# Medalist Diversified, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [Medalist Diversified, Inc.](/companies/mdrr.md) (CIK 1654595)
- Form: 10-Q
- Filed: 2024-05-09
- Accepted by EDGAR: May 9, 2024, 16:20 ET
- Period: 2024-03-31
- Accession: 0001558370-24-007624
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1654595/000155837024007624/mdrr-20240331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1654595/000155837024007624/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $2.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $2.8m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $876.7k | us-gaap:InterestExpense |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $1.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.60 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $0.61 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 2,248,142 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $492.4k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $510.9k | us-gaap:PaymentsOfDividends |
| Cash and equivalents | at 2024-03-31 | $3.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-03-31 | $76.0m | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $58.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-03-31 | $13.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 65,282 characters.

*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. 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 conditions;
- capital expenditures;
- the availability, terms and deployment of capital;
- financing risks;
- inflation;
- the general level of interest rates;
- changes in our business or strategy;
- fluctuations in interest rates and increased operating costs;
- our incurrence of impairment charges;
- our limited operating history;
- 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;
- potential natural disasters such as hurricanes;
- the impact of epidemics, pandemics, or other outbreaks of illness, disease or virus (such as COVID-19 and its variants);
- 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 securities laws.

### Company Overview

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. Our company serves as the general partner of Medalist Diversified Holdings, LP which was formed as a Delaware limited partnership on September 29, 2015.

Our company was formed to acquire, reposition, renovate, lease and manage income-producing properties. Our primary focus is on commercial properties, including retail properties and flex-industrial properties in secondary and tertiary markets in the southeastern part of the United States, with an expected concentration in Virginia, North Carolina, South Carolina, Georgia, Florida and Alabama, and STNL assets with an expected national focus. We may also pursue, in an opportunistic manner, other 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, and indirect investments in real property, such as those that may be obtained in a joint venture. While these types of investments are not intended to be a primary focus, we may make such investments in our discretion.

As of March 31, 2024, our company owns four retail center properties consisting of (i) the Shops at Franklin Square, a 134,239 square foot retail property located in Gastonia, North Carolina (the “Franklin Square Property”), (ii) the Ashley Plaza Shopping Center, a 156,012 square foot retail property located in Goldsboro, North Carolina (the “Ashley Plaza Property”), (iii) the Lancer Center, a 181,590 square foot retail property located in Lancaster, South Carolina (the “Lancer Center Property”), and (iv) the Salisbury Marketplace Shopping Center, a 79,732 square foot retail property located in Salisbury, North Carolina (the “Salisbury Marketplace Property”). On March 13, 2024, our company, and its tenant in common partner, sold the Shops at Hanover Square North, a 73,440 square foot retail property located in Mechanicsville, Virginia (the “Hanover Square Shopping Center Property”). Our company owned 84% of the Hanover Square Shopping Center Property as a tenant in common with a noncontrolling owner which owned the remaining 16% interest. Our company and its tenant in common partner retained ownership of the 0.864 acre outparcel (the “Hanover Square Outparcel”). On March 25, 2024, our company purchased its tenant in common partner’s 16% interest in the Hanover Square Outparcel (see Note 3 of the accompanying notes to the condensed consolidated financial statements).

Our company owns three flex warehouse properties consisting of (i) Brookfield Center, a 64,880 square foot mixed-use industrial/office property located in Greenville, South Carolina (the “Brookfield Center Property”), (ii) the Greenbrier Business Center, an 89,280 square foot mixed-use industrial/office property located in Chesapeake, Virginia (the “Greenbrier Business Center Property”), and (iii) the Parkway Property, a 64,109 square foot mixed-use industrial office property located in Virginia Beach, Virginia (the “Parkway Property”), in which our company owns an 82% tenant in common interest with a noncontrolling owner which owns the remaining 18% interest.

Our company owns three STNL properties consisting of (i) the Citibank Property, a 4,350 square foot single tenant building on 0.45 acres located in Chicago, Illinois, (ii) the East Coast Wings building, a 5,000 square foot single tenant building on approximately 0.89 acres located in Goldsboro, North Carolina (the “East Coast Wings Property”), and (iii) the T-Mobile building, a 3,000 square foot single tenant building on approximately 0.78 acres located in Goldsboro, North Carolina (the “T-Mobile Property”). The East Coast Wings Property and the T-Mobile Property are both located on outparcels adjacent to our company’s Ashley Plaza Property. Prior to January 1, 2024, our company included the East Coast Wings Property and the T-Mobile Property as part of the Ashley Plaza Property.

Our company also owns three undeveloped parcels which are currently being marketed for use as STNL properties including (i) an outparcel at its Lancer Center Property consisting of approximately 1.8 acres (the “Lancer Outparcel”), (ii) an outparcel at its Salisbury Marketplace Property consisting of approximately 1.2 acres (the “Salisbury Outparcel”) (the exact size of the Lancer Outparcel and Salisbury Outparcel will not be determined until a user is identified), and (iii) the Hanover Square Outparcel consisting of 0.864 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 March 31, 2024 our reportable segments were retail center properties, flex center properties and STNL properties.

