# MacKenzie Realty Capital, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [MacKenzie Realty Capital, Inc.](/companies/mkzr.md) (CIK 1550913)
- Form: 10-Q
- Filed: 2025-05-15
- Accepted by EDGAR: May 15, 2025, 16:46 ET
- Period: 2025-03-31
- Accession: 0001140361-25-019315
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1550913/000114036125019315/ef20047665_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1550913/000114036125019315/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $4.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-07-01 to 2025-03-31 | $17.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$5.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-07-01 to 2025-03-31 | −$17.8m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$6.1m | us-gaap:ProfitLoss |
| Net income | 9 months, 2024-07-01 to 2025-03-31 | −$18.0m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.47 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-07-01 to 2025-03-31 | −$1.47 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.47 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-07-01 to 2025-03-31 | −$1.47 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 14,764,100 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-07-01 to 2025-03-31 | 13,846,149 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-07-01 to 2025-03-31 | −$53.1k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 9 months, 2024-07-01 to 2025-03-31 | $4.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2025-03-31 | $5.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2025-03-31 | $237.1m | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $139.2m | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $66.7m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 75,316 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 March 31, 2025, 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 March 31, 2025, and June 30, 2024:

| Investments, at fair value | Fair Value March 31, 2025 | June 30, 2024 |
| --- | ---: | ---: |
| Blackstone Real Estate Income Trust, Inc. - Class S | $- | $330,828 |
| Highlands REIT, Inc. | 35,704 | 69,322 |
| Moody National REIT II, Inc. | 12,929 | 18,759 |
| National Healthcare Properties, Inc. | 872,177 | 856,285 |
| SmartStop Self Storage REIT, Inc. - Class A | 28,069 | 41,149 |
| Starwood Real Estate Income Trust, Inc. - Class S | 21,685 | 24,821 |
| Total | $970,564 | $1,341,164 |

| Equity method investments, at fair value | Fair Value March 31, 2025 | June 30, 2024 |
| --- | ---: | ---: |
| 5210 Fountaingate, LP | $- | $4,950 |
| Lakemont Partners, LLC | 742,910 | 791,990 |
| Green Valley Medical Center, LP | - | 2,005,102 |
| Martin Plaza Associates, LP | 393,232 | 465,053 |
| Westside Professional Center I, LP | 1,148,259 | 1,436,171 |
| Total | $2,284,401 | $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 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 Apartments is owned through our subsidiary PVT and Satellite Place Office Building is owned through our subsidiary MacKenzie Satellite Place Corp. In August 2024, the Company listed Hollywood Apartments for sale. However, as of February 1, 2025, we discontinued marketing the property for sale and opted to retain ownership and continue operations. As a result, it no longer qualifies as held for sale.

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 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 March 31, 2025, 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 | $370,923 | 06/15/2031 | 1, 5 years |
| Norcal Gold | Real Estate | 2,896 | $181,297 | 03/31/2026 | No |
| Bao Ling Li | Restaurant | 3,212 | $174,960 | 11/30/2030 | No |
| Whole Health | Medical | 2,186 | $137,219 | 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 | $137,219 | 13% |
| 2026 | 1 | 2,896 | $181,297 | 17% |
| 2029 | 1 | 1,059 | $69,283 | 6% |
| Thereafter | 4 | 12,916 | $684,012 | 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 March 31, 2025, 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 | $513,443 | 09/20/2026 | 2, 5 years |
| Brotlemarkle | Accounting Services | 4,366 | $247,921 | 07/31/2030 | 2, 5 years |
| Napa Palisades | Restaurant | 3,462 | $196,769 | 08/31/2040 | No |
| Moss Adams | Accounting Services | 3,428 | $169,480 | 06/30/2025 | No |

43

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 | $318,177 | 21% |
| 2026 | 1 | 9,470 | $513,443 | 33% |
| 2027 | 1 | 1,135 | $74,275 | 5% |
| Thereafter | 5 | 11,122 | $623,805 | 41% |

