Medalist Diversified REIT, Inc. (MDRR): 5 FORCES Analysis [Nov-2025 Updated]

You're digging into Medalist Diversified REIT, Inc. (MDRR), trying to figure out if this small-cap player in the Southeast-managing retail and flex space-can navigate the late 2025 landscape. Honestly, the picture is mixed: while some tenants are locked in by long-term leases, the real pressure point is on the capital side. With mortgages payable hitting $\mathbf{\$43.5}$ million as of Q2 2025 and a recent line of credit costing $\mathbf{7.25\%}$, the bargaining power of suppliers-especially lenders-is defintely high, making MDRR's $\mathbf{\$30}$ million market cap feel even smaller against rivals. We've mapped out all five of Porter's forces, from the threat of e-commerce substitutes to the high hurdles new entrants face, so you can see exactly where the near-term risks and opportunities lie for this diversified portfolio. Keep reading to see the full breakdown.

Medalist Diversified REIT, Inc. (MDRR) - Porter's Five Forces: Bargaining power of suppliers

You're looking at the financing side of Medalist Diversified REIT, Inc. (MDRR), and honestly, the power dynamic with lenders is tilted in their favor right now. Given the current interest rate environment, lenders hold significant sway over Medalist Diversified REIT, Inc. (MDRR).

We see this leverage situation clearly in the Q2 2025 figures. Mortgages payable stood at \$43.5 million as of that quarter, which, while an improvement, still represents a substantial debt load. Leverage eased slightly, with mortgages making up 56% of total assets, down from 67% at year-end 2024. That still gives lenders a strong position when negotiating terms.

The high cost of capital isn't just theoretical; you can see it in the numbers. A recent line of credit entered into on July 18, 2025, bears an interest rate of 7.25%. That rate reflects the current market's pricing of risk for Medalist Diversified REIT, Inc. (MDRR).

Here's a quick look at the debt profile as of mid-2025:

Specialized property management and construction contractors in secondary markets probably have moderate leverage. They are essential for maintaining the portfolio, but their power is generally less concentrated than the debt providers. Still, finding reliable, specialized labor in non-primary markets can create friction points.

The capital providers for the Delaware Statutory Trust (DST) program also hold significant negotiation power, especially when structuring complex transactions. For instance, a recent internal contribution and financing tied to a Tesla-occupied property on November 7, 2025, involved a DST that secured a \$7,710,000 loan from Pinnacle Bank. The structure required the operating partnership to provide a limited guaranty, which solidifies the lender's position in that specific deal.

Key supplier dynamics to watch include:

• Lender control due to high leverage relative to market cap.
• Floating rate debt exposes Medalist Diversified REIT, Inc. (MDRR) to rate fluctuations.
• Recent debt issuance at 7.25% sets a high benchmark for future borrowing costs.
• DST financing partners dictate terms on specific asset-level funding.
• The \$7,710,000 Pinnacle Bank loan shows the scale of third-party capital involvement.

Finance: draft sensitivity analysis on a 100-basis-point rate increase by next Tuesday.

Medalist Diversified REIT, Inc. (MDRR) - Porter's Five Forces: Bargaining power of customers

You're looking at Medalist Diversified REIT, Inc. (MDRR) through the lens of customer power, and honestly, it's a mixed bag depending on which tenant you're looking at. The power dynamic shifts quite a bit across their portfolio as of late 2025.

Single-Tenant Net Lease (STNL) Tenants: Low Power

For the tenants locked into Single-Tenant Net Lease (STNL) agreements, their bargaining power is definitely on the low end of the spectrum. This is the classic structure where the tenant handles most operating expenses, and the leases are typically long-term and non-cancellable. This provides Medalist Diversified REIT, Inc. (MDRR) with predictable, stable cash flow, which is a big plus for a REIT with a smaller revenue base.

As of June 30, 2025, Medalist Diversified REIT, Inc. (MDRR) owned five of these STNL properties. Based on reported figures from a recent period, the revenue attributable to the Single Tenant Net Lease segment was \$892.12k on a last-twelve-months (LTM) basis. Their focus on assets essential to tenant operations and generally resistant to e-commerce pressures further cements this low-power dynamic for those specific customers.

