MacKenzie Realty Capital, Inc. 10-Q

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Statements by MacKenzie Realty Capital, Inc., together with its subsidiaries as discussed in Note 1 of the financial statements included in this report (collectively, the “Company,” “we,” or “us”) contained herein, other than historical facts, may constitute “forward-looking statements.” These statements may relate to, among other things, future events or our future performance or financial condition. In some cases, stockholders can identify forward-looking statements by terminology such as “may,” “might,” “believe,” “will,” “provided,” “anticipate,” “future,” “could,” “growth,” “plan,” “intend,” “expect,” “should,” “would,” “if,” “seek,” “possible,” “potential,” “likely” or the negative of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any anticipated results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. An economic downturn could impair our ability to continue to operate, which could lead to the loss of some or all of our investments, a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities, and interest rate volatility could adversely affect our results, particularly if we elect to use leverage as a part of our investment strategy. For a discussion of factors that could cause our actual results to differ from forward-looking statements contained herein, please see the discussion under the heading “Risk Factors” in our Annual Report on Form 10-K. 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. Overview Historically, we were an externally managed non-diversified closed-end management investment company that elected to be treated as a BDC under the 1940 Act, but we withdrew our election to be treated as a BDC on December 31, 2020. Our objective remains to generate both current income and capital appreciation through real estate-related investments. We have elected to be treated as a REIT under the Code and as a REIT, we are not subject to federal income taxes on amounts that we distribute to the stockholders, provided that, on an annual basis, we 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. Our wholly owned subsidiary, MacKenzie NY Real Estate 2 Corp. (“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 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; 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. 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. Our independent directors review our investment policies periodically, at least annually, to confirm that our policies are in the best interests of our stockholders. Each such determination and the basis thereof are contained in the minutes of our Board of Directors meetings. 30 Table of Contents 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. Like our other investments, we would expect to hold distressed properties and infuse funds as necessary to extract unrealized value. 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 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 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. 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. 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 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. 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. Any such fees are generated in connection with our investments and recognized as earned. Expenses Our primary operating expenses include the payment of: (i) advisory fees to our Advisers; (ii) our allocable portion of overhead and other expenses incurred by MacKenzie in performing its obligations under the Administration Agreement; and (iii) other operating expenses as detailed below. Our investment advisory fees compensate our Investment Adviser and Real Estate Adviser for their work in identifying, evaluating, negotiating, closing, monitoring and servicing our investments. Our expenses must be billed to and paid by us, except that MacKenzie may be reimbursed for actual cost of goods and services used by us and certain necessary administrative expenses. We will bear all other expenses of our operations and transactions, including: • the cost of operating and maintaining real estate properties; • the cost of calculating our net asset value, including the cost of any third-party valuation services; • the cost of effecting sales and repurchases of our shares and other securities; • 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; • fees and expenses associated with marketing efforts; • federal and state registration fees, any stock exchange listing fees in the future; • federal, state and local taxes; • independent directors’ fees and expenses; • brokerage commissions; • fidelity bond, directors and officers errors and omissions liability insurance, and other insurance premiums; • direct costs and expenses of administration and sub-administration, including printing, mailing, long distance telephone and staff; • fees and expenses associated with independent audits and outside legal costs; • costs associated with our reporting and compliance obligations under the 1934 Act and applicable federal and state securities laws; and 31 Table of Contents • 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. Portfolio Investment Composition 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 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 December 31, 2023, and June 30, 2023: Fair Value Investments, at fair value December 31, 2023 June 30, 2023 5210 Fountaingate, LP 6,820 6,820 Blackstone Real Estate Income Trust, Inc. - Class S 15,801 - Capitol Hill Partners, LLC - 1,107,795 Citrus Park Hotel Holdings, LLC 4,100,000 4,100,000 Healthcare Trust, Inc. 1,211,815 1,554,693 Highlands REIT, Inc. 53,804 2,794,926 Lakemont Partners, LLC 805,210 829,381 Moody National REIT II, Inc. 20,760 13,853 SmartStop Self Storage REIT, Inc. - Class A 1,726,247 1,878,092 Starwood Real Estate Income Trust, Inc. - Class