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Item 1A. Risk Factors

2021-09-28 compared with 2020-09-21 · 490 added, 522 removed, 8 unchanged (99% of the section changed)

Investing in our common stock involves significant risks.

In addition to the other information contained in the Registration Statement and any accompanying prospectus supplement, stockholders should

consider carefully the following information regarding our common stock.

The risks set out below may not be the only risks we face, but are the risks of which we are presently aware.

If any of the following risks are realized, our business, financial

condition and results of operations could be materially and adversely affected.

In such case, our NAV and the price of our common stock could decline, and stockholders may lose all or part of their investment.

Risks Relating to Our Business and Structure

Our investment portfolio is recorded at fair value, as determined by our Board of Directors and, as a result, there will be uncertainty as to the value of our portfolio

Under the 1940 Act, we are required to carry our portfolio investments at market value or, if there is no readily available market value, at fair value as determined by us in accordance with our written valuation

Our Board of Directors has final responsibility for overseeing, reviewing and approving, in good faith, our estimate of fair value.

Typically, there is no public market for the securities of the privately held companies in which we invest.

a result, we value these securities quarterly at fair value based on input from management and our audit committee, with the oversight, review and approval of our Board of Directors.

The determination of fair value and consequently, the amount of unrealized gains and losses in our portfolio, are to a certain degree, subjective and dependent on a valuation process approved by our Board of Directors.

Certain factors that may be considered in determining the fair value of our investments include external events, such as private mergers, sales and acquisitions involving comparable companies.

Because such valuations, and particularly valuations of

private securities and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates.

Our determinations of fair value may differ materially from the values that would have been used if a

ready market for these securities existed.

Due to this uncertainty, our fair value determinations may cause our NAV on a given date to materially understate or overstate the value that we may ultimately realize on one or more of our investments.

result, investors purchasing our common stock based on an overstated NAV would pay a higher price than the value of our investments might warrant.

Conversely, investors selling shares during a period in which the NAV understates the value of our

investments receive a lower price for their shares than the value of our investments might warrant.

Our financial condition and results of operations depend on our ability to effectively manage and deploy capital.

Our ability to achieve our investment objective depends on our ability to effectively manage and deploy capital, which depends, in turn, on the Adviser's ability to identify, evaluate and monitor, and our ability to

finance and invest in, companies that meet our investment criteria.

Accomplishing our investment objective on a cost-effective basis is largely a function of the Adviser's handling of the investment process, its ability to provide competent, attentive and efficient services and our

access to investments offering acceptable terms.

In addition to monitoring the performance of our existing investments, the Adviser's investment team is also called upon, from time to time, to provide managerial assistance to some of our portfolio

These demands on their time may distract them or slow the rate of investment.

Even if we grow and build upon our investments, failure to manage our growth effectively could have a material adverse effect on our business, financial condition, results of operations and prospects.

The results of

our operations depend on many factors, including the availability of opportunities for investment, readily accessible short- and long-term funding alternatives in the financial markets and economic conditions.

Furthermore, if we cannot successfully

operate our business or implement our investment policies and strategies as described herein, it could negatively impact our ability to pay dividends.

We are dependent upon the Adviser's key personnel for our success.

We depend on the diligence, skill and network of business contacts of the investment professionals of the Adviser.

The investment professionals at the Adviser evaluate, negotiate, structure, close and monitor our

Our success depends on the continued service of our investment team and the other senior investment professionals available to the Adviser.

We cannot assure you that unforeseen business, medical, personal or other circumstances would not

lead any of the members of the investment team to terminate their relationship with us, and we do not purchase any "key man" insurance to cover the Adviser's personnel.

The loss of one or more of the investment team or other senior investment

professionals who serve on the Adviser's investment team could have a material adverse effect on our ability to achieve our investment objectives as well as on our financial condition and results of operations.

In addition, we can offer no assurance

that the Adviser will continue indefinitely as our investment adviser.

We expect the Adviser’s investment team to dedicate significant time to our activities.

The members of the Adviser's investment team are and may in the future become affiliated with entities engaged in business

activities similar to those conducted by us or other business activities that could divert their time and attention, and which may create conflicts of interest in allocating their time.

Our success depends on the ability of the Adviser to attract and retain qualified personnel in a competitive environment.

Our growth requires that the Adviser retains and attracts new investment and administrative personnel in a competitive market.

Its ability to attract and retain personnel with the requisite credentials, experience and

skills depends on several factors including its ability to offer competitive wages, benefits and professional growth opportunities.

Many of the entities, including investment funds (such as private equity funds and mezzanine funds) and traditional

financial services companies, with which the Adviser competes for experienced personnel have greater resources than the Adviser.

We are dependent on MacKenzie Capital Management's key personnel for our success.

We depend on the skill, experience, and care of the professionals at MacKenzie to record, administer, and manage our business, including our stockholder records and financial records, prepare and file reports to our

stockholders, SEC reports and our tax returns.

We cannot assure you that these key personnel will not terminate their relationship with MacKenzie.

The loss of one or more of these professionals could have a material adverse effect on our ability to

achieve our business objectives.

There are significant potential conflicts of interest generated from the Adviser's activities that could impact our investment returns.

The Adviser's investment team presently manages 30 private funds.

In addition, our executive officers and directors, as well as the current and future members of the Adviser, may serve as officers, directors or

principals of other entities that operate in the same or a related line of business as we do.

Accordingly, they may have obligations to investors in those entities, the fulfillment of which obligations may not be in the best interests of us or our

An investment in our common stock and preferred stock involves substantial risks.

In addition to the other

information contained in our Registration Statements and Offering Circulars, and any accompanying supplements thereto, stockholders should consider carefully the following information regarding our common and preferred stock.

The risks set out

below may not be the only risks we face but are the material risks of which we are presently aware.

If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected.

In such case the price of our common stock and preferred stock could decline, and stockholders may lose all or part of their investment.

Risks Related to Investing in Real Estate

Real estate investments are subject to risks particular to real property, including:

Adverse changes in national and local economic and market conditions, including the credit and securitization markets;

Changes in governmental laws and regulations, fiscal policies and zoning ordinances and the related costs of compliance with laws and regulations, fiscal policies and ordinances;

Takings by condemnation or eminent domain;

Real estate conditions, such as an oversupply of or a reduction in demand for real estate space in the area;

The perceptions of tenants and prospective tenants of the convenience, attractiveness and safety of our properties;

Competition from comparable properties;

The occupancy rate of our properties;

The ability to collect all rent from tenants on a timely basis;

The effects of any bankruptcies or insolvencies of major tenants;

The expense of re-leasing space;

Changes in interest rates and in the availability, cost and terms of mortgage funding;

The impact of present or future environmental legislation and compliance with environmental laws;

Acts of war or terrorism, including the consequences of terrorist attacks;

Acts of God, including earthquakes, floods and other natural disasters, which may result in uninsured losses;

Cost of compliance with the Americans with Disabilities Act.

If any of these or similar events occur, it may reduce our return from an affected property or investment and reduce or eliminate our ability to make distributions to stockholders.

The market for real estate investments is highly competitive.

Identifying attractive real estate investment opportunities, particularly in the multi-family residential real estate sector, is difficult and involves a high degree of uncertainty.

Furthermore, the historical performance of a particular property or market is not a guarantee or prediction of the properties’ or market’s future performance.

There can be no assurance that we will be able to locate suitable acquisition

opportunities in our target markets, achieve its investment goal and objectives, or fully deploy for the Company’s cash.

Because of the recent growth in demand for real estate investments, there may be increased competition among investors to invest in the same asset classes as the company.

This competition may

lead to an increase in the investment prices or otherwise less favorable investment terms.

If this situation occurs with a particular investment, our return on that investment is likely to be less than the return it could have achieved if it had

invested at a time of less investor competition for the investment.

For this and other reasons, the Adviser is under no restrictions concerning the timing of investments.

Investments in real estate-related assets can be speculative.

Investments in real estate-related assets can involve speculative risks and always involve substantial risks.

No assurance can be given that the Adviser will be able to execute the investment

strategy or that stockholders in the company will realize their investment objectives.

No assurance can be given that our stockholders will realize a substantial return (if any) on their investment or that they will not lose their entire

investment in the company.

Our investments may be concentrated.

We expect to diversify our investments, and do not expect to concentrate on any single investment.

However, our investments may nonetheless result in significant concentration in a single

investment, especially in our initial stages of operation, or in a group of investments in one or more target markets.

If such an investment experienced a material adverse event, or if investments in a particular target market experienced

material adverse event specific to that particular market, the company and our stockholders would likely be significantly and adversely affected.

We may be subject to the risk of liability and casualty loss as the owner of an investment.

It is expected that the Adviser will maintain or cause to be maintained insurance against certain liabilities and other losses for an investment, but the insurance obtained will not cover all

amounts or types of loss.

There is no assurance that any liability that may occur will be insured or that, if insured, the insurance proceeds will be sufficient to cover the loss.

There are certain categories of loss that may be or may become uninsurable or not economically insurable, such as earthquakes, floods and hazardous waste.

Further, if losses arise from

hazardous substance contamination that cannot be recovered from a responsible party, the financial viability of the affected investment may be substantially impaired.

It is possible that we will acquire an investment with known or unknown

environmental problems that may adversely affect our investments.

We could be exposed to environmental liabilities with respect to investments to which we take title.

In the course of our business, and taking title to properties, we could be subject to environmental liabilities with respect to such properties.

In such a circumstance, we may be held liable to

a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or we may be required to investigate or clean up hazardous

or toxic substances or chemical releases at a property.

The costs associated with investigation or remediation activities could be substantial.

If we become subject to significant environmental liabilities, our business, financial condition,

liquidity and results of operations could be materially and adversely affected.

