# MacKenzie Realty Capital, Inc.: Form 10-Q for the period ended Dec 31, 2024

- Company: [MacKenzie Realty Capital, Inc.](/companies/mkzr.md) (CIK 1550913)
- Form: 10-Q
- Filed: 2025-02-14
- Accepted by EDGAR: Feb 14, 2025, 13:23 ET
- Period: 2024-12-31
- Accession: 0001140361-25-004609
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1550913/000114036125004609/ef20039012_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1550913/000114036125004609/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-12-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-10-01 to 2024-12-31 | $8.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-07-01 to 2024-12-31 | $13.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2024-10-01 to 2024-12-31 | −$4.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-07-01 to 2024-12-31 | −$12.0m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2024-10-01 to 2024-12-31 | −$4.5m | us-gaap:ProfitLoss |
| Net income | 6 months, 2024-07-01 to 2024-12-31 | −$11.9m | us-gaap:ProfitLoss |
| Diluted EPS | 6 months, 2024-07-01 to 2024-12-31 | −$1.00 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-10-01 to 2024-12-31 | −$0.39 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-07-01 to 2024-12-31 | −$1.00 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 6 months, 2024-07-01 to 2024-12-31 | 13,397,151 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-07-01 to 2024-12-31 | $2.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 6 months, 2024-07-01 to 2024-12-31 | $3.3m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-12-31 | $6.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2024-12-31 | $236.4m | us-gaap:Assets |
| Total liabilities | at 2024-12-31 | $138.6m | us-gaap:Liabilities |
| Long-term debt | at 2024-12-31 | $14.7m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2024-12-31 | $68.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 73,560 characters.

*Statements by MacKenzie Realty Capital, Inc., together with its subsidiaries as discussed in Note 1 of the financial statements included in this report (collectively, the “Company,” “we,” or “us”) contained herein, other than historical facts, may constitute “forward-looking statements.” These statements may relate to, among other things, future events or our future performance or financial condition. In some cases, stockholders can identify forward-looking statements by terminology such as “may,” “might,” “believe,” “will,” “provided,” “anticipate,” “future,” “could,” “growth,” “plan,” “intend,” “expect,” “should,” “would,” “if,” “seek,” “possible,” “potential,” “likely” or the negative of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any anticipated results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. An economic downturn could impair our ability to continue to operate, which could lead to the loss of some or all of our investments, a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities, and interest rate volatility could adversely affect our results, particularly if we elect to use leverage as a part of our investment strategy. For a discussion of factors that could cause our actual results to differ from forward-looking statements contained herein, please see the discussion under the heading “Risk Factors” in our Annual Report on Form 10-K, as updated by the Company’s subsequent filings with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).*

*Further, we may experience fluctuations in our operating results due to a number of factors, including the effect of the return on our equity investments, the interest rates payable on our debt investments, the default rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.*

### Overview

Historically, we were an externally managed non-diversified closed-end management investment company that elected to be treated as a BDC under the Investment Company Act of 1940 (the “1940 Act”), but we withdrew our election to be treated as a BDC on December 31, 2020. Our objective remains to generate both current income and capital appreciation through real estate-related investments. We have elected to be treated as a REIT under the Code and, as a REIT, we are not subject to federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we generally distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain) to the stockholders and meet certain other conditions. To the extent that we satisfy the annual distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. Our wholly owned subsidiary, MacKenzie NY Real Estate 2 Corp. (“MacKenzie NY 2”), is subject to corporate federal and state income tax on its taxable income at regular statutory rates.

We are managed by the Advisers, and MacKenzie provides the non-investment management services and administrative services necessary for us to operate.

#### Investment Plan

We generally seek to invest in real estate assets. We intend to invest at least 80% of our total assets in equity or debt in real estate assets. We can invest up to 20% of our total assets in investment securities of real estate companies. A real estate company is one that (i) derives at least 50% of its revenue from the ownership, construction, financing, management or sale of commercial, industrial or residential real estate and land; or (ii) has at least 50% of its assets invested in such real estate. We will not invest in general partnerships, joint ventures, or other entities that do not afford limited liability to their security holders. However, limited liability entities in which we invest may hold interests in general partnerships, joint ventures, or other non-limited liability entities. When purchasing securities, we generally favor purchasing securities issued by entities that have (i) completed the initial offering of their securities, (ii) operated for a period of at least two years, and typically more than five years, from the completion of their initial offering, and (iii) fully invested their capital in real properties or other real estate related investments.

Our investment objective is to generate current income and capital appreciation through the acquisition of real estate assets and debt and equity real estate-related investments. Our independent directors review our investment policies periodically, at least annually, to confirm that our policies are in the best interests of our stockholders. Each such determination and the basis thereof are contained in the minutes of our Board of Directors meetings.

We seek to accomplish our objective by rigorously analyzing the value of and risks associated with potential acquisitions, and, for up to 20% of our total assets, by acquiring real estate securities at significant discounts to their net asset value.

We intend to expand our investment strategy to include acquisition of distressed real properties. Like our other investments, we would expect to hold distressed properties and infuse funds as necessary to extract unrealized value.

We will engage in various investment strategies to achieve our overall investment objectives. The strategy we select depends upon, among other things, market opportunities, the skills and experience of the Advisers’ investment team and our overall portfolio composition. We generally seek to acquire assets that produce ongoing distributable income for investors, yet with a primary focus on purchasing such assets at a discount from what the Advisers estimate to be the actual or potential value of the real estate.

We intend to continue our historical activities related to launching tender offers to purchase shares of non-traded REITs in order to boost our short-term cash flow and to support our distributions, subject to the constraint that such securities will not exceed 20% of our portfolio. We believe this niche strategy will allow us to pay distributions that are supported by cash flow rather than paying back investors’ capital, although there can be no assurance that some portion of any distribution is not a return of capital.

#### Rental, Reimbursement and Other Property Income

We generate rental revenue by leasing office space and apartment units to a building’s tenants. These tenant leases fall under the scope of Accounting Standards Codification (“ASC”) Topic 842 and are classified as operating leases. Revenues from such leases are recognized on a straight-line basis over the terms of the lease agreements.

#### Investment Income

We generate revenues in the form of operating income, capital gains and dividends on dividend-paying equity securities or other equity interests that we acquire, in addition to interest on any debt investments that we hold. Further, we may generate revenue in the form of commitment, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees. Any such fees are generated in connection with our investments and recognized as earned.

#### Expenses

Our primary operating expenses include the payment of: (i) advisory fees to our Advisers; (ii) our allocable portion of overhead and other expenses incurred by MacKenzie in performing its obligations under the Administration Agreement; and (iii) other real estate properties operating expenses, including interest expenses on debt obtained to finance our property acquisitions, as detailed below. Our investment advisory fees compensate our Investment Adviser and Real Estate Adviser for their work in identifying, evaluating, negotiating, closing, monitoring and servicing our investments. Our expenses must be billed to and paid by us, except that MacKenzie may be reimbursed for actual cost of goods and services used by us and certain necessary administrative expenses. We will bear all other expenses of our operations and transactions, including:

- the cost of operating and maintaining real estate properties;
- the cost of calculating our net asset value, including the cost of any third-party valuation services;
- the cost of effecting sales and repurchases of our shares and other securities;
- interest payable on debt, if any, to finance our investments;
- fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence reviews of prospective investments and third-party advisory fees;
- transfer agent and safekeeping fees;
- fees and expenses associated with marketing efforts;
- federal and state registration fees, any stock exchange listing fees in the future;
- federal, state and local taxes;
- independent directors’ fees and expenses;
- brokerage commissions;
- fidelity bond, directors and officers errors and omissions liability insurance, and other insurance premiums;
- direct costs and expenses of administration and sub-administration, including printing, mailing, long distance telephone and staff;
- fees and expenses associated with independent audits and outside legal costs;
- costs associated with our reporting and compliance obligations under the Exchange Act and applicable federal and state securities laws; and
- all other expenses incurred by either MacKenzie or us in connection with administering our business, including payments under the Administration Agreement that are based upon our allocable portion of overhead and other expenses incurred by MacKenzie in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our chief compliance officer and our chief financial officer and any administrative support staff.

