What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-15 compared with 2023-02-14 · 338 added, 283 removed, 290 unchanged (68% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements by MacKenzie Realty Capital, Inc., its wholly owned subsidiaries MRC TRS, Inc.

and MacKenzie Satellite Place Corp., and, our majority owned subsidiaries MacKenzie Realty

Operating Partnership, LP, Madison-PVT Partners LLC and PVT-Madison Partners LLC (the “Company,” “we,” or “us”) contained herein, other than historical facts, may constitute “forward-looking statements.” These statements may relate to, among other

things, future events or our future performance or financial condition.

In some cases, stockholders can identify forward-looking statements by terminology such as “may,” “might,” “believe,” “will,” “provided,” “anticipate,” “future,” “could,”

“growth,” “plan,” “intend,” “expect,” “should,” “would,” “if,” “seek,” “possible,” “potential,” “likely” or the negative of such terms or comparable terminology.

These forward-looking statements involve known and unknown risks, uncertainties and

other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any anticipated results, levels of activity, performance or achievements expressed or implied by such forward-looking

An economic downturn could impair our ability to continue to operate, which could lead to the loss of some or all of our investments, a contraction of available credit and/or an inability to access the equity markets could impair our

lending and investment activities, and interest rate volatility could adversely affect our results, particularly if we elect to use leverage as a part of our investment strategy.

For a discussion of factors that could cause our actual results to

differ from forward-looking statements contained herein, please see the discussion under the heading “Risk Factors” in our Annual Report on Form 10-K.

Statements by MacKenzie Realty Capital, Inc., together with its subsidiaries as discussed in Note 1 of the financial statements included in this report (collectively the

“Company,” “we,” or “us”) contained herein, other than historical facts, may constitute “forward-looking statements.” These statements may relate to, among other things, future events or our future performance or financial condition.

cases, stockholders can identify forward-looking statements by terminology such as “may,” “might,” “believe,” “will,” “provided,” “anticipate,” “future,” “could,” “growth,” “plan,” “intend,” “expect,” “should,” “would,” “if,” “seek,” “possible,”

“potential,” “likely” or the negative of such terms or comparable terminology.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or

achievements to be materially different from any anticipated results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

An economic downturn could impair our ability to continue to operate,

which could lead to the loss of some or all of our investments, a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities, and interest rate volatility could adversely

affect our results, particularly if we elect to use leverage as a part of our investment strategy.

For a discussion of factors that could cause our actual results to differ from forward-looking statements contained herein, please see the discussion

under the heading “Risk Factors” in our Annual Report on Form 10-K.

We may experience fluctuations in our operating results due to a number of factors, including the effect of the withdrawal of our BDC election, the return on our equity

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As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

Historically, we were an externally managed non-diversified closed-end management investment company that elected to be treated as a BDC under the 1940 Act, but we withdrew our election to be treated

as a BDC on December 31, 2020.

Historically, we were an externally managed non-diversified closed-end management investment company that elected to be treated as a BDC under the 1940 Act, but we withdrew our election to be

treated as a BDC on December 31, 2020.

Our objective remains to generate both current income and capital appreciation through real estate-related investments.

We have elected to be treated as a REIT under the Code and as a REIT, we are not subject to

federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we distribute at least 90% of our REIT taxable income to the stockholders and meet certain other conditions.

We have elected to be treated as a REIT under the Code and as a REIT, we are not subject

to federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we distribute at least 90% of our REIT taxable income to the stockholders and meet certain other conditions.

To the extent that we satisfy

the annual distribution requirement but distribute less than 100% of our taxable income, we will be subject to an excise tax on our undistributed taxable income.

Our wholly owned subsidiary, MRC TRS, Inc., is subject to corporate federal and state

income tax on its taxable income at regular statutory rates.

Our wholly owned subsidiary, MacKenzie NY Real Estate 2 Corp.

(“MacKenzie NY 2”), is

subject to corporate federal and state income tax on its taxable income at regular statutory rates.

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

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We intend to invest at least 80% of our total assets in equity or debt in real estate assets.

We can invest up to

20% of our total assets in investment securities of real estate companies.

We can invest up

to 20% of our total assets in investment securities of real estate companies.

A real estate company is one that (i) derives at least 50% of its revenue from the ownership, construction, financing, management or sale of commercial, industrial or

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Directors meetings.

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

at significant discounts to their net asset value.

We seek to accomplish our objective by rigorously analyzing the value of and risks associated with potential acquisitions, and, for up to 20% of our total assets, by acquiring real estate

securities at significant discounts to their net asset value.

We intend to expand our investment strategy to include acquisition of distressed real properties.

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We will engage in various investment strategies to achieve our overall investment objectives.

The strategy we select depends upon, among other things, market opportunities, the skills and experience

of the Adviser’s investment team and our overall portfolio composition.

We generally seek to acquire assets that produce ongoing distributable income for investors, yet with a primary focus on purchasing such assets at a discount from what the

Adviser estimates to be the actual or potential value of the real estate.

Our investment strategies include making loans to or investments in previously syndicated projects that had encountered difficulties with occupancy, financing, tenant improvements or encounter other

Since entering the recent recession, certain of our portfolio companies have encountered additional cash shortfalls, and, in some cases, we have provided additional capital to the extent that we now own the majority of the project.

such cases, we intend to consolidate the portfolio company into our financial statements, which is a key reason for dropping our BDC status.

The strategy we select depends upon, among other things, market opportunities, the skills and

experience of the Adviser’s investment team and our overall portfolio composition.

We generally seek to acquire assets that produce ongoing distributable income for investors, yet with a primary focus on purchasing such assets at a discount from

what the Adviser estimates to be the actual or potential value of the real estate.

Our investment strategies include making loans to or investments in previously syndicated projects that had encountered difficulties with occupancy, financing, tenant improvements or encounter

other cash needs.

In such cases, we intend to consolidate the portfolio company into our financial statements, which is a key reason for dropping our BDC status.

We intend to continue our historical activities related to tender offers for shares of non-traded REITs in order to boost our short-term cash flow and to support our distributions, subject to the

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These tenant leases fall under the scope of ASC 842 and are classified as operating leases.

from such leases are recognized on a straight-line basis over the terms of the lease agreements.

Revenues from such leases are recognized on a straight-line basis over the terms of the lease agreements.

Investment income

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(i) advisory fees to our Advisers;

(ii) our allocable portion of overhead and other expenses incurred by MacKenzie in performing its obligations

under the Administration Agreement;

(ii) our allocable portion of overhead and other expenses incurred by MacKenzie in performing its

obligations under the Administration Agreement;

and (iii) other operating expenses as detailed below.

Our investment advisory fees compensate our Investment and Real Estate Adviser for their work in identifying, evaluating, negotiating, closing, monitoring and

servicing our investments.

Our investment advisory fees compensate our Investment and Real Estate Adviser for their work in identifying, evaluating, negotiating, closing,

monitoring and servicing our investments.

Our expenses must be billed to and paid by us, except that MacKenzie may be reimbursed for actual cost of goods and services used by us and certain necessary administrative expenses.

We will bear all other expenses of our

operations and transactions, including:

We will bear all other

expenses of our operations and transactions, including:

the cost of operating and maintaining real estate properties;

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interest payable on debt, if any, to finance our investments;

fees payable to third parties relating to, or associated with, making investments, including fees and expenses associated with performing due diligence reviews of prospective investments and third-party advisory

advisory fees;

transfer agent and safekeeping fees;

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Portfolio Investment Composition

Beginning with the withdrawal of our election to be treated as a BDC on December 31, 2020, we began transforming our portfolio of investments in an orderly fashion into one comprised of controlled

real estate investments (either wholly owned or controlled through voting securities).