We may be adversely affected by unfavorable economic changes in the specific geographic areas where our investments are concentrated.

We expect that our investments will be located throughout the United States.

Our largest concentration of investments is in Northern California, followed by Connecticut and Florida.

conditions (including business layoffs or downsizing, industry slowdowns, changing demographics and other factors) in the areas where our investments are located and/or concentrated, including any cities or towns within such target States, and

local real estate conditions (such as oversupply of, or reduced demand for, office, industrial, retail or multifamily properties) may have an adverse effect on the value of our investments.

A material decline in the demand or the ability of tenants

to pay rent, or the general market for sales of multi-family properties in such geographic areas may result in a material decline in our cash available for distribution to our stockholders.

Our success is materially dependent on attracting qualified tenants.

We will not collect revenue for a property while it is vacant and we will be responsible for all utility costs and maintenance services until we are able to lease it.

Our success is dependent

on the financial stability of tenants in the aggregate.

If we cannot rent our properties or our tenants default on our leases or fail to comply with the terms of our leases, our operations, financial performance, and the quality and value of our

properties could be negatively impacted.

We may not be able to re-lease or renew leases at the investments held by us on terms favorable to us or at all.

We are subject to risks that upon expiration or earlier termination of the leases for our properties that such properties may not be re-leased or, if re-leased, the terms of the renewal or

re-leasing (including the costs of required renovations or concessions to tenants) may be less favorable than current lease terms.

Any of these situations may result in extended periods where there is a significant decline in revenues or no

revenues generated by an investment.

If we are unable to re-lease or renew leases for all or substantially all of our investments, or if the rental rates upon such renewal or re-leasing are significantly lower than expected, and if our reserves for

these purposes prove inadequate, or if we are required to make significant renovations or concessions to tenants as part of the renewal or re-leasing process, we will experience a reduction in net income and may be required to reduce or eliminate

distributions to our stockholders.

The bankruptcy, insolvency or diminished creditworthiness of our tenants under their leases or delays by our tenants in making rental payments could seriously harm our operating

results and financial condition.

We will lease our properties to tenants, and we receive rents from our tenants during the terms of their respective leases.

A tenant’s ability to pay rent is often initially determined by the

creditworthiness of the tenant and the income of the tenant.

However, if a tenant’s credit deteriorates or a tenant’s income deteriorates, the tenant may default on its obligations under its lease and the tenant may also become bankrupt.

bankruptcy or insolvency of our tenants or other failure to pay is likely to adversely affect the income produced by our real estate investments.

Any bankruptcy filings by or relating to one of our tenants could bar us from collecting

pre-bankruptcy debts from that tenant or its property, unless we receive an order permitting us to do so from the bankruptcy court.

A tenant bankruptcy could delay our efforts to collect past due balances under the relevant leases, and could

ultimately preclude full collection of these sums.

If a tenant files for bankruptcy, we may not be able to evict the tenant solely because of such bankruptcy or failure to pay.

A court, however, may authorize a tenant to reject and terminate its

lease with us.

In such a case, our claim against the tenant for unpaid, future rent would be subject to a statutory cap that might be substantially less than the remaining rent owed under the lease.

In addition, certain amounts paid to us within

90 days prior to the tenant’s bankruptcy filing could be required to be returned to the tenant’s bankruptcy estate.

In any event, it is highly unlikely that a bankrupt or insolvent tenant would pay in full amounts it owes us under its lease.

other circumstances, where a tenant’s financial condition has become impaired, we may agree to partially or wholly terminate the lease in advance of the termination date in consideration for a lease termination fee that is likely less than the

agreed rental amount.

If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages.

Any unsecured claim we hold against a bankrupt entity may be paid only to the extent that funds are available and

only in the same percentage as is paid to all other holders of unsecured claims.

We may recover substantially less than the full value of any unsecured claims, which would harm our financial condition.

We may not obtain audited results of operation of individual investments.

In some cases, the Company will not obtain audited operating statements regarding the prior operations of an investment.

In such case, the Company will rely on unaudited financial information

provided by the sellers of the investments.

Thus, it is possible that information relied upon by the Company with respect to the acquisition of some of the investments may not be accurate at the time that the Company acquires such investment.

Significant restrictions on transfer and encumbrance of investments are expected.

The terms of any mortgage or other debt financing for an investment are expected to prohibit the transfer or further encumbrance of that investment or any interest in that investment except

with the lender’s prior consent, which consent each lender is expected to be able to withhold.

The relative illiquidity of the investments may prevent or substantially impair our ability to dispose of an investment at times when it may be

otherwise advantageous for us to do so.

If we were forced to immediately liquidate some or all of our investments, the proceeds are likely to result in a significant loss, if such a liquidation is possible at all.

We may not obtain appraisals or reports.

The Company typically may not obtain independent third-party appraisals or valuations of an investment, or other reports with respect to an investment, before the Company invests in such

If the Company does not obtain such third-party appraisals or valuations, there can be no assurance that an investment’s value will exceed its cost or that any sale or other disposition of such investment will result in a profit.

Third-party appraisals and other reports may be prepared for lenders, in which case the Company typically will try to obtain a copy of such appraisals and reports for review, as well as reliance letters from the third-party preparers to allow the

Company to rely on appraisals and reports.

To the extent the Company does not obtain such other reports or reliance letters before investing in an investment, the risk of investing in such investment may be increased.

Risks Related to our Financial Position

We are subject to risks associated with debt and capital stock issuances, and such issuances may have consequences to holders of shares of our securities.

If we were to raise additional capital through the issuance of equity securities, we could dilute the interests of holders of shares of our current outstanding securities.

Further, we may incur indebtedness in the future to finance our operations.

Such indebtedness could result in important consequences to holders of our preferred shares, including subjecting us

to covenants restricting our operating flexibility, increasing our vulnerability to general adverse economic and industry conditions, limiting our ability to obtain additional financing to fund future working capital, capital expenditures and

other general corporate requirements, requiring the use of a portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital,

acquisitions, capital expenditures and general corporate requirements, and limiting our flexibility in planning for, or reacting to, changes in our business and our industry.

If we pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments and stockholders’ overall return will be

Although our distribution policy is to use our cash flow from operations to make distributions, we are permitted to pay distributions from any source, including offering proceeds, borrowings, or

sales of assets.

We have not placed a cap on the use of proceeds to fund distributions.

Risks Related to Our Business Strategy

Many of the factors that can affect the availability and timing of cash distributions to stockholders are beyond our control, and a change in any one

factor could adversely affect our ability to pay future distributions.

There can be no assurance that future cash flow will support distributions at the rate that such distributions are paid in any particular distribution period.

To the extent that we make payments or reimburse certain expenses to our Adviser pursuant to our Advisory Agreement, our cash flow and therefore our ability to make distributions from cash

flow, as well as cash flow available for investment, will be negatively impacted.

Under Maryland law, we may issue our own securities as stock dividends in lieu of making cash distributions to stockholders.

We may issue securities as stock dividends in the future.

dilute current stockholders’ equity in the Company and may reduce the value of their investment.

We may change our targeted investments without shareholder consent.

Our Adviser may change our targeted investments and asset allocation at any time without the consent of our shareholders, which could result in our making investments that

are different from, and possibly riskier than, the investments described in Item 1 hereof.

A change in our targeted investments may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which

could adversely affect the value of our securities and our ability to make distributions to stockholders.

Furthermore, a change in our asset allocation could result in our making investments in asset categories different from those described in

this Annual Report.

The ability of our Board of Directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

Our Charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best

interest to continue to qualify as a REIT.

If we cease to qualify as a REIT, we would become subject to U.S.

federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders,

which may have adverse consequences on our total return to our stockholders.

Our Business Strategy is, as of yet, untested.

Our Business Strategy may not produce the results expected.

As a consequence, the value of stockholders’

shares may decrease over time and they may lose their entire investment.

Our prior operating history has been as a BDC, but now that we have withdrawn the election to be treated as a BDC our strategy will focus more on the acquisition of real property assets as

opposed to securities, which strategy is untested by us and may not produce profitable or favorable results.

If our strategy fails to produce sufficient income and/or returns to cover our expenses, we could lose invested capital.

Due diligence by our Adviser may not reveal all of the liabilities associated with such investments and may not reveal other weaknesses in such investments, which could lead to

investment losses.

Because the Company intends to purchase real estate at below-market-prices, there may not be enough time to investigate the condition of any particular investment.

Before making an investment, our Adviser will assess the strengths and weaknesses of a target investment property.

The Adviser will also consider other factors and characteristics that are

material to the performance of the investment.

Such other factors may include the pricing trends for similar properties in the area where the target investment property is located.

In making such assessments and otherwise conducting customary due diligence, our Adviser relies on resources available to it and, in some cases, an investigation by third parties.

no assurance that our Adviser’s due diligence process will uncover all relevant facts or that any investment will be successful.

Our investments may include rehabilitating distressed real estate and such rehabilitation may not result in higher asset values.

In many of our intended but yet unidentified real estate acquisitions, the property value is diminished, and real estate may require significant rehabilitation.

The Company intends to perform such rehabilitation

from time to time to increase the rental rates for an acquired property.

When coupled with the limited time to perform due diligence on any particular investment, cash may be used to rehabilitate a property where the cost of rehabilitation is not justified and will not result in increased

asset valuation.

Lack of diversification in numbers or types of investments increases our dependence on individual investments.

Our investment strategy depends in large part on acquiring a diversified portfolio based on the number of properties or investments we acquire relative to our total assets.

Such diversification reduces the risk

that a default or other problem with any single property or investment will have a material negative impact on our earnings.

