What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-13 compared with 2023-05-15 · 379 added, 437 removed, 191 unchanged (81% of the section changed)

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“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,”

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.

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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

investments, the interest rates payable on our debt investments, the default rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we

encounter competition in our markets and general economic conditions.

Further, we may experience fluctuations in our operating results due to a number of factors, including the effect of the return on our equity investments, the interest rates

payable on our debt investments, the default rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our

markets and general economic conditions.

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

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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.

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.

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

subject to federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we generally distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and

excluding any net capital gain) to the stockholders and meet certain other conditions.

To the extent that we satisfy the annual distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S.

corporate income tax on our undistributed REIT taxable income.

In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay to our stockholders in a calendar year is less than a minimum amount specified under

federal tax laws.

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

(“MacKenzie NY 2”), is

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

(“MacKenzie NY 2”), Inc.

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

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

Investment Plan

Now that we are no longer a BDC, we generally seek to invest in real estate assets.

We generally seek to invest in real estate assets.

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

We can invest up

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

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

residential real estate and land;

We can invest up to 20% of our total assets in

investment securities of real estate companies.

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

or (ii) has at least 50% of its assets invested in such real estate.

We will not invest in general partnerships, joint ventures, or other entities that do not afford limited liability to their security holders.

However, limited liability entities in which we invest may hold interests in general partnerships, joint ventures, or other non-limited liability entities.

When purchasing securities, we generally favor purchasing securities issued by entities that

have (i) completed the initial offering of their securities, (ii) operated for a period of at least two years, and typically more than five years, from the completion of their initial offering, and (iii) fully invested their capital in real

properties or other real estate related investments.

However, limited liability entities

in which we invest may hold interests in general partnerships, joint ventures, or other non-limited liability entities.

When purchasing securities, we generally favor purchasing securities issued by entities that have (i) completed the initial

offering of their securities, (ii) operated for a period of at least two years, and typically more than five years, from the completion of their initial offering, and (iii) fully invested their capital in real properties or other real estate

related investments.

Our investment objective is to generate current income and capital appreciation through the acquisition of real estate assets and debt and equity real estate-related investments.

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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 cash needs.

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

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

constraint that such securities will not exceed 20% of our portfolio.

We believe this niche strategy will allow us to pay distributions that are supported by cash flow rather than paying back investors’ capital, although there can be no assurance

that some portion of any distribution is not a return of capital.

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

of the Advisers’ investment team and our overall portfolio composition.

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

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

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

subject to the constraint that such securities will not exceed 20% of our portfolio.

We believe this niche strategy will allow us to pay distributions that are supported by cash flow rather than paying back investors’ capital, although there can be

no assurance that some portion of any distribution is not a return of capital.

Rental and Reimbursement

We generate rental revenue by leasing office space and apartment units to the building’s tenants.

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

We generate rental revenue by leasing office space and apartment units to a building’s tenants.

These tenant leases fall under the scope of Accounting Standards Codification (“ASC”) Topic 842, and are

classified as operating leases.

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

Investment Income

We generate revenues in the form operating income, capital gains and dividends on dividend-paying equity securities or other equity interests that we acquire, in addition to interest on any debt

We generate revenues in the form of operating income, capital gains and dividends on dividend-paying equity securities or other equity interests that we acquire, in addition to interest on any debt

investments that we hold.

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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,

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

monitoring and servicing our investments.

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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 fees;

transfer agent and safekeeping fees;

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fees and expenses associated with independent audits and outside legal costs;

costs associated with our reporting and compliance obligations under the 1934 Act, the 1940 Act and applicable federal and state securities laws;

costs associated with our reporting and compliance obligations under the 1934 Act and applicable federal and state securities laws;

all other expenses incurred by either MacKenzie or us in connection with administering our business, including payments under the Administration Agreement that are based upon our allocable portion of overhead and other expenses incurred

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

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

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 March 31, 2023, and June 30, 2022:

As of September 30, 2023, we owned various real estate limited partnerships and REITs that are listed in the “Investments, at fair value” in the table below.

