UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark one)

☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2024

☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission file number 000-55006

MacKenzie Realty Capital, Inc.

(Exact name of registrant as specified in its charter)

Maryland	45-4355424
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

89 Davis Road, Suite 100, Orinda, CA	94563
(Address of principal executive offices)	(Zip Code)

(925) 631-9100

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of class	Trading symbol (s)	Name of exchange on which registered
Common Stock, $0.0001 par value per share	MKZR	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   ☑       No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)  Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☑	Smaller reporting company ☑
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No  ☑

The number of the shares of issuer’s Common Stock outstanding as of February 14, 2025 was 13,908,244.80.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Consolidated Balance Sheets as of December 31, 2024 and June 30, 2024 (Unaudited)	1
	Consolidated Statements of Operations for the three and six months ended December 31, 2024 and 2023 (Unaudited)	2
	Consolidated Statements of Changes in Equity for the three and six months ended December 31, 2024 (Unaudited)	3
	Consolidated Statements of Changes in Equity for the three and six months ended December 31, 2023 (Unaudited)	4
	Consolidated Statements of Cash Flows for the six months ended December 31, 2024 and 2023 (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4.	Controls and Procedures	53
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	56

Part I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

MacKenzie Realty Capital, Inc.

Consolidated Balance Sheets

(Unaudited)

	December 31, 2024			June 30, 2024
Assets
Real estate assets
Land	$	35,690,148		$	34,053,565
Building, fixtures and improvements		169,400,043			157,251,012
Intangible lease assets		12,437,847			10,976,549
Less: accumulated depreciation and amortization		(17,154,350	)		(12,684,205	)
Total real estate assets, net		200,373,688			189,596,921
Cash and cash equivalents		6,142,915			11,777,930
Restricted cash		780,406			778,330
Investments, at fair value		972,545			1,341,164
Equity method investments, at fair value		2,598,444			4,703,266
Investments income, rents and other receivables		1,637,176			1,239,666
Deferred offering costs		667,607			-
Prepaid expenses and other assets		1,038,730			1,254,722
Assets held for sale, net		22,147,725			22,395,769
Total assets	$	236,359,236		$	233,087,768
Liabilities
Mortgage notes payable, net	$	124,450,160		$	113,687,699
Notes payable		1,773,288			1,635,773
Deferred rent and other liabilities		1,281,595			1,193,209
Finance lease liabilities		2,377,410			1,887,984
Dividend payable		1,386,405			2,313,822
Accounts payable and accrued liabilities		5,408,173			2,311,554
Below-market lease liabilities, net		1,236,869			1,284,832
Due to related entities		122,446			171,260
Capital pending acceptance		171,088			297,000
Liabilities held for sale		415,085			355,543
Total liabilities		138,622,519			125,138,676
Equity
Common stock, $0.0001 par value, 80,000,000 shares authorized; 13,473,075.79 and 13,302,572.99 shares issued and outstanding as of December 31, 2024 and June 30, 2024, respectively.		1,347			1,330
Preferred stock, $0.0001 par value, 20,000,000 shares authorized:
Series A Preferred stock, 764,887.87 and 761,370.46 shares issued and outstanding as of  December 31, 2024 and June 30, 2024, respectively.		74			76
Series B Preferred stock, 95,088.26 and 49,564.56 shares issued and outstanding as of December 31, 2024 and June 30, 2024, respectively.		10			5
Capital in excess of par value		138,814,050			137,072,283
Accumulated deficit		(70,490,641	)		(54,715,347	)
Total stockholders’ equity		68,324,840			82,358,347
Non-controlling interests		29,411,877			25,590,745
Total equity		97,736,717			107,949,092
Total liabilities and equity	$	236,359,236		$	233,087,768

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

1

MacKenzie Realty Capital, Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended December 31,						Six Months Ended December 31,
	2024			2023			2024			2023
Revenue
Rental, reimbursements and other property income	$	8,030,316		$	3,577,486		$	12,982,545		$	7,137,467
Expenses
Depreciation and amortization		2,175,924			1,559,771			4,456,680			3,119,439
Interest expense		1,968,113			1,452,780			3,859,822			2,774,731
Property operating and maintenance		1,711,617			1,505,063			3,589,214			2,895,067
Asset management fees to related party (Note 8)		858,578			790,557			1,707,036			1,577,634
General and administrative		406,145			311,471			839,862			518,747
Professional fees		137,617			81,781			565,633			401,151
Administrative cost reimbursements to related party (Note 8)		167,464			189,184			334,928			378,367
Directors’ fees		64,336			28,500			122,039			54,000
Transfer agent cost reimbursements to related party (Note 8)		1,536			16,566			3,072			33,133
Impairment loss		5,093,918			-			9,500,167			-
Total operating expenses		12,585,248			5,935,673			24,978,453			11,752,269
Operating loss		(4,554,932	)		(2,358,187	)		(11,995,908	)		(4,614,802	)
Other income (loss)
Dividend and distribution income from equity securities at fair value		11,546			162,583			35,535			383,271
Net unrealized gain (loss) on equity securities at fair value		(18,567	)		263,478			(21,120	)		(466,315	)
Net income (loss) from equity method investments at fair value		40,974			1,664,519			(99,125	)		221,537
Net realized income (loss) from investments		62,845			(1,285,998	)		214,215			(1,285,998	)
Net loss		(4,458,134	)		(1,553,605	)		(11,866,403	)		(5,762,307	)
Net income attributable to non-controlling interests		(471,087	)		(106,273	)		(873,083	)		(226,609	)
Net income attributable to preferred stockholders Series A and B		(350,279	)		(278,822	)		(682,693	)		(547,205	)
Net loss attributable to common stockholders	$	(5,279,500	)	$	(1,938,700	)	$	(13,422,179	)	$	(6,536,121	)
Net loss per share attributable to common stockholders	$	(0.39	)	$	(0.15	)	$	(1.00	)	$	(0.49	)
Weighted average common shares outstanding		13,448,336			13,239,849			13,397,151			13,294,159

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

2

MacKenzie Realty Capital, Inc.

Consolidated Statements of Changes in Equity

(Unaudited)

	Common Stock					Series A Preferred Stock						Series B Preferred Stock
	Number of		Par			Number of			Par			Number of		Par			Additional Paid-			Accumulated			Total Stockholders’			Non-controlling
Three Months Ended December 31, 2024	Shares		Value			Shares			Value			Shares		Value			in Capital			Deficit			Equity			Interests			Total Equity
Balance, September 30, 2024		13,435,656.79	$	1,344			765,429.60		$	77			63,909.52	$	6		$	137,981,396		$	(64,537,486	)	$	73,445,337		$	28,588,812		$	102,034,149
Contributions by non-controlling interest holders		-		-			-			-			-		-			-			-			-			829,652			829,652
Distributions to non-controlling interest holders		-		-			-			-			-		-			-			-			-			(435,274	)		(435,274	)
Dividends to common stockholders		-		-			-			-			-		-			-			(673,655	)		(673,655	)		-			(673,655	)
Dividends to Series A preferred stockholders		-		-			-			-			-		-			-			(286,686	)		(286,686	)		-			(286,686	)
Dividends to Series B preferred stockholders		-		-			-			-			-		-			-			(63,593	)		(63,593	)		-			(63,593	)
Net income (loss)		-		-			-			-			-		-			-			(4,929,221	)		(4,929,221	)		471,087			(4,458,134	)
Operating Partnership Class A conversion to common stock		238.00		-	*		-			-			-		-			2,441			-			2,441			(2,441	)		-
Preferred Series A conversion to common stock		37,181.00		3			(4,639.87	)		(3	)		-		-			-			-			-			-			-
Issuance of Series A preferred stock through reinvestment of dividends		-		-			2,122.14			-	*		-		-			47,748			-			47,748			-			47,748
Issuance of Series B preferred stock through reinvestment of dividends		-		-			-			-			140.74		-	*		3,166			-			3,166			-			3,166
Issuance of Series A preferred stock		-		-			1,976.00			-	*		-		-			49,403			-			49,403			-			49,403
Issuance of Series B preferred stock		-		-			-			-			31,038.00		4			775,946			-			775,950			-			775,950
Increase in liquidation preference - Series B preferred stock		-		-			-			-			-		-			47,694			-			47,694			-			47,694
Issuance of Operating Partnership Series A Preferred Units through reinvestment of dividends		-		-			-			-			-		-			-			-			-			24,737			24,737
Increase in liquidation preference of Operating Partnership Series B Preferred Units		-		-			-			-			-		-			-			-			-			24,307			24,307
Payment of selling commissions and fees		-		-			-			-			-		-			(88,193	)		-			(88,193	)		(89,003	)		(177,196	)
Redemptions of common stock		-		-			-			-			-		-			(21	)		-			(21	)		-			(21	)
Redemptions of Series A preferred stock		-		-			-			-			-		-			(5,530	)		-			(5,530	)		-			(5,530	)
Balance, December 31, 2024		13,473,075.79	$	1,347			764,887.87		$	74			95,088.26	$	10		$	138,814,050		$	(70,490,641	)	$	68,324,840		$	29,411,877		$	97,736,717

	Common Stock					Series A Preferred Stock						Series B Preferred Stock
	Number of		Par			Number of			Par			Number of		Par			Additional Paid-			Accumulated			Total Stockholders’			Non-controlling
Six Months Ended December 31, 2024	Shares		Value			Shares			Value			Shares		Value			in Capital			Deficit			Equity			Interests			Total Equity
Balance, June 30, 2024		13,302,572.99	$	1,330			761,370.46		$	76			49,564.56	$	5		$	137,072,283		$	(54,715,347	)	$	82,358,347		$	25,590,745		$	107,949,092
Contributions by non-controlling interest holders		-		-			-			-			-		-			-			-			-			1,189,652			1,189,652
Distributions to non-controlling interest holders		-		-			-			-			-		-			-			-			-			(867,690	)		(867,690	)
Dividends to common stockholders		-		-			-			-			-		-			-			(2,353,115	)		(2,353,115	)		-			(2,353,115	)
Dividends to Series A preferred stockholders		-		-			-			-			-		-			-			(573,722	)		(573,722	)		-			(573,722	)
Dividends to Series B preferred stockholders		-		-			-			-			-		-			-			(108,971	)		(108,971	)		-			(108,971	)
Net income (loss)		-		-			-			-			-		-			-			(12,739,486	)		(12,739,486	)		873,083			(11,866,403	)
Operating Partnership Class A conversion to common stock		321.80		-	*		-			-			-		-			3,300			-			3,300			(3,300	)		-
Preferred Series A conversion to common stock		37,181.00		3			(4,639.87	)		(3	)		-		-			-			-			-			-			-
Stock-based compensation		133,000.00		14			-			-			-		-			465,486			-			465,500			-			465,500
Issuance of Series A preferred stock through reinvestment of dividends		-		-			4,181.28			1			-		-			94,080			-			94,081			-			94,081
Issuance of Series B preferred stock through reinvestment of dividends		-		-			-			-			225.70		-	*		5,078			-			5,078			-			5,078
Issuance of Series A preferred stock		-		-			3,976.00			-	*		-		-			99,403			-			99,403			-			99,403
Issuance of Series B preferred stock		-		-			-			-			45,298.00		5			1,132,444			-			1,132,449			-			1,132,449
Increase in liquidation preference - Series B preferred stock		-		-			-			-			-		-			81,731			-			81,731			-			81,731
Operating Partnership Series A Preferred Units issued		-		-			-			-			-		-			-			-			-			2,712,194			2,712,194
Issuance of Operating Partnership Series A Preferred Units through reinvestment of dividends		-		-			-			-			-		-			-			-			-			48,251			48,251
Increase in liquidation preference of Operating Partnership Series B Preferred Units		-		-			-			-			-		-			-			-			-			48,614			48,614
Payment of selling commissions and fees		-		-			-			-			-		-			(134,204	)		-			(134,204	)		(179,672	)		(313,876	)
Redemptions of common stock		-		-			-			-			-		-			(21	)		-			(21	)		-			(21	)
Redemptions of Series A preferred stock		-		-			-			-			-		-			(5,530	)		-			(5,530	)		-			(5,530	)
Balance, December 31, 2024		13,473,075.79	$	1,347			764,887.87		$	74			95,088.26	$	10		$	138,814,050		$	(70,490,641	)	$	68,324,840		$	29,411,877		$	97,736,717

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

3

MacKenzie Realty Capital, Inc.

Consolidated Statements of Changes in Equity

(Unaudited)

	Common Stock						Series A Preferred Stock						Series B Preferred Stock
	Number of			Par			Number of			Par			Number of		Par			Additional Paid-			Accumulated			Total Stockholders’			Non-controlling
Three Months Ended December 31, 2023	Shares			Value			Shares			Value			Shares		Value			in Capital			Deficit			Equity			Interests			Total Equity
Balance, September 30, 2023		13,241,516.62		$	1,324			727,506.10		$	73			-	$	-		$	135,011,994		$	(41,106,367	)	$	93,907,024		$	12,033,146		$	105,940,170
Contributions by non-controlling interest holders		-			-			-			-			-		-			-			-			-			140,423			140,423
Distributions to non-controlling interest holders		-			-			-			-			-		-			-			-			-			(194,056	)		(194,056	)
Dividends to common stockholders		-			-			-			-			-		-			-			(1,652,367	)		(1,652,367	)		-			(1,652,367	)
Dividends to Series A preferred stockholders		-			-			-			-			-		-			-			(276,600	)		(276,600	)		-			(276,600	)
Dividends to Series B preferred stockholders		-			-			-			-			-		-			-			(2,222	)		(2,222	)		-			(2,222	)
Net loss		-			-			-			-			-		-			-			(1,659,878	)		(1,659,878	)		106,273			(1,553,605	)
Issuance of common stock through reinvestment of dividends		62,830.04			6			-			-			-		-			463,680			-			463,686			-			463,686
Issuance of Series A preferred stock through reinvestment of dividends		-			-			1,942.10			-	*		-		-			43,698			-			43,698			-			43,698
Issuance of Series A preferred stock		-			-			14,414.11			2			-		-			359,599			-			359,601			-			359,601
Issuance of Series B preferred stock		-			-			-			-			4,444		-	*		100,000			-			100,000			-			100,000
Increase in liquidation preference - Series B preferred stock		-			-			-			-			-		-			1,667			-			1,667			-			1,667
Issuance of Operating Partnership Series A Preferred Units through reinvestment of dividends		-			-			-			-			-		-			-			-			-			20,794			20,794
Payment of selling commissions and fees		-			-			-			-			-		-			(331,224	)		-			(331,224	)		-			(331,224	)
Redemptions of common stock		(64,497.30	)		(6	)		-			-			-		-			(475,984	)		-			(475,990	)		-			(475,990	)
Redemptions of Series A preferred stock		-			-			(400.00	)		-	*		-		-			(9,100	)		-			(9,100	)		-			(9,100	)
Balance, December 31, 2023		13,239,849.36		$	1,324			743,462.31		$	75			4,444.44	$	-		$	135,164,330		$	(44,697,434	)	$	90,468,295		$	12,106,580		$	102,574,875

	Common Stock						Series A Preferred Stock						Series B Preferred Stock
	Number of			Par			Number of			Par			Number of		Par			Additional Paid-			Accumulated			Total Stockholders’			Non-controlling
Six Months Ended December 31, 2023	Shares			Value			Shares			Value			Shares		Value			in Capital			Deficit			Equity			Interests			Total Equity
Balance, June 30, 2023		13,243,279.96		$	1,324			671,340.45		$	67			-	$	-		$	133,762,999		$	(34,856,258	)	$	98,908,132		$	12,103,874		$	111,012,006
Contributions by non-controlling interest holders		-			-			-			-			-		-			-			-			-			140,423			140,423
Distributions to non-controlling interest holders		-			-			-			-			-		-			-			-			-			(382,358	)		(382,358	)
Dividends to common stockholders		-			-			-			-			-		-			-			(3,305,055	)		(3,305,055	)		-			(3,305,055	)
Dividends to Series A preferred stockholders		-			-			-			-			-		-			-			(544,983	)		(544,983	)		-			(544,983	)
Dividends to Series B preferred stockholders		-			-			-			-			-		-			-			(2,222	)		(2,222	)		-			(2,222	)
Net loss		-			-			-			-			-		-			-			(5,988,916	)		(5,988,916	)		226,609			(5,762,307	)
Operating Partnership Class A conversion to common stock		2,265.00			-	*		-			-			-		-			23,216			-			23,216			(23,216	)		-
Issuance of common stock through reinvestment of dividends		122,893.70			12			-			-			-		-			906,945			-			906,957			-			906,957
Issuance of Series A preferred stock through reinvestment of dividends		-			-			3,713.55			-	*		-		-			83,556			-			83,556			-			83,556
Issuance of Series A preferred stock		-			-			68,808.31			8			-		-			1,718,943			-			1,718,951			-			1,718,951
Issuance of Series B preferred stock		-			-			-			-			4,444.44		-	*		100,000			-			100,000			-			100,000
Increase in liquidation preference - Series B preferred stock		-			-			-			-			-		-			1,667			-			1,667			-			1,667
Issuance of Operating Partnership Series A Preferred Units through reinvestment of dividends		-			-			-			-			-		-			-			-			-			41,248			41,248
Payment of selling commissions and fees		-			-			-			-			-		-			(474,919	)		-			(474,919	)		-			(474,919	)
Redemptions of common stock		(128,589.30	)		(12	)		-			-			-		-			(948,977	)		-			(948,989	)		-			(948,989	)
Redemptions of Series A preferred stock		-			-			(400.00	)		-	*		-		-			(9,100	)		-			(9,100	)		-			(9,100	)
Balance, December 31, 2023		13,239,849.36		$	1,324			743,462.31		$	75			4,444.44	$	-		$	135,164,330		$	(44,697,434	)	$	90,468,295		$	12,106,580		$	102,574,875

*Amount is less than $1.

