What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-02-14 compared with 2024-11-14 · 456 added, 303 removed, 322 unchanged (70% of the section changed)

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.

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, as updated by the Company’s subsequent filings with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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.

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

as a BDC on December 31, 2020.

Historically, we were an externally managed non-diversified closed-end management investment company that elected to be treated as a BDC under the Investment Company Act of 1940 (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.

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 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

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.

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

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

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

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

investment securities of real estate companies.

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

securities of real estate companies.

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

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

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.

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.

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.

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.

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.

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.

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 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, Reimbursement and Other Property Income

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

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and (iii) other real estate properties operating expenses, including interest expenses on debt obtained to finance our property acquisitions, 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.

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:

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

costs associated with our reporting and compliance obligations under the 1934 Act 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.

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

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, 2024, we owned various real estate limited partnerships and REITs that are listed in the “Investments, at fair value” in the table below.

We also owned various investments in

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

these are listed below as

“Unconsolidated investments (non-securities), at fair value.” The following table summarizes the composition of our investments at fair value as of September 30, 2024, and June 30, 2024:

As of December 31, 2024, 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 “Equity method

investments, at fair value”.

September 30, 2024

The following table summarizes the composition of our investments at fair value as of December 31, 2024, and June 30, 2024:

Investments, at fair value

December 31, 2024

June 30, 2024

5210 Fountaingate, LP

Blackstone Real Estate Income Trust, Inc.

Highlands REIT, Inc.

Lakemont Partners, LLC

Moody National REIT II, Inc.

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Starwood Real Estate Income Trust, Inc.

Unconsolidated investments (non-security), at fair value

September 30, 2024

Equity method investments, at fair value

December 31, 2024

June 30, 2024

5210 Fountaingate, LP

Lakemont Partners, LLC

Green Valley Medical Center, LP

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Satellite Place Office Building located in Duluth, GA, 1300 Main Office Building, First &

& Main Office Building and Main Street West Office Building located in Napa, CA, Woodland Corporate Center located in Woodland, CA, 220 Campus Lane Office Building, Green Valley Medical Center and Green Valley Executive Center located in

Fairfield, CA and One Harbor Center located in Suisun, CA and four residential apartments:

Commodore Apartments and The Park (f/k/a as Pon De Leo Apartments), located in Oakland, CA, Hollywood Apartments located in Los Angeles, CA, and the

Shoreline Apartments in Concord, CA.

1300 Main Office Building, First & Main Office Building, Main Street West Office Building, Woodland Corporate Center, Hollywood Apartments, and Green Valley Medical Center are owned through our subsidiary,

the Operating Partnership;

Main Office Building and Main Street West Office Building located in Napa, CA, Woodland Corporate Center located in Woodland, CA, 220 Campus Lane Office Building, Green Valley Medical Center and Green Valley Executive Center located in Fairfield, CA

and One Harbor Center located in Suisun, 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

in Concord, CA.

1300 Main Office Building, First & Main Office Building, Main Street West Office Building, Woodland Corporate Center, Hollywood Apartments, Shoreline Apartments and Green Valley Medical Center are

owned through our subsidiary, the Operating Partnership;

the Commodore Apartments are owned through our subsidiary Madison;

The Park View (f/k/a as Pon De Leo Apartments) is owned through our subsidiary PVT;

and the Shoreline Apartments are owned through our subsidiary

BAA-Shoreline.

In August 2024, we have listed Hollywood Apartments for sale.

the Park View (f/k/a as Pon De Leo Apartments) is owned through our subsidiary PVT and Satellite Place Office Building is owned

through our subsidiary MacKenzie Satellite Place Corp.

In August 2024, we listed Hollywood Apartments for sale;

however, as of February 1, 2025, management decided to discontinue marketing Hollywood Apartments and terminated the listing.

We own our properties through our subsidiaries, which are listed in the table below.

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Madison-PVT Partners LLC

The Park View (fka as Pon De Leo Apartments)

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

PVT-Madison Partners LLC

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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, 2024, the property

is 95% occupied by 7 tenants.

As of December 31, 2024, the property is

95% occupied by 7 tenants.

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

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First and Main Office Building contains 27,398 square feet, of which approximately 19,000 square feet is office space and the remainder is designated as retail space.

As of September 30, 2024, the

property is 100% occupied by 9 tenants.

As of December 31, 2024, the property

is 100% occupied by 9 tenants.

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

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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, 2024, the

As of December 31, 2024, the

property is 89% occupied by 8 tenants.

AUL Corporation has elected to terminate its lease as of February 3, 2025.

During the six months ended December 31, 2024, we recorded an impairment loss of $9,500,167 on Main Street West Office Building due to the

early lease termination of AUL Corporation, and ongoing foreclosure proceedings due to maturity default of the debt secured by the property.

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

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State of California

Strategies To Empower People

Strategies To

Empower People

Azzurro Pizzeria

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Satellite Place Office Building contains 134,785 square feet, all of which is office space.

As of September 30, 2024, the property is approximately 71% occupied by 4 tenants.