As of December 31, 2022, we still owned various real estate limited partnerships and REITs that are listed in the “Investments, at fair value” in the table

We also owned various investments in entities that own real estate which gave us enough control such that the investments are not securities for 1940 Act purposes, but not enough to consolidate the financials of such entities with our own;

these are listed below as “Unconsolidated investments (non-securities), at fair value.” As a result of the change in our status and applying the new basis of accounting, on the effective date of the termination of our status as a BDC, we recorded

the fair value of the investments as the new carrying value of the investments.

The following table summarizes the composition of our investments at fair value as of December 31, and June 30, 2022:

Beginning with the withdrawal of our election to be treated as a BDC on December 31, 2020, we began transforming our portfolio of investments in an orderly fashion into one comprised of

controlled real estate investments (either wholly owned or controlled through voting securities).

As of March 31, 2023, we still owned various real estate limited partnerships and REITs that are listed in the “Investments, at fair value” in the

recorded the fair value of the investments as the new carrying value of the investments.

The following table summarizes the composition of our investments at fair value as of March 31, 2023, and June 30, 2022:

Investments, at fair value

December 31, 2022

March 31, 2023

June 30, 2022

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Unconsolidated investments (non-security), at fair value

December 31, 2022

March 31, 2023

June 30, 2022

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Woodland Corporate Center Two, LP

In addition to our investment securities, we currently own and manage four commercial real estate properties:

Addison Corporate Center located in Windsor, CT, Satellite Place in Duluth, GA, 1300 Main

Office Building in Napa, CA and First & Main Office Building in Napa, CA.

We also own four residential apartments:

Commodore Apartments and Pon De Leo Apartments, located in Oakland, CA, the Hollywood Apartments located in Los Angeles, CA, and

the Shoreline Apartments in Concord, CA.

These eight properties are owned through our eight subsidiaries as noted in below table.

First & Main, LP and 1300 Main, LP became wholly owned subsidiaries of the Operating Partnership in July 2022 and

October 2022, respectively.

In addition to our investment securities, we currently own and manage six commercial real estate properties:

Addison Corporate Center located in Windsor, CT, Satellite Place in Duluth, GA, 1300

Main in Napa, CA, First & Main in Napa, CA, Main Street West in Napa, CA, and Woodland Corporate Center in Woodland, CA and four residential apartments:

Commodore Apartments and The Park View (f/k/a as the Pon De Leo Apartments), located in

Oakland, CA, the Hollywood Property located in Los Angeles, CA, and the Shoreline Apartments in Concord, CA.

The Addison Corporate Center, 1300 Main, First & Main, Main Street West, Woodland Corporate Center, and the Hollywood Property are

owned through our subsidiary, the Operating Partnership, the Commodore Apartments are owned through our subsidiary Madison, The Park View (f/k/a as the Pon De Leo Apartments) are owned through our subsidiary PVT, and the Shoreline Apartments are

owned through our subsidiary BAA-Shoreline.

The remaining properties are owned directly.

Property Owners

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Madison-PVT Partners LLC

Pon De Leo Apartments

The Park View (fka as Pon De Leo Apartments)

PVT-Madison Partners LLC

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1300 Main, LP

Woodland Corporate Center Office Building

Woodland Corporate Center Two, LP

Main Street West Office Building

Main Street West, LP

Addison Corporate Center contains 605,502 square feet, of which approximately 185,000 square feet is office space and the remainder is designated as flex office/warehouse space.

Addison Corporate

Center serves as a collateral to a loan which matured on April 30, 2022.

Center serves as collateral to a loan which matured on April 30, 2022.

After the maturity, Addison Property Owner was unable to extend the loan and entered into a forbearance agreement with the lender on June 28, 2022.

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agreement, the property is currently being marketed for sale.

Accordingly, Addison Corporate Center is classified as an asset held for sale as of December 31, 2022.

As of December 31, 2022, the property is approximately 40% occupied by 6 tenants.

The following table shows the largest tenants and square footage occupied:

Largest Tenants

Accordingly, Addison Corporate Center is classified as an asset held for sale as of March 31, 2023.

In April 2023, we entered into a sale agreement with a third-party buyer at a sale

price of $10.50 million which was approved by the lender.

The sale is expected to close in May 2023.

As of March 31, 2023, the property is approximately 42% occupied by 6 tenants.

The following table shows the largest tenants and square footage

Largest Tenants Business

Rent per annum

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Number of Leases Expiring

Percentage of Gross

Percentage of Gross Rent

First & Main Office Building contains 27,396 square feet, of which approximately 19,000 square feet is office space and the remainder is designated as retail space.

As of December 31, 2022, the

As of March 31, 2023, the

property is 93.0% occupied by 7 tenants.

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Largest Tenants

Rent per annum

Legal Services

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Number of Leases Expiring

Percentage of Gross

Percentage of Gross Rent

1300 Main Office Building contains 20,145 square feet, of which approximately 13,900 square feet is office space and the remainder is designated as retail space.

As of December 31, 2022, the property

is 100% occupied by 8 tenants.

As of March 31, 2023, the

property is 100% occupied by 8 tenants.

The following table shows the largest tenants and square footage occupied:

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Number of Leases Expiring

Percentage of Gross

Percentage of Gross Rent

Woodland Corporate Center contains 37,034 square feet, all of which is office space.

As of March 31, 2023, the property is 94% occupied by 14 tenants.

The following table shows the largest

tenants and square footage occupied:

Largest Tenants

Rent per annum

Agtech Innovation

Research and Development

Physical Therapy

Johnston, Martin & Montgomery

Children’s Home Society

Non-Profit Education

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

Number of Leases Expiring

Percentage of Gross Rent

Main Street West contains 38,136 square feet, of which approximately 32,500 square feet is office space and the remainder is designated as retail space.

As of March 31, 2023, the property is 84%

occupied by 7 tenants.

The following table shows the largest tenants and square footage occupied:

Largest Tenants

Rent per annum

Renewal options

AUL Corporation

Strategies To Empower

State Of California

Azzurro Pizzeria

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

Number of Leases Expiring

Percentage of Gross Rent

Satellite Place is a six-story office building contains 143,785 square feet of rentable office area located in Duluth, Georgia.

As of December 31, 2022, the property is approximately 53% occupied by 1

As of March 31, 2023, the property is approximately 53% occupied by

1 tenant as listed in below table.

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Rent per annum

Lease Expiration

Renewal options

OS National, LLC

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Commodore Apartments is a mid-rise apartment building built in 1912 and has 48 units.

As of December 31, 2022, Commodore Apartment building is approximately 93.8% occupied.

Pon De Leo Apartments is

also a mid-rise apartment building built in 1929 and has 39 units.

As of December 31, 2022, Pon Do Leo Apartment building is approximately 97.4% occupied.

Hollywood Apartments, located in Los Angeles, CA, is a mid-rise apartment building built in 1917 and has 53 units.

The property contains approximately 37,000 square feet of net rentable apartment area

and 8,560 square feet of retail space.

As of March 31, 2023, Commodore Apartment building is approximately 97.9% occupied.

The Park View (f/k/a as

Pon De Leo Apartments) is also a mid-rise apartment building built in 1929 and has 39 units.

As of March 31, 2023, The Park View building is approximately 100% occupied.