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

4

MacKenzie Realty Capital, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended December 31,
	2024			2023
Cash flows from operating activities:
Net loss	$	(11,866,403	)	$	(5,762,307	)
Adjustments to reconcile net loss to net cash from operating activities:
Net unrealized loss on equity securities at fair value		21,120			466,315
Net (income) loss from equity method investments at fair value		99,720			(21,025	)
Net realized (gain) loss on investments		(214,215	)		1,285,998
Impairment loss		9,500,167			-
Straight-line rent		(84,099	)		(30,534	)
Depreciation and amortization		4,456,680			3,119,439
Amortization of deferred financing costs and debt mark-to-market		441,034			633,437
Accretion of above (below) market lease, net		(129,328	)		(190,867	)
Changes in assets and liabilities:
Investments income, rents and other receivables		(288,956	)		132,782
Due from related entities		-			17,000
Prepaid expenses and other assets		207,516			(28,159	)
Deferred rent and other liabilities		18,147			101,544
Accounts payable and accrued liabilities		357,102			(287,055	)
Due to related entities		(1,657	)		(22,289	)
Net cash from operating activities		2,516,828			(585,721	)
Cash flows from investing activities:
Proceeds from sale of investments		774,078			4,020,482
Investments in real estate assets		(8,440,472	)		(5,664,391	)
Purchase of investments		(212,364	)		(551,340	)
Return of capital distributions		-			404,187
Payment on contingent liability		-			(785,000	)
Net cash from investing activities		(7,878,758	)		(2,576,062	)
Cash flows from financing activities:
Proceeds from mortgage notes payable		19,926,961			3,288,715
Payments on mortgage notes payable		(17,417,534	)		(596,467	)
Payments on notes payable		(12,485	)		(358,543	)
Payment of loan extension fee		-			(876,500	)
Acquisition cost of below market debt		-			(343,000	)
Dividend to common stockholders		(3,342,287	)		(2,332,595	)
Dividend to Series A preferred stockholders		(477,692	)		(427,000	)
Dividend to Series B preferred stockholders		(14,188	)		-
Proceeds from issuance of Series A preferred stock		99,403			1,718,951
Proceeds from issuance of Series B preferred stock		1,132,449			100,000
Payment on finance lease liabilities		(110,574	)		(31,469	)
Payment of deferred offering costs		(202,107	)		-
Payment of selling commissions and fees		(345,059	)		(492,713	)
Contributions by non-controlling interests holders		1,189,651			140,423
Distributions to non-controlling interests holders		(718,993	)		(340,280	)
Redemption of common stock		(21	)		(917,997	)
Redemption of Series A preferred stock		(5,530	)		(9,100	)
Capital pending acceptance		(125,912	)		(463,600	)
Net cash from financing activities		(423,918	)		(1,941,175	)
Net decrease in cash, cash equivalents and restricted cash		(5,785,848	)		(5,102,958	)
Cash, cash equivalents and restricted cash at beginning of the period		13,077,339			18,141,019
Cash, cash equivalents and restricted cash at end of the period	$	7,291,491		$	13,038,061
Cash and cash equivalents at end of the period	$	6,142,915		$	12,173,527
Restricted cash at end of the period		780,406			27,520
Cash and restricted cash at end of the period classified as assets held for sale		368,170			837,014
Total cash, cash equivalents, restricted cash and cash classified as held for sale at end of the period	$	7,291,491		$	13,038,061
Supplemental disclosure of non-cash financing activities and other cash flow information:
Issuance of Series A preferred stock through reinvestment of dividends	$	94,081		$	83,556
Issuance of Series B preferred stock through reinvestment of dividends	$	5,078		$	-
Increase in liquidation preference of Series B preferred stock	$	81,731		$	1,667
Issuance Operating Partnership Preferred Units - Series A through reinvestment of dividends	$	48,251		$	41,249
Cash paid for interest	$	3,179,716		$	2,082,860
Increase in liquidation preference of Operating Partnership Preferred Units - Series B	$	48,614		$	-
Issuance of the Operating Partnership Preferred Units for the purchase of Green Valley Medical Center, LP (Note 1)	$	2,712,194		$	-
Fair value of assets acquired from consolidation of Green Valley Medical Center, LP	$	13,621,753		$	-
Fair value of liabilities assumed from consolidation of Green Valley Medical Center, LP	$	8,904,457		$	-
Stock-based compensation	$	465,500		$	-
Operating Partnership Class A conversion to common stock	$	3,300		$	-
Capitalized construction in progress outstanding as accounts payable and accrued expenses	$	2,709,354		$	-
Issuance of common stock through reinvestment of dividends	$	-		$	906,957

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

5

MacKenzie Realty Capital, Inc.

Notes to Consolidated Financial Statements

December 31, 2024

(Unaudited)

NOTE 1 – PRINCIPAL BUSINESS AND ORGANIZATION

MacKenzie Realty Capital, Inc. (the “Parent Company” together with its subsidiaries as discussed below, collectively, the “Company,” “we,” “us,” or “our”) was incorporated under the general corporation laws of the State of Maryland on January 27, 2012. We have elected to be treated as a real estate investment trust (“REIT”) as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). We are authorized to issue 100,000,000 shares, of which (i) 80,000,000 are designated as common stock, with a $0.0001 par value per share; and (ii) 20,000,000 are designated as preferred stock, with a $0.0001 par value per share. We commenced our operations on February 28, 2013, and our fiscal year-end is June 30.

We filed our initial registration statement in June 2012 with the Securities and Exchange Commission (“SEC”) to register the initial public offering of 5,000,000 shares of our common stock. The initial public offering commenced in January 2014 and concluded in October 2016. We filed a second registration statement with the SEC to register a subsequent public offering of 15,000,000 shares of our common stock. The second offering commenced in December 2016 and concluded on October 28, 2019. We filed a third registration statement with the SEC to register a public offering of 15,000,000 shares of our common stock that was declared effective by the SEC on October 31, 2019. The third offering commenced shortly thereafter and expired on October 31, 2020. On April 29, 2024, our common stock became eligible for trading on the OTCQX Best Market under the ticker symbol of MKZR. In addition, on November 6, 2024, Nasdaq approved the listing of the Company’s common stock, and trading commenced on November 11, 2024.

We are externally managed by MacKenzie Capital Management, LP (“MacKenzie”) under a turnkey administration agreement dated and effective as of January 1, 2021 (the “Administration Agreement”). MCM Advisers, LP (the “Investment Adviser”), an affiliate of MacKenzie, advises us in our assessment, acquisition, and divestiture of securities under the advisory agreement amended and restated effective January 1, 2021 (the “Amended and Restated Investment Advisory Agreement”). Another affiliate of Mackenzie, MacKenzie Real Estate Advisers, LP (the “Real Estate Adviser”; together, the “Investment Adviser” and the “Real Estate Adviser” may be referred to as “Adviser” or “Advisers” as appropriate) advises us in our assessment, acquisition, and divestiture of real estate assets. We pursue a strategy focused on investing primarily in real estate assets, and to a lesser extent (intended to be less than 20% of our portfolio) in illiquid or non-traded debt and equity securities issued by U.S. companies generally owning commercial real estate. These companies are likely to be non-traded REITs, small-capitalization publicly traded REITs, public and private real estate limited partnerships, and limited liability companies.

Our wholly owned subsidiary, MRC TRS, Inc. (“TRS”), was incorporated under the general corporation laws of the State of California on February 22, 2016, and operated as a taxable REIT subsidiary. MacKenzie NY Real Estate 2 Corp. (“MacKenzie NY 2”), a wholly owned subsidiary of TRS, was formed for the purpose of making certain limited investments in New York companies. We terminated TRS effective December 31, 2022, after the sale of its sole investment and transferred the ownership of MacKenzie NY 2, to the Parent Company. The financial statements of TRS (through its termination date) and MacKenzie NY 2 have been consolidated with the Parent Company. Effective tax year 2023, MacKenzie NY 2 has elected to be treated as a taxable REIT subsidiary.

On May 20, 2020, we formed an operating partnership, MacKenzie Realty Operating Partnership, LP (the “Operating Partnership”) for the purpose of acquiring and operating real estate assets. As of December 31, 2024, we own all limited partnership units of the Operating Partnership except for 81,909.89 Class A Limited Partnership units, 1,061,250.25 Series A preferred units and 43,212.86 Series B preferred units. Upon liquidation of the Operating Partnership, (i) the 81,909.89 Class A Limited Partnership units are convertible into the Company’s shares of common stock on a 1:1 conversion ratio; (ii) the 1,061,250.25 Series A preferred units are entitled to a liquidation preference of $26,531,256 (based on the stated value of $25 per share for the Series A preferred units); and (iii) the 43,212.86 Series B preferred units are entitled to a liquidation preference of $1,080,322 (based on the stated value of $25 per share for the Series B preferred units). The Parent Company has contributed $87,539,713 in capital to the Operating Partnership since inception; thus, the Class A, Series A and Series B Preferred Units represent approximately 24.53% of all capital contributions.

In March 2021, we, together with our joint venture partners, formed two operating companies: Madison-PVT Partners LLC (“Madison”) and PVT-Madison Partners LLC (“PVT”), to acquire and operate two residential apartment buildings located in Oakland, California. We own 98.45% and 98.75% of equity units of Madison and PVT, respectively. The joint venture partners own the remaining 1.55% and 1.25% equity units of Madison and PVT, respectively, and also hold a carried interest in both companies. We are the controlling majority owner of both companies; therefore, effective March 31, 2021, we have consolidated the financial statements of these companies.

6

On April 13, 2021, we filed a preliminary offering circular (the “Offering Circular”) pursuant to Regulation A with the SEC to sell up to $50 million of shares of our Series A preferred stock at an initial offering price of $25.00 per share. We filed a post-effective amendment to the Offering Circular on October 14, 2022, and increased the offering to sell up to $75 million of shares of our Series A preferred stock. The post-effective amendment to this Offering Circular was declared effective on November 13, 2022. We filed a second post-effective amendment to the Offering Circular on November 1, 2023, which amended the offering 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 qualified by the SEC on November 14, 2023, and terminated on November 1, 2024. We filed a new offering circular (the “Second Offering Circular”) in December 2024, to sell an aggregate of up to approximately $71.3 million of shares of either our Series A preferred stock or our Series B preferred stock at an offering price of $25 per share. The Second Offering Circular was qualified by the SEC on January 29, 2025. In November 2024, we filed a new shelf registration statement on Form S-3 (the “Form S-3 Registration Statement”) to sell our common and preferred stock, warrants, rights and units up to an aggregate of $75 million. The Form S-3 Registration Statement was declared effective by the SEC on January 15, 2025. Also on January 15, 2025, we entered into an Equity Distribution Agreement (the “ATM Sales Agreement”) with Maxim Group LLC (the “Sales Agent” or “Maxim”) pursuant to which we may issue and sell shares of our common stock, covered by the prospectus supplement filed with the SEC on January 15, 2025 and accompanying base prospectus dated January 15, 2025 (together, the “ATM Prospectus”) from time to time through or to the Sales Agent, acting as our agent or principal (subject to compliance with Regulation M). Sales of shares of our common stock under the ATM Prospectus may be made in negotiated transactions (including block transactions) or transactions that are deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on Nasdaq or sales made to or through a market maker other than on an exchange, 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. Under the terms of the ATM Sales Agreement, we also may sell shares our common stock to the Sales Agent, as principal for its own account (subject to compliance with Regulation M), at a price to be agreed upon at the time of sale. If we sell shares to the Sales Agent, as principal (subject to compliance with Regulation M), we will enter into a separate agreement with the Sales Agent and we will describe the agreement in a separate prospectus supplement or pricing supplement.

On October 4, 2021, through the Operating Partnership, we acquired a 90% economic interest in Hollywood Hillview Owner, LLC (“Hollywood Hillview”), a Delaware limited liability company, to acquire and operate a multifamily building (“Hollywood Apartments”) located in Los Angeles, California. The remaining 10% economic interest in Hollywood Hillview is owned by an unaffiliated third party, True USA, LLC. Hollywood Hillview owns 100% of the membership interests in PT Hillview GP, LLC (the “PT Hillview”). We are the controlling majority owner of Hollywood Hillview; therefore, effective December 31, 2021, we have consolidated the financial statements of Hollywood Hillview.

On January 25, 2022, through the Operating Partnership, we acquired a 98% limited liability company interest in MacKenzie BAA IG Shoreline LLC (“MacKenzie Shoreline”), formed to acquire, renovate, and own the 84-unit multifamily building located at 1841 Laguna Street, Concord, CA. The joint venture partners own the remaining 2% of the limited liability company interest as well as a carried interest. We are the controlling majority owner of the MacKenzie Shoreline; therefore, effective June 30, 2022, we have consolidated the financial statements of MacKenzie Shoreline.

On April 1, 2022, we, and our newly formed, wholly owned subsidiary, FSP Merger Sub, Inc. (“Merger Sub”) entered into a reverse triangular merger agreement with FSP Satellite Place Corp. (“FSP Satellite”), pursuant to which the Merger Sub merged with and into FSP Satellite with FSP Satellite as the surviving entity, but renamed MacKenzie Satellite Place Corp. (“MacKenzie Satellite”), effective June 1, 2022, at which time MacKenzie Satellite became our wholly owned subsidiary. MacKenzie Satellite owns the Satellite Place Office Building, a six-story Class “A” suburban office building containing approximately 134,785 rentable square feet of space located on approximately 10 acres of land in Duluth, GA. The former shareholders of FSP Satellite received cash or shares of the Company, based upon their election. All former shareholders of FSP Satellite holders elected to be paid in cash with the exception of two shareholders who elected to receive common and preferred stock in the amount of $27,503 and $13,752, respectively. Subsequent to the completion of the merger, we have consolidated the financial statements of MacKenzie Satellite effective June 30, 2022.

On May 6, 2022, the Operating Partnership purchased 100% of the membership interests in eight limited liability companies (each a “Management Company”) and one parcel of entitled land from The Wiseman Company, LLC (“Wiseman”) for $18,333,000 and $3,050,000, respectively. Each Management Company is the sole general partner and owns all general partnership interest in a limited partnership (each a “Wiseman Partnership”) that owns a Class A or B office property in Napa, Fairfield, Suisun, or Woodland, California (the “Wiseman Properties”). As part of the purchase agreement, $4,650,000 of the purchase price was paid through the issuance of 206,666.67 Preferred Units of the Operating Partnership and $750,000 of the land purchase price was paid through the issuance of 77,881.62 Class A units of the Operating Partnership. We have consolidated the financial statements of the eight limited liability companies, which hold the general partnership interests in the limited partnerships, effective June 30, 2022.