S 24,289 - Strategic Realty Trust, Inc. 183,331 216,068 Summit Healthcare REIT, Inc. 598,983 930,852 Total $ 8,747,060 $ 13,432,480 Fair Value Unconsolidated investments (non-securities), at fair value December 31, 2023 June 30, 2023 Green Valley Medical Center, LP 1,874,072 2,363,000 Martin Plaza Associates, LP 562,546 493,000 One Harbor Center, LP 3,894,552 4,076,500 Westside Professional Center I, LP 1,466,133 1,784,000 Total $ 7,797,303 $ 8,716,500 32 Table of Contents Properties In addition to our investment securities, we currently own and manage six commercial real estate properties: Satellite Place located in Duluth, GA, 1300 Main, First & Main and Main Street West located in Napa, CA, Woodland Corporate Center Two located in Woodland, CA, 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 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 is owned through our subsidiary PVT; and the Shoreline Apartments are owned through our subsidiary BAA-Shoreline. Property: Property Owners Commodore Apartments Madison-PVT Partners LLC The Park View (fka as Pon De Leo Apartments) PVT-Madison Partners LLC Hollywood Apartments PT Hillview GP, LLC Shoreline Apartments MacKenzie BAA IG Shoreline LLC Satellite Place Office Building MacKenzie Satellite Place Corp. First & Main Office Building First & Main, LP 1300 Main Office Building 1300 Main, LP Woodland Corporate Center Office Building Woodland Corporate Center Two, LP Main Street West Office Building Main Street West, LP 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 December 31, 2023, the property is 88% occupied by 7 tenants. The following table shows the largest tenants and square footage occupied: Largest Tenants Business Business Square Ft. Occupied Annual Base Rent Lease Expiration Renewal options Wilson Daniels Wine Wholesaler 6,712 $ 426,922 3/15/25 1, 5 years Norcal Gold Real Estate 2,896 $ 174,734 3/31/26 No Bao Ling Li Restaurant 3,212 $ 152,960 11/30/30 No Whole Health Medical 2,186 $ 135,267 7/31/25 No The following information pertains to lease expirations at 1300 Main Office Building: Year Number of Leases Expiring Total Area Annual Base Rent Percentage of Gross Rent 2024 1 1,088 $ 74,232 7 % 2025 2 8,898 $ 562,189 53 % 2026 1 2,896 $ 174,735 16 % Thereafter 3 4,854 $ $253,464 24 % 33 Table of Contents 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 December 31, 2023, the property is 98% occupied by 8 tenants. The following table shows the largest tenants and square footage occupied: Largest Tenants Business Business Square Ft. Occupied Annual Base Rent Lease Expiration Renewal options GVM Law Legal Services 9,470 $ 495,059 9/20/26 2, 5 years Brotlemarkle Accounting Services 4,366 $ 239,368 7/31/30 2, 5 years Napa Palisades Restaurant 3,462 $ 188,691 8/31/40 No Moss Adams Accounting Services 3,428 $ 164,544 6/30/25 No The following information pertains to lease expirations at First & Main Office Building: Year Number of Leases Expiring Total Area Annual Base Rent Percentage of Gross Rent 2024 1 1,135 $ 71,280 5 % 2025 2 5,648 $ 308,601 21 % 2026 1 9,470 $ 495,059 34 % Thereafter 4 10,550 $ 575,060 40 % 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 December 31, 2023, the property is 84% occupied by 7 tenants. The following table shows the largest tenants and square footage occupied: Largest Tenants Business Business Square Ft. Occupied Annual Base Rent Lease Expiration Renewal options AUL Corporation Insurance 13,806 $ 810,319 2/3/26 No State of California Medical 4,697 $ 259,721 4/30/28 No Strategies To Empower Medical 4,875 $ 216,700 12/31/27 No Azzurro Pizzeria Restaurant 2,935 $ 202,380 7/31/24 No The following information pertains to lease expirations at Main Street West Office Building: Year Number of Leases Expiring Total Area Annual Base Rent Percentage of Gross Rent 2024 3 6,613 $ 371,792 21 % 2026 1 13,806 $ 810,319 45 % 2027 2 7,010 $ 336,494 19 % Thereafter 1 4,697 $ 259,721 15 % Satellite Place Office Building contains 134,785 square feet, all of which is office space. 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 Business Business Square Ft. Occupied Annual Base Rent Lease Expiration Renewal options OS National, LLC Title Services 71,085 $ 1,373,362 12/31/29 2, 5 years Polytron Title Services 10,737 $ 207,898 4/16/31 2, 5 years Sun Taiyang Consumer Products 4,383 $ 93,654 11/30/29 No 34 Table of Contents The following information pertains to lease expirations at Satellite Place Office Building: Year Number of Leases Expiring Total Area Annual Base Rent Percentage of Gross Rent 2029 2 75,468 $ 1,467,016 88 % 2031 1 10,737 $ 207,898 12 % Woodland Corporate Center Office Building contains 37,034 square feet, of which 7,797 square feet are laboratories and the rest is office space. All of the laboratories space is occupied by Agtech Innovation. As of December 31, 2023, the property is 97% occupied by 14 tenants. The following table shows the largest tenants and square footage occupied: Largest Tenants Business Business Square Ft. Occupied Annual Base Rent Lease Expiration Renewal options Agtech Innovation Research and Development 12,940 $ 421,680 8/31/32 No Children’s Home Society Non-Profit Education 4,042 $ 146,160 6/30/28 No Johnston, Martin & Montgomery Accounting 3,388 $ 133,668 11/2/24 2, 5 years Burger Rehab Physical Therapy 4,013 $ 118,367 9/22/28 No The following information pertains to lease expirations at Woodland Corporate Center Office Building: Year Number of Leases Expiring Total Area Annual Base Rent Percentage of Gross Rent 2024 5 7,303 $ 272,328 23 % 2025 3 4,106 $ 131,135 11 % 2027 2 1,456 $ 51,729 4 % 2028 3 10,161 $ 331,851 27 % Thereafter 1 12,940 $ 421,680 35 % Commodore Apartments is a mid-rise apartment building built in 1912 and has 48 units. 