Executive Summary

Q1 2023 printed softer headline results as MDRR’s pivot away from hotels and elevated advisory costs weighed on GAAP earnings and FFO, while underlying retail/flex operations and leasing improved; Total revenue fell 15.3% YoY to $2.46M, but same-property NOI rose 1.4% and retail same-property NOI rose 8.6% .
Non-GAAP metrics weakened: FFO fell to ($0.04)M and AFFO to ($0.66)M on higher legal fees tied to strategic alternatives and elevated leasing capex (tenant improvements/commissions) amid robust leasing activity .
Portfolio quality strengthened: occupancy hit 96.7% (vs 94.0% LY), WALT ~4.1 years, weighted average mortgage rate 4.1% and maturity 5.84 years; retail/flex now 100% of NOI after exiting hotels .
Near-term catalysts center on the ongoing strategic review and corporate actions (1-for-8 reverse split completed May 3; Nasdaq bid-price compliance regained May 18), alongside continued leasing momentum .

What Went Well and What Went Wrong

What Went Well
- Same-property performance and occupancy: Same-property NOI +1.4% YoY to $1.51M; retail same-property NOI +8.6% YoY, with portfolio occupancy up to 96.7% and WALT ~4.1 years, reflecting successful leasing and tenant retention .
- Retail resilience post-repositioning: Retail property revenues +24.0% YoY to $1.89M as the portfolio is now fully retail/flex after hotel divestitures, strengthening cash flow visibility .
- Management execution signal: “Robust leasing activity late in 2022 and year-to-date in 2023 … increased our portfolio-wide occupancy to 96.7 percent,” underscoring demand in the Company’s markets (CEO, Messier) .
What Went Wrong
- Headline growth and profitability: Total revenue -15.3% YoY to $2.46M and NOI -11.6% to $1.66M due to the prior sale of the Clemson hotel and higher corporate costs; operating loss widened to ($0.34)M .
- FFO/AFFO deterioration: FFO to ($0.04)M (vs $0.39M LY) and AFFO to ($0.66)M (vs $0.22M LY) on legal fees linked to strategic alternatives and higher leasing-related capex (reflecting heavy leasing) .
- Dividend optics: Common dividend paid declined to $0.01/share in Q1 2023 (from $0.02/share in Q1 2022) as AFFO turned negative, raising questions about near-term dividend capacity .

Financial Results

Revenue, earnings, and cash flow (YoY: Q1 2022 → Q1 2023)

Metric	Q1 2022	Q1 2023
Total Revenue ($)	$2,903,964	$2,460,976
Operating (Loss) ($)	($234,398)	($340,716)
Net Loss to Common ($)	($989,284)	($1,221,295)
Loss per Share ($)	($0.06)	($0.07)
NOI ($)	$1,880,781	$1,663,484
Same-Property NOI ($)	$1,488,152	$1,508,255
FFO ($)	$387,155	($40,715)
AFFO ($)	$217,023	($657,538)
Dividend per Common Share ($)	$0.02	$0.01
Portfolio Occupancy (%)	94.0% (as of 3/31/22)	96.7% (as of 3/31/23)

Sequential context (Q3 2022 → Q1 2023)

Metric	Q3 2022	Q1 2023
Total Revenue ($)	$2,841,073	$2,460,976
Loss per Share ($)	($0.10)	($0.07)
NOI ($)	$1,488,336	$1,663,484
Same-Property Retail & Flex NOI ($)	$1,071,278	$1,508,255
Portfolio Occupancy (%)	96.5% (as of 9/30/22)	96.7% (as of 3/31/23)

Segment revenue mix (YoY: Q1 2022 → Q1 2023)

Segment Revenues ($)	Q1 2022	Q1 2023
Retail Property Revenues	$1,525,085	$1,891,679
Flex Property Revenues	$613,390	$569,297
Hotel Property Revenues	$765,489	$0
Total Revenue	$2,903,964	$2,460,976

Property NOI composition (Q1 2023 vs Q1 2022)

NOI ($)	Q1 2022	Q1 2023
Retail Property NOI	$1,064,536	$1,311,319
Flex Property NOI	$423,616	$352,165
Hotel Property NOI	$392,629	$0
Total NOI	$1,880,781	$1,663,484

KPIs and balance sheet

KPI	Q1 2022	Q1 2023
Total Properties (Retail/Flex)	7 (as of 3/31/22)	8 (as of 3/31/23)
Total Sq Ft	771,550 (as of 3/31/22)	851,282 (as of 3/31/23)
Occupancy (Total)	94.0% (as of 3/31/22)	96.7% (as of 3/31/23)
WALT – Retail (yrs)	4.44 (FY22)	4.68 (Q1’23)
WALT – Flex (yrs)	2.37 (FY22)	2.47 (Q1’23)
WALT – Portfolio (yrs)	3.91 (FY22)	4.12 (Q1’23)
Weighted Avg Mortgage Maturity (yrs)	6.08 (FY22)	5.84 (Q1’23)
Weighted Avg Mortgage Rate	4.2% (FY22)	4.1% (Q1’23)
Cash and Restricted Cash ($)	$8,079,034 (Q1’22)	$4,985,365 (Q1’23)
Total Debt, net ($)	$61,340,259 (12/31/22)	$61,065,672 (3/31/23)

