating Income from retail center properties was $841,380 for the three months ended June 30, 2025. Adjusted Net Operating Income for the three months ended June 30, 2025 increased by $64,575 from the three months ended June 30, 2024, due to increased Adjusted Net Operating Income from the Ashley Plaza Property, Franklin Square Property and the Salisbury Marketplace Property, which were slightly offset by decreased Adjusted Net Operating Income from the Franklin Square Property.
49
Table of Contents
Increased Adjusted Net Operating Income from the Salisbury Marketplace Property resulted from increased tenant CAM reimbursement revenues, offset by increased retail center operating expenses. Increased Adjusted Net Operating Income from the Franklin Square Property resulted from increased rent revenues due to full occupancy and a slight decrease in operating expenses and interest expense. Increased Adjusted Net Operating Income from the Ashley Plaza Property was a result of increased retail center property revenues resulting from new leasing activity and lower interest expense due to loan principal amortization, offset by increased retail center operating expenses. These increases in Adjusted Net Operating Income were slightly offset by an decrease in Adjusted Net Operating Income from the Lancer Center Property due to decreased retail center property revenues from continuing vacancies and increased retail center operating expenses.
Flex Center Property Revenues and Adjusted Net Operating Income
The following tables present property operating revenues, operating expenses and interest expense for our flex center properties for the three months ended June 30, 2025 and 2024:
For the three months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
Brookfield Center |
|
|
|
|
|
| |||
Flex center property revenues | $ | 176,933 | $ | 214,005 | $ | (37,072) | |||
Flex center property operating expenses | 59,007 | 68,339 | (9,332) | ||||||
Interest expense | 43,802 | 44,755 | (953) | ||||||
Adjusted net operating income | $ | 74,124 | $ | 100,911 | $ | (26,787) | |||
Greenbrier Business Center |
|
|
|
|
|
| |||
Flex center property revenues | $ | 274,493 | $ | 254,206 | $ | 20,287 | |||
Flex center property operating expenses | 50,853 | 68,678 | (17,825) | ||||||
Interest expense | 57,636 | 59,089 | (1,453) | ||||||
Adjusted net operating income | $ | 166,004 | $ | 126,439 | $ | 39,565 | |||
Parkway |
|
|
|
|
|
| |||
Flex center property revenues | $ | 210,994 | $ | 199,024 | $ | 11,970 | |||
Flex center property operating expenses | 58,084 | 47,096 | 10,988 | ||||||
Interest expense | 61,613 | 56,908 | 4,705 | ||||||
Adjusted net operating income | $ | 91,297 | $ | 95,020 | $ | (3,723) | |||
Total Flex Center Properties |
|
|
|
|
|
| |||
Flex center property revenues | $ | 662,420 | $ | 667,235 | $ | (4,815) | |||
Flex center property operating expenses | 167,944 | 184,113 | (16,169) | ||||||
Interest expense | 163,051 | 160,752 | 2,299 | ||||||
Adjusted net operating income | $ | 331,425 | $ | 322,370 | $ | 9,055 | |||
Flex center property revenues were $662,420 for the three months ended June 30, 2025, a decrease of $4,815 from the three months ended June 30, 2024. Increased revenues at the Greenbrier Business Center Property and Parkway Property from increased occupancy were partially offset by decreased revenues from the Brookfield Property due to a continuing vacancy.
Adjusted Net Operating Income from our flex center properties was $331,425 for the three months ended June 30, 2025. Adjusted Net Operating Income for the three months ended June 30, 2025 increased by $9,055 from the three months ended June 30, 2024 due to increased Adjusted Net Operating Income from the Greenbrier Business Center Property, offset by decreased Adjusted Net Operating Income from the Brookfield Property and Parkway Property.
Increased Adjusted Net Operating Income from the Greenbrier Business Center resulted from increased flex center property revenues due to strong leasing and renewal activity and decreased flex center property operating expenses. Decreased Adjusted Net Operating Income from the Brookfield Property resulted from decreased flex center property revenues due to a new vacancy, offset by
50
Table of Contents
decreased flex center operating expenses. Decreased Adjusted Net Operating Income from the Parkway Property resulted from increased operating expenses and interest expense, offset by increased flex center property revenues from contractual rent escalations and new leases.
STNL Property Revenues and Adjusted Net Operating Income
The following tables present property operating revenues, operating expenses and interest expense for our STNL center properties for the three months ended June 30, 2025 and 2024:
For the three months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
East Coast Wings |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 26,479 | $ | 26,486 | $ | (7) | |||
Single tenant net lease property operating expenses | 4,029 | 3,718 | 311 | ||||||
Adjusted net operating income | $ | 22,450 | $ | 22,768 | $ | (318) | |||
T-Mobile |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 29,946 | $ | 29,944 | $ | 2 | |||
Single tenant net lease property operating expenses | 4,653 | 4,083 | 570 | ||||||
Adjusted net operating income | $ | 25,293 | $ | 25,861 | $ | (568) | |||
Citibank |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 37,700 | $ | 37,699 | $ | 1 | |||
Adjusted net operating income | $ | 37,700 | $ | 37,699 | $ | 1 | |||
Buffalo Wild Wings |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 43,585 | $ | — | $ | 43,585 | |||
Adjusted net operating income | $ | 43,585 | $ | — | $ | 43,585 | |||
United Rentals |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 51,098 | $ | — | $ | 51,098 | |||
Adjusted net operating income | $ | 51,098 | $ | — | $ | 51,098 | |||
Total STNL |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 188,808 | $ | 94,129 | $ | 94,679 | |||
Single tenant net lease property operating expenses | 8,682 | 7,801 | 881 | ||||||
Adjusted net operating income | $ | 180,126 | $ | 86,328 | $ | 93,798 | |||
STNL property revenues were $188,808 for the three months ended June 30, 2025, a $94,679 increase from the three months ended June 30, 2024. Adjusted Net Operating Income from STNL properties was $180,126 for the three months ended June 30, 2025, an increase of $93,798 over the three months ended June 30, 2024. STNL property revenues and Adjusted Net Operating Income increased due to the acquisition of the Buffalo Wild Wings Property and the United Rentals Property, owning the Citibank Property for the full the three months ended June 30, 2025.