### Portfolio Investment Composition

As of December 31, 2024, we owned various real estate limited partnerships and REITs that are listed in the “Investments, at fair value” in the table below. We also owned various investments in entities that own real estate which gave us enough control such that the investments are not securities for 1940 Act purposes, but not enough to consolidate the financial statements of such entities with our own; these are listed below as “Equity method investments, at fair value”. The following table summarizes the composition of our investments at fair value as of December 31, 2024, and June 30, 2024:

| Investments, at fair value | Fair Value December 31, 2024 | June 30, 2024 |
| --- | ---: | ---: |
| Blackstone Real Estate Income Trust, Inc. - Class S | $- | $330,828 |
| Highlands REIT, Inc. | 51,064 | 69,322 |
| Moody National REIT II, Inc. | 14,411 | 18,759 |
| National Healthcare Properties, Inc. | 842,263 | 856,285 |
| SmartStop Self Storage REIT, Inc. - Class A | 40,104 | 41,149 |
| Starwood Real Estate Income Trust, Inc. - Class S | 24,703 | 24,821 |
| Total | $972,545 | $1,341,164 |

| Equity method investments, at fair value | Fair Value December 31, 2024 | June 30, 2024 |
| --- | ---: | ---: |
| 5210 Fountaingate, LP | $4,950 | $4,950 |
| Lakemont Partners, LLC | 805,000 | 791,990 |
| Green Valley Medical Center, LP | - | 2,005,102 |
| Martin Plaza Associates, LP | 536,848 | 465,053 |
| Westside Professional Center I, LP | 1,251,646 | 1,436,171 |
| Total | $2,598,444 | $4,703,266 |

#### Properties

In addition to our investment securities, we currently own and manage nine commercial real estate properties: Satellite Place Office Building located in Duluth, GA, 1300 Main Office Building, First & Main Office Building and Main Street West Office Building located in Napa, CA, Woodland Corporate Center located in Woodland, CA, 220 Campus Lane Office Building, Green Valley Medical Center and Green Valley Executive Center located in Fairfield, CA and One Harbor Center located in Suisun, CA and four residential apartments: Commodore Apartments and the Park View (f/k/a as Pon De Leo Apartments), located in Oakland, CA, Hollywood Apartments located in Los Angeles, CA, and the Shoreline Apartments in Concord, CA.

1300 Main Office Building, First & Main Office Building, Main Street West Office Building, Woodland Corporate Center, Hollywood Apartments, Shoreline Apartments and Green Valley Medical Center are owned through our subsidiary, the Operating Partnership; the Commodore Apartments are owned through our subsidiary Madison; the Park View (f/k/a as Pon De Leo Apartments) is owned through our subsidiary PVT and Satellite Place Office Building is owned through our subsidiary MacKenzie Satellite Place Corp. In August 2024, we listed Hollywood Apartments for sale; however, as of February 1, 2025, management decided to discontinue marketing Hollywood Apartments and terminated the listing.

We own our properties through our subsidiaries, which are listed in the table below.

|  |  |
| --- | --- |
| Property: | Property Owners |
| Commodore Apartments | Madison-PVT Partners LLC |
| The Park View (f/k/a as Pon De Leo Apartments) | PVT-Madison Partners LLC |
| Hollywood Apartments | PT Hillview GP, LLC |
| Shoreline Apartments | MacKenzie BAA-IG Shoreline LLC |
| Satellite Place Office Building | MacKenzie Satellite Place Corp. |
| First & Main Office Building | First & Main, LP |
| 1300 Main Office Building | 1300 Main, LP |
| Woodland Corporate Center | Woodland Corporate Center Two, LP |
| Main Street West Office Building | Main Street West, LP |
| 220 Campus Lane Office Building | 220 Campus Lane, LLC |
| Green Valley Executive Center | GV Executive Center, LLC |
| One Harbor Center | One Harbor Center, LP |
| Green Valley Medical Center | Green Valley Medical Center, LP |

1300 Main Office Building contains 20,145 square feet, of which approximately 13,900 square feet is office space and the remainder is designated as retail space. As of December 31, 2024, the property is 95% occupied by 7 tenants. The following table shows the largest tenants and square footage occupied:

| Largest Tenants Business | Business | Square Ft. Occupied | Annual Base Rent | Lease Expiration | Renewal options |
| --- | --- | ---: | ---: | --- | --- |
| Wilson Daniels | Wine Wholesaler | 6,712 | $382,998 | 06/15/2031 | 1, 5 years |
| Norcal Gold | Real Estate | 2,896 | $179,976 | 03/31/2026 | No |
| Bao Ling Li | Restaurant | 3,212 | $174,960 | 11/30/2030 | No |
| Whole Health | Medical | 2,186 | $138,648 | 07/31/2025 | 2, 5 years |

The following information pertains to lease expirations at 1300 Main Office Building:

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2025 | 1 | 2,186 | $138,648 | 13% |
| 2026 | 1 | 2,896 | $179,976 | 17% |
| 2029 | 1 | 1,059 | $68,739 | 6% |
| Thereafter | 4 | 12,916 | $695,029 | 64% |

First and Main Office Building contains 27,398 square feet, of which approximately 19,000 square feet is office space and the remainder is designated as retail space. As of December 31, 2024, the property is 100% occupied by 9 tenants. The following table shows the largest tenants and square footage occupied:

| Largest Tenants Business | Business | Square Ft. Occupied | Annual Base Rent | Lease Expiration | Renewal options |
| --- | --- | ---: | ---: | --- | --- |
| GVM Law | Legal Services | 9,470 | $510,903 | 09/20/2026 | 2, 5 years |
| Brotlemarkle | Accounting Services | 4,366 | $246,187 | 07/31/2030 | 2, 5 years |
| Napa Palisades | Restaurant | 3,462 | $195,318 | 08/31/2040 | No |
| Moss Adams | Accounting Services | 3,428 | $169,480 | 06/30/2025 | No |

38

The following information pertains to lease expirations at First & Main Office Building:

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2025 | 2 | 5,648 | $314,644 | 21% |
| 2026 | 1 | 9,470 | $510,903 | 33% |
| 2027 | 1 | 1,135 | $73,418 | 5% |
| Thereafter | 5 | 11,222 | $619,933 | 41% |

Main Street West Office Building contains 38,136 square feet, of which approximately 32,700 square feet is office space and the remainder is designated as retail space. As of December 31, 2024, the property is 89% occupied by 8 tenants. AUL Corporation has elected to terminate its lease as of February 3, 2025. During the six months ended December 31, 2024, we recorded an impairment loss of $9,500,167 on Main Street West Office Building due to the early lease termination of AUL Corporation, and ongoing foreclosure proceedings due to maturity default of the debt secured by the property. The following table shows the largest tenants and square footage occupied:

| Largest Tenants Business | Business | Square Ft. Occupied | Annual Base Rent | Lease Expiration | Renewal options |
| --- | --- | ---: | ---: | --- | --- |
| AUL Corporation | Insurance | 13,806 | $811,795 | 02/03/2025 | No |
| State of California | Health Care | 4,697 | $259,721 | 10/31/2028 | No |
| Strategies To Empower People | Health Care | 4,875 | $223,198 | 01/28/2028 | No |
| Azzurro Pizzeria | Restaurant | 2,735 | $144,000 | 03/31/2029 | 1, 5 years |

The following information pertains to lease expirations at Main Street West Office Building:

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2025 | 2 | 14,744 | $872,875 | 47% |
| 2026 | 1 | 2,740 | $110,000 | 6% |
| 2027 | 1 | 7,010 | $346,585 | 19% |
| Thereafter | 4 | 9,373 | $512,669 | 28% |

