MacKenzie Realty Capital Inc

Previous wording

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 operating expenses 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:

Current wording

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:

Previous wording

In addition to our investment securities, we currently own and manage seven commercial real estate properties: Satellite Place located in Duluth, GA, 1300 Main, First & Main and Main Street West located in Napa, CA, Woodland Corporate Center Two located in Woodland, CA, 220 Campus Lane and Green Valley Executive Center located in Fairfield, 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 located in Concord, CA.

Current wording

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 (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, 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 the Shoreline Apartments are owned through our subsidiary BAA-Shoreline. In August 2024, we have listed Hollywood Apartments for sale.

Previous wording

First and Main Office Building contains 27,396 square feet, of which approximately 19.000 square feet is office space and the remainder is designated as retail space. As of March 31, 2024, the property is 100% occupied by 9 tenants. The following table shows the largest tenants and square footage occupied:

Current wording

First and Main Office Building contains 27,396 square feet, of which approximately 19,000 square feet is office space and the remainder is designated as retail space. As of September 30, 2024, the property is 100% occupied by 9 tenants. The following table shows the largest tenants and square footage occupied:

Previous wording

Main Street West Office Building contains 38,153 square feet, of which approximately 32,700 square feet is office space and the remainder is designated as retail space. As of March 31, 2024, the property is 89% occupied by 8 tenants. The following table shows the largest tenants and square footage occupied:

Current wording

Main Street West Office Building contains 38,156 square feet, of which approximately 32,700 square feet is office space and the remainder is designated as retail space. As of September 30, 2024, the property is 89% occupied by 8 tenants. The following table shows the largest tenants and square footage occupied:

Previous wording

Woodland Corporate Center Office Building contains 37,034 square feet, of which 7,797 square feet are laboratories and the rest is office space. All of the laboratories space is occupied by Agtech Innovation. As of March 31, 2024, the property is 100% occupied by 14 tenants. The following table shows the largest tenants and square footage occupied:

Current wording

Woodland Corporate Center Office Building 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 September 30, 2024, the property is 100% occupied by 14 tenants. The following table shows the largest tenants and square footage occupied:

Previous wording

Green Valley Executive Center Office Building 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, 2024, the property is 100% occupied by 16 tenants. The following table shows the largest tenants and square footage occupied:

Current wording

Green Valley Executive Center Office Building 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 September 30, 2024, the property is 100% occupied by 17 tenants. The following table shows the largest tenants and square footage occupied:

Previous wording

Commodore Apartments is a mid-rise apartment building built in 1912 and has 48 units. As of March 31, 2024, Commodore Apartment building is approximately 93.8% occupied. The Park View is also a mid-rise apartment building built in 1929 and has 39 units. As of March 31, 2024, The Park View building is approximately 94.9% occupied. Hollywood Hillview Apartments (“Hollywood Property”), 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 8,560 square feet of retail space. All of the retail space is currently occupied by restaurants and nightclubs. The apartment units are 88.9% occupied as of March 31, 2024. Shoreline Apartments is a mid-rise apartment building built in 1967 and renovated in 2015 which has 84 units. As of March 31, 2024, Shoreline Apartments building is approximately 90.5% occupied.

Current wording

Commodore Apartments is a mid-rise apartment building built in 1912 and has 48 units. As of September 30, 2024, Commodore Apartment building is approximately 91.7% occupied. The Park View is also a mid-rise apartment building built in 1929 and has 39 units. As of September 30, 2024, The Park View building is approximately 97.4% 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 apartment units are 96.3% occupied as of September 30, 2024. Shoreline Apartments is a mid-rise apartment building built in 1967 and renovated in 2015 which has 84 units. As of September 30, 2024, Shoreline Apartments building is approximately 84.5% occupied.

Previous wording

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, 2024, the building had no tenants. One tenant is scheduled to occupy 7,166 square feet beginning in June 2024.

Current wording

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 September 30, 2024, four tenants are leasing space totaling 11,986 square feet or 27.7% of the building. The annualized base rent for these tenants is $371,640.

Previous wording

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 has not commenced, and we are uncertain about the duration and financial resources required to realize our goal. 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.

Current wording

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.

Previous wording

We plan to build a multi-family residential community on this land which will include 72 units and a club house. The city’s planning commission approved our development project last September and the building department is currently reviewing our building permit submittals. In order to fund the construction of the project, we plan to raise $10 million in preferred capital and in addition obtain a construction loan. Accordingly, we commenced selling the preferred units in February 2024 and in addition closed on a construction loan of $17.15 million on February 21, 2024. We commenced the construction preparation and grading work on April 1, 2024.