The following table shows

the largest tenants and square footage occupied:

As of December 31, 2024, the property is approximately 71% occupied by 4 tenants.

OS National, LLC has elected

to terminate its lease early as of December 31, 2024 from its original lease expiration of December 31, 2029.

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

Largest Tenants

Annual Base Rent

Lease Expiration

OS National, LLC

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Percentage of Gross Rent

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

All of the laboratory space is occupied by Agtech

As of September 30, 2024, the property is 100% occupied by 14 tenants.

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

All of the laboratory space is occupied by Agtech Innovation.

December 31, 2024, the property is 91% occupied by 13 tenants.

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

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Research and Development

Children’s Home

Children’s Home Society

Non-Profit Education

Johnston, Martin

Physical Therapy

California Dept of

Rehabilitation

Rehabilitation Services

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

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Percentage of Gross Rent

Green Valley Executive Center Office Building contains 46,101 square feet, of which approximately 41,600 square feet is office space and the remainder is designated as retail space.

As of September

30, 2024, the property is 100% occupied by 17 tenants.

Green Valley Executive Center contains 46,101 square feet, of which approximately 41,600 square feet is office space and the remainder is designated as retail space.

As of December 31, 2024, the property

is 96% occupied by 16 tenants.

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

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Opportunities

Arkshire Financial, LLC

Larsen & Toubro Limited, Inc.

Arkshire Financial,

Larsen & Toubro

Limited, Inc.

Multinational Conglomerate

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Percentage of Gross Rent

One Harbor Center Office Building contains 49,569 square feet, all of which is office space.

As of September 30, 2024, the property is 93% occupied by 13 tenants.

The following table shows the largest

tenants and square footage occupied:

One Harbor Center contains 49,569 square feet, all of which is office space.

As of December 31, 2024, the property is 90% occupied by 12 tenants.

The following table shows the largest tenants and square

footage occupied:

Largest Tenants

Annual Base Rent

Shimmick Construction Company, Inc.

Richmond American Homes

Wiseman Company Mgt.

Shimmick Construction

Company, Inc.

American Homes

The following information pertains to lease expirations at One Harbor Center Office Building:

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Percentage of Gross Rent

Green Valley Medical Center Office Building contains 31,590 square feet of which approximately 19,000 square feet is office space, approximately 8,300 square feet

is health care space, and the remainder is designated as retail space.

As of September 30, 2024, the property is 91% occupied by 13 tenants.

Green Valley Medical Center contains 31,590 square feet of which approximately 19,000 square feet is office space, approximately 8,300 square feet is health care

space, and the remainder is designated as retail space.

As of December 31, 2024, the property is 80% occupied by 12 tenants.

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

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State Emergency Services

Property Management

Green Valley Oral Surgery

California Forever

Green Valley Oral

The following information pertains to lease expirations at Green Valley Medical 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, 2024, Commodore Apartment building is approximately 91.7% occupied.

The Park View is also a

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

As of September 30, 2024, The Park View building is approximately 97.4% occupied.

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

As of December 31, 2024, Commodore Apartments is approximately 93.8% occupied.

The Park View (f/k/a as Pon De Leo

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

As of December 31, 2024, The Park View (f/k/a as Pon De Leo Apartments) is approximately 92.3% occupied.

Hollywood Apartments, located in Los Angeles, CA, is a mid-rise

apartment building built in 1917 and has 54 units.

The property contains approximately 37,000 square feet of net rentable apartment area and 8,910 square feet of retail space.

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

The apartment units are 96.3%

occupied as of September 30, 2024.

The Hollywood Apartments units are 81.5% occupied as of December 31, 2024.

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

As of September 30, 2024, Shoreline Apartments building is approximately 84.5% occupied.

As of December 31, 2024, Shoreline Apartments building is

approximately 89.3% occupied.

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

Property Name

Percentage Leased

Monthly Base Rent/Occupied Unit

Rent/Occupied

The Park View

Multi-Family Residential

Hollywood Apartments

Multi-Family Residential

(f/k/a as Pon De Leo Apartments)

Los Angeles, CA

Shoreline Apartments

Multi-Family Residential

Property Name

Rent/Occupied

Hollywood Apartments

Los Angeles, CA

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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 September 30, 2024, four tenants are leasing space totaling 11,986 square feet or 27.7% of the building.

Currently we are in the process of renovating the building and marketing it

As of December 31, 2024, six tenants are leasing space totaling 12,264 square feet or 28.4% of the building.

The annualized base rent for these tenants is $393,292.

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There are no present plans for any major renovation or development of any property except for our 220 Campus Lane Office Building, Aurora at Green Valley 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.

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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.

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 Office Building, First and Main Office Building, Main Street West Office Building, One Harbor Center, Satellite Place Office Building, Woodland Corporate

Center, 220 Campus Lane Office Building, and Green Valley Executive Center are all Class A suburban office properties and are located in Napa, Woodland, Suisun City and Fairfield, California and Duluth, Georgia.

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.