Satellite Place Office Building contains 134,785 square feet, all of which is office space. As of December 31, 2024, the property is approximately 71% occupied by 4 tenants. OS National, LLC has elected to terminate its lease early as of December 31, 2024 from its original lease expiration of December 31, 2029. The following table shows the largest tenants and square footage occupied:

| Largest Tenants Business | Business | Square Ft. Occupied | Annual Base Rent | Lease Expiration | Renewal options |
| --- | --- | ---: | ---: | --- | --- |
| OS National, LLC | Title Services | 71,085 | $1,373,364 | 12/31/2024 | No |
| Polytron | Title Services | 10,737 | $214,097 | 04/30/2031 | 2, 5 years |
| Ampirical | Engineering Consulting | 9,790 | $205,264 | 09/30/2030 | 2, 5 years |
| Sun Taiyang | Consumer Products | 4,383 | $95,754 | 11/30/2029 | 1, 5 years |

The following information pertains to lease expirations at Satellite Place Office Building:

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2024 | 1 | 71,085 | $1,373,364 | 73% |
| 2029 | 1 | 4,383 | $96,466 | 5% |
| Thereafter | 2 | 20,527 | $419,361 | 22% |

39

Woodland Corporate Center contains 37,034 square feet, of which 7,797 square feet are laboratories and the rest is office space. All of the laboratory space is occupied by Agtech Innovation. As of December 31, 2024, the property is 91% occupied by 13 tenants. The following table shows the largest tenants and square footage occupied:

| Largest Tenants Business | Business | Square Ft. Occupied | Annual Base Rent | Lease Expiration | Renewal options |
| --- | --- | ---: | ---: | --- | --- |
| Agtech Innovation | Research and Development | 12,940 | $335,820 | 04/09/2031 08/31/2032 12/21/2032 | No |
| Children’s Home Society | Non-Profit Education | 4,042 | $149,062 | 10/31/2028 | No |
| Burger Rehab | Physical Therapy | 4,013 | $121,912 | 09/22/2028 | No |
| California Dept of Rehabilitation | Rehabilitation Services | 3,057 | $94,788 | 07/31/2025 | No |

The following information pertains to lease expirations at Woodland Corporate Center Office Building:

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2025 | 4 | 5,539 | $179,202 | 17% |
| 2027 | 2 | 2,160 | $84,011 | 8% |
| 2028 | 3 | 9,777 | $326,369 | 32% |
| Thereafter | 4 | 16,170 | $448,524 | 43% |

Green Valley Executive Center contains 46,101 square feet, of which approximately 41,600 square feet is office space and the remainder is designated as retail space. As of December 31, 2024, the property is 96% occupied by 16 tenants. The following table shows the largest tenants and square footage occupied:

| Largest Tenants Business | Business | Square Ft. Occupied | Annual Base Rent | Lease Expiration | Renewal options |
| --- | --- | ---: | ---: | --- | --- |
| Community Housing Opportunities | Real Estate | 8,510 | $348,852 | 08/31/2026 | No |
| Arkshire Financial, LLC | Insurance | 7,016 | $308,400 | 02/28/2027 | No |
| Sticky Rice | Restaurant | 4,388 | $186,005 | 08/17/2034 | No |
| Larsen & Toubro Limited, Inc. | Multinational Conglomerate | 3,311 | $178,890 | 02/13/2028 | No |

The following information pertains to lease expirations at Green Valley Executive Center Office Building:

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2025 | 3 | 4,143 | $179,893 | 9% |
| 2026 | 3 | 13,567 | $566,984 | 29% |
| 2027 | 3 | 9,147 | $414,464 | 21% |
| Thereafter | 7 | 17,901 | $801,412 | 41% |

40

One Harbor Center contains 49,569 square feet, all of which is office space. As of December 31, 2024, the property is 90% occupied by 12 tenants. The following table shows the largest tenants and square footage occupied:

| Largest Tenants Business | Business | Square Ft. Occupied | Annual Base Rent | Lease Expiration | Renewal options |
| --- | --- | ---: | ---: | --- | --- |
| Shimmick Construction Company, Inc. | Construction | 10,221 | $340,380 | 05/15/2027 | No |
| Richmond American Homes | Home Builder | 7,993 | $256,860 | 12/31/2024 | No |
| Equiventure | Health Care | 6,446 | $232,200 | 11/16/2033 | 4, 5 years |
| Wiseman Company Mgt. | Real Estate | 4,883 | $167,064 | 05/31/2025 | No |

The following information pertains to lease expirations at One Harbor Center Office Building:

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2024 | 1 | 7,993 | $256,860 | 16% |
| 2025 | 5 | 12,526 | $455,225 | 29% |
| 2026 | 3 | 5,402 | $195,300 | 13% |
| Thereafter | 3 | 18,628 | $649,636 | 42% |

Green Valley Medical Center contains 31,590 square feet of which approximately 19,000 square feet is office space, approximately 8,300 square feet is health care space, and the remainder is designated as retail space. As of December 31, 2024, the property is 80% occupied by 12 tenants. The following table shows the largest tenants and square footage occupied:

| Largest Tenants Business | Business | Square Ft. Occupied | Annual Base Rent | Lease Expiration | Renewal options |
| --- | --- | ---: | ---: | --- | --- |
| Cal OES | State Emergency Services | 7,605 | $286,554 | 08/31/2031 | No |
| California Forever | Real Estate | 3,341 | $152,400 | 10/17/2028 | No |
| Green Valley Oral Surgery | Health Care | 2,179 | $100,021 | 05/07/2029 | 2, 10 years |
| Movement Mortgage | Real Estate | 1,515 | $69,475 | 06/27/2027 | 1, 3 years |

The following information pertains to lease expirations at Green Valley Medical Center Office Building:

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2025 | 1 | 889 | $32,076 | 3% |
| 2026 | 1 | 1,332 | $67,537 | 7% |
| 2027 | 2 | 3,030 | $134,359 | 13% |
| Thereafter | 8 | 19,971 | $778,604 | 77% |

41

Commodore Apartments is a mid-rise apartment building built in 1912 and has 48 units. As of December 31, 2024, Commodore Apartments is approximately 93.8% occupied. The Park View (f/k/a as Pon De Leo Apartments) is also a mid-rise apartment building built in 1929 and has 39 units. As of December 31, 2024, The Park View (f/k/a as Pon De Leo Apartments) is approximately 92.3% occupied. Hollywood Apartments, located in Los Angeles, CA, is a mid-rise apartment building built in 1917 and has 54 units. The property contains approximately 37,000 square feet of net rentable apartment area and 8,910 square feet of retail space. All of the retail space is currently occupied by restaurants and nightclubs. The Hollywood Apartments units are 81.5% occupied as of December 31, 2024. Shoreline Apartments is a mid-rise apartment building built in 1967 and renovated in 2015 which has 84 units. As of December 31, 2024, Shoreline Apartments building is approximately 89.3% occupied.

The following table provides information regarding each of the residential properties:

| Property Name | Sector | Location | Square Feet | Units | Percentage Leased | Annual Base Rent | Monthly Base Rent/Occupied Unit |
| --- | --- | --- | ---: | ---: | ---: | ---: | ---: |
| The Park View (f/k/a as Pon De Leo Apartments) | Multi-Family Residential | Oakland, CA | 36,654 | 39 | 92.3% | $1,061,397 | $2,457 |
| Commodore Apartments | Multi-Family Residential | Oakland, CA | 31,156 | 48 | 93.8% | $855,897 | $1,585 |
| Hollywood Apartments | Multi-Family Residential | Los Angeles, CA | 36,991 | 54 | 81.5% | $1,175,628 | $2,227 |
| Shoreline Apartments | Multi-Family Residential | Concord, CA | 67,925 | 84 | 89.3% | $1,906,746 | $2,119 |

| Property Name | Sector | Location | Square Feet | Units | Percentage Leased | Annual Base Rent | Monthly Base Rent/Occupied Unit |
| --- | --- | --- | ---: | ---: | ---: | ---: | ---: |
| Hollywood Apartments | Retail | Los Angeles, CA | 8,610 | 1 | 100.0% | $333,356 | $27,780 |

Our 220 Campus Lane Office Building was purchased in September 2023. The office building was vacant at the time of our purchase. Currently we are in the process of renovating the building and marketing it for lease. As of December 31, 2024, six tenants are leasing space totaling 12,264 square feet or 28.4% of the building. The annualized base rent for these tenants is $393,292.

