What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-02-13 compared with 2023-11-13 · 297 added, 232 removed, 338 unchanged (61% 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.

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,”

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

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

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

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

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

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

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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 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.

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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;

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

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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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.

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

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

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

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

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

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 a building’s tenants.

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

classified as operating leases.

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.

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Further, we may generate revenue in the form of commitment, origination, structuring or diligence fees, monitoring fees, fees for providing managerial assistance and possibly consulting fees and performance-based fees.

such fees are generated in connection with our investments and recognized as earned.

Any such fees are generated in connection with our investments and recognized as earned.

Our primary operating expenses include the payment of:

(i) advisory fees to our Advisers;

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

under the Administration Agreement;

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

obligations under the Administration Agreement;

and (iii) other operating expenses as detailed below.

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

monitoring and servicing our investments.

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

closing, monitoring and servicing our investments.

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

We will bear all other

expenses of our operations and transactions, including:

all other expenses of our operations and transactions, including:

the cost of operating and maintaining real estate properties;

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

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

advisory fees;

transfer agent and safekeeping fees;

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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

by MacKenzie in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related

expenses of our chief compliance officer and our chief financial officer and any administrative support staff.

incurred by MacKenzie in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and

related expenses of our chief compliance officer and our chief financial officer and any administrative support staff.

Portfolio Investment Composition

As of 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.

As of December 31, 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

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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:

“Unconsolidated investments (non-securities), at fair value”.

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

Investments, at fair value

September 30, 2023

December 31, 2023

June 30, 2023

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Summit Healthcare REIT, Inc.

Unconsolidated investments (non-security), at fair value

September 30, 2023

Unconsolidated investments (non-securities), at fair value

December 31, 2023

June 30, 2023

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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.

1300 Main, First & Main, Main Street West, Woodland Corporate Center 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.

The Park View is owned through our subsidiary PVT;

and the Shoreline Apartments are owned through our subsidiary BAA-Shoreline.

Property Owners

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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 September 30, 2023, the property

is 100% occupied by 8 tenants.

As of December 31, 2023, the

property is 88% occupied by 7 tenants.

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

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Wine Wholesaler

Hal Yamashita

Shackford’s Kitchen

The following information pertains to lease expirations at 1300 Main Office Building:

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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

As of December 31, 2023, the

property is 98% occupied by 8 tenants.

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Main Street West Office Building contains 38,136 square feet, of which approximately 32,700 square feet is office space and the remainder is designated as retail space.

As of September 30, 2023, the

As of December 31, 2023, the

property is 84% occupied by 7 tenants.

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Satellite Place Office Building contains 134,785 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:

As of December 31, 2023, the property is approximately 64% occupied by 3 tenants.

The following table

shows the largest tenants and square footage occupied:

Largest Tenants

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All of the laboratories space is occupied by Agtech

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

As of December 31, 2023, the property is 97% occupied by 14 tenants.

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

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Research and Development

Physical Therapy

Johnston, Martin & Montgomery

Children’s Home Society

Non-Profit Education

Johnston, Martin & Montgomery

Physical Therapy

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

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

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

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

As of December 31, 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

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

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

apartment units are 81.5% occupied as of December 31, 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%

As of December 31, 2023, Shoreline Apartments building is approximately

90.5% occupied.

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

Property Name

Percentage Leased

Annual Base Rent

Monthly Base Rent/Occupied Unit

Rent/Occupied

The Park View

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Property Name

Percentage Leased

Annual Base Rent

Monthly Base Rent/Occupied Unit

Rent/Occupied

Hollywood Property

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

We are currently in the process of renovating the building and

Currently we are in the process of renovating the building and

marketing it for lease.

As of December 31, 2023, we have one tenant on a month-to-month basis occupying 5,015 sq.

feet of space.

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.

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

The entitlement process for the vacant land is commencing now but the financial resources to realize our goal of commencing construction in late 2025 has not been secured and will be dependent upon the City’s response to our

development application to be submitted in April 2024.