7

Wiseman is a full-service real estate syndicator, developer, broker, and property manager founded in 1979. Concurrently with acquiring the Management Companies and land from Wiseman, the Operating Partnership also negotiated the right to acquire the limited partnership interests in each Wiseman Partnership at pre-determined prices over a two-year period that expired in May 2024. Management believed this transaction was strategically important as it focuses the portfolio on our desired geographic area (Western United States) and created a captive pipeline of properties. We completed the acquisition of all of the limited partnership interests in five of the eight partnerships prior to the expiration of the two-year window, and one shortly thereafter via a separate agreement. We may acquire the remaining limited partnership interests via separate agreements in the future, but there is no agreement or obligation to do so. We acquired all the limited partnership interests in, and therefore all the equity in, the following partnership on the following dates: First & Main, LP (“First and Main”) in July 2022, 1300 Main, LP (“1300 Main”) in October 2022, Woodland Corporate Center Two, LP (“Woodland Corporate Center Two”) in January 2023, Main Street West, LP (“Main Street West”) in February 2023, One Harbor Center, LP (“One Harbor Center”) in May 2024 and Green Valley Medical Center, LP (“Green Valley Medical Center”) in August 2024. Some of these acquisitions were paid in all cash, and some were purchased through issuance of 459,620.35 and 43,212.86 of the Operating Partnership’s Series A and Series B preferred units, respectively. We consolidated the financial statements of these six limited partnerships after we completed the acquisition of the limited partnership interests in each of these Wiseman Partnerships.

On February 6, 2023, we formed a new entity, MRC Aurora, LLC (“MRC Aurora”) for the purpose of owning, developing, renovating, leasing, managing, renting, and potentially selling certain real property and building and improvements located at 5000 Wiseman Way, Fairfield, California (the “Aurora Project”). The Parent Company is the manager and the Operating Partnership is the sole common member of MRC Aurora. The Operating Partnership contributed the entitled land located at 5000 Wiseman Way, Fairfield, California to MRC Aurora in exchange for the common membership interest in MRC Aurora. MRC Aurora commenced selling its preferred units in February 2024 with the goal of raising $10 million in preferred capital and closed on a construction loan of $17.15 million on February 21, 2024, to fund the development of the Aurora Project. Since the Operating Partnership has 100% of the voting rights and we, as the manager, have the managing and operating rights of MRC Aurora, we have consolidated the financial statements of MRC Aurora. As of December 31, 2024, the Operating Partnership has contributed $4.18 million (including the value of the land) in exchange for common units and $4.91 million in exchange for preferred units in MRC Aurora and we have raised $3.41 million in exchange for preferred units from outside investors.

On September 1, 2023, we formed 220 Campus Lane, LLC (“220 Campus Lane”) to acquire, lease and operate a vacant office building located at 220 Campus Lane, Fairfield, CA (“220 Campus Lane Office Building”) and Campus Lane Residential, LLC (“Campus Lane Residential”) to acquire and develop a parcel of vacant land adjacent to 220 Campus Lane Office Building into a multi-family residential community. 220 Campus Lane acquired the 220 Campus Lane Office Building, and Campus Lane Residential acquired the vacant land in September 2023. The entitlement process for the vacant land is currently underway, but our goal of commencing construction in late 2025 will be dependent upon the City’s approval of our development application that was submitted in April 2024 and securing the necessary financial resources. We own 100% of both of these companies; therefore, we consolidated the financial statements of these companies after the acquisitions were completed on September 8, 2023.

On January 1, 2024, the Operating Partnership acquired 100% membership interest in GV Executive Center, LLC (“GVEC”), which owns an office building located in Fairfield, California known as “Green Valley Executive Center” from an affiliate of our Advisers, for a net purchase price of $8,703,127, which was paid through issuance of 386,805.64 Series A Preferred Units of the Operating Partnership. The net acquisition price was determined based on the price paid for the building by the affiliate in August 2022 adjusted for the company’s other current assets and liabilities as of the acquisition date. The acquisition of GVEC was approved by our Independent Directors.

On August 26, 2024, the Company entered into a letter agreement with Maxim to provide general financial advisory and investment banking services to the Company in connection with, among other things, strategic planning, potential uplisting to a U.S. exchange (Nasdaq, New York Stock Exchange), and potential rights offering, equity issuance or other mechanisms to enhance corporate and shareholder value. In connection with the agreement, the Company has issued in a private placement an aggregate amount of 133,000 shares of common stock to Maxim’s affiliate, approximately 1% of the Company’s outstanding stock. The common stock does not have any conversion rights.

As of December 31, 2024, we have raised approximately $119.10 million from our common stock public offerings, $18.61 million from our Series A preferred stock offering and $2.47 million from our Series B preferred stock offering pursuant to the Offering Circular. As of December 31, 2024, we have issued shares of common stock, Series A preferred stock and Series B preferred stock with gross proceeds of $15.56 million, $0.34 million and $0.01 million, respectively, under our dividend reinvestment plans (each a “DRIP” and together the “DRIPs”). Of the total shares issued by us as of December 31, 2024, approximately $14.28 million and $0.11 million, respectively, worth of shares of common stock and Series A preferred stock have been repurchased under our share repurchase program. As of December 31, 2024, we have 13,473,075.79 shares of common stock, 764,887.87 shares of Series A preferred stock and 95,088.26 shares of Series B preferred stock outstanding.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation Policy

The accompanying consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and Regulation S-X. We follow the accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of our wholly owned consolidated subsidiaries and majority-owned controlled subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements reflect all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of our results for the interim periods presented. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year.

The assets and liabilities of each of the consolidated subsidiaries are separate from those of the Parent Company and the Operating Partnership. Consequently, the assets of the consolidated subsidiaries are not available to settle the obligations of the Parent Company or the Operating Partnership, and the obligations of the subsidiaries does not constitute obligations of the Parent Company or the Operating Partnership.

These unaudited consolidated financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2024, included in our annual report on Form 10-K filed with the SEC.

There have been no changes in the significant accounting policies from those disclosed in the audited financial statements for the year ended June 30, 2024.

Certain prior period information has been reclassified to conform to the current year end presentation. The reclassification has no effect on our consolidated balance sheet or the consolidated statement of operations as previously reported.

Use of Estimates

The preparation of consolidated financial statements requires management to make estimates and assumptions that affect reported asset values, liabilities, revenues, expenses and unrealized gains (losses) on investments during the reporting period. Material estimates that are susceptible to change, and actual results could differ from those estimates.

Cash, Cash Equivalents and Restricted Cash

Our cash and cash equivalents represent current bank accounts and other bank deposits free of encumbrances and having maturity dates of three months or less from the respective dates of deposit. We limit cash investments to financial institutions with high credit standing; therefore, we believe our cash investments are not exposed to any significant credit risk. The restricted cash includes escrow accounts for real property taxes, insurance, capital expenditures and tenant improvements, and debt service and leasing costs held by lenders. These balances are insured by the Federal Deposit Insurance Corporation up to certain limits. Often, the cash balances held in financial institutions by us may exceed these insured limits.

Restricted cash is subject to legal or contractual restrictions as to withdrawal or use, including restrictions that require the funds to be used for a specified purpose and restrictions that limit the purpose for which the funds can be used.

Investment Income Receivable

Investment income receivable represents dividends, distributions, and sales proceeds recognized in accordance with our revenue recognition policy but not yet received as of the date of the consolidated financial statements. We monitor and adjust our receivables, and those deemed to be uncollectible are written-off only after all reasonable collection efforts are exhausted. We believe, based on the credit worthiness of the obligors, that all investments income receivable balances outstanding as of December 31, 2024 and June 30, 2024, are collectible and do not require recording any uncollectible allowance.

8

Rental, Reimbursement and Other Property Income

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. During the three and six months ended December 31, 2024, we recorded lease termination income of $3,000,000 due to an early lease termination by one of the tenants of our Satellite Place Office Building as a part of rental, reimbursement and other property income in the consolidated statements of operations.

Rents and Other Receivables

We will periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. We exercise judgment in establishing these allowances and consider payment history and current credit status of tenants in developing these estimates. As of December 31, 2024 and June 30, 2024, we recognized an allowance for doubtful accounts of $183,178 and $213,797, respectively.

Capital Pending Acceptance

We conduct closings for new issuance of our Series A and Series B preferred stock and MRC Aurora preferred units twice per month and admit new stockholders effective beginning the first of each month. Subscriptions are effective only upon our acceptance. Any gross proceeds received from subscriptions which are not accepted as of the period-end are classified as capital pending acceptance in the consolidated balance sheets. We close our common stock ATM sales on a daily basis. As of December 31, 2024 and June 30, 2024, capital pending acceptance associated with our Series A and B preferred stock was $171,088 and $297,000, respectively.

Income Taxes and Deferred Tax Liability

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 net capital gain) to the stockholders and meets certain other conditions. To the extent 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% nondeductible 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. 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 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 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 and GVEC are limited liability companies. First & Main, 1300 Main, Woodland Corporate Center Two, Main Street West, One Harbor Center, and Green Valley Medical Center are limited partnerships. Accordingly, all income tax liabilities of these entities flow through to their partners, which, subject to the minority exceptions described in this document, ultimately is the Company. Therefore, no income tax provisions are recorded for these entities.

We follow ASC 740, Income Taxes (“ASC 740”), to account for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for the future tax liabilities attributable to the net unrealized investment gain (losses) on existing investments. In estimating future tax consequences, we consider all future events, other than enactments of changes in tax laws or rates. The effect on deferred tax assets and liabilities of a change in tax rates will be recognized as income or expense in the period of enactment. In addition, ASC 740 provides guidance for recognizing, measuring, presenting, and disclosing uncertain tax positions in the financial statements. As of December 31, 2024 and June 30, 2024, there were no uncertain tax positions. Management’s determinations regarding ASC 740 are subject to review and adjustment at a later date based upon factors including, but not limited to, an on-going analysis of tax laws, regulations and interpretations thereof.

9

Subsequent Events

Subsequent events are events or transactions that occur after the date of the consolidated balance sheets but before the date the consolidated financial statements are issued. Subsequent events that provide additional evidence about conditions that existed at the date of the consolidated balance sheets are considered in the preparation of the consolidated financial statements presented herein. Subsequent events that occur after the date of the consolidated balance sheets that do not provide evidence about the conditions that existed as of the date of the consolidated statements of changes in equity are considered for disclosure based upon their significance in relation to our consolidated financial statements taken as a whole.

Fair Value of Financial Instruments

Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. We believe that the carrying amounts of our financial instruments, consisting of cash, restricted cash, investments income, rent and other receivables, prepaid expenses and other assets, mortgage notes payable, accounts payable and accrued liabilities, below-market lease liabilities, net, deferred rent and other liabilities and due to related entities, approximate the fair values of such items based on their nature, terms, and interest rates.

Equity Securities

We have minority and non-controlling equity investments in various limited partnerships and non-traded entities, which do not have readily determinable fair values. We do not have controlling interests in these entities. Thus, these investments have been recorded as investments in equity securities in accordance with ASC Topic 321, Investments – Equity Securities, and measured at fair value. The changes in the fair value of these investments are recorded in the consolidated statements of operations.

Equity Method Investments with Fair Value Option Election

We elected the fair value option of accounting for the investments listed below that would have otherwise been recorded under the equity method of accounting. The primary purpose of electing the fair value option was to enhance the transparency of our financial condition. Changes in the fair value of these investments, which are inclusive of equity in income, are recorded in the consolidated statements of operations during the period such changes occur.

The below list of investments would have been accounted for under the equity method if the fair value method had not been elected and have been included in investments in the consolidated balance sheets as of December 31, 2024 and June 30, 2024:

Investee	Legal Form	Asset Type	% Ownership				Fair Value as of December 31, 2024
5210 Fountaingate, LP	Limited Partnership	LP Interest		9.92	%		$	4,950
Lakemont Partners, LLC	Limited Liability Company	LP Interest		17.02	%			805,000
Martin Plaza Associates, LP	Limited Partnership	GP Interest		1.00	%	*		536,848
Westside Professional Center I, LP	Limited Partnership	GP Interest		1.00	%	*		1,251,646
Total							$	2,598,444

Investee	Legal Form	Asset Type	% Ownership				Fair Value as of June 30, 2024
5210 Fountaingate, LP	Limited Partnership	LP Interest		9.92	%		$	4,950
Lakemont Partners, LLC	Limited Liability Company	LP Interest		17.02	%			791,990
Green Valley Medical Center, LP	Limited Partnership	GP Interest		1.00	%	*		2,005,102
Martin Plaza Associates, LP	Limited Partnership	GP Interest		1.00	%	*		465,053
Westside Professional Center I, LP	Limited Partnership	GP Interest		1.00	%	*		1,436,171
Total							$	4,703,266

*The general partner has a 1% partnership interest but is also entitled to profit sharing distributions ranging from 25% to 50% after certain thresholds are met.

10

Assets and Liabilities Held for Sale

We classify long-lived assets or disposal groups to be sold as held for sale in the period in which all of the following criteria are met:

• Management, having the authority to approve the action, commits to a plan to sell the asset (disposal group);

• The asset (disposal group) is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (disposal groups);

• An active program to locate a buyer and other actions required to complete the plan to sell the asset (disposal group) have been initiated;

• The sale of the asset (disposal group) is probable, and transfer of the asset (disposal group) is expected to qualify for recognition as a completed sale within one year, except if events or circumstances beyond our control extend the period of time required to sell the asset or disposal group beyond one year;

• The asset (disposal group) is being actively marketed for sale at a price that is reasonable in relation to its current fair value. The price at which a long-lived asset (disposal group) is being marketed is indicative of whether the entity currently has the intent and ability to sell the asset (disposal group). A market price that is reasonable in relation to fair value indicates that the asset (disposal group) is available for immediate sale, whereas a market price in excess of fair value indicates that the asset (disposal group) is not available for immediate sale; and

• Actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

On the day that these criteria are met, we suspend depreciation on the investment properties held for sale, including depreciation for tenant improvements and additions, as well as on the amortization of acquired in-place leases. The investment properties and liabilities associated with those investment properties that are held for sale are classified separately on the consolidated balance sheets for the most recent reporting period and recorded at the lesser of the carrying value or fair value less costs to sell. The prior period investment properties and liabilities associated with those investment properties that are classified as held for sale have been classified separately as assets and liabilities held for sale on the consolidated balance sheet as of June 30, 2024 for comparative purposes. Refer to Note 5.

Leases

Six of our properties, 1300 Main, Main Street West, Woodland Corporate Center, Green Valley Executive Center, One Harbor Center and Green Valley Medical Center had solar equipment leases in place at the time of our acquisition. Therefore, these existing solar leases were reassessed at the acquisition date and were recorded as finance leases in accordance with ASC 842. We record leases on the consolidated balance sheets in the form of a lease liability for the present value of future minimum payments under the lease terms and a right-of-use asset equal to the lease liability adjusted for items such as deferred or prepaid rent, lease incentives, and any impairment of the right-of-use asset. The discount rate used in determining the lease liability is based upon incremental borrowing rates that we could obtain for similar loans as of the date of commencement or renewal. We do not record leases on the consolidated balance sheets that are classified as short term (less than one year).

At lease inception, we determine the lease term by considering the minimum lease term and all optional renewal periods that are reasonably certain to be exercised. The lease term is also used to calculate straight-line rent expense. The depreciable life of leasehold improvements is limited by the estimated lease term, including renewals if they are reasonably certain to be exercised. Our leases do not contain residual value guarantees or material variable lease payments that will impact our ability to pay dividends or cause us to incur additional expenses.

The amortization of the right-of-use asset arising from finance leases is expensed through depreciation and amortization expense and the interest on the related lease liability is expensed through interest expense on our consolidated statements of operations.

Impairment of Real Estate Assets

We continually monitor events and changes in circumstances that could indicate that the carrying value of our real estate and related intangible assets may not be recoverable. When indicators of potential impairment emerge, we assess whether we will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this assessment, if we do not believe that we will recover the carrying value of the real estate and related intangible assets, we will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets.

11

During the three and six months ended December 31, 2024, we recorded an impairment loss of $5,093,918 and $9,500,167, respectively, with respect to our Main Street West Office Building due to an early lease termination by the anchor tenant and maturity default of the debt secured by the property. We utilized the inputs from a recent third-party appraisal and potential new leases to estimate the fair value of the property to determine the impairment amount. We consider these inputs as Level 3 measurements within the fair value hierarchy.