In addition to our commercial and residential real estate properties, we also own two parcels of land: a vacant parcel adjacent to our 220 Campus Lane Office Building in Fairfield, California (“Campus Lane Land”), and a vacant parcel located at 5000 Wiseman Way, Fairfield, California (“Aurora Land”). We acquired the Campus Lane Land in September 2023 with the long-term objective of developing it into a multi-family residential community. The entitlement process for the vacant land is currently underway, but the financial resources to realize our goal of commencing construction in late 2025 have not been secured and will be dependent upon the City’s approval process. The development of Aurora Land is discussed below. Both parcels of land are owned by the Operating Partnership through its subsidiaries: Campus Lane Residential, LLC and MRC Aurora, LLC.

#### Aurora Land Development (known as Aurora at Green Valley)

We are actively constructing a multi-family residential community on this land which will include 72 units in three buildings, and a club house. The city’s planning commission approved our development project in September 2023, and we obtained all necessary building permits in August 2024 and the building construction phase commenced in September 2024. Construction is progressing on schedule and on budget. In February 2024, we commenced selling preferred units in MRC Aurora with the goal of raising $10 million in preferred capital and closed on a construction loan of $17.15 million. We have raised $4.36 million in preferred capital from outside investors as of the date of this report.

There are no present plans for any major renovation or development of any property except for our 220 Campus Lane Office Building, Aurora at Green Valley and Campus Lane Land, as discussed above. Each property is being held for income production and increased occupancy and/or rental rates. We have property and liability insurance policies on all properties which we believe are adequate.

### Current Market and Economic Conditions

The markets in which our properties operate are highly competitive, and each property faces unique competitive challenges based upon local economic, political, and legal factors. Our West coast multi-family residential properties are generally restricted from raising rents significantly by local rent control laws. Rent control can result in average rents that are significantly below market, and this provides some buffer against declining rents in a recession. However, in order to encourage development, rent control usually does not apply to newer properties. Since older properties may be unable to raise rents as needed, they may be unable to make improvements that could allow them to compete with newer properties.

Our consolidated office properties, 1300 Main Office Building, First and Main Office Building, Main Street West Office Building, One Harbor Center, Satellite Place Office Building, Woodland Corporate Center, 220 Campus Lane Office Building, and Green Valley Executive Center are all Class A suburban office properties and are located in Napa, Woodland, Suisun City and Fairfield, California and Duluth, Georgia, which also must compete with every other office property in the market.

Recently, the broader economy began experiencing increased levels of inflation, higher interest rates and tightening monetary and fiscal policies, although inflation has now moderated and interest rates have begun to come back down some. The Federal Reserve increased the federal funds rate multiple times in 2022 and 2023 then paused hikes in earlier part of 2024 before implementing rate cuts in the fourth quarter. We currently have fixed and variable interest rates for our loans. The rise in overall interest rates caused an increase in our variable rate borrowing costs resulting in an increase in interest expense. The cumulative effect of the prior rate increases may adversely impact real estate asset values. In addition, a prolonged period of high and persistent inflation could cause an increase in our expenses. The current market and economic conditions could have a material impact on our business, cash flow and results of operations. It could also impact our ability to find suitable acquisitions, sell properties, and raise equity and debt capital.

### Results of Operations

#### Three Months Ended December 31, 2024 and 2023.

The commercial and residential properties owned by us during the three months ended December 2024 and 2023 are as follows:

| Three Months Ended December 31, 2024 | Three Months Ended December 31, 2023 |
| --- | --- |
| **Commercial properties** | **Commercial properties** |
| Satellite Place Office Building | Satellite Place Office Building |
| First & Main Office Building | First & Main Office Building |
| 1300 Main Office Building | 1300 Main Office Building |
| Main Street West Office Building | Main Street West Office Building |
| Woodland Corporate Center | Woodland Corporate Center |
| 220 Campus Lane Office Building | 220 Campus Lane Office Building |
| Green Valley Executive Center |  |
| One Harbor Center |  |
| Green Valley Medical Center (Acquired in August 2024) |  |
| **Residential properties** | **Residential properties** |
| Commodore Apartments | Commodore Apartments |
| The Park View (f/k/a as Pon De Leo Apartments) | The Park View (f/k/a as Pon De Leo Apartments) |
| Hollywood Apartments | Hollywood Apartments |
| Shoreline Apartments | Shoreline Apartments |

#### Rental, reimbursements and other property income:

Rental and reimbursement revenues are generated from our commercial and residential real estate properties. During the three months ended December 31, 2024, we generated $8.03 million in rental and reimbursements revenues, of which $6.57 million was generated from our nine commercial properties and $1.46 million was generated from our four residential properties. During the three months ended December 31, 2023, we generated $3.58 million in rental and reimbursements revenues, of which $2.10 million was generated from our six commercial properties, and $1.48 million was generated from our four residential properties. The total increase in rental revenues was mainly due to the acquisition of three office buildings (Green Valley Executive Center, One Harbor Center and Green Valley Medical Center) since December 31, 2023 and an early lease termination income of $3.0 million received from one of the tenants at our Satellite Place Office Building in December 2024.

#### Investment income:

Investment income was made up of dividends, distributions from operations, distributions from sales/capital transactions, interest, and other investment income. Total investment income for the three months ended December 31, 2024 and 2023 was $0.02 million and $0.26 million, respectively. During the three months ended December 31, 2024, we received minimal distributions from operations, sales, and liquidations as compared to $0.10 million during the three months ended December 31, 2023. The decrease was mainly due to the decrease in distributions received from investments. During the three months ended December 31, 2024, we received dividends, interest, and other investment income of $0.02 million as compared to $0.16 million received during the three months ended December 31, 2023. This decrease was mainly due to decrease in interest income from our cash deposits in money market funds during the three months ended December 31, 2024.

#### Expenses:

Our asset management and incentive management fees are based on the advisory agreements that were effective January 1, 2021.

#### Asset management fee:

The asset management fees for the three months ended December 31, 2024 and 2023 were $0.86 million and $0.79 million, respectively. The slight increase was due to total increase of $17.92 million in total invested capital from $164.74 million as of December 31, 2023 to $182.66 million as of December 31, 2024.

#### Incentive management fee:

Under the Advisory Management Agreement, we pay an incentive management fee that is equal to 15% of all distributions once shareholders have received cumulative distributions equal to 6% from the effective date of the Advisory Management Agreement. We did not incur any incentive management fee for the three months ended December 31, 2024 and 2023.

#### Administrative cost and transfer agent reimbursements:

Costs reimbursed to MacKenzie for the three months ended December 31, 2024 were $0.17 million as compared to $0.19 million for the three months ended December 31, 2023. The slight decrease was due to a decrease in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to December 31, 2023, mainly due to hiring of a third party transfer service agent since December 31, 2023.

There were minimal transfer agent cost reimbursements paid to MacKenzie for the three months ended December 31, 2024. Transfer agent cost reimbursements paid to MacKenzie for the three months ended December 31, 2023 was $0.02 million.