If, due to factors such as lack of adequate capital, or the unavailability of suitable investment opportunities, we acquire relatively few properties or acquire properties or investments that are significant (in

terms of capital invested) to our overall asset size, our portfolio could become concentrated, increasing the risk of loss to stockholders if a default or other problem arises.

Alternatively, property sales may reduce the aggregate amount of our property investment portfolio in value or number.

As a result, our portfolio could become more concentrated, thereby reducing the benefits of

diversification by factors such as geography, property type, tenancy or other measures.

While we intend to endeavor to grow and diversify our portfolio through additional property acquisitions, we may never reach a significant size to achieve

true portfolio diversity.

Our Board of Directors has approved very broad investment guidelines for our Adviser and will not approve each investment and financing decision made by our Adviser unless

required by our investment guidelines.

Our Adviser is authorized to follow very broad investment guidelines established by our Board of Directors.

Our Board of Directors will periodically review our investment guidelines and our portfolio of assets but

will not, and will not be required to, review all of our proposed investments, except in limited circumstances as set forth in our investment policies.

Our Adviser has great latitude within the broad parameters of our investment guidelines in determining the types and amounts of assets in which to invest on our behalf, including making investments that may result

in returns that are substantially below expectations or result in losses, which would materially and adversely affect our business and results of operations, or may otherwise not be in the best interests of our stockholders.

Transactions entered

into by our Adviser may be costly, difficult or impossible to unwind by the time they are reviewed by our Board of Directors.

Because stockholders will be unable to evaluate the merits of these operational and investment guidelines, they will have to rely entirely on the ability of our Adviser and Board of Directors to formulate and follow these operational and

investment guidelines.

Even though our Adviser will be providing real estate advisory services, our Adviser is not a licensed asset manager nor is our Adviser a licensed real estate advisor.

Our Adviser provides real estate advisory services on a best-effort basis.

Because our Adviser is not a licensed professional advisor and is not a licensed real estate manager, our Adviser does not maintain errors

and omissions insurance that we could turn to in the event our Adviser provides improper investing advice.

Should improper investment actions be taken by our Adviser, the value of our preferred shares will likely decline.

Our investments will be carried at estimated fair value as determined by our Adviser and there may be uncertainty

as to the value of these investments.

Substantially all of our investments are illiquid and not publicly traded.

To determine the net asset value of our Company, our Adviser estimates the fair

value of our assets in conjunction with our external valuation experts.

Because such valuations are inherently uncertain, our Company value may fluctuate over short periods of time, and may be based on numerous estimates and assumptions, our

determinations of fair value of our investments are inherently speculative and subject to errors.

The value of our shares could be adversely affected if our determinations regarding the fair value of these investments are materially higher than

the values that we ultimately realize upon their disposal.

We, through our Adviser, are often required to make a number of judgments in applying accounting policies, and different estimates and assumptions in the

application of these policies could result in changes to our reporting of financial condition and results of operations.

Various valuation estimates are used in the preparation of our consolidated financial statements, including estimates related to asset and liability valuations (or

potential impairments) and various receivables.

Often these estimates require the use of market data values that may be difficult to assess, as well as estimates of future performance or receivables collectability that may be difficult to

accurately predict.

While we have identified those accounting policies that are considered critical and have procedures in place to facilitate the associated judgments, different assumptions in the application of these policies could result in

material changes to our consolidated financial condition and results of operations.

Risks Related to Our Organization and Corporate Structure

Our Charter permits our Board of Directors to issue stock with terms that may subordinate the rights of common stockholders or preferred shareholders or discourage a third

party from acquiring us in a manner that might result in a premium price to our stockholders.

Our Charter permits our Board of Directors to issue up to 80,000,000 shares of common stock and 20,000,000 preferred shares.

Our Board of Directors is permitted, subject to certain restrictions set forth in our

charter, to authorize the issuance of shares of common stock and preferred stock without stockholder approval.

Further, our Board of Directors may classify or reclassify any unissued shares of common or preferred stock into other classes or

series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms or conditions of redemption of the stock and may amend our

charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series that we have authority to issue without stockholder approval.

Thus, our Board of Directors could authorize us to issue

shares of preferred stock ranking senior to our common stock with respect to distribution rights upon our liquidation, dissolution or winding up or with terms and conditions that could have the effect of delaying, deferring or preventing a change

in control of us, including an extraordinary transaction such as a merger, tender offer or sale of all or substantially all of our assets, that might provide a premium price for holders of our common stock.

Risks Related to Conflicts of Interest

The Advisory Agreement with our Adviser was not negotiated on an arm’s-length basis and may not be as favorable to us as if it had been negotiated with an unaffiliated third

Our executive officers, including one of our directors, are executives of our Adviser.

Our Advisory Agreement was negotiated between related parties and its terms,

including fees payable to our Adviser, may not be as favorable to us as if it had been negotiated with an unaffiliated third party.

In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the Advisory

Agreement because of our desire to maintain our ongoing relationship with the Adviser and its affiliates.

We may have conflicts of interest with our Adviser and other affiliates, which could result in investment decisions that are not in the best interests of our stockholders.

There are numerous conflicts of interest between our interests and the interests of our Adviser and its respective affiliates, including conflicts arising out of allocation of personnel to our activities,

allocation of investment opportunities between us and investment vehicles affiliated with our Adviser, purchase or sale of properties, including from or to investment entities affiliated with our Adviser, and fee arrangements with our Adviser

that might induce our Adviser to make investment decisions that are not in our best interests.

Examples of these potential conflicts of interest include, but are not limited to:

Competition for the time and services of personnel that work for us and our affiliates;

Compensation payable by us to our Adviser and its affiliates for their various services, which may not be on market terms and is payable, in some cases, whether or not our stockholders receive distributions;

The possibility that our Adviser, its officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of properties and other investments, and that such conflicts

may not be resolved in our favor, thus potentially limiting our investment opportunities, impairing our ability to make distributions and adversely affecting the trading price of our stock;

The possibility that if we acquire properties from investment entities affiliated with our Adviser or its affiliates, the price may be higher than we would pay if the transaction were the result of

arm’s-length negotiations with a third party;

The possibility that our Adviser will face conflicts of interest, some of whose officers are also our officers and two of whom are directors of ours, resulting in actions that may not be in the long-term best

interests of our stockholders;

Our Adviser has considerable discretion with respect to the terms and timing of our acquisition, disposition and leasing transactions;

The possibility that we may acquire or merge with our Adviser, resulting in an internalization of our management functions;

The possibility that the competing demands for the time of our Adviser, its affiliates and our officers may result in them spending insufficient time on our business, which may result in our missing

investment opportunities or having less efficient operations, which could reduce our profitability and result in lower distributions to stockholders.

Any of these and other conflicts of interest between us and our Adviser could have a material adverse effect on the returns on our investments, our ability to make distributions to stockholders and the trading

price of our stock.

Our Adviser, its officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of real estate investments, and such conflicts may

not be resolved in our favor.

Conflicts caused by our Adviser may severely curtail our investment opportunities, impair our ability to make distributions and reduce the value of stockholders’ investment in us.

Our Adviser also advises other

clients and such clients may compete with the Company for investments.

Our Advisers have policies in place to deal with such potential conflicts, but such policies may result in other clients buying assets that may be in the best interest of the

Company to purchase.

Our Adviser, and the personnel it provides are not exclusively dedicated to management of our business.

If the competing demands for the time of our Adviser, its key personnel, its affiliates and our officers result in them spending insufficient time on our business, we may miss investment opportunities or have less

efficient operations, which could reduce our profitability and result in lower distributions to stockholders.

We have not adopted any specific conflicts of interest policies, and, therefore, other than in respect of the restrictions placed on our Adviser in the Advisory Agreement, we will be reliant upon

the good faith of our Adviser, officers and directors in the resolution of any conflict.

We do not have a policy that expressly restricts any of our directors, officers, stockholders or affiliates, including our Adviser and its officers and employees, from having a pecuniary interest in an investment

in or from conducting, for their own account, business activities of the type we conduct.

This may mean that our ability to access the best investments may be curtailed, which could result in greater than expected operating expense, losses and

reduced distributions to our Shareholders.

Risks Associated with Debt Financing

We expect to use mortgage and other debt financing to acquire properties or interests in properties and otherwise incur other indebtedness, which increases our expenses and

could subject us to the risk of losing properties in foreclosure if our cash flow is insufficient to make loan payments.

We are permitted to acquire real properties and other real estate-related investments, including entity acquisitions, by assuming either existing financing secured by the asset or by borrowing new funds.

addition, we may incur or increase our mortgage debt by obtaining loans secured by some or all of our assets to obtain funds to acquire additional investments or to pay distributions to our stockholders.

We also may borrow funds if necessary to

satisfy the requirement that we distribute at least 90% of our annual “REIT taxable income,” or otherwise as is necessary or advisable to assure that we maintain our qualification as a REIT for federal income tax purposes.

There is no limit on the amount we may invest in any single property or other asset or on the amount we can borrow to purchase any individual property or other investment.

If we mortgage a property and have

insufficient cash flow to service the debt, we risk an event of default which may result in our lenders foreclosing on the properties securing the mortgage.

If we cannot repay or refinance loans incurred to purchase our properties, or interests therein, then we may lose our interests in the properties secured by the loans we are unable to repay or refinance.

High mortgage rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flow from operations and the amount of cash

distributions we can make.

To qualify as a REIT, we will be required to distribute at least 90% of our annual taxable income (excluding net capital gains) to our stockholders in each taxable year, and thus our ability to retain internally

generated cash is limited.

Accordingly, our ability to acquire properties or to make capital improvements to or remodel properties will depend on our ability to obtain debt or equity financing from third parties or the sellers of properties.

If mortgage debt is

unavailable at reasonable rates, we may not be able to finance the purchase of properties.

If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the debt becomes due or of being unable to

refinance on favorable terms.