Recently, the broader economy began experiencing increased levels of inflation, higher interest rates and tightening monetary and fiscal policies, although inflation has now moderated and interest

rates have begun to come back down some.

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.

office property in the market.

Recently, the broader economy began experiencing increased levels of inflation, higher interest rates and tightening monetary and fiscal policies, although inflation has now moderated and interest rates

have begun to come back down some.

The Federal Reserve increased the federal funds rate multiple times in 2022 and 2023 then paused hikes in earlier part of 2024 before implementing rate cuts in the fourth quarter.

We currently have fixed and variable

interest rates for our loans.

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

The cumulative effect of the prior rate increases may 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.

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, 2024 and 2023.

The commercial and residential properties owned by us during the three months ended September2024 and 2023 are as follows:

Three Months Ended September 30, 2024

Three Months Ended September 30, 2023

Three Months Ended December 31, 2024 and 2023.

The commercial and residential properties owned by us during the three months ended December 2024 and 2023 are as follows:

Three Months Ended December 31, 2024

Three Months Ended December 31, 2023

Commercial properties

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Commodore Apartments

The Park View

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

Hollywood Apartments

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Shoreline Apartments

Rental and reimbursements revenues:

Rental, reimbursements and other property income:

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

During the three months ended September 30, 2024, we generated $4.95 million in rental and

During the three months ended December 31, 2024, we generated $8.03 million in rental and

reimbursements revenues, of which $6.57 million was generated from our nine commercial properties and $1.46 million was generated from our four residential 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, which excludes 220 Campus Lane Office Building, as it had not yet commenced operations during the three months ended September 30, 2023

and $1.50 million was generated from our four residential properties.

The total increase in rental revenues was mainly due to the acquisition of three office buildings (Green Valley Executive Center, One Harbor Center and Green Valley Medical

Center) since September 2023.

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, and $1.48 million was generated from our four residential properties.

The total increase in rental revenues was mainly due to the acquisition

of three office buildings (Green Valley Executive Center, One Harbor Center and Green Valley Medical Center) since December 31, 2023 and an early lease termination income of $3.0 million received from one of the tenants at our Satellite Place Office

Building in December 2024.

Investment income:

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Total investment income for the three

months ended September 30, 2024 and 2023 was $0.02 million and $0.32 million, respectively.

During the three months ended September 30, 2024 we received minimal distributions from operations, sales, and liquidations as compared to $0.09 million

during the three months ended September 30, 2023.

months ended December 31, 2024 and 2023 was $0.02 million and $0.26 million, respectively.

During the three months ended December 31, 2024, we received minimal distributions from operations, sales, and liquidations as compared to $0.10 million during

the three months ended December 31, 2023.

The decrease was mainly due to the decrease in distributions received from investments.

During the three months ended September 30, 2024, we received dividends, interest, and other investment income

of $0.02 million as compared to $0.23 million received during the three months ended September 30, 2023.

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

September 30, 2024.

During the three months ended December 31, 2024, we received dividends, interest, and other investment income of $0.02

million as compared to $0.16 million received during the three months ended December 31, 2023.

This decrease was mainly due to decrease in interest income from our cash deposits in money market funds during the three months ended December 31, 2024.

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, 2024 and 2023 were $0.85 million and $0.79 million, respectively.

The slight increase was due to total increase of $17.70 million in total invested capital from $164.23 million as of September 30, 2023 to $181.93 million as of September 30, 2024.

The asset management fees for the three months ended December 31, 2024 and 2023 were $0.86 million and $0.79 million, respectively.

The slight increase was due to total increase of $17.92 million in total invested capital from $164.74 million as of December 31, 2023 to $182.66 million as of December 31, 2024.

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 September 30, 2024 and 2023.

effective date of the Advisory Management Agreement.

We did not incur any incentive management fee for the three months ended December 31, 2024 and 2023.

Administrative cost and transfer agent reimbursements:

Costs reimbursed to MacKenzie for the three months ended September 30, 2024 were $0.17 million as compared to $0.19 million for the three months ended September 30, 2023.

The slight decrease was due

to a decrease in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to September 30, 2023, mainly due to hiring of a third party transfer service agent since September 30, 2023.

Transfer agent cost reimbursements paid to MacKenzie for the three months ended September 30, 2024 and 2023 were $0.00 million and $0.02 million, respectively.

Costs reimbursed to MacKenzie for the three months ended December 31, 2024 were $0.17 million as compared to $0.19 million for the three months ended December 31, 2023.

The slight decrease was due to a

decrease in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to December 31, 2023, mainly due to hiring of a third party transfer service agent since December 31, 2023.

There were minimal transfer agent cost reimbursements paid to MacKenzie for the three months ended December 31, 2024.

Transfer agent cost reimbursements paid to MacKenzie for the three months ended

December 31, 2023 was $0.02 million.

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, 2024, we incurred operating and maintenance expenses of $1.88 million, of which $1.19 million were

During the three months ended December 31, 2024, we incurred operating and maintenance expenses of $1.71 million, of which $1.07 million were

incurred in the operation of our nine commercial properties and $0.64 million were incurred in the operation of our four residential properties.