#### Property operating and maintenance expenses:

Operating and maintenance expenses mainly consist of real estate taxes, utilities, repair and maintenance, cleaning, landscape, security, property management fees, insurance, and various other administrative expenses incurred in the operation of our commercial and residential real estate assets. During the three months ended December 31, 2024, we incurred operating and maintenance expenses of $1.71 million, of which $1.07 million were incurred in the operation of our nine commercial properties and $0.64 million were incurred in the operation of our four residential properties. During the three months ended December 31, 2023, we incurred operating and maintenance expenses of $1.51 million, of which $0.85 million were incurred in the operation of our six commercial properties and $0.66 million from our four residential properties. The increase in the operating expenses was mainly due to the acquisitions of three new office buildings (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

#### Depreciation and amortization:

During the three months ended December 31, 2024, we recorded depreciation and amortization of $2.18 million, of which $1.79 million was attributable to the depreciation and amortization of real estate and intangible assets of our nine commercial properties and $0.39 million was attributable to our four residential properties. During the three months ended December 31, 2023, we recorded depreciation and amortization of $1.56 million, of which $1.02 million was attributable to the depreciation and amortization of real estate and intangible assets of our six commercial properties and $0.54 million was attributable to our four residential properties. The increase in total depreciation and amortization of $0.62 million during the three months ended December 31, 2024 was due to the acquisitions of three new office buildings (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

#### Interest expense:

Interest expense for the three months ended December 31, 2024 was $1.97 million, of which $1.38 million was incurred on the mortgage notes payable associated with our nine commercial properties and $0.59 million was incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential. Interest expense for the three months ended December 31, 2023 was $1.45 million, of which $0.63 million was incurred on the mortgage notes payable associated with our five commercial properties, which exclude Satellite Place Office Building since there was no debt on the property during the three months ended December 31, 2023, and $0.82 million was incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential. The total increase of $0.52 million in interest expense during the three months ended December 31, 2024, was primarily due to the additional mortgage notes payable of four office buildings (Satellite Place Office Building, Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

#### Other operating expenses:

Other operating expenses include professional fees, directors’ fees, printing and mailing expense, and other general and administrative expenses. Other operating expenses for the three months ended December 31, 2024 and 2023, were $0.61 million and $0.42 million, respectively. The increase in other operating expenses was mainly due to the acquisition of three commercial properties (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023, resulting in a higher amount of general and administrative operating expenses during the three months ended December 31, 2024.

#### Net realized gain (loss) on sale of investments:

During the three months ended December 31, 2024, we recorded a realized gain of $0.06 million as compared to $1.29 million net realized loss during the three months ended December 31, 2023. Total realized gain for three months ended December 31, 2024, was realized from the sale of two non-traded REIT securities. Total net realized loss for the three months ended December 31, 2023, resulted from a realized gain on the sale of one non-traded REIT security, offset by a realized loss from the write-off of a limited partnership interest.

#### Net unrealized gain (loss) on investments:

During the three months ended December 31, 2024, we recorded a net unrealized gain of $0.02 million, which was net of $0.03 million of unrealized gain reclassification adjustment. The reclassification adjustments are the accumulated unrealized gains or losses as of the end of prior period that are realized during the current period. Accordingly, the net unrealized gains excluding the reclassification adjustment for the three months ended December 31, 2024, were $0.05 million, which resulted from fair value appreciations of $0.01 million from general partnership interests, $0.02 million from limited partnership interests and $0.02 million from non-traded REIT securities.

During the three months ended December 31, 2023, we recorded a net unrealized gain of $1.83 million, which was net of $2.31 million of unrealized losses reclassification adjustments. The reclassification adjustments are the accumulated unrealized gains or losses as of the end of prior period that are realized during the current period. Accordingly, the net unrealized losses excluding the reclassification adjustments for the three months ended December 31, 2023, were $0.48 million, which resulted from fair value depreciations of $0.02 million from limited partnership interests, $0.08 million from general partnership interests and $0.38 million from non-traded REIT securities.

#### Income tax provision (benefit):

The Parent Company has elected to be treated as a REIT for tax purposes under the Code and, as a REIT, is not subject to federal income taxes on amounts that it distributes to the stockholders, provided that, on an annual basis, it generally distributes at least 90% of its REIT taxable income (determined without regard to the dividends paid deduction and excluding any capital gain) to the stockholders and meets certain other conditions. To the extent that it satisfies the annual distribution requirement but distributes less than 100% of its REIT taxable income, it will be subject to U.S. federal corporate income tax on its undistributed taxable income. In addition, it will be subject to a 4% excise tax if the actual amount that it pays to its stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws.

The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax year ended December 31, 2023. Therefore, it did not incur any tax expense or excise tax on its income from operations during the quarterly periods within the tax year 2023. Similarly, for the tax year 2024, the Parent Company paid the requisite amounts of dividends during the year and met other REIT requirements such that the Parent Company will not owe any income taxes. Therefore, the Parent Company did not record any income tax provisions during any fiscal periods within the tax year 2024.

MacKenzie NY 2 is subject to corporate federal and state income tax on its taxable income at regular statutory rates. As of December 31, 2024, it did not have any taxable income for tax year 2024. Therefore, we did not record any tax provisions during any fiscal periods within the tax year 2024. MacKenzie Satellite is a qualified REIT subsidiary of the Parent Company. Therefore, it does not file a separate tax return.

The Operating Partnership is a limited partnership. Hollywood Hillview, MacKenzie Shoreline, Madison, PVT, 220 Campus Lane, Campus Lane Residential, Green Valley Executive Center, One Harbor Center and Green Valley West are limited liability companies. First & Main, 1300 Main, Woodland Corporate Center Two, Main Street West, and Green Valley Medical Center are limited partnerships. Accordingly, all income tax liabilities of these entities flow through to their partners, which ultimately is the Company. Therefore, no income tax provisions are recorded for these entities.

#### Six Months Ended December 31, 2024 and 2023.

The commercial and residential properties owned by us during the six months ended December 2024 and 2023 are as follows:

| Six Months Ended December 31, 2024 | Six Months Ended December 31, 2023 |
| --- | --- |
| **Commercial properties** | **Commercial properties** |
| Satellite Place Office Building | Satellite Place Office Building |
| First & Main Office Building | First & Main Office Building |
| 1300 Main Office Building | 1300 Main Office Building |
| Main Street West Office Building | Main Street West Office Building |
| Woodland Corporate Center | Woodland Corporate Center |
| 220 Campus Lane Office Building | 220 Campus Lane Office Building |
| Green Valley Executive Center |  |
| One Harbor Center |  |
| Green Valley Medical Center (Acquired in August 2024) |  |
| **Residential properties** | **Residential properties** |
| Commodore Apartments | Commodore Apartments |
| The Park View (f/k/a as Pon De Leo Apartments) | The Park View (f/k/a as Pon De Leo Apartments) |
| Hollywood Apartments | Hollywood Apartments |
| Shoreline Apartments | Shoreline Apartments |

#### Rental, reimbursements and other property income:

Rental and reimbursement revenues are generated from our commercial and residential real estate properties. During the six months ended December 31, 2024, we generated $12.98 million in rental and reimbursements revenues, of which $10.03 million was generated from our nine commercial properties and $2.95 million was generated from our four residential properties. During the six months ended December 31, 2023, we generated $7.14 million in rental and reimbursements revenues, of which $4.17 million was generated from our six commercial properties, and $2.97 million was generated from our four residential properties. The total increase in rental revenues was mainly due to the acquisition of three office buildings (Green Valley Executive Center, One Harbor Center and Green Valley Medical Center) since December 31, 2023, and an early lease termination income of $3 million received from one of the tenants at our Satellite Place Office Building in December 2024.