If interest rates are higher when we refinance the properties, our income could be reduced.

We may be unable to refinance properties.

If any of these events occurs, our cash flow would be reduced.

This, in turn, would

reduce cash available for distribution to stockholders and may hinder our ability to raise capital by issuing more stock or borrowing more money.

Some of our mortgage loans may have “due on sale” provisions, which may impact the manner in which we acquire, sell and/or finance our properties.

In purchasing properties subject to financing, we may obtain financing with “due-on-sale” and/or “due-on-encumbrance” clauses.

Due-on-sale clauses in mortgages allow a mortgage lender to demand full repayment of

the mortgage loan if the borrower sells the mortgaged property.

Similarly, due-on-encumbrance clauses allow a mortgage lender to demand full repayment if the borrower uses the real estate securing the mortgage loan as security for another loan.

In such event, we may be required to sell our properties on an all-cash basis, which may make it more difficult to sell the property or reduce the selling price.

If we are required to make payments under any “bad boy” carve-out guaranties that we may provide in connection with certain mortgages and related loans, our business and

financial results could be materially adversely affected.

In obtaining certain nonrecourse loans, we may provide standard carve-out guaranties.

These guaranties are only applicable if and when the borrower directly, or indirectly through agreement with an affiliate, joint

venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper (commonly referred to as “bad boy” guaranties).

Although we believe that

“bad boy” carve-out guaranties are not guaranties of payment in the event of foreclosure or other actions of the foreclosing lender that are beyond the borrower’s control, some lenders in the real estate industry have recently sought to make

claims for payment under such guaranties.

In the event such a claim were made against us under a “bad boy” carve-out guaranty following foreclosure on mortgages or related loan, and such claim were successful, our business and financial results

could be materially adversely affected.

Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to our stockholders.

We may finance our property acquisitions using interest-only mortgage indebtedness.

During the interest-only period, the amount of each scheduled payment will be less than that of a traditional amortizing mortgage

The principal balance of the mortgage loan will not be reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period.

After the interest-only period, we will be required either

to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity.

These required principal or balloon payments will increase the amount of our scheduled payments and may increase our risk of

default under the related mortgage loan.

If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest rates.

Increased payments and substantial principal or balloon

maturity payments will reduce the funds available for distribution to our stockholders because cash otherwise available for distribution will be required to pay principal and interest associated with these mortgage loans.

Leveraging an investment allows a lender to foreclose on that investment.

Lenders to an investment, even non-recourse lenders, are expected in all instances to retain the right to foreclose on that investment if there is a default in the loan terms.

If this were to occur, we would likely

lose our entire investment in that investment.

Availability of financing and market conditions will affect the success of the company.

Market fluctuations in real estate financing may affect the availability and cost of funds needed in the future for investments.

In addition, credit availability has been restricted in the past and may become

restricted again in the future.

Restrictions upon the availability of real estate financing or high interest rates for real estate loans could adversely affect the investments and our ability to execute its investment goals.

Risks Related to Compliance and Regulation

We may not be successful in availing ourselves of the Investment Company Act exclusion, and even if we are successful, the exclusion would impose limits on our operations, which

could adversely affect our operations.

The Investment Company Act requires that any issuer that is beneficially owned by 100 or more persons and that is engaged “primarily… in the business of investing, reinvesting, or trading in securities” or “in the

business of investing, reinvesting, owning, holding, or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40 per centum of the value of such issuer’s total assets” to be registered as required

under the Investment Company Act.

The Company believes that, because the Company will be primarily purchasing the real estate assets directly or through wholly owned subsidiaries, the ownership of these assets will not be deemed to be investment

securities for purposes of the Investment Company Act.

It is anticipated that the assets will either qualify as “real estate assets” for purposes of the Investment Company Act, not be considered investment securities for purposes of the

Investment Company Act, or will comprise less than 40% of the Company’s portfolio of assets (in fact, intended to be less than 20%).

As a result, the Company expects to be exempt from the Investment Company Act’s requirements, and does not intend

to register under the Investment Company Act.

If the Company does not qualify for the real estate exemption, the Company will attempt to qualify for a different exemption from the Investment Company Act.

Even though we intend to conduct our operations so that we will not be required to register as an investment company under the Investment Company Act, the SEC may disagree with our approach.

Consequently, the SEC may

require us to register under the Investment Company Act thus requiring us to adjust our investment strategy.

Any such adjustment in our strategy could have a material adverse effect on us.

We have not asked the staff of the SEC for confirmation of

our analysis under the Investment Company Act, although we did disclose our plan to withdraw our election to be treated as a BDC (and therefore to no longer be an investment company) and to lower our portfolio of investment securities to below 20%

of our total assets.

In the event the Company is required to register under the Investment Company Act, the returns to the stockholders will likely be significantly reduced.

Risks Related to Our Taxation as a REIT

Our failure to qualify as a REIT would result in higher taxes and reduced cash available for stockholders.

We intend to continue to operate in a manner so as to qualify as a REIT for U.S.

federal income tax purposes.

Our initial and continued qualification as a REIT depends on our satisfaction of certain asset, income,

organizational, distribution and stockholder ownership requirements on a continuing basis.

Our ability to satisfy some of the asset tests depends upon the fair market values of our assets, some of which are not able to be precisely determined

and for which we will not obtain independent appraisals.

If we were to fail to qualify as a REIT in any taxable year, and certain statutory relief provisions were not available, we would be subject to U.S.

federal income tax, including any applicable alternative minimum

tax, on our taxable income at regular corporate rates, and distributions to stockholders would not be deductible by us in computing our taxable income.

Any such corporate tax liability could be substantial and would reduce the amount of cash

available for distribution.

Unless entitled to relief under certain Internal Revenue Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions.

As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it

would adversely affect the value of our securities.

Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our

stockholders.

Any affiliated investment vehicle formed in the future and managed by the Adviser or its affiliates may, notwithstanding different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may

invest in asset classes targeted by us.

As a result, the Adviser may face conflicts in allocating investment opportunities between us and such other entities.

It is possible that, in the future, we may not be given the opportunity to participate in

investments made by investment funds managed by the Adviser or an investment manager affiliated with the Adviser.

In any such case, when the Adviser identifies an investment, it will be forced to choose which investment fund should make the

The Adviser has mitigated this risk by adopting an allocation policy designed to equitably distribute such investment opportunities consistent with the requirements of the 1940 Act.

We may participate in investments that are sourced by the Adviser for other investors.

If the Adviser forms other investment entities in the future or accepts advisory engagements with existing investment entities, we may co-invest on a concurrent basis with such other entities, subject to compliance

with our Charter, the 1940 Act, applicable regulations, regulatory guidance and our allocation procedures.

Those investments may be selected by the Adviser to satisfy the objectives of the co-investor, might not be ideally suited for us, and

therefore might not be in the best interests of us or our stockholders.

The Adviser's compensation could impact our investment returns.

We pay management and incentive fees to the Adviser and reimburse the Adviser for certain expenses it incurs.

As a result, investors in our common stock invest on a "gross" basis and receive dividends on a "net" basis

after expenses, resulting in a lower rate of return than an investor might achieve through direct investments.

There are significant potential conflicts of interest with our Administrator that could impact our investment returns.

Under the Administration Agreement with MacKenzie, MacKenzie granted us a royalty-free license to use the name "MacKenzie" for so long as the Adviser or one of its affiliates remains our investment adviser.

addition, we pay MacKenzie, an affiliate of the Adviser, 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 compensation of MacKenzie's chief financial officer and any administrative support staff.

These arrangements create conflicts of interest that our Board of Directors must continue

There are significant potential conflicts of interest generated from related party transactions that could impact our investment returns.

In the ordinary course of business, we may enter into transactions with portfolio companies that may be considered related party transactions.

Related party transactions carry with them the risk that the terms could

benefit the related parties, to our detriment.

To ensure that we do not engage in any transactions with any persons affiliated with us that are prohibited by the 1940 Act, we have implemented certain written policies and procedures, described in our

prospectus contained in the Registration Statement, under "Certain Relationships and Transactions."

Our incentive fee structure and the formula for calculating the management fee may incentivize the Adviser to pursue speculative investments, use leverage when it may be unwise to

do so, or refrain from deleveraging when it would otherwise be appropriate to do so.

The incentive fee payable by us to the Adviser may create an incentive for the Adviser to pursue investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation

The incentive fee payable to the Adviser is calculated based on a percentage of our return on invested capital.

In addition, the base management fee is based on "Gross Invested Capital", including capital invested in leveraged assets.

This may encourage the Adviser to use leverage to increase the aggregate amount of and the return on our investments, even when it may not be appropriate to do so, and to refrain from de-levering when it would otherwise be appropriate to do so.

certain circumstances, the use of leverage may increase the likelihood of default, which would impair the value of our common stock.

In addition, the Adviser receives the incentive fee based, in part, upon net capital gains realized on our

This could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.

The incentive fee payable by us to the Adviser also may induce the Adviser to invest on our behalf in instruments that have a deferred interest feature, even if such deferred payments would not provide cash necessary

to enable us to pay current dividends to our stockholders.

Under these investments, we would accrue interest over the life of the investment but would not receive the cash income from the investment until the end of the term.

Our net investment

income used to calculate the income portion of our investment fee, however, includes accrued interest.

Thus, a portion of this incentive fee would be based on income that we have not yet received in cash.

Although we do not currently expect to do so, we may invest, to the extent permitted by law, in the securities and instruments of other investment companies, including private funds, and, to the extent we so invest,

will bear our ratable share of any such investment company's expenses, including management and performance fees.

We will also remain obligated to pay management and incentive fees to the Adviser with respect to the assets invested in the securities

and instruments of other investment companies.