We also owned various investments in

entities that own real estate which gave us enough control such that the investments are not securities for 1940 Act purposes, but not enough to consolidate the financial statements of such entities with our own;

these are listed below as

“Unconsolidated investments (non-securities), at fair value.” The following table summarizes the composition of our investments at fair value as of September 30, 2023, and June 30, 2023:

Investments, at fair value

March 31, 2023

September 30, 2023

June 30, 2023

3100 Airport Way South LP

5210 Fountaingate

American Healthcare REIT, Inc.

5210 Fountaingate, LP

Blackstone Real Estate Income Trust, Inc.

Capitol Hill Partners, LLC

Citrus Park Hotel Holdings, LLC

Coastal Realty Business Trust, REEP, Inc.

Corporate Property Associates 18 Global A Inc.

Healthcare Trust, Inc.

HGR Liquidating Trust

Highlands REIT, Inc.

KBS Real Estate Investment Trust II, Inc.

Lakemont Partners, LLC

Moody National REIT II, Inc.

Secured Income, LP

SmartStop Self Storage REIT, Inc Class A

SmartStop Self Storage REIT, Inc Class T

SmartStop Self Storage REIT, Inc.

Starwood Real Estate Income Trust, Inc.

Strategic Realty Trust, Inc.

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Unconsolidated investments (non-security), at fair value

March 31, 2023

September 30, 2023

June 30, 2023

1300 Main, LP

Dimensions28 LLP

First & Main, LP

Green Valley Medical Center, LP

Main Street West, LP

Martin Plaza Associates, LP

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Westside Professional Center I, LP

Woodland Corporate Center Two, LP

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.

Satellite Place located in Duluth, GA, 1300 Main, First & Main and Main Street West

located in Napa, CA, Woodland Corporate Center Two located in Woodland, CA, and 220 Campus Lane located in Fairfield, CA and four residential apartments:

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

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

1300 Main, First & Main, Main Street West, Woodland Corporate Center and 220 Campus Lane office buildings, and the Hollywood Apartments are

owned through our subsidiary, the Operating Partnership as noted below.

The Commodore Apartments are owned through our subsidiary Madison;

The Park View are owned through our subsidiary PVT;

and the Shoreline Apartments are owned through our

subsidiary BAA-Shoreline.

Property Owners

Addison Corporate Center

Addison Property Owner, LLC

Commodore Apartments

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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 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.

Pursuant to the forbearance

agreement, the property is currently being marketed for sale.

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

Aircraft Design, Manufacturing, and Engineering

Global Engineering and Consulting

Quest Diagnostics

Laboratory Services

The following information pertains to lease expirations at the Addison Corporate Center:

Number of Leases Expiring

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 March 31, 2023, the

property is 93.0% occupied by 7 tenants.

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

Largest Tenants

Legal Services

Accounting Services

Napa Palisades

Accounting Services

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

Number of Leases Expiring

Percentage of Gross Rent

220 Campus Lane Office Building

220 Campus Lane, LLC

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

As of March 31, 2023, the

property is 100% occupied by 8 tenants.

As of September 30, 2023, the property

is 100% occupied by 8 tenants.

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

Largest Tenants

Rent per annum

Annual Base Rent

Wilson Daniels

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Number of Leases Expiring

Annual Base Rent

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:

First and Main Office Building contains 27,396 square feet, of which approximately 19.000 square feet is office space and the remainder is designated as retail space.

As of September 30, 2023, the

property is 98% occupied by 8 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:

Annual Base Rent

Legal Services

Accounting Services

Napa Palisades

Accounting Services

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

Number of Leases Expiring

Annual Base Rent

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.

Main Street West Office Building 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 September 30, 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

Annual Base Rent

AUL Corporation

Strategies To Empower

State of California

Strategies To Empower

Azzurro Pizzeria

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Number of Leases Expiring

Annual Base Rent

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

1 tenant as listed in below table.

Satellite Place Office Building contains 143,785 square feet, all of which is office space.