Stock-based Compensation

ASC 718, Stock-based Compensation, requires generally that all equity awards granted to employees and consultants be accounted for at fair value. This fair value is measured at grant date for stock settled awards, and at subsequent exercise or settlement for cash-settled awards. Under this method, we recorded the 133,000 shares of common stock issued to Maxim discussed in Note 1 at fair value as a deferred offering cost. The fair value is computed based on the trading price of the common stock on the OTCQX capital market at the grant date of August 26, 2024.

Reportable Segments

ASC 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. We have one reportable segment, income-producing real estate properties, which consists of activities related to investing in real estate. The real estate properties are geographically diversified throughout the United States, and we evaluate operating performance on an overall portfolio level.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting – Improvements to Reportable Segments Disclosures, to enhance reportable segment disclosure requirements, primarily through increased disclosures about significant segment expenses. The amendment is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and should be applied retrospectively to all periods presented. Early adoption is permitted. We are currently evaluating the impact of these amendments on our consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes – Improvements to Income Tax, to enhance the transparency and decision usefulness of income tax disclosures, primarily related to rate reconciliation and income taxes paid information. The amendment is effective for annual periods beginning after December 15, 2024, and should be applied on a prospective basis, with the option to apply retrospectively. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. We are currently evaluating the impact of adopting these amendments on our consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. The ASU’s purpose is to improve the disclosures about a public business entity’s expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions (such as cost of sales, SG&A, and research and development). This ASU is effective for the Company’s annual reporting periods beginning after December 15, 2026 and interim reporting periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of this ASU on our consolidated financial statements.

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NOTE 3 – INVESTMENTS IN REAL ESTATE

The following tables provide summary information regarding our operating properties, which are owned through our subsidiaries. The ownership interest shown below is the percentage of the property owned by the subsidiary, not the percentage of the subsidiary owned by the Parent Company or the Operating Partnership.

Consolidated Operating Properties

Property Name:	Commodore Apartments	Pon de Leo Apartments	Hollywood Apartments	Shoreline Apartments
Property Owner:	Madison-PVT Partners LLC	PVT-Madison Partners LLC	PT Hillview GP, LLC	MacKenzie BAA IG Shoreline LLC
Location:	Oakland, CA	Oakland, CA	Hollywood, CA	Concord, CA
Number of Tenants:	45	36	44	75
Year Built:	1912	1929	1917	1968
Ownership Interest:	100%	100%	100%	100%
Property Name:	Satellite Place Office Building	First & Main Office Building	1300 Main Office Building	Woodland Corporate Center
Property Owner:	MacKenzie Satellite Place Corp.	First & Main, LP	1300 Main, LP	Woodland Corporate Center Two, LP
Location:	Duluth, GA	Napa, CA	Napa, CA	Woodland, CA
Number of Tenants:	4	9	7	13
Year Built:	2002	2001	2020	2004
Ownership Interest:	100%	100%	100%	100%
Property Name:	Main Street West Office Building	220 Campus Lane Office Building	Green Valley Executive Center	One Harbor Center
Property Owner:	Main Street West, LP	220 Campus Lane, LLC	GV Executive Center, LLC	One Harbor Center, LP
Location:	Napa, CA	Fairfield , CA	Fairfield , CA	Suisun,CA
Number of Tenants:	8	6	16	12
Year Built:	2007	1990	2006	2001
Ownership Interest:	100%	100%	100%	100%
Property Name	Green Valley Medical Center
Property Owner	Green Valley Medical Center, LP
Location:	Fairfield , CA
Number of Tenants:	12
Year Built:	2002
Ownership Interest:	100%

The following table presents the purchase price allocation of real estate asset acquired during the six months ended December 31, 2024 based on asset acquisition accounting.

Property Name:	Green Valley Medical Center
Acquisition Date:	August 1, 2024
Purchase Price Allocation
Land	$	1,582,517
Building		9,469,081
Site Improvements		705,581
Tenant Improvements		518,070
Lease In Place		556,019
Leasing Commissions		231,042
Legal & Marketing Lease Up Costs		90,214
Solar Finance Lease		600,000
Total assets acquired		13,752,525
Net leasehold liability		(74,271	)
Total assets acquired, net	$	13,678,254

The total depreciation expense of our operating properties for the three and six months ended December 31, 2024 was $1,525,655 and $3,107,179, respectively. The total depreciation expense of our operating properties for the three and six months ended December 31, 2023 was $1,146,504 and $2,276,279, respectively.

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Operating Leases:

Our real estate assets are leased to tenants under operating leases that contain varying terms and expirations. The leases may have provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. We retain substantially all the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, we do not require a security deposit from tenants on our commercial real estate properties, depending upon the terms of the respective leases and the creditworthiness of the tenants. Even when required, security deposits generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of the security deposit. Security deposits received in cash related to tenant leases are included in other accrued liabilities in the accompanying consolidated balance sheets and were immaterial as of December 31, 2024 and June 30, 2024.

The following table presents the components of income from real estate operations for the three and six months ended December 31, 2024:

	Three Months Ended		Six Months Ended
	December 31, 2024		December 31, 2024
Lease income - Operating leases	$	7,740,656	$	12,359,834
Variable lease income (1)		289,660		622,711
	$	8,030,316	$	12,982,545

(1) Primarily includes tenant reimbursements for utilities and common area maintenance.

The following table presents the components of income from real estate operations for the three and six months ended December 31, 2023:

	Three Months Ended		Six Months Ended
	December 31, 2023		December 31, 2023
Lease income - Operating leases	$	3,334,728	$	6,690,518
Variable lease income (1)		242,758		446,949
	$	3,577,486	$	7,137,467

(1) Primarily includes tenant reimbursements for utilities and common area maintenance.

As of December 31, 2024, the future minimum rental income from our real estate properties under non-cancelable operating leases is as follows:

Year ended June 30, :	Rental Income
2025	$	5,711,908
2026		9,023,532
2027		6,845,370
2028		5,516,828
2029		4,403,431
Thereafter		10,512,799
Total	$	42,013,868

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Lease Intangibles, Above-Market Lease Assets and Below-Market Lease Liabilities, Net

As of December 31, 2024 and June 30, 2024, our acquired lease intangibles, above-market lease assets, and below-market lease liabilities were as follows:

	As of December 31, 2024
	Lease Intangibles			Above-Market Lease Asset			Below-Market Lease Liabilities
Cost	$	11,612,977		$	824,870		$	2,914,040
Accumulated amortization		(5,146,812	)		(342,153	)		(1,677,171	)
Total	$	6,466,165		$	482,717		$	1,236,869
Weighted average amortization period (years)		4.8			4.6			4.8

	As of June 30, 2024
	Lease Intangibles			Above-Market Lease Asset			Below-Market Lease Liabilities
Cost	$	10,738,744		$	702,254		$	2,717,150
Accumulated amortization		(4,168,692	)		(226,628	)		(1,432,318	)
Total	$	6,570,052		$	475,626		$	1,284,832
Weighted average amortization period (years)		4.8			4.6			4.8

Our amortization of lease intangibles, above-market lease assets and below-market lease liabilities for the three and six months ended December 31, 2024, was as follows:

	Three Months Ended December 31, 2024
	Lease Intangibles		Above-Market Lease Asset		Below-Market Lease Liabilities
Amortization	$	650,269	$	55,668	$	(117,672	)

	Six Months Ended December 31, 2024
	Lease Intangibles		Above-Market Lease Asset		Below-Market Lease Liabilities
Amortization	$	1,349,501	$	115,525	$	(244,853	)

Our amortization of lease intangibles, above-market lease assets and below-market lease liabilities for the three and six months ended December 31, 2023, was as follows:

	Three Months Ended December 31, 2023
	Lease Intangibles		Above-Market Lease Asset		Below-Market Lease Liabilities
Amortization	$	413,267	$	29,425	$	(124,858	)

	Six Months Ended December 31, 2023
	Lease Intangibles		Above-Market Lease Asset		Below-Market Lease Liabilities
Amortization	$	843,160	$	58,851	$	(249,718	)

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The following table provides the projected amortization expense and adjustments to revenue from tenants for intangible assets and liabilities for the next five years:

	Year Ended June 30,
	2025 (remainder)			2026			2027			2028			2029			Thereafter
In-place leases, to be included in amortization	$	1,195,800		$	1,914,065		$	1,163,690		$	789,035		$	630,132		$	873,536
Above-market lease intangibles	$	88,591		$	137,574		$	99,803		$	53,296		$	43,298		$	60,155
Below-market lease liabilities		(196,052	)		(354,995	)		(264,696	)		(177,823	)		(138,172	)		(105,131	)
	$	(107,461	)	$	(217,421	)	$	(164,893	)	$	(124,527	)	$	(94,874	)	$	(44,976	)

NOTE 4 – INVESTMENTS

The following table summarizes the composition of our equity method investments with fair value option election and other equity securities at fair value as of December 31, 2024 and June 30, 2024:

	Fair Value		Fair Value
Asset Type	December 31, 2024		June 30, 2024
Non Traded Companies	$	972,545	$	1,341,164
GP Interests (Equity method investment with fair value option election)		1,788,494		3,906,326
LP Interests (Equity method investment with fair value option election)		809,950		796,940
Total	$	3,570,989	$	6,044,430

Our above total investments at fair value are disclosed in two separate lines as investments and equity method investments in the consolidated balance sheets as of December 31, 2024 and June 30, 2024.

During the three and six months ended December 31, 2024, we realized a total net gain of $62,845 and $214,215, respectively, from two investment liquidations and disposals (Blackstone Real Estate Income Trust, Inc. and Highlands REIT, Inc.). During the three and six months ended December 31, 2023, we realized a total net loss of $1,285,998 from one investment liquidation and disposal (Highlands REIT, Inc.) and one investment write-off (BP3 Affiliates, LLC).

The following table presents fair value measurements of our investments as of December 31, 2024 and June 30, 2024, according to the fair value hierarchy that is described in our annual report on Form 10-K:

	As of  December 31, 2024
Asset Type		Total		Level I		Level II		Level III
Non Traded Companies		$	972,545	$	-	$	-	$	972,545
GP Interests			1,788,494		-		-		1,788,494
LP Interests			809,950		-		-		809,950
Total		$	3,570,989	$	-	$	-	$	3,570,989

	As of June 30, 2024
Asset Type	Total		Level I		Level II		Level III
Non Traded Companies	$	1,341,164	$	-	$	-	$	1,341,164
GP Interests		3,906,326		-		-		3,906,326
LP Interests		796,940		-		-		796,940
Total	$	6,044,430	$	-	$	-	$	6,044,430

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The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III of the fair value hierarchy) for the six months ended December 31, 2024:

Balance at July 1, 2024	$	6,044,430
Purchases of investments		212,364
Transfer to Investments in Real Estate		(2,627,725	)
Proceeds from sales, net		(774,078	)
Net realized gain		214,215
Net unrealized gain		501,783
Ending balance at December 31, 2024	$	3,570,989

For the six months ended December 31, 2024, net change in unrealized losses included in earnings relating to Level III investments still held at December 31, 2024 was $124,523.

The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III of the fair value hierarchy) for the three months ended December 31, 2023:

Balance at July 1, 2023	$	22,148,980
Purchases of investments		551,341
Proceeds from sales, net		(4,020,482	)
Return of capital distributions		(404,187	)
Net realized loss		(1,285,998	)
Net unrealized loss		(445,291	)
Ending balance at December 31, 2023	$	16,544,363

There were no transfers of investments from Level III to Level I category during the three months ended December 31, 2023.

For the six months ended December 31, 2023, net change in unrealized losses included in earnings relating to Level III investments still held at December 31, 2023 was $2,113,291.

The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at December 31, 2024:

Asset Type	Fair Value		Primary Valuation Techniques	Unobservable Inputs Used	Range			Weighted Average
Non Traded Companies	$	972,545	Market Activity	Secondary market industry publication
				Acquisition cost
GP Interests		1,788,494	Direct Capitalization Method	Capitalization rate		6.3	%		6.3	%
				Discount rate		6.8% - 7.0	%		6.9	%
LP Interests		805,000	Discounted Cash Flow	Discount rate		7.0	%		7.0	%
LP Interests		4,950	Estimated Liquidation Value	Sponsor provided value
	$	3,570,989

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The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2024:

Asset Type	Fair Value		Primary Valuation Techniques	Unobservable Inputs Used	Range			Weighted Average
Non Traded Companies	$	1,341,164	Market Activity	Secondary market industry publication
				Acquisition cost
GP Interests		3,906,326	Direct Capitalization Method	Capitalization rate		6.3% - 6.5	%		6.3	%
				Discount rate		6.8% - 7.0	%		7.0	%
LP Interests		791,990	Discounted Cash Flow	Discount rate		7.0	%		7.0	%
LP Interests		4,950	Estimated Liquidation Value	Sponsor provided value
	$	6,044,430

Summarized Financial Statements for Equity Method Investments (Fair Value Option)

Our investments in securities are generally in small and mid-sized companies in a variety of industries. In accordance with the Rule 8-03(b)(3) of Regulation S-X applicable for smaller reporting companies, we must determine which of our equity method investments measured at fair value under the Fair Value Option are considered “significant”, if any. Regulation S-X mandates the use of three different tests to determine if any of our investments are considered significant investments: the investment test, the asset test, and the income test. The rule requires summarized financial statements for any significant equity method investments in an annual and interim report if any of the three tests exceed 20%.

In addition to the SEC rules, ASC 323-10-50-3(c) requires summarized financial statements of our equity method investments, including those reported under the fair value option, if they are material individually or in aggregate.

None of our equity method investments accounted under the fair value option was determined to be individually significant under any of the tests as of December 31, 2024. Furthermore, our equity method investments accounted under the fair value option in aggregate were not material as of December 31, 2024.

Unconsolidated Significant Subsidiaries

In accordance with SEC Rules 3-09 and 4-08(g) of Regulation S-X, we must determine which of our investments in securities are considered “significant subsidiaries”, if any. Regulation S-X mandates the use of three different tests to determine if any of our controlled investments are significant subsidiaries: the investment test, the asset test, and the income test. Rule 3-09 of Regulation S-X requires separate audited financial statements for any unconsolidated majority-owned subsidiary in an annual report if any of the three tests exceed 20%. Rule 4-08(g) of Regulation S-X requires summarized financial information in an annual report if any of the three tests exceeds 10%.

As of December 31, 2024 and June 30, 2024, none of our investments in securities was considered unconsolidated significant subsidiaries under the SEC rules described above.

NOTE 5 – REAL ESTATE ACQUISITIONS AND HELD FOR SALE

As discussed in Note 1, on August 1, 2024, the Operating Partnership completed the acquisition of 100% limited partnership interest in Green Valley Medical Center for a total purchase price of $3,004,194, of which $2,712,194 was paid through the issuance of 120,541.96 Series A Preferred Units of the Operating Partnership.

Assets and Liabilities Held for Sale

In August 2024, the Company decided to list Hollywood Apartments for sale and met the criteria to be classified as held for sale, which requires us to present the related assets and liabilities as separate line items in our consolidated balance sheets. We recorded these assets and liabilities at the lesser of the carrying value or fair value less costs to sell. As of December 31, 2024, we did not record any impairment loss allowance on Hollywood Apartments, which is our only asset held for sale.

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The following table presents information related to the major classes of assets and liabilities that were classified as held for sale in our consolidation balance sheets:

	December 31, 2024			June 30, 2024
Assets
Real estate assets
Land	$	8,704,577		$	8,704,577
Building, fixtures and improvements		14,243,695			14,236,895
Intangible lease assets		471,474			464,449
Less: accumulated depreciation		(1,468,443	)		(1,373,139	)
accumulated amortization		(371,378	)		(364,622	)
Total real estate assets, net		21,579,925			21,668,160
Cash and cash equivalents		99,663			77,016
Restricted cash		268,507			444,063
Investment income, rent and other receivable		164,351			176,277
Prepaid expenses and other assets		35,279			30,253
Total assets	$	22,147,725		$	22,395,769
Liabilities
Deferred rent and other liabilities		286,740			241,267
Accounts payable and accrued liabilities		127,848			113,917
Due to related entities		497			359
Total liabilities	$	415,085		$	355,543

As of February 1, 2025, management decided to discontinue marketing Hollywood Apartments for sale. As a result, it no longer qualifies as held for sale since it is no longer listed.