Hollywood Hillview Apartments (“Hollywood Property”), located in Los Angeles, CA, is a mid-rise apartment building built in 1917 and has 53 units.

The property contains approximately 37,000

square feet of net rentable apartment area and 8,560 square feet of retail space.

All of the retail space is currently occupied by restaurants and nightclubs.

The apartment units are 96.2% occupied as of December 31, 2022 as the property recently began to add tenants after renovations.

property underwent extensive renovations in order to reposition the complex as a premier rental with significant rate increases over previous years.

Virtually all of the renovations have been completed, with the final apartments scheduled to be

finished as remaining tenants vacate.

A grand opening for the public was held in early April and marketing of the newly renovated units began in late April.

Shoreline Apartments is a mid-rise apartment building built in 1967 and renovated in 2015

which has 84 units.

As of December 31, 2022, Shoreline Apartments building is approximately 91.7% occupied.

The apartment units are 96.2% occupied as of March 31, 2023.

Shoreline Apartments is a

mid-rise apartment building built in 1967 and renovated in 2015 which has 84 units.

As of March 31, 2023, Shoreline Apartments building is approximately 92.9% occupied.

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

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Rent/Occupied

The Park View (f/k/a Pon De Leo Apartments)

Multi-Family Residential

Hollywood Apartments

Hollywood Property

Multi-Family Residential

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Rent/Occupied

Hollywood Apartments

Hollywood Property

Los Angeles, CA

Aurora Land Development

We also own a parcel of entitled land of approximately 3 acres located at the corner of Business Center Drive and Healthcare Drive in Fairfield, California.

We plan to build a multi-family residential

building on this land and are currently working on the design of the building.

The development application will be submitted to the City of Fairfield in February 2023.

There are no present plans for the improvement or development of any property except for the Hollywood Apartments and Aurora land development.

Each property is being held for income production and

increased occupancy and/or rental rates.

We also own a parcel of land totaling approximately 3 acres located at the corner of Business Center Drive and Healthcare Drive in

Fairfield, California.

We plan to build a multi-family residential community o n this land which will include 72 units and a club house.

The City is currently reviewing our development application

and we hope for the approval and commencement of the construction in the fall of this year.

There are no present plans for the improvement or development of any property other than the Aurora property.

Each property is being held for income production and increased occupancy and/or

rental rates.

We have property and liability insurance policies on all properties which we believe are adequate.

The markets in which our properties (those consolidated and those that are not yet consolidated) operate are highly competitive, and each property faces unique competitive challenges based upon local

economic, political, and legal factors.

Our West coast multi-family properties, Commodore Apartments, and Pon De Leo Apartments, are generally restricted from raising rents by local rent control laws.

Two of our unconsolidated investments in

apartment properties, Lakemont Partners and Capitol Hill, are also subject to rent control.

Rent control can result in average rents that are significantly below market, and this provides some buffer against declining rents in a recession.

in order to encourage development, rent control usually does not apply to newer properties.

Since older properties may be unable to raise rents as needed, they may be unable to make improvements that could allow them to compete with newer

Our consolidated office properties, Addison Corporate Center, 1300 Main, First and Main, and Satellite Place, are Class B, Class A, Class A, Class A, and Class A suburban office properties located in

Windsor, Connecticut, Napa, California, Napa, California, and Duluth, Georgia, respectively.

These properties must compete with every other office property in the market, as well as facing the uncertainty of workers returning to the office after

The markets in which our properties (those consolidated and those that are not yet consolidated) operate are highly competitive, and each property faces unique competitive challenges based upon

local economic, political, and legal factors.

Our West coast multi-family properties, Commodore Apartments and The Park View (f/k/a as Pon De Leo Apartments), are generally restricted from raising rents by local rent control laws.

unconsolidated investments in apartment properties, Lakemont Partners and Capitol Hill, are also subject to rent control.

Rent control can result in average rents that are significantly below market, and this provides some buffer against declining

rents in a recession.

However, in order to encourage development, rent control usually does not apply to newer properties.

Since older properties may be unable to raise rents as needed, they may be unable to make improvements that could allow them

to compete with newer properties.

Our consolidated office properties, Addison Corporate Center, 1300 Main, First and Main, Main Street West, Satellite Place, and Woodland Corporate Center, are Class B, Class A, Class A, Class A,

Class A, and Class A suburban office properties located in Windsor, Connecticut, Napa, California, Napa, California, Napa, California, Duluth, Georgia, and Napa, California, respectively.

All properties must compete with every other office property

in the market, as well as facing the uncertainty of workers returning to the office after COVID-19.

Our unconsolidated investment in a hotel property, Citrus Park Hotel, is a Courtyard by Marriott located in the Tampa/St.

Petersburg market that competes for business and leisure travel.

suffered a significant decline during 2020 as a result of a drastic reduction in business and leisure travel but is now near pre COVID-19 levels in revenue.

Park suffered a significant decline during 2020 as a result of a drastic reduction in business and leisure travel but is now near pre COVID-19 levels in revenue.

Results of Operations

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The situation surrounding the COVID-19 pandemic remains fluid, and we are actively managing our response and assessing potential impacts to our financial position and operating results.

This includes the evaluation

and implementation of certain efforts to help us mitigate the impact that reduced revenues from distributions and capital events may have on our fiscal year 2022 financial results.

We are focusing on maintaining a strong balance sheet and liquidity

position and searching for opportunistic investments.

In anticipation of reduced revenues and uncertain future economic conditions, the Board of Directors had discontinued distributions starting March 2020 and share redemptions starting May 2020.

We are focusing on maintaining

a strong balance sheet and liquidity position and searching for opportunistic investments.

In anticipation of reduced revenues and uncertain future economic conditions, the Board of Directors had discontinued distributions starting March 2020 and

share redemptions starting May 2020.

However, after reassessing our cash flow, the Board of Directors resumed the share redemptions in March of 2021 and reinstated the quarterly distributions in May 2021.

The Board intends to continue quarterly distributions so long as it is supported

by the previous quarter’s income, but retains discretion to increase or decrease the distributions.

Three Months Ended December 31, 2022 and 2021

The Board intends to continue quarterly

distributions so long as it is supported by the previous quarter’s income, but retains discretion to increase or decrease the distributions.

Three Months Ended March 31, 2023 and 2022

Rental and reimbursements revenues:

Rental and reimbursement revenues are generated from our commercial and residential real estate properties.

During the three months ended December 31, 2022, we generated $3.67 million in rental and

reimbursements revenues, of which $2.20 million was generated from our four commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300 Main Office Building), $1.47 million from our

four residential properties (Commodore Apartments, Pon De Leo Apartments, Hollywood Apartments, and Shoreline Apartments).

During the three months ended December 31, 2021, we generated $2.57 million in rental and reimbursements revenues, of which

$1.88 million was generated from the Addison Corporate Center tenants and $0.69 million from our three residential properties (Commodore Apartments, Pon De Leo Apartments and Hollywood Apartments).

During the three months ended March 31, 2023, we generated $4.47 million in rental and

reimbursements revenues, of which $2.87 million was generated from our six commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Main Street West Office

Building and Woodland Corporate Center Office Building), and $1.60 million was generated from our four residential properties (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments), Hollywood Apartments, and Shoreline Apartments).

During the three months ended March 31, 2022, we generated $2.52 million in rental and reimbursements revenues, of which $1.85 million was generated from the Addison Corporate Center tenants, and $0.67 million was generated from the three

residential apartments (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments), and Hollywood Apartments).