As of September 30, 2023, the property is approximately 64% occupied by 3 tenants.

The following table shows

the largest tenants and square footage occupied:

Largest Tenants

Rent per annum

Annual Base Rent

Lease Expiration

Renewal options

OS National, LLC

Title Services

Consumer Products

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

Number of Leases Expiring

Percentage of Gross

Annual Base Rent

Percentage of Gross Rent

Woodland Corporate Center Office Building contains 37,034 square feet, of which 7,797 square feet are laboratories and the rest is office space.

All of the laboratories space is occupied by Agtech

As of September 30, 2023, the property is 97% occupied by 14 tenants.

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

Largest Tenants

Annual Base Rent

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 Office Building:

Number of Leases Expiring

Annual Base Rent

Percentage of Gross Rent

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

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.

As of September 30, 2023, Commodore Apartment building is approximately 100% occupied.

The Park View is also a

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

As of September 30, 2023, The Park View building is approximately 92.3% 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 8,610 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 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.

apartment units are 66% occupied as of September 30, 2023.

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

As of September 30, 2023, Shoreline Apartments building is approximately 92.9%

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

Property Name

Rent/Occupied

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

Percentage Leased

Annual Base Rent

Monthly Base Rent/Occupied Unit

The Park View

Multi-Family Residential

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Property Name

Rent/Occupied

Percentage Leased

Annual Base Rent

Monthly Base Rent/Occupied Unit

Hollywood Property

Los Angeles, CA

Our 220 Campus Lane Office building was purchased in September 2023.

The office building was vacant at the time of our purchase.

We are currently in the process of renovating the building and

marketing it for lease.

In addition to our commercial and residential real estate properties, we also own two parcels of land:

a vacant parcel adjacent to our 220 Campus Lane Office Building in Fairfield,

California (“Campus Lane Land”), and a vacant parcel located at 5000 Wiseman Way, Fairfield, California (“Aurora Land”).

We acquired the Campus Lane Land in September 2023 with the long term objective of developing it into a multi-family

residential community.

The entitlement process for the vacant land has not commenced, and we are uncertain about the duration and financial resources required to realize our goal .

The development of Aurora

Land is discussed below.

Both parcels of land are owned by the Operating Partnership through its subsidiaries:

Campus Lane Residential, LLC, and MRC Aurora, LLC.

Aurora Land Development

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

The city’s planning commission has approved our development project and the building

department is currently reviewing our building permit submittals.

In order to fund the construction of the project, we plan to raise $10 million in preferred capital and also obtain a construction loan.

We hope to obtain the construction loan

during the first two months of 2024 and commence the construction in early Spring 2024.

There are no present plans for any major renovation or development of any property except for our 220 Campus Lane Office Building, Aurora Land and Campus Lane Land as discussed above.

Each property is

being held for income production and increased occupancy and/or rental rates.

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

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.

Current Market and Economic Conditions

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

economic, political, and legal factors.

Our West coast multi-family properties are generally restricted from raising rents significantly by local rent control laws.

Two of our unconsolidated investments in apartment properties, Lakemont Partners

and Capitol Hill, are also subject to rent control.

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

However, in order to encourage development, rent

control usually does not apply to newer properties.

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

Our consolidated office properties, 1300 Main, First and Main, Main Street West, Satellite Place, Woodland Corporate Center Two, and 220 Campus Lane are all Class A suburban office properties and are

located in Napa, California, Napa, California, Napa, California, Duluth, Georgia, Woodland, California, and Fairfield, 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.

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.

Recently, the broader economy began experiencing increased levels of inflation, higher interest rates and tightening monetary and fiscal policies.

The Federal Reserve has increased its targeted range

for the federal funds rate, leading to increased interest rates and it foresees further interest rate increases.

We currently have fixed and variable interest rates for our loans.

The rise in overall interest rates has caused an increase in our

variable rate borrowing costs resulting in an increase in interest expense.

The higher interest rates imposed by the Federal Reserve to address inflation may also adversely impact real estate asset values.