51
Table of Contents
Operating Expenses
The following table presents our operating expenses for the three months ended June 30, 2025 and 2024:
For the three months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
Property Operating Expense Reconciliation |
|
|
|
|
|
| |||
Retail center property operating expenses | $ | 407,821 | $ | 391,563 | $ | 16,258 | |||
Flex center property operating expenses | 167,944 | 184,113 | (16,169) | ||||||
STNL property operating expenses | 8,682 | 7,801 | 881 | ||||||
Total Property Operating Expenses from Consolidated Statements of Operations | $ | 584,447 | $ | 583,477 | $ | 970 | |||
Other Operating Expenses |
|
|
|
|
|
| |||
Bad debt expense | $ | — | $ | 8,164 | $ | (8,164) | |||
Legal, accounting and other professional fees | 315,785 | 286,496 | 29,289 | ||||||
Corporate general and administrative expenses | 357,377 | 213,945 | 143,432 | ||||||
Loss on impairment | 5,700 | — | 5,700 | ||||||
Depreciation and amortization | 933,292 | 993,299 | (60,007) | ||||||
Total Operating Expenses | $ | 2,196,601 | $ | 2,085,381 | $ | 111,220 | |||
Total operating expenses were $2,196,601 for the three months ended June 30, 2025. Total expenses for the three months ended June 30, 2025 increased by $111,220 over the three months ended June 30, 2024, primarily due to increased legal, accounting and other professional fees, corporate general and administrative expenses, which increased primarily due to increased marketing and compensation expenses, and loss on impairment, offset by decreased bad debt expense and decreased depreciation and amortization expense.
Operating Income (Loss)
Operating income for the three months ended June 30, 2025 was $241,506, an increase of $25,731 from the operating income of $215,775 for the three months ended June 30, 2024. This increase was primarily a result of increased adjusted net operating income from our three operating segments, decreased bad debt expense and depreciation and amortization expense, offset by increased legal, accounting and other professional fees, corporate general and administrative expenses, loss on impairment, loss on extinguishment of debt
Interest Expense
Interest expense was $558,840 and $723,360 for the three months ended June 30, 2025 and 2024, respectively, as follows:
For the three months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
Interest Expense Reconciliation |
|
|
|
|
|
| |||
Retail center property interest expense | $ | 364,744 | $ | 371,424 | $ | (6,680) | |||
Flex center property interest expense | 163,051 | 160,752 | 2,299 | ||||||
Addback: Non cash interest expense | 29,179 | 23,766 | 5,413 | ||||||
Addback: Other interest expense | 1,866 | 167,418 | (165,552) | ||||||
Total Interest Expense from Condensed Consolidated Statements of Operations | $ | 558,840 | $ | 723,360 | $ | (164,520) | |||
52
Table of Contents
Total interest expense for the three months ended June 30, 2025 decreased by $164,520 over the three months ended June 30, 2024. This decrease was primarily a result of decreased interest expense due to the redemption of the mandatorily redeemable preferred stock. Non cash interest expense, above, includes non-cash amortization of discounts and capitalized issuance costs related to the mandatorily redeemable preferred stock. See Note 5 of the accompanying notes to the unaudited condensed consolidated financial statements.
Other Income
During the three months ended June 30, 2025, other income was $7,161, which consisted of interest income. This is a decrease of $8,950 from other income of $16,111 for the three months ended June 30, 2024, which also consisted of interest income.
Other Expense
During the three months ended June 30, 2025, other expense was $20,990 related to the fair value change of the interest rate cap. This is an increase of $13,790 from other expense of $7,200 for the three months ended June 30, 2024, which also consisted of the fair value change of the interest rate cap.
Net (Loss) Income
Net loss was $331,163 for the three months ended June 30, 2025, before adjustments for net loss attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net loss attributable to our common stockholders was $456,444.
Net loss for the three months ended June 30, 2025, decreased by $167,511 over the three months ended June 30, 2024, before adjustments for net (loss) income attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net income attributable to our common stockholders for the three months ended June 30, 2025 decreased by $65,258 over the three months ended June 30, 2024.