Investment income:

Investment income was made up of dividends, distributions from operations, distributions from sales/capital transactions, interest, and other investment income.

Total investment income for the three

months ended December 31, 2022 and 2021 was $0.31 million and $1.21 million, respectively.

During the three months ended December 31, 2022, we received $0.24 million of distributions from operations, sales, and liquidations as compared to $0.91

million during the three months ended December 31, 2021.

During the three months ended December 31, 2022, we received dividends, interest, and other investment income of $0.07 million as compared to $0.30 million received during the three months

ended December 31, 2021.

The Company’s asset management and incentive management fees are based on the advisory agreement that was effective January 1, 2021.

Total investment income for the

three months ended March 31, 2023 and 2022 was $10.23 million and $1.17 million, respectively.

During the three months ended March 31, 2023, we received $10.15 million of distributions from operations, sales, and liquidations as compared to $0.72

million during the three months ended March 31, 2022.

During the three months ended March 31, 2023, we received dividends, interest, and other investment income of $0.08 million as compared to $0.45 million received during the three months ended

March 31, 2022.

The majority of the sales distributions received during the three months ended March 31, 2023 was from Dimension 28, LLP.

Dimension 28 sold the underlying property and distributed the majority of the proceeds from the sale in

February 2023.

We received $21.12 million from Dimension 28, of which $11.09 million was a return of capital and the remaining $10.02 million was recorded as distribution income from sales transactions.

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

Asset management fee:

The asset management fees for the three months ended December 31, 2022 and 2021 were $0.74 million and $0.67 million, respectively.

The asset management fees for the three months ended March 31, 2023 and 2022 were $0.77 million and $0.68 million, respectively.

The slight increase was due to an increase in the Invested Capital

since December 31, 2021.

since March 31, 2022.

Incentive management fee:

Under the Advisory Management Agreement, we pay an incentive management fee that is equal to 15% of all distributions once shareholders have received cumulative distributions equal to 6%

from the effective date of the Agreement.

We did not incur any incentive management fee for the three months ended December 31, 2022 and 2021.

Under the Advisory Management Agreement, we pay an incentive management fee that is equal to 15% of all distributions once shareholders have received cumulative distributions equal

to 6% from the effective date of the Agreement.

We did not incur any incentive management fee for the three months ended March 31, 2023 and 2022.

Administrative cost reimbursements and Transfer agent reimbursements:

Costs reimbursed to MacKenzie for the three months ended December 31, 2022, were $0.18 million as compared to $0.15 million for the three months ended December 31, 2021.

Costs reimbursed to MacKenzie for the three months ended March 31, 2023, were $0.18 million as compared to $0.15 million for the three months ended March 31, 2022.

The slight increase was due to

an increase in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to December 31, 2021, as a result of the increase in the number of real estate assets owned by us since December 2021.

Transfer agent cost reimbursement paid to MacKenzie for three months ended December 31, 2022 and 2021 were $0.02 million and $0.03 million, respectively.

an increase in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to March 31, 2022, as a result of the increase in the number of real estate assets owned by us since March 2022.

Transfer agent cost reimbursement paid to MacKenzie for three months ended March 31, 2023 and 2022 were $0.02 million and $0.03 million, respectively.

Property operating and maintenance expenses:

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administrative expenses incurred in the operation of our commercial and residential real estate assets.

During the three months ended December 31, 2022, we incurred operating and maintenance expenses of $2.29 million, of which $1.67 million were

incurred in the operation of our four commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300 Main Office Building) and $0.62 million from our four residential properties

(Commodore Apartments, Pon De Leo Apartments, Hollywood Apartments, and Shoreline Apartments).

During the three months ended December 31, 2021, we incurred operating and maintenance expenses of $1.84 million, of which $1.27 million was incurred in

the operation of Addison Corporate Center.

Operating and maintenance expenses incurred in the operation of three residential properties (Commodore Apartments, Pon De Leo Apartments and Hollywood Apartments) were $0.57 million.

During the three months ended March 31, 2023, we incurred operating and maintenance expenses of $2.54 million, of which $1.87 million were

incurred in the operation of our six commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building and Main Street West

Office Building ) and $0.67 million were incurred in the operation of our four residential properties (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments) , Hollywood Apartments, and Shoreline Apartments).

During the three months

ended March 31, 2022, we incurred operating and maintenance expenses of $1.47 million, of which $1.18 million mainly incurred in the operation of Addison Corporate Center.

Operating and maintenance expenses incurred in the operation of three

residential apartments (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments), and Hollywood Property) were $0.29 million.

Depreciation and amortization:

During the three months ended December 31, 2022, we recorded depreciation and amortization of $1.16 million, of which $0.57 million was the depreciation and amortization of real estate and intangible

assets of our four commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300 Main Office Building) and $0.59 million of our four residential properties (Commodore Apartments, Pon De

Leo Apartments, Hollywood Apartments, and Shoreline Apartments).

During the three months ended December 31, 2021, we recorded depreciation and amortization of $1.11 million, of which $0.84 million was the depreciation and amortization of real

estate and intangible assets of Addison Corporate Center and $0.27 million of the three residential properties (Commodore Apartments, Pon De Leo Apartments and Hollywood Apartments).

During the three months ended March 31, 2023, we recorded depreciation and amortization of $1.66 million, of which $1.09 million was attributable to the depreciation and amortization of real

estate and intangible assets of our five commercial properties (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building and Main Street West Office Building ) and $0.57

million was attributable to our four residential properties (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments), Hollywood Apartments, and Shoreline Apartments).

During the three months ended March 31, 2022, we recorded

depreciation and amortization of $1.15 million, of which $0.83 million was attributable to the depreciation and amortization of real estate and intangible assets of Addison Corporate Center and $0.32 million was attributable to the three

residential properties (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments) and Hollywood Apartments).

Interest expense:

Interest expense for the three months ended December 31, 2022 was $1.68 million, of which $1.01 million was incurred on the notes payable associated with our four commercial properties (Addison

Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300 Main Office Building) and $0.67 million was incurred on the mortgage notes payable associated with our four residential properties (Commodore Apartments,

Pon De Leo Apartments, Hollywood Apartments, and Shoreline Apartments).

Interest expense for the three months ended December 31, 2021 was $0.50 million, of which $0.38 million was incurred on the notes payable associated with the Addison Corporate

Center and $0.12 million was incurred on the two mortgage notes payable associated with the three residential properties (Commodore Apartments, Pon De Leo Apartments and Hollywood Apartments).

Interest expense for the three months ended March 31, 2023 was $1.91 million, of which $1.23 million was incurred on the mortgage notes payable associated with our five commercial properties

(Addison Corporate Center, First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building and Main Street West Office Building ) and $0.68 million was incurred on the mortgage notes payable associated with

our four residential properties (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments), Hollywood Apartments, and Shoreline Apartments).

Interest expense for the three months ended March 31, 2022 was $0.57 million, of which $0.23

million was incurred on the notes payable associated with the Addison Corporate Center and $0.34 million was incurred on the two mortgage notes payable associated with the three residential properties (Commodore Apartments, The Park View (f/k/a as

Pon De Leo Apartments) and Hollywood Apartments).

Other operating expenses:

Other operating expenses include professional fees, directors’ fees, printing and mailing expenses, and other general and administrative expenses.

Other operating expenses for the three months ended

December 31, 2022 and 2021, were $0.38 million and $0.30 million, respectively.