#### Investment income:

Investment income was made up of dividends, distributions from operations, distributions from sales/capital transactions, interest, and other investment income. Total investment income for the six months ended December 31, 2024 and 2023, was $0.04 million and $0.58 million, respectively. During the six months ended December 31, 2024, we received minimal distributions from operations, sales, and liquidations as compared to $0.20 million during the six months ended December 31, 2023. The decrease was mainly due to the decrease in distributions received from investments. During the six months ended December 31, 2024, we received dividends, interest, and other investment income of $0.04 million as compared to $0.38 million received during the six months ended December 31, 2023. This decrease was mainly due to decrease in interest income from our cash deposits in money market funds during the six months ended December 31, 2024.

#### Expenses:

Our asset management and incentive management fees are based on the advisory agreements that were effective January 1, 2021.

#### Asset management fee:

The asset management fees for the six months ended December 31, 2024 and 2023, were $1.71 million and $1.58 million, respectively. The slight increase was due to total increase of $17.92 million in total invested capital from $164.74 million as of December 31, 2023 to $182.66 million as of December 31, 2024.

#### Incentive management fee:

Under the Advisory Management Agreement, we pay an incentive management fee that is equal to 15% of all distributions once shareholders have received cumulative distributions equal to 6% from the effective date of the Agreement. We did not incur any incentive management fee for the six months ended December 31, 2024 and 2023.

#### Administrative cost and transfer agent reimbursements:

Costs reimbursed to MacKenzie for the six months ended December 31, 2024 were $0.33 million as compared to $0.38 million for the six months ended December 31, 2023. The slight decrease was due to a decrease in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to December 31, 2023, mainly due to hiring of a third party transfer service agent since December 31, 2023.

There were minimal transfer agent cost reimbursements paid to MacKenzie for the six months ended December 31, 2024. Transfer agent cost reimbursements paid to MacKenzie for the six months ended December 31, 2023 was $0.03 million.

#### Property operating and maintenance expenses:

Operating and maintenance expenses mainly consist of real estate taxes, utilities, repair and maintenance, cleaning, landscape, security, property management fees, insurance, and various other administrative expenses incurred in the operation of our commercial and residential real estate assets. During the six months ended December 31, 2024, we incurred operating and maintenance expenses of $3.59 million, of which $2.27 million were incurred in the operation of our nine commercial properties and $1.32 million were incurred in the operation of our four residential properties. During the six months ended December 31, 2023, we incurred operating and maintenance expenses of $2.90 million, of which $1.55 million were incurred in the operation of our six commercial properties and $1.35 million from our four residential properties. The increase in the operating expenses was mainly due to the acquisitions of three new office buildings (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

#### Depreciation and amortization:

During the six months ended December 31, 2024, we recorded depreciation and amortization of $4.46 million, of which $3.57 million was attributable to the depreciation and amortization of real estate and intangible assets of our nine commercial properties and $0.89 million was attributable to our four residential properties. During the six months ended December 31, 2023, we recorded depreciation and amortization of $3.12 million, of which $2.03 million was attributable to the depreciation and amortization of real estate and intangible assets of our six commercial properties and $1.09 million was attributable to our four residential properties. The increase in total depreciation and amortization of $1.34 million during the six months ended December 31, 2024, was due to the acquisitions of three new office buildings (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

#### Interest expense:

Interest expense for the six months ended December 31, 2024, was $3.86 million, of which $2.54 million was incurred on the mortgage notes payable associated with our nine commercial properties and $1.32 million was incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential. Interest expense for the six months ended December 31, 2023, was $2.77 million, of which $1.27 million was incurred on the mortgage notes payable associated with our five commercial properties, which exclude Satellite Place Office Building since there was no debt on the property during the six months ended December 31, 2023, and $1.50 million was incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential. The total increase of $1.09 million in interest expense during the six months ended December 31, 2024, was primarily due to the additional mortgage notes payable of four office buildings (Satellite Place Office Building, Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

#### Other operating expenses:

Other operating expenses include professional fees, directors’ fees, printing and mailing expense, and other general and administrative expenses. Other operating expenses for the six months ended December 31, 2024 and 2023, were $1.53 million and $0.97 million, respectively. The increase in other operating expenses was mainly due to the acquisition of three commercial properties (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023, resulting in a higher amount of general and administrative operating expenses during the six months ended December 31, 2024.

#### Net realized gain (loss) on sale of investments:

During the six months ended December 31, 2024, we recorded a realized gain of $0.21 million as compared to $1.29 million net realized loss during the six months ended December 31, 2023. Total realized gain for six months ended December 31, 2024, was realized from the sale of two non-traded REIT securities. Total net realized loss for the six months ended December 31, 2023, resulted from a realized gain on the sale of one non-traded REIT security, offset by a realized loss from the write-off of a limited partnership interest.

#### Net unrealized gain (loss) on investments:

During the six months ended December 31, 2024, we recorded a net unrealized loss of $0.12 million, which was net of $0.14 million of unrealized gain reclassification adjustment. The reclassification adjustments are the accumulated unrealized gains or losses as of the end of prior period that are realized during the current period. Accordingly, the net unrealized gain excluding the reclassification adjustment for the six months ended December 31, 2024, were $0.02 million, which resulted from fair value depreciations of $0.11 million from general partnership interests, fair value appreciations of $0.12 million from non-traded REIT securities and $0.01 million from limited partnership interests.

During the six months ended December 31, 2023, we recorded a net unrealized loss of $0.44 million, which was net of $2.31 million of unrealized losses reclassification adjustment. The reclassification adjustments are the accumulated unrealized gains or losses as of the end of prior period that are realized during the current period. Accordingly, the net unrealized losses excluding the reclassification adjustment for the six months ended December 31, 2023, were $2.75 million, which resulted from fair value depreciations of $0.51 million from general partnership interests, $1.11 million from non-traded REIT securities and $1.13 million from limited partnership interests.

#### Income tax provision (benefit):

Income tax provision for six months ended December 31, 2024 and 2023 are discussed above under the three months ended section.

### Liquidity and Capital Resources

#### Capital Resources:

We offered to sell up to 5 million shares of common stock in our first public offering and up to 15 million shares of common stock in each of our second and third public offerings. We have raised total gross proceeds of $119.10 million from the issuance of common stock under the public offerings, $42.46 million from our first public offering, which concluded in October 2016, $67.99 million from the second public offering, which concluded in October 2019, and $8.65 million from our third public offering, which concluded in October 2020. In addition, we have raised $15.56 million from the issuance of shares of common stock under the common stock DRIP as of December 31, 2024. Out of the total proceeds from DRIPs, we have utilized a total of $14.28 million to repurchase shares of common stock under the Share Repurchase Program. In November 2021, the SEC qualified our Offering Circular pursuant to Regulation A to sell up to $50,000,000 of shares of our Series A preferred stock at an initial offering price of $25.00 per share. On October 14, 2022, we amended our Offering Circular and increased the offering to sell up to $75 million of shares of our Series A preferred stock. On November 1, 2023, we further amended our Offering Circular to sell an aggregate of up to $75 million of shares of either our Series A preferred stock or our Series B preferred stock. This post-effective amendment to the Offering Circular was declared effective on November 14, 2023, and terminated on November 1, 2024. We have raised $18.61 million through the sale of our Series A preferred stock and $2.47 million Series B preferred stock pursuant to the Offering Circular as of December 31, 2024. In addition, we have raised $0.35 million from the issuance of shares of Series A and Series B preferred stock under the preferred stock DRIP. In January 2025, a new Offering Circular was qualified by the SEC for the sale of 1,436,638.62 shares of Series A and 1,417,216.17 shares of Series B preferred stock. Of these amounts, 150,000 shares of each are reserved for the preferred stock DRIP. On January 15, 2025, our shelf registration statement on Form S-3 for the sale of up to $75 million in common stock, preferred stock, warrants, and units was declared effective by the SEC, and we entered into an equity distribution agreement with Maxim to issue and sell our common stock for an aggregate gross sales price of $20 million pursuant to the at-the-market offering described in the ATM Prospectus, subject to maintaining compliance with General Instruction I.B.6 of Form S-3 which requires that in no event will we sell securities in a public primary offering with a value exceeding more than one-third of our public float in any 12-month period so long as our public float remains below $75.0 million.