Six months ended June 30, 2025
Revenues
Revenues for the six months ended June 30, 2025 and 2024 are as follows:
For the six months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
Retail center property revenues | $ | 3,106,392 | $ | 3,389,409 | $ | (283,017) | |||
Flex center property revenues |
| 1,342,983 |
| 1,331,302 |
| 11,681 | |||
STNL property revenues |
| 337,438 |
| 152,084 |
| 185,354 | |||
Total Revenues | $ | 4,786,813 | $ | 4,872,795 | $ | (85,982) | |||
Total revenue was $4,786,813 for the six months ended June 30, 2025, a decrease of $85,982 from the six months ended June 30, 2024. Decreases in retail center property revenues from the sale of the Hanover Square Shopping Center and increased vacancies in the Lancer Center Property, were partially offset by increases in flex center property revenues from the Parkway and Greenbrier Business Center properties, and STNL property revenues resulting from the acquisition of the Buffalo Wild Wings Property and the United Rentals Property.
Adjusted Net Operating Income
Adjusted Net Operating Income is a non-GAAP financial measure and is not considered a measure of operating results or cash flows from operations under GAAP.
53
Table of Contents
Please see below for the reconciliation of revenue and Adjusted Net Operating Income for each property.
Retail Center Property Revenues and Adjusted Net Operating Income
The following tables present property revenues, operating expenses and interest expense for our retail center properties for the six months ended June 30, 2025 and 2024:
For the six months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
Ashley Plaza |
|
|
|
|
|
| |||
Retail center property revenues | $ | 744,979 | $ | 738,633 | $ | 6,346 | |||
Retail center property operating expenses | 186,926 | 138,807 | 48,119 | ||||||
Interest expense | 196,269 | 201,766 | (5,497) | ||||||
Adjusted net operating income | $ | 361,784 | $ | 398,060 | $ | (36,276) | |||
Franklin Square |
|
|
|
|
|
| |||
Retail center property revenues | $ | 1,319,265 | $ | 1,238,451 | $ | 80,814 | |||
Retail center property operating expenses | 307,550 | 328,984 | (21,434) | ||||||
Interest expense | 252,380 | 255,083 | (2,703) | ||||||
Adjusted net operating income | $ | 759,335 | $ | 654,384 | $ | 104,951 | |||
Hanover Square |
|
|
|
|
|
| |||
Retail center property revenues | $ | — | $ | 307,325 | $ | (307,325) | |||
Retail center property operating expenses | — | 92,536 | (92,536) | ||||||
Interest expense | — | 129,248 | (129,248) | ||||||
Adjusted net operating income | $ | — | $ | 85,541 | $ | (85,541) | |||
Lancer Center |
|
|
|
|
|
| |||
Retail center property revenues | $ | 581,141 | $ | 654,792 | $ | (73,651) | |||
Retail center property operating expenses | 214,697 | 177,269 | 37,428 | ||||||
Interest expense | 140,221 | 144,521 | (4,300) | ||||||
Adjusted net operating income | $ | 226,223 | $ | 333,002 | $ | (106,779) | |||
Salisbury Marketplace |
|
|
|
|
|
| |||
Retail center property revenues | $ | 461,007 | $ | 450,208 | $ | 10,799 | |||
Retail center property operating expenses | 128,372 | 82,226 | 46,146 | ||||||
Interest expense | 138,645 | 142,898 | (4,253) | ||||||
Adjusted net operating income | $ | 193,990 | $ | 225,084 | $ | (31,094) | |||
Total Retail Center Properties |
|
|
|
|
|
| |||
Retail center property revenues | $ | 3,106,392 | $ | 3,389,409 | $ | (283,017) | |||
Retail center property operating expenses | 837,545 | 819,822 | 17,723 | ||||||
Interest expense | 727,515 | 873,516 | (146,001) | ||||||
Adjusted net operating income | $ | 1,541,332 | $ | 1,696,071 | $ | (154,739) | |||
Retail center property revenues were $3,106,392 for the six months ended June 30, 2025, a $283,017 decrease from the six months ended June 30, 2024, primarily due to decreased revenues resulting from the sale of the Hanover Square Shopping Center Property and a continuing vacancy in the Lancer Center Property. These decreased revenues were offset by increased revenues from the Franklin Square Property, which resulted from full occupancy, and the Salisbury Marketplace Property due to new leasing activity.
Adjusted Net Operating Income from retail center properties was $1,541,332 for the six months ended June 30, 2025. Adjusted Net Operating Income for the six months ended June 30, 2025 decreased by $154,739 from the six months ended June 30, 2024, due to the sale of the Hanover Square Property, decreased Adjusted Net Operating Income from the Ashley Plaza Property, Lancer Center
54
Table of Contents
Property and the Salisbury Marketplace Property, which decreases were slightly offset by increased Adjusted Net Operating Income from the Franklin Square Property.
Decreased Adjusted Net Operating Income from the Lancer Center Property resulted from a decline in retail center property revenues due to a continuing vacancy and an increase in operating expenses. Decreased Adjusted Net Operating Income from the Ashley Plaza and Salisbury Marketplace properties were primarily a result of increased operating expenses. These decreases in Adjusted Net Operating Income were slightly offset by an increase in Adjusted Net Operating Income from the Franklin Square Property due to increased retail center property revenues from new leases and contractual rent escalations and a decrease in operating expenses.