Other operating expenses for the three months

ended March 31, 2023 and 2022, were $0.42 million and $0.34 million, respectively.

The increase in other operating expenses is due to the acquisition of new properties:

Shoreline Apartments in May 2022, Satellite Place Office Building in June 2022,

First & Main Office Building in July 2022, 1300 Main Office Building in October 2022, resulting in higher amounts of general and administrative operating expenses during the three months ended December 31, 2022.

First & Main Office Building in July 2022, 1300 Main Office Building in October 2022, Woodland Corporate Center Office Building in January 2023 and Main Street West Office Building in February 2023, resulting in higher amounts of general and

administrative operating expenses during the three months ended March 31, 2023.

Net realized gain/loss on investments:

During the three months ended December 31, 2022, we had a realized gain of $0.31 million as compared to $3.75 million during the three months ended December 31, 2021.

Total realized gains for the

three months ended December 31, 2022, were realized from sale of four non-traded REIT securities with total realized gain of $0.26 million, and an investment trust with realized gains of $0.05 million.

Total realized gains for the three months

ended December 31, 2021, were realized from sales of six non-traded REIT securities with net realized gain of $3.75 million.

During the three months ended March 31, 2023, we had no realized gain as compared to $5.11 million during the three months ended March 31, 2022.

Total realized gains for the three months ended

March 31, 2022, were realized from sale of a publicly traded REIT securities, three non-traded REIT securities, and a limited partnership interest with total realized gains of $5.11 million.

Net unrealized gain/loss on investments:

During the three months ended December 31, 2022, we recorded net unrealized loss of $0.83 million, which were net of $ 0.19 million of

unrealized gains reclassification adjustment.

During the three months ended March 31, 2023, we recorded net unrealized loss of $11.23 million, which includes of $7.76 million of unrealized gain reclassification

The reclassification adjustments are the accumulated unrealized gains or losses as of the end of prior period that are realized during the current period.

Accordingly , the

net unrealized loss excluding the reclassification adjustment for the three months ended December 31, 2022 were $0.64 million, which resulted from fair value depreciations $0.18 million from limited

partnership interests, $0.03 million from general partnership interests, $0.40 million from non-traded REIT securities and $0.03 million from investment trust.

During the three months ended December 31, 2021, we recorded net unrealized gains of $1.63 million, which were net of $0.10 million of unrealized gains reclassification adjustment.

Accordingly, net unrealized loss excluding the reclassification adjustment for

the three months ended March 31, 2022 were $3.47 million, which resulted from fair value depreciations of $3.11 million from limited partnership interests, $0.20 million from general partnership interests, and $0.16 million from non-traded REIT

During the three months ended March 31, 2022, we recorded net unrealized gains of $1.26 million, which were net of $0.42 million of unrealized loss reclassification adjustment.

reclassification adjustments are the accumulated unrealized gains or losses as of the end of prior period that are realized during the current period.

Accordingly, the net unrealized gains excluding the reclassification adjustment for the three

months ended December 31, 2021, were $1.73 million, which resulted from fair value appreciation of $1.60 million from limited partnership interests, $0.25 million from non-traded REIT securities, $0.01 million from investment trust, and offset by

fair value depreciation of $0.13 million from publicly traded REIT securities.

Accordingly, the net unrealized gains excluding the reclassification adjustment for the three months ended March 31, 2022 were $1.68 million, resulted from fair value appreciations of $4.60 million from limited partnership interests and fair value depreciations of $2.91 million from non-traded

REIT securities and $0.01 million from investment trust.

Income tax provision (benefit):

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The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax year ended December 31, 2021.

Therefore, it did not incur any tax expense or excise tax on its income

from operations during the quarterly periods within the tax year 2021.

Similarly, for the tax year 2022, we believe the Parent Company paid the requisite amounts of dividends during the year and met other REIT requirements such that it will not owe

any income taxes.

Therefore, it did not incur any tax expense or excise tax on its

income from operations during the quarterly periods within the tax year 2021.

Similarly, for the tax year 2022, we believe the Parent Company paid the requisite amounts of dividends during the year and met other REIT requirements such that it will

not owe any income taxes.

Therefore, the Parent Company did not record any income tax provisions during any fiscal periods within the tax year 2022.

TRS and MacKenzie NY 2 are subject to corporate federal and state income tax on their taxable income at regular statutory rates.

However, as of December 31, 2022, they did not have any taxable income

for tax years 2021 or 2022.

Therefore, TRS and MacKenzie NY 2 did not record any income tax provisions during any fiscal period within the tax year 2021 and 2022.

MacKenzie Satellite is a qualified REIT subsidiary of the Parent Company.

it does not file a separate tax return.

As discussed in Note 1 of our financial statements, TRS terminated

effective December 31, 2022.

As of December 31, 2022, they did not have material taxable income for tax year 2022.

Therefore, TRS and MacKenzie NY 2 did not record any income tax provisions during any fiscal period within the tax year 2022.

March 31, 2023, MacKenzie NY 2, as a taxable corporate subsidiary of the Parent Company, did not have any taxable income.

Therefore, we did not record any tax provisions for tax year 2023.

MacKenzie Satellite is a qualified REIT subsidiary of the

Parent Company.

Therefore, it does not file a separate tax return.

The Operating Partnership is a limited partnership and its subsidiaries;

Addison Property Owner, LLC (the “Addison Property Owner”), Hollywood Hillview Owner, LLC (“Hollywood Hillview”) and MacKenzie

BAA IG Shoreline LLC (“MacKenzie Shoreline”) are limited liability companies.

Madison and PVT are also limited liability companies.

First & Main, LP and 1300 Main, LP are limited partnerships.

Accordingly, all income tax liabilities of these

entities flow through to their partners, which ultimately is the Company.

Addison Property Owner, Hollywood Hillview and MacKenzie Shoreline are limited liability companies.

Madison and PVT are

also limited liability companies.

First & Main, 1300 Main, Woodland Corporate Center Two, and Main Street West are limited partnerships.

Accordingly, all income tax liabilities of these entities flow through to their partners, which ultimately

is the Company.

Therefore, no income tax provisions are recorded for these entities.

Six Months Ended December 31, 2022 and 2021

Nine Months Ended March 31, 2023 and 2022

Rental and reimbursements revenues:

Rental and reimbursement revenues are generated from our commercial and residential real estate properties.

During the six months ended December 31, 2022, we generated $6.74 million in rental and

reimbursements revenues, of which $3.90 million was generated from our commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300 Main Office Building), and $2.84 million from our

four residential apartments (Commodore Apartments, Pon De Leo Apartments, Hollywood Apartments, and Shoreline Apartments).

During the six months ended December 31, 2021, we generated $5.29 million in rental and reimbursements revenues, of which

$4.06 million was generated from the Addison Corporate Center tenants and $1.23 million from the three residential properties (Commodore Apartments, Pon De Leo Apartments and Hollywood Apartments).

During the nine months ended March 31, 2023, we generated $11.21 million in rental and

reimbursements revenues, of which $6.78 million was generated from our commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Main Street West Office Building

and Woodland Corporate Center Two), and $4.43 million was generated from our four residential apartments (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments), Hollywood Apartments, and Shoreline Apartments).

During the nine months

ended March 31, 2022, we generated $7.81 million in rental and reimbursements revenues, of which $5.91 million was generated from the Addison Corporate Center tenants and $1.90 million was generated from the three residential properties (Commodore

Apartments, The Park View (f/k/a as Pon De Leo Apartments) and Hollywood Apartments).