During the three months ended September 30, 2023, we incurred operating and maintenance expenses of

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 and $0.66 million from our four residential properties.

The increase in the operating expenses was mainly due to the acquisitions of three new

office buildings (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since September 30, 2023.

The increase in the operating expenses was mainly due to the acquisitions of three new office

buildings (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

Depreciation and amortization:

During the three months ended September 30, 2024, we recorded depreciation and amortization of $2.28 million, of which $1.79 million was attributable to the depreciation and amortization of real

estate and intangible assets of our nine commercial properties and $0.49 million was attributable to our four residential properties.

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 and $0.55 million was attributable to our four residential properties.

The increase in total

depreciation and amortization of $0.72 million during the three months ended September 30, 2024 was due to the acquisitions of three new office buildings (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since

September 30, 2023.

During the three months ended December 31, 2024, we recorded depreciation and amortization of $2.18 million, of which $1.79 million was attributable to the depreciation and amortization of real estate and

intangible assets of our nine commercial properties and $0.39 million was attributable to our four residential properties.

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 and $0.54 million was attributable to our four residential properties.

The increase in total depreciation and

amortization of $0.62 million during the three months ended December 31, 2024 was due to the acquisitions of three new office buildings (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

Interest expense:

Interest expense for the three months ended September 30, 2024 was $1.89 million, of which $1.14 million was incurred on the mortgage notes payable associated with our nine commercial properties and

$0.75 million was incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential.

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, which exclude Satellite Place Office Building since there was no debt on the property during the three months ended September 30, 2023, and $0.7

Interest expense for the three months ended December 31, 2024 was $1.97 million, of which $1.38 million was incurred on the mortgage notes payable associated with our nine commercial properties and

$0.59 million was incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential.

The total increase of $0.57 million in interest expense during the three months ended September 30, 2024,

was primarily due to the additional mortgage notes payable of four office buildings (Satellite Place Office Building, Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since September 30, 2023.

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, which exclude Satellite Place Office Building since there was no debt on the property during the three months ended December 31, 2023, and $0.82 million was

incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential.

The total increase of $0.52 million in interest expense during the three months ended December 31, 2024, was primarily due

to the additional mortgage notes payable of four office buildings (Satellite Place Office Building, Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

Other operating expenses:

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Other operating expenses for the three months ended

September 30, 2024 and 2023, were $0.92 million and $0.55 million, respectively.

December 31, 2024 and 2023, were $0.61 million and $0.42 million, respectively.

The increase in other operating expenses was mainly due to the acquisition of three commercial properties (Green Valley Executive Center, One Harbor Center, and Green

Valley Medical Center) since September 30, 2023 resulting in a higher amount of general and administrative operating expenses during the three months ended September 30, 2024.

Net realized gain on sale of investments:

During the three months ended September 30, 2024, we recorded a realized gain of $0.15 million as compared to no realized gain during the three months ended September 30, 2023.

Total realized gain for

three months ended September 30, 2024 was realized from the sale of two non-traded REIT securities.

Valley Medical Center) since December 31, 2023, resulting in a higher amount of general and administrative operating expenses during the three months ended December 31, 2024.

Net realized gain (loss) on sale of investments:

During the three months ended December 31, 2024, we recorded a realized gain of $0.06 million as compared to $1.29 million net realized loss during the three months ended December 31, 2023.

Total realized

gain for three months ended December 31, 2024, was realized from the sale of two non-traded REIT securities.

Total net realized loss for the three months ended December 31, 2023, resulted from a realized gain on the sale of one non-traded REIT

security, offset by a realized loss from the write-off of a limited partnership interest.

Net unrealized gain (loss) on investments:

During the three months ended September 30, 2024, we recorded a net unrealized loss of $0.14 million, which was net of $0.10 million of unrealized gain 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 losses excluding the reclassification adjustment for the three

months ended September 30, 2024 were $0.04 million, which resulted from fair value depreciations of $0.12 million from general partnership interests, $0.02 million from limited partnership interests and fair value appreciations of $0.10 million

from non-traded REIT securities.

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

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

During the three months ended December 31, 2024, we recorded a net unrealized gain of $0.02 million, which was net of $0.03 million of unrealized gain reclassification adjustment.

The reclassification

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

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

31, 2024, were $0.05 million, which resulted from fair value appreciations of $0.01 million from general partnership interests, $0.02 million from limited partnership interests and $0.02 million from non-traded REIT securities.

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 adjustments.

The reclassification

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

Accordingly, the net unrealized losses excluding the reclassification adjustments 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.

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.

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.

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, 2023.

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

from operations during the quarterly periods within the tax year 2023.

In addition, for the tax year 2024, we intend to pay the requisite amounts of dividends during the year and meet 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 2024.MacKenzie NY 2 is subject to corporate federal and state income tax on its taxable income at regular

statutory rates.

