Hanover Square North shopping center was Medalist’s largest local holding. (BizSense file)
As it looks to continue to find its footing after a management shakeup last summer, a local real estate firm has offloaded its main Richmond-area property.
Medalist Diversified REIT last month sold Hanover Square, a 73,000-square-foot Mechanicsville shopping center it had owned since 2018. That’s according to an SEC filing made by the publicly traded, downtown-based firm.
The Marshalls- and Old Navy-anchored retail strip at 7230 Bell Creek Road sold for $13 million. The sale included the divestiture of Medalist’s 84 percent stake in the property and the 16 percent stake of its tenant-in-common partner.
The buyer was North Carolina-based Prudent Growth Partners. Its other Richmond-area holding is the Shoppes at River Forest in Chester, according to Prudent’s website.
Medalist and its partner bought Hanover Square in May 2018 for $12.17 million. The company said last month’s sale generated cash proceeds of $2.64 million after paying off the $9.5 million mortgage.
While Medalist would not comment on what drove the sale, its SEC filings show that interest rates likely played a hand.
The mortgage rate on Hanover Square jumped last year from 4.25 percent to 6.94 percent, which put it at a higher rate compared to the longer-term fixed rates on Medalist’s other properties.
Hanover Square North is anchored by Old Navy.
Hanover Square was 96.7 percent leased as of Dec. 31, filings show. Tenants in the center pay an average of $16.03 per square foot. Old Navy pays $229,000 annually for its 15,000-square-foot space. Marshalls pays $336,000 for its 38,000-square-foot space.
With the shopping center now out of its hands, Medalist still owns an adjacent outparcel at Hanover Square, an undeveloped 0.8-acre parcel that it has also owned with its partner since 2018. And last week Medalist purchased the partner’s 16 percent stake in the outparcel for $98,000, giving the REIT full ownership of the site.
The company said it would look to eventually develop the parcel for a single-tenant, net-lease user. That’s the sort of project CEO Frank Kavanaugh, who was installed last summer after the ousting of Medalist’s founders, has said he wants to do more of now that he’s at the helm.
The company took another step in that direction in February when it disclosed early details of an agreement with an entity controlled by Kavanaugh to acquire a property that’s leased by Citibank in a single-tenant net lease structure. Medalist has yet to disclose further specifics of the deal, including the location and the price it expects to pay.
Other than the Hanover Square outparcel, Medalist no longer owns any Richmond-area assets. Its seven other properties consist of three retail centers in North Carolina, one in South Carolina and flex industrial space in Virginia Beach, Chesapeake and South Carolina.
Also last month, Medalist had another run-in with shareholder Jon Wheeler, who has taken an aggressive, vocal approach over the last 18 months in an attempt to gain more influence over the company.
His latest effort came March 19 in the form of an unsolicited offer to acquire all of Medalist’s shares and take the REIT private.
The letter, which Wheeler shared with BizSense, was sent by his new firm, Resurgent Realty Trust, and offered to buy each outstanding share of Medalist stock for $6.92 in cash.
With 2.23 million shares outstanding, the offer was valued at $15.47 million, the letter states. Wheeler said the per-share offer represented a 20 percent premium based on the closing price of Medalist’s stock on March 19.
“We believe this is a compelling premium that the Board will determine to be in the best interests of MDRR’s current shareholders,” the letter stated.
Wheeler said he had secured a financing commitment from an “alternative investment manager” and that he would plan to use the Medalist portfolio as well as additional financing to acquire 10-15 assets per year.
However, Wheeler’s overture didn’t seem to gain any traction.
In a response sent March 20 and also shared with BizSense, Kavanaugh told Wheeler, “At present the company is not for sale.”
Frank Kavanaugh
Kavanaugh argued that Medalist’s financial prospects have improved, including an increase in net operating income, reduced expenses, and lower debt due in part to the Hanover Square sale.
“We welcome you as an investor as we believe the current market price does not reflect the underlying value of our assets and organization,” Kavanaugh said in his response.
The company told BizSense its board considered Wheeler’s approach and that its legal counsel determined it was not an offer that required any further SEC disclosures.
Wheeler, reached last week, told BizSense he still believes taking Medalist private is a prudent approach. “This company at its present day size is better to be private,” he said.
Medalist reported a loss of $4.5 million in 2023, compared to a loss of $4.7 million in 2022.
Medalist’s stock, which trades as MDRR on Nasdaq, closed Friday at $5.77 a share. The stock is up nearly 9 percent over the last month but down about 13 percent over the last 12 months.
Its share price is down 92 percent since going public in 2018.