With respect to each of these investments, each of our stockholders will bear his or her share of the management and incentive fee of the Adviser as well as indirectly bearing the management and

performance fees and other expenses of any investment companies in which we invest.

A general increase in interest rates will likely have the effect of making it easier for the Adviser to receive incentive fees, without necessarily resulting in an increase in our

net earnings.

Any general increase in interest rates typically leads to higher investment returns on our investments.

Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle

rate and may result in a substantial increase in the amount of incentive fees payable to the Adviser under the Advisory Agreement without any increase in performance on the part of the Adviser.

Our Adviser has the right to resign on 120 days' notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that

could adversely affect our financial condition, business and results of operations.

Our Adviser has the right, under the Advisory Agreement, to resign at any time upon not less than 120 days' written notice, whether we have found a replacement or not.

If the Adviser resigns, we may not be able to find

a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 120 days, or at all.

If we are unable to do so quickly, our operations are likely to

experience a disruption, our financial condition, business and results of operations as well as our ability to pay dividends are likely to be adversely affected and the value of our shares may decline.

In addition, the coordination of our internal

management and investment activities is likely to suffer if we are unable to identify and reach an agreement with a single institution or group of executives having the expertise possessed by the Adviser and its affiliates.

Even if we retain

comparable management, whether internal or external, the integration of such management and their lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our financial condition,

business and results of operations.

Regulations governing our operation as a BDC affect our ability to raise additional capital and the way in which we do so.

As a BDC, the necessity of raising additional capital

may expose us to risks, including the typical risks associated with leverage.

We may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, which we refer to collectively as "senior securities," up to the maximum amount permitted by the 1940 Act.

However, we have no current intention to borrow money for investment purposes, although if we withdraw our BDC election and purchase real estate assets, we would like use leverage to do so.

Under the provisions of the 1940 Act, we are permitted, as a

BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 200.0% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of

senior securities.

If we were to issue senior securities and the value of our assets declines, we may be unable to satisfy this test.

If that happens, we may be required to sell a portion of our investments and, depending on the nature of our

leverage, repay a portion of our indebtedness at a time when such sales may be disadvantageous.

Also, any amounts that we use to service our indebtedness would not be available for dividends to our common stockholders.

Furthermore, as a result of

issuing senior securities, we would also be exposed to typical risks associated with leverage, including an increased risk of loss.

If we issue preferred stock, the preferred stock would rank "senior" to common stock in our capital structure,

preferred stockholders would have separate voting rights on certain matters and might have other rights, preferences, or privileges more favorable than those of our common stockholders, and the issuance of preferred stock could have the effect of

delaying, deferring or preventing a transaction or a change of control that might involve a premium price for holders of our common stock or otherwise be in your best interest.

If our Stockholders approve the withdrawal of our BDC election, we will

no longer be subject to the limits and restrictions described in this paragraph.

We have and may continue to sell common stock at a price below NAV under certain circumstances.

While we are a BDC, we may not issue and sell our common stock at a price below NAV per share unless our Board of Directors determines that such sale is in the best interests of the Company and its stockholders, and

our stockholders approve such sale.

Our Board of Directors has so determined on numerous occasions, but has respected the prohibition against issuing stock at a price that, in the determination of our Board of Directors, does not closely approximate

the market value of such securities (less any distributing commission or discount).

If we continue to raise funds by issuing more common stock or senior securities convertible into, or exchangeable for, our common stock for a price below NAV, then

the percentage ownership of our stockholders at that time will decrease, and you may experience dilution.

We may borrow money, which would magnify the potential for gain or loss on amounts invested and will increase the risk of investing in us.

The use of leverage magnifies the potential for gain or loss on amounts invested and, therefore, increases the risks associated with investing in our securities.

We may borrow from and issue senior debt securities to

banks, insurance companies and other lenders in the future, however we have no current intention to borrow for investment purposes unless we withdraw our election to be treated as a BDC.

Holders of these senior securities would have fixed dollar

claims on our assets that would be superior to the claims of our common stockholders, and we would expect such lenders to seek recovery against our assets in the event of a default.

If the value of our assets decreases, leveraging would cause NAV to

decline more sharply than it would in the absence of leverage.

Similarly, any decrease in our income would cause net income to decline more sharply than it would in the absence of leverage.

Such a decline could also negatively affect our ability to

make dividend payments on our common stock.

Leverage is generally considered a speculative investment technique.

Our ability to service any debt that we incur will depend largely on our financial performance and will be subject to prevailing economic

conditions and competitive pressures.

Moreover, as the management fee payable to the Adviser is based on our Gross Invested Capital, including amounts invested in leveraged assets, the Adviser has a financial incentive to incur leverage which may not

be consistent with our stockholders' interests.

In addition, our common stockholders will bear the burden of any increase in expenses that results from leverage, including any increase in the management fee payable to the Adviser.

If we remain a BDC, we are required to meet an asset coverage ratio, defined generally under the 1940 Act as the ratio of our gross assets (less all liabilities and indebtedness not represented by senior securities) to

our outstanding senior securities, of at least 200.0% after each issuance of senior securities.

If this ratio declines below 200.0% we may not be able to incur additional debt and could be required by law to sell a portion of our investments to repay

some debt when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make distributions.

The amount of any leverage that we employ would depend on the Adviser's and our Board of

Directors' assessment of market and other factors at the time of any proposed borrowing.

We cannot assure you that we will be able to obtain credit at all or on terms acceptable to us.

Any debt facility into which we may enter would likely impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and

investments or to make the distributions required to maintain our status as a REIT under the Code.

We may experience fluctuations in our quarterly results.

We could experience fluctuations in our quarterly operating results due to a number of factors, including our ability or inability to make investments in companies that meet our investment criteria, the interest rate

payable on the debt securities we acquire, the level of portfolio dividend and fee income, 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.

Results for any period should not be relied upon as being indicative of performance in future periods.

Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes of preferred stock, which could convey special rights and

privileges to its owners.

Under the Maryland General Corporation Law (or " MGCL ") and our Charter, our Board of Directors is authorized to classify and reclassify any authorized but unissued shares of stock into one or more classes of

stock, including preferred stock.

Prior to issuance of shares of each class or series, the Board of Directors will be required by the MGCL and our Charter to set the terms, preferences, conversion or other rights, voting powers, restrictions,

limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series.

Thus, the Board of Directors could authorize the issuance of shares of preferred stock with terms and conditions which

could have the effect of delaying, deferring or preventing a transaction or a change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest.

The cost of any such reclassification would be

borne by our common stockholders.

Certain matters under the 1940 Act require the separate vote of the holders of any issued and outstanding preferred stock.

For example, holders of preferred stock would vote separately from the holders of common

stock on a proposal to cease operations as a BDC.

In addition, the 1940 Act provides that holders of preferred stock are entitled to vote separately from holders of common stock to elect two preferred stock directors.

The issuance of preferred shares

convertible into shares of common stock may also reduce the net income and NAV per share of our common stock upon conversion, provided, that we are only permitted to issue such convertible preferred stock to the extent we comply with the requirements

of Section 61 of the 1940 Act, including obtaining common stockholder approval.

These effects, among others, could have an adverse effect on your investment in our common stock.

We currently have no plans to issue preferred stock.

Our Board of Directors may change our investment objectives, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse.

Our Board of Directors has the authority to modify or waive our investment objectives, current operating policies, investment criteria and strategies without prior notice and without stockholder approval.

will receive notice within 60 days if the Board of Directors decides to change our investment objective.

The principal investment strategies are not fundamental and may be changed without prior notice.

cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, NAV, operating results and value of our stock.

However, the effects might be adverse, which could negatively

impact our ability to pay dividends and cause shareholders to lose all or part of their investment.

There is a risk that our stockholders may not receive dividends or that our dividends may not grow over

We may make dividends on a quarterly basis to our stockholders only out of assets legally available for distribution.

Our assets would be "legally available" if, after giving effect to the dividend, (i) we would be

able to pay any outstanding debt, and (ii) our total assets would be greater than the sum of our total liabilities plus the amount needed to satisfy any preferential rights upon dissolution held by any stockholders who have preferential rights on

dissolution superior to those receiving the dividend, if we were to be dissolved at the time of distribution.

We plan on making dividends only from income and gains on our portfolio, do not plan to borrow to make distributions, and do not intend to

make distributions from our offering proceeds, though we are not prohibited from borrowing for dividends or distributing up to approximately 5.0% of our offering proceeds.

We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions.

In addition, so long as we remain subject

to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions.

Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.

We are subject to applicable local, state and federal laws and regulations.

New legislation may be enacted or new interpretations, rulings or regulations could be adopted, including those governing the types of

investments we are permitted to make, any of which could harm us and our stockholders, potentially with retroactive effect.

Additionally, any changes to the laws and regulations governing our operations relating to permitted investments may cause us

to alter our investment strategy to avail ourselves of new or different opportunities.

Such changes could result in material differences to our strategies and plans and may result in our investment focus shifting from the areas of expertise of the

Adviser's investment team to other types of investments in which the investment team may have less expertise or little or no experience.

Thus, any such changes, if they occur, could have a material adverse effect on our results of operations and the

value of your investment.

We incur significant costs as a result of being a public company.

As a public company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Securities

Exchange Act of 1934 (" 1934 Act "), as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, and other rules implemented by the SEC.

Loss of our status as a REIT would have significant adverse consequences.

If we lose our REIT status in any taxable year, we would be subject to federal income tax (including any applicable minimum tax) on our taxable income computed in the usual manner for corporate taxpayers without any

deduction for distributions to our stockholders.

Unless entitled to relief under specific statutory provisions, we would be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status, assuming we had

previously been treated as a REIT.

To renew our REIT qualification at the end of such a four-year period, we would be required to distribute all current and accumulated earnings and profits before the end of the period and the funds available for

satisfying our obligations and for distribution to our stockholders could be significantly reduced.