Flex Center Property Revenues and Adjusted Net Operating Income
The following tables present property operating revenues, operating expenses and interest expense for our flex center properties for the six months ended June 30, 2025 and 2024:
For the six months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
Brookfield Center |
|
|
|
|
|
| |||
Flex center property revenues | $ | 368,925 | $ | 428,383 | $ | (59,458) | |||
Flex center property operating expenses | 125,713 | 120,763 | 4,950 | ||||||
Interest expense | 87,365 | 89,743 | (2,378) | ||||||
Adjusted net operating income | $ | 155,847 | $ | 217,877 | $ | (62,030) | |||
Greenbrier Business Center |
|
|
|
|
|
| |||
Flex center property revenues | $ | 541,654 | $ | 504,532 | $ | 37,122 | |||
Flex center property operating expenses | 119,285 | 116,490 | 2,795 | ||||||
Interest expense | 115,013 | 118,540 | (3,527) | ||||||
Adjusted net operating income | $ | 307,356 | $ | 269,502 | $ | 37,854 | |||
Parkway |
|
|
|
|
|
| |||
Flex center property revenues | $ | 432,404 | $ | 398,387 | $ | 34,017 | |||
Flex center property operating expenses | 130,649 | 91,533 | 39,116 | ||||||
Interest expense | 129,502 | 121,796 | 7,706 | ||||||
Adjusted net operating income | $ | 172,253 | $ | 185,058 | $ | (12,805) | |||
Total Flex Center Properties |
|
|
|
|
|
| |||
Flex center property revenues | $ | 1,342,983 | $ | 1,331,302 | $ | 11,681 | |||
Flex center property operating expenses | 375,647 | 328,786 | 46,861 | ||||||
Interest expense | 331,880 | 330,079 | 1,801 | ||||||
Adjusted net operating income | $ | 635,456 | $ | 672,437 | $ | (36,981) | |||
Flex center property revenues were $1,342,983 for the six months ended June 30, 2025, an increase of $11,681 from the six months ended June 30, 2024. Increased revenues at the Greenbrier Business Center Property and Parkway Property from increased occupancy were partially offset by decreased revenues from the Brookfield Property due to a vacancy.
Adjusted Net Operating Income from our flex center properties was $635,456 for the six months ended June 30, 2025. Adjusted Net Operating Income for the six months ended June 30, 2025 decreased by $36,981 from the six months ended June 30, 2024 due to decreased Adjusted Net Operating Income from the Brookfield Property and Parkway Property, slightly offset by increased Adjusted Net Operating Income from the Greenbrier Business Center Property.
Decreased Adjusted Net Operating Income from the Brookfield Property resulted from decreased flex center property revenues due to a continuing vacancy and slightly increased operating expenses. Decreased Adjusted Net Operating Income from the Parkway Property resulted from increased operating expenses, offset by increased flex center property revenues from contractual rent escalations and new leases. These decreases in Adjusted Net Operating Income were slightly offset by increased Adjusted Net Operating Income
55
Table of Contents
form the Greenbrier Business Center Property resulting from by increased flex center property revenues from contractual rent escalations and new leases.
STNL Property Revenues and Adjusted Net Operating Income
The following tables present property operating revenues, operating expenses and interest expense for our STNL center properties for the six months ended June 30, 2025 and 2024:
For the six months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
East Coast Wings |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 53,108 | $ | 53,113 | $ | (5) | |||
Single tenant net lease property operating expenses | 21,558 | 7,436 | 14,122 | ||||||
Adjusted net operating income | $ | 31,550 | $ | 45,677 | $ | (14,127) | |||
T-Mobile |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 59,892 | $ | 59,798 | $ | 94 | |||
Single tenant net lease property operating expenses | 9,051 | 8,073 | 978 | ||||||
Adjusted net operating income | $ | 50,841 | $ | 51,725 | $ | (884) | |||
Citibank |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 75,397 | $ | 39,173 | $ | 36,224 | |||
Adjusted net operating income | $ | 75,397 | $ | 39,173 | $ | 36,224 | |||
Buffalo Wild Wings |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 76,294 | $ | — | $ | 76,294 | |||
Adjusted net operating income | $ | 76,294 | $ | — | $ | 76,294 | |||
United Rentals |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 72,747 | $ | — | $ | 72,747 | |||
Adjusted net operating income | $ | 72,747 | $ | — | $ | 72,747 | |||
Total STNL |
|
|
|
|
|
| |||
Single tenant net lease property revenues | $ | 337,438 | $ | 152,084 | $ | 185,354 | |||
Single tenant net lease property operating expenses | 30,609 | 15,509 | 15,100 | ||||||
Adjusted net operating income | $ | 306,829 | $ | 136,575 | $ | 170,254 | |||
STNL property revenues were $337,438 for the six months ended June 30, 2025, a $185,354 increase from the six months ended June 30, 2024. Adjusted Net Operating Income from STNL properties was $306,829 for the six months ended June 30, 2025, an increase of $170,254 from the six months ended June 30, 2024. Revenues and Adjusted Net Operating Income increased due to the acquisition of the Buffalo Wild Wings Property and the United Rentals Property and owning the Citibank Property for the full six months ended June 30, 2025.