### Recent Trends and Activities

#### Sale of the Hanover Square Shopping Center Property

On March 13, 2024, our company sold the Hanover Square Shopping Center Property to an unrelated third party for a sale price of $13.0 million, less credits for repairs of $85,000, resulting in a gain on disposal of investment properties of $2,819,502 reported on our Company’s condensed consolidated statement of operations for the three months ended March 31, 2024. Our company did not report any gain or loss on the disposal of investment properties for the three months ended March 31, 2023.

#### Acquisition of the 16% Noncontrolling Interest in the Hanover Square Outparcel

On March 25, 2024, our company completed the acquisition of its tenant in common partner’s 16% ownership interest in the Hanover Square Outparcel through a wholly-owned subsidiary. The purchase price for the 16% interest in the Hanover Square Outparcel was $98,411 paid in cash. Our company’s total investment was $100,891. Our company incurred $2,480 of closing costs which were capitalized and added to the tangible assets acquired.

#### Acquisition of the Citibank Property

On March 28, 2024, our company completed its acquisition of the Citibank Property, a 4,350 square foot single tenant building on 0.45 acres located in Chicago, Illinois, through a wholly-owned subsidiary. The Citibank Property, built in 1954 and subsequently renovated, was 100% leased to Citibank, NA. The purchase price for the Citibank Property was $2,400,000 paid through the issuance of 417,391 Operating Partnership Units at a price of $5.75 per Operating Partnership Unit. Our company’s total investment was $2,444,454. Our company incurred $44,454 of closing costs which were capitalized and added to the tangible assets acquired.

#### Wells Fargo Line of Credit

On June 13, 2022, our company, through its wholly-owned subsidiaries, entered into a loan agreement with Wells Fargo Bank for a $1,500,000 line of credit (the “Wells Fargo Line of Credit”). As of March 31, 2024 and 2023, the Wells Fargo Line of Credit had an outstanding balance of $1,000,000 and $0, respectively. Outstanding balances on the Wells Fargo Line of Credit will bear interest at a floating rate of 2.25% above daily SOFR. As of March 31, 2024 and 2023, SOFR was 5.35% and 4.3%, respectively. The Wells Fargo Line of Credit has a one-year, renewable term, is unconditionally guaranteed by our company, and any outstanding balances are secured by the Lancer Center Property, the Greenbrier Business Center Property and the Salisbury Marketplace Property. On May 2, 2023, our company and Wells Fargo Bank entered into the First Amendment to Revolving Line of Credit Note which extended the maturity date of the Wells Fargo Line of Credit to June 9, 2024. Our company is currently in discussions with Wells Fargo to extend the maturity date of the Wells Fargo Line of Credit, but there can be no assurance that we will be successful. We plan to continue to use the Wells Fargo Line of Credit for general working capital needs and to help fund future acquisitions.

#### Common stock grants under the 2018 Equity Incentive Plan

On January 18, 2024, the Compensation Committee approved a grant of 15,275 Common Shares to our company’s five independent directors, a grant of 2,546 Common Shares to a consultant of our company and a grant of 38,697 Operating Partnership Units to our company’s President and CEO, under the Equity Incentive Plan. The effective date of the grants was January 18, 2024. The Common Shares granted vested immediately and are unrestricted. The Operating Partnership Units granted vest immediately but are not convertible to Common Shares until January 18, 2025. However, the Equity Incentive Plan includes other restrictions on the sale of shares issued under the Equity Incentive Plan. Because the Common Shares and Operating Partnership Units vested immediately, the fair value of the grants, or $277,500, was recorded to share based compensation expense on our company’s condensed consolidated statements of operations on the effective date of the grant. The fair value of the grants was determined by the market price of our company’s Common Shares on the effective date of the grant.

#### Financing Activities

### Mortgages payable

Our company financed its acquisitions of its investment properties through mortgages, as follows:

*(unaudited)*

| ​ ​ ​ ​ Property | ​ ​ ​ ​ | ​ ​ ​ ​ Monthly Payment | ​ ​ ​ ​ | ​ ​ ​ Interest Rate | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Maturity | ​ ​ ​ ​ | ​ ​ Balance March 31, 2024 | ​ ​ ​ | ​ ​ ​ ​ ​ December 31, 2023 | ​ ​ ​ ​ ​ |
| --- | --- | ---: | --- | --- | ---: | --- | --- | ---: | --- | ---: | --- |
| Franklin Square (a) |  | ​ Interest only |  | ​ | 3.808% | December 2031 | ​ | $13,250,000 | ​ | $13,250,000 | ​ |
| Ashley Plaza (b) | ​ | $52,795 |  | ​ | 3.75% | September 2029 | ​ | 10,651,510 | ​ | 10,708,557 | ​ |
| Brookfield Center (c) | ​ | $22,876 |  | ​ | 3.90% | November 2029 | ​ | 4,547,770 | ​ | 4,571,410 | ​ |
| Parkway Center (d) | ​ | $28,161 | ​ | ​ | Variable ​ | November 2031 | ​ | ​ 4,856,285 | ​ | ​ 4,870,403 | ​ |
| Wells Fargo Mortgage Facility (e) | ​ | $103,438 | ​ | ​ | 4.50% | June 2027 | ​ | ​ 17,832,561 | ​ | ​ 17,939,276 | ​ |
| **Total mortgages payable** | **​** | **​** **​** | **​** | **​** | **​** **​** | **​** | **​** | **$51,138,126** | **​** | **$51,339,646** | ​ |

Amounts presented do not reflect unamortized loan issuance costs.