Current wording

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 $3.17 million in preferred capital from outside investors as of the date of this report.

Previous wording

The markets in which our properties (those consolidated and those that are not yet consolidated) operate are highly competitive, and each property faces unique competitive challenges based upon local economic, political, and legal factors. Our West coast multi-family properties are generally restricted from raising rents significantly by local rent control laws. Two of our unconsolidated investments in apartment properties, Lakemont Partners and Capitol Hill, are also subject to rent control. 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.

Current wording

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.

Previous wording

Our consolidated office properties, 1300 Main, First and Main, Main Street West, Satellite Place, Woodland Corporate Center Two, 220 Campus Lane, and Green Valley Executive Center are all Class A suburban office properties and are located in Napa, Woodland and Fairfield, California and Duluth, Georgia. All properties must compete with every other office property in the market, as well as facing the uncertainty of workers returning to the office after COVID-19.

Current wording

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. All properties must compete with every other office property in the market, as well as facing the uncertainty of workers returning to the office after COVID-19.

Previous wording

Recently, the broader economy began 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. We currently have fixed and variable interest rates for our loans. The rise in overall interest rates has caused an increase in our variable rate borrowing costs resulting in an increase in interest expense. The higher interest rates imposed by the Federal Reserve to address inflation may also 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.

Current wording

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. We currently have fixed and variable interest rates for our loans. The rise in overall interest rates has caused an increase in our variable rate borrowing costs resulting in an increase in interest expense. The higher interest rates imposed by the Federal Reserve to address inflation may also 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.

Previous wording

Three Months Ended March 31, 2024 and 2023

Current wording

Three Months Ended September 30, 2024 and 2023. The commercial and residential properties owned by us during the three months ended September2024 and 2023 are as follows:

Previous wording

Rental and reimbursement revenues are generated from our commercial and residential real estate 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 (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Main Street West Office Building, Woodland Corporate Center Office Building, 220 Campus Lane Office Building and Green Valley Executive Center Office Building), and $1.48 million was generated from our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments and Shoreline Apartments). During the three months ended March 31, 2023, we generated $4.47 million in rental and reimbursements revenues, of which $2.87 million was generated from our six commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Main Street West Office Building and Woodland Corporate Center Office Building) and $1.60 million from our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments). The total decrease of $0.39 million in rental revenues during the three months ended March 31, 2024 was mainly due to the sale of Addison Corporate Center building in June 2023 partly offset by acquisition of two commercial properties: 220 Campus Lane and Green Valley Executive Center since March 2023.

Current wording

Rental and reimbursement revenues are generated from our commercial and residential real estate properties. During the three months ended September 30, 2024, we generated $4.95 million in rental and reimbursements revenues, of which $3.47 million was generated from our nine commercial properties and $1.48 million was generated from our four residential properties. During the three months ended September 30, 2023, we generated $3.56 million in rental and reimbursements revenues, of which $2.06 million was generated from our five commercial properties, which excludes 220 Campus Lane Office Building, as it had not yet commenced operations during the three months ended September 30, 2023 and $1.50 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 September 2023.

Previous wording

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, 2024 and 2023 was $0.22 million and $10.23 million, respectively. During the three months ended March 31, 2024, we received $0.08 million of distributions from operations, sales, and liquidations as compared to $10.15 million during the three months ended March 31, 2023. The decrease was mainly because during the three months ended March 31, 2023, we had received the proceeds from liquidation of Dimension 28, LP. During the three months ended March 31, 2024, we received dividends, interest, and other investment income of $0.14 million as compared to $0.08 million received during the three months ended March 31, 2023. This increase was mainly due to increase in interest income from our cash deposits in money market funds during the three months ended March 31, 2024.

Current wording

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 September 30, 2024 and 2023 was $0.02 million and $0.32 million, respectively. During the three months ended September 30, 2024 we received minimal distributions from operations, sales, and liquidations as compared to $0.09 million during the three months ended September 30, 2023. The decrease was mainly due to the decrease in distributions received from investments. During the three months ended September 30, 2024, we received dividends, interest, and other investment income of $0.02 million as compared to $0.23 million received during the three months ended September 30, 2023. This decrease was mainly due to decrease in interest income from our cash deposits in money market funds during the three months ended September 30, 2024.

Previous wording

The asset management fees for the three months ended March 31, 2024 and 2023 were $0.81 million and $0.77 million, respectively. The slight increase was due to total increase of $14.09 million in total invested capital from $160.15 million as of March 31, 2023 to $174.24 million as of March 31, 2024.