The development of Aurora Land is discussed below.

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

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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.

The city’s planning commission approved our development project last September and

the building department is currently reviewing our building permit submittals.

In order to fund construction of the project, we are closing a $17.15 million construction loan in February 2024 and will be raising $10 million in preferred capital.

We plan to commence construction in early March 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.

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.

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.

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.

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.

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.

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

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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.

The Federal Reserve increased the federal funds

rate multiple times in 2022 and 2023.

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

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

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

The rise in overall interest rates has caused an increase in our variable rate borrowing costs resulting in an increase in interest

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.

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.

It could also impact our ability to find suitable acquisitions, sell properties, and raise equity and debt capital.

Results of Operations

Three Months Ended September 30, 2023 and 2022

Three Months Ended December 31, 2023 and 2022

Rental and reimbursements revenues:

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

During the three months ended 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.

During the three months ended December 31, 2023, we generated $3.58 million in rental and

reimbursements revenues, of which $2.10 million was generated from our six commercial properties (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Main Street West Office Building, Woodland Corporate

Center Office Building and 220 Campus Lane Office Building), and $1.48 million was generated from our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments and Shoreline Apartments).

During the three months ended

December 31, 2022, we generated $3.67 million in rental and reimbursements revenues, of which $2.20 million was generated from our four commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office

Building and 1300 Main Office Building) and $1.47 million from our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

The total decrease of $0.09 million in rental revenues during

the three months ended December 31, 2023 was mainly due to the sale of Addison Corporate Center building in June 2023.

Investment income:

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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.

months ended December 31, 2023 and 2022 was $0.26 million and $0.31 million, respectively.

During the three months ended December 31, 2023 we received $0.10 million of distributions from operations, sales, and liquidations as compared to $0.24

million during the three months ended December 31, 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.

During the three months ended December 31, 2023, we received dividends, interest, and other investment

income of $0.16 million as compared to $0.07 million received during the three months ended December 31, 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.

December 31, 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 September 30, 2023 and 2022 were $0.79 million and $0.72 million, respectively.

The asset management fees for the three months ended December 31, 2023 and 2022 were $0.79 million and $0.74 million, respectively.

The slight increase was due to total increase of $12.27 in total

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

invested capital from $152.47 million as of December 30, 2022 to $164.74 million as of December 31, 2023.

Incentive management fee:

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effective date of the Agreement.

We did not incur any incentive management fee for the three months ended September 30, 2023 and 2022.

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

Costs reimbursed to MacKenzie for the three months ended December 31, 2023 were $0.19 million as compared to $0.18 million for the three months ended December 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 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.

to an increase in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to December 31, 2022, as a result of the increase in number of properties since December 2022.

Transfer agent cost reimbursements paid to MacKenzie for the three months ended December 31, 2023 and 2022 were $0.02 million and $0.02 million, respectively.

Property operating and maintenance expenses:

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

During the three months ended 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.

During the three months ended December 31, 2023, we incurred operating and maintenance expenses of $1.51 million, of which $0.85 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 $0.66 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 December 31, 2022, we

incurred operating and maintenance expenses of $2.29 million, of which $1.67 million were incurred in the operation of our four commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building and

1300 Main Office Building) and $0.62 million from our four residential properties (Commodore Apartments, 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 (Main Street West, Woodland Corporate Center and 220 Campus Lane Office Building) since December 31, 2022.

Depreciation and amortization:

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.

During the three months ended December 31, 2023, we recorded depreciation and amortization of $1.56 million, of which $1.02 million was attributable to the depreciation and amortization of real

Campus Lane Office Building) and $0.54 million was attributable to our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

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

depreciation and amortization of $1.16 million, of which $0.57 million was attributable to the depreciation and amortization of real estate and intangible assets of our four commercial properties (Addison Corporate Center, Satellite Place Office

Building, First & Main Office Building and 1300 Main Office Building) and $0.59 million 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 $0.40 million during the three months ended December 31, 2023 was due to the acquisitions of three new office buildings (Main Street West, Woodland Corporate Center and 220 Campus Lane Office Building) since

December 31, 2022.

Interest expense:

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

Interest expense for the three months ended December 31, 2023 was $1.45 million, of which $0.63 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 $0.82 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.

Interest expense for the three months ended December 31, 2022 was $1.68 million, of which $1.01

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

on the mortgage notes payable associated with our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

The total decrease of $0.23 million in interest expense during the three months

ended December 31, 2023, was primarily due to the settlement of the Addison Property Owner debt after the sale of Addison Corporate Center in June 2023.

Other operating expenses:

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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.

December 31, 2023 and 2022, were $0.42 million and $0.38 million, respectively.

The increase in other operating expenses was mainly due to the acquisition of three commercial properties (Main Street West, Woodland Corporate Center and 220 Campus

Lande Office Building) since December 31, 2022 resulting in higher amount of general and administrative operating expenses during the three months ended December 31, 2023.

Net realized gain (loss) on sale of investments:

During the three months ended December 31, 2023, we recorded a net realized loss on investments of $1.29 million, as compared to a net realized gain on investments of $0.31 million during the three

months ended December 31, 2022.

The total net realized loss for the three months ended December 31, 2023, was realized from a limited partnership interest write off (BP 3 affiliates) with a realized loss of $1.67 million offset by a realized gain

from sale of one non-traded REIT securities with total realized gain of $0.38 million.

The total realized gains for the three months ended December 31, 2022, were realized from sale of four non-traded REIT securities with total realized gain of

$0.26 million, and an investment trust with realized gains of $0.05 million.

Net unrealized gain (loss) on investments:

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.

During the three months ended December 31, 2023, we recorded a net unrealized gain of $1.83 million, which was net of $2.31 million of unrealized losses 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 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.

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

months ended December 31, 2023 were $0.48 million, which resulted from fair value depreciations of $0.02 million from limited partnership interests, $0.08 million from general partnership interests and $0.38 million from non-traded REIT

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

unrealized gains reclassification adjustment.

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

Accordingly ,

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

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

Income tax provision (benefit):

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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

Similarly, for the tax year 2023, The Parent Company paid the requisite amounts of dividends during the year and met other REIT requirements such that the Parent Company will

not owe any income taxes.

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

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

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

MacKenzie NY 2 is subject to corporate federal and state income tax on its taxable income at regular statutory rates.

As of December 31, 2023, it did not have any taxable income for tax year 2023.

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

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

Therefore, it does not file a separate tax return.

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provisions are recorded for these entities.

Six Months Ended December 31, 2023 and 2022

Rental and reimbursements revenues:

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

During the six months ended December 31, 2023, we generated $7.14 million in rental and

reimbursements revenues, of which $4.17 million was generated from our six commercial properties (Satellite Place Office Building, First & Main Office Building, 1300 Main Office Building, Main Street West Office Building, Woodland Corporate

Center Office Building and 220 Campus Lane Office Building), and $2.97 million from our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments and Shoreline Apartments).

During the six months ended December 31,

2022, we generated $6.74 million in rental and reimbursements revenues, of which $3.90 million was generated from our four commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300

Main Office Building), and $2.84 million from our four residential apartments (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

The total increase of $0.40 million in rental revenues during the six months

ended December 31, 2023 was mainly due to the acquisition of three commercial properties since December 2022 partly offset by the disposal of Addison Corporate Center in June 2023.

Investment income:

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

Total investment income

for the six months ended December 31, 2023 and 2022 was $0.58 million and $0.76 million, respectively.

During the six months ended December 31, 2023, we received $0.20 million of distributions from operations, sales, and liquidations as

compared to $0.56 million during the six months ended December 31, 2022.

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

During the six months ended December 31, 2023, we received dividends, interest, and other

investment income of $0.38 million as compared to $0.20 million received during the six months ended December 31, 2022.