(a) The mortgage loan for the Franklin Square Property in the 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 is interest only until January 6, 2025, at which time the monthly payment will become $61,800, which includes interest and principal based on a thirty-year amortization schedule. The mortgage includes covenants for our company to maintain a net worth of $13,250,000, excluding the assets and liabilities associated with the Franklin Square Property and to maintain liquid assets of no less than $1,000,000. As of March 31, 2024 and December 31, 2023, respectively, our company believes that we are compliant with these covenants. Our company has 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, our company assumed certain guaranty obligations under the Ashley Plaza Property mortgage loan related to the Guaranty Substitution (see below). These obligations include covenants for our company to maintain a net worth of $11,400,000, excluding the liabilities associated with the mortgage loan for the Ashley Plaza Property and for our company to maintain liquid assets of no less than $1,100,000. As of March 31, 2024 and December 31, 2023, respectively, our company believes that we are compliant with these covenants.

(c) The mortgage loan for the Brookfield Center 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, our company assumed certain guaranty obligations under the Brookfield Center Property mortgage loan related to the Guaranty Substitution (see below). These obligations include covenants for our company to maintain a net worth of $4,850,000, excluding the liabilities associated with the mortgage loan for the Brookfield Center Property and for our company to maintain liquid assets of no less than $485,000. As of March 31, 2024 and December 31, 2023, respectively, our company believes 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 March 31, 2024 and December 31, 2023 the rate in effect for the Parkway Property mortgage was 7.05%. 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 March 31, 2024 and December 31, 2023, respectively, our company believes that we are compliant with this covenant.

On October 28, 2021, our company 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 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 March 31, 2024, the applicable index (LIBOR or SOFR), exceeded the 3% cap, and payments from the Interest Rate Protection Transaction reduced our company’s net interest expense. Payments to our company from the Interest Rate Protection Transaction are recorded as an offset to interest expense on our company’s condensed consolidated statements of operations for the years ended three months ended March 31, 2024 and 2023, respectively.

(e) On June 13, 2022, our company 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. Our company has 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 and a minimum debt yield of 9.5% on the Salisbury Marketplace Property, the Lancer Center Property and the Greenbrier Business Center Property, and to maintain liquid assets of not less than $1,500,000. As of March 31, 2024 and December 31, 2023, respectively, our company believes that we are compliant with these covenants.

Our company financed its acquisitions of its assets held for sale through mortgages, which as of December 31, 2023 were recorded as mortgages payable, net, associated with assets held for sale, on our condensed consolidated balance sheets. Our company sold the Hanover Square Shopping Center Property on March 13, 2024 and repaid the mortgage payable.

*(unaudited)*

| ​ ​ Property | ​ ​ ​ Monthly Payment | ​ ​ | ​ ​ Interest ​ Rate | ​ ​ Maturity | ​ ​ | ​ ​ March 31, 2024 | ​ ​ | ​ ​ December 31, 2023 |
| --- | ---: | --- | ---: | --- | --- | ---: | --- | ---: |
| Hanover Square (a) | $78,098 | ​ | 6.94% | December 2027 | ​ | $— | ​ | $9,640,725 |
| **Total mortgages payable associated with assets held for sale** | **​** **​** | **​** | **​** **​** | **​** | **​** | **$—** | **​** | **$9,640,725** |

Amounts presented do not reflect unamortized loan issuance costs.

(a) The mortgage loan for the Hanover Square Property bore interest at a fixed rate of 4.25% until January 1, 2023, when the interest rate adjusted to a fixed rate of 6.94%, which was determined by adding 3.00% to the daily average yield on United States Treasury securities adjusted to a constant maturity of five years, as made available by the Federal Reserve Board, with a minimum of 4.25%. As a result of the interest rate change, as of February 1, 2023, the fixed monthly payment of $56,882 increased to $78,098 which includes interest at the fixed rate, and principal, based on a twenty-five -year amortization schedule. On March 13, 2024, our company sold the Hanover Square Shopping Center Property and repaid the mortgage loan for the Hanover Square Property.

### Off-Balance Sheet Arrangements

As of March 31, 2024 and December 31, 2023, we have no off-balance sheet arrangements.

### Summary of Critical Accounting Policies

The preparation of condensed 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 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 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

For our retail center properties, flex center properties and STNL properties, 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.

#### Accounting for Leases

Our company adopted Accounting Standards Update (“ASU”) 2016-02, *Leases (Topic 842)* on January 1, 2022 using the modified retrospective approach within ASU 2018-11, which allows for the application date to be the beginning of the reporting period in which the entity first applies the new standard. Our company historically has not been and is not currently a “lessee” under any lease agreements, and thus did not have any arrangements requiring the recognition of lease assets or liabilities on its balance sheet. As a “lessor”, our company has active lease agreements with over 130 tenants across our portfolio of investment properties.