As of September 30, 2024, it did not have any taxable income for tax year 2023 and 2024.

Therefore, we did not record any tax provisions during any fiscal periods within the tax year 2023 and 2024.

MacKenzie Satellite is a

qualified REIT subsidiary of the Parent Company.

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

operations during the quarterly periods within the tax year 2023.

Similarly, for the tax year 2024, 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 2024.

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

As of December 31, 2024, it did not have any taxable income for tax year 2024.

Therefore, we did not record any tax provisions during any fiscal periods within the tax year 2024.

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

Therefore, it does not file a separate tax return.

The Operating Partnership is a limited partnership.

Hollywood Hillview, MacKenzie Shoreline, Madison, PVT, 220 Campus Lane, Campus Lane Residential, Green Valley Executive Center, One Harbor Center

and Green Valley West are limited liability companies.

Hollywood Hillview, MacKenzie Shoreline, Madison, PVT, 220 Campus Lane, Campus Lane Residential, Green Valley Executive Center, One Harbor Center and

Green Valley West are limited liability companies.

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

Accordingly, all income tax liabilities of these entities

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

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, 2024 and 2023.

The commercial and residential properties owned by us during the six months ended December 2024 and 2023 are as follows:

Six Months Ended December 31, 2024

Six Months Ended December 31, 2023

Commercial properties

Satellite Place Office Building

First & Main Office Building

1300 Main Office Building

Main Street West Office Building

Woodland Corporate Center

220 Campus Lane Office Building

Green Valley Executive Center

One Harbor Center

Green Valley Medical Center (Acquired in August 2024)

Residential properties

Commodore Apartments

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

Hollywood Apartments

Shoreline Apartments

Rental, reimbursements and other property income:

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

During the six months ended December 31, 2024, we generated $12.98 million in rental and

reimbursements revenues, of which $10.03 million was generated from our nine commercial properties and $2.95 million was generated from our four residential 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, and $2.97 million was generated from our four residential properties.

The total increase in rental revenues was mainly due to the acquisition of three

office buildings (Green Valley Executive Center, One Harbor Center and Green Valley Medical Center) since December 31, 2023, and an early lease termination income of $3 million received from one of the tenants at our Satellite Place Office Building in

December 2024.

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, 2024 and 2023, was $0.04 million and $0.58 million, respectively.

During the six months ended December 31, 2024, we received minimal distributions from operations, sales, and liquidations as compared to $0.20 million during the six

months ended December 31, 2023.

The decrease was mainly due to the decrease in distributions received from investments.

During the six months ended December 31, 2024, we received dividends, interest, and other investment income of $0.04 million as

compared to $0.38 million received during the six months ended December 31, 2023.

This decrease was mainly due to decrease in interest income from our cash deposits in money market funds during the six months ended December 31, 2024.

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 six months ended December 31, 2024 and 2023, were $1.71 million and $1.58 million, respectively.

The slight increase was due to total increase of $17.92 million in total invested capital from $164.74 million as of December 31, 2023 to $182.66 million as of December 31, 2024.

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, 2024 and 2023.

Administrative cost and transfer agent reimbursements:

Costs reimbursed to MacKenzie for the six months ended December 31, 2024 were $0.33 million as compared to $0.38 million for the six months ended December 31, 2023.

The slight decrease was due to a

There were minimal transfer agent cost reimbursements paid to MacKenzie for the six months ended December 31, 2024.

Transfer agent cost reimbursements paid to MacKenzie for the six months ended December

31, 2023 was $0.03 million.

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 six months ended December 31, 2024, we incurred operating and maintenance expenses of $3.59 million, of which $2.27 million were incurred

in the operation of our nine commercial properties and $1.32 million were incurred in the operation of our four residential properties.

During the six months ended December 31, 2023, we incurred operating and maintenance expenses of $2.90 million, of

which $1.55 million were incurred in the operation of our six commercial properties and $1.35 million from our four residential properties.

The increase in the operating expenses was mainly due to the acquisitions of three new office buildings (Green

Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

Depreciation and amortization:

During the six months ended December 31, 2024, we recorded depreciation and amortization of $4.46 million, of which $3.57 million was attributable to the depreciation and amortization of real estate and

intangible assets of our nine commercial properties and $0.89 million was attributable to our four residential properties.

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 and $1.09 million was attributable to our four residential properties.

The increase in total depreciation and amortization of

$1.34 million during the six months ended December 31, 2024, was due to the acquisitions of three new office buildings (Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

Interest expense:

Interest expense for the six months ended December 31, 2024, was $3.86 million, of which $2.54 million was incurred on the mortgage notes payable associated with our nine commercial properties and $1.32

million was incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential.

Interest expense for the six months ended December 31, 2023, was $2.77 million, of which $1.27 million was

incurred on the mortgage notes payable associated with our five commercial properties, which exclude Satellite Place Office Building since there was no debt on the property during the six months ended December 31, 2023, and $1.50 million was incurred

on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Residential.

