EX-99.1 3 tm2129637d1_ex99-1.htm EXHIBIT 99.1

Exhibit 99.1

 

GREENBRIER BUSINESS CENTER

 

 

FINANCIAL STATEMENTS

 

 

Six Months Ended June 30, 2021 (unaudited) and

Years Ended December 31, 2020 and 2019

 

Table of Contents

 

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

 

 

 

 

Report of Independent Auditor

 

Board of Directors

Medalist Diversified REIT, Inc.

 

 

We have audited the accompanying statements of revenues and certain operating expenses (the “Statements”) of Greenbrier Business Center (the “Property”), as defined in Note 1 of the Statements, for the years ended December 31, 2020 and 2019.

 

Management’s Responsibility for the Statements

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

 

Auditor’s Responsibility

Our responsibility is to express an opinion on the Statements 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 Statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Statements, 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 Statements 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 Statements.

 

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 Statements referred to above present fairly, in all material respects, the revenues and certain operating expenses of the Property for the years ended December 31, 2020 and 2019 in conformity with accounting principles generally accepted in the United States of America.

 

Emphasis of Matter

The accompanying Statements were prepared as described in Note 1, for the purpose of complying with the rules and regulations of the Securities and Exchange Commission and are 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

October 19, 2021 

 

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GREENBRIER BUSINESS CENTER

 

STATEMENTS OF REVENUES AND CERTAIN OPERATING EXPENSES

 

Six Months Ended June 30, 2021 (unaudited) and

Years Ended December 31, 2020 and 2019

 

   Six months
ended June 30,		   Year ended December 31, 
   2021   2020   2019 
   Unaudited         
REVENUE               
Flex center property revenues  $322,889   $533,655   $560,497 
Flex center property tenant reimbursements   54,153    106,337    103,925 
                
Total revenues   377,042    639,992    664,422 
                
CERTAIN OPERATING EXPENSES               
Real estate taxes and insurance   40,884    81,864    78,264 
Operating and maintenance   28,259    47,508    48,245 
Management fee   11,511    18,747    19,121 
Bad debt expense   -    40,794    - 
                
Total certain operating expenses   80,654    188,913    145,630 
                
Revenues in excess of certain operating expenses  $296,388   $451,079   $518,792 

 

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

  

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Notes to Statements of Revenues and Certain Operating Expenses

 

Note 1.  Basis of Presentation

 

The accompanying statements of revenues and certain operating expenses (the “Statements”) includes the operations of Greenbrier Business Center (the “Property”).

 

The Statements have 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 Statements are 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 has determined that it is appropriate to include bad debt expense in the Statements to reflect the inherent risk of real property ownership and the possibility that bad debt expense could be incurred in the future. Management is not aware of any material factors during the years ended December 31, 2020 or 2019, respectively, 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 Statements have 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.

 

Bad debt expense:

 

For the year ended December 31, 2020, Management recorded $40,794 in bad debt expense related to rent revenues that were recorded during the year ended December 31, 2019 and which were subsequently determined to be uncollectible.

 

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 Statements in conformity with GAAP. Actual results could differ from those estimates.

 

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 Note 3.  Minimum Future Lease Rentals

 

There are various lease agreements in place with tenants to lease space in the Property. As of June 30, 2021, the minimum future cash rents receivable under noncancelable operating leases in each of the next five years and thereafter are as follows:

 

   (Unaudited) 
For the remaining six months ending December 31, 2021  $308,457 
2022   497,239 
2023   254,267 
2024   207,500 
2025   124,299 
Thereafter   53,476 
Total future rents  $1,445,238 

 

Note 4.  Tenant Concentrations

 

As of December 31, 2020 and 2019, respectively, the Property’s occupancy rate was 85.8 percent and 82.2 percent. For the year ended December 31, 2020, four tenants combine to represent approximately 48.7 percent of the Property’s rental revenues. For the year ended December 31, 2019, three tenants combine to represent approximately 43.6 percent 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, flex center 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, difficulties in vaccinating 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 tenants in the Property could continue to be significant in the coming months.

 

Note 6.  Subsequent Events

 

Management has evaluated subsequent events through October 19, 2021, the date the financial statements were available to be issued and there are no subsequent events for disclosure in the accompanying financial statement.

 

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