Upon the adoption of ASC No. 842, our company has elected the practical expedient permitting lessors to elect by class of underlying asset to not separate non-lease components (for example, maintenance services, including common area maintenance) from associated lease components (the “non-separation practical expedient”) if both of the following criteria are met: (1) the timing and pattern of transfer of the lease and non-lease component(s) are the same and (2) the lease component would be classified as an operating lease if it were accounted for separately. If both criteria are met, the combined component is accounted for in accordance with ASC No. 842 if the lease component is the predominant component of the combined component; otherwise, the combined component is accounted for in accordance with the revenue recognition standard. Our company assessed the criteria above with respect to our operating leases and determined that they qualify for the non-separation practical expedient. As a result, we have accounted for and presented the revenues from these leases, including tenant reimbursements, as a single line item on our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023.

#### Acquisition of Investments in Real Estate

The adoption of ASU 2017-01, 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, our company estimates 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. Our 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.

#### 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 four subsequent taxable years. 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 Company’s Ability to Continue as a Going Concern

Under the accounting guidance related to the presentation of financial statements, our 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 our 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. Our 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 our company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our company’s obligations due over the next twelve months, as well as our company’s recurring business operating expenses.

The redemption date of our company’s mandatorily redeemable preferred stock is February 19, 2025 (the “Redemption Date”). Our company will require additional liquidity to fund the redemption. Our company expects to be able to generate this liquidity from a number of sources, including cash on hand, forecasted future cash flows for the periods prior to the Redemption Date, and careful management of our company’s capital expenditures during the periods prior to the Redemption Date.

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 company’s liquidity, see Note 5 – Loans Payable and Note 8 – Commitments and Contingencies in the notes to our company’s 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 are expected to be provided primarily by the rental receipts from our retail and flex center properties.

### Cash Flows

At March 31, 2024, our consolidated cash and restricted cash on hand totaled $5,136,434 compared to consolidated cash on hand of $3,809,605 at December 31, 2023. Cash from operating activities, investing activities and financing activities for the three months ended March 31, 2024 are as follows:

#### Operating Activities

During the three months ended March 31, 2024, our cash provided by operating activities was $492,441 compared to cash provided by operating activities of $450,724 for the three months ended March 31, 2023, an increase in cash provided by operating activities of $41,717.

Cash flows from operating activities has two components. The first component consists of net operating loss adjusted for non-cash operating activities. During the three months ended March 31, 2024, operating activities adjusted for non-cash items resulted in net cash provided by operating activities of $493,480. During the three months ended March 31, 2023, operating activities adjusted for non-cash items resulted in net cash used in operating activities of $817. The increase of $494,297 in cash flows from operating activities for the three months ended March 31, 2024 was a result of improved net operating income from our investment properties and reduced management restructuring expenses of $241,450.

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 three months ended March 31, 2024, net changes in asset and liability accounts resulted in $1,039 in cash used by operations. During the three months ended March 31, 2023, net changes in asset and liability accounts resulted in $451,541 in cash provided by operations. This increase of $452,580 in cash used in operations resulting from changes in assets and liabilities is a result of decreased changes in accounts payable and accrued liabilities of $412,935, decreased changes in other assets of $47,431, and decreased changes in rent and other receivables, net, of $39,244, offset by decreased changes in unbilled rent of $47,030.

The net of (i) the $493,480 increase in cash provided by operations from the first category and (ii) the $1,039 cash used by operations from the second category results in a total increase of cash provided in operations of $492,441 for the three months ended March 31, 2024.

#### Investing Activities

During the three months ended March 31, 2024, our cash provided by investing activities was $2,738,142, compared to cash used in investing activities of $647,690 during the three months ended March 31, 2023, an increase in cash provided by investing activities of $3,385,832.

During the three months ended March 31, 2024, cash provided by investing activities consisted of $3,110,149 in cash received from the disposal of investment properties, offset by $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 $226,662 in capitalized expenditures, including $29,124 in building improvements, $2,300 in site improvements, $54,963 in leasing commissions and $140,275 in tenant improvements. During the three months ended March 31, 2023, cash used in investing activities consisted of $647,690 in capitalized expenditures, including $168,464 in building improvements, $11,323 in site improvements, $90,638 in capitalized leasing commissions, and $377,265 in capitalized tenant improvements.

The non-cash investing activity for the three months ended March 31, 2024 that did not affect our cash provided by investing activities, was the issuance of $2,400,000 in Operating Partnership Units for the acquisition of the Citibank Property. There were no non-cash investing activities for the three months ended March 31, 2023.

#### Financing Activities

During the three months ended March 31, 2024, our cash used by financing activities was $1,903,754 compared to cash used by financing activities of $480,522 during the three months ended March 31, 2023, an increase in cash used by financing activities of $1,423,232. During the three months ended March 31, 2024, our cash used by financing activities consisted of $1,000,000 to repay the line of credit, short term, $331,215 in principal payments for our company’s mortgages, $510,950 in dividends and distributions and $61,589 for the Operating Partnership Unit redemption. During the three months ended March 31, 2023, cash used in financing activities consisted of $301,577 for mortgage debt principal payments and $178,945 for dividends and distributions.