Main Street West Office Building contains 38,135 square feet, of which approximately 32,700 square feet is office space and the remainder is designated as retail space. As of March 31, 2025, the property is 53% occupied by 8 tenants. AUL Corporation has elected to terminate its lease as of February 3, 2025. During the nine months ended March 31, 2025, 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 the foreclosure proceedings due to maturity default of the debt secured by the property. On March 25, 2025, the Company entered into the Forbearance Agreement with the Lender. As part of the Forbearance Agreement, the Company paid down $5 million on the loan and took control of the property from the receiver. Subject to performance by the Company, the Lender agreed to forbear until the forbearance termination date of September 30, 2025, from taking any further foreclosure actions. 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 |
| --- | --- | ---: | ---: | --- | --- |
| State of California | Health Care | 4,697 | $259,721 | 10/31/2028 | No |
| Strategies To Empower People | Health Care | 4,875 | $224,859 | 01/28/2028 | No |
| Azzurro Pizzeria | Restaurant | 2,735 | $144,000 | 03/31/2029 | 1, 5 years |
| Bay Area Legal Aid | Legal Services | 2,135 | $124,305 | 12/15/2027 | 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 | 3 | 3,878 | $184,544 | 18% |
| 2027 | 1 | 2,135 | $124,305 | 12% |
| 2028 | 2 | 9,572 | $484,580 | 46% |
| Thereafter | 2 | 4,659 | $252,948 | 24% |

Satellite Place Office Building contains 134,785 square feet, all of which is office space. As of March 31, 2025, the property is approximately 29% occupied by 4 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 |
| --- | --- | ---: | ---: | --- | --- |
| Codoxo | Healthcare Software | 13,956 | $294,424 | 06/30/2030 | No |
| Polytron | Title Services | 10,737 | $215,682 | 04/30/2031 | 2, 5 years |
| Ampirical | Engineering Consulting | 9,790 | $206,651 | 09/30/2030 | 2, 5 years |
| Sun Taiyang | Consumer Products | 4,383 | $97,178 | 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 |
| --- | ---: | ---: | ---: | ---: |
| 2029 | 1 | 4,383 | $97,178 | 12% |
| 2030 | 2 | 23,746 | $501,075 | 62% |
| Thereafter | 1 | 10,737 | $215,682 | 26% |

44

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 March 31, 2025, 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 | $336,168 | 04/09/2031 08/31/2032 12/21/2032 | No |
| Children’s Home Society | Non-Profit Education | 4,042 | $150,174 | 10/31/2028 | No |
| Burger Rehab | Physical Therapy | 4,013 | $122,818 | 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:

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2025 | 4 | 5,539 | $180,143 | 17% |
| 2027 | 2 | 2,160 | $84,637 | 8% |
| 2028 | 3 | 9,777 | $329,680 | 32% |
| Thereafter | 4 | 16,170 | $450,549 | 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 March 31, 2025, the property is 100% 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 |
| Larsen & Toubro Limited, Inc. | Multinational Conglomerate | 5,130 | $277,026 | 02/13/2028 | No |
| Sticky Rice | Restaurant | 4,388 | $187,157 | 08/17/2034 | No |

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

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2025 | 1 | 968 | $45,816 | 2% |
| 2026 | 3 | 13,567 | $568,311 | 28% |
| 2027 | 3 | 9,147 | $414,464 | 20% |
| Thereafter | 9 | 22,295 | $1,036,379 | 50% |

45

One Harbor Center contains 49,569 square feet, all of which is office space. As of March 31, 2025, the property is 74% occupied by 11 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 |
| Equiventure | Health Care | 6,446 | $232,200 | 11/16/2033 | 4, 5 years |
| Wiseman Company Mgt. | Real Estate | 4,883 | $171,216 | 06/01/2028 | No |
| Loan Depot | Financial Services | 2,949 | $100,300 | 08/02/2026 | 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 |
| --- | ---: | ---: | ---: | ---: |
| 2025 | 3 | 5,672 | $212,405 | 16% |
| 2026 | 4 | 7,373 | $269,212 | 21% |
| 2027 | 1 | 10,221 | $340,380 | 26% |
| Thereafter | 3 | 13,290 | $481,037 | 37% |