Retail and Flex-Industrial Tenants: Moderate Power

Tenants occupying the retail center and flex-industrial spaces face a more moderate level of power. Medalist Diversified REIT, Inc. (MDRR) held four retail center properties and three flex center properties on the same date. The retail segment, which generated \$6.10m in LTM revenue in the same reported period, benefits from strong market fundamentals in late 2025, with vacancy for many subtypes at a 30-year low. Still, these tenants operate in secondary or tertiary markets, which can offer them more local alternatives compared to prime, high-demand locations.

Here's a quick look at how the property types stack up in terms of customer leverage:

Customer Concentration Risk

You have to keep an eye on the overall size of the customer base. Medalist Diversified REIT, Inc. (MDRR)'s Q2 2025 revenue came in at \$2.47 million. That's a relatively small revenue base for a publicly traded REIT, so the loss of even one significant tenant could disproportionately impact the financials. This small base inherently increases customer concentration risk, meaning the few customers you have hold more sway than they would for a larger entity.

DST Investors: High Switching Potential

When looking at the Delaware Statutory Trust (DST) investors, who are customers for the replacement property side of the business, their power to switch sponsors is quite high. These investors are typically executing a 1031 exchange and are looking for a specific tax deferral outcome. If Medalist Diversified REIT, Inc. (MDRR)'s sponsor arm isn't competitive on terms, yield, or asset quality, these investors can-and will-move their capital.

The DST market is dynamic, so investors have options. Here's what that competitive landscape looks like:

• DST investors can easily switch to other sponsors offering similar 1031 exchange products.
• Industrial and Multifamily asset classes currently dominate new DST offerings, representing about 55% of offerings by number.
• The market continues to see equity looking to purchase new DST offerings, meaning competition for that capital is present.
• Sponsors must remain active in due diligence to keep new, attractive offerings coming to market.

Lease Renewal Pressure

Lease renewal negotiations for the multi-tenant properties will definitely face pressure from local market supply and tenant mobility, especially in the secondary/tertiary markets where Medalist Diversified REIT, Inc. (MDRR) often operates. While the retail sector is strong overall, if a specific submarket has new supply coming online or if a tenant has a viable, lower-cost alternative nearby, you'll see that reflected in the renewal terms you have to offer. Tenant mobility is a constant factor that keeps renewal rates from being a guaranteed win.

Medalist Diversified REIT, Inc. (MDRR) - Porter's Five Forces: Competitive rivalry

High rivalry exists among small-cap, diversified REITs and private equity funds in the Southeast. This segment of the market sees intense competition for acquisition, leasing, and disposition opportunities, particularly as capital flows into Sunbelt markets. Private equity funds often have deeper pockets and a mandate for aggressive, short-term value creation, putting pressure on smaller, publicly traded entities like Medalist Diversified REIT, Inc. (MDRR).

Medalist Diversified REIT, Inc. (MDRR)'s small market capitalization of approximately \$31.58 million as of November 18, 2025, makes it a minor market player. This scale limits its ability to compete on large-scale acquisitions or absorb significant operational shocks compared to larger peers. For context, its market capitalization as of January 8, 2025, was reported at \$16.73M.

Direct competition from larger, better-capitalized REITs like CTO Realty Growth in the retail and flex space is a significant factor. CTO Realty Growth, Inc. reported a market capitalization of \$556.48 million as of November 18, 2025, and \$0.56 Billion USD as of November 2025. This difference in capital base means CTO Realty Growth can pursue larger portfolio transactions, such as its announced acquisition of a three-property portfolio for \$137.5 million in August 2024. CTO Realty Growth's portfolio is concentrated in retail and mixed-use properties, owning 24 properties spanning 5.2 million square feet with a 93.9% leased occupancy as of 2Q25.