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

six months ended December 31, 2023.

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

Asset management fee:

The asset management fees for the six months ended December 31, 2023 and 2022 were $1.58 million and $1.46 million, respectively.

The slight increase was due to total increase of $12.27 in total

invested capital from $152.47 million as of December 30, 2022 to $164.74 million as of December 31, 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 six months ended December 31, 2023 and 2022.

Administrative cost reimbursements and Transfer agent reimbursements:

Costs reimbursed to MacKenzie for the six months ended December 31, 2023, were $0.38 million as compared to $0.36 million for the six months ended December 31, 2022.

The slight increase was due to

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

Transfer agent cost reimbursements paid to MacKenzie for the six months ended December 31, 2023 and 2022 were $0.03 million and $0.05 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 six months ended December 31, 2023, we incurred operating and maintenance expenses of $2.90 million, of which $1.55 million mainly

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 $1.35 million from our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

During the six months ended December 31, 2022, we incurred operating and

maintenance expenses of $4.12 million, of which $2.88 million mainly were incurred in the operation of our four commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300 Main

Office Building) and $1.24 million from our four residential properties (Commodore Apartments, 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 (Main Street West, Woodland Corporate Center and 220 Campus Lane Office Building) since December 31, 2022.

Depreciation and amortization:

During the six months ended December 31, 2023, we recorded depreciation and amortization of $3.12 million, of which $2.03 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 $1.09 million was attributable to our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

During the six months ended December 31, 2022, we recorded depreciation

and amortization of $2.08 million, of which $0.93 million was attributable to the depreciation and amortization of real estate and intangible assets of our four commercial properties (Addison Corporate Center, Satellite Place Office Building,

First & Main Office Building and 1300 Main Office Building) and $1.15 million 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 $0.40 million during the six months ended December 31, 2023 was due to the acquisitions of three new office buildings (Main Street West, Woodland Corporate Center and 220 Campus Lane) since December 31, 2022.

Interest expense:

Interest expense for the six months ended December 31, 2023 was $2.77 million, of which $1.27 million was incurred on the 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 $1.50 million was incurred on the mortgage notes payable associated our five

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

Interest expense for the six months ended December 31, 2022 was $3.26 million, of which $1.67 million was

incurred on the notes payable associated with our four commercial properties (Addison Corporate Center, Satellite Place Office Building, First & Main Office Building and 1300 Main Office Building) and $1.59 million was incurred on the

mortgage notes payable associated our four residential properties (Commodore Apartments, The Park View, Hollywood Apartments, and Shoreline Apartments).

The total decrease of $0.49 million in interest expense during the six months ended December

31, 2023, was primarily due to the settlement of the Addison Property Owner debt after the sale of Addison Corporate Center in June 2023.

Other operating expenses:

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

Other operating expenses for the six months ended

December 31, 2023 and 2022, were $0.97 million and $0.71 million, respectively.

The increase in other operating expenses was mainly due to the acquisition of three commercial properties (Main Street West, Woodland Corporate Center and 220 Campus

Lane Office Building) since December 31, 2022 resulting in higher amount of general and administrative operating expenses during the six months ended December 31, 2023.

Net realized gain (loss) on sale of investments:

During the six months ended December 31, 2023, we recorded a net realized loss on investments of $1.29 million as compared to $0.83 million during the six months ended December 31, 2022.

realized loss for the six months ended December 31, 2023, was realized from a limited partnership interest write-off (BP 3 affiliates) with a realized loss of $1.67 million offset by a realized gain from sale of one non-traded REIT securities

with a realized gain of $0.38 million.

The total net realized gain for the six months ended December 31, 2022, was realized from sales of publicly traded REIT securities with realized gains of $0.01 million, six non-traded REIT securities with a

total realized gain of $0.44 million, a limited partnership interest with realized gains of $0.33 million and investment trust of $0.05.

