Q4 2019 Earnings Call

Good morning, welcome to medalist diversified <unk> fourth quarter fiscal year 2019 earnings call an update on March 4th the company issued a press release that provided an overview of its results. Today's conference is being recorded and will be available online all participants on this call will be in listen only mode.

The call will be followed by a question answer session.

Before the call begins it relates to remind everyone that various remarks about future expectations plans or prospects constitute forward looking statements for purposes of safe Harbor provisions under the private Securities Litigation Reform Act of 1995.

Cautions that these forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated including risks described the company's filing with the FCC.

Any forward looking statements made on this conference call speak only as of today's date Monday March nine 2020 medalist does not intend to update any of these forward looking statements to reflect events or circumstances that would occur. After today's date with that I would like to turn the call over to chairman and CEO.

<unk>. Please go ahead.

Hi, good morning, everyone and thanks for getting on the call.

Yes, I'm more said we are this is an Irish coal however.

I will start by listing somewhat a great fundamentals of our company at this time.

Fourth quarter, we doubled the size of the company with three great assets.

Oh shopping center.

They are.

Very attractive hotel and.

Comps in South Carolina.

And a flex property and Greenville, South Carolina shot show, our already attractive portfolio three other properties. So fourth quarter, we had six properties.

Creating earnings or revenues for us.

And.

With that I'd like to turn it over to Brent when to talk about earnings and then we'll ask any questions.

Regarding that and as we move along I will say that you'd have access to me. After this call you May call me on eight zero for.

Three or four four.

For for.

Three five.

Right.

Good morning.

As Tim mentioned like start off with.

Some major kind of bigger picture items.

During the fourth quarter of 2019 or.

God doubled from three to six properties, which increased our assets by $30 million over.

December 31st 2018 assets.

During the fourth quarter, our revenues increased.

66.8% over the fourth quarter 2018.

From.

One.

To $3.1 million and that was due to the three acquisitions that closed.

Which we had the benefit of all three properties during the fourth quarter.

During the fourth quarter. We also saw to decrease the nonrecurring expenses are primarily noncash share based compensation.

Adam is at a loss on pyramid.

Our net loss for the quarter was $734000 compared to a million thought for the quarter ended.

Number 31st 2018.

As a rate we have very heavy noncash depreciation and amortization items. So we will be talking primarily going forward about net losses, but when adjusted.

For those noncash items.

We will start to see stronger cash flow going forward.

This leads into at that though which is a supplemental financial measure that we use.

During the fourth quarter.

Ended December 31st 2019, or after that though increased by $823000 to $380000 over the fourth quarter 2018. This is a eight cents per.

For a common share.

For the four year, our net loss was $3.8 million compared to $2.9 million to prior year again. This is a function.

Nonrecurring expenses and heavy depreciation and amortization costs.

[noise] our.

Looking at our [noise].

Hey, I thought that whatever so as I said, our after that though increased significantly but our funds from operations also increased substantially from $769000 negative in 2018 fourth quarter, two $287000 positive in the fourth quarter 2019 or no.

Over a million dollar increase.

So going forward.

Oh, we plan to add.

One to two properties of the near term.

Which will.

Create more cash flow.

It would be accretive to the right.

Would you don't have a prediction on when the they will close but we expect them to close to the first half of the year.

No we don't have a closing date yet.

We our plans for the future or too.

Well a significantly.

You are buying properties in the southeast.

Where cap rates are 79%.

A much higher yields than in primary cities.

In the secondary tertiary markets are the southeast.

With that I'll open it up for questions regarding our earnings.

Thank you if he would like to ask the question. Please press star one on your telephone keypad confirmation Tele indicate your line is in the question you kill you May press star to if he would like to remove your question from the Q.

For a participant using speaker equipment may be necessary to pick up your handset before pressing the star he is.

Our first question is from Ben Zucker with L. Aegis capital. Please proceed.