We plan to fund future investments with the net proceeds raised from our preferred equity offering and any future offerings of securities and cash flows from operations, as well as interest earned from the temporary investment of cash in U.S. government securities and other high-quality debt investments that mature in one year or less. However, we have not raised as much from our preferred equity offering as we did when it was first offered, at least in part due to rising interest rates making the preferred return less attractive. Thus, there is no guarantee that we can raise sufficient funds to meet our goals in terms of growth, strategic or necessary loan rebalancing, and additional investments. We also may fund a portion of our investments through borrowings from banks and issuances of senior securities. We also may borrow money within the underlying companies in which we have majority ownership.

We intend to utilize leverage to enhance the total returns of our portfolio. Historically, we were only able to access leverage at attractive costs through a credit facility, but the termination of our BDC status effective December 31, 2020 has provided us with greater flexibility in choosing among different alternatives for raising debt capital going forward.

We also have greater flexibility in issuing securities with common equity participation features (such as warrants and convertible notes) and/or additional classes of stock (such as preferred) in order to facilitate capital formation now that we are no longer subject to the restrictions of the 1940 Act.

Our aggregate borrowings (if any), secured and unsecured, are expected to be reasonable in relation to our net assets and will be reviewed by the Board of Directors at least quarterly.

We used the funds raised from our public offerings to invest in portfolio companies and to pay operating expenses.

We finished the six months ended December 31, 2024, with cash and cash equivalents, and restricted cash of approximately $7.29 million. Our principal demands for cash are to fund operating and administrative expenses, debt service obligations, and dividends on our common and preferred Series A and B stock. In addition, we may also use cash to purchase additional properties. We expect to fund our material cash requirements over the next year through a combination of cash on hand, net cash provided by our property operations, new capital raised from our preferred series A and B stock, and new borrowings at the underlying companies and at the Parent Company level under a new line of credit.

#### Cash Flows:

#### Six months ended December 31, 2024:

For the six months ended December 31, 2024, we experienced a net decrease in cash of $5.79 million. During this period, we generated cash of $2.51 million in our operating activities, used cash of $7.88 million in our investing activities and used cash of $0.42 million in our financing activities.

The net cash inflow of $2.51 million from operating activities resulted from $12.50 million of rental revenues and $0.04 million of investment income, offset by cash outflow of $10.03 million used in operating expenses.

The net cash outflow of $7.88 million from investing activities resulted from $8.44 million of real estate acquisitions through our subsidiaries, and $0.21 million purchases of equity investments, offset by cash inflow of $0.77 million from sale of investments.

The net cash outflow of $0.42 million from financing activities resulted from $3.34 million payment of dividends to common stockholders, $17.41 million payment on existing mortgage notes payables, $0.72 million capital distributions to non-controlling interests holders, $0.48 million payment of dividends to Series A preferred stockholders, $0.35 million payment of selling commissions and fees, $0.20 million payment of deferred offering costs, $0.13 million change in capital pending acceptance, $0.11 million repayment of finance lease liabilities, $0.01 million payment of dividends to Series B preferred stockholders, $0.01 million payment on existing notes payables and $0.01 million redemption of Series A preferred stock, offset by cash inflows of $19.93 million of additional mortgage borrowings, $1.19 million of capital contributions by non-controlling interests holders, $1.13 million of issuance of Series B preferred stock and $0.10 million of issuance of Series A preferred stock.

#### Six months ended December 31, 2023:

For the six months ended December 31, 2023, we experienced a net decrease in cash of $5.10 million. During this period, we used cash of $0.59 million in our operating activities, $2.57 million in our investing activities and $1.94 million in our financing activities.

The net cash outflow of $0.59 million from operating activities resulted from $8.32 million used in operating expenses offset by cash inflows of $7.15 million of rental revenues and $0.58 million of investment income.

The net cash outflow of $2.57 million from investing activities resulted from $5.65 million of real estate acquisitions through our subsidiaries, $0.55 million of purchases of equity investments and $0.79 million of payment of contingent liability, offset by cash inflows of $4.02 million from sale of investments and $0.40 million from distributions received from our investments that are considered return of capital.

The net cash outflow of $1.94 million from financing activities resulted from $2.34 million of payment of dividends to common stockholders, $0.92 million of redemption of common stock, $0.88 million of payment of loan extension fee, $0.60 million of payment of mortgage payables, $0.49 million of payments of selling commissions and fees, $0.42 million of payment of dividends to Series A preferred stockholders, $0.36 million of payment on notes payables, $0.34 million of acquisition of below market debt, $0.34 million of distributions to non-controlling interests holders, $0.03 million of payments on finance lease liabilities, and $0.01 million of redemption of Series A preferred stock, offset by cash inflows of $3.29 million of proceeds from mortgage notes payable, $1.26 million of proceeds from the issuance of Series A preferred stock, $0.14 million of capital contributions from non-controlling interests holders and $0.10 million of proceeds from the issuance of Series B preferred stock.

### Material Cash Obligations

We have entered into two contracts under which we have material future commitments: (i) the Advisory Management Agreement and the Amended and Restated Investment Advisory Agreement, under which the Advisers serves as our advisers, and (ii) the Administration Agreement, under which MacKenzie furnishes us with certain non-investment management services and administrative services necessary to conduct our day-to-day operations. Each of these agreements is terminable by either party upon proper notice. Payments under the Advisory Management Agreement in future periods will be (i) a percentage of the value of our Invested Capital; (ii) Acquisition Fees, and (iii) incentive fees based on our performance above specified hurdles. Payments under the Administration Agreement will occur on an ongoing basis as expenses are incurred on our behalf by MacKenzie. However, if MacKenzie withdraws as our administrator, it will be liable for any expenses we incur as a result of such withdrawal. For additional information concerning the terms of these agreements and related fees paid, see Note 8 – Related Party Transactions in the consolidated financial statements included in this report.

### Borrowings

On January 22, 2025, we entered into a revolving line of credit agreement with Patterson Real Estate Services, LP, an affiliate of the Adviser, of up to $10,000,000. Interest will accrue on any unpaid principal balance on the note at a fixed annual interest rate of 10.00%. In addition, an origination fee of 2% will be charged on each advance and the sum will be added to the principal balance. The loan matures on June 1, 2026. The loan requires monthly interest beginning on March 1, 2025, with the remaining principal balance due at maturity. This note was not included in our consolidated balance sheet as of December 31, 2024. As of the date of this report, the Company has borrowed $5 million under the line of credit.

We anticipate utilizing this credit facility on a short-term basis to bridge the gap between our asset acquisition expenditures and the inflow of funds from our planned capital raise. We expect to be subject to various customary covenants and restrictions on our operations, such as covenants which would (i) require us to maintain certain financial ratios, including asset coverage, debt to equity and interest coverage, and a minimum net worth, and/or (ii) restrict our ability to incur liens, additional debt, merge or sell assets, make certain investments and/or distributions or engage in transactions with affiliates. We also borrow money within the underlying companies in which we have majority ownership.