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 March 31, 2025, the property is 94% occupied by 14 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 | $289,383 | 08/31/2031 | No |
| California Forever | Real Estate | 3,341 | $152,400 | 10/17/2028 | No |
| Jethro Nicolas et al | Health Care | 3,409 | $143,700 | 04/14/2035 | No |
| Green Valley Oral Surgery | Health Care | 2,179 | $100,832 | 05/07/2029 | 2, 10 years |

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

| Year | Number of Leases Expiring | Total Area | Annual Base Rent | Percentage of Gross Rent |
| --- | ---: | ---: | ---: | ---: |
| 2025 | 2 | 2,404 | $100,356 | 8% |
| 2026 | 1 | 1,332 | $68,270 | 6% |
| 2027 | 1 | 1,515 | $64,884 | 5% |
| Thereafter | 10 | 24,383 | $970,723 | 81% |

Commodore Apartments is a mid-rise apartment building built in 1912 and has 48 units. As of March 31, 2025, Commodore Apartments is approximately 91.7% occupied. The Park View Apartments is also a mid-rise apartment building built in 1929 and has 39 units. As of March 31, 2025, The Park View Apartments is approximately 89.7% 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 8,610 square feet of retail space. All of the retail space is currently occupied by restaurants and nightclubs. The apartments units are 94.4% occupied as of March 31, 2025. Shoreline Apartments is a mid-rise apartment building built in 1967 and renovated in 2015 which has 84 units. As of March 31, 2025, Shoreline Apartments building is approximately 92.9% 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 Apartments | Multi-Family Residential | Oakland, CA | 36,654 | 39 | 89.7% | $1,028,037 | $2,448 |
| Commodore Apartments | Multi-Family Residential | Oakland, CA | 31,156 | 48 | 91.7% | $838,617 | $1,588 |
| Hollywood Apartments | Multi-Family Residential | Los Angeles, CA | 37,551 | 54 | 94.4% | $1,372,601 | $2,243 |
| Shoreline Apartments | Multi-Family Residential | Concord, CA | 67,925 | 84 | 92.9% | $1,974,606 | $2,110 |

| 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% | $343,357 | $28,613 |

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 March 31, 2025, 7 tenants are leasing space totaling 12,404 square feet or 28.7% of the building. The annualized base rent for these tenants is $412,300.

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. The clubhouse is scheduled to open in mid-June 2025 for pre-leasing activities. The first of the three residential buildings should be completed with certificate of occupancy issued by mid to late July 2025, with each of the remaining two residential buildings scheduled to open shortly thereafter. In February 2024, we commenced selling preferred units in MRC Aurora with the goal of raising $10 million in preferred capital to fund the construction of the project and we have raised $6.58 million in preferred capital from outside investors as of the date of this report. In addition, we closed on a construction loan of $17.15 million with Valley Strong Credit Union in February 2024.

#### Campus Lane Land Development (known as Blue Ridge at Suisun Valley)

We are preparing to launch our second multi-family residential community, Blue Ridge at Suisun Valley (“Blue Ridge”), which will be developed on the Campus Lane Land located in Solano County, California. Blue Ridge will be an 84-unit luxury multi-family community in one of the fastest growing counties in California.

We currently do not have plans for any major renovation or development of any properties except for our 220 Campus Lane Office Building, Aurora at Green Valley and Blue Ridge, as discussed above. Each property is being held for income generation and potential value appreciation through increased occupancy and/or rental rates. We maintain property and liability insurance policies on all properties, which we believe are adequate and in line with industry standards.

### 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. Available office space is plentiful in each market in which our office properties are located, which magnifies the competitive challenges that we face in these markets.

The broader economy has been experiencing increased levels of inflation, higher interest rates and tightening monetary and fiscal policies. The Federal Reserve increased the federal funds rate multiple times in 2022 and 2023 then paused hikes in the 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 March 31, 2025 and 2024.