NOTE 6 –LEASES

Lessee Arrangements

As discussed in Note 2, we acquired six partnerships which had solar equipment leases in place. We reassessed the leases as of the acquisition date and recorded them as finance leases in accordance with ASC 842. Our leases have remaining terms of 3.67 to 8.25 years. Right-of-use assets and lease liabilities by lease type, and the associated balance sheet classifications, are as follows:

	Balance Sheet Classification	December 31, 2024		June 30, 2024
Right-of-use assets:
Finance leases	Real estate assets, net	$	2,157,423	$	1,799,962
Lease liabilities:
Finance leases	Finance lease liabilities	$	2,377,410	$	1,887,984

We have included these leases in real estate assets, net as follows:

	December 31, 2024			June 30, 2024
Building, fixtures and improvements	$	2,622,675		$	2,022,675
Accumulated depreciation		(465,252	)		(222,713	)
Real estate assets, net	$	2,157,423		$	1,799,962

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Lease Expense

The components of total lease cost were as follows for the three and six months ended December 31, 2024:

	Three Months Ended December 31, 2024		Six Months Ended December 31, 2024
Finance lease cost
Right-of-use asset amortization	$	126,270	$	242,540
Interest expense		32,537		57,504
Total lease cost	$	158,807	$	300,044

The components of total lease cost were as follows for the three and six months ended December 31, 2023:

	Three Months Ended December 31, 2023		Six Months Ended December 31, 2023
Finance lease cost
Right-of-use asset amortization	$	20,493	$	40,986
Interest expense		4,272		11,355
Total lease cost	$	24,765	$	52,341

Lease Obligations

Future undiscounted lease payments for finance leases with initial terms of one year or more are as follows:

Fiscal Year Ending June 30, :	Finance Leases
2025 (remainder)	$	180,659
2026		378,742
2027		388,783
2028		399,268
2029		563,133
Thereafter		911,365
Total undiscounted lease payments		2,821,950
Less: Imputed interest		(444,540	)
Net lease liabilities	$	2,377,410

Supplemental Lease Information

	December 31, 2024		June 30, 2024
Finance lease weighted average remaining lease term (years)	5.82 years			5.83 years
Finance lease weighted average discount rate		5.0%		5.0%
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from finance leases	$	110,574	$	104,416
Right-of-use assets obtained in exchange for new finance lease liabilities	$	600,000	$	1,363,980

NOTE 7 – VARIABLE INTEREST ENTITIES

A variable interest in a variable interest entity (VIE) is an investment or other interest that will absorb portions of the VIE’s expected losses and/or receive portions of the VIE’s expected residual returns. Our variable interests in VIEs include limited partnership interests. VIEs sometimes finance the purchase of assets by issuing limited partnership interests that are either collateralized by or indexed to the assets held by the VIE.

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The enterprise with a controlling financial interest in a VIE is known as the primary beneficiary and consolidates the VIE. We determine whether we are the primary beneficiary of a VIE by performing an analysis that principally considers: (a) which variable interest holder has the power to direct activities of the VIE that most significantly impact the VIE’s economic performance; (b) which variable interest holder has the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE; (c) the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders; (d) the VIE’s capital structure; (e) the terms between the VIE and its variable interest holders and other parties involved with the VIE; and (f) related-party relationships. We reassess our evaluation of whether an entity is a VIE when certain reconsideration events occur. We reassess our determination of whether we are the primary beneficiary of a VIE on an ongoing basis based on current facts and circumstances.

Nonconsolidated VIEs

As of December 31, 2024 and June 30, 2024, two of our unconsolidated VIEs include interests in limited partnerships and limited liability companies. We have determined that the Company is not the primary beneficiary of these entities because the managing partner or member of each of these VIEs has the power to direct the activities that most significantly affect the VIE’s economic performance. Accordingly, these VIEs have not been consolidated with us, and they have been reported as equity method investments at fair value in the December 31, 2024 and June 30, 2024 consolidated balance sheets.

The table below presents a summary of the nonconsolidated VIEs in which we hold variable interests:

Total Nonconsolidated VIEs	As of December 31, 2024		As of June 30, 2024
Fair value of investments in VIEs	$	809,950	$	796,940
Carrying value of variable interests - assets	$	867,358	$	867,358
Maximum Exposure to Loss:
Limited Partnership Interest	$	867,358	$	867,358

Our exposure to the obligations of VIEs is generally limited to the carrying value of the limited partnership interests in these entities.

NOTE 8 – RELATED PARTY TRANSACTIONS

Advisory Agreements Effective January 1, 2021:

As discussed in Note 1, on January 26, 2021, our Board of Directors approved, effective January 1, 2021, two advisory agreements, an Advisory Management Agreement with the Real Estate Adviser and the Amended and Restated Investment Advisory Agreement with the Investment Adviser.

The terms of the Advisory Management Agreement with the Real Estate Adviser provide that we will continue to pay an Asset Management Fee on essentially the same terms as we were paying the Investment Adviser prior to 2021, namely based upon a percentage of Invested Capital (3% of the first $20 million, 2% of the next $80 million, and 1.5% over $100 million). Invested Capital is equal to the amount calculated by multiplying the total number of outstanding shares of common stock, shares of preferred stock, and the partnership units (units in our operating partnership issued by us and held by persons other than us) issued by us by the price paid for each or the value ascribed to each in connection with their issuance. The Advisory Management Agreement also provides for a 2.5% Acquisition Fee on new (non-security) purchases, subject to certain limitations designed to eliminate incentives to “churn” our assets. The new Advisory Management Agreement also provides for 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.

The Investment Adviser will receive an annual fee equal to $100 for providing the investment advice to us as to our securities portfolio under the Amended and Restated Investment Advisory Agreement.

During the three and six months ended December 31, 2024, we incurred asset management fees of $858,578 and $1,707,036, respectively. During the three and six months ended December 31, 2023, we incurred asset management fees of $790,557 and $1,577,634, respectively.

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The asset management fees mentioned above were based on the following quarter ended Invested Capital segregated in three columns based on the annual fee rate:

Asset Management Fee Annual %		3.0%		2.0%		1.5%	Total Invested Capital
Quarter ended:
September 30, 2024	$	20,000,000	$	80,000,000	$	81,925,868	$	181,925,868
December 31, 2024	$	20,000,000	$	80,000,000	$	82,656,576	$	182,656,576
Quarter ended:
September 30, 2023	$	20,000,000	$	80,000,000	$	64,229,944	$	164,229,944
December 31, 2023	$	20,000,000	$	80,000,000	$	64,735,338	$	164,735,338

During the three and six months ended December 31, 2024 and 2023, we did not incur or accrue any incentive management fee under the new Advisory Management Agreement.

Property Management and Leasing Services:

On May 6, 2022, the Real Estate Adviser’s newly formed wholly owned subsidiary, Wiseman Company Management, LLC (“WCM”), purchased the property management and leasing services rights from Wiseman. Therefore, effective as of the acquisition date, WCM has been providing property management and leasing services to the limited partnerships acquired from WCM affiliates in accordance with the pre-existing agreements. There have been no changes to any of the management services agreements terms with these limited partnerships since the acquisition of the property management service rights. In addition, WCM also provides the property management and leasing services to 220 Campus Lane under a similar term as the eight-property partnership.

During the three and six months ended December 31, 2024, these WCM managed limited partnerships paid total property management fees of $172,206 and $344,412, respectively, and total leasing commissions of $83,610 and $474,287, respectively, to WCM. In addition, during the three and six months ended December 31, 2024, the ten limited partnerships also paid $390,677 to WCM for direct operating costs and construction of tenant improvements.

During the three and six months ended December 31, 2023, these WCM managed limited partnerships paid total property management fees of $132,220 and $257,970, respectively, and total leasing commissions of $116,727 and $181,635, respectively, to WCM. In addition, during the three and six months ended December 31, 2023, the eight limited partnerships also paid $440,596 and $840,367, respectively, to WCM for direct operating costs and construction of tenant improvements.

Organization and Offering Costs Reimbursement:

As detailed in the Offering Circular, offering costs incurred and paid by us in excess of $825,000 (excluding legal fees) in connection with the offering of preferred stock will be reimbursed by the Advisers except to the extent that 10% in broker fees are not incurred during the issuance of the shares of preferred stock. In such case, the broker fees savings are available to us for paying marketing expenses or other non-cash compensation and therefore the broker fees savings increases the offering cost reimbursement threshold from the Advisers. As of November 1, 2024, the date of the Offering Circular termination, we incurred $1,465,754 (excluding legal fees) of offering costs, of which $1,443,519 relates to offering cost paid by MacKenzie on behalf of us in connection with the preferred stock offering. As of June 30, 2024, we incurred $1,385,342 (excluding legal fees) of offering costs, of which $1,363,107 relates to offering cost paid by MacKenzie on behalf of us in connection with the preferred stock offering. The total offering cost incurred as of December 31, 2024 and June 30, 2024 were in excess of the total offering cost reimbursement threshold including the broker savings by $328,970, and $259,575, respectively. Of the  cumulative offering costs in excess of the reimbursable threshold of $328,970, as of December 31, 2024, $259,575 have been reimbursed by the Advisor as of December 31, 2024. The remaining reimbursable amount of $69,395 is expected to be reimbursed by the Adviser in March 2025.

Administration Agreement:

Under the Administration Agreement, we reimburse MacKenzie for its allocable portion of overhead and other expenses it incurs in performing its obligations under the Administration Agreement, including furnishing us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing us with other administrative services, subject to the independent directors’ approval. In addition, we reimburse MacKenzie for the fees and expenses associated with performing compliance functions, and its allocable portion of the compensation of our Chief Financial Officer, Chief Compliance Officer, Director of Accounting and Financial Reporting, and any administrative support staff.

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Since November 1, 2018, MacKenzie has provided transfer agent services, with the out-of-pocket costs incurred by MacKenzie being reimbursed by us. No fee (only cost reimbursement) is paid to MacKenzie for this service. Effective March 5, 2024, to comply with Nasdaq listing requirements, we hired Securities Transfer Corporation, a third-party transfer agent, to provide these services for our common and Series B preferred stock. However, effective September 30, 2024, Computershare Limited, another third-party transfer agent, took over as transfer agent for our common stock. 

The administrative cost reimbursements for the three and six months ended December 31, 2024 were $167,464 and $334,928, respectively. The administrative cost reimbursements for the three and six months ended December 31, 2023 were $189,184 and $378,367, respectively. The transfer agent services cost reimbursement for the three and six months ended December 31, 2024 were $1,536 and $3,072, respectively. The transfer agent services cost reimbursement for the three and six months ended December 31, 2023 were $16,566 and $33,133, respectively.

The table below outlines the related party expenses incurred for the six months ended December 31, 2024 and 2023, and unpaid as of December 31, 2024, and June 30, 2024.

	Six Months Ended				Unpaid as of
Types and Recipient	December 31, 2024		December 31, 2023		December 31, 2024		June 30, 2024
Asset management fees- the Real Estate Adviser	$	1,707,036	$	1,577,634	$	-	$	-
Administrative cost reimbursements - MacKenzie		334,928		378,367		-		-
Asset acquisition fees- the Real Estate Adviser (1)		292,000		107,500		-		-
Transfer agent cost reimbursements - MacKenzie		3,072		33,133		-		-
Organization & Offering Cost (2) - MacKenzie		32,612		95,295		32,612		79,632
Other expenses (3)- MacKenzie and Subsidiary’s GPs		-		-		89,834		91,987
Due to related entities					$	122,446	$	171,619

⁽¹⁾ Asset acquisition fees paid to the Real Estate Adviser were capitalized as a part of the real estate basis in accordance with our policy. The acquisition fee paid during the six months ended December 31, 2024 was for the acquisition of Green Valley Medical Center in August 2024.

⁽²⁾ Offering costs paid by MacKenzie - discussed in this Note under organization and offering costs reimbursements.

⁽³⁾ Expenses paid by MacKenzie and General Partner of a subsidiary on behalf of us and subsidiary.

NOTE 9 – MARGIN LOANS

We have a brokerage account through which we buy and sell publicly traded securities. The provisions of the account allow us to borrow on certain securities held in the account and to purchase additional securities based on the account equity (including cash). Amounts borrowed are collateralized by the securities held in the account and bear interest at a negotiated rate payable monthly. Securities pledged to secure margin balances cannot be specifically identified as a portion of all securities held in a brokerage account are used as collateral. As of December 31, 2024 and June 30, 2024, we had no margin credit available for cash withdrawal or the ability to purchase in additional securities. Accordingly, as of December 31, 2024 and June 30, 2024, there was no amount outstanding under this short-term credit line.

NOTE 10 – MORTGAGE NOTES PAYABLE, NOTES PAYABLE AND DEBT GUARANTY

Madison and PVT Notes Payable

On February 26, 2021, Madison and PVT obtained mortgage loans from First Republic Bank in the amounts of $6,737,500 and $8,387,500, respectively, both at a fixed interest rate of 3.0% per annum through April 1, 2026. Effective May 1, 2026, interest rates will be the average of the twelve most recently published yields on U.S. Treasury securities adjusted a constant maturity of one year as published by the Federal Reserve System in the Statistical Release H.15 plus 2.75% per annum. The loans were obtained to finance the acquisition of the Commodore Apartments and The Park View (f/k/a as Pon De Leo Apartments), which are located in Oakland, California. The loans mature on April 1, 2031, and are cross-collateralized by both properties owned by Madison and PVT. The loan requires interest only monthly payments through April 1, 2026, and beginning May 1, 2026, monthly payments of principal and interests are due based on 360 months of amortization period. The remaining unpaid principal balance is due at maturity date. Accordingly, as of December 31, 2024 and June 30, 2024, the outstanding loan balances for both years were $6,737,500 and $8,387,500, on the Madison and PVT mortgage loans, respectively. The mortgage notes payable balances are disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

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PT Hillview Notes Payable

On October 4, 2021, PT Hillview entered into a loan agreement with Ladder Capital Finance in the amount of $17,500,000. The annual interest rate was equal to the greater of (i) a floating rate of interest equal to 5.5% plus LIBOR, and (ii) 5.75%. The loan was obtained to finance the acquisition of Hollywood Apartments. The loan is secured by Hollywood Apartments and has an initial maturity date of October 6, 2023, which could be extended for two successive 12-month terms (the “Maturity Date”). On August 14, 2023, PT Hillview exercised the first extension option to extend the term of the loan to October 6, 2024. The loan requires interest-only monthly payments with the principal balance due at maturity date. Interest is due based on a 360-day amortization period. The outstanding balances as of December 31, 2024 and June 30, 2024 were $16,165,000 and $17,500,000, respectively, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets. PT Hillview also entered into an interest rate cap agreement on October 4, 2021, as required by the lender. The interest rate cap agreement was revised on September 29, 2023. We have not recorded the fair value and the changes in the fair value of the contract in our consolidated financial statements as the amounts were insignificant to our consolidated financial statements.

Pursuant to Section 2.4.5 of the loan agreement, the lender determined that a substitute benchmark rate transition event occurred. Accordingly, the loan agreement was amended on March 15, 2023 to update the interest rate on the loan. Pursuant to the amendment, effective April 6, 2023, the annual interest rate shall be equal to the greater of (i) a floating rate of interest equal to 5.61148% plus the secured overnight financing rate (SOFR) published by Federal Reserve Bank of New York, and (ii) 5.75%.

We (along with three other principals of True USA) guaranteed: (1) the “Recourse Obligations” as defined in the loan agreement, which are triggered only if the borrower of the loan engages in “Bad Boy Acts” (such as fraud, intentional misrepresentation, willful misconduct, waste, conversion, intentional failure to pay taxes or maintain insurance, filing for bankruptcy, ADA noncompliance, and environmental contamination, etc.), (2) a “Debt Service and Carry Guaranty” under the loan, which guarantees the payment of interest on the loan and other “Basic Carrying Costs”, and (3) a “Guaranty of Completion” guaranteeing that the redevelopment work contracted to be performed will be completed as agreed. As of December 31, 2024, we have not recorded any guaranty obligations since we have not engaged in any bad boy acts, substantial cash reserves are maintained to cover the basic carrying costs and the redevelopment construction work was completed as agreed.

