Local real estate firm announces major changes, including sale of half of its properties and management shakeup

July 14, 2023
Posted in News
July 14, 2023 veps

After months of pressure from shareholders and fielding offers for its assets, a publicly traded Richmond real estate firm has major changes in the works.

Medalist Diversified REIT announced Wednesday in an SEC filing its plans to sell four of the eight properties in its portfolio and institute a leadership shakeup.

The downtown-based company said a special committee of its board of directors has completed an “exploration of strategic alternatives,” a process that included marketing its commercial properties for sale.

As a result, the company said the committee approved a potential sale of what amounts to half of its real estate holdings, though it didn’t specify which of its eight properties it would unload nor who the buyer might be.

Medalist owns a mix of shopping centers and flex/industrial buildings, totaling around 850,000 square feet. Its lone Richmond-area holding is Hanover Square North shopping center in Mechanicsville, which is anchored by retailers Marshalls and Old Navy.

In line with what it labeled as strategic shifts, the company also announced that it has begun discussions to significantly restructure its management setup.

While Medalist has a board of directors, owns all its real estate and its stock is traded on Nasdaq, the company and its maneuvers have been largely controlled since its inception by an external management company.

That entity is owned 50/50 by Tim Messier and Bill Elliott, who also serve as Medalist’s CEO and president, respectively.

Such a structure pays Messier and Elliott third-party management fees that have totaled more than $4 million dollars since the company went public in 2018. However, during that time, the company’s stock price has steadily plummeted and is down nearly 93 percent since its IPO.

The discrepancy between those fees and the dwindling stock press has fueled shareholder scrutiny, particularly in recent months with public calls for a change in leadership and an internalization of management.

The company said it plans to do just that and has begun discussions with the external management to consummate the change.

“If completed, the internalization would be expected to lead to streamlined operations, reduced costs, and increased agility, while also fostering a closer alignment between management’s interests and those of the Company’s shareholders,” the company said in the SEC filing.

It said that transition from external to internal management would result in changes to several key leadership roles. While it didn’t offer specifics, those changes likely would affect Messier and Elliott in some way.

“Medalist is committed to a smooth transition process and ensuring continuity of leadership, with the primary focus on preserving and enhancing shareholder value,” the filing states.

It said a completion of the transition hinges on entering into certain, unspecified agreements, likely related to payouts owed to any executives who might be exiting or changing roles.

Medalist did not respond to questions from BizSense on Thursday.

Other changes announced in the filing include a temporary suspension of stock dividends for at least six months.

It also said the company is “exploring diverse opportunities that might include mergers, investments, or other strategic combinations, with a focused objective of enhancing shareholder value.” No further specifics were mentioned in the filing.

The announcement appears to be a sign that the company’s board has taken to heart at least some of the concerns expressed in recent months by shareholders, some of whom went public with their grievances.

“The Board extends its gratitude to shareholders for their patience and feedback throughout this process. As the Company ventures into this significant period of change, the Board reaffirms its commitment to enhancing shareholder value and improving company performance,” the SEC filing states.

The announced changes also come about a month after one of those outspoken shareholders, Frank Kavanaugh, was given a seat on Medalist’s board.

Kavanaugh is one of the company’s largest shareholders, owning nearly 10 percent of its stock. He had previously publicly called for Messier to be removed from his post and replaced by Elliott, and for the elimination of the external management agreement.

Medalist shares trade on Nasdaq and until recently had been in penny stock territory, trading at under $1 per share for nearly a year. At risk of a delisting from the stock market, the company executed a reverse stock split, which shrunk the number of outstanding shares and thereby increased its share price. The shares traded at $0.70 just before the split and opened at more than $5 per share post-split.

The stock closed Thursday at $5.49 per share, down about 2 percent for the day. Its market cap is $12.1 million.

Medalist was founded as a private real estate fund in 2013 before going public five years later. Its headquarters are in the James Center in downtown Richmond.

source: richmondbizsense