Oh, good morning, guys. Thanks for taking my questions and congratulations on a what I view as a as a pretty strong quarter and definitely a nice.

Turning around and jump in the business and the underlying metrics.

I guess just to kind of kicked off you guys now own two hotels could you talk about maybe seasonality factors and how that might have played into both the fourth quarter results. But then also kind of your outlook and your expectations looking out for 2020.

Sure. These limited service hotels, we vote or that we own now and have over the past usually in November and December and sometimes a january the seasonality where business travel is a lower or a group travel is lower so we always have to allow for that we had some seasonality of the two hooked.

Tells a in November December a we expect revenue to pick up or going into the fourth quarter fourth quarter and certainly into the second quarter.

Both situations.

Our group trips and other activities in the years, where our hotels are located and we should see remedies picked up significantly like I said in the first to second quarter.

Gotcha, and then just real quickly staying on the topic of on hotels I, you know notwithstanding that the seasonality you're talking about have you seen any kind of change or potential change in demand that could be attributable to want to the corona virus, yet or is it still too early to tell.

We have not seen any change in a demand as a result to that we've checked with our hotel managers that are booking rooms.

Really on a every other day basis in a we've not seen any problems with that yet.

Understood on the all your lease expiration schedule I believe you had some leases that were set to expire in 2020, Howard just from a high level how are those conversations shaping out with tenants a thus far there any update said that you could provide.

We've done I contacted those tenants yet, we usually wait until six months before prior to a there a expirations and.

So that's our strategy we use a outside.

Leasing agents or to handle our all leashing arrangements, but we usually wait until a six months prior to a tenant I'm sorry.

Understood and then you started touching on the deployment or talking about maybe closing some more assets in the first.

Half could you maybe talk about the types of assets that you guys are looking at I know the market will always be the southeast put as or anything like do you think you might do a foray into multifamily or do you think you'll be sticking with the company's kind of a retail strip centers just want to maybe get a flavor for what you guys are looking out in your.

Type one.

Well, we love multifamily so expensive right now.

They'll get strategy or purchasing multifamily.

Okay properties, we have a on our radar. It one is a flex property 90000 square feet located in Chesapeake Virginia.

In a great aereo Chesapeake well those a lot of economic activity.

Another ish of properties, a shopping center as you produce Virginia.

Heavily travel road or Warwick Boulevard and they produce.

The main acres there are a autozone.

Food line.

And then just touching back on bringing that all back home so kind of the current events, which is on everyone's mind I think of the Corona virus. How are you view and you know the rush or patients towards deploying capital and I'm asking that because obviously debt costs continue to get very.

Favorable so the opportunity to lock in some ultra cheap or long term debt is probably better than it's been in recent history right now, but there's also still some uncertainty. So are you guys, maybe a little bit more cautious and try and no wait and see with how everything plays out or or do you think you're really going to be still just trying a lot.

Second the properties that you're looking at right now and take advantage of the low cost debt markets.

Thanks for asking that question I mean right now.

The latest numbers, we've seen a way sub 4% on most assets.

I would say right now we can get three they have to three or three quarters on a shopping center a neighborhood shopping center flex property or hotels or multifamily I think is around three Ted.

All for 10 years fixed very very cheap debt, we have not seen a lot of Ah Ah handwringing regarding the CRO to virus in the southeast a activities are still going on.

The Atlanta Cook Inlet Acos Conference HCC tournament for basketball is still on for this week.

We have a oh furniture market, which is a huge event and the Greensboro area that will benefit our Hampton Inn that is no. One has cancel their so we haven't seen any real worry about the CRO to virus in our area as of yet.

So we're very fortunate in that regard in my opinion.

We keep our fingers crossed if we want.

Right well listen I I appreciate the clarity there I look forward to reviewing the the 10-K filing when that comes out and and again just just want to say congratulations I think the the sequential jump in earnings that certainly you know kind of showing the value of of the of the property as you've been assembly.