In addition, a prolonged period of high

and persistent inflation could cause an increase in our expenses.

The current market and economic conditions could have a material impact on our business, cash flow and results of operations.

It could also impact our ability to find suitable

acquisitions, sell properties, and raise equity and debt capital.

Results of Operations

COVID-19 pandemic

Considerable uncertainty still surrounds the COVID-19 pandemic and its potential effects, and the extent of and effectiveness of any responses taken on a national and local level.

However, measures taken to limit the impact of the COVID-19 pandemic, including social distancing and other restrictions on travel, congregation, and business operations have already resulted in significant negative economic impacts.

some of the companies in which we have invested have cancelled their quarterly dividends and distributions for the current and future quarters.

The long-term impact of the COVID-19 pandemic and any future outbreaks or variants on the United

States and world economies remains uncertain, but may result in a world-wide economic downturn, the duration and scope of which cannot currently be predicted .

MacKenzie and our Advisers have taken numerous steps, and will continue to take further actions, to address the COVID-19 pandemic.

They implemented business continuity plans and the management team is in place to

respond to changes in the global environment quickly and effectively.

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.

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 March 31, 2023 and 2022

Three Months Ended September 30, 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 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).

During the three months ended September 30, 2023, we generated $3.56 million in rental and

reimbursements revenues, of which $2.06 million was generated from our five commercial properties (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Main Street West Office Building and Woodland Corporate

Center Office Building), and $1.50 million was generated from our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments and Shoreline Apartments).

During the three months ended September 30, 2022, we generated $3.07

million in rental and reimbursements revenues, of which $1.70 million was generated from three commercial properties (Addison Corporate Center, Satellite Place Office Building and First & Main Office Building) and $1.37 million from our four

residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

The total increase of $0.49 million in rental revenues during the three months ended June 30, 2023 was mainly due to the acquisition of

three commercial properties since September 2022.

Investment income:

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

Total investment income for the

three months ended March 31, 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.

Total investment income for the three

months ended September 30, 2023 and 2022 was $0.32 million and $0.45 million, respectively.

During the three months ended September 30, 2023 we received $0.09 million of distributions from operations, sales, and liquidations as compared to $0.33

million during the three months ended September 30, 2022.

The decrease was mainly due to liquidation of Dimension 28, LP in December 2022.

During the three months ended September 30, 2023, we received dividends, interest, and other investment

income of $0.23 million as compared to $0.12 million received during the three months ended September 30, 2022.

This increase was mainly due to increase in interest income from our cash deposits in money market funds during the three months ended

September 30, 2023.

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

Asset management fee:

The asset management fees for the three months ended March 31, 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 March 31, 2022.

The asset management fees for the three months ended September 30, 2023 and 2022 were $0.79 million and $0.72 million, respectively.

The slight increase was due to total increase of $15.59 in total

invested capital from $148.64 million as of September 30, 2022 to $164.23 million as of September 30, 2023.

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 March 31, 2023 and 2022.

Administrative cost reimbursements and Transfer agent reimbursements:

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 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.

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 September 30, 2023 and 2022.

Administrative cost and transfer agent reimbursements:

Costs reimbursed to MacKenzie for the three months ended September 30, 2023 were $0.19 million as compared to $0.18 million for the three months ended September 30, 2022.

The slight increase was due

to an increase in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to September 30, 2022, as a result of the increase in number of properties since September 2022.

Transfer agent cost reimbursements paid to MacKenzie for the three months ended September 30, 2023 and 2022 were $0.02 million and $0.02 million, respectively.

Property operating and maintenance expenses:

Operating and maintenance expenses mainly consists of real estate taxes, utilities, repair and maintenance, cleaning, landscape, security, property management fees, insurance, and various other

Operating and maintenance expenses mainly consist of real estate taxes, utilities, repair and maintenance, cleaning, landscape, security, property management fees, insurance, and various other

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

During the three months ended March 31, 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.