Current wording

The asset management fees for the three months ended September 30, 2024 and 2023 were $0.85 million and $0.79 million, respectively. The slight increase was due to total increase of $17.70 million in total invested capital from $164.23 million as of September 30, 2023 to $181.93 million as of September 30, 2024.

Previous wording

Costs reimbursed to MacKenzie for the three months ended March 31, 2024 were $0.19 million as compared to $0.18 million for the three months ended March 31, 2023. The slight increase was due to an increase in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to March 31, 2023, as a result of the increase in number of properties since March 2023.

Current wording

Costs reimbursed to MacKenzie for the three months ended September 30, 2024 were $0.17 million as compared to $0.19 million for the three months ended September 30, 2023. The slight decrease was due to a decrease in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to September 30, 2023, mainly due to hiring of a third party transfer service agent since September 30, 2023.

Previous wording

Transfer agent cost reimbursements paid to MacKenzie for the three months ended March 31, 2024 and 2023 were $0.02 million and $0.02 million, respectively.

Current wording

Transfer agent cost reimbursements paid to MacKenzie for the three months ended September 30, 2024 and 2023 were $0.00 million and $0.02 million, respectively.

Previous wording

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, 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 (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building, Main Street West Office Building, 220 Campus Lane Office Building and Green Valley Executive Center Office Building) and $0.72 million were incurred in the operation of our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments). During the three months ended March 31, 2023, we incurred operating and maintenance expenses of $2.54 million, of which $1.87 million were incurred in the operation of our six commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building and Main Street West Office Building) and $0.67 million from our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments). The decrease in the operating expenses was mainly due to the sale of Addison Property in June 2023 partly offset by the acquisitions of two new office buildings (220 Campus Lane Office Building and Green Valley Executive Center Office Building) since March 31, 2023.

Current wording

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 September 30, 2024, we incurred operating and maintenance expenses of $1.88 million, of which $1.19 million were incurred in the operation of our nine commercial properties and $0.69 million were incurred in the operation of our four residential properties. During the three months ended September 30, 2023, we incurred operating and maintenance expenses of $1.39 million, of which $0.69 million were incurred in the operation of our six commercial properties and $0.7 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 September 30, 2023.

Previous wording

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 (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building, Main Street West Office Building, 220 Campus Lane Office Building and Green Valley Executive Center Office Building) and $0.54 million was attributable to our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments). During the three months ended March 31, 2023, we recorded depreciation and amortization of $1.66 million, of which $1.09 million was attributable to the depreciation and amortization of real estate and intangible assets of our five commercial properties (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building and Main Street West Office Building) and $0.57 million was attributable to our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments). The increase in total depreciation and amortization of $0.25 million during the three months ended March 31, 2024 was due to the acquisitions of two new office buildings (220 Campus Lane Office Building and Green Valley Executive Center Office Building) since March 31, 2023. The sale of Addison Corporate Center in June 2023, which was previously held for sale and not depreciated, did not contribute to the overall increase.

Current wording

During the three months ended September 30, 2024, we recorded depreciation and amortization of $2.28 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 $0.49 million was attributable to our four residential properties. During the three months ended September 30, 2023, we recorded depreciation and amortization of $1.56 million, of which $1.01 million was attributable to the depreciation and amortization of real estate and intangible assets of our six commercial properties and $0.55 million was attributable to our four residential properties. The increase in total depreciation and amortization of $0.72 million during the three months ended September 30, 2024 was due to the acquisitions of three new office buildings (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since September 30, 2023.

Previous wording

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 (First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building, Main Street West Office Building, 220 Campus Lane Office Building and Green Valley Executive Center Office Building) and $0.80 million was incurred on the mortgage notes payable associated with our five residential properties (Commodore Apartments, The Park View, Hollywood Apartments, Shoreline Apartments and Campus Lane Residential). Interest expense for the three months ended March 31, 2023 was $1.91 million, of which $1.23 million was incurred on the notes payable associated with our five commercial properties (Addison Corporate Center, First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building and Main Street West Office Building) and $0.68 million was incurred on the mortgage notes payable associated with our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments). The total decrease of $0.31 million in interest expense during the three months ended March 31, 2024, was primarily due to the settlement of the Addison Property Owner debt after the sale of Addison Corporate Center in June 2023.

Current wording

Interest expense for the three months ended September 30, 2024 was $1.89 million, of which $1.14 million was incurred on the mortgage notes payable associated with our nine commercial properties and $0.75 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 September 30, 2023 was $1.32 million, of which $0.62 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 September 30, 2023, and $0.7 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 $0.57 million in interest expense during the three months ended September 30, 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 September 30, 2023.