### Future Liquidity Needs

Liquidity for general operating needs and our company’s investment properties is generally provided by the rental receipts from our retail properties and flex center properties, and revenues from our hotel properties, if any. We expect to provide any liquidity for growth (acquisition of new investment properties) by raising additional investment capital. In addition, our company continually reviews and evaluates its outstanding mortgages payable for refinancing opportunities. While some of our mortgages payable are not pre-payable, some mortgages payable may present opportunities for refinancing.

The primary, non-operating liquidity needs of our company are $5,000,000 to redeem our mandatorily redeemable preferred stock in February, 2025, $54,154 to pay the dividends and distributions to our common stockholders and Operating Partnership Unit holders, $100,000 to pay the dividends to holders of our mandatorily redeemable preferred stock that were declared on April 8, 2024 and payable on April 25, 2024 to holders of record on April 22, 2024, and $612,808 in principal payments due on our mortgages payable during the remaining nine months ending December 31, 2024. 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. Our company plans to pay these obligations through a combination of cash on hand, potential dispositions and operating cash.

To meet these future liquidity needs, our company has the following resources:

- $3,637,400 in unrestricted cash as of March 31, 2024;
- $1,499,034 held in lender reserves for the purposes of tenant improvements, leasing commissions, real estate taxes and insurance premiums;
- Our company’s $1,500,000 line of credit with Wells Fargo Bank, which has an available balance of $1,500,000 as of March 31, 2024, and which matures on June 9, 2024; and
- Cash generated from operations during the remaining nine months ending December 31, 2024, if any.

### Results of Operations

#### Three months ended March 31, 2024

### Revenues

Total revenue was $2,571,639 for the three months ended March 31, 2024, consisting of $1,849,617 in revenues from retail center properties, $664,067 from flex center properties and $57,955 from STNL properties. Total revenues for the three months ended March 31, 2024 increased by $110,663 over the three months ended March 31, 2023, resulting from new leasing activity in our retail center and flex center properties, and the acquisition of the Citibank Property.

| ​ ​ ​ ​ Revenues | ​ ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 ​ | ​ | ​ ​ 2023 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Increase / (Decrease) ​ | ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- |
| Retail center properties | ​ | $1,849,617 | ​ | $1,835,373 | ​ | $14,244 | ​ |
| Flex center properties | ​ | 664,067 | ​ | 569,297 | ​ | 94,770 | ​ |
| Single tenant net lease properties | ​ | 57,955 | ​ | 56,306 | ​ | 1,649 | ​ |
| **Total Revenues** | **​** | **$2,571,639** | **​** | **$2,460,976** | **​** | **$110,663** | **​** |

Revenues from retail center properties were $1,849,617 for the three months ended March 31, 2024, an increase of $14,244 over retail center property revenues for the three months ended March 31, 2023. Increased revenues of $33,262 from the Franklin Square Property and $22,385 from the Lancer Center Property due to new leasing activity, were offset by reduced revenues of $3,950 from the Ashley Plaza Property, and $13,341 from the Salisbury Marketplace Property, due to reduced occupancy, and reduced revenues of $24,112 due to the sale of the Hanover Square Property on March 13, 2024.

| ​ ​ ​ ​ Retail Center Properties | ​ ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 ​ | ​ | ​ ​ 2023 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Franklin Square Property | ​ | $617,136 | ​ | $583,874 | ​ | $33,262 |
| Hanover Square Property | ​ | 307,325 | ​ | 331,437 | ​ | (24,112) |
| Ashley Plaza Property | ​ | 371,593 | ​ | 375,543 | ​ | (3,950) |
| Lancer Center Property | ​ | ​ 327,170 | ​ | ​ 304,785 | ​ | ​ 22,385 |
| Salisbury Property | ​ | ​ 226,393 | ​ | ​ 239,734 | ​ | ​ (13,341) |
| ​ | **​** | **$1,849,617** | **​** | **$1,835,373** | **​** | **$14,244** |

Revenues from the flex center properties were $664,067 for the three months ended March 31, 2024, an increase of $94,770 over revenues from flex center properties for the three months ended March 31, 2023 due increased revenues from the Parkway Property of $17,423 and the Greenbrier Business Center Property of $70,080, both due to new leasing activity, and the Brookfield Center Property of $7,267.

| ​ ​ ​ ​ Flex Center Properties | ​ ​ ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Increase / (Decrease) ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Brookfield Center Property | ​ | $214,378 | ​ | $207,111 | ​ | $7,267 |
| Greenbrier Business Center Property | ​ | ​ 250,326 | ​ | ​ 180,246 | ​ | ​ 70,080 |
| Parkway Center Property | ​ | ​ 199,363 | ​ | ​ 181,940 | ​ | ​ 17,423 |
| **​** | **​** | **$664,067** | **​** | **$569,297** | **​** | **$94,770** |

Revenues from STNL properties were $57,955 for the three months ended March 31, 2024, an increase of $1,649 from revenues from STNL properties for the three months ended March 31, 2023, due to a lease escalation for the T-Mobile Property and the acquisition of the Citibank Property.