During the three months ended September 30, 2023, we incurred operating and maintenance expenses of $1.39 million, of which $0.69 million were incurred in the operation of our six commercial

properties (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building, Main Street West Office Building and 220 Campus Lane Office Building) and $0.7 million were

incurred in the operation of our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

During the three months ended September 30, 2022, we incurred operating and maintenance expenses of

$1.83 million, of which $1.20 million were incurred in the operation of our three commercial properties (Addison Corporate Center, Satellite Place Office Building and First & Main Office Building) and $0.63 million were incurred in the

operation of our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

The decrease in the operating expenses was mainly due to the sale of Addison Property in June 2023 partly offset by

the acquisitions of three new office buildings (1300 Main, Main Street West and Woodland Corporate Center) since September 30, 2022.

Depreciation and amortization:

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).

During the three months ended September 30, 2023, we recorded depreciation and amortization of $1.56 million, of which $1.01 million was attributable to the depreciation and amortization of real

estate and intangible assets of our six commercial properties (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building, Main Street West Office Building and 220 Campus

Lane Office Building) and $0.55 million was attributable to our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

During the three months ended September 30, 2022, we recorded

depreciation and amortization of $0.91 million, of which $0.36 million was attributable to the depreciation and amortization of real estate and intangible assets of our two commercial properties (Satellite Place Office Building and First & Main

Office Building) and $0.55 million was attributable to our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments and Shoreline Apartments).

The increase in total depreciation and amortization of $0.65 million during

the three months ended September 30, 2023 was due to the acquisitions of three new office buildings (1300 Main, Main Street West and Woodland Corporate Center) since September 30, 2022.

Interest expense:

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).

Interest expense for the three months ended September 30, 2023 was $1.32 million, of which $0.62 million was incurred on the mortgage notes payable associated with our five commercial properties

(First & Main Office Building, 1300 Main Office Building, Woodland Corporate Center Office Building, Main Street West Office Building and 220 Campus Lane Building) and $0.7 million was incurred on the mortgage notes payable associated with

our five residential properties (Commodore Apartments, The Park View, Hollywood Apartments, Shoreline Apartments and Campus Lane Residential).

Interest expense for the three months ended September 30, 2022 was $1.59 million, of which $0.66

million was incurred on the notes payable associated with our two commercial properties (Addison Corporate Center and First & Main Office Building), $0.93 million was incurred on the mortgage notes payable associated with our four residential

properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments) and $0.02 million was incurred on short sale fees.

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 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, 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 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.

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

Other operating expenses for the three months ended

September 30, 2023 and 2022, were $0.55 million and $0.33 million, respectively.

The increase in other operating expenses was mainly due to the acquisition of three commercial properties (1300 Main, Main Street West and Woodland Corporate Center)

since September 30, 2022 resulting in higher amount of general and administrative operating expenses during the three months ended September 30, 2023.

Net realized gain on sale of investments:

During the three months ended September 30, 2023, no realized gain was recorded as compared to $0.52 million during the three months ended September 30, 2022.

Total realized gains for the three months

ended September 30, 2022, were realized from sale of a publicly traded REIT securities with realized gain of $0.01 million, four non-traded REIT securities with total realized gain of $0.18 million, and a limited partnership interest with realized

gains of $0.33 million.

Net unrealized gain (loss) on investments:

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, 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.

During the three months ended September 30, 2023, we recorded net unrealized losses on investments of $2.27 million, which resulted from fair value depreciations of $1.11 million from limited

partnership interests, $0.43 million from general partnership interests and $0.73 million from non-traded REIT securities.

During the three months ended September 30, 2022, we recorded net unrealized gains of $2.84 million, which were net of $0.49 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 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.

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

months ended September 30, 2022 were $3.33 million, which resulted from fair value appreciations of $2.99 million from limited partnership interests, $0.65 million from general partnership interests, and $0.03 million from investment trust and

fair value depreciations of $0.34 million from non-traded REIT securities.

Income tax provision (benefit):

The Parent Company has elected to be treated as a REIT for tax purposes under the Code and, as a REIT, is not subject to federal income taxes on amounts that it distributes to the stockholders,

provided that, on an annual basis, it distributes at least 90% of its REIT taxable income to the stockholders and meets certain other conditions.