In addition, we would be subject to the built-in gain tax based upon the values at the time of REIT election.

As a REIT, we may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.

Since we contemplate investing in real estate through partnerships and other REITs, we may have to recognize taxable income attributable to those investments prior to the time we receive cash distributions with respect

to such investments.

As indicated above, in order to benefit from REIT taxation, we need to distribute at least 90.0% of our REIT taxable income.

If we do not receive cash representing such income at the same time as we recognize such income, we may

have difficulty making distributions necessary to benefit from REIT taxation.

We may in the future choose to pay dividends in our own stock, in which case you may be required to pay tax in excess of the cash you receive.

We may in the future elect to pay dividends in our own stock, as opposed to cash.

In such case or in the event you participate in the dividend reinvestment plan (our " DRIP "), you may be required to pay tax in

excess of the cash you receive from us.

Risks Related to Our Investments

We have not yet identified all portfolio companies in which we will invest.

We have not yet identified all additional potential investments for our portfolio.

As a result, you will be unable to evaluate any future portfolio company investments prior to purchasing our shares.

Additionally, our

stockholders will have no input with respect to such investment decisions.

These factors increase the uncertainty, and thus the risk, of investing in our shares.

The achievement of our investment objectives cannot be guaranteed.

While we remain a BDC, we may not be successful in locating real estate-related securities suitable for purchase.

We may not be able to purchase securities at an acceptable price.

Even if suitable securities are

located at an acceptable price, our performance is affected by many factors that are beyond the control of the Adviser, including unpredictable economic and financial events.

Accordingly, we do not guarantee our dividends or the return of your

For example, a review of the performance of prior funds sponsored by the Adviser reveals that not all such funds were successful, or will be successful, in producing their targeted returns.

The indirect ownership of real properties involves numerous risks.

While we remain a BDC, our investments are primarily in entities that directly or indirectly own real property, real estate joint ventures, or other real property-based investments.

As a result, an investment in us is

subject to all risks inherent in real estate investments.

Among these are the following:

the operation of real property is subject to the general competitive conditions in the relevant real estate markets, which have suffered in the recent economic crisis;

downturns in local economies, overbuilding and other general economic conditions may adversely affect the operations of real property, especially with the current economic conditions;

indebtedness secured by a portfolio of real properties may bear a variable interest rate that could result in increased debt service payments (and reduced cash flow) if interest rates rise;

the lack or uncertainty of availability or high cost of financing, especially in current markets, may adversely affect the ability of the real estate owners to sell their properties and the terms of any such sales;

the availability and cost of financing or refinancing is uncertain, especially in current markets, and may adversely affect the ability of the real estate owners to sell their properties and the terms of any such sales (for example, some

of the REITs in which previous funds have invested have struggled to refinance their existing indebtedness, resulting in a depressed stock price, and, in some cases, causing issuers to file for bankruptcy protection);

the real properties may be damaged and suffer losses which are not adequately insured;

property tax reform, rent control, and other regulatory and governmental action may adversely affect the value of the real properties;

energy shortages and allocations and increased energy prices in the areas where the real properties are located may adversely affect their operations or otherwise reduce their value.

Investment in mortgage loans or issuers that own or originate mortgage loans involves numerous risks.

We may make investments in mortgage loans or in issuers that own or originate mortgage loans.

As a result, an investment in the Company is subject to all risks inherent in mortgage loans.

Among these are the following:

We are at risk of defaults by the borrowers on those mortgage loans.

These defaults may be caused by many conditions beyond the control of us or the Adviser, including interest rate levels and local and other economic conditions affecting

real estate values.

Our Adviser will not know whether the values of the properties securing the mortgage loans will remain at the levels existing on the dates of origination of those mortgage loans.

If the values of the underlying properties

drop, our risk will increase because of the lower value of the security associated with such loans;

If an issuer in which we invest relies on originating, holding, or servicing mortgage loans for a significant portion of its income, defaults on such mortgage loans could impair the value of the issuer itself and consequently put our

investment in such issuer at risk (for example, previous funds managed by the Adviser suffered losses investing in mortgage companies or originators);

Fixed-rate, long-term mortgage loans could yield a return that is lower than the then-current market rates if interest rates rise.

If interest rates decrease, we could be adversely affected to the extent that mortgage loans are prepaid

because we may not be able to generate equivalent returns upon reinvestment of the funds;

Declines in real estate values may induce mortgagors to voluntarily default on their loans, increasing the risk of foreclosure and loss of capital (for example, some of the hotel REITs have just "walked away" from the hotels they owned);

Issuers may file for bankruptcy if they cannot meet the demands of their debt service, and bankruptcy judges have wide latitude to modify the terms of indebtedness, which could result in lower than expected returns on our investment;

Delays in liquidating defaulted mortgage loans could reduce our or an issuer's investment returns.

If there are defaults under those mortgage loans, we or the issuer may not be able to repossess and sell the underlying properties quickly.

The resulting time delay could reduce the value of our or the issuer's investment in the defaulted mortgage loans.

An action to foreclose on a property securing a mortgage loan is regulated by state statutes and regulations and is subject to

many of the delays and expenses of other lawsuits if the defendant raises defenses or counterclaims.

Further, given the recent economic events, foreclosure actions may flood the courthouses, causing further delays in prosecuting such actions.

In the event of default by a mortgagor, these restrictions, among other things, may impede our or an issuer's ability to foreclose on or sell the mortgaged property or to obtain proceeds sufficient to repay all amounts due to us or the issuer

on the mortgage loan.

For example, previous funds managed by the Administrator have invested in a mortgage where the borrower defaulted.

The Administrator began foreclosure proceedings in July 2007, but did not get a foreclosure sale set

until December 2009 due to various circumstances beyond the control of our Adviser.

Thereafter, the foreclosure was further delayed by a bankruptcy filing that has yet to be resolved.

We do not participate in the management of the real estate owned by our portfolio companies.

While we remain a BDC, the issuers of the securities held by us typically have exclusive management and control of the operation of their real estate portfolios, and we therefore typically rely exclusively on the

management capabilities of such issuers, regardless of whether the Adviser agrees with the decisions of such issuers.

If the Adviser decides that an action taken by an issuer is contrary to our interests, we may take legal action to protect our

We could be forced to bear the costs of a challenge or lawsuit, which could be substantial, and there can be no certainty that legal action undertaken to halt any such actions would be successful.

Information on our target securities may be difficult to obtain.

Complete and current information regarding securities to be acquired and properties owned by issuers of such securities (particularly properties which may be performing poorly) may in many cases (particularly in the

case of securities of companies not registered with the SEC) not be available to the Adviser or, even if available, it may not be economical for the Adviser to obtain such information.

As a result, we may purchase securities with less than adequate

Further, the information that is obtained may not be reliable.

For example, prior funds sponsored by the Administrator invested in a company that filed for bankruptcy protection.

The investors in those funds lost all their invested

The company had falsely stated that none of its loans were cross‑collateralized (meaning that one failed property or development would not impair the value of the other properties).

The company had several loans go into default, thereby

impairing the value of all its remaining properties.

Investments in publicly traded securities present market risks that are less prevalent with private securities.

Publicly traded investments such as REITs present certain market risks that are not present when investing directly in real estate or in private partnerships that own real estate.

The trading price of public securities

can change in response to various factors, not all of which relate to the real estate owned by the entities.

A "bear market" can cause all publicly traded securities to trade at lower prices, even if the fundamental economic factors driving the value

of real estate remain unchanged.

If the trading price of a public entity is adversely affected by such factors, it can be subject to takeover attempts by opportunistic investors who see the ability to acquire assets below NAV.

Because we may not be a

significant holder of such securities, there may be little or nothing that we or the Adviser can do to prevent the sale of such entities at prices that are below the estimated NAV of the real estate owned by the entities, which would adversely affect

our performance.

Investments in privately held securities may present more risks than investments in publicly held securities.

Privately held partnerships and companies, unlike public entities, are not required to file periodic reports with the SEC or state securities regulators.

As a result, the Adviser's evaluation of a possible investment

in a private entity may be based on incomplete or misleading information.

In addition, as privately held entities generally have significantly fewer investors than public companies, a private issuer may be more concerned about a possible takeover.

The private issuer may therefore be more reluctant to approve a transfer of securities to us or admit us as a record owner, which would result in the loss of rights associated with record ownership, including voting rights.

Accurate valuation of illiquid real estate-related securities is difficult.

Our Adviser uses techniques to value our target securities that necessarily involve reliance on both objective and subjective criteria and assumptions and predictions that may or may not be realized.

despite the Adviser's analysis, there is no assurance that any investment by us will be on terms that reflect the true economic value of the securities purchased.

We compete with other entities and persons to purchase real estate-related securities.

The market for the real estate-related securities sought by us is limited and generally inefficient, and competition for these securities may reduce the availability and increase the prices of the securities.

example, in recent years, at least two new competitors have entered the marketplace buying some of the same type of securities that we target for acquisition.

Lack of Diversification.

Some of our investments and target portfolio companies are private partnerships or other privately held entities that invest in only a single parcel of real property.

Due to such issuers' lack of diversification, the

value of their securities may be more volatile than securities issued by entities with larger, more diverse portfolios.

We are susceptible to claims under Federal and state securities laws.

Due in part to the diverse and relatively risky nature of our acquisition procedures, we may be more susceptible to investigations, litigation, or other proceedings under securities laws.

Any such investigation,

litigation, or other proceeding undertaken by state or Federal regulatory agencies or private parties could necessitate the expenditure of material amounts of our capital for legal and other costs.

Moreover, the dedication of human and capital

resources of the Adviser and MacKenzie to such proceedings could limit MacKenzie's effectiveness in managing the Company, even if we are ultimately successful in its defense.

If and to the extent that claims or suits for rescission are brought and

successfully concluded for acts or omissions constituting offenses under Federal or applicable state securities laws, we could be materially and adversely affected, jeopardizing our ability to operate successfully.

Our purchase of securities may be subject to complex tender offer rules.

Because of the nature of the market for real estate-related securities, we expect to buy securities from time to time through tender offers.

Federal securities laws impose obligations and requirements upon a party who

undertakes a tender offer.

Sanctions and penalties could be imposed on us if we do not fully comply with these complex requirements.

Further, because of the perceived hostile nature of tender offers, some issuers may respond by taking legal action

against us and our affiliates.

We could be forced to bear some of the costs of a suit, which could be substantial, and there can be no certainty that we would be successful in fighting such a suit.

Likewise, we may participate in legal actions

against issuers to force them to provide investor lists when their governing documents so require, but the issuers refuse to comply.

Issuers of securities we own may vote to change the structure of the portfolio company or propose a "roll-up."

In recent years, general partners of portfolio company targets have successfully consolidated several related limited partnerships into larger entities (these consolidations are sometimes referred to as "roll-ups").

The new entities have usually been in the form of infinite-life REITs or master limited partnerships, and often are listed to trade on one of the stock exchanges.

In other cases, limited partners have been asked to approve the conversion of their

partnership interests into common stock of a new corporation or into unsecured debentures.

In most roll-ups to date, the sponsoring general partners used an estimated market price for shares of the new entity to determine the exchange value for the

limited partnership units.

Shares of the new entities may fall below the exchange value and historically have often traded substantially below the exchange value.

If the Adviser decides that a roll-up proposed by a portfolio company is contrary to

our interests, we may take legal action to protect our interests.

We could be forced to bear the costs of a suit, which could be substantial, and there can be no certainty that legal action undertaken to halt a roll-up by a portfolio company would be

Our Adviser may experience a substantial delay in identifying and locating suitable investments for us.

It may take time for the Adviser to identify suitable securities for investment.

Moreover, once suitable securities are identified, a considerable delay may be experienced in consummating their purchase.

In such event,

corresponding delays would be experienced by us before distributions and allocations are received from our investments.

We may temporarily invest our cash reserves in volatile securities.

Our Adviser may at times make the decision to invest some of our cash reserves into publicly traded REITs.

This action has risk associated with it as the market for such publicly traded assets may be volatile.

past few years, some such investments made by other funds managed by the Adviser have declined dramatically in value, making it impossible to recover the cash reserves unless and until the market price of the securities returns to previous levels.

some cases, REITs have ceased operations, resulting in a loss of capital for such funds.

We may use leverage, including margin accounts.

We may utilize short-term borrowing and may acquire securities or make distributions through use of brokerage margin account loan agreements.

Utilization of margin loans involves the risk of losses greater than the

equity involved.

Any such borrowing is subject to the leverage limitations under the 1940 Act that are described above.

If our stockholders approve the withdrawal of our BDC election, we will no longer be subject to the limits and restrictions

described in this paragraph.

The FDIC deposit insurance limits may be exceeded.

Our cash deposits with banks are insured by the Federal Deposit Insurance Corporation up to $250,000 per account.

We may at times exceed such limits in our deposit accounts, which could subject us to a loss of any

amount over such limit if the deposit institution were to fail.

The tax consequences of an investment in us depends on the activities and reporting positions taken by the entities in which we invest.

We have little or no control over the reporting activities of the issuers of securities we buy.

Our Adviser does not prepare and typically does not review income tax information returns of the issuers of securities in

which we invest.

These issuers have made and will make a number of decisions on such tax matters as the expensing or capitalizing of particular items, the proper period over which capital costs may be depreciated or amortized, the allocation of

acquisition costs between real property, improvements and personal property, and many other items.

An IRS audit of an issuer's information return may result in the disallowance of certain deductions and may cause audits of your individual returns.

opinion of counsel generally is not available with respect to these issues, either because they involve factual determinations, or because they involve legal doctrines not fully developed under existing case law.

Our taxable gain or loss will likely be measured by the issuer's tax basis in the real property, rather than by our purchase price for its securities.

Some of our investments are and will be made through partnerships and other REITs.

The Federal income tax basis of the real estate held by those entities may be based upon their purchase price paid, as opposed to the

purchase price we paid to acquire those securities.

Thus, there is a risk that we may have to report more income or gain on such entities disposition of real estate than the amount of income or gain we would have reported if we purchased the real

property directly.

An issuer of securities in which we invest could be deemed a "publicly traded partnership."

Some of our investments are and will be made through partnerships.

If interests in a partnership are traded on an established exchange or readily tradable on a secondary exchange (or substantial equivalent) the

partnership is treated as a publicly traded partnership.

As such, the partnership might be treated as a C corporation, resulting in its income being subject to double level taxation.

In addition, the real estate held within the partnership would no

longer be considered in the calculation of our REIT asset test.

The lack of liquidity in our investments may adversely affect our business.

We invest in many companies whose securities are not publicly traded, and whose securities are subject to legal and other restrictions on resale or will otherwise be less liquid than publicly traded securities.

illiquidity of these investments may make it difficult for us to sell these investments when desired.

In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we

had previously recorded these investments.

As a result, we do not expect to achieve liquidity in our investments in the near-term.

Our investments are usually subject to contractual or legal restrictions on resale or are otherwise illiquid because

there is usually no established trading market for such investments.

The illiquidity of most of our investments may make it difficult for us to dispose of them at a favorable price, and, as a result, we may suffer losses.

Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as "follow-on" investments, in order to (i) increase or maintain in whole or in part our equity

ownership percentage;

(ii) exercise warrants, options or convertible securities that were acquired in the original or a subsequent financing;

or (iii) attempt to preserve or enhance the value of our investment.

We may elect not to make follow-on

investments or otherwise lack funds to make those investments.

The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed

opportunity for us to increase our participation in a successful operation.

Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we do not want to increase our

concentration of risk, we prefer other opportunities, we are subject to BDC requirements that would prevent such follow-on investments, or the follow-on investment would affect our REIT tax status.

Our portfolio may lack diversification among portfolio companies, subjecting us to a risk of significant loss if one or more of these companies fail to perform.

Our portfolio may hold a limited number of portfolio companies.

We do not have fixed guidelines for diversification, and our investments may be concentrated in relatively few companies.

As our portfolio is less

diversified than the portfolios of some larger funds, we are more susceptible to failure if a single investment fails.

Similarly, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly

or if we need to write down the value of any one investment.

We do not intend to concentrate our portfolio on any specific geographic area, however, we may be subject to a risk of significant loss if there is a downturn in an area in which

a number of our investments are concentrated.

We do not intend to concentrate our portfolio on any specific geographic areas.

However, a downturn in an area in which we are invested could significantly impact the aggregate returns we realize.

Some of our portfolio

companies hold assets that are heavily concentrated in a single state.

In the table below, we list such investments if they represent 5.0% or higher of the total fair value of our portfolio as of June 30, 2020.

Investments (Fair Value)

% of total Fair Value

We may not realize gains from our equity investments.

We may invest in warrants or other equity securities.

Investments in equity securities involve significant risks, including the risk of further dilution as a result of additional issuances, inability to access

additional capital and failure to pay current dividends.

Investments in preferred securities involve special risks, such as the risk of deferred distributions, credit risk, illiquidity and limited voting rights.

In addition, we may from time to time

make non-control, equity investments in portfolio companies.

Our goal is ultimately to realize gains upon our disposition of such equity interests.

However, the value of the equity interests we receive may not appreciate and, in fact, may decline.

Accordingly, we may not be able to realize gains from our equity interests, and any gains that we realize on the disposition may not be sufficient to offset other losses we experience.

We also may be unable to realize any value if a portfolio company

does not have a liquidity event, such as a sale of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests.

We often seek puts or similar rights to give us the right to sell our equity

securities back to the portfolio company issuer.

We may be unable to exercise these put rights for the consideration provided in our investment documents if the issuer is in financial distress.

Risk related to our plan to withdraw our election to be treated as a BDC

Following withdrawal of our BDC election, we will no longer be subject to regulation by the 1940 Act.

On October 23, 2020, our stockholders will be asked to approve the proposal to withdraw our election to be regulated as a BDC under the 1940 Act.

If our stockholders approve the withdrawal of our BDC election, we will,

effective upon receipt by the SEC of our application for withdrawal, no longer be regulated as a BDC and will no longer be subject to the regulatory provisions of the 1940 Act, which is designed to protect the interests of investors in investment

companies, including certain laws and regulations related to insurance, custody, capital structure, composition of the Board of Directors, affiliated transactions, leverage limitations, and compensation arrangements.

We may be unable to identify and complete acquisitions of real assets following withdrawal of our BDC election.

Our ability to identify and complete acquisitions of real assets on favorable terms and conditions are subject to the following risks:

we may be unable to acquire a desired asset because of competition from other investors with significant capital, including publicly traded REITs and institutional investment funds;

competition from other investors may significantly increase the purchase price of a desired real asset or result in less favorable terms;

we may not complete the acquisition of a desired real asset even if we have signed an agreement to acquire such real asset because such agreements are subject to customary conditions to closing, including

completion of due diligence investigations to our satisfaction;

we may be unable to finance acquisitions of real assets on favorable terms or at all.

We may not be able to sell our real asset investments quickly.

Investments in real assets are relatively illiquid compared to other investments.

Accordingly, we may not be able to sell real asset investments when we desire or at prices acceptable to us in response to changes in

economic or other conditions.

We may be dependent on external property managers

Following the withdrawal of our BDC election, we may acquire real estate properties, and we may have to rely on property managers for the operation and management of the real estate properties.

