Hanover Square North shopping center is Medalist’s lone local holding. (BizSense file)
A changing of the guard has played out at a publicly traded Richmond real estate firm after months of pressure from shareholders and years of plummeting stock prices.
Medalist Diversified REIT announced Tuesday in an SEC filing that it has completed a process to internalize management, resulting in the departure of CEO and board chairman Tim Messier and President Bill Elliott.
The company’s board of directors named as interim CEO and president Frank Kavanaugh, one of the company’s largest shareholders who had publicly called for Messier to be removed from his post and replaced by Elliott, and for the elimination of a management agreement with an external company owned 50/50 by Messier and Elliott.
Timothy O’Brien will serve as board chairman, according to the filing, and Brent Winn will continue as Medalist’s CFO.
A press release included with the filing states: “These changes are expected to lead to streamlined operations, reduced costs, and increased agility. Medalist is committed to a smooth transition process and ensuring continuity of leadership, with the primary focus on preserving and enhancing shareholder value.”
Medalist’s Tim Messier (left) and Bill Elliott
The release included a joint statement from Messier and Elliott, who were quoted as saying:
“Since Medalist Diversified REIT’s founding, we have worked to build a diversified real estate portfolio that is now approximately 98 percent leased, has consistently produced positive cash flow, and performed throughout the COVID-19 pandemic.
“We are proud that Medalist has paid dividends to its shareholders for nine consecutive quarters, even as the REIT industry in general, and microcap REITs in particular, have been impacted by market forces that are causing REITS to trade at a fraction of their worth,” the statement said. “We believe Medalist has a strong platform and portfolio that is well positioned for the future.”
The shakeup follows public calls in recent months for a change in leadership and an internalization of management. The company said in a filing last week it planned to do just that and that it had begun discussions with the external management to consummate the change.
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 the external management company owned by Messier and Elliott.
That structure paid Messier and Elliott third-party management fees that have totaled more than $4 million 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 price has fueled shareholder scrutiny.
One of four billboard messages calling attention to Medalist’s performance. (BizSense file photo)
Tuesday’s filing states: “Going forward, the Company will be self-managed under the executive leadership of Francis P. Kavanaugh, who was appointed by the Board as interim-Chief Executive Officer and President concurrent with the Internalization.”
It adds that the company entered into a termination agreement that included the immediate termination of the external management agreement. The termination agreement provides for $1.6 million in aggregate settlement payments, as well as the resignation of Messier and Elliott.
The termination agreement was negotiated and unanimously approved by a committee consisting of members of the board that was formed in March with the goal of evaluating strategic alternatives available to the company.
Also reported in the filing was Colin Elliott’s intent to resign as Medalist’s vice president and as an employee of Gunston Consulting LLC. A resignation effective date and other terms were still being negotiated.
Frank Kavenaugh (Courtesy Fort Ashford Funds)
Kavanaugh, 63, was appointed to Medalist’s board on May 24. He is a co-founder of Fort Ashford Funds LLC, a privately held investment firm, and has served as its managing director since its inception in 2004. He also serves in a leadership role at New Patriots Holdings Inc., a professional employer organization, according to the filing.
“Mr. Kavanaugh has over 30 years of diverse experience in real estate investment, business restructuring, and operational leadership,” the filing states. “He has been actively involved with the restructuring of over 20 businesses in the public and private sectors and is adept at navigating complexity and implementing strategic changes.”
O’Brien was appointed as the board’s non-executive chairman. He has served as a director since June 2021.
The board committee’s “exploration of strategic alternatives” included marketing its commercial properties for sale. As a result, the company has said the committee approved a potential sale of what amounts to half of its real estate holdings, though it hasn’t specified 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.
Medalist shares trade on Nasdaq and until recently had been in penny stock territory, trading at under $1 per share for nearly a year. The stock closed Tuesday at $5.58 per share, down about 6 percent for the day.
The company 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.
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