The commercial and residential properties owned by us during the three months ended March 2025 and 2024 are as follows:

| Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 |
| --- | --- |
| **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 | 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 Apartments | The Park View Apartments |
| Hollywood Apartments | Hollywood Apartments |
| Shoreline Apartments | Shoreline Apartments |

48

#### 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 March 31, 2025, we generated $4.27 million in rental and reimbursements revenues, of which $2.81 million was generated from our nine commercial properties and $1.46 million was generated from our four residential properties. During the three months ended March 31, 2024, we generated $4.08 million in rental and reimbursements revenues, of which $2.60 million was generated from our seven 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 two office buildings (One Harbor Center and Green Valley Medical Center) since March 31, 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 March 31, 2025 and 2024 was $0.01 million and $0.22 million, respectively. During the three months ended March 31, 2025, we received minimal distributions from operations, sales, and liquidations as compared to $0.08 million during the three months ended March 31, 2024. The decrease was mainly due to the decrease in distributions received from investments. During the three months ended March 31, 2025, we received dividends, interest, and other investment income of $0.01 million as compared to $0.14 million received during the three months ended March 31, 2024. This decrease was mainly due to decrease in interest income from our cash deposits in money market funds during the three months ended March 31, 2025 as we withdrew all of the deposits during 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 March 31, 2025 and 2024 were $0.86 million and $0.81 million, respectively. The slight increase was due to total increase of $10.58 million in total invested capital from $174.24 million as of March 31, 2024 to $184.82 million as of March 31, 2025.

#### 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 March 31, 2025 and 2024.

#### Administrative cost and transfer agent reimbursements:

Costs reimbursed to MacKenzie for the three months ended March 31, 2025 were $0.17 million as compared to $0.19 million for the three months ended March 31, 2024. The slight decrease was due to a decrease in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to March 31, 2024, mainly due to hiring of a third party transfer service agent since March 31, 2024.

There were minimal transfer agent cost reimbursements paid to MacKenzie for the three months ended March 31, 2025. Transfer agent cost reimbursements paid to MacKenzie for the three months ended March 31, 2024 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 March 31, 2025, we incurred operating and maintenance expenses of $1.89 million, of which $1.19 million were incurred in the operation of our nine commercial properties and $0.70 million were incurred in the operation of our four residential properties. During the three months ended March 31, 2024, we incurred operating and maintenance expenses of $1.81 million, of which $1.09 million were incurred in the operation of our seven commercial properties and $0.72 million from our four residential properties. The increase in the operating expenses was mainly due to the acquisitions of two new office buildings (One Harbor Center and Green Valley Medical Center) since March 31, 2024.

#### Depreciation and amortization:

During the three months ended March 31, 2025, we recorded depreciation and amortization of $2.63 million, of which $1.89 million was attributable to the depreciation and amortization of real estate and intangible assets of our nine commercial properties and $0.74 million was attributable to our four residential properties. During the three months ended March 31, 2024, we recorded depreciation and amortization of $1.91 million, of which $1.37 million was attributable to the depreciation and amortization of real estate and intangible assets of our seven commercial properties and $0.54 million was attributable to our four residential properties. The increase in total depreciation and amortization of $0.72 million during the three months ended March 31, 2025, was due to the acquisitions of two new office buildings (One Harbor Center and Green Valley Medical Center) since March 31, 2024.

#### Interest expense:

Interest expense for the three months ended March 31, 2025 was $2.66 million, of which $1.27 million was incurred on the mortgage notes payable associated with our nine commercial properties, $1.29 million was incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential, and $0.10 million was incurred on the line of credit agreement of the Company. Interest expense for the three months ended March 31, 2024 was $1.60 million, of which $0.80 million was incurred on the mortgage notes payable associated with our six commercial properties, which exclude Satellite Place Office Building since there was no debt on the property during the three months ended March 31, 2024, and $0.80 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 $1.06 million in interest expense during the three months ended March 31, 2025, was primarily due to the additional mortgage notes payable of three office buildings (Satellite Place Office Building, One Harbor Center and Green Valley Medical Center) since March 31, 2024, Main Street West loan accruing at a default rate of 8% since the maturity date of November 2024 as compared to 4% prior to the maturity date, and Hollywood Apartments incurring loan maturity extension fees and loan refinancing fees in 2025. A small increase was attributed to the Parent Company borrowing under the new line of credit.