The total increase of $1.09 million in interest expense during the six months ended December 31, 2024, was primarily due to the

additional mortgage notes payable of four office buildings (Satellite Place Office Building, Green Valley Executive Center, One Harbor Center, and Green Valley Medical Center) since December 31, 2023.

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 six months ended December

31, 2024 and 2023, were $1.53 million and $0.97 million, respectively.

The increase in other operating expenses was mainly due to the acquisition of three commercial properties (Green Valley Executive Center, One Harbor Center, and Green Valley Medical

Center) since December 31, 2023, resulting in a higher amount of general and administrative operating expenses during the six months ended December 31, 2024.

Net realized gain (loss) on sale of investments:

During the six months ended December 31, 2024, we recorded a realized gain of $0.21 million as compared to $1.29 million net realized loss during the six months ended December 31, 2023.

Total realized

gain for six months ended December 31, 2024, was realized from the sale of two non-traded REIT securities.

Total net realized loss for the six months ended December 31, 2023, resulted from a realized gain on the sale of one non-traded REIT security,

offset by a realized loss from the write-off of a limited partnership interest.

Net unrealized gain (loss) on investments:

During the six months ended December 31, 2024, we recorded a net unrealized loss of $0.12 million, which was net of $0.14 million of unrealized gain 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 gain excluding the reclassification adjustment for the six months ended December 31,

2024, were $0.02 million, which resulted from fair value depreciations of $0.11 million from general partnership interests, fair value appreciations of $0.12 million from non-traded REIT securities and $0.01 million from limited partnership interests.

During the six months ended December 31, 2023, we recorded a net unrealized loss of $0.44 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 six months ended December 31,

2023, were $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.

Income tax provision (benefit):

Income tax provision for six months ended December 31, 2024 and 2023 are discussed above under the three months ended section.

Liquidity and Capital Resources

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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 $15.56 million from the issuance of common shares under the DRIP as of September 30, 2024.

We have raised total

gross proceeds of $119.10 million from the issuance of common stock under the 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 $15.56 million from the issuance of shares of common stock under the common stock DRIP as of December 31, 2024.

Out of the total

proceeds from DRIP, we have utilized a total of $14.28 million to repurchase common shares 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.

proceeds from DRIPs, we have utilized a total of $14.28 million to repurchase shares of common stock 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,

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

This post-effective amendment to the Offering Circular was declared effective

on November 14, 2023.

We had raised $18.56 million through the sale of our Series A preferred stock and $1.65 million Series B preferred stock pursuant to the Offering Circular as of September 30, 2024.

In addition, we have raised $0.30 million

from the issuance of Series A and Series B 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.

on November 14, 2023, and terminated on November 1, 2024.

We have raised $18.61 million through the sale of our Series A preferred stock and $2.47 million Series B preferred stock pursuant to the Offering Circular as of December 31, 2024.

we have raised $0.35 million from the issuance of shares of Series A and Series B preferred stock under the preferred stock DRIP.

In January 2025, a new Offering Circular was qualified by the SEC for the sale of 1,436,638.62 shares of Series A and

1,417,216.17 shares of Series B preferred stock.

Of these amounts, 150,000 shares of each are reserved for the preferred stock DRIP.

On January 15, 2025, our shelf registration statement on Form S-3 for the sale of up to $75 million in common stock,

preferred stock, warrants, and units was declared effective by the SEC, and we entered into an equity distribution agreement with Maxim to issue and sell our common stock for an aggregate gross sales price of $20 million pursuant to the at-the-market

offering described in the ATM Prospectus, subject to maintaining compliance with General Instruction I.B.6 of Form S-3 which requires that in no event will we sell securities in a public primary offering with a value exceeding more than one-third of

our public float in any 12-month period so long as our public float remains below $75.0 million.

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.

However, we have not raised as much from our preferred equity offering as we did when it was first offered,

at least in part due to rising interest rates making the preferred return less attractive.

Thus, there is no guarantee that we can raise sufficient funds to meet our goals in terms of growth, strategic or necessary loan rebalancings, and additional

However, we have not raised as much from our preferred equity offering as we did when it was first offered, at least

in part due to rising interest rates making the preferred return less attractive.

Thus, there is no guarantee that we can raise sufficient funds to meet our goals in terms of growth, strategic or necessary loan rebalancing, and additional investments.

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

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

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

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

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

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

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

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

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

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

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

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, 2024, with cash and cash equivalents, and restricted cash of approximately $11.97 million.

We finished the six months ended December 31, 2024, with cash and cash equivalents, and restricted cash of approximately $7.29 million.

Our principal demands for cash are to fund operating and

administrative expenses, debt service obligations, and dividends on our common and preferred Series A and B stocks.

administrative expenses, debt service obligations, and dividends on our common and preferred Series A and B stock.

In addition, we may also use cash to purchase additional properties.

We expect to fund our material cash requirements over the next

year through a combination of cash on hand, net cash provided by our property operations, new capital raised from our preferred series A and B stocks, and new borrowings at the underlying companies and at the Parent Company level under a new line

Three months ended September 30, 2024:

For the three months ended September 30, 2024, we experienced a net decrease in cash of $1.11 million.

