8-K: Medalist Diversified REIT Announces Acquisition of Two Properties and Private Placement

Medalist Diversified REIT's operating partnership has entered into agreements to acquire two properties in Alabama and Kentucky, funded by preferred and common units, and has also completed a private placement of common stock.

Summary

• Medalist Diversified REIT's operating partnership has agreed to acquire two properties, one in Huntsville, Alabama for $3,145,000 and another in Bowling Green, Kentucky for $2,620,000.
• The acquisitions will be funded through a combination of Series B Preferred Units valued at $25.00 per unit and Common Units valued at $12.50 per unit in the operating partnership.
• The company has made earnest money deposits of $15,000 for each property.
• The company amended its partnership agreement to designate up to 2,000,000 5.0% Series B Convertible Redeemable Preferred Units with a liquidation preference of $27.50 per unit.
• The company received a notice from Nasdaq that its 8.0% Series A Cumulative Redeemable Preferred Stock no longer meets the minimum 100,000 publicly held shares requirement.
• The company plans to redeem all outstanding shares of its 8.0% Series A Cumulative Redeemable Preferred Stock on January 10, 2025, and expects the stock to be suspended from Nasdaq before market open on that date.
• The company completed a private placement of 230,000 shares of common stock at $12.50 per share, raising $2,875,000.
• The board granted waivers to certain investors in the private placement to allow them to own up to 7.50% of the company's outstanding shares.

Sentiment

Score: 5

Explanation: The document contains both positive and negative elements. The acquisitions and capital raise are positive, but the delisting of the preferred stock is a significant negative. The overall sentiment is neutral to slightly negative.

Positives

• The company is expanding its real estate portfolio with the acquisition of two new properties.
• The company is raising capital through a private placement of common stock.
• The company is creating a new series of preferred units that are convertible and redeemable.

Negatives

• The company's 8.0% Series A Cumulative Redeemable Preferred Stock is being delisted from Nasdaq due to not meeting the minimum public float requirement.
• The company is redeeming all outstanding shares of its 8.0% Series A Cumulative Redeemable Preferred Stock, which may impact investors holding that stock.

Risks

• There is no assurance that the company will complete the acquisitions on the terms described or at all.
• The company's 8.0% Series A Cumulative Redeemable Preferred Stock is being delisted from Nasdaq.
• The company's ability to redeem the Series B Preferred Units is dependent on the price of the REIT Common Shares.

Future Outlook

The company expects to complete the property acquisitions and the redemption of the 8.0% Series A Cumulative Redeemable Preferred Stock. The company also needs to submit a compliance plan to Nasdaq by January 27, 2025, to address the delisting notice.

Industry Context

The company is expanding its real estate portfolio, which is a common strategy for REITs. The use of preferred units and common units in the operating partnership to fund acquisitions is a typical structure for REITs. The delisting of the preferred stock highlights the challenges some smaller REITs face in maintaining listing requirements.

Comparison to Industry Standards

• The acquisition of two properties for a combined $5.765 million is relatively small compared to larger REITs, which often acquire properties worth tens or hundreds of millions of dollars.
• The use of operating partnership units to fund acquisitions is a common practice among REITs, allowing for tax-deferred transactions.
• The private placement of common stock at $12.50 per share is a typical method for smaller REITs to raise capital, but the price is below the 52 week high of $17.50.
• The delisting of the preferred stock due to low public float is not uncommon for smaller REITs, and the company's plan to redeem the shares is a standard approach to address this issue.
• Companies such as AGNC Investment Corp. and Annaly Capital Management are examples of larger REITs that issue preferred stock, but they typically have much larger market capitalizations and trading volumes.

Corporate Governance

Related Party Transactions

• The Dan Tibbs Road Contributor and the Scottsville Road Contributor are related parties to the Company because their manager is Frank Kavanaugh, the Company's CEO and a board member.

Stakeholder Impact

• Shareholders will be impacted by the delisting of the 8.0% Series A Cumulative Redeemable Preferred Stock and the private placement of common stock.
• Preferred shareholders will be impacted by the redemption of the 8.0% Series A Cumulative Redeemable Preferred Stock.
• The company's employees may be impacted by the changes in the company's financial position and strategy.

Next Steps

• The company needs to complete the property acquisitions.
• The company needs to redeem the 8.0% Series A Cumulative Redeemable Preferred Stock on January 10, 2025.
• The company needs to submit a compliance plan to Nasdaq by January 27, 2025.
• The company needs to complete the private placement of common stock.

Key Dates

Keywords

real estate, acquisition, preferred stock, common stock, private placement, Nasdaq, delisting, redemption, convertible, REIT