#### 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 March 31, 2025 and 2024, were $1.89 million and $0.42 million, respectively. The increase in other operating expenses was due to the acquisition of two commercial properties (One Harbor Center and Green Valley Medical Center) since March 31, 2024, resulting in a higher amount of general and administrative operating expenses, and new consulting and marketing services expenses incurred by the Company during the three months ended March 31, 2025.

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

During the three months ended March 31, 2025, we recorded a realized gain of $0.02 million as compared to $0.26 million net realized loss during the three months ended March 31, 2024. Total realized gain for three months ended March 31, 2025, was realized from the sale of a non-traded REIT security and a limited partnership interest. Total net realized loss for the three months ended March 31, 2024, was realized from sales of three non-traded REIT securities.

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

During the three months ended March 31, 2025, we recorded a net unrealized loss of $0.29 million, which was net of $0.02 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 losses excluding the reclassification adjustment for the three months ended March 31, 2025, were $0.27 million, which resulted from fair value depreciations of $0.24 million from general partnership interests, $0.06 million from limited partnership interests and fair value appreciations of $0.03 million from non-traded REIT securities.

During the three months ended March 31, 2024, we recorded a net unrealized loss of $0.22 million, which was net of $0.13 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 March 31, 2024, were $0.35 million, which resulted from fair value depreciations of $0.01 million from limited partnership interests, $0.14 million from general partnership interests and $0.20 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, 2024. Therefore, it did not incur any tax expense or excise tax on its income from operations during the quarterly periods within the tax year 2024. In addition, for the tax year 2025, the Parent Company intends to pay the requisite amounts of dividends during the year and meet 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 2025.

MacKenzie NY 2 is subject to corporate federal and state income tax on its taxable income at regular statutory rates. As of March 31, 2025, it did not have any taxable income for tax year 2024 and 2025. Therefore, we did not record any tax provisions during any fiscal periods within the tax year 2024 and 2025. 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.

#### Nine months ended March 31, 2025 and 2024.

The commercial and residential properties owned by us during the nine months ended March 2025 and 2024 are as follows:

| Nine Months Ended March 31, 2025 | Nine Months Ended March 31, 2024 |
| --- | --- |
| **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 | 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 Apartments | The Park View Apartments |
| Hollywood Apartments | Hollywood Apartments |
| Shoreline Apartments | Shoreline Apartments |

51

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

Rental and reimbursement revenues are generated from our commercial and residential real estate properties. During the nine months ended March 31, 2025, we generated $17.26 million in rental and reimbursements revenues, of which $12.84 million was generated from our nine commercial properties and $4.42 million was generated from our four residential properties. During the nine months ended March 31, 2024, we generated $11.22 million in rental and reimbursements revenues, of which $6.77 million was generated from our seven commercial properties, and $4.45 million was generated from our four residential properties. The total increase in rental revenues was mainly due to the acquisition of two office buildings (One Harbor Center and Green Valley Medical Center) since March 31, 2024, 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 nine months ended March 31, 2025 and 2024, was $0.05 million and $0.80 million, respectively. During the nine months ended March 31, 2025, we received minimal distributions from operations, sales, and liquidations as compared to $0.28 million during the nine months ended March 31, 2024. The decrease was mainly due to the decrease in distributions received from investments. During the nine months ended March 31, 2025, we received dividends, interest, and other investment income of $0.05 million as compared to $0.52 million received during the nine months ended March 31, 2024. This decrease was mainly due to decrease in interest income from our cash deposits in money market funds during the nine months ended March 31, 2025.

#### 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 nine months ended March 31, 2025 and 2024, were $2.57 million and $2.39 million, respectively. The slight increase was due to total increase of $10.58 million in total invested capital from $174.24 million as of March 31, 2024 to $184.82 million as of March 31, 2025.

#### 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 nine months ended March 31, 2025 and 2024.

#### Administrative cost and transfer agent reimbursements:

Costs reimbursed to MacKenzie for the nine months ended March 31, 2025 were $0.50 million as compared to $0.57 million for the nine months ended March 31, 2024. The slight decrease was due to a decrease in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to March 31, 2024, mainly due to hiring of a third party transfer service agent since March 31, 2024.

