Exhibit 99.1

 

LANCER CENTER SHOPPING CENTER

 

 

 

FINANCIAL STATEMENT

 

 

Three Months Ended March 31, 2021 (unaudited) and

Year Ended December 31, 2020

 

 

LANCER CENTER SHOPPING CENTER

 

 

FINANCIAL STATEMENT

 

 

Three Months Ended March 31, 2021 (unaudited) and

Year Ended December 31, 2020

 

Table of Contents

 

 

Report of Independent Auditor	1
Statement of Revenues and Certain Operating Expenses	2
Notes to Statement of Revenues and Certain Operating Expenses	3

 

 

Report of Independent Auditor

 

To the Board of Directors

Medalist Diversified REIT, Inc.

 

We have audited the accompanying statement of revenues and certain operating expenses (the “Statement”) of Lancer Center shopping center (the “Property”), as defined in Note 1 of the Statement, for the year ended December 31, 2020.

 

Management’s Responsibility for the Statement

Management is responsible for the preparation and fair presentation of this Statement, in accordance with accounting principles generally accepted in the United States of America that is free from material misstatement, whether due to fraud or error.

 

Auditor’s Responsibility

Our responsibility is to express an opinion on this Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statement.

 

We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenues and certain operating expenses of the Property for the year ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

 

Emphasis of Matter

The accompanying Statement was prepared as described in Note 1, for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to this matter.

 

/s/ Cherry Bekaert LLP

 

Richmond, Virginia

March 9, 2021

 

 

 

 

LANCER CENTER SHOPPING CENTER

 

STATEMENT OF REVENUES AND CERTAIN OPERATING EXPENSES

 

Three Months Ended March 31, 2021 (unaudited) and

Year Ended December 31, 2020

 

		Three months ended
		March 31, 2021				2020
		Unaudited
REVENUE
Retail center property revenues		$	255,313			$	1,016,010
Retail center property tenant reimbursements			22,053				129,905
Total revenues			277,366				1,145,915
CERTAIN OPERATING EXPENSES
Real estate taxes and insurance			44,529				178,116
Operating and maintenance			14,577				70,279
Management fee			8,279				34,850
Bad debt expense			-				16,077
Total certain operating expenses			67,385				299,322
Revenues in excess of certain operating expenses		$	209,981			$	846,593

 

See accompanying notes to statement of revenues and certain operating expenses.

  

  

Notes to Statement of Revenues and Certain Operating Expenses

 

Note 1.  Basis of Presentation

 

The accompanying statement of revenues and certain operating expenses (the “Statement”) includes the operations of Lancer Center shopping center (the “Property”).

 

The Statement has been prepared for the purpose of complying with Rule 8-06 of Regulation S-X promulgated under the Securities Act of 1933, as amended. Accordingly, the Statement is not representative of the actual operations for the periods presented, as revenues and certain operating expenses, which may not be directly attributable to the revenues and expenses expected to be incurred in the future operations of the Property, have been excluded. Such excluded items include certain legal, accounting, maintenance and repair and interest expenses, non-cash expenses such as depreciation, amortization, and amortization of above-market and below-market leases, and interest income. Management is not aware of any material factors during the year ended December 31, 2020 that would cause the reported financial information not to be indicative of future operating results.

 

Note 2.  Nature of Business and Summary of Significant Accounting Policies

 

Basis of accounting:

 

The Statement has been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States (“GAAP”) as determined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”).

 

Revenue recognition:

 

The Property recognizes rental revenue from tenants on a straight-line basis over the lease term when collectability is reasonably assured and the tenant has taken possession or controls the physical use of the leased asset. Tenant recoveries related to reimbursement of real estate taxes, insurance, repairs and maintenance, and other operating expenses are recognized as revenue in the period the applicable expenses are incurred. Tenant recoveries and reimbursable expenses are recognized and presented gross, as the Property is generally the primary obligor with respect to purchasing goods and services from third-party suppliers, has discretion in selecting the supplier and bears the associated credit risk.

 

Income taxes:

 

As a limited liability company, the Property’s taxable income or loss is allocated to its members. Therefore, no provision or liability for income taxes has been included in the financial statement.

 

Use of estimates:

 

Management has made a number of estimates and assumptions relating to the reporting and disclosure of revenues and certain operating expenses during the reporting period to present the Statement in conformity with GAAP. Actual results could differ from those estimates.

 

 

 

Note 3.  Minimum Future Lease Rentals

 

There are various lease agreements in place with tenants to lease space in the Property. As of December 31, 2020, the minimum future cash rents receivable under noncancelable operating leases in each of the next five years and thereafter are as follows:

 

			(Unaudited)
2021			$	969,687
2022				975,710
2023				890,931
2024				632,272
2025				548,676
Thereafter				630,351
Total future rents			$	4,647,627

 

Note 4.  Tenant Concentrations

 

As of the December 31, 2020, the Property’s occupancy rate is 97.25%. For the year ended December 31, 2020, four tenants combine to represent approximately 50% of the Property’s rental revenues.

 

Note 5.  Commitments and Contingencies

 

The Property is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. Management believes that the ultimate settlement of these actions will not have a material adverse effect on the Property’s results of operations.

 

Since March 2020, retail properties such as the Property have been significantly impacted by measures taken by local, state and federal authorities to mitigate the impact of COVID-19, such as mandatory business closures, quarantines, restrictions on travel and “shelter-in-place” or “stay-at-home” orders. While some of these measures have been relaxed by the respective governmental authorities, with the uncertainty resulting from the continued spread of COVID-19, delays in delivering vaccines to the public, and its new variants and the possibility of the re-imposition of mandatory business closures, quarantines, restrictions on travel and “shelter-in-place” or “stay-at-home” orders by some governmental authorities, the negative impact on demand for the goods and services of the retail tenants in the Property could continue to be significant in the coming months.

 

Note 6.  Subsequent Events

 

Management has evaluated subsequent events through March 9, 2021, the date the financial statement was available to be issued and there are no subsequent events for disclosure in the accompanying financial statement.