The diversified portfolio of Medalist Diversified REIT, Inc. forces competition across multiple distinct property sectors simultaneously. You are competing in the Flex/Industrial, Multifamily, Neighborhood Shopping Centers, and Limited Service Hotels spaces all at once, which fragments management focus and capital deployment. This contrasts with more specialized REITs that can focus resources on mastering one sector's competitive dynamics.

Active property sales by Medalist Diversified REIT, Inc. signal portfolio repositioning under competitive pressure. You are actively pruning assets to improve focus or shore up the balance sheet, which is a direct response to market dynamics. For instance, subsidiaries of Medalist Diversified REIT, Inc. entered into agreements in late October 2025 for significant dispositions:

• Sale of the Greenbrier Business Center in Chesapeake, VA, for \$11,000,000.
• Sale of properties in Bowling Green, KY, and Huntsville, AL, for \$5.35 million.
• The company also completed the sale of the Salisbury Marketplace Shopping Center for \$9.93 million.

Here's a quick math comparison showing the scale disparity in late 2025:

Medalist Diversified REIT, Inc. (MDRR) - Porter's Five Forces: Threat of substitutes

You're looking at how outside forces, not just competitors, can chip away at Medalist Diversified REIT, Inc. (MDRR)'s potential returns. The threat of substitutes is real, especially given the structural shifts we've seen through 2025.

E-commerce is a long-term, structural substitute for physical retail space, pressuring retail center rents.

The digital shift continues to put pressure on the four retail center properties in the Medalist Diversified REIT, Inc. (MDRR) portfolio as of June 30, 2025. While growth has slowed from pandemic peaks, the digital channel still commands significant share. U.S. ecommerce accounted for 16.3% of total sales in Q2 2025, based on Commerce Department data including all retail and food-service sales. Unadjusted figures put the share at 15.5% for that quarter. Projections indicate that U.S. retail e-commerce sales for the full year 2025 will total approximately $1.47 trillion. This sustained digital presence means that physical retail space, like that owned by Medalist Diversified REIT, Inc. (MDRR), faces a persistent headwind from online alternatives.

Remote work and hybrid models substitute for traditional office components within flex-industrial properties.

For the three flex center properties Medalist Diversified REIT, Inc. (MDRR) operated as of June 30, 2025, the substitute threat from evolving work patterns is significant. The national office vacancy rate stood at 18.7% in August 2025, reflecting a lasting transformation in commercial real estate use. Furthermore, the inventory of coworking spaces has seen a 25% yearly surge, offering a flexible alternative to leased, traditional footprints. To be fair, 66% of US companies still offer some form of flexibility, solidifying hybrid work as a standard expectation rather than a temporary measure.

Investment capital can substitute real estate with other asset classes, like bonds or infrastructure.

Investors can easily reallocate capital away from real estate, including Medalist Diversified REIT, Inc. (MDRR)'s holdings, toward other asset classes offering perceived better risk-adjusted returns. The traditional 60/40 portfolio model is being questioned, with some major industry figures advocating for a 50/30/20 framework that allocates 20% to alternatives like infrastructure and real estate. However, within alternatives, real estate is losing ground to infrastructure among some large investors. Sovereign wealth funds saw their allocation to real estate decline for the fourth consecutive year, settling at 7.3% of Assets Under Management (AUM) in 2025. Conversely, infrastructure allocation among these same funds grew to 8.1% in 2025, overtaking real estate for the first time in 2024. This rotation suggests capital is actively substituting traditional property plays for infrastructure debt and equity.

Tenants can substitute MDRR's space with alternative, non-traditional commercial property types.

Tenants leasing space from Medalist Diversified REIT, Inc. (MDRR)-which includes retail, flex-industrial, and Single Tenant Net Lease (STNL) properties-have options beyond traditional lease structures. The growth in coworking space, mentioned earlier, is a direct substitute for conventional office components within flex properties. For STNL and retail tenants, the substitute is often the direct-to-consumer model enabled by e-commerce. The pressure is clear in the numbers: in Q2 2025, U.S. ecommerce sales growth was only 5.3% year-over-year, the slowest rate since Q4 2022 when it was 3.4%, yet total retail sales growth was 3.8% in the same period, showing the relative strength of the physical channel is tightening. Still, the long-term trend favors digital substitutes.

Here's a quick look at Medalist Diversified REIT, Inc. (MDRR)'s structure as of mid-2025, which informs how these substitutes hit the bottom line:

The key areas where tenants can seek alternatives to Medalist Diversified REIT, Inc. (MDRR)'s offerings include:

• Physical retail space replaced by online sales channels.
• Office/Flex space substituted by hybrid work arrangements.
• Coworking spaces absorbing demand for flexible footprints.
• Investment capital rotating from REITs to infrastructure assets.

Medalist Diversified REIT, Inc. (MDRR) - Porter's Five Forces: Threat of new entrants

The threat of new entrants for Medalist Diversified REIT, Inc. (MDRR) is currently moderated by substantial financial and regulatory barriers, though the relatively small size of MDRR means a well-capitalized entrant could target similar niches.

High capital requirements and high interest rates are significant financial barriers to entry. Launching a public REIT demands significant upfront capital, not just for property acquisition but also for the offering process itself. New entrants face a challenging debt environment; for instance, MDRR's own Line of Credit bears a floating interest rate currently at 7.25%, subject to a floor rate of 6.25%. This reflects the broader commercial real estate lending market in 2025, where rates can range from just over 5% to above 15% depending on the loan structure. Furthermore, the North American Securities Administrators Association (NASAA) 2025 proposed amendments require a sponsor or affiliate to contribute an amount not less than 10% of the total net assets upon completion of the initial public offering, setting a high initial capital floor.

New entrants must overcome the complex regulatory and compliance hurdles of becoming a public REIT. To qualify for REIT tax status, a new entity must adhere to strict rules, such as the 5/50 Test, which mandates that no more than 50% in value of the company's outstanding capital stock can be owned by five or fewer individuals. Beyond the SEC requirements, state-level compliance, guided by NASAA's REIT Guidelines, imposes investor suitability standards that have recently tightened. As of late 2025, these guidelines require investors to meet minimum annual gross income and net worth thresholds of at least $100,000 and $350,000, respectively, unless a state administrator allows otherwise. Additionally, offering expenses for a new REIT must be reasonable and cannot exceed 15% of the proceeds raised in the offering.

MDRR's focus on secondary and tertiary markets requires specialized local knowledge and relationships. Medalist Diversified REIT, Inc. strategically invests primarily in secondary and tertiary markets across the southeastern United States, concentrating on states like Virginia, North Carolina, South Carolina, Georgia, Florida, and Alabama. Breaking into these specific, often less-trafficked markets requires deep, localized expertise in underwriting, leasing, and property management that takes years to cultivate. A new national entrant would struggle to replicate this targeted geographic footprint immediately.

Difficulty in raising equity capital; MDRR's small size limits its ability to compete on large-scale acquisitions. As of late 2025, Medalist Diversified REIT, Inc. operates with a small market capitalization, reported around $27.76 million in November 2025, with a portfolio of only 12 developed properties as of June 30, 2025. This small scale makes raising substantial equity capital for large, competitive acquisitions difficult compared to larger, more established REITs. For context, one of MDRR's recent property acquisitions in July 2025 had a total purchase price of $14,544,504, representing a significant portion of the company's total market capitalization at that time.

Established relationships with lenders and institutional investors are hard for new firms to replicate. Securing favorable financing terms is heavily dependent on an established track record with lenders. Medalist Diversified REIT, Inc. has demonstrated access to credit, evidenced by its $14,700,000 Line of Credit with Farmers and Merchants Bank, and its use of Delaware Statutory Trust (DST) programs for asset structuring. New entrants lack this history, forcing them to rely on more expensive, less flexible financing or to spend considerable time building the necessary institutional trust.

The barriers to entry can be summarized by comparing the scale of MDRR's operations against the requirements for a new public offering:

New entrants must also navigate the specific operational requirements for maintaining REIT status, which include:

• Distributing at least 90% of taxable income as dividends.
• Ensuring at least 75% of assets are real estate assets quarterly.
• Limiting income from non-qualifying sources to no more than 5%.