In August 2024, the underlying property was listed for sale. On October 3, 2024, the loan agreement was amended to update the extension option. Pursuant to the amended loan agreement, PT Hillview has the option to extend the term of the loan beyond the current maturity date for three periods from October 6, 2024 to November 6, 2024 with a principal paydown of $515,000, the first extension option, from November 6, 2024 to December 6, 2024 with a principal paydown of $410,000, the second extension option, and from December 6, 2024 to February 6, 2025 with a principal paydown of $410,000, which is the final extension option. PT Hillview exercised all three extension options pursuant to the amended agreement as of December 31, 2024. In February 2025, the loan agreement was further amended to extend the maturity date to April 6, 2025.

MacKenzie Shoreline Mortgage Notes Payable

On May 6, 2021, MacKenzie Shoreline entered into a loan agreement with Pacific Premier Bank, in the amount of $17,650,000. The annual interest rate under the agreement is 3.65% for the first 60 months, and a variable interest rate based on a 6-month CME Term Secured Overnight Financing Rate plus a margin of 3.00 percentage points, for months thereafter until maturity. The loan was obtained to finance the acquisition of Shoreline Apartments. The loan matures on June 1, 2032, and is secured by Shoreline Apartments. The loan requires interest only monthly payments through June 30, 2027, and beginning July 1, 2027, monthly payments of principal and interests are due based on 360 months of amortization period. Accordingly, the outstanding loan balance as of December 31, 2024 and June 30, 2024, was $17,650,000, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

First & Main Mortgage Notes Payable

On January 4, 2021, First & Main entered into a loan agreement with Exchange Bank, in the amount of $12,000,000 at a fixed annual interest rate of 3.75%. The loan was obtained to finance the acquisition of First & Main Office Building. The loan matures on February 1, 2026, and is secured by First & Main Office Building. The loan requires monthly payments of principal and interest based on a 25-year amortization period with the remaining principal balance due at maturity. The loan is guaranteed by Wiseman, but Wiseman was subsequently indemnified by the Operating Partnership on July 1, 2022, as discussed in Note 5. The outstanding balance of the loan as of December 31, 2024 and June 30, 2024, was $10,796,368 and $10,963,355, respectively, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

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The following table provides the projected principal payments on the loan for the next two years:

Fiscal Year Ending June 30, :	Principal
2025 (remainder)	$	170,338
2026		10,626,030
Total	$	10,796,368

First & Main Other Note Payables:

Junior Debt

In 2018, First & Main voted to issue $1,000,000 in interest-only junior promissory notes. The notes were issued in 2018 and 2019 with an original maturity date of December 31, 2023 and included no prepayment penalty for early retirement. Of the total promissory notes, notes with a total principal balance of $350,000 were paid off as of December 31, 2023. The maturity dates of the remaining promissory notes were extended to: December 31, 2025 for notes with a principal balance of $100,000, December 31, 2026, for notes with a principal balance of $100,000, and December 31, 2028 for the remaining notes with a principal balance of $450,000. Interest on the notes is payable on the first day of each month at 7% per annum. The promissory notes are disclosed as a part of the notes payable in the consolidated balance sheets.

In March 2024, the partnership obtained a new loan with the principal amount of $200,000 in an interest-only junior promissory note. The note was issued on March 8, 2024 with a maturity date of March 31, 2025. Interest on the note is payable on the first day of each month at 8.5% per annum.

Small Business Administration (“SBA”) Loan

In June 2020, First & Main borrowed $151,000 from the SBA, under the Economic Injury Disaster Loan program. The loan will be paid back over 30 years at an annual interest rate of 3.75% starting on December 20, 2022. Monthly payments will be $731. The loan is disclosed as a part of the notes payable in the consolidated balance sheets.

Solar System Loan (First & Main)

In August 2020, First & Main borrowed $220,000 from The Wiseman Family Trust to fund the installation of the solar power system at First & Main Office Building. The loan will be paid back over a period of 10 years at an annual interest rate of 5%. Monthly payments of principal and interest will be $1,486. As of December 31, 2024 and June 30, 2024, the outstanding balance of the loan amounted to $153,525 and $163,362, respectively, and is disclosed as a part of the notes payable in the consolidated balance sheets.

1300 Main Mortgage Notes Payable

On April 12, 2019, 1300 Main entered into a loan agreement with Suncrest Bank, in the amount of $9,160,000 at a fixed annual interest rate of 4.55% for the first 60 payments. Beginning May 25, 2024, the interest rate will be calculated on the unpaid principal balance at an interest rate based on the Prime Rate as published in the Western Edition Wall Street Journal, plus a margin of 1%. The loan was obtained to consolidate the construction loans obtained during the development and construction of the building. The loan matures on April 25, 2029, and is secured by 1300 Main Office Building. The loan requires monthly payments of principal and interest of $51,610 for 60 consecutive payments followed by 59 monthly payments of principal and interest of $60,674 with the remaining principal balance due at maturity. The loan is guaranteed by Wiseman, but Wiseman was subsequently indemnified by the Operating Partnership on July 1, 2022. The outstanding balance of the loan as of June 30, 2024 was $8,168,350, which was disclosed as a part of the mortgage notes payable in the consolidated balance sheets. As of December 31, 2024, there was no outstanding balance on the loan.

Consistent with asset acquisition accounting, the debt assumed from the acquisition of 1300 Main was measured at fair value. The interest rate on the debt was below the current market rates, as a result, $338,000 of the acquisition cost was allocated to debt mark-to-market. The debt mark-to-market value is amortized over the remaining loan term. The debt mark-to-market value was fully amortized as of June 30, 2024.

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On November 4, 2024, 1300 Main entered into a loan agreement with Valley Strong Credit Union, in the amount of $8,000,000 at a fixed annual interest rate of 6.85%. The loan was obtained to refinance the prior $9,160,000 loan from Suncrest Bank which was scheduled to mature on April 25, 2029. The loan matures on November 15, 2029, and is secured by a real property and the assignment of all its rental revenue. The loan requires monthly payments of principal and interest of $52,534 through maturity. The remaining unpaid principal balance is due at maturity. The note is guaranteed by the Parent Company. The outstanding balance of the loan as of December 31, 2024 was $8,000,000, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

The following table provides the projected principal payments on the loan for the next five years:

Fiscal Year Ending June 30, :	Principal
2025 (remainder)	$	221,359
2026		377,129
2027		394,900
2028		412,646
2029		6,593,966
Total	$	8,000,000

1300 Main Other Notes Payable:

SBA Loan

On January 13, 2021, 1300 Main borrowed $150,000 from the SBA, under the Economic Injury Disaster Loan program. The loan will be paid back over 30 years at an annual interest rate of 3.75% starting on July 11, 2023. Monthly payments will be $731. The outstanding balance of the loan as of December 31, 2024 and June 30, 2024 was $158,463 and $160,111, respectively, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

Woodland Corporate Center Two Mortgage Notes Payable

On October 2, 2019, Woodland Corporate Center Two entered into a loan agreement with Western Alliance Bank, in the amount of $7,500,000 at a fixed annual interest rate of 4.15%. The loan was obtained to finance the acquisition of Woodland Corporate Center Office Building. The loan matures on October 7, 2024 and is secured by Woodland Corporate Center Office Building. The loan requires monthly payments of principal and interest based on a 25-year amortization period with the remaining principal balance due at maturity. The loan is guaranteed by Wiseman, but Wiseman was subsequently indemnified by the Operating Partnership on July 1, 2022 as discussed in Note 5. The outstanding balance of the loan as of June 30, 2024 was $6,626,543, which was disclosed as a part of the mortgage notes payable in the consolidated balance sheets. The loan matured on October 7, 2024.

On October 4, 2024, Woodland Corporate Center Two entered into a loan agreement with Summit Bank, in the amount of $6,000,000 at a fixed annual interest rate of 6.5%. The loan was obtained to refinance the prior $7,500,000 loan from Western Alliance Bank which matured on October 7, 2024. The loan matures on October 5, 2027, and is secured by the real property and the assignment of all its rental revenue. The loan requires monthly payments of principal and interest of $40,873 through October 5, 2027. The remaining unpaid principal balance is due at maturity. The loan is guaranteed by the Parent Company. The outstanding balance of the loan as of December 31, 2024 was $5,982,119, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

Main Street West Mortgage Notes Payable

On October 22, 2019, Main Street West entered into a loan agreement with First Northern Bank of Dixon, in the amount of $16,600,000 at a fixed annual interest rate of 4%. The loan matures on November 1, 2024, and is secured by Main Street West Office Building. The loan requires monthly payments of principal and interest based on a 25-year amortization period with the remaining principal balance due at maturity. The loan is guaranteed by Wiseman, but Wiseman was subsequently indemnified by the Operating Partnership on July 1, 2022 as discussed in Note 5. The outstanding principal balance of the loan as of December 31, 2024, and June 30, 2024 was $14,742,049 and $14,893,842, respectively, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets. Total accrued interest on the loan as of December 31,2024 and June 30, 2024, were $601,495 and $373,873, respectively.

Consistent with asset acquisition accounting, the debt assumed from the acquisition of Main Street West was measured at fair value. The interest rate on the debt was below the current market rates, as a result, $717,000 of the acquisition cost was allocated to debt mark-to-market. The debt mark-to-market value is amortized over the remaining loan term. The debt mark-to-market value, net of accumulated amortization as of June 30, 2024 amounted to $162,955, and was netted against the total debt balance in the consolidated balance sheets. The debt mark-to-market value was fully amortized as of December 31, 2024.

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On November 1, 2024, the loan matured, and we were unable to agree with the bank on extension terms. 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 a 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.

Main Street West Other Notes Payable:

SBA Loan

On April 7, 2021, Main Street West borrowed $150,000 from the SBA, under the Economic Injury Disaster Loan program. The loan will be paid back over 30 years at an annual interest rate of 3.75% starting in September 4, 2023. Monthly payments will be $731. The outstanding balance of the loan as of December 31, 2024 and June 30, 2024 was $161,300, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

220 Campus Lane Mortgage Notes Payable

On September 8, 2023, 220 Campus Lane borrowed $2,145,000 from Northern California Laborers Pension Fund at a fixed annual interest rate of 5%. The loan was obtained to finance the acquisition of 220 Campus Lane Office Building and the underlying parcel of land. The loan matures on September 30, 2028, and is secured by the vacant office building and the underlying parcel of land. The loan requires interest only monthly payments of $8,938 through September 30, 2028. The remaining unpaid principal balance is due at maturity date. Accordingly, the outstanding balance of the loan as of December 31, 2024 and June 30, 2024 was $2,145,000, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

Consistent with asset acquisition accounting, this debt was measured at fair value. The interest rate on the debt was below the current market rates, as a result, $223,000 of the acquisition cost was allocated to debt mark-to-market. The debt mark-to-market value is amortized over the remaining loan term. The debt mark-to-market value, net of accumulated amortization as of December 31, 2024 and June 30, 2024 amounted to $164,896 and $187,196, respectively, and was netted against the total debt balance in the consolidated balance sheets.

Campus Lane Residential Mortgage Notes Payable

On September 8, 2023, Campus Residential borrowed $1,155,000 from Northern California Laborers Pension Fund at a fixed annual interest rate of 5%. The loan was obtained to finance the acquisition of a vacant parcel of land. The loan matures on September 30, 2028, and is secured by the vacant parcel of land. The loan requires interest only monthly payments of $4,813 through September 30, 2028. The remaining unpaid principal balance is due at maturity date. The outstanding balance of the loan as of December 31, 2024 and June 30, 2024 was $1,155,000, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

Consistent with asset acquisition accounting, the debt acquired from the acquisition of Campus Lane Residential Land was measured at fair value. The interest rate on the debt was below the current market rates, as a result, $120,000 of the acquisition cost was allocated to debt mark-to-market. The debt mark-to-market value is amortized over the remaining loan term. The debt mark-to-market value, net of accumulated amortization as of December 31, 2024 and June 30, 2024, amounted to $88,733 and $100,732, respectively, and was netted against the total debt balance in the consolidated balance sheets.

Green Valley Executive Center Mortgage Notes Payable

On August 16, 2022, the predecessor owner, GVEC entered into a $14,000,000 fixed-rate loan agreement with Columbia State Bank. The initial interest rate is 4.25% until October 1, 2027, increasing to 5.46% thereafter. The loan matures on September 1, 2032 and is secured by the Green Valley Executive Center. The loan requires monthly payments of principal and interest based on a 30-year amortization period with the remaining principal balance due at maturity. The loan was assumed by GVEC on January 1, 2024 from the predecessor owner. The outstanding balance of the loan as of December 31, 2024 and June 30, 2024 was $13,474,980 and $13,599,329, respectively, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

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Consistent with asset acquisition accounting, the debt assumed from the acquisition of Green Valley Executive Center was measured at fair value. The interest rate on the debt was below the current market rates, as a result, $993,000 of the acquisition cost was allocated to debt mark-to-market. The debt mark-to-market value is amortized over the remaining loan term. The debt mark-to-market value, net of accumulated amortization as of December 31, 2024 and June 30, 2024 amounted to $893,700 and $943,350, respectively, and was netted against the total debt balance in the consolidated balance sheets.

The following table provides the projected principal payments on the loan for the next five years:

Fiscal Year Ending June 30, :	Principal
2025 (remainder)	$	117,607
2026		263,665
2027		275,253
2028		250,402
2029		253,672
Thereafter		12,314,381
Total	$	13,474,980

One Harbor Center Mortgage Notes Payable

On April 20, 2020, under the predecessor ownership, One Harbor Center, LP borrowed $8,378,825 from Travis Credit Union at a fixed annual interest rate of 4.96%. The loan matures on June 1, 2028, and is secured by a real property and the assignment of all its rental revenue. The loan requires monthly payments of principal and interest of $46,092 through June 1, 2028. The remaining unpaid principal balance is due at maturity date. The outstanding balance of the loan as of December 31, 2024 and June 30, 2024 were $7,776,036 and $7,846,182, respectively, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

Consistent with asset acquisition accounting, the debt assumed from the acquisition of One Harbor Center was measured at fair value. The interest rate on the debt was below the current market rates, as a result, $334,000 of the acquisition cost was allocated to debt mark-to-market. The debt mark-to-market value is amortized over the remaining loan term. The debt mark-to-market value, net of accumulated amortization as of December 31, 2024 and June 30, 2024 amounted to $280,984 and $320,746, respectively, and was netted against the total debt balance in the consolidated balance sheets.

The following table provides the projected principal payments on the loan for the next four years:

Fiscal Year Ending June 30, :	Principal
2025 (remainder)	$	73,099
2026		151,701
2027		161,643
2028		7,389,593
Total	$	7,776,036

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One Harbor Center Other Notes Payable:

SBA Loan

In August 2020, One Harbor Center borrowed $150,000 from the SBA, under the Economic Injury Disaster Loan program. The loan will be paid back over 30 years at an annual interest rate of 3.75% starting on February 10, 2023. The outstanding balance of the loan as of December 31, 2024 and June 30, 2024 was $150,000, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

MRC Aurora Construction Loan

As discussed in Note 1, in order to fund the development of the Aurora Project (known as Aurora at Green Valley), we closed on a construction loan of $17.15 million with Valley Strong Credit Union, headquartered in Bakersfield, CA, on February 21, 2024. Interest rate on the loan will be the current index (Prime) plus a spread of 0.25%. The loan matures on March 1, 2026. As of December 31, 2024, we have not drawn any amount on the line. Per the loan agreement, MRC Aurora will first use its cash equity of $12.5 million, less any out-of-pocket costs already spent on the project, for the construction before drawing on the line.

MacKenzie Satellite Mortgage Notes Payable

On August 21, 2024, MacKenzie Satellite entered into a loan agreement with Summit Bank, in the amount of $6,000,000 at a fixed annual interest rate of 6.50%. The loan matures on August 21, 2027, and is secured by a real property and the assignment of all its rental revenue. The Parent Company has guaranteed the loan. The loan requires monthly payments of principal and interest of $40,867 through August 21, 2027. The remaining unpaid principal balance is due at maturity date. The outstanding balance of the loan as of December 31, 2024 was $5,959,644, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

The following table provides the projected principal payments on the loan for the next four years:

Fiscal Year Ending June 30, :	Principal
2025 (remainder)	$	40,945
2026		103,403
2027		110,427
2028		5,704,869
Total	$	5,959,644

Green Valley Medical Center Mortgage Notes Payable

On July 15, 2024, Green Valley Medical Center entered into a loan agreement with Valley Strong Credit Union, in the amount of $7,800,000 at a fixed annual interest rate of 7.12%. The loan matures on August 1, 2029, and is secured by the real property and the assignment of all its rental revenue. The Parent Company provided a guaranty of the Note. The loan requires monthly payments of principal and interest of $52,628 through December 1, 2028. The remaining unpaid principal balance is due at maturity date. The outstanding balance of the loan as of December 31, 2024 was $7,788,809, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets. We consolidated Green Valley Medical Center with our consolidated financial statements during the quarter ended December 31, 2024; accordingly, this mortgage note payable was not included in our consolidated balance sheet as of June 30, 2024.