To the extent that it satisfies the annual distribution requirement but distributes less than 100% of

its taxable income, it is either subject to U.S.

federal corporate income tax on its undistributed taxable income or 4% excise tax on catch-up distributions paid in the subsequent year.

provided that, on an annual basis, it generally distributes at least 90% of its REIT taxable income (determined without regard to the dividends paid deduction and excluding any capital gain) to the stockholders and meets certain other conditions.

To the extent that it satisfies the annual distribution requirement but distributes less than 100% of its REIT taxable income, it will be subject to U.S.

federal corporate income tax on its undistributed taxable income.

In addition, it will be

subject to a 4% excise tax if the actual amount that it pays to its stockholders in a calendar year is less than a minimum amount specified under U.S.

federal tax laws.

The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax year ended December 31, 2022.

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

income from operations during the quarterly periods within the tax year 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 2022.

Similarly, for the tax year 2023, we intend to pay the requisite amounts of dividends during the year and meet other REIT requirements such that it will not owe any income

Therefore, the Parent Company did not record any income tax provisions during any fiscal periods within the tax year 2023.

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

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.

However, these subsidiaries did not have material taxable income for

tax year 2022.

In addition, as discussed in Note 1, TRS was terminated effective December 31, 2022.

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

As of September 30,

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.

MacKenzie Satellite is a qualified REIT subsidiary of the Parent

Therefore, it does not file a separate tax return.

The Operating Partnership is a limited partnership and its subsidiaries;

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.

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 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

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 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 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 nine months ended March 31, 2023 and 2022.

Administrative cost reimbursements and Transfer agent reimbursements:

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 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:

Operating and maintenance expenses mainly consists of real estate taxes, utilities, repair and maintenance, cleaning, landscape, security, property management fees, insurance, and various other

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

During the nine months ended March 31, 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 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 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 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,

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

Net realized gain/loss on investments:

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

The Operating Partnership is a limited partnership.

Hollywood Hillview, MacKenzie Shoreline, Madison, PVT, 220 Campus Lane, and Campus Lane Residential are limited liability companies.

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.

Liquidity and Capital Resources

Capital Resources:

We offered to sell up to 5 million shares under our first public offering and up to 15 million shares each under our second and third public offerings.

We have raised total gross proceeds of

$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 March 31, 2023, we have used

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

In November 2021, the SEC qualified our offering statement pursuant to Regulation A to sell up to $50,000,000 of shares of our Series A preferred stock at an initial offering

price of $25.00 per share.

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

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;

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.

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.

Historically, we have only been able to access leverage at attractive costs through a credit facility.

We also expect to have greater flexibility in issuing securities with common equity participation features (such as warrants and convertible notes) and/or additional classes of stock (such as

preferred) in order to facilitate capital formation now that we are no longer subject to the restrictions of the 1940 Act.

We offered to sell up to 5 million shares of common stock in our first public offering and up to 15 million shares of common stock in each of our second

and third public offerings.

We have raised total gross proceeds of $119.10 million from the issuance of common stock under the three public offerings:

$42.46 million from our first public offering, which concluded in October 2016, $67.99 million

from the second public offering, which concluded in October 2019, and $8.65 million from our third public offering, which concluded in October 2020.

In addition, we have raised $14.63 million from the issuance of common shares under the DRIP as

of September 30, 2023.

Out of the total proceeds from DRIP, we have utilized a total of $13.80 million to repurchase common stocks under the Share Repurchase Program.

In November 2021, the SEC qualified our Offering Circular pursuant to

Regulation A to sell up to $50,000,000 of shares of our Series A preferred stock at an initial offering price of $25.00 per share.

On October 14, 2022, we amended our Offering Circular and increased the offering to sell up to $75 million of

shares of our Series A preferred stock.

On November 1, 2023, we further amended our Offering Circular to sell an aggregate of up to $75 million of shares of either our Series A preferred stock or our Series B preferred stock.