| ​ ​ ​ ​ Single Tenant Net Lease Properties | ​ ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 ​ | ​ | ​ ​ 2023 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| East Cost Wings Property (Ashley Plaza) | ​ | $26,628 | ​ | $26,628 | ​ | $— |
| T-Mobile Property (Ashley Plaza) | ​ | ​ 29,853 | ​ | ​ 29,678 | ​ | ​ 175 |
| Citibank Property | ​ | ​ 1,474 | ​ | ​ — | ​ | ​ 1,474 |
| ​ | **​** | **$57,955** | **​** | **$56,306** | **​** | **$1,649** |

### Operating Expenses

Total operating expenses were $2,574,544 for the three months ended March 31, 2024, consisting of $428,259 in expenses from retail center properties, $158,729 in expenses from the flex center properties, $7,708 in expenses from the STNL properties, $277,500 in share based compensation expenses, $393,078 in legal, accounting and other professional fees, $296,794 in corporate general and administrative expenses, and $1,012,476 in depreciation and amortization.

| ​ ​ ​ ​ Operating Expenses | ​ ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 ​ | ​ | ​ ​ 2023 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Retail center properties (1) | ​ | $428,259 | ​ | $513,012 | ​ | $(84,753) |
| Flex center properties (2) | ​ | 158,729 | ​ | 203,734 | ​ | (45,005) |
| Single tenant net lease properties | ​ | 7,708 | ​ | 7,728 | ​ | (20) |
| **Total Investment Property Operating Expenses** | **​** | **594,696** | **​** | **724,474** | **​** | **(129,778)** |
| Share based compensation expenses | ​ | 277,500 | ​ | — | ​ | 277,500 |
| Legal, accounting and other professional fees (3) | ​ | 393,078 | ​ | 525,628 | ​ | (132,550) |
| Corporate general and administrative expenses | ​ | 296,794 | ​ | 117,049 | ​ | 179,745 |
| Management restructuring expenses | ​ | ​ — | ​ | 241,450 | ​ | (241,450) |
| Loss on impairment | ​ | — | ​ | 36,743 | ​ | (36,743) |
| Depreciation and amortization | ​ | 1,012,476 | ​ | 1,156,348 | ​ | (143,872) |
| **Total Operating Expenses** | **​** | **$2,574,544** | **​** | **$2,801,692** | **​** | **$(227,148)** |

(1) Includes bad debt expense of $0 and $125 for the three months ended March 31, 2024 and 2023, respectively.

(2) Includes bad debt expense of $14,056 and $26,997 for the three months ended March 31, 2024 and 2023, respectively.

(3) Includes $176,891 and $144,734 in expenses paid to the Consultant pursuant to the initial Consulting Agreement and subsequent Staffing Agreement for the three months ended March 31, 2024 and 2023, respectively.

Operating expenses for retail center properties were $428,259 for the three months ended March 31, 2024, a decrease of $84,753 from retail center property operating expenses for the three months ended March 31, 2023. Decreased operating expenses in all of the Company’s properties, including $22,300 from the Salisbury Property, $811 from the Hanover Square Property, $21,851 from the Franklin Square Property, $21,327 from the Ashley Plaza Property, and $18,464 from the Lancer Center Property, primarily from the elimination of the asset management fees paid by the properties to our company’s former Manager.

| ​ ​ ​ ​ Retail Center Properties | ​ ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 ​ | ​ | ​ ​ 2023 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Franklin Square Property | ​ | $156,641 | ​ | $178,492 | ​ | $(21,851) |
| Hanover Square Property | ​ | 88,342 | ​ | 89,153 | ​ | (811) |
| Ashley Plaza Property | ​ | ​ 58,883 | ​ | ​ 80,210 | ​ | ​ (21,327) |
| Lancer Center Property (1) | ​ | 85,800 | ​ | 104,264 | ​ | (18,464) |
| Salisbury Property | ​ | 38,593 | ​ | 60,893 | ​ | (22,300) |
| ​ | **​** | **$428,259** | **​** | **$513,012** | **​** | **$(84,753)** |

(1) Includes bad debt expense of $0 and $125 for the three months ended March 31, 2024 and 2023, respectively.

Operating expenses from the flex center properties were $158,729 for the three months ended March 31, 2024, a decrease of $45,005 over flex center property operating expenses for the three months ended March 31, 2023 due to decreased operating expenses from the Greenbrier Business Center Property of $23,324, from the Parkway Property of $13,254, and from the Brookfield Center Property of $8,427.

| ​ ​ ​ ​ Flex Center Properties | ​ ​ ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 ​ ​ | ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ ​ ​ ​ | ​ ​ ​ ​ Increase / (Decrease) ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Brookfield Center Property | ​ | $52,424 | ​ | $60,851 | ​ | $(8,427) |
| Greenbrier Business Center Property (1) | ​ | ​ 61,868 | ​ | ​ 85,192 | ​ | ​ (23,324) |
| Parkway Center Property (2) | ​ | ​ 44,437 | ​ | ​ 57,691 | ​ | ​ (13,254) |
| ​ | ​ | **$158,729** | **​** | **$203,734** | **​** | **$(45,005)** |

(1) Includes bad debt expense of $14,056 and $24,463 for the three months ended March 31, 2024 and 2023, respectively.