There were minimal transfer agent cost reimbursements paid to MacKenzie for the nine months ended March 31, 2025. Transfer agent cost reimbursements paid to MacKenzie for the nine months ended March 31, 2024 was $0.05 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 nine months ended March 31, 2025, we incurred operating and maintenance expenses of $5.48 million, of which $3.46 million were incurred in the operation of our nine commercial properties and $2.02 million were incurred in the operation of our four residential properties. During the nine months ended March 31, 2024, we incurred operating and maintenance expenses of $4.70 million, of which $2.63 million were incurred in the operation of our seven commercial properties and $2.07 million from our four residential properties. The increase in the operating expenses was mainly due to the acquisitions of two new office buildings (One Harbor Center and Green Valley Medical Center) since March 31, 2024.

#### Depreciation and amortization:

During the nine months ended March 31, 2025, we recorded depreciation and amortization of $7.09 million, of which $5.45 million was attributable to the depreciation and amortization of real estate and intangible assets of our nine commercial properties and $1.64 million was attributable to our four residential properties. During the nine months ended March 31, 2024, we recorded depreciation and amortization of $5.03 million, of which $3.40 million was attributable to the depreciation and amortization of real estate and intangible assets of our seven commercial properties and $1.63 million was attributable to our four residential properties. The increase in total depreciation and amortization of $2.06 million during the nine months ended March 31, 2025, was due to the acquisitions of two new office buildings (One Harbor Center and Green Valley Medical Center) since March 31, 2024.

#### Interest expense:

Interest expense for the nine months ended March 31, 2025, was $6.52 million, of which $3.80 million was incurred on the mortgage notes payable associated with our nine commercial properties, $2.62 million was incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential, and $0.10 million was incurred on the line of credit agreement of the Company. Interest expense for the nine months ended March 31, 2024, was $4.38 million, of which $2.06 million was incurred on the mortgage notes payable associated with our six commercial properties, which exclude Satellite Place Office Building since there was no debt on the property during the nine months ended March 31, 2024, and $2.32 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 $2.14 million in interest expense during the nine months ended March 31, 2025, was due to the additional mortgage notes payable of three office buildings (Satellite Place Office Building, One Harbor Center and Green Valley Medical Center) since March 2024, Main Street West loan accruing at a default rate of 8% since the debt maturity date of November 2024 as compared to 4% prior to the maturity date, and Hollywood Apartments incurring loan maturity extension fees and loan refinancing fees in 2025. A small increase was attributed to the Parent Company’s borrowing under the new line of credit.

#### 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 nine months ended March 31, 2025 and 2024, were $3.41 million and $1.40 million, respectively. The increase in other operating expenses was mainly due to the acquisition of two commercial properties (One Harbor Center and Green Valley Medical Center) since March 2024, and new consulting and marketing services expenses incurred by the Company during the nine months ended March 31, 2024, resulting in a higher amount of general and administrative operating expenses during the nine months ended March 31, 2025.

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

During the nine months ended March 31, 2025, we recorded a realized gain of $0.23 million as compared to $1.55 million net realized loss during the nine months ended March 31, 2024. Total realized gain for nine months ended March 31, 2025, was realized from the sale of two non-traded REIT securities and a limited partnership interest. Total net realized loss for the nine months ended March 31, 2024, was realized from a limited partnership interest write-off, offset by the sale of three non-traded REIT securities.

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

During the nine months ended March 31, 2025, we recorded a net unrealized loss of $0.41 million, which was net of $0.16 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 losses excluding the reclassification adjustment for the nine months ended March 31, 2025, were $0.25 million, which resulted from fair value depreciations of $0.35 million from general partnership interests, $0.05 million from limited partnership interests and fair value appreciations of $0.15 million from non-traded REIT securities.

During the nine months ended March 31, 2024, we recorded a net unrealized loss of $0.66 million, which was net of $2.44 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 nine months ended March 31, 2024, were $3.10 million, which resulted from fair value depreciations of $0.65 million from general partnership interests, $1.31 million from non-traded REIT securities and $1.14 million from limited partnership interests.