56
Table of Contents
Operating Expenses
The following table presents our operating expenses for the six months ended June 30, 2025 and 2024:
For the six months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
Property Operating Expense Reconciliation |
|
|
|
|
|
| |||
Retail center property operating expenses | $ | 837,545 | $ | 819,822 | $ | 17,723 | |||
Flex center property operating expenses | 375,647 | 328,786 | 46,861 | ||||||
STNL property operating expenses | 30,609 | 15,509 | 15,100 | ||||||
Total Property Operating Expenses from Consolidated Statements of Operations | $ | 1,243,801 | $ | 1,164,117 | $ | 79,684 | |||
Other Operating Expenses |
|
|
|
|
|
| |||
Bad debt expense | $ | 1,321 | $ | 22,220 | $ | (20,899) | |||
Share based compensation expenses | 397,182 | 277,500 | 119,682 | ||||||
Legal, accounting and other professional fees | 742,354 | 679,574 | 62,780 | ||||||
Corporate general and administrative expenses | 772,933 | 510,739 | 262,194 | ||||||
Loss on impairment | 67,503 | — | 67,503 | ||||||
Depreciation and amortization | 1,898,503 | 2,005,775 | (107,272) | ||||||
Total Operating Expenses | $ | 5,123,597 | $ | 4,659,925 | $ | 463,672 | |||
Total operating expenses were $5,123,597 for the six months ended June 30, 2025. Total expenses for the six months ended June 30, 2025, increased by $463,672 over the six months ended June 30, 2024, primarily due to increased share based compensation, loss on impairment, legal, accounting and other professional fees, and corporate general and administrative expenses, which increased primarily due to increased marketing and compensation expenses.
Operating (Loss) Income
Operating loss for the six months ended June 30, 2025 was $373,225, a decrease of $3,353,760 from the operating income of $2,980,535 for the six months ended June 30, 2024. This decrease was primarily a result of the gain on the sale of the Hanover Square Property of $2,819,502 during the six months ended June 30, 2024, but increased share based compensation, loss on impairment, legal, accounting and other professional fees, and corporate general and administrative expenses, also contributed to the decrease.
Interest Expense
Interest expense was $1,131,856 and $1,600,108 for the six months ended June 30, 2025 and 2024, respectively, as follows:
For the six months ended | |||||||||
June 30, | |||||||||
2025 |
| 2024 | Increase / | ||||||
| (unaudited) |
| (unaudited) |
| (Decrease) | ||||
Interest Expense Reconciliation |
|
|
|
|
|
| |||
Retail center property interest expense | $ | 727,515 | $ | 873,516 | $ | (146,001) | |||
Flex center property interest expense | 331,880 | 330,079 | 1,801 | ||||||
Addback: Non cash interest expense | 58,359 | 47,533 | 10,826 | ||||||
Addback: Other interest expense | 14,102 | 348,980 | (334,878) | ||||||
Total Interest Expense from Condensed Consolidated Statements of Operations | $ | 1,131,856 | $ | 1,600,108 | $ | (468,252) | |||
Total interest expense for the six months ended June 30, 2025 decreased by $468,252 over the six months ended June 30, 2024. This decrease was primarily a result of decreased interest from the sale of the Hanover Square Shopping Center Property and the redemption of the mandatorily redeemable preferred stock. Non cash interest expense, above, includes non-cash amortization of
57
Table of Contents
discounts and capitalized issuance costs related to the mandatorily redeemable preferred stock. See Note 5 of the accompanying notes to the unaudited condensed consolidated financial statements.
Other Income
During the six months ended June 30, 2025, other income was $134,035, which consisted of $118,529 in lease termination fees and interest income of $15,507. This is an increase of $80,235 from other income of $53,800 for the six months ended June 30, 2024, which consisted of $28,138 in income related to the fair value change of the interest rate cap and interest income of $25,662.
Other Expense
During the six months ended June 30, 2025, other expense was $49,216 related to the fair value change of the interest rate cap. There was no such other expense for the six months ended June 30, 2024.
Net (Loss) Income
Net loss was $1,420,262 for the six months ended June 30, 2025, before adjustments for net loss attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net loss attributable to our common stockholders was $1,525,485.
Net income for the six months ended June 30, 2025 decreased by $2,854,489 over the six months ended June 30, 2024, before adjustments for net (loss) income attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net income attributable to our common stockholders for the six months ended June 30, 2025 decreased by $2,361,181 over the six months ended June 30, 2024.
Other Non-GAAP Measures
Funds from Operations and Adjusted Funds from Operations
We use funds from operations (“FFO”), a non-GAAP measure, as an alternative measure of our operating performance, specifically as it relates to results of operations and liquidity. We compute FFO in accordance with standards established by the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) in its December 2018 White Paper (the “NAREIT White Paper”). As defined in the NAREIT White Paper, FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus real estate related depreciation and amortization (excluding amortization of loan origination costs and above and below market leases) and after adjustments for unconsolidated partnerships and joint ventures. Most industry analysts and equity REITs, including us, consider FFO to be an appropriate supplemental measure of operating performance because, by excluding gains or losses on dispositions and excluding depreciation, FFO is a helpful tool that can assist in the comparison of the operating performance of a company’s real estate between periods, or as compared to different companies. Management uses FFO as a supplemental measure to conduct and evaluate our business because there are certain limitations associated with using GAAP net income alone as the primary measure of our operating performance. Historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time, while historically real estate values have risen or fallen with market conditions. Accordingly, we believe FFO provides a valuable alternative measurement tool to GAAP when presenting our operating results.