This post-effective

amendment to the Offering Circular has not been declared effective yet as of the date of this filing.

We had raised $17.72 million through the sale of our Series A preferred stock pursuant to the Offering Circular as of September 30, 2023.

addition, we have raised $0.12 million from the issuance of Series A preferred shares under the DRIP.

We plan to fund future investments with the net proceeds raised from our preferred equity offering and any future offerings of securities and

cash flows from operations, as well as interest earned from the temporary investment of cash in U.S.

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

We also may fund a portion of our investments

through borrowings from banks and issuances of senior securities.

We also may borrow money within the underlying companies in which we have majority ownership.

In addition, from time to time, we may draw on the Company’s margin line of credit on

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

For additional information concerning our margin borrowing activity,

please see Note 9 - Margin Loans in the financial statements included in this report.

We intend to utilize leverage to enhance the total returns of our portfolio.

Historically, we were only able to access leverage at attractive costs through a credit facility, but the termination of

our BDC status effective December 31, 2020 has provided us with greater flexibility in choosing among different alternatives for raising debt capital going forward.

We also have greater flexibility in issuing securities with common equity participation features (such as warrants and convertible notes) and/or additional classes of stock (such as preferred) in

order to facilitate capital formation now that we are no longer subject to the restrictions of the 1940 Act.

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

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

We finished the three months ended September 30, 2023, with cash and cash equivalents, restricted cash, and receivables of approximately $15.58 million and $4.49 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 continuing 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 $2.74 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 $0.52 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.

Three months ended September 30, 2023:

For the three months ended September 30, 2023, we experienced a net decrease in cash of $3.46 million.

During this period , we used cash of $5.43

million in our investing activities and generated $1.45 million in our financing activities and $0.52 million in our operating activities.

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

operating expenses.

The net cash outflow of $5.43 million from investing activities resulted from real estate acquisitions through our subsidiaries of $5.06 million

and purchases of equity investments of $0.39 million, offset by cash inflows of $0.02 million from distributions received from our investments that are considered return of capital .

The net cash inflow of $1.45 million from financing activities resulted from $2.95 million proceeds from mortgage notes payable and $1.36 million proceeds from the issuance of preferred

stock, offset by payment of dividends of $1.36 million, $0.45 million redemption of common stocks, payments of selling commissions and fees amounting to $0.18 million, capital distributions to non-controlling interests holders amounting to $ 0.17 million, $0.01 million repayment of finance lease liabilities, $0.40 million change in capital pending acceptance and $0.29 million payment of mortgage payables.

Three months ended September 30, 2022:

For the three months ended September 30, 2022, we experienced a net increase in cash of $2.91 million.

During this period , we generated cash of

$3.21 million from our financing activities, $0.55 million from our investing activities and used $0.85 million in our operating activities.

The net cash outflow of $0.85 million from operating activities resulted from $4.33 million of rental revenues and $0.45 million of investment income offset by $5.63 million of cash used in operating

The net cash inflow of $0.55 million from investing activities resulted from real estate acquisitions through our subsidiaries of $1.22 million,

investment acquisition deposit of $0.37 million, payment of contingent liability of $0.86 million and purchases of equity investments of $0.11 million offset by cash inflows of $2.08 million from sale of investments, and $1.03 million from

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

The net cash inflow of $3.21 million from financing activities resulted from payment of dividends of $0.97 million, $0.35 million redemption of common stocks, payments of syndication

cost amounting to $0.54 million, capital distributions to non-controlling interests holders amounting to $0.06 million and $0.05 million payment of mortgage payables offset by $5.03 million proceeds from the

issuance of preferred stock and $0.15 million from capital pending acceptance.

Material Cash Obligations

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However, if MacKenzie withdraws as our administrator, it will be liable for any expenses we incur as a result of such

For additional information concerning the terms of these agreements and related fees paid, see Note 8 – Related Party Transactions in the consolidated financial statements included in this report.

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.

1 unchanged sentence

which we have majority ownership.