(2) Includes bad debt expense of $0 and $2,534 for the three months ended March 31, 2024 and 2023, respectively.

Operating expenses for STNL properties were $7,708 for the three months ended March 31, 2024, a decrease of $20 from operating expenses from hotel properties for the three months ended March 31, 2023, due to decreased operating expenses from the T-Mobile Property offset by increased operating expenses of $94 for the East Coast Wings Property.

| ​ ​ ​ ​ Single Tenant Net Lease Properties | ​ ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 ​ | ​ | ​ ​ 2023 ​ | ​ ​ ​ ​ | ​ ​ ​ ​ Increase / (Decrease) ​ |
| --- | --- | ---: | --- | ---: | --- | ---: |
| East Cost Wings Property (Ashley Plaza) | ​ | $3,719 | ​ | $3,625 | ​ | $94 |
| T-Mobile Property (Ashley Plaza) | ​ | ​ 3,989 | ​ | ​ 4,103 | ​ | ​ (114) |
| Citibank Property | ​ | ​ — | ​ | ​ — | ​ | ​ — |
| ​ | **​** | **$7,708** | **​** | **$7,728** | **​** | **$(20)** |

### Operating Income (Loss)

Operating income for the three months ended March 31, 2024 was $2,764,760, an increase of $3,105,476 from the operating loss of $340,716 for the three months ended March 31, 2023. This increase was a result of increased investment property operating income of $240,441, decreased legal, accounting and other professional fees of $132,550, decreased management restructuring expenses of $241,450, decreased loss on impairment of $36,743, and decreased depreciation and amortization expenses of $143,872, offset by increased share based compensation expenses of $277,500, and increased corporate general and administrative expenses of $179,745.

### Interest Expense

Interest expense was $876,748 and $864,052 for the three months ended March 31, 2024 and 2023, respectively, as follows:

| ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 | ​ | ​ ​ 2023 | ​ ​ ​ ​ | ​ ​ ​ ​ Increase / (Decrease) |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Franklin Square | ​ | $134,634 | ​ | $133,233 | ​ | $1,401 |
| Hanover Square | ​ | 129,248 | ​ | 173,863 | ​ | (44,615) |
| Ashley Plaza | ​ | 105,514 | ​ | 106,490 | ​ | (976) |
| Brookfield Center | ​ | 47,825 | ​ | 48,229 | ​ | (404) |
| Parkway Center | ​ | ​ 67,645 | ​ | ​ 30,672 | ​ | ​ 36,973 |
| Wells Fargo Mortgage Facility | ​ | ​ 210,320 | ​ | ​ 212,761 | ​ | ​ (2,441) |
| Wells Fargo Line of Credit | ​ | ​ 15,144 | ​ | ​ — | ​ | ​ 15,144 |
| Amortization and preferred stock dividends on mandatorily redeemable preferred stock | ​ | 164,126 | ​ | 158,804 | ​ | 5,322 |
| Other interest | ​ | 2,292 | ​ | — | ​ | 2,292 |
| **Total interest expense** | **​** | **$876,748** | **​** | **$864,052** | **​** | **$12,696** |

Total interest expense for the three months ended March 31, 2024 increased by $12,696 over the three months ended March 31, 2023. This increase was a result of increased interest of $1,401 from the Franklin Square Mortgage, $36,973 from the Parkway Mortgage, $15,144 from the Wells Fargo Line of Credit, $5,322 of amortization and preferred dividends on the Company’s mandatorily redeemable preferred stock, and $2,292 of other interest, offset by decreased interest expense from the Ashley Plaza mortgage of $976, the Brookfield mortgage of $404, $44,615 from the sale of the Hanover Square Shopping Center Property, and $2,441 from the Wells Fargo Mortgage Facility. 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 condensed consolidated financial statements.

### Other Income

During the three months ended March 31, 2024, other income was $44,889, an increase of $34,059 from other income of $10,830 for the three months ended March 31, 2023. Other income for the three months ended March 31, 2024 consisted of $35,338 in income related to the fair value change of the interest rate cap, and interest income of $9,551. Other income for the three months ended March 31, 2023 consisted of interest income of $10,830.

### Other Expense

During the three months ended March 31, 2024, other expense was $0, a decrease of $39,868 from other expense of $39,868 for three months ended March 31, 2023. Other expense for the three months ended March 31, 2023 consisted of $39,868 in expense related to the fair value change of the interest rate cap.

### Net Income (Loss)

Net income was $1,932,901 for the three months ended March 31, 2024, before adjustments for net income (loss) attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net income attributable to our common shareholders was $1,357,398. Net loss was $1,233,806 for the three months ended March 31, 2023, before adjustments for net income (loss) attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net loss attributable to Medalist common shareholders was $1,221,295, for the three months ended March 31, 2023.

Net income for the three months ended March 31, 2024 increased by $3,166,707 over the net loss from the three months ended March 31, 2023, before adjustments for net loss attributable to noncontrolling interests. After adjusting for noncontrolling interests, the net income attributable to Medalist common shareholders for the three months ended March 31, 2024 increased by $2,578,693 over the net loss from the three months ended March 31, 2023.

### 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 March 1995 White Paper (as amended in November 1999, April 2002 and December 2018). As defined by NAREIT, FFO represents net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, 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.