Previous wording

Other operating expenses include professional fees, directors’ fees, printing and mailing expenses, and other general and administrative expenses. Other operating expenses for the nine months ended March 31, 2024 and 2023, were $1.40 million and $1.13 million, respectively. The increase in other operating expenses was mainly due to the acquisition of two commercial properties (220 Campus Lane Office Building and Green Valley Executive Center Office Building ) since March 31, 2023 resulting in a higher amount of general and administrative operating expenses during the nine months ended March 31, 2024.

Current wording

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 September 30, 2024 and 2023, were $0.92 million and $0.55 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 September 30, 2023 resulting in a higher amount of general and administrative operating expenses during the three months ended September 30, 2024.

Previous wording

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 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, 2024 were $0.35 million, which resulted from fair value depreciations of $.01 million from limited partnership interests, $0.14 million from general partnership interests and $0.20 million from non-traded REIT securities.

Current wording

During the three months ended September 30, 2024, we recorded a net unrealized loss of $0.14 million, which was net of $0.10 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 September 30, 2024 were $0.04 million, which resulted from fair value depreciations of $0.12 million from general partnership interests, $0.02 million from limited partnership interests and fair value appreciations of $0.10 million from non-traded REIT securities.

Previous wording

The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax year ended December 31, 2022. Therefore, it did not incur any tax expense or excise tax on its income from operations during the quarterly periods within the tax year 2022. Similarly, for the tax year 2023, 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 2023.

Current wording

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. In addition, for the tax year 2024, we intend 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 2024.MacKenzie NY 2 is subject to corporate federal and state income tax on its taxable income at regular statutory rates. As of September 30, 2024, it did not have any taxable income for tax year 2023 and 2024. Therefore, we did not record any tax provisions during any fiscal periods within the tax year 2023 and 2024. MacKenzie Satellite is a qualified REIT subsidiary of the Parent Company. Therefore, it does not file a separate tax return.

Previous wording

The Operating Partnership is a limited partnership. Hollywood Hillview, MacKenzie Shoreline, Madison, PVT, 220 Campus Lane, Campus Lane Residential and Green Valley Executive Center are limited liability companies. First & Main, 1300 Main, Woodland Corporate Center Two, and Main Street West 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.

Current wording

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.

Previous wording

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 three 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 common shares under the DRIP as of March 31, 2024. Out of the total proceeds from DRIP, we have utilized a total of $14.28 million to repurchase common stocks 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 $3 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. We had raised $18.37 million through the sale of our Series A preferred stock and $0.41 million Series B preferred stock pursuant to the Offering Circular as of March 31, 2024. In addition, we have raised $0.21 million from the issuance of Series A preferred shares under the DRIP. 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. 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. In addition, from time to time, we may draw on the Company’s margin line of credit on a temporary basis to bridge our investment purchases and sales or capital raising. For additional information concerning our margin borrowing activity, please see Note 9 - Margin Loans in the financial statements included in this report.

Current wording

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 three 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 common shares under the DRIP as of September 30, 2024. Out of the total proceeds from DRIP, we have utilized a total of $14.28 million to repurchase common shares 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. We had raised $18.56 million through the sale of our Series A preferred stock and $1.65 million Series B preferred stock pursuant to the Offering Circular as of September 30, 2024. In addition, we have raised $0.30 million from the issuance of Series A and Series B preferred shares under the DRIP.

Previous wording

For the nine months ended March 31, 2023, we experienced a net increase in cash of $10.02 million. During this period, we generated cash of $8.83 million from our financing activities and $6.10 million from our investing activities and used $4.91 million in our operating activities.

Current wording

For the three months ended September 30, 2024, we experienced a net decrease in cash of $1.11 million. During this period, we generated cash of $1.32 million in our operating activities, used cash of $6.00 million in our investing activities and generated cash of $3.57 million in our financing activities.

Previous wording

The net cash outflow of $4.91 million from operating activities resulted from $18.5 million of cash used in operating expenses offset by cash inflows of $11.99 million of rental revenues and $1.60 million of investment income.

Current wording

The net cash inflow of $1.32 million from operating activities resulted from $4.62 million of rental revenues and $0.03 million of investment income offset by cash outflow of $3.33 million used in operating expenses.

Previous wording

The net cash inflowof $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 ofcapital offset byreal estate acquisitions through our subsidiaries of $6.72 million, $0.97 million purchases of equity investments and $0.79 million payment of contingent liability.

Current wording

The net cash outflow of $6.00 million from investing activities resulted from $6.50 million of real estate acquisitions through our subsidiaries, $0.17 million purchases of equity investments, offset by cash inflow of $0.67 million from sale of investments.