The NAREIT White Paper states, “FFO of a REIT includes the FFO of all consolidated properties, including consolidated, partially owned affiliates”. Additionally, since the adjustments to GAAP net income, such as depreciation and amortization, used in the reconciliation of net income (loss) to determine FFO are not allocated between common stockholders and noncontrolling interests (i.e. 100% of depreciation and amortization are “added back” without reduction to reflect the noncontrolling owners’ interest in such items), we believe that the appropriate starting point for the calculation is the net (loss) income before allocation to noncontrolling interests. This allows us to use FFO as a tool to measure the overall performance of its investment properties, as a whole, not just the portion of the investment properties controlled by our common stockholders.
58
Table of Contents
The following table reconciles our calculations of FFO, which is a non-GAAP measurement, to net (loss) income, the most directly comparable GAAP financial measure, for the six months ended June 30, 2025 and 2024:
For the six months ended | ||||||
June 30, | ||||||
| 2025 |
| 2024 | |||
(unaudited) |
| (unaudited) | ||||
Net (loss) income | $ | (1,420,262) | 1,434,227 | |||
Depreciation of tangible real property assets (1) |
| 1,172,082 | 1,190,945 | |||
Depreciation of tenant improvements (2) |
| 354,043 | 389,513 | |||
Amortization of tenant improvement lease incentives (3) | 1,236 | 1,482 | ||||
Amortization of leasing commissions (4) |
| 109,229 | 92,602 | |||
Amortization of intangible assets (5) |
| 263,149 | 332,715 | |||
Gain on disposal of investment property (6) | — | (2,819,502) | ||||
Loss on impairment (7) |
| 67,503 | — | |||
Loss on extinguishment of debt (8) | 27,066 | 51,837 | ||||
Loss on redemption of mandatorily redeemable preferred stock (8) |
| 9,375 | — | |||
Funds from operations (FFO) | $ | 583,421 | $ | 673,819 | ||
(1) | Depreciation expense for buildings and site improvements. |
(2) | Depreciation of tenant improvements, including those (i) acquired as part of the purchase of the retail center, flex center and STNL properties and (ii) those we constructed for the retail center properties and flex center properties subsequent to their acquisition. |
(3) | Depreciation of tenant improvements recorded as lease incentives. |
(4) | Amortization of leasing commissions paid for the retail center properties and flex center properties subsequent to the acquisition of the properties. |
(5) | Amortization of (i) intangible assets acquired as part of the purchase of the retail center properties, flex center properties and STNL properties, including leasing commissions, leases in place and legal and marketing costs. |
(6) | As defined in the NAREIT White Paper, FFO specifically excludes gains and losses from the sale of certain real estate assets. |
(7) | The NAREIT White Paper provides guidance for the treatment of impairment write-downs. Specifically, “To the extent there is an impairment write-down of depreciable real estate … related to a REIT’s main business, the write-down is excluded from FFO (i.e., adjusted from net income in calculating FFO).” Additionally, the NAREIT White Paper provides guidance on gains or losses on the sale of assets, stating “the REIT has the option to include or exclude such gains and losses in the calculation of FFO.” |
(8) | Consistent with the treatment of impairment write-downs, we include an adjustment for our gain on extinguishment of lease liability, loss on extinguishment of debt, and loss on redemption of mandatorily redeemable preferred stock. |
The NAREIT White Paper encourages companies reporting FFO to “make supplemental disclosure of all material non-cash revenues and expenses affecting their results for each period.” We believe that the computation of FFO in accordance with the NAREIT White Paper’s definition includes certain items that are not indicative of the results provided by our operating portfolio and affect the comparability of our period-over-period performance. These items include 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 our calculation of AFFO. Therefore, in addition to FFO, management uses Adjusted FFO (“AFFO”), which we define to exclude such items. Management believes that these adjustments are appropriate in determining AFFO as their exclusion is not indicative of the operating performance of our assets. In addition, we believe that AFFO is a useful supplemental measure for the investing community to use in comparing us to other REITs as many REITs provide some form of adjusted or modified FFO. However, there can be no assurance that AFFO presented by us is comparable to the adjusted or modified FFO of other REITs.