Investment income:

Investment income was made up of dividends, distributions from operations, distributions from sales/capital transactions, interest, and other investment income.

Total investment income for the six

months ended December 31, 2022 and 2021 was $0.76 million and $3.35 million, respectively.

During the six months ended December 31, 2022, we received $0.56 million of distributions from operations, sales, and liquidations as compared to $2.68

million during the six months ended December 31, 2021.

During the six months ended December 31, 2022, we received dividends, interest, and other investment income of $0.20 million as compared to $0.67 million received during the six months ended

December 31, 2021.

The Company’s asset management and incentive management fees are based on the advisory agreement that was effective January 1, 2021.

Total investment income for the

nine months ended March 31, 2023 and 2022 was $10.99 million and $4.52 million, respectively.

During the nine months ended March 31, 2023, we received $10.71 million of distributions from operations, sales, and liquidations as compared to $3.40

million during the nine months ended March 31, 2022.

During the nine months ended March 31, 2023, we received dividends, interest, and other investment income of $0.28 million as compared to $1.12 million received during the nine months ended March

The majority of the sales distributions received during the nine months ended March 31, 2023, was from Dimension 28, LLP.

Dimension 28 sold the underlying property and distributed the majority of the proceeds from the sale in February

We received $21.12 million from Dimension 28, of which $11.09 million was a return of capital and the remaining $10.02 million was recorded as distribution income from sales transactions.

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

Asset management fee:

The asset management fees for the six months ended December 31, 2022 and 2021 were $1.46 million and $1.35 million, respectively.

The asset management fees for the nine months ended March 31, 2023 and 2022 were $2.23 million and $2.03 million, respectively.

The slight increase was due to an increase in the Invested Capital

since December 31, 2021.

since March 31, 2022.

Incentive management fee:

Under the Advisory Management Agreement, we pay an incentive management fee that is equal to 15% of all distributions once shareholders have received cumulative distributions equal to 6%

from the effective date of the Agreement.

We did not incur any incentive management fee for the six months ended December 31, 2022 and 2021.

Under the Advisory Management Agreement, we pay an incentive management fee that is equal to 15% of all distributions once shareholders have received cumulative distributions equal

to 6% from the effective date of the Agreement.

We did not incur any incentive management fee for the nine months ended March 31, 2023 and 2022.

Administrative cost reimbursements and Transfer agent reimbursements:

Costs reimbursed to MacKenzie for the six months ended December 31, 2022, were $0.36 million as compared to $0.30 million for the six months ended December 31, 2021.

Costs reimbursed to MacKenzie for the nine months ended March 31, 2023, were $0.54 million as compared to $0.46 million for the nine months ended March 31, 2022.

The slight increase was due to an

increase in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to December 31, 2021, as a result of the increase in the number of real estate assets owned by us since December 2021.

Transfer agent cost reimbursement paid to MacKenzie for six months ended December 31, 2022 and 2021 were both $0.05 million.

increase in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to March 31, 2022, as a result of the increase in the number of real estate assets owned by us since March 2022.

Transfer agent cost reimbursement paid to MacKenzie for nine months ended March 31, 2023 and 2022 were $0.07 million and $0.08 million, respectively.

Property operating and maintenance expenses:

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administrative expenses incurred in the operation of our commercial and residential real estate assets.

During the six months ended December 31, 2022, we incurred operating and maintenance expenses of $4.12 million, of which $2.88 million mainly

were incurred in the operation of our four commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300 Main Office Building) and $1.24 million from our four residential properties

(Commodore Apartments, Pon De Leo Apartments, Hollywood Apartments, and Shoreline Apartments) During the six months ended December 31, 2021, we incurred operating and maintenance expenses of $3.24 million, of which $2.44 million mainly incurred in

the operation of Addison Corporate Center.

Operating and maintenance expenses incurred in the operation of three residential properties (Commodore Apartments, Pon De Leo Apartments and Hollywood Apartments) were $0.80 million.

During the nine months ended March 31, 2023, we incurred operating and maintenance expenses of $6.66 million, of which $4.75 million mainly were

incurred in the operation of our six commercial properties (Addison Corporate Center, Satellite Place, First & Main, 1300 Main, Main Street West and Woodland Corporate Center Two office buildings) and $1.91 million were incurred in the

operation of our four residential properties (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments), Hollywood Apartments, and Shoreline Apartments) During the nine months ended March 31, 2022, we incurred operating and maintenance

expenses of $4.71 million, of which $3.62 million mainly incurred in the operation of Addison Corporate Center.

Operating and maintenance expenses incurred in the operation of three residential properties (Commodore Apartments, The Park View (f/k/a

as Pon De Leo Apartments) and Hollywood Apartments) were $1.09 million.

Depreciation and amortization:

During the six months ended December 31, 2022, we recorded depreciation and amortization of $2.08 million, of which $0.93 million was the depreciation and amortization of real estate and intangible

assets of our four commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300 Main Office Building) and $1.15 million of our four residential properties (Commodore Apartments, Pon De

Leo Apartments, Hollywood Apartments, and Shoreline Apartments).

During the six months ended December 31, 2021, we recorded depreciation and amortization of $2.08 million, of which $1.66 million was the depreciation and amortization of real estate

and intangible assets of Addison Corporate Center and $0.42 million of the three residential properties (Commodore Apartments, Pon De Leo Apartments and Hollywood Apartments).

During the nine months ended March 31, 2023, we recorded depreciation and amortization of $3.74 million, of which $2.02 million was attributable to the depreciation and amortization of real

estate and intangible assets of our five commercial properties (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Main Street West Office Building and Woodland Corporate Center Office Building) and $1.72

million was attributable to our four residential properties (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments), Hollywood Apartments, and Shoreline Apartments).

During the nine months ended March 31, 2022, we recorded

depreciation and amortization of $3.23 million, of which $2.5 million was attributable to the depreciation and amortization of real estate and intangible assets of Addison Corporate Center and $0.73 million was attributable to the three residential

properties (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments) and Hollywood Apartments).

Interest expense:

Interest expense for the six months ended December 31, 2022 was $3.26 million, of which $1.67 million was incurred on the notes payable associated with our four commercial properties (Addison

Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300 Main Office Building) and $1.59 million was incurred on the mortgage notes payable associated our four residential properties (Commodore Apartments, Pon De

Leo Apartments, Hollywood Apartments, and Shoreline Apartments).

Interest expense for the six months ended December 31, 2021 was $0.85 million, of which $0.61 million was incurred on the notes payable associated with the Addison Corporate Center

and $0.24 million was incurred on the mortgage notes payable associated with the three residential properties (Commodore Apartments, Pon De Leo Apartments and Hollywood Apartments.

Interest expense for the nine months ended March 31, 2023 was $5.17 million, of which $2.90 million was incurred on the notes payable associated with our five commercial properties (Addison

Corporate Center, First & Main Office Building,1300 Main Office Building, Main Street West Office Building and Woodland Corporate Center Office Building) and $2.27 million was incurred on the mortgage notes payable associated our four

residential properties (Commodore Apartments, The Park View (f/k/a as Pon De Leo Apartments), Hollywood Apartments, and Shoreline Apartments).

Interest expense for the nine months ended March 31, 2022 was $1.42 million, of which $0.69 million was

incurred on the notes payable associated with the Addison Corporate Center and $0.73 million was incurred on the mortgage notes payable associated with the three residential properties (Commodore Apartments, The Park View (f/k/a as Pon De Leo

Apartments) and Hollywood Apartments).