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 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 building built in 1917 and has 53 units. The property contains approximately 37,000 square feet of net rentable apartment area and 8,560 square feet of retail space. All of the retail space is currently occupied by restaurants and nightclubs. The apartment units are 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 December 31, 2023, Shoreline Apartments building is approximately 90.5% occupied. 35 Table of Contents The following table provides information regarding each of the residential properties: Property Name Sector Location Square Feet Units Percentage Leased Annual Base Rent Monthly Base Rent/Occupied Unit The Park View Multi-Family Residential Oakland, CA 36,654 39 92.3 % $ 1,006,753 $ 2,330 Commodore Multi-Family Residential Oakland, CA 31,156 48 97.9 % $ 894,481 $ 1,586 Hollywood Property Multi-Family Residential Los Angeles, CA 36,991 53 81.5 % $ 1,180,415 $ 2,236 Shoreline Apartments Multi-Family Residential Concord, CA 67,925 84 90.5 % $ 1,925,571 $ 2,111 Property Name Sector Location Square Feet Units Percentage Leased Annual Base Rent Monthly Base Rent/Occupied Unit Hollywood Property Retail Los Angeles, CA 8,610 1 100 % $ 323,647 $ 26,971 Our 220 Campus Lane Office building was purchased in September 2023. The office building was vacant at the time of our purchase. Currently we are in the process of renovating the building and marketing it for lease. As of 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 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: Campus Lane Residential, LLC, and MRC Aurora, LLC. Aurora Land Development We plan to build a multi-family residential community on this land which will include 72 units and a club house. The city’s planning commission approved our development project last September and the building department is currently reviewing our building permit submittals. In order to fund 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. 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. 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. 36 Table of Contents 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. Recently, the broader economy began experiencing increased levels of inflation, higher interest rates and tightening monetary and fiscal policies. The Federal Reserve increased the federal funds rate multiple times in 2022 and 2023. . We currently have fixed and variable interest rates for our loans. The rise in overall interest rates has caused an increase in our variable rate borrowing costs resulting in an increase in interest expense. The higher interest rates imposed by the Federal Reserve to address inflation may also adversely impact real estate asset values. In addition, a prolonged period of high and persistent inflation could cause an increase in our expenses. The current market and economic conditions could have a material impact on our business, cash flow and results of operations. It could also impact our ability to find suitable acquisitions, sell properties, and raise equity and debt capital. Results of Operations 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 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: Investment income was made up of dividends, distributions from operations, distributions from sales/capital transactions, interest, and other investment income. Total investment income for the three months ended December 31, 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 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 December 31, 2023. Expenses: 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 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 $152.47 million as of December 30, 2022 to $164.74 million as of December 31, 2023. 37 Table of Contents Incentive management fee: Under the Advisory Management Agreement, we pay an incentive management fee that is equal to 15% of all distributions once shareholders have received cumulative distributions equal to 6% from the effective date of the Agreement. We did not incur any incentive management fee for the three months ended December 31, 2023 and 2022. Administrative cost and transfer agent reimbursements: 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 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: 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 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 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 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 $0.54 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 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 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. 38 Table of Contents Other operating expenses: 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 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 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. The reclassification adjustments are the accumulated unrealized gains or losses as of the end of prior period that are realized during the current period. Accordingly, the net unrealized losses excluding the reclassification adjustment for the three months ended 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 securities. 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): 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 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 2022. Similarly, for the tax year 2023, The Parent Company paid the requisite amounts of dividends during the year and met other REIT requirements such that the Parent Company will not owe any income taxes. Therefore, the Parent Company did not record any income tax provisions during any fiscal periods within the tax year 2023. 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. 39 Table of Contents The Operating Partnership is a limited partnership. Hollywood Hillview, MacKenzie Shoreline, Madison, PVT, 220 Campus Lane, and Campus Lane Residential are limited liability companies. First & Main, 1300 Main, Woodland Corporate Center Two, and Main Street West are limited partnerships. Accordingly, all income tax liabilities of these entities flow through to their partners, which ultimately is the Company. Therefore, no income tax provisions are recorded for these entities. 