The below table presents the total loans outstanding at the underlying companies as of December 31, 2024 and the fiscal years those loans mature:

| Fiscal Year Ending June 30, : | Principal |
| --- | ---: |
| 2025 (remainder) | $31,628,021 |
| 2026 | 11,827,833 |
| 2027 | 1,262,229 |
| 2028 | 19,599,058 |
| 2029 | 10,924,135 |
| Thereafter | 53,292,017 |
| **Total** | $128,533,293 |

Three of our underlying companies: Hollywood Hillview, Woodland Corporate Center Two, and Main Street West’s debts mature during the fiscal year ending June 30, 2025. The $17.5 million note payable on Hollywood Hillview matured in October 2024; however, prior to the maturity date, the loan agreement was amended with the options to extend the current maturity date for three periods from October 6, 2024 to November 6, 2024 with a principal paydown of $515,000, from November 6, 2024 to December 6, 2024 with a principal paydown of $410,000, and from December 6, 2024 to February 6, 2025 with a principal paydown of $410,000. We exercised all three extension options to extend the maturity date to February 6, 2025. In February 2025, the loan agreement was further amended to extend the maturity to April 6, 2025. We listed the underlying property for sale in August 2024; however, on February 1, 2025, we decided to discontinue marketing the property for sale. As a result, it no longer qualifies as held for sale since it is no longer listed. The $7.5 million note payable on Woodland Corporate Center Two also matured in October 2024, and was refinanced through a new loan that closed on October 4, 2024. The $14.74 million note payable on Main Street West matured on November 1, 2024; however, we were unable to agree with the bank on the principal paydown amount to extend the maturity date. As a result, the Company is currently in default under the note terms. Despite on-going negotiations, the bank has initiated foreclosure proceedings and filed and notice of default, and on January 28, 2025, a receiver was appointed by the court. The bank may file a notice of sale on or about February 25, 2025, and the property could potentially be sold within 20 days of that date. However, the Company is pursuing several refinancing and leasing options at this time.

### Distributions to Stockholders

We pay quarterly distributions to stockholders to the extent that we have income from operations available. Our quarterly distributions, if any, will be determined by our Board of Directors after a review and distributed pro-rata to holders of our shares; we declare distributions on a monthly basis, but pay each quarter. Any distributions to our stockholders will be declared out of assets legally available for distribution. In no event are we permitted to borrow money to make distributions if the amount of such distributions would exceed our annual accrued and received revenues, less operating costs. Distributions in kind are not permitted, except as provided in our Charter.

We have elected to be treated as a REIT under the Code. As a REIT, we are not subject to federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we generally distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain) to the stockholders and meet certain other conditions. To the extent that we satisfy the annual distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S. federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay to our stockholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws.

We have DRIPs that provide for reinvestment of our dividends and other distributions on behalf of stockholders for any individual stockholder who elects to participate in the DRIPs, provided that the applicable DRIP is permitted by the state in which the stockholders reside. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions. On March 4, 2024, the Board of Directors suspended the common stock share repurchase program and common stock DRIP in connection with trading of its common stock on the OTCQX Best Market. When our common stock became eligible for trading on OTC Markets in April 2024, the share repurchase program automatically terminated, and the Board of Directors will decide whether, and when, to reinstate the common stock DRIP.

During the six months ended December 31, 2024, the Board approved the following quarterly dividends:

| During the Quarter Ended | Dividends Common Stock Per Share | Amount | Series A Preferred Stock Per Share | Amount | Series B Preferred Stock Per Share | Amount |  |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | --- |
| September 30, 2024 | $0.125 | $1,679,460 | $0.375 | $287,036 | $0.750 | $45,378 |  |
| December 31, 2024 | 0.050 | 673,655 | 0.375 | 286,686 | 0.750 | 63,593 |  |
|  | $0.175 | $2,353,115 | $0.750 | $573,722 | $1.500 | $108,971 | \* |

\* Of the total dividends declared for Series B during the six months ended December 31, 2024, $81,731 was an increase in liquidation preference and $27,240 was the cash dividend.

### Critical Accounting Estimates

Our consolidated financial statements have been prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of our financial statements and the reported amounts of revenues and expenses during the reporting period. While we do not believe the reported amounts would be materially different, application of these policies involves the exercise of judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on experience and on various other assumptions that are believed to be reasonable under the circumstances. All of our significant accounting policies, including certain critical accounting estimates, are disclosed in our Annual Report on Form 10-K for the year ended June 30, 2024. We have not made any material changes to our critical accounting policies and estimates during the period covered by this report.

## Market risk

As filed, 2,280 characters.

Our portfolio primarily consists of equity and debt investments in smaller U.S. companies that primarily own commercial real estate that are either illiquid or not listed on any exchange, and our investments are considered speculative in nature. As a result, we are subject to risk of loss which may prevent our stockholders from achieving price appreciation, dividend distributions and a return of their capital.

At December 31, 2024, financial instruments that subjected us to concentrations of market risk consisted principally of equity investments, which represented approximately 10% of our total assets as of that date. As discussed in Note 4 – Investments, to our consolidated financial statements, these investments primarily consist of securities in companies with no readily determinable market values and as such are valued in accordance with our fair value policies and procedures. Our investment portfolio sometimes also includes shares of publicly traded REITs, which are valued at recently quoted trading prices. Our investment strategy represents a high degree of business and financial risk due primarily to the general illiquidity of our investments. We may make short-term investments in cash equivalents, U.S. government securities and other high-quality investments that mature in one year or less, pending investments in portfolio companies made according to our principal investment strategy.

In addition, we are exposed to interest rate risk with respect to our variable-rate indebtedness, generally an increase in interest rates would directly result in higher interest expense. We seek to manage our exposure to interest rate risk by utilizing a mix of fixed and floating rate financing, and through interest rate hedging agreements to fix or cap our variable rate debt. As of December 31, 2024, the outstanding principal balance of our variable rate indebtedness was $17.5 million, which is the mortgage debt on Hollywood Apartments. The debt is indexed to Secured Overnight Financing Rate (“SOFR”). In order to mitigate the raising interest rate risk, we have executed an interest rate cap. For the year ended December 31, 2024, a 10% increase in SOFR would have resulted in no change in interest expense, net of the impact of our interest rate cap.

## Controls and procedures

As filed, 1,369 characters.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) as of the end of the period covered by this report as required by paragraph (b) of Rule 13a-15 or 15d-15 of the Exchange Act. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date and provided reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting (identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act) during the fiscal quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 2,869 characters.

In addition to the other information set forth in this report, you should carefully consider the risks that could materially affect our business, financial condition or results of operations that are discussed under the caption “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended June 30, 2024. The additional risk factor set forth below updates, and should be read together with, such risk factors.

### Risks Relating to Potential Rescission Claims

*Previous issuances of common shares under our dividend reinvestment program may have violated certain federal and/or state securities laws, and shareholders could file suit to seek rescission of such securities.*

During the period beginning June 2021 and ending December 2021, in an offering pursuant to our registration statement on Form N-2, we made sales of securities under our dividend reinvestment program pursuant to a deficient registration statement (which registrant statement became deficient by virtue of our inadvertently failing to amend the registration statement to include the then-current audit report of our auditors). Consequently, the offer and sale of securities pursuant to the Form N-2 may have failed to comply fully with Section 5 of the Securities Act which may trigger a right of rescission under the Securities Act for investors that purchased shares of our common stock during this period under our dividend reinvestment program.

Accordingly, we may have liability to purchasers of such securities if they were to file suit against us; the remedy could be to repurchase such securities at their purchase price plus statutory interest, less the amount of any income received with respect to such shares.

*There may be claims relating to our possible non-compliance with federal and/or state securities laws relating to the deficient Form N-2 referenced above, and we may continue to be contingently liable for rescission or damages of an indeterminate amount.*

It is possible that regulators could pursue enforcement actions or impose penalties and fines against us with respect to any violations of securities laws relating to the issuance of dividend reinvestment program shares under the deficient Form N-2 referenced above.

*If we have to repurchase shares as discussed above, it may affect our cash balances.*

If we have to repurchase shares of our common stock issued under the deficient registration statement referenced above, such rescission payments will be funded from our existing cash balances. Any rescission payments would reduce funds available to us for our operations. If all persons issued shares without registration were to successfully file suit and force rescission, we could need to pay a total of approximately $865,000 and our results of operations, cash balances or financial condition will be negatively affected.

Filed Feb 14, 2025.
Source: SEC EDGAR, the filing index for accession 0001140361-25-004609. Last ingested by Listed: Oct 26, 2026, 06:02 ET. No prices; not investment advice.