Notes: Q1’22 WALT and debt metrics shown where disclosed in FY22 supplement for directional context .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Formal Financial Guidance	2023	Not provided	Not provided	Maintained (no guidance)
Dividend per Common Share	Q1 2023	$0.02 (Q1 2022 actual)	$0.01 (Q1 2023 actual)	Decreased (actual paid)

No explicit revenue, margin, OpEx, or tax guidance ranges were provided in Q1 2023 disclosures .

Earnings Call Themes & Trends

No Q1 2023 earnings call transcript was available in company filings; we did not locate a transcript in our document system. Themes below reflect press releases and filings across recent quarters.

Topic	Previous Mentions (Q3 2022, FY 2022)	Current Period (Q1 2023)	Trend
Strategic alternatives	Special Committee formed; JLL Securities engaged; legal counsel retained (3/10/23)	Legal fees elevated; continued pursuit of alternatives	Ongoing review; costs impacting FFO
Capital markets/listing	—	1-for-8 reverse split effective 5/3; bid-price compliance regained 5/18	Execution of listing remediation
Portfolio repositioning (exit hotels)	Completed sale of Clemson Best Western; portfolio now retail/flex	Hotel revenues NOI now zero; retail/flex drive results	Mix fully retail/flex
Leasing/occupancy	Occupancy ~96.5%; strong leasing	Occupancy 96.7%; 8 new and 11 renewals; WALT ~4.1 years	Improving utilization/duration
Debt & rates	Weighted average rate ~4.2%, maturity ~6.1 yrs (FY22)	Weighted average rate 4.1%, maturity 5.84 yrs	Stable cost, slightly shorter term
Dividend	Paid $0.02 in Q3’22	Paid $0.01 in Q1’23	Lower payout amid AFFO pressure

Management Commentary

“First quarter results were disappointing and we do not believe they reflect the underlying strength of our portfolio… Robust leasing activity late in 2022 and year-to-date in 2023 … increased our portfolio-wide occupancy to 96.7 percent.” — Thomas E. Messier, Chairman & CEO .
“Completed the repositioning of our portfolio, which is now exclusively comprised of retail and flex/industrial properties that have proven to be resilient… occupancy of 96.5% and long-tenured, primarily fixed rate debt.” — CEO commentary on Q3 2022 .
Strategic review update: Special Committee with independent directors continues to evaluate alternatives; JLL Securities is financial advisor . Reverse split approved and effected to support bid-price compliance; compliance subsequently regained .

Q&A Highlights

We found no Q1 2023 earnings call transcript in company filings; no public Q&A content to summarize from our document set (earnings-call-transcript: none found) [ListDocuments: earnings-call-transcript none].

Estimates Context

S&P Global Wall Street consensus for Q1 2023 EPS and revenue was unavailable via our estimates tool at this time (daily request limit exceeded); consequently, we cannot provide an estimates comparison for MDRR’s Q1 2023 results. Values would be retrieved from S&P Global if available.

Key Takeaways for Investors

Underlying operating strength contrasts with GAAP/FFO softness: Same-property NOI grew and occupancy/WALT improved, but higher legal costs and leasing-related capex pushed FFO/AFFO negative — monitor expense normalization as the strategic review progresses .
Portfolio quality upgraded: Full exit from hotels concentrates the platform in necessity-oriented retail/flex (retail revenues +24% YoY) with high occupancy and multi-year WALT, supportive of medium-term stability .
Capital markets milestones reduce overhang: Reverse split completed and Nasdaq compliance regained; corporate actions can stabilize the listing profile, but do not address fundamentals by themselves .
Dividend prudence: Lower Q1 dividend ($0.01) and negative AFFO highlight the need for sustained leasing-driven cash flow and expense control to underpin distributions near term .
Watch leasing conversion to cash: Elevated leasing capex hurt AFFO this quarter; as new/renewed leases commence, look for NOI uplift and lower run-rate capex to improve AFFO trajectory .
Strategic alternatives as a potential catalyst: Any announced transaction (asset sales/JV, balance sheet moves) could re-rate the equity; timing and outcomes remain uncertain .
Risk lens: Interest rates stable at ~4.1% weighted average; refinancing and macro demand remain key variables for multi-tenant retail/flex exposure in MDRR’s markets .

Additional relevant press releases in the period:

Reverse stock split announcement and process (4/18 and 5/3/23) .
Nasdaq minimum bid-price compliance regained (5/22/23) .
Board addition tied to cooperation agreement and Special Committee (5/24/23) .

Medalist Diversified REIT, Inc. (MDRR)·Q1 2023 Earnings Summary