Other operating expenses:

Other operating expenses include professional fees, directors’ fees, printing and mailing expenses, and other general and administrative expenses.

Other operating expenses for the six months ended

December 31, 2022 and 2021, were $0.71 million and $0.57 million, respectively.

Other operating expenses for the nine months

ended March 31, 2023 and 2022, were $1.13 million and $0.90 million, respectively.

The increase in other operating expenses is due to the acquisition of new properties:

Shoreline Apartments in May 2022, Satellite Place Office Building in June 2022,

First & Main Office Building in July 2022 and 1300 Main Office Building in October 2022, resulting in higher amounts of general and administrative operating expenses during the six months ended December 31, 2022.

administrative operating expenses during the nine months ended March 31, 2023.

Net realized gain/loss on investments:

During the six months ended December 31, 2022, we had a realized gain of $0.83 million as compared to $4.35 million during the six months ended December 31, 2021.

Total realized gains for the six

months ended December 31, 2022, were realized from sale of a publicly traded REIT securities with realized gain of $0.01 million, six non-traded REIT securities with total realized gain of $0.44 million, and a limited partnership interest with

realized gains of $0.33 million and investment trust of $0.05.

Total realized gains for the six months ended December 31, 2021, were realized from sales of a publicly traded REIT security with total realized gains of $0.07 million and twelve

non-traded REIT securities with net realized gain of $4.28 million.

During the nine months ended March 31, 2023, we had a realized gain of $0.83 million as compared to $9.46 million during the nine months ended March 31, 2022.

Total realized gains for the nine

months ended March 31, 2023, were realized from sale of a publicly traded REIT securities with realized gain of $0.01 million, six non-traded REIT securities with total realized gain of $0.44 million, a limited partnership interest with realized

gains of $0.33 million and investment trust of $0.05.

Total realized gains for the nine months ended March 31, 2022, were realized from sale of three publicly traded REIT securities with total realized gains of $4.26 million, thirteen non-traded

REIT securities with net realized gain of $4.28 million, and two limited partnership interest with total realized gains of $0.92 million.

Net unrealized gain/loss on investments:

During the six months ended December 31, 2022, we recorded net unrealized gains of $2.01 million, which were net of $ 0.68 million of

unrealized gains reclassification adjustment.

During the nine months ended March 31, 2023, we recorded net unrealized loss of $9.22 million, which were net of $ 8.44 million of

unrealized gains reclassification adjustments.

The reclassification adjustments are the accumulated unrealized gains or losses as of the end of prior period that are realized during the current period.

Accordingly , the

net unrealized gains excluding the reclassification adjustment for the six months ended December 31, 2022 were $2.69 million, which resulted from fair value appreciations of $2.81 million from limited

partnership interests, and $0.62 million from general partnership interests and fair value depreciations of $0.74 million from non-traded REIT securities.

During the six months ended December 31, 2021, we recorded net unrealized gains of $4.92 million, which were net of $1.72 million of unrealized gains reclassification adjustment.

The reclassification

adjustments are the accumulated unrealized gains or losses as of the end of prior period that are realized during the current period.

Accordingly, the net unrealized gains excluding the reclassification adjustment for the six months ended December

31, 2021, were $6.64 million, which resulted from fair value appreciation of $3.08 million from limited partnership interests, $3.54 million from non-traded REIT securities, $0.01 from investment trust and $0.01 million from publicly traded REIT

Accordingly ,

the net unrealized gains excluding the reclassification adjustment for the nine months ended March 31, 2023 were $0.78 million, which resulted from fair value appreciations of $0.42 million from general

partnership interests and fair value depreciations of $0.90 million from non-traded REIT securities and $0.30 million from limited partnership interests.

During the nine months ended March 31, 2022, we recorded net unrealized gains of $6.18 million, which were net of $2.14 million of unrealized gains reclassification adjustment.

reclassification adjustments are the accumulated unrealized gains or losses as of the end of prior period that are realized during the current period.

Accordingly, the net unrealized gains excluding the reclassification adjustment for the nine

months ended March 31, 2022, were $8.32 million, which resulted from fair value appreciation of $7.68 million from limited partnership interests, $0.62 million from non-traded REIT securities, $0.01 million from investment trust and $0.01 million

from publicly traded REIT securities.

Income tax provision (benefit):

Income tax provision for six months ended December 31, 2022, and 2021 are discussed above under the three months ended section.

Income tax provision for nine months ended March 31, 2023, and 2022 are discussed above under the three months ended section.

Liquidity and Capital Resources

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We have raised total gross proceeds of

million from the issuance of shares under the three public offerings, $42.46 million from our first public offering, which concluded in October 2016, $67.99 million from the second public offering, which concluded in October 2019, and $8.65 million

from our third public offering, which concluded in October 2020.

$119.10 million from the issuance of shares under the three public offerings, $42.46 million from our first public offering, which concluded in October 2016, $67.99 million from the second public offering, which concluded in October 2019, and $8.65

million from our third public offering, which concluded in October 2020.

In addition, we have raised $13.36 million from the issuance of shares under the DRIP.

Of the total capital raised from the public offerings as of December 31, 2022, we have used

Of the total capital raised from the public offerings as of March 31, 2023, we have used

$12.88 million to repurchase shares under our share repurchase program.

2 unchanged sentences

On October 14, 2022, we increased the offering to sell up to $75 million of shares of our Series A preferred stock.

We raised $12.36 million pursuant to the Offering Circular as of December 31, 2022.

We plan to fund

future investments with the net proceeds raised from our preferred equity offering and any future offerings of securities and cash flows from operations, as well as interest earned from the temporary investment of cash in U.S.

government securities

and other high-quality debt investments that mature in one year or less.

We raised $14.41 million pursuant to the Offering Circular as of March 31, 2023.

We plan to fund future

investments with the net proceeds raised from our preferred equity offering and any future offerings of securities and cash flows from operations, as well as interest earned from the temporary investment of cash in U.S.

government securities and

other high-quality debt investments that mature in one year or less.

We may also fund a portion of our investments through borrowings from banks and issuances of senior securities.

While we were a BDC, we did not borrow money on a long-term

basis or issue debt securities at the Company level;

While we were a BDC, we did not borrow money on a long-term basis

or issue debt securities at the Company level;

however, now that our BDC status is withdrawn, we may borrow money within the underlying companies in which we have majority ownership.

In addition, from time to time we may draw on the margin

line of credit on a temporary basis to bridge our investment purchases and sales or capital raising.

In addition, from time to time we may draw on the margin line of

credit on a temporary basis to bridge our investment purchases and sales or capital raising.

We intend to utilize leverage to enhance the total returns of our portfolio, and we expect to have greater flexibility in raising debt capital, following the withdrawal of our BDC election.

3 unchanged sentences

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

amount of such borrowing will no longer be limited by the 1940 Act.

We used the funds raised from our public offerings to invest in portfolio companies, paying cash distributions to holders of our common stock (from investment income and realized capital gains), and

paying operating expenses.

We finished the three months ended December 31, 2022 with cash and cash equivalents, restricted cash, and receivables of $8.51 million, and approximately $3.91 million of current liabilities.

of our strong liquidity and the liquidity preservation measures taken by the board, we are currently capable of meeting all of our obligations and continue our operations for the foreseeable future.

We intend to continue to qualify as a REIT and to

meet the associated testing requirements, including paying out at least 90% of our taxable income.

Six months ended December 31, 2022:

For the six months ended December 31, 2022, we experienced a net decrease in cash of $0.82 million.