#### Income tax provision (benefit):

Income tax provision for nine months ended March 31, 2025 and 2024 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 March 31, 2025. 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 $18.74 million through the sale of our Series A preferred stock and $2.86 million Series B preferred stock pursuant to the Offering Circular as of March 31, 2025. In addition, we have raised $0.40 million from the issuance of shares of Series A and Series B preferred stock under the preferred stock DRIP. In January 2025, the Second 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. As of March 31, 2024, under the ATM offering, we sold 569,483 shares with gross proceeds of approximately $1.49 million. On February 28, 2025, the Company offered and sold 1,534,034 shares of the Company’s common stock, pre-funded warrants to purchase up to 1,292,265 shares of common stock, and unregistered warrants to purchase up to an aggregate of 4,239,448 shares of common stock. The gross proceeds to the Company from this transaction were approximately $4.8 million before deducting the placement agent’s fees and other offering expenses payable by the Company.

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 nine months ended March 31, 2025, with cash and cash equivalents, and restricted cash of approximately $5.46 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:

#### Nine months ended March 31, 2025:

For the nine months ended March 31, 2025, we experienced a net decrease in cash of $7.62 million. During this period, we used net cash of $0.05 million in our operating activities, used net cash of $14.27 million in our investing activities and generated net cash of $6.70 million in our financing activities.

The net cash outflow of $0.05 million from operating activities resulted from $16.74 million used in operating expenses, offset by cash inflow of $16.64 million of rental revenues and $0.05 million of investment income.

The net cash outflow of $14.27 million from investing activities resulted from $14.87 million of real estate acquisitions through our subsidiaries, and $0.23 million purchases of equity investments, offset by cash inflow of $0.83 million from sale of investments.

The net cash inflow of $6.70 million from financing activities resulted from $35.33 million of additional mortgage borrowings, $8.16 million proceeds from borrowings under line of credit, $3.79 million of issuance of common stock, $2.59 million of capital contributions by non-controlling interests holders, $1.94 million of issuance of pre-funded warrants, $1.46 million of issuance of Series B preferred stock, $0.47 million change in capital pending acceptance, $0.38 million of issuance of Series A common stock warrants, $0.23 million of issuance of Series A preferred stock and $0.22 million of issuance of Series B common stock warrants, offset by cash outflows of $38.15 million payment on existing mortgage notes payables, $4.02 million payment of dividends to common stockholders, $1.85 million payment of financing fees, $1.60 million payment of selling commissions and fees, $1.10 million capital distributions to non-controlling interests holders, $0.72 million payment of dividends to Series A preferred stockholders, $0.22 million payment on existing notes payables, $0.17 million repayment of finance lease liabilities, $0.03 million payment of dividends to Series B preferred stockholders and $0.01 million redemption of Series A preferred stock.

#### Nine months ended March 31, 2024:

For the nine months ended March 31, 2024, we experienced a net decrease in cash of $1.99 million. During this period, we used cash of $0.16 million in our operating activities, generated cash of $0.75 million in our investing activities and used cash of $2.90 million in our financing activities.

The net cash inflow of $0.16 million from operating activities resulted from $11.55 million of rental revenues and $0.80 million of investment income, offset by cash outflows of $12.19 million used in operating expenses.

The net cash inflow of $0.75 million from investing activities resulted from $8.80 million sale of investments and $0.43 million distributions received from our investments that are considered return of capital, offset by real estate acquisitions through our subsidiaries of $6.72 million, $0.97 million purchases of equity investments and $0.79 million payment of contingent liability.

The net cash outflow of $2.90 million from financing activities resulted from payment of dividends to common stockholders of $3.53 million, redemption of common stocks of $1.39 million, payment of mortgage payables of $0.97 million, payment of loan extension fee of $0.88 million, payments of selling commissions and fees of $0.71 million, payment of dividends to Series A preferred stockholders of $0.66 million, distributions to non-controlling interests holders of $0.52 million, payment on notes payables of $0.36 million, acquisition of below market debt of $0.34 million, payments on finance lease liabilities of $0.06 million and redemption of Series A preferred stock of $0.05 million, offset by cash inflows of $3.49 million proceeds from mortgage notes payable, $1.74 million proceeds from the issuance of Series A preferred stock, $0.94 million of capital contributions from non-controlling interests holders and $0.40 million 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%. 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. As of the date of this report, the Company has borrowed $9.59 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 March 31, 2025 and the fiscal years those loans mature:

| Fiscal Year Ending June 30, : | Principal |
| --- | ---: |
| 2025 (remainder) | $10,710,337 |
| 2026 | 22,758,201 |
| 2027 | 1,327,856 |
| 2028 | 19,803,310 |
| 2029 | 4,776,681 |
| Thereafter | 71,051,768 |
| **Total** | $130,428,153 |

Three of our underlying companies (Hollywood Hillview, Woodland Corporate Center Two, and Main Street West) had debts that matured during the fiscal year ending June 30, 2025. Of the three, the Woodland Corporate Center loan was refinanced in October 2024 and the Hollywood Hillview loan was refinanced in March 2025.

The $14.74 million note payable on Main Street West matured on November 1, 2024. Following a default, the bank initiated foreclosure proceedings in January 2025 and a court-appointed receiver took control of the property in February 2025. On March 25, 2025, the Company entered into a Forbearance Agreement with the Lender. As part of the agreement, the Company paid down $5 million on the loan and regained control of the property from the receiver. Subject to performance by the Company, the lender agreed to forbear from taking any further foreclosure actions through the forbearance termination date of September 30, 2025. As of March 31, 2025, the outstanding balance on the loan was $10.46 million. The Company is currently working with a new lender to refinance the loan.

### 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 nine months ended March 31, 2025, 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 |  |
| March 31, 2025 | 0.050 | 786,925 | 0.375 | 286,981 | 0.750 | 79,152 |  |
|  | $0.225 | $3,140,040 | $1.125 | $860,703 | $2.250 | $188,123 | \* |

\* Of the total dividends declared for Series B during the nine months ended March 31, 2025, $141,096 was an increase in liquidation preference and $47,027 was the cash dividend.

On May 12, 2025, following a review of the Company's financials, the current economic climate, the potential impact of new tariffs on demand for office and retail space, and the increased likelihood of a near-term recession, the Board of Directors approved the suspension of the regular quarterly dividend on the Company's common stock effective immediately. This decision was made to preserve liquidity and will remain in effect until further notice.

### 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, 2,116 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 March 31, 2025, financial instruments that subjected us to concentrations of market risk consisted principally of equity investments, which represented approximately 0.4% 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 March 31, 2025, $3.0 million of our total outstanding loan balance was under variable-rate debt indexed to the Prime rate. A hypothetical increase or decrease of 100 basis points in the Prime rate would result in a corresponding increase or decrease in our annual interest expense of approximately $0.03 million.

## Controls and procedures

As filed, 1,366 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 March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 4,276 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.

### Risks Relating to Issuance of Warrants

#### There are unresolved issues related to rights of the warrant holder.

In February 2025, we issued pre-funded and unfunded warrants to a single institutional investor pursuant to warrant agreements that grant the investor the right to share in dividends. This dividend right is understandable and undisputed with respect to pre-funded warrants to purchase up to 1,292,265 shares of common stock. Conversely, the Company did not agree to pay dividends on unfunded warrants to purchase 4,239,448 shares of common stock. Nonetheless, the investor has taken the position that dividends are payable on both its pre-funded warrants and unfunded warrants. The Company is attempting to resolve this misunderstanding with the investor, but no resolution has been reached.

*The holder of unfunded warrants could assert claims for dividends on the unfunded warrants.*

The unfunded warrants become exercisable at the end of August, six months after issuance of the warrants. From and after that time, the holder of the unfunded warrants could bring claims for participation rights in any dividends declared by the Company on its common shares. While the Company has suspended the payment of dividends while experiencing negative cash flow, such potential claims by the holder of the unfunded warrants could be material if and when the Company re-starts dividend payments.

Filed May 15, 2025.
Source: SEC EDGAR, the filing index for accession 0001140361-25-019315. Last ingested by Listed: Oct 26, 2026, 06:02 ET. No prices; not investment advice.