Our Adviser has limited experience in direct property acquisitions and management

Our Adviser’s experience mostly relates to acquisition of investment securities.

Its affiliate, Lemon Creek Advisers, LP will advise us on our real estate purchases, but it has less experience in the management and

operation of real estate properties than many more established REIT advisers.

Following withdrawal of our BDC election, we will be dependent upon key personnel of Lemon Creek Advisers, LP for our future success.

Following withdrawal of our BDC election, we anticipate entering into a co-Advisory Agreement with Lemon Creek Advisers, LP to provide full advisory services to us for real asset investments.

We will be dependent on

the diligence, expertise and business relationships of the management of Lemon Creek to implement our strategy of investing in real estate assets.

The departure of one or more investment professionals of Lemon Creek could have a material adverse

effect on our ability to implement this strategy and on the value of our common shares.

There can be no assurance that we will be successful in implementing our strategy following withdrawal of our BDC election.

We have elected to be taxed as a REIT under the federal income tax laws commencing with our taxable year ended December 31, 2014.

We believe that we have and will continue to operate in a manner qualifying us as a

REIT for our taxable year ended December 31, 2020 and intend to continue to so operate.

However, we cannot assure the stockholders that we will remain qualified as a REIT.

Moreover, our qualification and taxation as a REIT depend upon our ability to meet on a continuing basis, through actual annual

operating results, certain qualification tests set forth in the federal tax laws.

Tax counsel will not review our compliance with those tests on a continuing basis.

Accordingly, no assurance can be given that our actual results of operations for

any particular taxable year will satisfy such requirements.

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:

we would not be able to deduct distributions paid to stockholders in computing our taxable income and would be subject to U.S.

federal income tax at regular corporate rates;

we could be subject to the federal alternative minimum tax and possibly increased state and local taxes;

unless we are entitled to relief under certain U.S.

federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions.

As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business

and raise capital, and it would adversely affect the value of our securities.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

To maintain our qualification as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets,

the amounts we distribute to our stockholders and the ownership of our capital stock.

In order to meet these tests, we may be required to forego investments we might otherwise make.

Thus, compliance with the REIT requirements may hinder our

In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets.

The remainder of

our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding

securities of any one issuer.

In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer.

If we fail to comply with

these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering

adverse tax consequences.

As a result, we may be required to liquidate otherwise attractive investments.

These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flows.

Even if we remain qualified as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted

as a result of a foreclosure, and state or local income, property and transfer taxes.

The prohibited transactions tax may subject us to tax on our gain from sales of property and limit our ability to dispose of our properties.

A REIT’s net income from prohibited transactions is subject to a 100% tax.

In general, prohibited transactions are sales or other dispositions of property other than foreclosure property, held primarily for sale to

customers in the ordinary course of business.

Although we intend to acquire and hold all of our assets as investments and not for sale to customers in the ordinary course of business, the IRS may assert that we are subject to the prohibited

transaction tax equal to 100% of net gain upon a disposition of real property.

The stock ownership limit imposed by the Internal Revenue Code for REITs and our charter may inhibit market activity in our stock and may restrict our business combination

opportunities.

In order for us to maintain our qualification as a REIT under the Internal Revenue Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as

defined in the Internal Revenue Code to include certain entities) at any time during the last half of each taxable year.

Additionally, at least 100 persons must beneficially own our capital stock during at least 335 days of a taxable year for

each taxable year.

Our charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT.

Unless exempted by the Board of Directors, no person may own more than 9.8% of the aggregate value of the outstanding shares of our stock or more than 9.8% in value or in number of shares, whichever is more

restrictive, of the outstanding our preferred shares.

The Board of Directors may not grant such an exemption to any proposed transferee whose ownership in excess of 9.8% of the value of our outstanding shares or more than 9.8% in value or in

number of shares, whichever is more restrictive, of the outstanding our preferred shares, would result in the termination of our status as a REIT.

These ownership limits could delay or prevent a transaction or a change in our control that might

be in the best interest of our stockholders.

Distributions payable by REITs do not qualify for the reduced tax rates available for some distributions.

The maximum tax rate applicable to “qualified distribution income” payable to U.S.

stockholders that are taxed at individual rates is 20%.

Distributions payable by REITs, however, generally are not eligible for the

reduced rates on qualified distribution income.

The more favorable rates applicable to regular corporate qualified distributions could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less

attractive than investments in the stocks of non-REIT corporations that pay distributions, which could adversely affect the value of the shares of REITs.

The prohibited transactions tax may subject us to tax on our gain from sales of property and limit our ability to dispose of our properties.

A REIT’s net income from prohibited transactions is subject to a 100% tax.

In general, prohibited transactions are sales or other dispositions of property other than foreclosure property, held primarily for sale to

customers in the ordinary course of business.

Although we intend to acquire and hold all of our assets as investments and not for sale to customers in the ordinary course of business, the IRS may assert that we are subject to the prohibited transaction tax equal to 100% of net gain upon a

disposition of real property.

Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, not all of our prior property dispositions qualified for the safe harbor and we cannot

assure the stockholders that we can comply with the safe harbor in the future or that we have avoided, or will avoid, owning property that may be characterized as held primarily for sale to customers in the ordinary course of business.

Failure to make required distributions would subject us to U.S.

federal corporate income tax.

We intend to continue to operate in a manner so as to qualify as a REIT for U.S.

federal income tax purposes.

In order to remain qualified as a REIT, we generally are required to distribute at least 90% of our REIT

taxable income, determined without regard to the distributions paid deduction and excluding any net capital gain, each year to our stockholders.

To the extent that we satisfy this 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 taxable income.

In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a

calendar year is less than a minimum amount specified under the Code.

We may be unable to generate sufficient revenue from operations, operating cash flow or portfolio income to pay our operating expenses, and our operating expenses could rise,

diminishing our ability and to pay distributions to our stockholders.

As a REIT, we are generally required to distribute at least 90% of our REIT taxable income, determined without regard to the distributions paid deduction and not including net capital gains, each year to our

stockholders.

To qualify for the tax benefits accorded to REITs, we intend to continue to make distributions to our stockholders in amounts such that we distribute all or substantially all our net taxable income each year, subject to certain

However, our ability to make distributions may be adversely affected by the risk factors described herein.

Our ability to make and sustain cash distributions is based on many factors, including the return on our

investments, the size of our investment portfolio, operating expense levels, and certain restrictions imposed by Maryland law.

Some of the factors are beyond our control and a change in any such factor could affect our ability to pay future distributions.

No assurance can be given as to our ability to pay distributions to our stockholders.

In the event of a downturn in our operating results and financial performance or unanticipated declines in the value of our asset portfolio, we may be unable to declare or pay annual distributions or make distributions to our stockholders.

timing and amount of distributions are in the sole discretion of our Board of Directors, which considers, among other factors, our earnings, financial condition, debt service obligations and applicable debt covenants, REIT qualification

requirements and other tax considerations and capital expenditure requirements as our Board of Directors may deem relevant from time to time.

Risk related to the current COVID-19 Pandemic

The current COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases, has and could continue to materially and adversely

impact or disrupt our financial condition, results of operations, cash flows and performance.

Our operating results depend, in large part, on generating revenues from leases to residential or commercial tenants, which in turn requires tenants to generate sufficient income

to pay their rents in a timely manner.

The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, may adversely affect our portfolio companies’ returns and profitability and, as a result, our

ability to make distributions to our stockholders or to realize appreciation in the value of our investments.

The spread of COVID-19 could result in further increases in unemployment, and tenants that experience deteriorating financial conditions as

a result of the pandemic may be unwilling or unable to pay rent in full on a timely basis.

In some cases, the companies in which we have invested may have to restructure tenants’ rent obligations, and they may not be able to do so on terms as

favorable to us as those currently in place.

The current COVID-19 pandemic, or the future outbreak of other highly infectious or contagious diseases, has and could continue to materially and adversely impact or disrupt

our financial condition, results of operations, cash flows and performance.

Our operating results depend, in large part, on generating revenues from leases to residential or commercial tenants, which in turn requires tenants to generate sufficient income to pay their rents in a timely

to our stockholders or to realize appreciation in the value of our investments.

The spread of COVID-19 could result in further increases in unemployment, and tenants that experience deteriorating financial conditions as a result of the pandemic may

be unwilling or unable to pay rent in full on a timely basis.

In some cases, the companies in which we have invested may have to restructure tenants’ rent obligations, and they may not be able to do so on terms as favorable to us as those currently

Numerous state, local, federal, and industry-initiated efforts may also affect property owners' ability to collect rent or enforce remedies for the failure to pay rent.

This may lead to reduction or

cancellation of dividends, which will in turn effect our ability to pay our expenses and to pay dividends to our shareholders.

Until such time as the virus is contained or eradicated and commerce and employment return to more customary levels, we may

experience material reductions in our operating revenue.

This may lead to reduction or cancellation of distributions, which

will in turn effect our ability to pay our expenses and to pay distributions to our shareholders.

Until such time as the virus is contained or eradicated and commerce and employment return to more customary levels, we may experience material

reductions in our operating revenue.

The full effects of the COVID-19 pandemic are highly uncertain and cannot be predicted.

The World Health Organization has declared the COVID-19 outbreak to be a pandemic, and the President of the United States declared it a national emergency.

Globally, population movement and trade

have been restricted.

Globally, population movement and trade have been

Within the United States, various state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19.

We do not yet know the duration of the

pandemic or all of its future effects, but it has already had negative effects on global health and the world economy.

We do not yet know the duration of the pandemic or

all of its future effects, but it has already had negative effects on global health and the world economy.

The full effects of the pandemic and its duration is unknown.

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Item 1A. Risk Factors