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

The below table presents the total loans outstanding at the underlying companies as of September 30, 2023 and the fiscal years those loans mature:

Fiscal Year Ending June 30, :

Debt Maturing

2024 (remainder)

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.

We have elected to be treated as a REIT under the Code.

As a REIT, we are not subject to federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we 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 the taxable income, we will either be subject to U.S.

federal corporate income tax on our undistributed taxable income or 4% excise tax on catch-up distributions paid in the subsequent year.

We are also subject to tax on built-in gains we realize during the first five years following REIT election.

Our DRIP provides for reinvestment of our dividends and other distributions on behalf of stockholders for any individual stockholder who elects to participate in the DRIP, provided that the DRIP is permitted by the

state in which the stockholders resides.

As a REIT, we are not subject to federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we

generally distribute at least 90% of our REIT taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain) to the stockholders and meet certain other conditions.

To the extent that we satisfy the

annual distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to U.S.

federal corporate income tax on our undistributed REIT taxable income.

In addition, we will be subject to a 4% nondeductible excise

tax if the actual amount that we pay to our stockholders in a calendar year is less than a minimum amount specified under U.S.

federal tax laws.

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

DRIP is permitted by the state in which the stockholders reside.

We can offer no assurance that we will achieve results that will permit the payment of any cash distributions.

On March 31, 2020, after assessing the impacts of the COVID-19 pandemic, our Board of Directors suspended regular quarterly distributions to our stockholders.

However, on May 10, 2021, the Board of Directors

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

During the three months ended September 30, 2023, the Board approved the following quarterly dividends:

Preferred Stock

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September 30, 2023

December 31, 2022

March 31, 2023

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our portfolio primarily consists of equity and debt investments in smaller U.S.

companies that primarily own commercial real estate that are either illiquid or not listed on any exchange, and our

investments are considered speculative in nature.

As a result, we are subject to risk of loss which may prevent our stockholders from achieving price appreciation, dividend distributions and a return of their capital.

At September 30, 2023,

financial instruments that subjected us to concentrations of market risk consisted principally of equity investments, which represented approximately 10% of our total assets as of that date.

As discussed in Note 4 – Investments, to our consolidated

financial statements, these investments primarily consist of securities in companies with no readily determinable market values and as such are valued in accordance with our fair value policies and procedures.

Our investment portfolio sometimes

also includes shares of publicly traded REITs, which are valued at recently quoted trading prices.

Our investment strategy represents a high degree of business and financial risk due primarily to the general illiquidity of our investments.

make short-term investments in cash equivalents, U.S.

government securities and other high-quality investments that mature in one year or less, pending investments in portfolio companies made according to our principal investment strategy.

In addition, we are exposed to interest rate risk with respect to our variable-rate indebtedness, generally an increase in interest rates would directly result in higher interest expense.

manage our exposure to interest rate risk by utilizing a mix of fixed and floating rate financing, and through interest rate hedging agreements to fix or cap our variable rate debt.

As of September 30, 2023, the outstanding principal balance of our

variable rate indebtedness was $17.5 million, which is the mortgage debt on Hollywood Property.

The debt is indexed to Secured Overnight Financing Rate (“SOFR”).

In order to mitigate the raising interest rate risk, we have executed an interest rate

For the year ended September 30, 2023, a 10% increase in SOFR would have resulted in no change in interest expense, net of the impact of our interest rate cap.

CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules

13a-15(e) or 15d-15(e) of the 1934 Act) as of the end of the period covered by this report as required by paragraph (b) of Rule 13a-15 or 15d-15 of the 1934 Act.

Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer

concluded that our disclosure controls and procedures were effective as of such date and provided reasonable assurance that information required to be disclosed by us in the reports we file or submit under the 1934 Act is recorded, processed,

summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to

allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting (identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the 1934 Act) during

the fiscal quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

LEGAL PROCEEDINGS

There have been no material changes to our risk factors discussed in “Risk Factors” in our annual report on Form 10-K for the fiscal year ended June 30, 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