59
Table of Contents
Total AFFO for the six months ended June 30, 2025 and 2024 was as follows:
For the six months ended | ||||||
June 30, | ||||||
2025 |
| 2024 | ||||
| (unaudited) |
| (unaudited) | |||
Funds from operations | $ | 583,421 | $ | 673,819 | ||
Amortization of above market leases (1) |
| 12,473 |
| 28,331 | ||
Amortization of below market leases (2) |
| (104,414) |
| (157,562) | ||
Straight line rent (3) |
| (69,264) |
| (46,098) | ||
Capital expenditures (4) |
| (650,236) |
| (359,726) | ||
Decrease (increase) in fair value of interest rate cap (5) |
| 49,216 |
| (28,138) | ||
Amortization of loan issuance costs (6) |
| 58,359 |
| 47,533 | ||
Amortization of preferred stock discount and offering costs (7) |
| 2,404 |
| 129,656 | ||
Share-based compensation (8) |
| 397,182 |
| 277,500 | ||
Bad debt expense (9) |
| 1,321 |
| 22,220 | ||
Adjusted funds from operations (AFFO) | $ | 280,462 | $ | 587,535 | ||
(1) | Adjustment to FFO resulting from non-cash amortization of intangible assets. |
(2) | Adjustment to FFO resulting from non-cash amortization of intangible liabilities. |
(3) | Adjustment to FFO resulting from non-cash revenues recognized as a result of applying straight line revenue recognition for the retail center properties and flex center properties. |
(4) | Adjustment to FFO for capital expenditures, including capitalized leasing commissions, tenant improvements, and building and site improvements. See Investing Activities, above, for detail of capital expenditures. |
(5) | Adjustment to FFO resulting from non-cash expenses recognized as a result of decreases in the fair value of the interest rate caps for the Parkway Property. |
(6) | Adjustment to FFO for amortization of non-cash expenses recognized as a result of amortizing loan issuance costs over the terms of the respective mortgages. |
(7) | Adjustment to FFO for amortization of non-cash expenses recognized as a result of amortizing the mandatorily redeemable preferred stock discount and offering costs over the mandatorily redeemable preferred stock’s five-year term. |
(8) | Adjustment to FFO resulting from non-cash expenses recorded for share-based compensation. |
(9) | The NAREIT White Paper provides guidance on non-cash revenues and expenses, stating, “To provide an opportunity for consistent analysis of operating results among REITs, the NAREIT White Paper encourages those reporting FFO to make supplemental disclosure of all material non-cash revenues and expenses affecting their results for each period. We have elected to include non-cash expenses (bad debt expense) in our calculation of AFFO. |
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have omitted a discussion of quantitative and qualitative disclosures about market risk because, as a smaller reporting company, we are not required to provide such information.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”)), that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is processed, recorded, summarized and reported within the time periods specified in the rules and regulations of the SEC and that such information is accumulated and communicated to management, including our Chief Executive Officer and
60
Table of Contents
Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
We have carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of our disclosure controls and procedures as of June 30, 2025, the end of the period covered by this Quarterly Report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer have concluded, as of June 30, 2025, that our disclosure controls and procedures were effective in ensuring that information required to be disclosed by us in reports filed or submitted under the Exchange Act (i) is processed, recorded, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow for timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)). Our management, including our Chief Executive Officer, evaluated, as of June 30, 2025, the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on that evaluation, our Chief Executive Officer concluded that our internal control over financial reporting, as of June 30, 2025, was effective.
This Quarterly Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Quarterly Report.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We and our subsidiaries are, from time to time, parties to litigation arising from the ordinary course of their business. We are not presently subject to any material litigation nor, to our knowledge, is any other litigation threatened against us, including routine actions for negligence or other claims and administrative proceedings arising in the ordinary course of business, some of which would be covered by liability insurance and any of which collectively would not be expected to have a material adverse effect on the Company’s liquidity, results of operations or business or financial condition
ITEM 1A.RISK FACTORS
Except as set forth below, there have been no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024. The following risk factor represents a material change from the risk factors described in that Form 10-K and should be read in conjunction with the other risk factors disclosed therein.
Our investment in bitcoin is subject to market volatility and regulatory uncertainty.
We have made, and may make additional, investments in bitcoin. The price of bitcoin has been highly volatile and may continue to be volatile in the future, due to market factors, regulatory developments and other risks that are outside of our control. The prevalence of bitcoin is a relatively recent trend, and the long-term adoption of bitcoin by investors, consumers, and businesses remains uncertain. Market participants lack sufficient data to predict the future trend of bitcoins with precision. Bitcoin’s lack of a physical form and its reliance on technology may subject its integrity to the threat of malicious attacks and technological obsolescence. To the extent the market value of our bitcoin investment decreases, our financial condition may be adversely impacted.
61
Table of Contents
The DST Program could subject us to liabilities from litigation or otherwise.
We have initiated a DST Program to issue and sell beneficial interests (“DST Interests”) in specific Delaware statutory trusts (“DSTs”) holding one or more real properties (each, a “DST Property” and, collectively, the “DST Properties”). These DST Interests will be sold in private placements exempt from registration under the Securities Act to “accredited investors” in specific DSTs holding one or more DST Properties. We expect that the DST Program will give us the opportunity to expand and diversify our capital-raising strategies by offering what we believe to be an attractive investment product for investors that may be seeking like-kind replacement properties to complete tax-deferred exchange transactions under Section 1031 of the Code. However, there is no guarantee that the DST Program will provide the tax benefits expected by investors. Investors who acquire DST Interests through such private placements may be seeking certain tax benefits that depend on the interpretation of, and compliance with, federal and state income tax laws and regulations. We may become subject to liability, from litigation or otherwise, as a result of the DST Program.
The DST Program will not shield us from risks related to the performance of the DST Properties held through such structures.
Under the DST Program, certain of our existing real properties and real properties acquired from third parties may be placed into DSTs, the DST Interests of which will be sold to investors. Due to tax-related restrictions on a DST’s leasing activities, unless a DST Property is long-term absolute net leased to a credit tenant, we, through a wholly owned subsidiary, will hold a long-term leasehold interest in each DST Property under a master lease, which may be guaranteed by the Operating Partnership. Under each master lease, we, through such subsidiary or applicable master tenant, will be responsible for subleasing the applicable DST Property to occupying tenants until the earlier of the expiration of the master lease or the Operating Partnership’s exercise of the FMV Option, as defined below, which means that we bear the risk that the underlying cash flows from a DST Property may be less than the master lease payments. Therefore, even though we will no longer own such applicable DST Property, because of the fixed terms of the master lease, which may be guaranteed by the Operating Partnership, negative operating performance by a DST Property could affect cash available for distributions to our stockholders and would likely have an adverse effect on our results of operations.