We expect to fund our material cash requirements over the next year

through a combination of cash on hand, net cash provided by our property operations, new capital raised from our preferred series A and B stock, and new borrowings at the underlying companies and at the Parent Company level under a new line of credit.

Six months ended December 31, 2024:

For the six months ended December 31, 2024, we experienced a net decrease in cash of $5.79 million.

During this period, we generated cash of $2.51 million in our operating activities, used cash of $7.88

$6.00 million in our investing activities and generated cash of $3.57 million in our financing activities.

million in our investing activities and used cash of $0.42 million in our financing activities.

The net cash inflow of $2.51 million from operating activities resulted from $12.50 million of rental revenues and $0.04 million of investment income, offset by cash outflow of $10.03 million used in

operating expenses.

The net cash outflow of $6.00 million from investing activities resulted from $6.50 million of real estate acquisitions through our subsidiaries, $0.17 million purchases of equity investments, offset

The net cash outflow of $7.88 million from investing activities resulted from $8.44 million of real estate acquisitions through our subsidiaries, and $0.21 million purchases of equity investments, offset

by cash inflow of $0.77 million from sale of investments.

The net cash inflow of $3.57 million from financing activities resulted from $5.89 million additional mortgage borrowings, $0.36 million capital contributions by non-controlling interests holders,

$0.36 million issuance of Series B preferred stock and $0.05 million issuance of Series A preferred stock, offset by $1.66 million payment of dividends to common stockholders, $0.41 million payment on existing mortgage notes payables, $0.34 million

capital distributions to non-controlling interests holders, $0.24 million payment of dividends to Series A preferred stockholders, $0.20 million change in capital pending acceptance, $0.17 million payment of selling commissions and fees, $0.06

million repayment of finance lease liabilities and $0.01 million payment of dividends to Series B preferred stockholders.

Three months ended September 30, 2023:

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

During this period, we generated cash of $0.52 million in our operating activities, used cash of

$5.43 million in our investing activities and generated cash of $1.45 million in our financing activities and.

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

operating expenses.

The net cash outflow of $5.43 million from investing activities resulted from $5.06 million of real estate acquisitions through our subsidiaries and $0.39 million in purchases of equity investments,

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 additional mortgage borrowings and $1.36 million proceeds from the issuance of Series A

preferred stock, offset by $1.36 million payment of dividends to common stockholders, $0.45 million redemption of common stocks, $0.18 million payment of selling commissions and fees, $0.17 million capital distributions to non-controlling interests

holders, $0.01 million repayment of finance lease liabilities, $0.40 million change in capital pending acceptance and $0.29 million payment on existing mortgage notes payable.

The net cash outflow of $0.42 million from financing activities resulted from $3.34 million payment of dividends to common stockholders, $17.41 million payment on existing mortgage notes payables, $0.72

million capital distributions to non-controlling interests holders, $0.48 million payment of dividends to Series A preferred stockholders, $0.35 million payment of selling commissions and fees, $0.20 million payment of deferred offering costs, $0.13

million change in capital pending acceptance, $0.11 million repayment of finance lease liabilities, $0.01 million payment of dividends to Series B preferred stockholders, $0.01 million payment on existing notes payables and $0.01 million redemption of

Series A preferred stock, offset by cash inflows of $19.93 million of additional mortgage borrowings, $1.19 million of capital contributions by non-controlling interests holders, $1.13 million of issuance of Series B preferred stock and $0.10 million

of issuance of Series A preferred stock.

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 $0.59 million in our operating activities, $2.57 million in our

investing activities and $1.94 million in our financing activities.

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

investment income.

The net cash outflow of $2.57 million from investing activities resulted from $5.65 million of real estate acquisitions through our subsidiaries, $0.55 million of purchases of equity investments and $0.79

million of payment of contingent liability, offset by cash inflows of $4.02 million 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 $2.34 million of payment of dividends to common stockholders, $0.92 million of redemption of common stock, $0.88 million of

payment of loan extension fee, $0.60 million of payment of mortgage payables, $0.49 million of payments of selling commissions and fees, $0.42 million of payment of dividends to Series A preferred stockholders, $0.36 million of payment on notes

payables, $0.34 million of acquisition of below market debt, $0.34 million of distributions to non-controlling interests holders, $0.03 million of payments on finance lease liabilities, and $0.01 million of redemption of Series A preferred stock,

offset by cash inflows of $3.29 million of proceeds from mortgage notes payable, $1.26 million of proceeds from the issuance of Series A preferred stock, $0.14 million of capital contributions from non-controlling interests holders and $0.10 million of

proceeds from the issuance of Series B preferred stock.

Material Cash Obligations

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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.

(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.

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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.

In August 2024, we have applied for a new line of credit at the Parent Company level.

We anticipate utilizing this credit facility on a short-term basis to bridge the gap between our asset acquisition

expenditures and the inflow of funds from our planned capital raise.

The bank is currently reviewing our application.