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The following table provides the projected principal payments on the loan for the next five years:

Fiscal Year Ending June 30, :	Principal
2025 (remainder)	$	41,446
2026		82,550
2027		88,623
2028		93,650
2029		102,032
Thereafter		7,380,508
Total	$	7,788,809

Green Valley Medical Center Other Notes Payable:

SBA Loan

In March of 2021, Green Valley Medical Center borrowed $150,000 from the SBA, under the Economic Injury Disaster Loan program. Related loan documents call for the loan to be amortized and repaid over 30 years at an annual interest rate of 3.75%. We have been making interest payments, but the Federal Government has not yet commenced amortization of the principal. The outstanding balance of the loan as of December 31, 2024 was $150,000, which is disclosed as a part of the mortgage notes payable in the consolidated balance sheets.

The table below presents the total loan outstanding at the underlying companies as of December 31, 2024, and the fiscal years those loans mature:

Fiscal Year Ending June 30, :	Principal
2025 (remainder)	$	31,628,021
2026		11,827,833
2027		1,262,229
2028		19,599,058
2029		10,924,135
Thereafter		53,292,017
Total	$	128,533,293

Line of Credit Agreement

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 payments 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.

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Debt Guaranty

The Wiseman partnerships have mortgage loans and solar leases with various banks, all of which were guaranteed by Wiseman and its owner, Doyle Wiseman and his trust, as of May 6, 2022, the date the Operating Partnership acquired the management companies. The mortgage loans of 1300 Main, LP, One Harbor Center, LP, Martin Plaza Associates, LP, and Main Street West, LP are also guaranteed by the partnerships’ general partner as the co-guarantor.

On July 1, 2022, subsequent to the Operating Partnership’s acquisition of the management companies, Wiseman’s owner, Doyle Wiseman and the Operating Partnership entered into an indemnity agreement whereby the Operating Partnership will indemnify Doyle Wiseman for any losses suffered by him through the default of a limited partnership on the mortgage secured by the property owned by the limited partnership, or default on any solar lease obligations. Historically, none of the limited partnerships has had any defaults on any mortgages and Doyle Wiseman has not had to satisfy any mortgage default through a guaranty. Furthermore, each of the limited partnerships is adequately capitalized, has sufficient cash flow from operations to service the mortgage notes and has not required Doyle Wiseman to provide any subordinated financial support to the limited partnerships. Therefore, we have not recorded any liability related to the guaranty on the mortgage loans as of December 31, 2024.

As of December 31, 2024, refinancings have resulted in removal of Wiseman as guarantor at Westside Professional Center, Green Valley Medical Center, Woodland Corporate Center Two and 1300 Main.  The Parent Company now guarantees the mortgage note at each of these properties, with the exception of Westside Professional Center which is guaranteed by its sole limited partner.

As discussed in Note 10, as of November 1, 2024, Main Street West is in default under its note terms. The bank has initiated the foreclosure proceedings and filed a 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 point. Should the lender be unable to recoup the amounts owed from the Company, the guarantor may be required to perform under the guaranty. As of December 31, 2024, the outstanding principal balance of the loan is $14,742,049 and accrued interest is $601,495. However, we have determined that the Company does not need to record any liability under the loan guaranty as of December 31, 2024, since the underlying property’s appraised value exceeds the outstanding debt balance.

The mortgage loan of GVEC is guaranteed by Patterson Real Estate Services LP, an affiliate of the Adviser, and its owner, Berniece A. Patterson and her trust. As part of the GVEC contribution agreement, the Operating Partnership indemnified Berneice Patterson and her trust for any losses suffered by her through the default by GVEC on the mortgage loan. The mortgage loans for MacKenzie Satellite, obtained in August 2024 and the construction loan for MRC Aurora, LLC are also guaranteed by the Parent Company.

NOTE 11 – EARNINGS PER SHARE

Basic earnings per share is computed using the weighted average number of shares outstanding. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for the incremental shares attributed to potentially diluted securities. The following table sets forth the computation of basic and diluted earnings per share for six months ended December 31, 2024 and 2023:

	Six Months Ended December 31, 2024			Six Months Ended December 31, 2023
Net loss attributable to common stockholders	$	(13,422,179	)	$	(6,536,121	)
Basic and diluted weighted average common shares outstanding		13,397,151.40			13,294,159.36
Basic and diluted earnings per share	$	(1.00	)	$	(0.49	)

NOTE 12 – SHARE OFFERINGS AND FEES

As discussed in Note 1, on August 26, 2024, in connection with our agreement with Maxim, the Company issued through a private placement agreement an aggregate amount of 133,000 shares of common stock to Maxim’s affiliate, approximately 1% of the Company’s outstanding stock.

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During the six months ended December 31, 2024, no shares of common stock were issued under the common stock DRIP. Additionally, in December 2024, we issued 321.80 shares of common stock at $10.25 per share to the Class A unit holders of the Operating Partnership who exercised their option to convert their Class A units to our common share, and 37,181.00 shares of common stock at $3.00 per share to the Series A preferred stock holders who exercised their option to convert their shares of Series A preferred stock to shares of our common stock.

During the six months ended December 31, 2024, we issued 3,976.00 shares of Series A preferred stock with total gross proceeds of $99,403 and 45,298.00 shares of Series B preferred stock with total gross proceeds of $1,132,449 under the Offering Circular and incurred syndication costs of $134,204 in relation to preferred stock offering. For the six months ended December 31, 2024, we issued 4,181.28 shares of Series A preferred stock with total gross proceeds of $94,081 under the preferred stock DRIP, 225.70 shares of Series B preferred stock with total gross proceeds of $5,078 under the preferred stock DRIP, and converted 4,639.87 shares of Series A preferred stock at $3.00 per share to shares of our common stock.

During the six months ended December 31, 2023, we issued 122,893.70 shares of common stock with total gross proceeds of $906,957 under the common stock DRIP. In addition, in July 2023, we issued 2,265 shares of common stock at $10.25 per share, to the Class A unit holders of the Operating Partnership who exercised their option to convert their Class A units to shares of our common stock.

During the six months ended December 31, 2023, we issued 68,808.31 shares of Series A preferred stock with total gross proceeds of $1,718,951 and 4,444.44 shares of Series B preferred stock with total gross proceeds of $100,000 under the Offering Circular and incurred syndication costs of $474,919 in relation to preferred stock offering. For the six months ended December 31, 2023, we issued 3,713.55 shares of Series A preferred stock with total gross proceeds of $83,556 under the preferred stock DRIP.

NOTE 13 – SHARE REPURCHASE PLAN

On March 4, 2024, the Board of Directors suspended the common stock share repurchase program and common stock DRIP in connection with its pursuit of the listing of its common stock on a securities exchange. During the six months ended December 31, 2024 and 2023, we repurchased shares of our common stock through our Share Repurchase Program and through third-party auctions as noted in the below table:

Period	Total Number of Shares Repurchased		Average Repurchase Price Per Share		Total Repurchase Consideration
During the six months ended December 31, 2024 Common stock
December 1, 2024 through December 31, 2024		-	$	-	$	21	*
Series A Preferred stock
September 1, 2024 through December 31, 2024		-	$	-	$	5,530	**

^*
Cash in-lieu of fractional shares payout.

^**
Fees paid for redemption lockup agreements

Period	Total Number of Shares Repurchased		Average Repurchase Price Per Share		Total Repurchase Consideration
During the six months ended December 30, 2023 Common stock
September 1, 2023 through September 30, 2023		64,092.00	$	7.38	$	472,999
December 1, 2023 through December 31, 2023		64,497.00		7.38		475,990
		128,589.00			$	948,989
Series A Preferred stock
September 1, 2023 through September 30, 2023		400.00	$	22.75	$	9,100

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NOTE 14 – STOCKHOLDER DIVIDENDS

The following table reflects the dividends per share that we have declared on our common stock and preferred stock during the six months ended December 31, 2024:

	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, 2024	$	0.125	$	1,679,460	$	0.375	$	287,036	$	0.750	$	45,378
December 31, 2024		0.050		673,655		0.375		286,686		0.750		63,593
	$	0.175	$	2,353,115	$	0.750	$	573,722	$	1.500	$	108,971	*

*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.

During the six months ended December 31, 2024, we paid common dividends of $3,342,287, none of which has been reinvested under our common stock DRIP. Similarly, during the six months ended December 31, 2024, we paid Series A preferred dividends of $571,773 and Series B Preferred dividends of $100,997, of which $94,081 and $5,078 have been reinvested under our preferred stock DRIP, respectively.

The dividends declared for the quarter ended December 31, 2024, were recorded as dividends payable in the consolidated balance sheets as of December 31, 2024, and were subsequently paid in January 2025.

On January 31, 2025, we declared the Series A Preferred stock quarterly dividend of $0.375 per share payable at the rate of $0.125 per month for holders of record as of January 31, 2025, February 28, 2025, and March 31, 2025. The Series A preferred stock dividend declared on January 31, 2025, will be paid in  April 2025.

On January 31, 2025, we also declared the Series B Preferred stock quarterly 3% dividend of $0.1875 per share payable at the rate of $0.0625 per month for holders of record as of January 31, 2025, February 28, 2025, and March 31, 2025. The Series B preferred stock dividend declared on January 31, 2025, will be paid in  April 2025. In addition, the Series B Preferred Stock will accrue dividends at the rate of 9% per annum on the stated value as an increase in liquidation preference.

The following table reflects the distributions declared by the Operating Partnership for the Class A and Preferred unit holders during the six months ended December 31, 2024:

	Distributions
	Class A Units				Series A Preferred Units				Series B Preferred Units
During the Quarter Ended	Per Share		Amount		Per Share		Amount		Per Share		Amount
September 30, 2024	$	0.125	$	10,269	$	0.375	$	382,489	$	0.750	$	32,410
December 31, 2024		0.050		4,095		0.375		397,969		0.750		32,409
	$	0.175	$	14,364	$	0.750	$	780,458	$	1.500	$	64,819	*

*Of the total distributions declared for Series B during the six months ended December 31, 2024, $48,614 was an increase in liquidation preference and $16,205 was the cash dividend.

During the six months ended December 31, 2024, the Operating Partnership paid Series A preferred distributions of $725,143, of which $48,251 have been reinvested under our preferred stock DRIP. Preferred (Series A and B), and common distributions declared were paid in January 2025.

The following table reflects the dividends per share that we have declared on our common stock and preferred stock during the six months ended December 31, 2023:

	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

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During the six months ended December 31, 2023, we paid common dividends of $3,239,552, of which $906,957 have been reinvested under our common stock DRIP. Similarly, during the six months ended December 31, 2023, we paid Series A preferred dividends of $510,556, of which $83,556 have been reinvested under our preferred stock DRIP. 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. Preferred (Series A and B) and common dividends declared during the quarter ended December 31, 2023, were paid in January 2024.

The following table reflects the distributions declared by the Operating Partnership for the Class A and Preferred unit holders during the six months ended December 31, 2023:

	Distributions
	Class A Units				Series A Preferred Units
During the Quarter Ended	Per Share		Amount		Per Share		Amount
September 30, 2023	$	0.125	$	10,372	$	0.375	$	177,930
December 31, 2023		0.125		10,372		0.375		178,277
	$	0.250	$	20,744	$	0.750	$	356,207

The above common and preferred distributions declared during the quarter ended December 31, 2023, were paid in January 2024.

During the six months ended December 31, 2023, the Operating Partnership paid Class A distributions of $20,601. Similarly, during the six months ended December 31, 2023, the Operating Partnership paid Series A preferred distributions of $355,519, of which $41,248 have been reinvested under our preferred stock DRIP.

NOTE 15 – COMMITMENTS

We commenced the Aurora Project construction in September 2024 and currently the building is being framed. As of December 31, 2024, MRC Aurora has entered into several contracts with third parties for the construction of the Aurora Project. These contracts represent MRC Aurora’s commitment to incur future expenditures for the development of the project. The total commitments as of December 31, 2024 and June 30, 2024, amounted to $13.71 million and $19.56 million, respectively.

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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, 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.

Overview

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. 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”), 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.

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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, Reimbursement and Other Property Income

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 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. 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 Exchange Act and applicable federal and state securities laws; and

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

	Fair Value
Investments, at fair value	December 31, 2024		June 30, 2024
Blackstone Real Estate Income Trust, Inc. - Class S	$	-	$	330,828
Highlands REIT, Inc.		51,064		69,322
Moody National REIT II, Inc.		14,411		18,759
National Healthcare Properties, Inc.		842,263		856,285
SmartStop Self Storage REIT, Inc. - Class A		40,104		41,149
Starwood Real Estate Income Trust, Inc. - Class S		24,703		24,821
Total	$	972,545	$	1,341,164

	Fair Value
Equity method investments, at fair value	December 31, 2024		June 30, 2024
5210 Fountaingate, LP	$	4,950	$	4,950
Lakemont Partners, LLC		805,000		791,990
Green Valley Medical Center, LP		-		2,005,102
Martin Plaza Associates, LP		536,848		465,053
Westside Professional Center I, LP		1,251,646		1,436,171
Total	$	2,598,444	$	4,703,266

Properties

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

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

Property:	Property Owners
Commodore Apartments	Madison-PVT Partners LLC
The Park View (f/k/a 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	Woodland Corporate Center Two, LP
Main Street West Office Building	Main Street West, LP
220 Campus Lane Office Building	220 Campus Lane, LLC
Green Valley Executive Center	GV Executive Center, LLC
One Harbor Center	One Harbor Center, LP
Green Valley Medical Center	Green Valley Medical Center, LP

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, 2024, the property is 95% 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	$	382,998	06/15/2031	1, 5 years
Norcal Gold	Real Estate		2,896	$	179,976	03/31/2026	No
Bao Ling Li	Restaurant		3,212	$	174,960	11/30/2030	No
Whole Health	Medical		2,186	$	138,648	07/31/2025	2, 5 years

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
2025	1		2,186	$	138,648	13%
2026	1		2,896	$	179,976	17%
2029	1		1,059	$	68,739	6%
Thereafter	4		12,916	$	695,029	64%

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 December 31, 2024, the property is 100% occupied by 9 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	$	510,903	09/20/2026	2, 5 years
Brotlemarkle	Accounting Services		4,366	$	246,187	07/31/2030	2, 5 years
Napa Palisades	Restaurant		3,462	$	195,318	08/31/2040	No
Moss Adams	Accounting Services		3,428	$	169,480	06/30/2025	No

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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
2025	2		5,648	$	314,644	21%
2026	1		9,470	$	510,903	33%
2027	1		1,135	$	73,418	5%
Thereafter	5		11,222	$	619,933	41%

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, 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:

Largest Tenants Business	Business	Square Ft. Occupied		Annual Base Rent		Lease Expiration	Renewal options
AUL Corporation	Insurance		13,806	$	811,795	02/03/2025	No
State of California	Health Care		4,697	$	259,721	10/31/2028	No
Strategies To   Empower People	Health Care		4,875	$	223,198	01/28/2028	No
Azzurro Pizzeria	Restaurant		2,735	$	144,000	03/31/2029	1, 5 years

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
2025	2		14,744	$	872,875	47%
2026	1		2,740	$	110,000	6%
2027	1		7,010	$	346,585	19%
Thereafter	4		9,373	$	512,669	28%

Satellite Place Office Building contains 134,785 square feet, all of which is office space. 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 Business	Business	Square Ft. Occupied		Annual Base Rent		Lease Expiration	Renewal options
OS National, LLC	Title Services		71,085	$	1,373,364	12/31/2024	No
Polytron	Title Services		10,737	$	214,097	04/30/2031	2, 5 years
Ampirical	Engineering Consulting		9,790	$	205,264	09/30/2030	2, 5 years
Sun Taiyang	Consumer Products		4,383	$	95,754	11/30/2029	1, 5 years