Thank you bid.

As a reminder, just star one on your telephone keypad, if he would like to ask the question. Our next question is from Jon Wheeler with Wheeler Real estate investments. Please proceed.

Good morning, guys, it's Jon Wheeler, how youre doing this morning.

Very well.

Wanted to touch base I had a couple of questions I'd like to ask online and offline as well or could you repeat your telephone number Jim.

Sure eight zero for 344.

For for three five.

Well for three five.

Alright. Thank you appreciate it.

Looking at some of the financials on the FCC website, and again I would agree with the previous caller congratulations on doubling the size of the portfolio from three to six.

My first question is and again it maybe more of an off line question, but it looks like your opinion based upon fourth quarter. The eight cents. If you just annualize that times four quarters.

Assuming that was the number you're paying out 50 cents a share annualized and you're only earned eight cents in fourth quarter.

My question is when you do the math on that you're paying out about 36% more the what's your earning.

And I'd love to get your comment on that because it seems a pretty aggressive for example, if you're earning age sensing you're paying out 12, and a half sense you can get addressed that first question.

Sure you know I'm, the two hotels has seasonality issues and the November and December if they perform the way they normally do during the year, we've had very close to covering or Oh, we're covering our dividend.

So you take that you couldn't bridge, if you use fourth quarter results as a benchmark metric you couldn't bridge that 36% on a quarterly basis. So Q1 over Q4 last year.

You want to Q4, although Q1.

Oh.

Q1 last year has nothing to do with the financial today, Oh, no I'm talking about some new I'm, sorry, I'm I'm talking about Q1 of a 20 when you report.

Based on what's your statement was if you earn sheet here.

I should be much closer to covering our dividend in Q1 that we were in Q4, because we expect the hotels to perform better Q2, we expect them to perform better than Q1. So we are getting very close to either covering for Oh.

Over covering our dividend I'm in the next couple of quarters.

Okay, that's good to hear.

Tell me about you're a diversified rate and the market traditionally I know you're on NASDAQ the market traditionally discounts diversified rates and I heard this morning that not along you an office or a warehouse retail and hotels, but you mentioned apartments. If you did.

That that would be for different property types are you running financials individually on each product type internally and then have a consolidated statement.

With that currently those three different product types combined.

That's correct look vis vis vis this strategy is born out of a bill elliot's experience of the commercial real estate space. Our strategy is to build a portfolio of workforce.

Necessity real estate comprised of four property types and those for more property types reflects industrial.

Limited service hotels, multi family and neighborhood retail not large a shopping malls.

Okay. We have managed tell me actually know that Ive property since we started as a private equity company you know three.

Okay. Thank you so tell me about external management when the company's externally managed a as a real estate investment Trust publicly traded real estate investment trust like the diversified reach their discount. It. When you are externally manage my experiences the stock is discounted and when I look at.

Where are the 52 week high the stock was versus where it is today.

It looks like you're down 72%. If you look at 52 weeks ago versus today. So if you could address or external manager what else might rise let off line. John you could call me a backup I never will talk about that.

Our fundamentals are very strong.

It's a street wants it just chemist because we're diversified that's your option, but you may call me back on that.

Question.

Okay. Good good I will I'm, okay with a whole my comments, there, but certainly to have some more hard line questions that will need direct answers and being a stockholder I'm sure you'll be transparent Whitney.

Sure absolutely.

Thank you all appreciate it.

With no more further questions in the queue I would like to turn the conference back over to Mr. messaging for additional closing remarks.

Again, thanks, everyone for getting on the call. This morning, we are very happy with our earnings were very excited about the future.

Again, we plan to add properties as we move along with <unk> plan to grow.

We have a extremely strong team of people.

Working with Us and we're very happy where the company is now and we.

Thank you for being all this morning.

Ladies and gentlemen that does conclude our conference for today. Thank you. So much for your participation have a wonderful day you may now disconnect.