We 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.

We also 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 September 30, 2024 and the fiscal years those loans mature:

On January 22, 2025, we entered into a revolving line of credit agreement with Patterson Real Estate Services, LP, an affiliate of the Adviser, of up to $10,000,000.

Interest will accrue on any unpaid principal balance on the note at a fixed annual interest rate of 10.00%.

In addition, an origination fee of 2% will be charged on each advance and the sum will be added to the principal balance.

The loan matures on

June 1, 2026.

The loan requires monthly interest beginning on March 1, 2025, with the remaining principal balance due at maturity.

This note was not included in our consolidated balance sheet as of December 31, 2024.

As of the date of this report, the

Company has borrowed $5 million under the line of credit.

We anticipate utilizing this credit facility on a short-term basis to bridge the gap between our asset acquisition expenditures and the inflow of funds from our planned capital raise.

We 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.

We also 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, 2024 and the fiscal years those loans mature:

Fiscal Year Ending June 30, :

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Hollywood Hillview matured in October 2024;

however, prior to the maturity date, the loan agreement was amended with the options to extend the current maturity date for three periods from October 6, 2024 to November 6, 2024 with a principal paydown

of $515,000, from November 6, 2024 to December 6, 2024 with a principal paydown of $410,000, and from December 6, 2024 to February 6, 2025 with a principal paydown of $410,000, as discussed in Note 10 in the financial statements included in this

We also listed the underlying property for sale in August 2024.

The $7.5 million note payable on Woodland Corporate Center Two also matured in October 2024, and was refinanced through a new loan that closed on October 4, 2024.

million note payable on Main Street West matured on November 1, 2024;

$515,000, from November 6, 2024 to December 6, 2024 with a principal paydown of $410,000, and from December 6, 2024 to February 6, 2025 with a principal paydown of $410,000.

We exercised all three extension options to extend the maturity date to

February 6, 2025.

In February 2025, the loan agreement was further amended to extend the maturity to April 6, 2025.

We listed the underlying property for sale in August 2024;

however, on February 1, 2025, we decided to discontinue marketing the

property for sale.

As a result, it no longer qualifies as held for sale since it is no longer listed.

The $7.5 million note payable on Woodland Corporate Center Two also matured in October 2024, and was refinanced through a new loan that closed on

October 4, 2024.

The $14.74 million note payable on Main Street West matured on November 1, 2024;

however, we were unable to agree with the bank on the principal paydown amount to extend the maturity date.

As a result, the Company is currently in default under the note terms.

We are actively negotiating with the bank to extend the maturity date.

As a result, the Company is currently in

default under the note terms.

Despite on-going negotiations, the bank has initiated foreclosure proceedings and filed and notice of default, and on January 28, 2025, a receiver was appointed by the court.

The bank may file a notice of sale on or about

February 25, 2025, and the property could potentially be sold within 20 days of that date.

However, the Company is pursuing several refinancing and leasing options at this time.

Distributions to Stockholders

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

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

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

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

and distributed pro-rata to holders of our shares;

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

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

In no event are we

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

In no event are we permitted

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

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

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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.

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.

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 DRIPs that provide for reinvestment of our dividends and other distributions on behalf of stockholders for any individual stockholder who elects to participate in the DRIPs, provided that the

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

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

On March 4, 2024, the Board of Directors suspended the common stock

share repurchase program and DRIP in connection with trading of its common stock on the OTCQX Best Market.

When our common stock became eligible for trading on OTC Markets in April 2024, the share repurchase program automatically terminated, and

the Board of Directors will decide whether, and when, to reinstate the DRIP.

During the three months ended September 30, 2024, the Board approved the following quarterly dividends:

On March 4, 2024, the Board of Directors suspended the common

stock share repurchase program and common stock DRIP in connection with trading of its common stock on the OTCQX Best Market.

When our common stock became eligible for trading on OTC Markets in April 2024, the share repurchase program automatically

terminated, and the Board of Directors will decide whether, and when, to reinstate the common stock DRIP.

During the six months ended December 31, 2024, the Board approved the following quarterly dividends:

Series A Preferred Stock

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September 30, 2024

* Of the total dividends declared for Series B during the three months ended September 30, 2024, $34,037 was an increase in liquidation preference and $11,341 was

the cash dividend.

December 31, 2024

* Of the total dividends declared for Series B during the six months ended December 31, 2024, $81,731 was an increase in liquidation preference and $27,240 was the

cash dividend.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the reported amount of assets and liabilities at

the date of our financial statements and the reported amounts of revenues and expenses during the reporting period.

While we do not believe the reported amounts would be materially different, application of these policies involves the exercise of

judgment and the use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

We evaluate our estimates and judgments on an ongoing basis.

We base our estimates on experience and on various other

assumptions that are believed to be reasonable under the circumstances.

All of our significant accounting policies, including certain critical accounting estimates, are disclosed in our Annual Report on Form 10-K for the year ended June 30, 2024.

have not made any material changes to our critical accounting policies and estimates during the period covered by this report.

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