Net unrealized gain (loss) on investments:

During the six months ended December 31, 2023, we recorded a net unrealized loss of $0.44 million, which was net of a $2.31 million of unrealized loss reclassification adjustment.

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

Accordingly, the net unrealized loss excluding the reclassification adjustment for the six

months ended December 31, 2023 was $2.75 million, which resulted from fair value depreciations of $0.51 million from general partnership interests, $1.11 million from non-traded REIT securities and $1.13 million from limited partnership

During the six months ended December 31, 2022, we recorded a net unrealized gain of $2.01 million, which was net of a $ 0.68 million of

unrealized gains reclassification adjustment.

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

Accordingly ,

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

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

Income tax provision (benefit):

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

Liquidity and Capital Resources

Capital Resources:

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

and third public offerings.

We 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.

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

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

In addition, we have raised $15.10 million from the issuance of common shares under the

DRIP as of December 31, 2023.

Out of the total proceeds from DRIP, we have utilized a total of $14.28 million to repurchase common stocks under the Share Repurchase Program.

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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.

amendment to the Offering Circular was declared effective on November 14, 2023.

We had raised $18.08 million through the sale of our Series A preferred stock and $0.10 million Series B preferred stock pursuant to the Offering Circular as of

December 31, 2023.

In addition, we have raised $0.16 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 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.

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.

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

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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.

We finished the three months ended December 31, 2023, with cash and cash equivalents, restricted cash, and receivables of approximately $14.14 million and $3.78 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.

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

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.

Six months ended December 31, 2023:

For the six months ended December 31, 2023, we experienced a net decrease in cash of $5.10 million.

During this period , we used cash of $2.57

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

million in our investing activities, $1.94 million in our financing activities and $0.59 million in our operating activities.

The net cash outflow of $0.59 million from operating activities resulted from $7.15 million of rental revenues and $0.58 million of investment income offset by cash outflows of $8.32 million used in

operating expenses.

The net cash outflow of $2.57 million from investing activities resulted from real estate acquisitions through our subsidiaries of $5.65 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.

$0.55 million purchases of equity investments and $0.79 million payment of contingent liability, offset by cash inflows of $4.02 from sale of investments and $0.40 million from distributions received from our investments that are considered

return of capital .

The net cash outflow of $1.94 million from financing activities resulted from:

payment of dividends to common stockholders of $2.34 million, payment of dividends to Series A preferred stockholders

of $0.42 million, payments on finance lease liabilities of $0.03 million, distributions to non-controlling interests holders of $0.34 million, acquisition of below market debt of $0.34 million, payment on notes payables of $0.36 million, payment

of mortgage payables of $0.60 million, payments of selling commissions and fees of $0.49 million, payment of loan extension fee of $0.88 million, redemption of common stocks of $0.92 million and redemption of Series A preferred stock of $0.01

The cash outflows were partly offset by cash inflows of:

$3.29 million proceeds from mortgage notes payable, $1.26 million proceeds from the issuance of Series A preferred stock, $0.10 million proceeds from the issuance of Series B

preferred stock and $0.14 million of capital contributions from non-controlling interests holders.

Six months ended December 31, 2022:

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

During this period , we generated cash of $7.90

$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,

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

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

operating expenses.

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

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

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

cost amounting to $0.54 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.

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

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

pending acceptance.

Material Cash Obligations

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which we have majority ownership.

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

The below table presents the total loans outstanding at the underlying companies as of December 31, 2023 and the fiscal years those loans mature:

Fiscal Year Ending June 30, :

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

In no event are we

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

In no event are

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

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

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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.

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 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.

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

Preferred Stock

During the three months ended December 31, 2023, the Board approved the following quarterly dividends:

Series A Preferred Stock

Series B Preferred Stock

During the Quarter Ended

September 30, 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.

December 31, 2023

Of the total dividend accrued for Series B as of December 31, 2023, $1,667 was an increase in liquidation preference and $555 was the cash dividend.

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