Previous wording

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. The cash outflows were partly 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.

Current wording

The net cash inflow of $3.57 million from financing activities resulted from $5.89 million additional mortgage borrowings, $0.36 million capital contributions by non-controlling interests holders, $0.36 million issuance of Series B preferred stock and $0.05 million issuance of Series A preferred stock, offset by $1.66 million payment of dividends to common stockholders, $0.41 million payment on existing mortgage notes payables, $0.34 million capital distributions to non-controlling interests holders, $0.24 million payment of dividends to Series A preferred stockholders, $0.20 million change in capital pending acceptance, $0.17 million payment of selling commissions and fees, $0.06 million repayment of finance lease liabilities and $0.01 million payment of dividends to Series B preferred stockholders.

Previous wording

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 $2.90 million in our financing activities and generated $0.75 million in our investing activities and $0.16 million in our operating activities.

Current wording

For the three months ended September 30, 2023, we experienced a net decrease in cash of $3.46 million. During this period, we generated cash of $0.52 million in our operating activities, used cash of $5.43 million in our investing activities and generated cash of $1.45 million in our financing activities and.

Previous wording

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.

Current wording

The net cash inflow of $0.52 million from operating activities resulted from $3.76 million of rental revenues and $0.32 million of investment income, offset by cash outflows of $3.56 million used in operating expenses.

Previous wording

The net cash inflow of $6.10 million from investing activities resulted from $13.22 million from sale of and sales distribution from investments and $12.28 million from distributions received from our investments that are considered return of capital, offset by real estate acquisitions through our subsidiaries of $17.95 million, payment of $1.15 million on the contingent liability and purchases of equity investments of $0.30 million.

Current wording

The net cash outflow of $5.43 million from investing activities resulted from $5.06 million of real estate acquisitions through our subsidiaries and $0.39 million in purchases of equity investments, offset by cash inflows of $0.02 million from distributions received from our investments that are considered return of capital.

Previous wording

The net cash inflow of $8.83 million from financing activities resulted from proceeds from the issuance of Series A preferred stock of $11.45 million, $3.03 million proceeds from mortgage payables, $0.46 million from capital pending acceptance and $0.01 million proceeds from notes payables. The cash inflows were offset by cash outflows of $3.20 million payment of dividends, $1.15 million redemption of common stocks, $1.01 million payments of selling commissions and fees, $0.45 million payment of mortgage payables, $0.28 million capital distributions to non-controlling interests holders, $0.02 million repayment of finance lease liabilities and $0.01 million payment of notes payables.

Current wording

The net cash inflow of $1.45 million from financing activities resulted from $2.95 million proceeds from additional mortgage borrowings and $1.36 million proceeds from the issuance of Series A preferred stock, offset by $1.36 million payment of dividends to common stockholders, $0.45 million redemption of common stocks, $0.18 million payment of selling commissions and fees, $0.17 million capital distributions to non-controlling interests holders, $0.01 million repayment of finance lease liabilities, $0.40 million change in capital pending acceptance and $0.29 million payment on existing mortgage notes payable.

Previous wording

We have entered into two contracts under which we have material future commitments: (i) the Advisory Management Agreement, under which the Real Estate Adviser serves as our adviser, 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.

Current wording

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.

Previous wording

We do not have any current plans to borrow money at the Parent Company level. In the event that we do so borrow, we would 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. While we do not have any plans to borrow money at the Parent Company level, we borrow money within the underlying companies in which we have majority ownership.

Current wording

In August 2024, we have applied for a new line of credit at the Parent Company level. 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. The bank is currently reviewing our application. 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.

Previous wording

We have a DRIP that provides for reinvestment of our dividends and other distributions on behalf of stockholders for any individual stockholder who elects to participate in the DRIP, provided that the 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 DRIP in connection with the pursuit of a listing of its common stock on a securities exchange.

Current wording

We have a DRIP that provides for reinvestment of our dividends and other distributions on behalf of stockholders for any individual stockholder who elects to participate in the DRIP, provided that the 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 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 DRIP.

Previous wording

During the nine months ended March 31, 2024, the Board approved the following quarterly dividends:

Current wording

During the three months ended September 30, 2024, the Board approved the following quarterly dividends:

Previous wording

Of the total dividend declared for Series B as of March 31, 2024, $7,725 was an increase in liquidation preference and $2,575 was the cash dividend.

Current wording

Of the total dividends declared for Series B during the three months ended September 30, 2024, $34,037 was an increase in liquidation preference and $11,341 was the cash dividend.