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. Expenses: 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. 40 Table of Contents 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. 41 Table of Contents 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. Total net 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. 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 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 interests. 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 have raised total gross proceeds of $119.10 million from the issuance of common stock under the three public offerings: $42.46 million from our first public offering, which concluded in October 2016, $67.99 million from the second public offering, which concluded in October 2019, and $8.65 million from our third public offering, which concluded in October 2020. In addition, we have raised $15.10 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. In November 2021, the SEC qualified our Offering Circular pursuant to Regulation A to sell up to $50,000,000 of shares of our Series A preferred stock at an initial offering price of $25.00 per share. On October 14, 2022, we amended our Offering Circular and increased the offering to sell up to $75 million of shares of our Series A preferred stock. On November 1, 2023, we further amended our Offering Circular to sell an aggregate of up to $3 million of shares of either our Series A preferred stock or our Series B preferred stock. This post-effective amendment to the Offering Circular was declared effective on November 14, 2023. We had raised $18.08 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 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. 42 Table of Contents 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. 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 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. 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. Cash Flows: 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, $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, $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 million. 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 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 distributions received from our investments that are considered return of capital. The net cash inflow of $7.90 million from financing activities resulted from payment of dividends of $2.03 million, $0.73 million redemption of common stocks, payments of syndication cost amounting to $0.81 million, capital distributions to non-controlling interests holders amounting to $ 0.17 million, $0.01 million payment of notes payables, and $0.20 million payment of mortgage payables offset by $9.40 million proceeds from the issuance of 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. 43 Table of Contents Material Cash Obligations We have entered into two contracts under which we have material future commitments: (i) the Advisory Management Agreement, under which the Real Estate Adviser serves as our adviser, and (ii) the Administration Agreement, under which MacKenzie furnishes us with certain non-investment management services and administrative services necessary to conduct our day-to-day operations. Each of these agreements is terminable by either party upon proper notice. Payments under the Advisory Management Agreement in future periods will be (i) a percentage of the value of our Invested Capital; (ii) Acquisition Fees, and (iii) incentive fees based on our performance above specified hurdles. Payments under the Administration Agreement will occur on an ongoing basis as expenses are incurred on our behalf by MacKenzie. However, if MacKenzie withdraws as our administrator, it will be liable for any expenses we incur as a result of such withdrawal. For additional information concerning the terms of these agreements and related fees paid, see Note 8 – Related Party Transactions in the consolidated financial statements included in this report. Borrowings We do not have any current plans to borrow money at the Parent Company level. In the event that we do so borrow, we would expect to be subject to various customary covenants and restrictions on our operations, such as covenants which would (i) require us to maintain certain financial ratios, including asset coverage, debt to equity and interest coverage, and a minimum net worth, and/or (ii) restrict our ability to incur liens, additional debt, merge or sell assets, make certain investments and/or distributions or engage in transactions with affiliates. While we do not have any plans to borrow money at the Parent Company level, we borrow money within the underlying companies in which we have majority ownership. 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, : Debt Maturing 2024 (remainder) $ 637,162 2025 39,737,498 2026 11,124,219 Thereafter 44,621,164 Total $ 96,120,043 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; 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. 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 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. 44 Table of Contents 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 December 31, 2023, the Board approved the following quarterly dividends: Dividends Common Stock Series A Preferred Stock Series B Preferred Stock During the Quarter Ended Per Share Amount Per Share Amount Per Share Amount September 30, 2023 $ 0.125 $ 1,652,688 $ 0.375 $ 268,383 $ - $ - December 31, 2023 0.125 1,652,367 0.375 276,600 0.500 2,222 $ 0.250 $ 3,305,055 $ 0.750 $ 544,983 $ 0.500 $ 2,222 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. 45 Table of Contents