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
2024	1		71,085	$	1,373,364	73%
2029	1		4,383	$	96,466	5%
Thereafter	2		20,527	$	419,361	22%

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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. As of December 31, 2024, the property is 91% occupied by 13 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	$	335,820	04/09/2031 08/31/2032 12/21/2032	No
Children’s Home Society	Non-Profit Education		4,042	$	149,062	10/31/2028	No
Burger Rehab	Physical Therapy		4,013	$	121,912	09/22/2028	No
California Dept of Rehabilitation	Rehabilitation Services		3,057	$	94,788	07/31/2025	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
2025		4		5,539	$	179,202		17%
2027		2		2,160	$	84,011		8%
2028		3		9,777	$	326,369		32%
Thereafter		4		16,170	$	448,524		43%

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:

Largest Tenants Business	Business	Square Ft. Occupied		Annual Base Rent		Lease Expiration	Renewal options
Community Housing   Opportunities	Real Estate		8,510	$	348,852	08/31/2026	No
Arkshire Financial,   LLC	Insurance		7,016	$	308,400	02/28/2027	No
Sticky Rice	Restaurant		4,388	$	186,005	08/17/2034	No
Larsen & Toubro   Limited, Inc.	Multinational Conglomerate		3,311	$	178,890	02/13/2028	No

The following information pertains to lease expirations at Green Valley Executive Center Office Building:

Year	Number of Leases Expiring		Total Area		Annual Base Rent		Percentage of Gross Rent
2025		3		4,143	$	179,893		9%
2026		3		13,567	$	566,984		29%
2027		3		9,147	$	414,464		21%
Thereafter		7		17,901	$	801,412		41%

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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 Business	Business	Square Ft. Occupied		Annual Base Rent		Lease Expiration	Renewal options
Shimmick Construction   Company, Inc.	Construction		10,221	$	340,380	05/15/2027	No
Richmond   American Homes	Home Builder		7,993	$	256,860	12/31/2024	No
Equiventure	Health Care		6,446	$	232,200	11/16/2033	4, 5 years
Wiseman   Company Mgt.	Real Estate		4,883	$	167,064	05/31/2025	No

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

Year	Number of Leases Expiring		Total Area		Annual Base Rent		Percentage of Gross Rent
2024		1		7,993	$	256,860		16%
2025		5		12,526	$	455,225		29%
2026		3		5,402	$	195,300		13%
Thereafter		3		18,628	$	649,636		42%

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:

Largest Tenants Business	Business	Square Ft. Occupied		Annual Base Rent		Lease Expiration	Renewal options
Cal OES	State Emergency Services		7,605	$	286,554	08/31/2031	No
California Forever	Real Estate		3,341	$	152,400	10/17/2028	No
Green Valley Oral   Surgery	Health Care		2,179	$	100,021	05/07/2029	2, 10 years
Movement   Mortgage	Real Estate		1,515	$	69,475	06/27/2027	1, 3 years

The following information pertains to lease expirations at Green Valley Medical Center Office Building:

Year	Number of Leases Expiring		Total Area		Annual Base Rent		Percentage of Gross Rent
2025		1		889	$	32,076		3%
2026		1		1,332	$	67,537		7%
2027		2		3,030	$	134,359		13%
Thereafter		8		19,971	$	778,604		77%

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Commodore Apartments is a mid-rise apartment building built in 1912 and has 48 units. 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 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 December 31, 2024, Shoreline Apartments building is approximately 89.3% occupied.

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    (f/k/a as Pon De Leo Apartments)	Multi-Family Residential	Oakland, CA		36,654		39		92.3%	$	1,061,397	$	2,457
Commodore   Apartments	Multi-Family Residential	Oakland, CA		31,156		48		93.8%	$	855,897	$	1,585
Hollywood   Apartments	Multi-Family Residential	Los Angeles, CA		36,991		54		81.5%	$	1,175,628	$	2,227
Shoreline   Apartments	Multi-Family Residential	Concord, CA		67,925		84		89.3%	$	1,906,746	$	2,119

Property Name

Sector

Location

Square Feet

Units

Percentage Leased

Annual Base Rent

Monthly Base Rent/Occupied Unit

Hollywood   Apartments

Retail

Los Angeles, CA

8,610

1

100.0%

$

333,356

$

27,780

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, 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.

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 currently underway, but the financial resources to realize our goal of commencing construction in late 2025 have not been secured and will be dependent upon the City’s approval process. 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 (known as Aurora at Green Valley)

We are actively constructing a multi-family residential community on this land which will include 72 units in three buildings, and a club house. The city’s planning commission approved our development project in September 2023, and we obtained all necessary building permits in August 2024 and the building construction phase commenced in September 2024. Construction is progressing on schedule and on budget. In February 2024, we commenced selling preferred units in MRC Aurora with the goal of raising $10 million in preferred capital and closed on a construction loan of $17.15 million. We have raised $4.36 million in preferred capital from outside investors as of the date of this report.

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

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Current Market and Economic Conditions

The markets in which our properties operate are highly competitive, and each property faces unique competitive challenges based upon local economic, political, and legal factors. Our West coast multi-family residential properties are generally restricted from raising rents significantly by local rent control laws. Rent control can result in average rents that are significantly below market, and this provides some buffer against declining rents in a recession. However, in order to encourage development, rent control usually does not apply to newer properties. Since older properties may be unable to raise rents as needed, they may be unable to make improvements that could allow them to compete with newer properties.

Our consolidated office properties, 1300 Main 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, which also must compete with every other 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.

Results of Operations

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	Commercial properties
Satellite Place Office Building	Satellite Place Office Building
First & Main Office Building	First & Main Office Building
1300 Main Office Building	1300 Main Office Building
Main Street West Office Building	Main Street West Office Building
Woodland Corporate Center	Woodland Corporate Center
220 Campus Lane Office Building	220 Campus Lane Office Building
Green Valley Executive Center
One Harbor Center
Green Valley Medical Center (Acquired in August 2024)
Residential properties	Residential properties
Commodore Apartments	Commodore Apartments
The Park View (f/k/a as Pon De Leo Apartments)	The Park View (f/k/a as Pon De Leo Apartments)
Hollywood Apartments	Hollywood Apartments
Shoreline 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 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 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.

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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, 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 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.

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, 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 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 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:

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, 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 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 December 31, 2023.

Depreciation and amortization:

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.

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Interest expense:

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. 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:

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, 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 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 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. 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.

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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. 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. 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. 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	Commercial properties
Satellite Place Office Building	Satellite Place Office Building
First & Main Office Building	First & Main Office Building
1300 Main Office Building	1300 Main Office Building
Main Street West Office Building	Main Street West Office Building
Woodland Corporate Center	Woodland Corporate Center
220 Campus Lane Office Building	220 Campus Lane Office Building
Green Valley Executive Center
One Harbor Center
Green Valley Medical Center (Acquired in August 2024)
Residential properties	Residential properties
Commodore Apartments	Commodore Apartments
The Park View (f/k/a as Pon De Leo Apartments)	The Park View (f/k/a as Pon De Leo Apartments)
Hollywood Apartments	Hollywood Apartments
Shoreline 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.

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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.

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 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 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 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.

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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.

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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 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 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, 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, 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. In addition, 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 rebalancing, and additional investments. 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.

We intend to utilize leverage to enhance the total returns of our portfolio. Historically, we were only able to access leverage at attractive costs through a credit facility, but the termination of our BDC status effective December 31, 2020 has provided us with greater flexibility in choosing among different alternatives for raising debt capital going forward.

We also have greater flexibility in issuing securities with common equity participation features (such as warrants and convertible notes) and/or additional classes of stock (such as preferred) in order to facilitate capital formation now that we are no longer subject to the restrictions of the 1940 Act.

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

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

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 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 stock, and new borrowings at the underlying companies and at the Parent Company level under a new line of credit.

Cash Flows:

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 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.

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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 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

We have entered into two contracts under which we have material future commitments: (i) the Advisory Management Agreement and the Amended and Restated Investment Advisory Agreement, under which the Advisers serves as our advisers, 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

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.

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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, :	Principal
2025 (remainder)	$	31,628,021
2026		11,827,833
2027		1,262,229
2028		19,599,058
2029		10,924,135
Thereafter		53,292,017
Total	$	128,533,293

Three of our underlying companies: Hollywood Hillview, Woodland Corporate Center Two, and Main Street West’s debts mature during the fiscal year ending June 30, 2025. The $17.5 million note payable on 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. 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. 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; 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.

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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 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:

	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, 2024	$	0.125	$	1,679,460	$	0.375	$	287,036	$	0.750	$	45,378
December 31, 2024		0.050		673,655		0.375		286,686		0.750		63,593
	$	0.175	$	2,353,115	$	0.750	$	573,722	$	1.500	$	108,971	*

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

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our portfolio primarily consists of equity and debt investments in smaller U.S. companies that primarily own commercial real estate that are either illiquid or not listed on any exchange, and our investments are considered speculative in nature. As a result, we are subject to risk of loss which may prevent our stockholders from achieving price appreciation, dividend distributions and a return of their capital.

At December 31, 2024, financial instruments that subjected us to concentrations of market risk consisted principally of equity investments, which represented approximately 10% of our total assets as of that date. As discussed in Note 4 – Investments, to our consolidated financial statements, these investments primarily consist of securities in companies with no readily determinable market values and as such are valued in accordance with our fair value policies and procedures. Our investment portfolio sometimes also includes shares of publicly traded REITs, which are valued at recently quoted trading prices. Our investment strategy represents a high degree of business and financial risk due primarily to the general illiquidity of our investments. We may make short-term investments in cash equivalents, U.S. government securities and other high-quality investments that mature in one year or less, pending investments in portfolio companies made according to our principal investment strategy.

In addition, we are exposed to interest rate risk with respect to our variable-rate indebtedness, generally an increase in interest rates would directly result in higher interest expense. We seek to manage our exposure to interest rate risk by utilizing a mix of fixed and floating rate financing, and through interest rate hedging agreements to fix or cap our variable rate debt. As of December 31, 2024, the outstanding principal balance of our variable rate indebtedness was $17.5 million, which is the mortgage debt on Hollywood Apartments. The debt is indexed to Secured Overnight Financing Rate (“SOFR”). In order to mitigate the raising interest rate risk, we have executed an interest rate cap. For the year ended December 31, 2024, a 10% increase in SOFR would have resulted in no change in interest expense, net of the impact of our interest rate cap.

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Item 4. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) as of the end of the period covered by this report as required by paragraph (b) of Rule 13a-15 or 15d-15 of the Exchange Act. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of such date and provided reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have been no changes in our internal control over financial reporting (identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 of the Exchange Act) during the fiscal quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

The Operating Partnership’s subsidiary, Main Street West, LP (“Main Street West”), had a loan from First Northern Bank of Dixon that matured on November 1, 2024. Despite attempts to negotiate an extension, an agreement could not be reached. As a result, Main Street West is currently in default under the note terms. The bank has initiated foreclosure proceedings and filed a notice of default, and on January 28, 2025, a receiver was appointed by the court.

Item 1A. RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the risks that could materially affect our business, financial condition or results of operations that are discussed under the caption “Risk Factors” in Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended June 30, 2024. The additional risk factor set forth below updates, and should be read together with, such risk factors.

Risks Relating to Potential Rescission Claims

Previous issuances of common shares under our dividend reinvestment program may have violated certain federal and/or state securities laws, and shareholders could file suit to seek rescission of such securities.

During the period beginning June 2021 and ending December 2021, in an offering pursuant to our registration statement on Form N-2, we made sales of securities under our dividend reinvestment program pursuant to a deficient registration statement (which registrant statement became deficient by virtue of our inadvertently failing to amend the registration statement to include the then-current audit report of our auditors). Consequently, the offer and sale of securities pursuant to the Form N-2 may have failed to comply fully with Section 5 of the Securities Act which may trigger a right of rescission under the Securities Act for investors that purchased shares of our common stock during this period under our dividend reinvestment program.

Accordingly, we may have liability to purchasers of such securities if they were to file suit against us; the remedy could be to repurchase such securities at their purchase price plus statutory interest, less the amount of any income received with respect to such shares.

There may be claims relating to our possible non-compliance with federal and/or state securities laws relating to the deficient Form N-2 referenced above, and we may continue to be contingently liable for rescission or damages of an indeterminate amount.

It is possible that regulators could pursue enforcement actions or impose penalties and fines against us with respect to any violations of securities laws relating to the issuance of dividend reinvestment program shares under the deficient Form N-2 referenced above.

If we have to repurchase shares as discussed above, it may affect our cash balances.

If we have to repurchase shares of our common stock issued under the deficient registration statement referenced above, such rescission payments will be funded from our existing cash balances. Any rescission payments would reduce funds available to us for our operations. If all persons issued shares without registration were to successfully file suit and force rescission, we could need to pay a total of approximately $865,000 and our results of operations, cash balances or financial condition will be negatively affected.

Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the six months ended December 31, 2024, we issued 321.80 shares of common stock, to the Class A unit holders of the Operating Partnership who exercised their option to convert their Class A units to shares of our common stock on a 1:1 conversion ratio.

During the six months ended December 31, 2024, we issued 3,976 of shares of Series A preferred stock with total gross proceeds of $99,403, and 45,298 shares of Series B preferred stock with total gross proceeds of $1,132,449. We also issued 4,181.28 shares of Series A preferred stock with total gross proceeds of $94,081 under the preferred stock DRIP and 225.70 shares of Series B preferred stock with total gross proceeds of $5,078 under the preferred stock DRIP. All such issuances were pursuant to our Regulation A Series A and Series B preferred stock offering.

Effective December 1, 2024, we issued 37,181 shares of common stock, at a stated value of $3 per share, to Series A unit holders of the Operating Partnership who exercised their option to convert their Series A units to our common stock.

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These private placements of shares of our common stock and preferred stock were exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 3(b)(2) and Regulation A thereunder (in the case of our Regulation A offering of shares of preferred stock) or Section 4(a)(2) and Regulation D thereunder (in the case of Operating Partnership unit conversions).

On August 26, 2024, in connection with our agreement with Maxim, the Company issued in a private placement an aggregate amount of 133,000 shares of common stock to Maxim’s affiliate, approximately 1% of the Company’s outstanding stock.  The private placement is exempt from registration under the Section 4(a)(2) of the Securities Act, and Regulation D thereunder. The Company is relying, in part, upon representations of Maxim that it is an accredited investor as defined in Regulation D under the Securities Act. The common stock does not have any conversion rights.

Issuer Purchases of Equity Securities

None.

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

During the quarterly period December 31, 2024, none of our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K under the Act).

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Item 6. EXHIBITS

Exhibit	Description
3.1	Articles of Amendment and Restatement of MacKenzie Realty Capital, Inc., effective as of January 10, 2025 (incorporated by reference to the Company’s Form 8-K/A, filed on January 10, 2025).
3.2(A)	Third Amended and Restated Bylaws of MacKenzie Realty Capital, Inc., effective as of January 8, 2025 (incorporated by reference to the Company’s Form 8-K/A, filed on January 10, 2025).
3.2(B)	Third Amended and Restated Bylaws of MacKenzie Realty Capital, Inc., effective as of January 8, 2025 (marked to show changes against the prior version) (incorporated by reference to the Company’s Form 8-K/A, filed on January 10, 2025).
10.1	Equity Distribution Agreement dated January 15, 2025 by and between MacKenzie Realty Capital, Inc. and Maxim Group LLC (incorporated by reference to the Company’s Form 8-K, filed on January 15, 2025).
31.1*	Section 302 Certification of Robert Dixon (President and Chief Executive Officer)
31.2*	Section 302 Certification of Angche Sherpa (Treasurer and Chief Financial Officer)
32.1*	Section 1350 Certification of Robert Dixon (President and Chief Executive Officer)
32.2*	Section 1350 Certification of Angche Sherpa (Treasurer and Chief Financial Officer)
101.INS*	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH*	Inline XBRL Taxonomy Extension Schema Documents.
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104*	Cover Page Interactive Data File (formatted as inline XBRL and contained Exhibit 101).

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

MACKENZIE REALTY CAPITAL, INC.
Date: February 14, 2025	By:	/s/ Robert Dixon
	President and Chief Executive Officer
Date: February 14, 2025	By:	/s/ Angche Sherpa
	Treasurer and Chief Financial Officer

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