DST Properties may be less liquid than other assets, which could impair our ability to utilize cash proceeds from sales of such DST Properties for other purposes such as paying down debt, distributions or additional investments.
We may later reacquire DST Properties through the Operating Partnership’s exercise of its contractual right to acquire a DST Property from the DST at its fair market value (the “FMV Option”). In such cases, the investors who elect to receive OP Units pursuant to the FMV Option and become limited partners in the Operating Partnership will generally still be tied to the applicable DST Property in terms of basis and built-in-gain. As a result, if a DST Property is subsequently sold, unless we effectuate a like-kind exchange under Section 1031 of the Code, then tax will be triggered on the investors’ built-in-gain. Any replacement property acquired in connection with a 1031 exchange will similarly be tied to such investors with similar considerations if such replacement property ever is sold. We also may enter into tax protection agreements with investors who elect to receive OP Units in connection with the exercise of a FMV Option pursuant to which we will agree to indemnify such investors from their tax liabilities generated from a taxable disposition of a DST Property during a protected period of time. As a result of these factors, placing real properties into the DST Program may limit our ability to access liquidity from such real properties or replacement properties through sale without triggering taxes due to the built-in-gain tied to investors in the DST Program. Such reduced liquidity could impair our ability to utilize cash proceeds from sales for other purposes such as paying down debt, paying distributions, funding repurchases or making additional investments.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
None.
Issuer Repurchases of Equity Securities
In March 2024, our Board approved the adoption of a share repurchase program (the “Repurchase Program”) through a Rule 10b5-1 plan, under which we were authorized to repurchase up to 35,265 shares of our Common Stock at or below a price of $12.00 per share. Under the Repurchase Program, during the three months ended June 30, 2025, we purchased 2,830 Common Shares at a total cost of $34,102, including fees, at an average price of $12.05 per Common Share. All repurchased Common Shares were retired in accordance with Maryland law. The Repurchase Program expired on May 15, 2025.
62
Table of Contents
Share repurchase activity during the quarterly period ended June 30, 2025 was as follows:
Issuer Purchases of Equity Securities
Period | Total number of shares (or units) purchased | Average price paid per share (or unit) | Total number of shares (or units) purchased as part of publicly announced plans or programs | Maximum number (or approximate dollar value) of shares (or units) that may yet be purchased under the plans or programs(1) | |||||
April 1 - April 30, 2025 | 2,830 | $ | 12.05 | 2,830 | 100,345 | ||||
May 1 - May 31 , 2025 | — | — | — | 100,345 | |||||
June 1 - June 30, 2025 | — | — | — | 100,345 | |||||
Total | 2,830 | $ | 12.05 | 2,830 |
(1) | All shares were purchased under the Repurchase Program. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Arrangements
During the three months ended June 30, 2025, none of our directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934)
EXHIBIT INDEX
Exhibit |
| Description | |
10.01 | Second Amendment to Credit Agreement, dated as of April 28, 2025 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 30, 2025). | ||
10.02 | Purchase and Sale Agreement dated as of June 11, 2025, by and between Drake Motor Partners Pensacola LLC and MDRR XXV Depositor 1, LL (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 12, 2025). | ||
10.03 | Loan Agreement, dated as of July 18, 2025, by and between MDRR XXV Depositor 1, LLC and Farmers and Merchants Bank of Long Beach (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on July 18, 2025). | ||
10.04 | Continuing Guaranty, dated as of July 18, 2025, by Medalist Diversified REIT, Inc. in favor of Farmers and Merchant Bank of Long Beach( incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on July 18, 2025). | ||
10.05 | Continuing Guaranty, dated as of July 18, 2025, by Medalist Diversified Holdings, LP in favor of Farmers and Merchant Bank of Long Beach (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on July 18, 2025). | ||
31.1 | Certification by Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 † | ||
31.2 | Certification by Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. † | ||
63
Table of Contents
32.1 | Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. † | |
32.2 | Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. † | |
101.INS | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL † | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document † | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document † | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document † | |
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document † | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document † | |
104 | Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit) † |
†Filed herewith.
Attached as Exhibit 101 to this report are the following documents formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets; (ii) Condensed Consolidated Statements of Operations; (iii) Condensed Consolidated Statements of Equity; (iv) Condensed Consolidated Statements of Cash Flows; and (v) Notes to Unaudited Consolidated Financial Statements.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MEDALIST DIVERSIFIED REIT, INC. | ||
Date: August 7, 2025 | By: | /s/ Francis P. Kavanaugh |
Francis P. Kavanaugh | ||
President and Chief Executive Officer | ||
Date: August 7, 2025 | By: | /s/ C. Brent Winn, Jr. |
C. Brent Winn, Jr. | ||
Chief Financial Officer | ||
64
FAQ
How much revenue did MDRR generate in Q2 2025?
What was MDRR's net loss per share for the six months ended June 30 2025?
How has MDRR's debt position changed since year-end 2024?
Why did MDRR’s year-to-date earnings decline compared with 2024?
What property is currently classified as held for sale by MDRR?
Did MDRR change its dividend in Q2 2025?