NAREIT’s December 2018 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 shareholders and noncontrolling interests (i.e. 100% of depreciation and amortization are “added back” without reduction to reflect the noncontrolling owners’ interest in such items), our company believes that the appropriate starting point for the calculation is the net income (loss) before allocation to noncontrolling interests. This allows our company 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 company’s shareholders.

Below is our company’s FFO, which is a non-GAAP measurement, for the three months ended March 31, 2024 and 2023:

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 | ​ | ​ ​ 2023 |
| --- | --- | ---: | --- | --- |
| Net income (loss) | ​ | $1,932,901 | ​ | ​ (1,233,806) |
| Depreciation of tangible real property assets (1) | ​ | 594,391 | ​ | ​ 674,398 |
| Depreciation of tenant improvements (2) | ​ | 200,231 | ​ | ​ 205,153 |
| Amortization of tenant improvement lease incentives (3) | ​ | ​ 741 | ​ | ​ — |
| Amortization of leasing commissions (4) | ​ | 45,839 | ​ | ​ 31,930 |
| Amortization of intangible assets (5) | ​ | 172,015 | ​ | ​ 244,867 |
| Gain on disposal of investment property (6) | ​ | ​ (2,819,502) | ​ | ​ — |
| Loss on impairment (6) | ​ | — | ​ | ​ 36,743 |
| Loss on extinguishment of debt (7) | ​ | ​ 51,837 | ​ | ​ — |
| Funds from operations | ​ | **$178,453** | ​ | **$(40,715)** |

(1) Depreciation expense for buildings, site improvements and furniture and fixtures.

(2) Depreciation of tenant improvements, including those (i) acquired as part of the purchase of the retail center and flex center properties and (ii) constructed by our company for the retail center properties and flex center property subsequent to their acquisition.

(3) Amortization of tenant lease incentives paid subsequent to the acquisition of the properties.

(4) Amortization of leasing commissions paid subsequent to the acquisition of the properties.

(5) Amortization of intangible assets acquired as part of the purchase of the retail center properties and flex center property, including leasing commissions, leases in place and legal and marketing costs.

(6) NAREIT’s December 2018 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, NAREIT’s December 2018 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.”

(7) Consistent with the treatment of impairment write-downs, our company includes an adjustment for its loss on extinguishment of debt.

NAREIT’s December 2018 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 NAREIT’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.

Total AFFO for the three months ended March 31, 2024 and 2023 was as follows:

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ For the three months ended March 31, 2024 | ​ | ​ ​ 2023 |
| --- | --- | ---: | --- | ---: |
| Funds from operations | ​ | $178,453 | ​ | $(40,715) |
| Amortization of above market leases (1) | ​ | 15,434 | ​ | 27,343 |
| Amortization of below market leases (2) | ​ | (79,856) | ​ | (100,361) |
| Straight line rent (3) | ​ | (1,869) | ​ | (48,899) |
| Capital expenditures (4) | ​ | (226,662) | ​ | (647,690) |
| Decrease (increase) in fair value of interest rate cap (5) | ​ | (35,338) | ​ | 39,868 |
| Amortization of loan issuance costs (6) | ​ | 23,767 | ​ | 26,990 |
| Amortization of preferred stock discount and offering costs (7) | ​ | 64,126 | ​ | 58,804 |
| Share-based compensation (8) | ​ | 277,500 | ​ | — |
| Bad debt expense (9) | ​ | 14,056 | ​ | 27,122 |
| **Adjusted funds from operations (AFFO)** | ​ | **$229,611** | ​ | **$(657,538)** |

(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, building and site improvements and purchases of furniture, fixtures and equipment that have not been reimbursed by property escrow accounts. 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 and Clemson Best Western 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 preferred stock discount over its five-year term.

(8) Adjustment to FFO for amortization of non-cash expenses recognized as a result of amortizing the preferred stock offering costs over its five-year term.

(9) NAREIT’s December 2018 White Paper provides guidance on non-cash revenues and expenses, stating, “To provide an opportunity for consistent analysis of operating results among REITs, NAREIT encourages those reporting FFO to make supplemental disclosure of all material non-cash revenues and expenses affecting their results for each period. Our company has elected to include non-cash expenses (bad debt expense) in its calculation of AFFO.

## Market risk

As filed, 180 characters.

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.

## Controls and procedures

As filed, 3,389 characters.

### 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, 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 principal executive officer and principal financial officer, regarding the effectiveness of our disclosure controls and procedures as of March 31, 2024, the end of the period covered by this Quarterly Report. Based on the foregoing, our principal executive officer and principal financial officer have concluded, as of March 31, 2024, 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 principal executive officer and principal financial officer, evaluated, as of March 31, 2024, 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 principal executive officer and principal financial officer concluded that our internal control over financial reporting, as of March 31, 2024, were effective.

This Quarterly Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit the Company 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.

## Risk factors

As filed, 138 characters.

**We have omitted a discussion of risk factors because, as a smaller reporting company, we are not required to provide such information.**

Filed May 9, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-007624. Last ingested by Listed: Oct 30, 2026, 16:11 ET. No prices; not investment advice.