During this period , we generated cash of $7.90

million from our financing activities and used $3.48 million in our operating activities and $5.24 million from our investing activities.

The net cash outflow of $3.48 million from operating activities resulted from $8.13 million of rental revenues and $0.76 million of investment income offset by $12.37 million of cash used in operating

The net cash outflow of $5.24 million from investing activities resulted from real estate acquisitions through our subsidiaries of $8.23 million,

investment acquisition deposit of $0.19 million, payment of contingent liability of $0.86 million and purchases of equity investments of $0.18 million offset by cash inflows of $3.20 million from sale of investments, and $1.02 million from

distributions received from our investments that are considered return of capital.

The net cash inflow of $7.90 million from financing activities resulted from payment of dividends of $2.03 million, $0.73 million redemption of common stocks, payments of syndication

cost amounting to $0.81 million, capital distributions to non-controlling interests holders amounting to $ 0.17 million, $0.01 million payment of notes payables, and $0.20 million payment of mortgage payables

offset by $9.40 million proceeds from the issuance of preferred stock, $0.01 million proceeds from notes payables, $2.10 million proceeds from mortgage payables and $0.34 million from capital pending

Six months ended December 31, 2021:

For the six months ended December 31, 2021, we experienced a net increase in cash of $17.57 million.

maximum amount of such borrowing will no longer be limited by the 1940 Act.

We used the funds raised from our public offerings to invest in portfolio companies, paying cash distributions to holders of our common stock (from investment income and realized capital gains),

and paying operating expenses.

We finished the three months ended March 31, 2023 with cash and cash equivalents, restricted cash, and receivables of $19.45 million, and approximately $4.17 million of current liabilities.

Because of our strong liquidity and the liquidity preservation measures taken by the board, we are currently capable of meeting all of our obligations and continue our operations for the foreseeable future.

We intend to continue to qualify as a

REIT and to meet the associated testing requirements, including paying out at least 90% of our taxable income.

Nine months ended March 31, 2023:

For the nine months ended March 31, 2023, we experienced a net increase in cash of $10.02 million.

During this period , we generated cash

of $8.83 million from our financing activities and $6.10 million from our investing activities and used $4.91 million in our operating activities.

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

$1.60 million of investment income.

The net cash inflow of $6.10 million from investing activities resulted from cash inflows of $13.22 million from sale of and sales

distribution from investments, and $12.28 million from distributions received from our investments that are considered return of capital offset by real estate acquisitions through our subsidiaries of $17.95 million, payment of $1.15 million on

the contingent liability and purchases of equity investments of $0.30 million.

The net cash inflow of $8.83 million from financing activities resulted from payment of dividends of $3.20 million, $1.15 million redemption of common stocks, payments of

syndication cost amounting to $1.01 million, capital distributions to non-controlling interests holders amounting to $0.28 million, $0.01 million payment of notes payables, $0.02 million repayment of

finance lease liabilities and $0.45 million payment of mortgage payables offset by $11.45 million proceeds from the issuance of preferred stock, $0.01 million proceeds from notes payables, $3.03 million proceeds from mortgage payables and $0.46

million from capital pending acceptance.

Nine months ended March 31, 2022:

For the nine months ended March 31, 2022, we experienced a net increase in cash of $32.03 million.

During this period, we generated cash of $2.74 million from our operating activities, $15.04

million from our investing activities and $14.25 million in our financing activities.

The net cash inflow of $2.25 million from operating activities resulted from $5.44 million of rental revenues and $3.35 million of investment income offset by $6.54 million of cash used in operating

The net cash inflow of $2.49 million from investing activities resulted from real estate acquisitions through our subsidiaries of $21.78 million and purchases of equity investments of $3.23 million

offset by cash inflows of $23.30 million from sale of investments and $4.20 million from distributions received from our investments that are considered return of capital.

The net cash inflow of $2.74 million from operating activities resulted from $7.58 million of rental revenues and $4.52 million of investment income offset by $9.36 million of cash used in

operating expenses and $0.04 million of other expenses.

The net cash inflow of $15.04 million from investing activities resulted from real estate acquisitions through our subsidiaries of $22.85 million, investment acquisition deposit of $0.90

million and purchases of equity investments of $13.79 million offset by cash inflows of $30.33 million from sale of investments and $22.25 million from distributions received from our investments that are considered return of capital.

The net cash inflow of $14.25 million from financing activities resulted from payment of dividends of $1.96 million, $0.16 million redemption of common stocks, payment of deferred finance cost

amounting to $0.78 million, payment of syndication cost amounting $0.43 million and payment on existing note payables of $0.71 million offset by cash inflows of contributions by non-controlling interests holders amounting to $0.86 million, $0.09

million proceeds from issuance of preferred stock, $0.07 million change in capital acceptance, and $15.00 million proceeds from note payables.

amounting to $0.78 million, payment of syndication cost amounting $0.52 million, capital distributions to non-controlling interests holders amounting to $0.01 million and payment on existing note payables of $1.29 million offset by cash inflows of

contributions by non-controlling interests holders amounting to $0.86 million, $1.98 million proceeds from the issuance of preferred stock, $0.01 million change in capital pending acceptance, and $16.12 million proceeds from note payables.

Material Cash Obligations

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We do not have any current plans to borrow money at the Parent Company level.

In the event that we do so borrow, we would expect to be subject to various customary covenants and restrictions on our

operations, such as covenants which would (i) require us to maintain certain financial ratios, including asset coverage, debt to equity and interest coverage, and a minimum net worth, and/or (ii) restrict our ability to incur liens, additional

In the event that we do so borrow, we would expect to be subject to various customary covenants and restrictions on

our operations, such as covenants which would (i) require us to maintain certain financial ratios, including asset coverage, debt to equity and interest coverage, and a minimum net worth, and/or (ii) restrict our ability to incur liens, additional

debt, merge or sell assets, make certain investments and/or distributions or engage in transactions with affiliates.

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which we have majority ownership.

As of December 31, 2022, total loan outstanding at the underlying companies amounted to $90,619,555, of which $21,484,471 was the loan associated with Addison Corporate Center that was being held for sale as of

December 31, 2022.

As of March 31, 2023, total loan outstanding at the underlying companies amounted to $113,284,153, of which $21,941,673 was the loan associated with Addison Corporate Center that was being held for sale as of March

Distributions to Stockholders

We pay quarterly distributions to stockholders to the extent that we have income from operations available.

Our quarterly distributions, if any, will be determined by our Board of Directors after a

review and distributed pro-rata to holders of our shares;

Our quarterly distributions, if any, will be determined by our Board of Directors after

a review and distributed pro-rata to holders of our shares;

we declare distributions on a monthly basis, but pay each quarter.

Any distributions to our stockholders will be declared out of assets legally available for distribution.

In no event are we

permitted to borrow money to make distributions if the amount of such distributions would exceed our annual accrued and received revenues, less operating costs.

In no event are

we permitted to borrow money to make distributions if the amount of such distributions would exceed our annual accrued and received revenues, less operating costs.

Distributions in kind are not permitted, except as provided in our Charter.

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reinstated the quarterly distributions after reassessing our cash flow and intends to continue such distribution so long as it is supported by the previous quarter’s income, but may increase or decrease the distribution accordingly .

During the six months ended December 31, 2022, the Board approved the following quarterly dividends:

During the nine months ended March 31, 2023, the Board approved the following quarterly dividends:

Preferred Stock

2 unchanged sentences

December 31, 2022

March 31, 2023

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis