UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2025
OR
☐
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)
  
(IRS Employer Identification No.)

89 Davis Road, Suite 100
Orinda, California
   94563
(Address of Principal Executive Offices)
  
(Zip Code)

Registrant’s Telephone Number, Including Area Code: (925) 631-9100

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

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

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐  No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐  No ☑

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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.   ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

The aggregate market value of voting stock held by non-affiliates of the registrant as of December 31, 2024 (the last business day of the registrant’s most recently completed second fiscal quarter) was $42,323,788, based on the closing price of the registrant’s common stock on the Nasdaq Capital Market on that date.

The number of the shares of issuer’s Common Stock outstanding as of September 29, 2025, after giving effect to the 1-for-10 reverse stock split effected on August 4, 2025, was 1,769,284.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s definitive proxy statement, in connection with its 2025 annual meeting of stockholders, to be filed within 120 days of June 30, 2025, are incorporated by reference into Part III of this Annual Report on Form 10-K.

 TABLE OF CONTENTS

PART I 
 
Page
Item 1.
1
Item 1A.
9
Item 1B.
28
Item 1C.
29
Item 2.
 31
Item 3.
 31
Item 4.
 31
 
 
PART II
 
 
Item 5.
32
Item 6.
35
Item 7.
35
Item 7A.
54
Item 8.
54
Item 9.
54
Item 9A.
55
Item 9B.
56
Item 9C.
56
 
 
 
PART III
 
 
Item 10.
57
Item 11.
57
Item 12.
57
Item 13.
57
Item 14.
57
 
 
 
PART IV
 
 
Item 15.
58
Item 16.
61
 
 

PART I

Item 1.
BUSINESS

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 are registered under Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and we will continue to file periodic reports on Form 10-K, Form 10-Q, and Form 8-K, as well as file proxy statements and other reports required under the Exchange Act.

We filed our initial registration statement with the Securities and Exchange Commission (“SEC”) in 2012 and have since completed multiple public offerings of our common stock. On April 29, 2024, our common stock became eligible for trading on the OTCQX Best Market under the ticker symbol “MKZR”. Subsequently, on November 6, 2024, The Nasdaq Stock Market (“Nasdaq”) approved the listing of our common stock, and trading commenced on the Nasdaq Capital Market 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 June 30, 2025, we own all limited partnership units of the Operating Partnership except for 81,909.89 Class A Limited Partnership units, 1,063,504.34 Series A preferred units and 43,212.86 Series B preferred units. Upon a limited partner’s request for redemption or upon liquidation of the Operating Partnership, 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 or, at the Company’s election, for cash based upon the 10-day average trading price of the Company’s common stock on a 1:1 basis. As a result of the Company’s 1-for-10 common stock reverse stock split (the “Reverse Stock Split”) on August 4, 2025, discussed below, the Class A Limited Partnership units are convertible into the Company’s common stock on a 10:1 basis subsequent to the Reverse Stock Split. Upon a request of a holder of Series A or Series B preferred units, the Company may elect to repurchase such units with the Company’s common stock based upon the volume weighted average price per share of common stock for the twenty (20) trading days prior to the repurchase date, or at the Company’s election or upon liquidation, the 1,063,504.34 Series A preferred units are entitled to a liquidation preference of $26,587,609 (based on the stated value of $25 per share for the Series A preferred units) and 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 $98,692,635 in capital to the Operating Partnership since inception; thus, the Class A, Series A and Series B preferred units represent approximately 22.41% of all capital contributions.
 
1
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% of 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.

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 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. 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 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 $71.30 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 June 2025, we filed a post-effective amendment to the Second Offering Circular to permit the sale of up to $72.90 million of Series A, Series B, and Series C preferred stock, at an offering price of $22.50 per Series A share and $25.00 per Series B or Series C share.

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 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 February 28, 2025, we entered into a securities purchase agreement with a single institutional investor. Under the agreement, the Company offered and sold in a registered direct offering (the “Registered Offering”), 153,403.40 shares of the Company’s common stock, $0.0001 par value per share, and pre-funded warrants to purchase up to 129,226.50 shares of common stock; and, in a concurrent private placement and together with the Registered Offering, warrants to purchase up to an aggregate of 423,944.85 shares of common stock. The purchase price for each share and the exercise price for each warrant was $17.10 per share, and the purchase price for each pre-funded warrant was $17.099 per share. The common stock warrants consist of Series A common stock warrants and Series B common stock warrants. The Series A common stock warrants to purchase up to 141,314.95 shares of common stock became exercisable six months after the closing date of the offering and expire 18 months from the date of issuance. The Series B common stock warrants to purchase up to 282,629.90 shares of common stock became exercisable six months after the date of issuance and expire five years from the date of issuance. The Company and the single institutional investor have no other material relationships. All share and warrant amounts described have been adjusted to give effect to the Reverse Stock Split that became effective on August 4, 2025.

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 (“True USA”). 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.

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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.

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 partnerships on the following dates: First & Main, LP (“First & 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 in May 2024 and Green Valley Medical Center, LP 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, and renovating certain real property and building and improvements located at 5000 Wiseman Way, Fairfield, California (the “Aurora Land”), and thereafter leasing, managing, renting, and potentially selling the completed project (the “Aurora at Green Valley”). The Parent Company is the manager and the Operating Partnership is the sole common member of MRC Aurora. The Operating Partnership contributed the Aurora Land to MRC Aurora in exchange for the common membership interest in MRC Aurora. Construction of the Aurora at Green Valley, which consists of three residential buildings and a clubhouse, began in September 2024. The clubhouse opened in June 2025 for pre-leasing activities and the first residential building was completed in July 2025, with leasing commencing in August 2025. The remaining two buildings were completed in September 2025, with leasing expected to commence shortly thereafter. The construction of Aurora at Green Valley was financed through $10 million of preferred capital ($7.23 million from outside investors and $2.77 million from the Operating Partnership) and a $17.15 million construction loan from Valley Strong Credit Union. The Operating Partnership holds 100% of the voting rights, and we, as the manager, have the managing and operating rights of MRC Aurora. Therefore, we consolidate the financial statements of MRC Aurora. As of June 30, 2025, the Operating Partnership has contributed $4.60 million (including the value of the Aurora Land) in exchange for common units and $2.77 million in exchange for preferred units in MRC Aurora and we have raised $7.23 million in exchange for preferred units from outside investors.

3
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. Our goal is to commence construction in spring 2026; however, this is subject to the city’s approval of our development application submitted in April 2024 and to securing the necessary financial resources. The Campus Lane Residential development project is now known as Blue Ridge at Suisun Valley (“Blue Ridge”). We own 100% of 220 Campus Lane and Campus Lane Residential; 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 Patterson Real Estate Services LP (“PRES”), 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 issued to Maxim’s affiliate in a private placement 13,300 shares of common stock, representing approximately 1% of the Company’s outstanding stock. The common stock does not have any conversion rights.

On January 30, 2025, the Company entered into a letter agreement with Outside The Box Capital Inc. (“OTB Capital”) to provide marketing and distribution services to communicate information about the Company. In connection with the agreement, the Company issued 8,583.70 shares of common stock to OTB Capital in a private placement. The common stock issued to OTB Capital does not have any conversion rights.

On May 8, 2025, we formed a new wholly owned subsidiary, Innovate Napa, LLC (“Innovate Napa”), to enter into a master lease of a portion of the Main Street West Office Building in connection with the refinancing of the Main Street West loan.

Our wholly owned subsidiary, MRC QRS, Inc. (“MRC QRS”), a qualified REIT subsidiary incorporated in Delaware on May 22, 2025, was formed to acquire and hold non-traded REIT shares.

On August 4, 2025, the Company effected a 1-for-10 Reverse Stock Split of its common stock, increasing the par value from $0.0001 per share to $0.001 per share. However, on the same date, the Company amended its charter to decrease the par value back to $0.0001. The Reverse Stock Split did not change the number of authorized shares of common stock. Prior to the Reverse Stock Split, the Company had 16,760,978 shares of common stock outstanding. Immediately following the Reverse Stock Split (and after giving effect to the payment of cash in lieu of fractional shares), the Company had 1,675,776 shares of common stock outstanding. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders entitled to receive a fractional share instead received a cash payment equal to the fraction of a share multiplied by the closing price of the Company’s common stock on The Nasdaq Capital Market on August 1, 2025, as adjusted for the Reverse Stock Split, without interest. All common share and per-share information in the accompanying consolidated financial statements and notes have been retroactively adjusted to reflect the Reverse Stock Split.

As of June 30, 2025, we have raised approximately $125.44 million from our common stock public offerings (including $4.80 million from our Registered Offering and the concurrent private placement, and $1.50 million from the ATM offering), $18.74 million from our Series A preferred stock offering and $3.11 million from our Series B preferred stock offering pursuant to the Second Offering Circular. As of June 30, 2025, we have issued shares of common stock, Series A preferred stock and Series B preferred stock with gross proceeds of $15.56 million, $0.44 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 June 30, 2025, 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 June 30, 2025, we have 1,578,192.98 shares of common stock 766,176.57 shares of Series A preferred stock and 116,112.32 shares of Series B preferred stock outstanding.

4
Investment Objective

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 (as defined in Part III, Item 10 of this annual report on Form 10-K) review our investment policies periodically, at least annually, to confirm that our policies are in the best interests of our stockholders. Each such determination and the basis thereof are contained in the minutes of our Board of Directors meetings.

We seek to accomplish our objective by rigorously analyzing the value of and risks associated with potential acquisitions, and, for up to 20% of our total assets, by acquiring real estate securities at significant discounts to their net asset value.

Our Corporate Information

Our offices are currently located at 89 Davis Road, Suite 100, Orinda, CA 94563 and our telephone number is (925) 631-9100 or (800) 854-8357.

Investment Strategy

Following withdrawal of our election to be regulated as a BDC in 2020, we have continued to invest in private companies that directly or indirectly own real property, increased our control over our private investments, and consolidated those investments for financial reporting purposes when appropriate, and we intend to continue to do the same. We conduct many of our operations through the Operating Partnership. The withdrawal of our BDC election has also allowed us to expand our investment pool to include real, physical assets, as opposed to only investment securities. We believe that this expanded pool of potential investments allows access to risk-adjusted returns consistent with our investment objective, while allowing us to maintain our REIT status.

We 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.

When evaluating opportunities to buy properties, we look for opportunistic and value-add situations similar to our approach to targeting real estate securities, including unique situations and value-added opportunities. We evaluate the broader market, the property’s position in the market, the needs our capital can address, and the track record of the sponsor or operator bringing the opportunity to us. We do not generally engage brokers to search for or acquire properties, and the majority of our properties were acquired in “off market” transactions.

We acquire mid-market properties that may be too small to attract most institutions, and where we believe we can create long-term value for our stockholders utilizing the following investment strategies.


 •
Value-Add. We invest in well-located properties with strong and stable cash flows in demographically attractive economic growth markets where we believe there exists significant potential for medium-term capital appreciation through renovation or redevelopment, to reposition the asset and drive future rental growth.


•
Opportunistic. We invest in properties available at opportunistic prices (i.e., at prices we believe are below those available in an otherwise efficient market) that exhibit some characteristics of distress, such as operational inefficiencies, significant deferred capital maintenance, or broken capital structures providing an opportunity for a substantial return from appreciation in value.


•
Invest-to-Own. We may invest in the development of properties in target markets where we believe we can capture significant development premiums upon completion. We generally use a mezzanine loan or convertible preferred equity structure which provides income during the development stage and/or the ability to capture development premiums at completion by exercising our conversion rights to take ownership.

5
We intend to continue our historical activities related to tender offers for shares of non-traded REITs 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. This strategy can boost cash-flow in two ways: (1) most such non-traded REITs pay regular cash distributions; and (2) when such non-traded REIT shares are liquidated or sold, we may realize a profit from having purchased the shares at a discount to the underlying net asset value.

Types of Investments

We target real estate-related investments which may include equity interests in LLCs, tenancies-in-common, mortgages, loans, bonds, other real estate-related investment entities, or direct ownership of real property. We intend to purchase primarily majority interests in properties or companies that own properties so that we can consolidate them into our financial statements. We may purchase non-controlling interests, but we intend that such investments will constitute less than 20% of our portfolio. We do not invest in general partnerships or other entities that do not afford limited liability to their security owners. However, limited liability entities in which we invest may hold interests in general partnerships, joint ventures, or other non-limited liability entities.

Investment Selection

Our Advisers’ investment team is responsible for all aspects of our investment process. The current members of the investment team are Glen Fuller, Chip Patterson, Robert Dixon, Angche Sherpa, and Christine Simpson. The investment strategy involves a team approach, whereby potential transactions are screened by various members of the investment team.

Our process for acquiring targeted real estate typically involves three steps: (i) identifying assets of the type we may be interested in acquiring; (ii) evaluating the assets to estimate their value or potential value to us, and (iii) either acquiring such assets directly or through our network of real estate partners. Different circumstances may require different procedures, or different combinations of procedures, and we adjust our acquisition strategy to fit the circumstances. Nonetheless, the typical stages of our investment selection process are as follows:

Deal Generation/Origination

We source investments through long-standing relationships with real estate operators, developers, industry contacts, brokers, commercial and investment bankers, entrepreneurs, services providers such as lawyers and accountants, as well as current and former clients, portfolio companies and investors. Our Advisers’ goal is to establish relationships with successful operators with proven track records in each region in which we operate, and to grow and deepen those relationships as they prove successful.

Screening

In screening potential investments, the Advisers’ investment team utilizes a value-oriented investment philosophy and commits resources to managing downside exposure.

Due Diligence

In conducting due diligence, the Advisers use publicly available information as well as information from its relationships with former and current management teams, investors, consultants, competitors and investment bankers.

Our Advisers’ due diligence typically includes:


 •
review of operating history, appraisals, market reports, vacancies, deferred maintenance;

•
review of historical and prospective financial information and regulatory disclosures;

•
research relating to the property’s management, industry, markets, products and services and competitors;

•
verification of collateral; and

•
appraisals or opinions of value by third party advisers.

6
Upon the completion of due diligence and a decision to proceed with an investment, the investment professionals leading the investment present the investment opportunity to the Advisers’ investment team, which then determines whether to pursue the potential investment. Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and independent accountants prior to the closing of the investment, as well as other outside third-party advisers, as appropriate. Any fees and expenses incurred by the Advisers to oversee due diligence investigations undertaken by third parties may be reimbursed by us, which are in addition to any management or incentive fees payable by us under the advisory agreements.

Monitoring

Our Advisers monitor our investments on an ongoing basis. Our Advisers have several methods of evaluating and monitoring the performance and value of the assets in which we invest, which include the following:


 •
Assessment of success in adhering to business plans and compliance with covenants;

•
Periodic and regular contact with property management to discuss financial position, requirements, and accomplishments;

•
Comparisons to other properties in the geographic area or sector;

•
Attendance at and participation in our board meetings; and

•
Review of monthly and quarterly consolidated financial statements and financial projections for properties.

Valuation of Investments

Securities for which market quotations are readily available on an exchange will be valued at the closing price on the day closest to the valuation date. Where a security is traded but in limited volume, we may instead utilize the weighted average closing price of the security over the prior 10 trading days. To value securities that do not trade on a national exchange, we may use published secondary market trading information.

Securities for which reliable market data is not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or Board of Directors, does not accurately measure fair value, are valued as follows: (i) the securities are initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; and (iii) the Board of Directors reviews these preliminary valuations and, where appropriate and necessary, valuations by third-party valuation firms, and uses such valuations, as adjusted by the Board if appropriate, to determine the fair value of the securities.

Securities for which market data is not readily available or for which a pricing source does not accurately measure value may include the following:


 •
private placements and restricted securities that do not have an active trading market;

•
securities whose trading has been suspended or for which market quotes are no longer available;

•
debt securities that have recently gone into default and for which there is no current market;

•
securities whose prices are stale;

•
securities affected by significant events; and

•
securities that the Investment Adviser believes were priced incorrectly.

Valuation of Real Property

When property is owned directly, the valuation process includes a full review of the property financial information. An ARGUS model is created using all known data such as current rent rolls, escalators, expenses, market data in the area where the property is located, cap rates, discount rates, mortgages, interest rates, and other pertinent information. We estimate future leasing and costs associated with the property, generally over a ten-year period, to determine the fair value of the property. Once the fair value is determined, a determination of whether any impairment is required is made and documented. In addition, we may obtain a third-party appraisal on directly owned properties.

Determination of fair value involves subjective judgments and estimates, and is reviewed by the Board of Directors. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our consolidated financial statements.

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Staffing

We do not currently have any employees. Our day-to-day investment operations are managed by the Advisers. Our Advisers may hire additional investment professionals, based upon their needs. We also entered into the Administration Agreement with MacKenzie, under which we reimburse MacKenzie for our allocable portion of overhead and other expenses incurred by it in performing its obligations, including rent, the fees and expenses associated with performing compliance functions, and the compensation of our chief financial officer, our chief compliance officer, and any administrative support staff. We have also retained MacKenzie as our initial transfer agent and have been reimbursing MacKenzie for certain software development costs, although in conjunction with our listing, we have retained a third-party transfer agent.

Compliance with governmental laws and regulations, including those relating to environmental matters

Because we operate as a REIT and own real estate properties, we are required to comply with various governmental laws and regulations, including those relating to environmental matters. Because we are a public company, we also must comply with the Exchange Act.

Environmental Matters

We have invested, and expect to continue to invest, in real property assets, which are subject to laws and regulations relating to the protection of the environment and human health and safety. Environmental laws and regulations may impose joint and several liability on tenants, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal. This liability could be substantial. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such property as collateral for future borrowings.

Some of these laws and regulations have been amended to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require material expenditures by us. Future laws, ordinances or regulations may impose material environmental liability. Additionally, our tenant companies’ operations, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties may affect our properties. In addition, there are various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply, and that may subject us to liability in the form of fines or damages for noncompliance. Any material expenditures, fines, or damages we must pay would reduce our ability to make distributions.

Other Regulations

State and federal laws in this area are constantly evolving, and we intend to monitor these laws and take commercially reasonable steps to protect ourselves from the impact of these laws, including where deemed necessary, obtaining environmental assessments of properties that we acquire; however, we will not obtain an independent third-party environmental assessment for every property we acquire. In addition, any assessment we obtain may not reveal all environmental liabilities or whether a prior owner of a property created a material environmental condition not known to us. The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims could materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution.

Board Approval of the Administration and Advisory Agreements

Our advisory and administrative services agreements were approved by our Board of Directors in January 2021, and have been reviewed and approved annually since 2021. Such approvals were made on the basis of an evaluation satisfactory to our Board of Directors including a consideration of, among other factors, (i) the nature, quality, and extent of the advisory and other services to be provided under the agreements, (ii) the investment performance of the personnel who manage REITs with objectives similar to ours, to the extent available, (iii) comparative data with respect to advisory fees or similar expenses paid by other REITs with similar investment objectives, to the extent available and (iv) information about the services to be performed and the personnel performing such services under each of the agreements.

Our internet address is www.mackenzierealty.com

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Item 1A.
RISK FACTORS

An investment in our common stock or preferred stock involves substantial risks. You should specifically consider the following material risks in addition to the other information contained in this annual report on Form 10-K. The occurrence of any of the following risks might have a material adverse effect on our business, financial condition, and results of operations, which could cause the price or value of our common stock or preferred stock to decline and could result in our stockholders losing some or all of their investment. The risks and uncertainties discussed below are not the only ones we face, but they represent those risks and uncertainties that we believe are most significant to our business, operating results, financial condition, prospects and forward-looking statements. As used herein, the term “you” refers to our current stockholders or potential investors in our common or preferred stock.

RISK FACTORS SUMMARY

The following is a summary of the most significant risks relating to our business activities that we have identified. If any of these risks occur, our business, financial condition, or results of operation, including our ability to generate cash and make distributions, could be materially adversely affected. For a more complete understanding of our material risk factors, this summary should be read in conjunction with the detailed discussion of our risk factors, which follows this summary.

Risks Related to Investing in Real Estate

•
Real property investments are subject to various risks, many of which are beyond our control, which could cause declines in our operating revenues and/or the underlying value of one or more of our properties.
•
The market for real estate investments is highly competitive and investments in real estate-related assets can be speculative.
•
Illiquidity of real estate investments could significantly affect our ability to respond to adverse changes in the performance of our properties and harm our financial condition.
•
We could be exposed to environmental liabilities, which could impact the value of real properties that we may acquire or underlying our investments.
•
We may not obtain independent third-party appraisals or valuation reports on all of our investments.
•
We may be adversely affected by unfavorable economic conditions, particularly in the specific geographic areas where our investments are concentrated.
•
Inflation may adversely affect our financial condition and results of operations.
•
Our success is materially dependent on attracting qualified tenants and, when vacancies occur, we may not be able to re-lease or renew leases at the properties held by us on terms favorable to us, or at all.
•
The bankruptcy, insolvency, or diminished creditworthiness of our tenants under their leases or delays by our tenants in making rental payments could seriously harm our operating results and financial condition.
•
Significant restrictions on transfer and encumbrance of investments subject to mortgage or other debt financing are expected, and we may experience delays in the sale of an investment.
•
We face possible risks associated with climate change.

Risks Related to Our Financial Position

•
Future debt or capital stock issuances by the Company could dilute the ownership interest of current stockholders and could subject us to covenants restricting our future financial and operating flexibility.
•
We do not have guaranteed cash flow, and if we pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments and our stockholders’ overall return will be reduced.
•
We may in the future choose to pay dividends in our own stock, in which case you may be required to pay income taxes in excess of the cash dividends you receive.

Risks Related to Our Business Operations and Strategy
 
•
We may change our targeted investment and operational policies without stockholder consent.
•
Our Board of Directors can revoke our REIT qualification without stockholder approval.
•
Our future growth will depend on our ability to acquire real estate investments in several competitive real estate markets, and lack of diversification in numbers or types of investments increases our dependence on individual investments.
•
We may experience difficulty in ultimately selling properties which no longer fit our investment criteria or are impractical to lease and maintain, which could force us to sell a property at a price that reduces the return to our investors.
•
Subject to broad investment guidelines approved by our Board of Directors, we are dependent on the investment analysis and management services provided by our Advisers and their key personnel for our success.

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•
Our investments will be carried at estimated fair value as determined by our Advisers and there may be uncertainty as to the value of these investments.
•
We, through our Advisers, are often required to make a number of judgments in applying accounting policies, and different estimates and assumptions in the application of these policies could result in changes to our reporting of financial condition and results of operations.

Risks Related to Our Organization and Corporate Structure
 
•
Our Charter permits our Board of Directors to issue stock with terms that may subordinate the rights of common stockholders or preferred shareholders or discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders.
•
Our rights and the rights of our shareholders to recover claims against our officers, directors, and our Advisers are limited.

Risks Related to Conflicts of Interest
 
•
The Advisory Agreements with our Advisers were not negotiated on an arm’s-length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third party.
•
We may have conflicts of interest with our Adviser and other affiliates, which may result in investment decisions that are not in the best interest of our stockholders.
•
Our Advisers, their officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of real estate investments, and such conflicts may not be resolved in our favor.
•
We have not adopted any specific conflicts of interest policies, and, therefore, other than in respect of the restrictions placed on our Advisers in the Advisory Agreements, we will be reliant upon the good faith of our Advisers, officers, and directors in the resolution of any conflict.

Risks Associated with Debt Financing
 
•
We expect to use mortgage and other debt financing to acquire properties or interests in properties and otherwise incur other indebtedness, which could subject us to the risk of losing properties in foreclosure if our cash flow is insufficient to make loan payments and reduce the cash available for distribution to stockholders.
•
High levels of debt or increases in interest rates could increase the amount of our loan payments, which could reduce the cash available for distribution to stockholders.
•
High mortgage rates may make it difficult for us to finance or refinance properties, may require us to pay down loans with investment capital, which could reduce the number of properties we can acquire, our cash flow from operations, and the amount of cash distributions we can make.
•
If we are required to make payments under any “bad boy” carve-out guaranties that we may provide in connection with certain mortgages and related loans, our business and financial results could be materially adversely affected.

Risks Related to Our Taxation as a REIT
 
•
Failure to remain qualified as a REIT would result in higher taxes and reduced cash available for distribution to our stockholders.
•
Complying with minimum required distributions and other REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.
•
The stock ownership limit imposed by the Code for REITs and in our Charter may inhibit market activity in our stock and may restrict our business combination opportunities.
•
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends, and a failure to make required distributions would subject us to U.S. federal corporate income tax.
•
The prohibited transactions tax may subject us to tax on our gain from sales of property and limit our ability to dispose of our properties.
•
We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our shares.

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Risks Related to Investing in Real Estate

Real estate investments are subject to risks particular to real property, including:


 •
Adverse changes in national and local economic and market conditions, including the credit and securitization markets;

•
Impacts from governmental laws and regulations, fiscal policies and zoning ordinances, including the impact of environmental laws and regulations, and related compliance costs, including costs to comply with future changes;

•
Takings by condemnation or eminent domain;

•
Real estate conditions, such as an oversupply of or a reduction in demand for real estate space in the area, which could adversely affect market rental rates;

•
The perceptions of tenants and prospective tenants of the convenience, attractiveness and safety of our properties;

•
Competition from comparable properties;

•
The occupancy rate of our properties;

•
The ability to collect all rent from tenants on a timely basis;

•
The effects of any bankruptcies or insolvencies of major tenants;

•
The expense of re-leasing space;

•
Changes in interest rates and in the availability, cost and terms of mortgage funding;

•
Economic or physical decline of the areas where our investments are located;

•
Deterioration in the physical condition of our investments and resulting maintenance expenses;

•
Acts of war or terrorism, including the consequences of terrorist attacks;

•
Acts of God, including earthquakes, floods and other natural disasters, which may result in uninsured losses; and

•
Cost of compliance with the Americans with Disabilities Act.

Any of these or similar events may reduce our return from an affected property or investment and reduce or eliminate our ability to make distributions to stockholders.

The market for real estate investments is highly competitive.

Identifying attractive real estate investment opportunities is difficult and involves a high degree of uncertainty. Furthermore, the historical performance of a particular property or market is not a guarantee or prediction of the property’s or market’s future performance. There can be no assurance that we will be able to locate suitable acquisition opportunities in our target markets, achieve our investment goal and objectives, or fully deploy our cash.

Because of the recent growth in demand for real estate investments, there may be increased competition among investors to invest in the same asset classes as we do. This competition may lead to an increase in investment prices or otherwise less favorable investment terms. If this situation occurs with a particular investment, our return on that investment is likely to be less than the return we could have achieved if we had invested at a time of less investor competition for the investment. For this and other reasons, the Real Estate Adviser is under no restrictions concerning the timing of investments.

Real estate investments are not as liquid as other types of assets, which may reduce economic returns to our stockholders.

Real estate investments are not as liquid as some other types of investments. The market for the sale of real estate properties can vary greatly and it may take a significant amount of time for us to sell any particular property on favorable terms, if at all. As a result, our ability to sell under-performing assets in our portfolio or respond to changes in economic and other conditions may be relatively limited.

Investments in real estate-related assets can be speculative.

Investments in real estate-related assets can involve speculative risks and always involve substantial risks. No assurance can be given that the Advisers will be able to execute the investment strategy or that stockholders in the company will realize their investment objectives. No assurance can be given that our stockholders will realize a substantial return (if any) on their investment or that they will not lose their entire investment in us.

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We will likely receive limited representations and warranties from sellers.

Investments will likely be acquired with limited representations and warranties from the seller regarding the condition of the investment, the status of leases, the presence of hazardous substances, the status of governmental approvals and entitlements and other significant matters affecting the use, ownership and enjoyment of the investment. As a result, if defects in an investment or other matters adversely affecting an investment are discovered, we may not be able to pursue a claim for damages against the seller of the investment. The extent of damages that we may incur as a result of such matters cannot be predicted, but potentially could result in a significant adverse effect on the value of the affected investments.

We may be subject to the risk of liability and casualty loss as the owner of an investment.

We will maintain insurance against certain liabilities and other losses for an investment, but the insurance obtained will not cover all amounts or types of loss. There is no assurance that any loss that may occur will be insured or that, if insured, the insurance proceeds will be sufficient to cover the loss.

There are certain categories of loss that may be or may become uninsurable or not economically insurable, such as earthquakes, floods and liabilities related to hazardous waste. Further, if losses arise from hazardous substance contamination that cannot be recovered from a responsible party, the financial viability of the affected investment may be substantially impaired. It is possible that we will acquire an investment with known or unknown environmental problems that may adversely affect our investments.

We could be exposed to environmental liabilities with respect to investments to which we take title.

In the course of our business, and taking title to properties, we could be subject to environmental liabilities with respect to such properties. In such a circumstance, we may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or we may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. If we become subject to significant environmental liabilities, our business, financial condition, liquidity and results of operations could be materially and adversely affected.

Liability relating to environmental matters may impact the value of the properties that we may acquire or underlying our investments.

Under various U.S. federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. If we fail to disclose environmental issues, we could also be liable to a buyer or lessee of a property.

There may be environmental problems associated with our properties which we were unaware of at the time of acquisition. The presence of hazardous substances may adversely affect our ability to sell real estate, including the affected property, or to borrow additional funds using real estate as collateral. The presence of hazardous substances, if any, on our properties may cause us to incur substantial remediation costs and potential costs of indemnification in the case of properties we sell or rent to others, thus harming our financial condition. The discovery of material environmental liabilities attached to such properties could have a material adverse effect on our results of operations and financial condition and our ability to make distributions to our stockholders.

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Discovery of previously undetected environmentally hazardous conditions, including mold or asbestos, may lead to liability for adverse health effects and costs of remediating the problem could adversely affect our operating results.

Under various U.S. federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the cost of removal or remediation of hazardous or toxic substances on, under or in such property. The costs of removal or remediation could be substantial. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used, and these restrictions may require substantial expenditures. Environmental laws provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. Certain environmental laws and common law principles could be used to impose liability for release of and exposure to hazardous substances, including asbestos-containing materials into the air, and third parties may seek recovery from owners or operators of real properties for personal injury or property damage associated with exposure to released hazardous substances. The cost of defending against claims of liability, of compliance with environmental regulatory requirements, of remediating any contaminated property, or of paying personal injury claims related to any contaminated property could materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to our security holders.

Adverse economic conditions may negatively affect our results of operations and, as a result, our ability to make distributions to our stockholders or to realize appreciation in the value of our investments.

Our operating results may be adversely affected by market and economic challenges, which may negatively affect our returns and profitability and, as a result, our ability to make distributions to our stockholders or to realize appreciation in the value of our investments. These market and economic challenges may include, but are not limited to, the following:


 •
any future downturn in the U.S. economy and the related reduction in spending, reduced home prices and high unemployment could result in tenant defaults under leases, vacancies at our office, industrial, retail or multifamily properties, and concessions or reduced rental rates under new leases due to reduced demand;


•
the rate of household formation or population growth in our target markets or a continued or exacerbated economic slow-down experienced by the local economies where our properties are located or by the real estate industry generally may result in changes in the supply of or demand for apartment units in our target markets; and


•
the failure of the real estate market to attract the same level of capital investment in the future that it attracts at the time of our purchases or a reduction in the number of companies seeking to acquire properties may result in the value of our investments not appreciating or decreasing significantly below the amount we pay for these investments.

The length and severity of any economic slow-down or downturn cannot be predicted. Our operations and, as a result, our ability to make distributions to our stockholders and/or our ability to realize appreciation in the value of our properties could be materially and adversely affected to the extent that an economic slow-down or downturn is prolonged or becomes severe.

We may be adversely affected by unfavorable economic changes in the specific geographic areas where our investments are concentrated.

We expect to diversify our investments and expect that our real estate investments will be located throughout the United States. However, our investments may nonetheless result in significant concentration in one or more target markets. Our largest concentrations of investments are in California and Georgia. Adverse conditions (including business layoffs or downsizing, industry slowdowns, changing demographics and other factors) in the areas where our investments are located and/or concentrated, including any cities or towns within such target States, and local real estate conditions (such as oversupply of, or reduced demand for, office, industrial, retail or multifamily properties) may have an adverse effect on the value of our investments. A material decline in the demand or the ability of tenants to pay rent, or the general market for sales of multi-family properties in such geographic areas may result in a material decline in our cash available for distribution to our stockholders.

Inflation may adversely affect our financial condition and results of operations.

Increased inflation could have a more pronounced negative impact on any variable-rate debt we incur in the future and on our results of operations. During times when inflation is greater than increases in rent, the contracted rent increases called for under our leases may be unable to keep pace with the rate of inflation. Additionally, substantial inflationary pressures and increased costs may have an adverse impact on our tenants, which may adversely affect the ability of our tenants to pay rent.

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Our Hollywood Apartments building has variable interest rate debt but has an interest rate cap which has mitigated and we believe will continue to mitigate the effect of rising interest rates. We have other loans that become floating rate loans after an initial period of years. If interest rates do not decrease before the initial period ends our interest costs on those loans will increase after the initial period.

Our success is materially dependent on attracting qualified tenants.

We will not collect revenue for a property while it is vacant and we will be responsible for all utility costs and maintenance services until we are able to lease it. Our success is dependent on the financial stability of tenants in the aggregate. If we cannot rent our properties or our tenants default on our leases or fail to comply with the terms of our leases, our operations, financial performance, and the quality and value of our properties could be negatively impacted.

We may not be able to re-lease or renew leases at the investments held by us on terms favorable to us or at all.

We are subject to risks that upon expiration or earlier termination of the leases for our properties that such properties may not be re-leased or, if re-leased, the terms of the renewal or re-leasing (including the costs of required renovations or concessions to tenants) may be less favorable than current lease terms. Any of these situations may result in extended periods where there is a significant decline in revenues or no revenues generated by an investment. If we are unable to re-lease or renew leases for all or substantially all of our investments, or if the rental rates upon such renewal or re-leasing are significantly lower than expected, and if our reserves for these purposes prove inadequate, or if we are required to make significant renovations or concessions to tenants as part of the renewal or re-leasing process, we will experience a reduction in net income and may be required to reduce or eliminate distributions to our stockholders.

The bankruptcy, insolvency or diminished creditworthiness of our tenants under their leases or delays by our tenants in making rental payments could seriously harm our operating results and financial condition.

We will lease our properties to tenants, and we receive rents from our tenants during the terms of their respective leases. A tenant’s ability to pay rent is often initially determined by the creditworthiness of the tenant and the income of the tenant. However, if a tenant’s credit deteriorates or a tenant’s income deteriorates, the tenant may default on its obligations under its lease and the tenant may also become bankrupt. The bankruptcy or insolvency of our tenants or other failure to pay is likely to adversely affect the income produced by our real estate investments. Any bankruptcy filings by or relating to one of our tenants could bar us from collecting pre-bankruptcy debts from that tenant or its property, unless we receive an order permitting us to do so from the bankruptcy court. A tenant bankruptcy could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude full collection of these sums. If a tenant files for bankruptcy, we may not be able to evict the tenant solely because of such bankruptcy or failure to pay. A court, however, may authorize a tenant to reject and terminate its lease with us. In such a case, our claim against the tenant for unpaid, future rent would be subject to a statutory cap that might be substantially less than the remaining rent owed under the lease. In addition, certain amounts paid to us within 90 days prior to the tenant’s bankruptcy filing could be required to be returned to the tenant’s bankruptcy estate. In any event, it is highly unlikely that a bankrupt or insolvent tenant would pay in full amounts it owes us under its lease. In other circumstances, where a tenant’s financial condition has become impaired, we may agree to partially or wholly terminate the lease in advance of the termination date in consideration for a lease termination fee that is likely less than the agreed rental amount. If a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages. Any unsecured claim we hold against a bankrupt entity may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims. We may recover substantially less than the full value of any unsecured claims, which would harm our financial condition.

We may not obtain audited results of prior operations for certain properties in which we invest.

In some cases, we will not obtain audited operating statements regarding the prior operations of an investment. In such case, we will rely on unaudited financial information provided by the sellers of the investments. Thus, it is possible that information relied upon by us with respect to the acquisition of some of the investments may not be accurate at the time that we acquire such investment.

Significant restrictions on transfer and encumbrance of investments subject to mortgage or other debt financing are expected.

The terms of any mortgage or other debt financing applicable to an investment are expected to prohibit the transfer or further encumbrance of that investment or any interest in that investment except with the lender’s prior consent, which consent each lender is expected to be able to withhold. The relative illiquidity of the investments may prevent or substantially impair our ability to dispose of an investment at times when it may be otherwise advantageous for us to do so. If we were forced to immediately liquidate some or all of our investments, the proceeds are likely to result in a significant loss, if such a liquidation is possible at all.

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We may not obtain independent third-party appraisals or valuation reports on all of our investments.

We typically may not obtain independent third-party appraisals or valuations, or other reports concerning an investment, before we invest in such investment. If we do not obtain such third-party appraisals or valuations, there can be no assurance that an investment’s value will exceed its cost or that any sale or other disposition of such investment will result in a profit. Third-party appraisals and other reports may be prepared for lenders, in which case we typically will try to obtain a copy of such appraisals and reports for review, as well as reliance letters from the third-party preparers to allow us to rely on appraisals and reports. To the extent we do not obtain such other reports or reliance letters before making an investment, the risk of such investment may be increased.

We may experience delays in the sale of an investment.

Should we need to dispose of an investment, it may not be possible to sell any or all of our investments at a favorable price, or at all, in the desired time frame. If we are unable to sell our investments in the time frames or for the prices anticipated, our ability to make distributions to you may be materially delayed or reduced, you may not be able to get a return of capital as expected or you may not have any liquidity with respect to your investment in our securities.

We face possible risks associated with climate change.

We may become subject to laws or regulations related to climate change, which could cause our business, results of operations and financial condition to be impacted adversely. Both the federal government and many of the states and localities in which we operate have enacted, and may continue to enact, certain climate change laws and regulations or have begun regulating carbon footprints and greenhouse gas emissions. Although these laws and regulations have not had any known material adverse effects on our business to date, they could result in substantial costs, including compliance costs, increased energy costs, retrofit costs and construction costs, including monitoring and reporting costs, and capital expenditures for environmental control facilities and other new equipment. We cannot predict how future laws and regulations, or future interpretations of current laws and regulations, related to climate change will affect our business, results of operations and financial condition. Additionally, the potential physical impacts of climate change on our operations are highly uncertain and may include changes to global weather patterns, which could include local changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperature averages or extremes. These impacts may adversely affect our properties, our business, financial condition and results of operations.

Additionally, there has been increasing public focus by investors, environmental activists, the media and governmental and nongovernmental organizations on a variety of environmental, social and other sustainability matters. We may make commitments relating to sustainability matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability. If we are not effective in addressing environmental, social and other sustainability matters affecting our business, or setting and meeting relevant sustainability goals, our reputation may suffer.

Risks Related to Our Financial Position

We are subject to risks associated with debt and capital stock issuances, and such issuances may have consequences to holders of shares of our securities.

Whenever we raise additional capital through the issuance of equity securities, we could dilute the interests of holders of shares of our current outstanding securities.

Further, we may incur indebtedness in the future to finance our operations. Such indebtedness could result in important consequences to holders of our common and preferred shares, including subjecting us to covenants restricting our operating flexibility, increasing our vulnerability to general adverse economic and industry conditions, limiting our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements, requiring the use of a portion of our cash flow from operations for the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund working capital, acquisitions, capital expenditures, distributions to our stockholders and general corporate requirements, and limiting our flexibility in planning for, or reacting to, changes in our business and our industry.

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If we pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments and stockholders’ overall return will be reduced.

Although our distribution policy is to use our cash flow from operations to make distributions, we are permitted to pay distributions from any source, including offering proceeds, borrowings, or sales of assets. We have not placed a cap on the use of proceeds to fund distributions.

We do not have guaranteed cash flow.

There can be no assurance that cash flow or profits will be generated by our investments. If the investments do not generate the anticipated amount of cash flow, we may not be able to pay the anticipated distributions to our stockholders without making such distributions from the net proceeds of any offerings of capital stock or from reserves.

While we are subject to minimum distribution requirements to maintain our status as a REIT, such distributions are not guaranteed and the availability and timing of cash distributions is uncertain.

Our ability to pay dividends is dependent on our ability to purchase, develop, or operate our assets profitably, and there are many factors that can affect the availability and timing of cash distributions to stockholders. Because we may receive rents and income from our properties and liquidations of or distributions from our securities at various times during our fiscal year, distributions paid may not reflect our income earned in that particular distribution period. The amount of cash available for distribution will be affected by many factors, including without limitation, the amount of income we will earn from investments in target assets, the amount of our operating expenses and many other variables. Actual cash available for distribution may vary substantially from our expectations.

While we intend to fund the payment of quarterly distributions to holders of our common and preferred shares entirely from distributable cash flows, we may fund quarterly distributions to our stockholders from a combination of available net cash flows, equity capital and proceeds from borrowings. In the event we are unable to consistently fund future quarterly distributions to stockholders entirely from distributable cash flows, the value of our common and preferred shares may be negatively impacted.

We are generally required to distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, each year to qualify as a REIT under the Code, which we intend to satisfy through quarterly cash distributions of all or substantially all of our REIT taxable income in such year, subject to certain adjustments. Our Board of Directors will determine the amount and timing of any distributions. In making such determinations, our directors will consider all relevant factors, including the amount of cash available for distribution, capital expenditures, general operational requirements and applicable law. We intend over time to make regular quarterly distributions to holders of our preferred shares. However, we bear all expenses incurred by our operations, and the funds generated by operations, after deducting these expenses, may not be sufficient to cover desired levels of distributions to stockholders. In addition, our Board of Directors, in its discretion, may retain any portion of such cash in excess of our REIT taxable income for working capital. We cannot predict the amount of distributions we may make over time.

We may in the future choose to pay dividends in our own stock, in which case you may be required to pay income taxes in excess of the cash dividends you receive.

We may in the future distribute taxable dividends that are payable in a combination of cash and shares of our equity securities at the election of each stockholder. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for United States federal income tax purposes. As a result, a U.S. stockholder may be required to pay income taxes with respect to such dividends in excess of the cash dividends received.

The IRS has issued guidance authorizing elective cash/stock dividends to be made by public REITs where a cap of at least 20% is placed on the amount of cash that may be paid as part of the dividend, provided that certain requirements are met. It is unclear whether and to what extent we would be able to or choose to pay taxable distributions in cash and stock. In addition, no assurance can be given that the IRS will not impose additional requirements in the future with respect to taxable cash/stock distributions, including on a retroactive basis, or assert that the requirements for such taxable cash/stock distributions have not been met.

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Risks Related to Our Business Operations and Strategy

We may change our targeted investment and operational policies without stockholder consent.

We may change our investment and operational policies, including our policies with respect to investments (including changes to our Advisers’ targeted assets and asset allocation), acquisitions, growth, operations, indebtedness, capitalization and distributions, at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the types of investments described in this filing. Any such changes may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect our ability to make distributions. Furthermore, a change in our asset allocation could result in our making investments in asset categories different from those described in this annual report.

The ability of our Board of Directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

Our Charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on our total return to our stockholders.

Our future growth will depend upon our ability to acquire real estate investments in several competitive real estate markets.

Our future growth will depend, in large part, upon our initial and continued ability to acquire properties. We face significant competition with respect to our acquisition and origination of assets from many other companies, including other REITs, insurance companies, private investment funds, hedge funds, specialty finance companies and other investors.

Some competitors may have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Some of our competitors also may have greater financial and operational resources, larger customer bases, and more established relationships with their customers and suppliers than we do. The competitive pressures we face, if not effectively managed, may have a material adverse effect on our business, financial condition, liquidity and results of operations.

Competition may limit the number of suitable investment opportunities offered to us and may result in higher prices, lower yields and a narrower spread of yields over our borrowing costs, making it more difficult for us to identify and pursue opportunities consistent with our objectives and to acquire new investments on attractive terms. This could delay our investment in desirable assets. Any failure to identify or consummate investments on satisfactory terms, or at all, may impede our growth, reduce our earnings per share and negatively affect our cash available for distribution to our stockholders.

Due diligence by our Advisers may not reveal all of the liabilities associated with the investments being evaluated and may not reveal other weaknesses in such investments, which could lead to investment losses.

Because we intend to purchase real estate at below-market-prices, there may not be enough time to investigate the condition of any particular investment.

Before making an investment, our Advisers will assess the strengths and weaknesses of a target investment property. The Advisers will also consider other factors and characteristics that are material to the performance of the investment. Such other factors may include the pricing trends for similar properties in the area where the target investment property is located. In making such assessments and otherwise conducting customary due diligence, our Advisers relies on resources available to them and, in some cases, an investigation by third parties. There can be no assurance that our Advisers’ due diligence process will uncover all relevant facts or that any investment will be successful.

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We may experience difficulty in ultimately selling any property or groups of properties which no longer fit our investment criteria or are impractical to lease and maintain, which could force us to sell a property at a price that reduces the return to our investors.

The real estate market is affected by many factors that are out of our control, including the availability of financing, interest rates and other factors, as well as supply and demand for real estate investments. As a result, we cannot predict whether we will be able to sell any property or groups of properties which no longer fit our investment criteria or are impractical to lease and maintain on favorable terms, or whether such sale could be made at a favorable price or on terms acceptable to us. We also cannot predict the length of time which will be needed to obtain a purchaser or to complete the sale of any property.

In addition, the terms of our leases and the laws regulating REITs could impact our ability to sell any property or groups of properties. To qualify as a REIT for federal income tax purposes, we must continually satisfy various tests, including tests regarding the nature of our assets which could restrict our disposition strategy.

Lack of diversification in numbers or types of investments increases our dependence on individual investments.

Our investment strategy depends in large part on acquiring a diversified portfolio based on the number of properties or investments we acquire relative to our total assets. Such diversification reduces the risk that a default or other problem with any single property or investment will have a material negative impact on our earnings.

Currently, our investments are concentrated in nine commercial real estate properties and four multi-family residential apartment properties, located primarily in the Oakland-San Francisco Bay area in California. If, due to factors such as lack of adequate capital, or the unavailability of suitable investment opportunities, we acquire relatively few properties or acquire properties or investments that are significant (in terms of capital invested) to our overall asset size, we may be unable to reduce the degree of concentration of our portfolio, which could increase the risk of loss to stockholders if a default or other problem arises.

Additionally, property sales may reduce the aggregate amount of our property investment portfolio in value or number. As a result, our portfolio could become more concentrated, thereby further reducing the benefits of diversification by factors such as geography, property type, tenancy, or other measures. While we intend to endeavor to grow and diversify our portfolio through additional property acquisitions, we may never reach a significant size to achieve true portfolio diversity.

Our success is materially dependent on the financial stability of our tenants.

The success of our business is dependent on the financial stability of the tenants occupying our properties. A default of a tenant on its lease payments may cause us to lose some of the anticipated revenue from an investment property.

Since our portfolio is relatively small, our exposure to each tenant may be more significant than we expect. We believe that this exposure will diminish (but not entirely) as we acquire more properties. In the event of a material default, we may experience delays in enforcing our rights as landlords and we may incur substantial costs in protecting our investment and possibly re-letting the property, as the case may be. If a lease is terminated, we cannot assure our investors that the property could be leased for the same amount of rent previously received or that we could sell the property without incurring a loss.

We are dependent on our Advisers and their key personnel for our success.

We are, and will continue to be, advised by our Advisers and, pursuant to the Advisory Agreement, our Advisers is not obligated to dedicate any specific personnel exclusively to us, nor is its personnel obligated to dedicate any specific portion of their time to the management of our business.

As a result, we cannot provide any assurances regarding the amount of time our Advisers will dedicate to the management of our business. Moreover, each of our officers and non-independent directors is also an employee of our Advisers or one of its affiliates and has significant responsibilities for other investment vehicles currently managed by affiliates, and may not always be able to devote sufficient time to the management of our business. Consequently, we may not receive the level of support and assistance that we otherwise might receive if we were internally managed.

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In addition, we offer no assurance that our Advisers will remain our Advisers or that we will continue to have access to our Advisers’ principals and professionals. The term of our Agreements with our Advisers only extends until the end of each calendar year, with automatic one-year renewals, and may be terminated earlier under certain circumstances. If the Agreement is terminated or not renewed and no suitable replacement is found to manage us, we may not be able to execute our business plan, which could have a material adverse effect on our results of operations and our ability to make distributions to our stockholders.

Our Board of Directors has approved very broad investment guidelines for our Advisers and will not approve each investment and financing decision made by our Advisers unless required by our investment guidelines.

Our Advisers are authorized to follow very broad investment guidelines established by our Board of Directors. Our Board of Directors will periodically review our investment guidelines and our portfolio of assets but will not, and will not be required to, review all of our proposed investments, except in limited circumstances as set forth in our investment policies.

Our Advisers have great latitude within the broad parameters of our investment guidelines in determining the types and amounts of assets in which to invest on our behalf, including making investments that may result in returns that are substantially below expectations or result in losses, which would materially and adversely affect our business and results of operations, or may otherwise not be in the best interests of our stockholders. Transactions entered into by our Advisers may be costly, difficult or impossible to unwind by the time they are reviewed by our Board of Directors.

Because stockholders will be unable to evaluate the merits of these operational and investment guidelines, they will have to rely entirely on the ability of our Advisers and Board of Directors to formulate and follow these operational and investment guidelines.

Because we are dependent upon our Advisers and its affiliates to conduct our operations, any adverse changes in the financial or operational condition of our Advisers or its affiliates, or our relationship with them, could hinder our operating performance and the return on your investment.

We are dependent on our Advisers and their affiliates to manage our operations and acquire and manage our portfolio of real estate assets. Under the direction of our Board of Directors, and subject to our investment guidelines, our Advisers makes all decisions with respect to the management of our company. Our Advisers depend upon the fees and other compensation they receive from us, and upon their ability to attract and retain skilled personnel, in carrying out these functions. Any adverse changes in the financial or operational condition of our Advisers and their affiliates, or in our relationship with our Advisers, could hinder its ability to successfully manage our operations and our portfolio of investments, which would adversely affect us and our stockholders.

Our investments will be carried at estimated fair value as determined by our Investment Adviser and there may be uncertainty as to the value of these investments.

Substantially all of our investments are illiquid, and the securities in which we invest are not publicly traded. To determine our net asset value, our Investment Adviser estimates the fair value of our assets in conjunction with our external valuation experts.

Because such valuations are inherently uncertain, our value may fluctuate over short periods of time, and may be based on numerous estimates and assumptions, our determinations of fair value of our investments are inherently speculative and subject to errors. The value of our shares could be adversely affected if our determinations regarding the fair value of these investments are materially higher than the values that we ultimately realize upon their disposal.

We, through our Advisers, are often required to make a number of judgments in applying accounting policies, and different estimates and assumptions in the application of these policies could result in changes to our reporting of financial condition and results of operations.

Various valuation estimates are used in the preparation of our consolidated financial statements, including estimates related to asset and liability valuations (or potential impairments) and various receivables. Often these estimates require the use of market data values that may be difficult to assess, as well as estimates of future performance or receivables collectability that may be difficult to accurately predict. While we have identified those accounting policies that are considered critical and have procedures in place to facilitate the associated judgments, different assumptions in the application of these policies could result in material changes to our consolidated financial condition and results of operations.

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The occurrence of cyber incidents, or a deficiency in our cybersecurity, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our financial results.

A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity, or availability of our information resources. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information. As reliance on technology by the Company, as well as the Advisers and tenants, has increased, so have the risks posed to our systems, both internal and those we have outsourced. Our three primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our tenants, and private data exposure. We have implemented processes, procedures and controls to help mitigate these risks, but these measures, as well as our increased awareness of a risk of a cyber incident, do not guarantee that our financial results will not be negatively impacted by such an incident.

Risks Related to Our Organization and Corporate Structure

Our Charter permits our Board of Directors to issue stock with terms that may subordinate the rights of common stockholders or preferred shareholders or discourage a third party from acquiring us in a manner that might result in a premium price to our stockholders.

Our Charter permits our Board of Directors to issue up to 80,000,000 shares of common stock and 20,000,000 preferred shares. Our Board of Directors is permitted, subject to certain restrictions set forth in our Charter, to authorize the issuance of shares of common stock and preferred stock without stockholder approval. Further, our Board of Directors may classify or reclassify any unissued shares of common or preferred stock into other classes or series of stock and establish the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms or conditions of redemption of the stock and may amend our Charter from time to time to increase or decrease the aggregate number of shares or the number of shares of any class or series that we have authority to issue without stockholder approval. Thus, our Board of Directors could authorize us to issue shares of preferred stock ranking senior to our common stock with respect to distribution rights upon our liquidation, dissolution or winding up or with terms and conditions that could have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction such as a merger, tender offer or sale of all or substantially all of our assets, that might provide a premium price for holders of our common stock.

Our rights and the rights of our shareholders to recover claims against our officers, directors and our Advisers are limited.

Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our Charter, in the case of our directors, officers, employees and agents, and the advisory agreements, in the case of the Advisers, require us to indemnify our directors, officers, employees and agents and the Advisers and its affiliates for actions taken by them in good faith and without negligence or misconduct.

Additionally, our Charter limits the liability of our directors and officers for monetary damages to the fullest extent permitted under Maryland law. Although our Charter does not allow us to exonerate and indemnify our directors and officers to a greater extent than permitted under Maryland law, we and our stockholders may have more limited rights against our directors, officers, employees and agents, and our Advisers and its affiliates, than might otherwise exist under common law, which could reduce our investor’s and our recovery against them. In addition, we may be obligated to fund the defense costs incurred by our directors, officers, employees and agents or the Advisers in some cases which would reduce the cash available for distributions.

Risks Related to Conflicts of Interest

The Advisory Agreements with our Advisers were not negotiated on an arm’s-length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third party.

Our executive officers, including one of our directors, are executives of our Advisers. Our Advisory Agreements were negotiated between related parties and their terms, including fees payable to our Advisers, may not be as favorable to us as if it had been negotiated with an unaffiliated third party. In addition, we may choose not to enforce, or to enforce less vigorously, our rights under the Advisory Agreements because of our desire to maintain our ongoing relationship with the Advisers and its affiliates.

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We may have conflicts of interest with our Advisers and other affiliates, which could result in investment decisions that are not in the best interests of our stockholders.

There are numerous conflicts of interest between our interests and the interests of our Advisers and its respective affiliates, including conflicts arising out of allocation of personnel to our activities, allocation of investment opportunities between us and investment vehicles affiliated with our Advisers, purchase or sale of properties, including from or to investment entities affiliated with our Advisers, and fee arrangements with our Advisers that might induce our Advisers to make investment decisions that are not in our best interests. Examples of these potential conflicts of interest include, but are not limited to:


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Competition for the time and services of personnel that work for us and our affiliates;

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Compensation payable by us to our Advisers and their affiliates for their various services, which may not be on market terms and is payable, in some cases, whether or not our stockholders receive distributions;

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The possibility that our Advisers, their officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of properties and other investments, and that such conflicts may not be resolved in our favor, thus potentially limiting our investment opportunities, impairing our ability to make distributions and adversely affecting the trading price of our stock;

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The possibility that if we acquire properties from investment entities affiliated with our Advisers or their affiliates, the price may be higher than we would pay if the transaction were the result of arm’s-length negotiations with a third party;

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The possibility that our Advisers will face conflicts of interest, since some of their officers are also our officers and two serve as directors of ours, resulting in actions that may not be in the long-term best interests of our stockholders;

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Our Advisers have considerable discretion with respect to the terms and timing of our acquisition, disposition and leasing transactions;

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The possibility that we may acquire or merge with our Advisers, resulting in an internalization of our management functions; and

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The possibility that the competing demands for the time of our Advisers, their affiliates and our officers may result in them spending insufficient time on our business, which may result in our missing investment opportunities or having less efficient operations, which could reduce our profitability and result in lower distributions to stockholders.

Any of these and other conflicts of interest between us and our Advisers could have a material adverse effect on the returns on our investments, our ability to make distributions to stockholders and the trading price of our stock.

Our Advisers, their officers and their respective affiliates will face conflicts of interest relating to the purchase and leasing of real estate investments, and such conflicts may not be resolved in our favor.

Conflicts created by our Advisers’ relationships with us and with other investment entities affiliated with our Advisers or their affiliates, as described above, may severely curtail our investment opportunities, impair our ability to make distributions and reduce the value of stockholders’ investment in us. Our Advisers also advise other clients and such clients may compete with us for investments. Our Advisers have policies in place to deal with such potential conflicts, but such policies may result in other clients buying assets that may be in our best interest to purchase.

Our Advisers and the personnel they provide are not exclusively dedicated to management of our business.

If the competing demands for the time of our Advisers, their key personnel, their affiliates and our officers result in them spending insufficient time on our business, we may miss investment opportunities or have less efficient operations, which could reduce our profitability and result in lower distributions to stockholders.

We have not adopted any specific conflicts of interest policies, and, therefore, other than in respect of the restrictions placed on our Advisers in the Advisory Agreements, we will be reliant upon the good faith of our Advisers, officers and directors in the resolution of any conflict.

We do not have a policy that expressly restricts any of our directors, officers, stockholders or affiliates, including our Advisers and their officers and employees, from having a pecuniary interest in an investment in or from conducting, for their own account, business activities of the type we conduct. This may mean that our ability to access the best investments may be curtailed, which could result in greater than expected operating expense, losses and reduced distributions to our shareholders.

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Risks Associated with Debt Financing

We expect to use mortgage and other debt financing to acquire properties or interests in properties and otherwise incur other indebtedness, which increases our expenses and could subject us to the risk of losing properties in foreclosure if our cash flow is insufficient to make loan payments.

We are permitted to acquire real properties and other real estate-related investments, including entity acquisitions, by either assuming existing financing secured by the asset or borrowing new funds. In addition, we may incur or increase our mortgage debt by obtaining loans secured by some or all of our assets to obtain funds to acquire additional investments or to pay distributions to our stockholders. We also may borrow funds if necessary to satisfy the requirement that we distribute at least 90% of our annual “REIT taxable income” (determined without regard to the dividends paid deduction and excluding any net capital gain), or otherwise as is necessary or advisable to assure that we maintain our qualification as a REIT for federal income tax purposes.

There is no limit on the amount we may invest in any single property or other asset or on the amount we can borrow to purchase any individual property or other investment. If we mortgage a property and have insufficient cash flow to service the debt, we risk an event of default which may result in our lenders foreclosing on the properties securing the mortgage and the loss of our interests in such properties if we are unable to repay or refinance.

High levels of debt or increases in interest rates could increase the amount of our loan payments, which could reduce the cash available for distribution to stockholders.

Our policies do not limit us from incurring debt. For purposes of calculating our leverage, we assume full consolidation of all of our real estate investments, whether or not they would be consolidated under the accounting principles generally accepted in the United States of America (“GAAP”).

High debt levels will cause us to incur higher interest charges, resulting in higher debt service payments, and may be accompanied by restrictive covenants. Interest we pay reduces cash available for distribution to stockholders. Additionally, with respect to our variable-rate debt, increases in interest rates increase our interest costs, which reduces our cash flow and our ability to make distributions to you. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of the maximum return on such investments and could result in a loss. In addition, if we are unable to service our debt, our lenders may foreclose on our interests in the real property that secures such debt.

High mortgage rates may make it difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire, our cash flow from operations and the amount of cash distributions we can make.

To qualify as a REIT, we generally will be required to distribute at least 90% of our annual taxable income (determined without regard to the dividends paid deduction and excluding any net capital gain) to our stockholders in each taxable year, limiting our ability to retain internally generated cash. Accordingly, our ability to acquire properties or to make capital improvements to or remodel properties will depend on our ability to obtain debt or equity financing from third parties or the sellers of properties. If mortgage debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. If we place mortgage debt on properties, we run the risk of being unable to refinance the properties when the debt becomes due or of being unable to refinance on favorable terms. If interest rates are higher when we refinance the properties, our income could be reduced. The interest rate may increase on some of our fixed-rate debt after the initial fixed rate period. If any of these events occurs, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to stockholders and may hinder our ability to raise additional capital.

Our ability to obtain financing on reasonable terms would be impacted by negative capital market conditions.

Recently, domestic and international financial markets have experienced unusual volatility and uncertainty. Liquidity has tightened in overall financial markets, including the investment grade debt and equity capital markets. Consequently, there is greater uncertainty regarding our ability to access the credit market in order to attract financing on reasonable terms. Investment returns on our assets and our ability to make acquisitions could be adversely affected by our inability to secure financing on reasonable terms, if at all.

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If we are required to make payments under any “bad boy” carve-out guaranties that we may provide in connection with certain mortgages and related loans, our business and financial results could be materially adversely affected.

In obtaining certain nonrecourse loans, we may provide standard carve-out guaranties. These guaranties are only applicable if and when the borrower directly, or indirectly through agreement with an affiliate, joint venture partner or other third party, voluntarily files a bankruptcy or similar liquidation or reorganization action or takes other actions that are fraudulent or improper (commonly referred to as “bad boy” guaranties). Although we believe that “bad boy” carve-out guaranties are not guaranties of payment in the event of foreclosure or other actions of the foreclosing lender that are beyond the borrower’s control, some lenders in the real estate industry have recently sought to make claims for payment under such guaranties. In the event such claims were made against us under a “bad boy” carve-out guaranty following foreclosure on mortgages or related loans, and such claims were successful, our business and financial results could be materially adversely affected.

Interest-only indebtedness may increase our risk of default and ultimately may reduce our funds available for distribution to our stockholders.

We may finance our property acquisitions using interest-only mortgage indebtedness. During the interest-only period, the amount of each scheduled payment will be less than that of a traditional amortizing mortgage loan. The principal balance of the mortgage loan will not be reduced (except in the case of prepayments) because there are no scheduled monthly payments of principal during this period. After the interest-only period, we will be required either to make scheduled payments of amortized principal and interest or to make a lump-sum or “balloon” payment at maturity. These required principal or balloon payments will increase the amount of our scheduled payments and may increase our risk of default under the related mortgage loan. If the mortgage loan has an adjustable interest rate, the amount of our scheduled payments also may increase at a time of rising interest rates. Increased payments and substantial principal or balloon maturity payments would reduce the funds available for distribution to our stockholders.

We may use floating rate, interest-only or short-term loans to acquire investments.

The Real Estate Adviser has the right, in its sole discretion, to negotiate any debt financing, including obtaining (i) interest-only, (ii) floating rate and/or (iii) short-term loans to acquire Investments. If the Real Estate Adviser obtains floating rate loans, the interest rate would not be fixed but would float with an established index (probably at higher interest rates in the future). No principal would be repaid on interest-only loans. Finally, we would be required to refinance short term loans at the end of a relatively short period. The credit markets have recently been in flux and are experiencing a malaise. No assurance can be given that the Real Estate Adviser would be able to refinance with fixed-rate permanent loans in the future, on favorable terms or at all, to refinance the short-term loans. In addition, no assurance can be given that the terms of such future loans to refinance the short-term loans would be favorable to us.

Risks Related to Our Taxation as a REIT

Our failure to qualify as a REIT would result in higher taxes and reduced cash available for stockholders.

We intend to continue to operate in a manner so as to qualify as a REIT for U.S. federal income tax purposes. Our initial and continued qualification as a REIT depends on our satisfaction of certain asset, income, organizational, distribution, and stockholder ownership requirements on a continuing basis. Our ability to satisfy some of the asset tests depends upon the fair market values of our assets, some of which are not able to be precisely determined and for which we will not obtain independent appraisals.

If we were to fail to qualify as a REIT in any taxable year, and certain statutory relief provisions were not available, we would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and distributions to stockholders would not be deductible by us in computing our taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution.

Unless entitled to relief under certain Code provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to qualify as a REIT. In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our securities.

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Failure to remain qualified as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our stockholders.

We have elected to be taxed as a REIT under the federal income tax laws commencing with our taxable year ended December 31, 2014. We believe that we have and will continue to operate in a manner qualifying us as a REIT for our taxable year ended December 31, 2025, and intend to continue to so operate.

However, we cannot assure the stockholders that we will remain qualified as a REIT. Moreover, our qualification and taxation as a REIT depend upon our ability to meet on a continuing basis, through actual annual operating results, certain qualification tests set forth in the federal tax laws. Tax counsel will not review our compliance with those tests on a continuing basis. Accordingly, no assurance can be given that our actual results of operations for any particular taxable year will satisfy such requirements.

If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:


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we would be taxed as a regular domestic corporation, which under current law, among other things, means being unable to deduct distributions paid to stockholders in computing our taxable income and being subject to U.S. federal income tax on our taxable income at corporate income tax rates;

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we could be subject to the federal alternative minimum tax and possibly increased state and local taxes;

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we would be required to pay taxes and, therefore, our cash available for distribution to stockholders would be reduced for each of the years during which we did not qualify as a REIT and for which we had taxable income; and

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unless we are entitled to relief under certain U.S. federal income tax laws, we could not re-elect REIT status until the fifth calendar year after the year in which we failed to qualify as a REIT.

In addition, if we fail to qualify as a REIT, we will no longer be required to make distributions. As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it would adversely affect the value of our securities.

REIT distribution requirements could adversely affect our liquidity.

In order to maintain our REIT status and to meet the REIT distribution requirements, we may need to borrow funds on a short-term basis or sell assets, even if the then-prevailing market conditions are not favorable for these borrowings or sales. To qualify as a REIT, we generally must distribute to our stockholders at least 90% of our REIT taxable income each year, determined without regard to the deduction for dividends paid and excluding any net capital gain.

In addition, we will be subject to corporate income tax to the extent we distribute less than 100% of our net taxable income including any realized net capital gain. We intend to make distributions to our stockholders to comply with the requirements of the Code for REITs and to minimize or eliminate our corporate income tax obligation to the extent consistent with our business objectives.

Our cash flows from operations may be insufficient to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital expenditures, the creation of reserves or required debt service or amortization payments. The insufficiency of our cash flows to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or sell equity securities in order to fund distributions required to maintain our REIT status. We will be subject to regular corporate income taxes on any undistributed REIT taxable income each year. In addition, we will be subject to a 4% non-deductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

Further, amounts distributed will not be available to fund investment activities. We expect to fund our investments by raising equity capital and through borrowings from financial institutions and the debt capital markets. If we fail to obtain debt or equity capital in the future, it could limit our ability to grow, which could have a material adverse effect on the value of our preferred shares.

24
Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

To maintain our qualification as a REIT for federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our capital stock. In order to meet these tests, we may be required to forego investments we might otherwise make. Thus, compliance with the REIT requirements may hinder our performance.

In particular, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualified real estate assets. The remainder of our investment in securities (other than government securities, qualified real estate assets and taxable REIT subsidiaries) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer, among other limitations.

In addition, in general, no more than 5% of the value of our assets (other than government securities, qualified real estate assets and taxable REIT subsidiaries) can consist of the securities of any one issuer, and no more than 20% of the value of our assets can consist of the securities of one or more taxable REIT subsidiaries. If we fail to comply with these requirements at the end of any calendar quarter, we generally must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

The tax status of the Operating Partnership and other partnerships could impact our qualification as a REIT.

If the IRS were to successfully challenge the status of the Operating Partnership or any other partnership in which we invest as a partnership or disregarded entity for U.S. federal income tax purposes, such partnerships could be subject to an entity level tax and could, depending on the circumstances, jeopardize our ability to qualify as a REIT.

Even if we remain qualified as a REIT, we may face other tax liabilities that reduce our cash flows.

Even if we remain qualified as a REIT, we may be subject to certain federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes.

The stock ownership limit imposed by the Code for REITs and in our Charter may inhibit market activity in our stock and may restrict our business combination opportunities.

In order for us to maintain our qualification as a REIT under the Code, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year. Additionally, at least 100 persons must beneficially own our capital stock during at least 335 days of each taxable year. Our Charter, with certain exceptions, authorizes our directors to take such actions as are necessary and desirable to preserve our qualification as a REIT.

Unless exempted by the Board of Directors, no person may own more than 9.80% of the aggregate value of the outstanding shares of our stock or more than 9.80% in value or in number of shares, whichever is more restrictive, of the aggregate outstanding common or preferred shares of the Company. The Board of Directors may not grant such an exemption to any proposed transferee whose ownership in excess of 9.80% of the value of our outstanding shares or more than 9.80% in value or in number of shares, whichever is more restrictive, would result in the termination of our status as a REIT. These ownership limits could delay or prevent a transaction or a change in our control that might be in the best interest of our stockholders.

Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.

The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are taxed at individual rates is 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates on qualified dividend income. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our preferred shares.

25
However, under current law, individual taxpayers are entitled to claim a deduction in determining their taxable income of 20% of ordinary REIT dividends (dividends other than capital gain dividends and dividends attributable to certain qualified dividend income received by us), which reduces the effective tax rate on such dividends. You are urged to consult with your tax advisor regarding the effect of this rule on your effective tax rate with respect to REIT dividends.

The prohibited transactions tax may subject us to tax on our gain from sales of property and limit our ability to dispose of our properties.

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property other than foreclosure property, held primarily for sale to customers in the ordinary course of business.

Although we intend to acquire and hold all of our assets as investments and not for sale to customers in the ordinary course of business, the IRS may assert that we are subject to the prohibited transaction tax equal to 100% of net gain upon a disposition of real property.

Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, not all of our prior property dispositions qualified for the safe harbor and we cannot assure the stockholders that we can comply with the safe harbor in the future or that we have avoided, or will avoid, owning property that may be characterized as held primarily for sale to customers in the ordinary course of business.

Failure to make required distributions would subject us to U.S. federal corporate income tax.

We intend to continue to operate in a manner so as to qualify as a REIT for U.S. federal income tax purposes. In order to remain qualified as a REIT, we generally are required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, each year to our stockholders. To the extent that we satisfy this 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 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 the Code.

We may be unable to generate sufficient revenue from operations, operating cash flow or portfolio income to pay our operating expenses, and our operating expenses could rise, diminishing our ability and to pay distributions to our stockholders.

As a REIT, we are generally required to distribute at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain, each year to our stockholders. To qualify for the tax benefits accorded to REITs, we intend to continue to make distributions to our stockholders in amounts such that we distribute all or substantially all our REIT taxable income each year, subject to certain adjustments.

However, our ability to make distributions may be adversely affected by the risk factors described herein. Our ability to make and sustain cash distributions is based on many factors, including the return on our investments, the size of our investment portfolio, operating expense levels, and certain restrictions imposed by Maryland law.

Some of the factors are beyond our control and a change in any such factor could affect our ability to pay future distributions. No assurance can be given as to our ability to pay distributions to our stockholders. In the event of a downturn in our operating results and financial performance or unanticipated declines in the value of our asset portfolio, we may be unable to declare or pay annual distributions or make distributions to our stockholders. The timing and amount of distributions are in the sole discretion of our Board of Directors, which considers, among other factors, our earnings, financial condition, debt service obligations and applicable debt covenants, REIT qualification requirements and other tax considerations and capital expenditure requirements as our Board of Directors may deem relevant from time to time.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our shares.

At any time, the U.S. federal income tax laws governing REITs or the administrative interpretations of those laws may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation, or interpretation may take effect retroactively. We and our stockholders could be adversely affected by any such change in the U.S. federal income tax laws, regulations or administrative interpretations.

26
The Inflation Reduction Act of 2022 (the “IRA”) includes numerous tax provisions that impact corporations, including the implementation of a corporate alternative minimum tax as well as a 1% excise tax on certain stock repurchases and economically similar transactions. However, REITs are excluded from the definition of an “applicable corporation” and therefore are not subject to the corporate alternative minimum tax. Additionally, stock repurchases by REITs are specifically excepted from the 1% excise tax. The impact of tax reform and any potential tax changes on our shares is uncertain. Investors should consult their own tax advisors regarding changes in tax laws.

Risk Related to Outbreaks of Infectious Diseases

Any future pandemic or similar threat, and governmental responses thereto, could once again materially and adversely impact or disrupt our financial condition, results of operations, cash flows and performance, as well as adversely affect our and our tenants’ financial condition and results of operations.

Our operating results depend, in large part, on generating revenues from leases to residential or commercial tenants, which in turn requires tenants to generate sufficient income to pay their rents in a timely manner. The market and economic challenges created by the COVID-19 pandemic, and measures implemented to prevent its spread, adversely affected our operations and, as a result, our ability to make distributions to our stockholders or to realize appreciation in the value of our investments. Any future local, regional, national or international outbreak of a contagious disease, including COVID-19 and its variants, MERS, SARS, H1N1 influenza virus, avian flu or any other similar illness, could result in further increases in unemployment, decrease the willingness of customers to patronize our tenants’ retail facilities, discourage residents from renting in our multi-family communities, cause shortages of employees to staff our tenants’ operations, interrupt supplies from third parties upon which our tenants rely, cause us or our tenants to temporarily close one or more of our properties, result in governmental regulation adversely impacting our or our tenants’ businesses and otherwise have a material adverse effect on our business, financial condition and results of operations, especially where a tenant may be unwilling or unable to pay rent in full on a timely basis. In some cases, the companies in which we have invested may have to restructure tenants’ rent obligations, and they may not be able to do so on terms as favorable to us as those currently in place. Numerous state, local, federal, and industry-initiated efforts may also affect property owners’ ability to collect rent or enforce remedies for the failure to pay rent. This may lead to reduction or cancellation of distributions, which will in turn effect our ability to pay our expenses and to pay distributions to our shareholders.

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.

27
Risks Relating to Issuance of Warrants

There are unresolved issues related to rights of the warrant holder.

In February 2025, we issued pre-funded and unfunded warrants to a single institutional investor pursuant to warrant agreements that granted the investor the right to share in dividends. This dividend right is undisputed with respect to pre-funded warrants to purchase up to 129,226.50 shares of common stock (although after August 2025, this issue became moot when the investor exercised all its prefunded warrants). However, the Company did not agree to pay dividends on unfunded warrants to purchase 423,944.85 shares of common stock. Nonetheless, the investor has taken the position that dividends are payable on its unfunded warrants. The Company attempted to resolve this misunderstanding with the investor, but no resolution has been reached.

The holder of unfunded warrants could assert claims for dividends on the unfunded warrants.

The unfunded warrants became exercisable at the end of August 2025, six months after issuance of the warrants. From and after that time, the holder of the unfunded warrants could bring claims for participation rights in any dividends declared by the Company on its common stock. While the Company has suspended the payment of dividends on its common stock while experiencing negative cash flow, such potential claims by the holder of the unfunded warrants could be material if and when the Company re-starts dividend payments.

Item 1B.
UNRESOLVED STAFF COMMENTS

None.

28
Item 1C.
CYBER SECURITY

Risk Management and Strategy
 
As an externally managed company, our day-to-day operations are managed by our Advisers and our executive officers under the oversight of our Board of Directors. As such, we rely on our Advisers’ cybersecurity program, as discussed herein, for assessing, identifying, and managing material risks to our business from cybersecurity threats.
 
Due to the small size of our operations, our Advisers have elected to outsource the information technology function to a third-party managed service provider, or the MSP, that specializes in fully managed information technology services and fully managed cybersecurity. The MSP is responsible for managing all of our Advisers’ hosted services, all of the computer and computer-related hardware and software used by our Advisers to manage our operations, and all onsite and offsite backups. The MSP also provides managed security services designed to prevent cybersecurity threats, to identify and remediate vulnerabilities, to monitor systems, to protect data and systems, to detect potential intrusions and cybersecurity incidents, to quarantine systems should they be compromised, and to recover from business interruptions or other disasters. The MSP follows the NIST Cybersecurity Framework, developed by the National Institute of Standards and Technology of the U.S. Department of Commerce, to measure the maturity of the services it provides to us and its other clients.
 
The MSP conducts ongoing cybersecurity training to ensure all employees are aware of cybersecurity risks and performs periodic phishing simulation testing for increased cyber resilience. Annually, the MSP conducts penetration testing to assess cybersecurity measures and to review the information security control environment and operating effectiveness. In addition, our Advisers evaluate key third-party service providers before granting the service provider access to its information systems and have a process in place to ensure that future access is appropriate. Our assessment of risks associated with the use of third-party providers is part of the Advisers’ overall cybersecurity risk management framework. For any software platforms that are hosted by third parties, our Advisers confirm the vendor maintains a System and Organization Controls (“SOC”) report. While we have control, through our contract with the MSP, over our information systems, we do not have control over the information systems of third parties who provide services, and in particular certain property management services, at our commercial and residential real estate properties. Although we confirm third party software platforms maintain a SOC report, we rely on third parties for managing their cybersecurity risk. Our Advisers maintain third-party cyber insurance and upon identification of a significant cyber incident involving the Advisers managed IT environment, our Advisers would notify their cyber insurance carrier.
 
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As of the date of this annual report, we are not aware of any risks from cybersecurity threats, including as a result of any cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations, or financial condition. However, our business is highly dependent on our ability to collect, use, store and manage organizational and property data. If any of our significant information and data management systems do not operate properly or are disabled, we could suffer a material disruption of our business or managing real estate, liability to tenants, loss of tenant or other sensitive data, regulatory intervention, breach of confidentiality or other contract provisions, or reputational damage. These systems may fail to operate properly or become disabled as a result of events wholly or partially beyond our control, including disruptions of electrical or communications services, natural disasters, political instability, terrorist attacks, sabotage, computer viruses, deliberate attempts to disrupt our computer systems through “hacking”, “phishing”, or other forms of both deliberate or unintentional cyber-attack, or our inability to occupy our office location. As our Advisers have elected to outsource our information technology functions to third-party providers, we bear the risk of having less direct control over the security and performance of those systems.
 
Governance
 
As part of its responsibilities pursuant to our corporate governance guidelines, our Board of Directors oversees our policies with respect to risk assessment and risk management, including with respect to cybersecurity risks. The Board of Directors administers its risk oversight function by receiving regular reports from our executive officers on areas of material risk to us, which reports include any updates regarding cybersecurity incidents or other developments.
 
As discussed above, we engage the MSP to assist us with the identification, monitoring and management of cybersecurity risks and rely on the expertise and knowledge of the MSP with respect to supporting our information technology network. The MPS reports periodically to our management team as necessary, including our Chief Executive Officer and Chief Financial Officer. These senior executive officers then brief our Board of Directors on security matters as required and no less frequently than annually. Our Chief Operating Officer is responsible for managing our cybersecurity risk and developing mitigation strategies and implementing controls to reduce the likelihood of a cybersecurity incident occurring and to reduce the impact of such an incident should this occur.
 
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Item 2.
PROPERTIES

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

Additional details concerning the properties are discussed under the heading Properties in Item 7 in this report.

Item 3.
LEGAL PROCEEDINGS

The Operating Partnership’s subsidiary, Main Street West, had a loan with First Northern Bank of Dixon (the “Prior Lender”) that matured on November 1, 2024. Despite attempts to negotiate an extension, the parties were unable to reach an agreement. As a result, Main Street West defaulted under the terms of the note. The Prior Lender initiated foreclosure proceedings and filed a notice of default, and on January 28, 2025, the court appointed a receiver. On March 25, 2025, the Company entered into the Forbearance, Settlement, and Release Agreement (the “Forbearance Agreement”) with the Prior Lender and as part of the Forbearance Agreement, the Company paid down $5 million on the loan and took control of the property from the receiver in April 2025. The loan from the Prior Lender was paid off on June 6, 2025, with a new loan from EverTrust Bank. See Note 10 in the consolidated financial statements included in this report for additional information regarding the Main Street West Office Building, the foreclosure proceedings, and the Forbearance Agreement.

Item 4.
MINE SAFETY DISCLOSURES

Not applicable.

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PART II

Item 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

On April 29, 2024, our common stock became eligible for trading on the OTCQX Best Market under the ticker symbol MKZR. We have also secured Depository Trust Company (“DTC”) eligibility for our common shares. Trading through DTC allows for cost-effective clearing and guaranteed settlement, simplifying and accelerating the settlement process of daily trades. In addition, on August 26, 2024, we 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, and potential rights offering, equity issuance or other mechanisms to enhance corporate and shareholder value. On November 11, 2024, our common stock commenced trading on the Nasdaq Capital Market under the ticker symbol MKZR. Trading on Nasdaq enhances the visibility and accessibility of MacKenzie to U.S. investors.

Holders

As of September 29, 2025, we had 1,769,284 shares of our common stock (after giving effect to the Reverse Stock Split), 763,483.15 shares of our Series A preferred stock, 120,494.05 shares of our Series B preferred stock, 27,520 shares of our Series C preferred stock outstanding, held by a total of 1,008 common stockholders, 389 Series A preferred stockholders, 75 Series B preferred stockholders and 7 Series C preferred stockholders, respectively. The 1,008 common stockholders of record include Cede & Co., which holds shares as nominee for the DTC, which itself holds shares on behalf of the beneficial owners of our common stock. Such information was obtained through our registrar and transfer agent.

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.

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.

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The following tables reflect the dividends per share that we have declared during the years ended June 30, 2025 and 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
  
$
1.250
    
$
1,679,460
    
$
0.375
    
$
287,036
    
$
0.750
    
$
45,378
  
December 31, 2024
    
0.500
      
673,655
      
0.375
      
286,686
      
0.750
      
63,593
  
March 31, 2025
    
0.500
      
786,925
      
0.375
      
286,981
      
0.750
      
79,152
  
June 30, 2025
    
-
      
-
      
0.375
      
287,316
      
0.750
      
85,058
  
 
  
$
2.250
    
$
3,140,040
    
$
1.500
    
$
1,148,019
    
$
3.000
    
$
273,181
*

 
  
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
  
$
1.250
    
$
1,652,688
    
$
0.375
    
$
268,383
    
$
-
    
$
-
  
December 31, 2023
    
1.250
      
1,652,367
      
0.375
      
276,600
      
0.750
      
2,222
  
March 31, 2024
    
1.250
      
1,660,225
      
0.375
      
281,770
      
0.750
      
8,078
  
June 30, 2024
    
1.250
      
1,662,826
      
0.375
      
284,737
      
0.750
      
31,696
  
 
  
$
5.000
    
$
6,628,106
    
$
1.500
    
$
1,111,490
    
$
2.250
    
$
41,996
*

*Of the total dividends declared for Series B during the year ended June 30, 2025 and 2024, $204,889 and $31,497 were increases in liquidation preference and $68,292 and $10,451 were the cash dividends, respectively.

During the year ended June 30, 2025, we did not issue any shares of common stock in connection with the DRIP. During the year ended June 30, 2024, we issued 18,581.97 shares of common stock in connection with the DRIP. During the years ended June 30, 2025 and 2024, we issued 8,567.49 and 7,741.20 shares of our Series A preferred stock, respectively, in connection with the DRIP. During the year ended June 30, 2025 and 2024, we issued 644.60 and 2.11 shares of our Series B preferred stock, respectively, in connection with the DRIP.

On May 19, 2025, following a review of the Company’s financials, the current economic climate, the potential impact of new tariffs on demand for office and retail space, and the increased likelihood of a near-term recession, the Board of Directors approved the suspension of the regular quarterly dividend on the Company’s common stock effective immediately. This decision was made to preserve liquidity, enable the Company to make further investments in its own properties and developments where prudent, and to provide financial flexibility as to near-term commitments; the suspension will remain in effect until further notice.

Recent Sale of Unregistered Securities

Below common shares and per share prices are after giving effect to the Reverse Stock Split that was effective on August 4, 2025.

During the year ended June 30, 2025, we issued 32.18 shares of common stock at $102.5 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 on a 10:1 conversion ratio.

During the year ended June 30, 2025, we issued 9,044 shares of Series A preferred stock with total gross proceeds of $226,100, and 65,903.16 shares of Series B preferred stock with total gross proceeds of $1,647,579. We also issued 8,567.49 shares of Series A preferred stock with total gross proceeds of $192,770 under the preferred stock DRIP and 644.60 shares of Series B preferred stock with total gross proceeds of $14,503 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 3,718.10 shares of common stock, at a stated value of $30 per share, to Series A unit holders of the Operating Partnership who exercised their option to convert their Series A units to shares of our common stock. Additionally, on February 1, 2025, we issued 1,017.40 shares of common stock, at a stated value of $40 per share, to Series A unit holders of the Operating Partnership who exercised their option to convert their Series A units to shares of our common stock. Effective March 1, 2025, we issued 6,592.10 shares of common stock, at a stated value of $20 per share, to Series A unit holders of the Operating Partnership who exercised their option to convert their Series A units to shares of our common stock. Effective April 1, 2025, we issued 4,340.50 shares of common stock, at a stated value of $10 per share, to Series A unit holders of the Operating Partnership who exercised their option to convert their Series A units to shares of our common stock.

These private placements of our common and preferred shares 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 preferred shares) or Section 4(a)(2) and Regulation D thereunder (in the case of Operating Partnership unit conversions).
 
33
On August 26, 2024, in connection with our agreement with Maxim, the Company has issued in a private placement an aggregate amount of 13,300 shares of common stock to Maxim’s affiliate, approximately of 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 the 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.

On January 30, 2025, in connection with our agreement with OTB Capital, the Company issued in a private placement an aggregate amount of 8,583.70 shares of common stock to OTB Capital, approximately $0.20 million worth of shares. 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 OTB Capital that it is an accredited investor as defined in Regulation D under the Securities Act. The common stock does not have any conversion rights.

On March 3, 2025, in connection with our agreement with an institutional investor, the Company issued an aggregate amount of 153,403.40 shares of common stock, pre-funded warrants to purchase 129,226.50 shares of common stock, Series A common stock warrants to purchase 141,314.95 shares of common stock, and Series B common stock warrants to purchase 282,629.90 shares of common stock.

The common stock warrants described above were offered and sold by the Company in a transaction not involving a public offering exclusively to an accredited investor under Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D promulgated thereunder and, along with the shares of common stock underlying such common stock warrants, have not been registered under the Securities Act or applicable state securities law. Accordingly, the unregistered common stock warrants and the underlying shares of common stock may not be reoffered or resold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws.

Issuer Purchases of Equity Securities

There were no purchases of our common stock and preferred stock during the year ended June 30, 2025.

34
Item 6.
[RESERVED]

Item 7.
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.

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.

For a discussion of additional factors that could cause our actual results to differ from forward-looking statements contained herein, please see the discussion under the heading “Risk Factors” above in Item 1A of this report.

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.

35
Our investment objective is to generate current income and capital appreciation through the acquisition of real estate assets and debt and equity real estate-related investments. Our independent directors review our investment policies periodically, at least annually, to confirm that our policies are in the best interests of our stockholders. Each such determination and the basis thereof are contained in the minutes of our Board of Directors meetings.

We seek to accomplish our objective by rigorously analyzing the value of and risks associated with potential acquisitions, and, for up to 20% of our total assets, by acquiring real estate securities at significant discounts to their net asset value.

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;

36

 •
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

•
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 June 30, 2025, 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 June 30, 2025 and 2024:

 
  
Fair Value
  
Investments, at fair value
  
June 30, 2025
    
June 30, 2024
  
Blackstone Real Estate Income Trust, Inc. - Class S
  
$
-
    
$
330,828
  
Highlands REIT, Inc.
    
37,403
      
69,322
  
Moody National REIT II, Inc.
    
2,963
      
18,759
  
National Healthcare Properties, Inc.
    
740,894
      
856,285
  
SmartStop Self Storage REIT, Inc. - Class A
    
29,154
      
41,149
  
Starwood Real Estate Income Trust, Inc. - Class S
    
939,114
      
24,821
  
Total
  
$
1,749,528
    
$
1,341,164
  

 
  
Fair Value
  
Equity method investments, at fair value
  
June 30, 2025
    
June 30, 2024
  
5210 Fountaingate, LP
  
$
-
    
$
4,950
  
Green Valley Medical Center, LP
    
-
      
2,005,102
  
Lakemont Partners, LLC
    
711,740
      
791,990
  
Martin Plaza Associates, LP
    
531,544
      
465,053
  
Westside Professional Center I, LP
    
882,167
      
1,436,171
  
Total
  
$
2,125,451
    
$
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 Apartments, located in Oakland, CA, Hollywood Apartments located in Los Angeles, CA, and the Shoreline Apartments located 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 Apartments is owned through our subsidiary, PVT and Satellite Place Office Building is owned through our subsidiary, MacKenzie Satellite Place Corp. In August 2024, the Company listed Hollywood Apartments for sale. However, as of February 1, 2025, we discontinued marketing the property for sale and opted to retain ownership and continue operations. Therefore, as of June 30, 2025, it no longer qualified as held for sale.

37
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 Apartments
 PVT-Madison Partners LLC
Hollywood Apartments
 PT Hilview GP. LLC
Shoreline Apartments
 MacKenzie -BAA IG Shoreline LLC
Satellite Place Office Bulding
 MacKenzie Satelhite Place Corp.
First & Main Office Building
 First & Main, LP
1300 Main Office Building
 300 Main, LP
Woodland Corporate Center
 Woodland Corperate 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 June 30, 2025, the property is 96% occupied by 8 tenants. The following table shows the largest tenants and square footage occupied:

Largest Tenants
Business
Business
  
Square Ft.
Occupied
    
Annual Base Rent
  
Lease
Expiration
Renewal
options
Wilson Daniels
Wine Wholesaler
    
6,712
    
$
373,239
  
06/15/2031
1, 5 years
Norcal Gold
Real Estate
    
2,896
    
$
181,297
  
03/31/2026
No
Bao Ling Li
Restaurant
    
3,212
    
$
174,960
  
11/30/2030
No
Whole Health
Medical
    
2,186
    
$
137,219
  
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
    
$
137,219
    
12%

2026
    
1
      
2,896
    
$
181,297
    
17%

2028
    
1
      
266
    
$
6,000
    
1%

Thereafter
    
5
      
13,975
    
$
757,250
    
70%


First & 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 June 30, 2025, 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
    
$
515,983
  
09/20/2026
2, 5 years
Brotlemarkle
Accounting Services
    
4,366
    
$
249,654
  
07/31/2030
2, 5 years
Napa Palisades
Restaurant
    
3,462
    
$
198,219
  
08/31/2040
No
33133 Investments, Inc.
Retail
    
2,220
    
$
181,452
  
07/31/2025
No

38
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
    
$
350,932
      
22%

2026
    
1
      
9,470
    
$
515,983
      
33%
2027
    
1
      
1,135
    
$
74,826
      
5%
Thereafter
    
5
      
11,122
    
$
629,535
      
40%

Main Street West Office Building contains 38,135 square feet, of which approximately 32,700 square feet is office space and the remainder is designated as retail space. As of June 30, 2025, the property is 53% occupied by 8 tenants. AUL Corporation elected to terminate its lease as of February 3, 2025. During the year ended June 30, 2025, 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 the foreclosure proceedings due to maturity default of the debt secured by the property. On March 25, 2025, the Company entered into the Forbearance Agreement with the Prior Lender and as part of the Forbearance Agreement, the Company paid down $5 million on the loan and took control of the property from the receiver in April 2025. The loan from the Prior Lender was paid off in June 6, 2025, with the proceeds from a new loan from EverTrust Bank. 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
State of California
Health Care
    
4,697
    
$
259,721
  
10/31/2028
No
Strategies To
  Empower People
Health Care
    
4,875
    
$
224,859
  
01/28/2028
No
Azzurro Pizzeria
Restaurant
    
2,735
    
$
147,888
  
03/31/2029
1, 5 years
Bay Area Legal
  Aid
Legal Services
    
2,135
    
$
124,305
  
12/15/2027
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
    
1
      
938
    
$
62,544
      
6%

2026
    
2
      
2,940
    
$
122,000
      
11%
2027
    
1
      
2,135
    
$
124,305
      
12%
Thereafter
    
4
      
14,231
    
$
744,356
      
71%

Satellite Place Office Building contains 134,785 square feet, all of which is office space. As of June 30, 2025, the property is approximately 29% occupied by 4 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
Codoxo
Healthcare Software
    
13,956
    
$
296,446
  
06/30/2030
No
Polytron
Title Services
    
10,737
    
$
217,267
  
04/30/2031
2, 5 years
Ampirical
Engineering Consulting
    
9,790
    
$
208,070
  
09/30/2030
2, 5 years
Sun Taiyang
Consumer Products
    
4,383
    
$
97,898
  
11/30/2029
1, 5 years

39
The following information pertains to lease expirations at Satellite Place Office Building:

Year
  
Number of Leases Expiring
    
Total Area
    
Annual Base Rent
    
Percentage of Gross Rent
2029
    
1
      
4,383
    
$
97,898
      
12%
2030
    
2
      
23,746
    
$
504,516
      
62%
2031
    
1
      
10,737
    
$
217,267
      
26%

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 June 30, 2025, 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
    
$
337,053
  
04/09/2031
08/31/2032
12/21/2032
No
Children’s Home
  Society
Non-Profit Education
    
4,042
    
$
151,286
  
10/31/2028
No
Burger Rehab
Physical Therapy
    
4,013
    
$
123,725
  
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:

Year
  
Number of Leases Expiring
    
Total Area
    
Annual Base Rent
    
Percentage of Gross Rent
2025
    
1
      
3,057
    
$
94,788
      
9%
2026
    
1
      
1,433
    
$
47,105
      
4%
2027
    
2
      
2,160
    
$
85,265
      
8%
Thereafter
    
9
      
26,996
    
$
823,764
      
79%

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 June 30, 2025, the property is 100% 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
Larsen & Toubro
  Limited, Inc.
Multinational Conglomerate
    
5,130
    
$
277,026
  
02/13/2028
No
Sticky Rice
Restaurant
    
4,388
    
$
188,309
  
08/17/2034
No

40
The following information pertains to lease expirations at Green Valley Executive Center:

Year
  
Number of Leases Expiring
    
Total Area
    
Annual Base Rent
    
Percentage of Gross Rent
  
2025
    
1
      
968
    
$
44,978
      
2%
2026
    
3
      
13,567
    
$
568,974
      
28%
2027
    
3
      
9,147
    
$
415,956
      
20%
Thereafter
    
9
      
22,295
    
$
1,040,385
      
50%

One Harbor Center contains 49,569 square feet, all of which is office space. As of June 30, 2025, the property is 74% 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
    
$
346,332
  
05/15/2027
No
Equiventure
Health Care
    
6,446
    
$
232,200
  
11/16/2033
4, 5 years
Wiseman
  Company Mgt.
Real Estate
    
4,883
    
$
171,995
  
06/01/2028
No
Dwight Davenport
Financial Services
    
2,592
    
$
104,595
  
07/31/2028
No

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

Year
  
Number of Leases Expiring
    
Total Area
    
Annual Base Rent
    
Percentage of Gross Rent
2025
    
2
      
3,080
    
$
112,265
      
8%
2026
    
5
      
7,535
    
$
286,533
      
22%
2027
    
1
      
10,221
    
$
346,332
      
26%
Thereafter
    
4
      
15,882
    
$
584,715
      
44%

Green Valley Medical Center contains 31,590 square feet, of which approximately 20,100 square feet is office space, approximately 8,300 square feet is health care space, and the remainder is designated as retail space. As of June 30, 2025, the property is 94% occupied by 14 tenants. The following table shows the largest tenants and square footage occupied:

Largest Tenants
Business
Business
  
Square Ft.
Occupied
    
Annual Base Rent
  
Lease
Expiration
Renewal
options
Cal OES
State Emergency Services
    
7,605
    
$
291,652
  
08/31/2031
No
California Forever
Real Estate
    
3,341
    
$
152,400
  
10/17/2028
No
Jethro Nicolas et al
Health Care
    
3,409
    
$
143,700
  
04/14/2035
No
Green Valley Oral
  Surgery
Health Care
    
2,179
    
$
101,631
  
05/07/2029
2, 10 years

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

Year
  
Number of Leases Expiring
    
Total Area
    
Annual Base Rent
    
Percentage of Gross Rent
  
2025
    
2
      
2,404
    
$
100,356
    
8%

2026
    
1
      
1,332
    
$
69,002
    
6%

2027
    
1
      
1,515
    
$
64,968
    
5%

Thereafter
    
10
      
24,383
    
$
976,332
    
81%


41
Commodore Apartments is a mid-rise apartment building built in 1912 and has 48 units. As of June 30, 2025, Commodore Apartments is approximately 97.9% occupied. The Park View Apartments is also a mid-rise apartment building built in 1929 and has 39 units. As of June 30, 2025, The Park View Apartments is approximately 94.9% 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 38,000 square feet of net rentable apartment area and 8,610 square feet of retail space. All of the retail space is currently occupied by restaurants and nightclubs. The apartment units are 87.0% occupied as of June 30, 2025. Shoreline Apartments is a mid-rise apartment building built in 1967 and renovated in 2015 which has 84 units. As of June 30, 2025, Shoreline Apartments building is approximately 92.9% 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
  Apartments
Multi-Family Residential
Oakland, CA
    
31,020
      
39
      
94.9
%
  
$
1,078,977
    
$
2,430
  
Commodore
  Apartments
Multi-Family Residential
Oakland, CA
    
26,635
      
48
      
97.9
%
  
$
905,159
    
$
1,605
  
Hollywood
  Apartments
Multi-Family Residential
Los Angeles, CA
    
37,971
      
54
      
87.0
%
  
$
1,230,422
    
$
2,182
  
Shoreline
  Apartments
Multi-Family Residential
Concord, CA
    
68,200
      
84
      
92.9
%
  
$
1,988,671
    
$
2,125
  

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
%
  
$
343,357
    
$
28,613
  

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 June 30, 2025, 7 tenants are leasing space totaling 12,583 square feet or 29.1% of the building. The annualized base rent for these tenants is $416,546.

In addition to our commercial and residential real estate properties, we own two parcels of land: a vacant parcel adjacent to the 220 Campus Lane Office Building in Fairfield, California (“Campus Lane Land”) and a vacant parcel at 5000 Wiseman Way in Fairfield, California (“Aurora Land”). These parcels were acquired with the objective of developing multi-family residential communities and are owned by the Operating Partnership through its subsidiaries, Campus Lane Residential and MRC Aurora. These development projects are further discussed below.

Aurora Land Development (known as the 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 commenced in September 2024. Construction is progressing on schedule and on budget.

The clubhouse opened in mid-June 2025 for pre-leasing activities. The first residential building was completed and received its certificate of occupancy in July 2025. Leasing of this building began in August 2025, and as of this report, 22 units have been leased, with current occupancy of 30.56% of the total 72 units. The remaining two buildings were completed and received certificates of occupancy in early September 2025. The leasing of the remaining two buildings is expected to commence in the coming weeks.

The construction of this project was financed through $10 million of preferred capital (including $7.23 million from outside investors) and a $17.15 million construction loan from Valley Strong Credit Union. As of the date of this report, we have borrowed $13.29 million from the construction loan.

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Campus Lane Land Development (known as Blue Ridge)

We acquired the Campus Lane Land in September 2023 with the long-term objective of developing it into a multi-family residential community. We are preparing to launch this project, known as Blue Ridge, which will consist of 84 luxury multi-family units in Solano County, one of the fastest-growing counties in California. The entitlement process for the vacant land is currently underway. Our goal is to commence construction in spring 2026; however, this is subject to the city’s approval of our development application submitted in April 2024 and to securing the necessary financial resources. We are currently evaluating financing alternatives to fund the development of this project.

We currently do not have plans for any other major renovation or development of any properties except for our 220 Campus Lane Office Building, the Aurora at Green Valley and Blue Ridge, as discussed above. Each property is being held for income generation and potential value appreciation through increased occupancy and/or rental rates. We maintain property and liability insurance policies on all properties, which we believe are adequate and in line with industry standards.

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 & 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. Available office space is plentiful in each market in which our office properties are located, which magnifies the competitive challenges that we face in these markets.

The broader economy has been experiencing increased levels of inflation, higher interest rates and tightening monetary and fiscal policies. The Federal Reserve increased the federal funds rate multiple times in 2022 and 2023 then paused hikes in the 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.

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Results of Operations

Comparison of the Fiscal Years Ended June 30, 2025 (“Fiscal 2025”) and June 30, 2024 (“Fiscal 2024”). The commercial and residential properties owned by us during Fiscal 2025 and 2024 are as follows:

Fiscal 2025
 
Fiscal 2024
 
 
 
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
 
Green Valley Executive Center
One Harbor Center
 
One Harbor Center
Green Valley Medical Center (Acquired in August 2024)
 
 
 
 
 
Residential properties
 
Residential properties
Commodore Apartments
 
Commodore Apartments
The Park View Apartments
 
The Park View 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 year ended June 30, 2025, we generated $22.06 million in rental and reimbursements revenues, of which $16.17 million was generated from our nine commercial properties and $5.89 million was generated from our four residential properties. During the year ended June 30, 2024, we generated $15.74 million in rental and reimbursements revenues, of which $9.82 million was generated from our eight commercial properties and $5.92 million was generated from our four residential properties. The total increase in rental revenues was mainly due to the acquisition of one office building (Green Valley Medical Center) since June 30, 2024, and an early lease termination income of $3 million received from one of the tenants at our Satellite Place Office Building in December 2024.

Investment income:

Investment income was made up of dividends, distributions from operations, distributions from sales/capital transactions, interest, and other investment income. Total investment income for the years ended June 30, 2025 and 2024 were $0.07 million and $0.85 million, respectively. During the year ended June 30, 2025, we received minimal distributions from operations, sales, and liquidations as compared to $0.27 million received during the year ended June 30, 2024. The decrease was mainly due to the decrease in distributions received from investments. During the year ended June 30, 2025, we received dividends, interest, and other investment income of $0.07 million as compared to $0.58 million received during the year ended June 30, 2024. This decrease was mainly due to decrease in interest income from our cash deposits in money market funds during the year ended June 30, 2025, as we withdrew all of the deposits during 2024.

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Expenses:

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 year ended June 30, 2025, we incurred operating and maintenance expenses of $7.39 million, of which $4.65 million were incurred in the operation of our nine commercial properties, $2.73 million were incurred in the operation of our four residential properties and $0.01 million were incurred in the operation of the Operating Partnership. During the year ended June 30, 2024, we incurred operating and maintenance expenses of $6.52 million, of which $3.78 million were incurred in the operation of our eight commercial properties, $2.73 million were incurred in the operation of our four residential properties and $0.01 million were incurred in the operation of the Operating Partnership. The increase in the operating expenses was mainly due to the acquisition of one new office building (Green Valley Medical Center) in August 2024.

Depreciation and amortization:

During the year ended June 30, 2025, we recorded depreciation and amortization of $11.43 million, of which $9.24 million was attributable to the depreciation and amortization of real estate and intangible assets of our nine commercial properties and $2.19 million was attributable to our four residential properties. During the year ended June 30, 2024, we recorded depreciation and amortization of $7.15 million, of which $4.98 million was attributable to the depreciation and amortization of real estate and intangible assets of our eight commercial properties and $2.17 million was attributable to our four residential properties. The increase in total depreciation and amortization of $4.28 million during the year ended June 30, 2025, was due to the acquisition of one new office building (Green Valley Medical Center) in August 2024 and write-off of leasehold improvements, lease commissions, and in-place lease related to our Satellite Place Office Building due to an early lease termination of its anchor tenant in December 2024.

Interest expense:

Interest expense for the year ended June 30, 2025 was $8.52 million, of which $5.02 million was incurred on the mortgage notes payable associated with our nine commercial properties, $3.12 million was incurred on the mortgage notes payable associated with our four residential properties and the debt on Campus Lane Land, and $0.38 million was incurred on the line of credit agreement of the Company. Interest expense for the year ended June 30, 2024 was $6.12 million, of which $3.12 million was incurred on the mortgage notes payable associated with our four residential properties and the loan on Campus Lane Land and $3 million was incurred on the mortgage notes payable associated with our seven commercial properties, which exclude Satellite Place Office Building since there is no debt on the property. The total increase of $2.40 million in interest expense for the year ended June 30, 2025, was primarily attributable to additional mortgage notes payable related to two office buildings (Satellite Place Office Building and Green Valley Medical Center) since June 30, 2024 and a residential property (Hollywood Apartments) incurring loan maturity extension fees and refinancing fees in 2025. Additionally, Main Street West’s loan with the Prior Lender accrued interest at 4% until its November 2024 maturity, after which it defaulted and increased to 8% subject to a Forbearance Agreement. On June 6, 2025, the loan was refinanced with EverTrust Bank at a rate equal to the Wall Street Journal Prime Rate (currently 7.50% annually), subject to a 6.50% floor. A small increase was also attributable to borrowings by the Parent Company under its new line of credit.

Unallocated corporate expenses:

Unallocated corporate expenses include corporate overhead expenses that are not directly attributable to one of our business segments and include interest expense, asset management fees to related party, general and administrative, professional fees, administrative cost reimbursements to related party, directors’ fees, and transfer agent cost reimbursements to related party.

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 years ended June 30, 2025 and 2024 were $3.45 million and $3.22 million, respectively. The slight increase was due to total increase of $8.92 million in total invested capital from $178.83 million as of June 30, 2024 to $187.75 million as of June 30, 2025.

45
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 years ended June 30, 2025 and 2024.

Administrative cost and transfer agent reimbursements:

Costs reimbursed to MacKenzie for the year ended June 30, 2025 were $0.67 million as compared to $0.76 million for the year ended June 30, 2024. The slight decrease was due to a decrease in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to June 30, 2024, mainly due to hiring of a third-party transfer agent after June 30, 2024.

Transfer agent cost reimbursements paid to MacKenzie for the years ended June 30, 2025 and 2024 were $0.01 million and $0.07 million, respectively.

Other corporate operating expenses:

Other corporate operating expenses include professional fees, directors’ fees, printing and mailing expense, and other general and administrative expenses. Other operating expenses for the years ended June 30, 2025 and 2024, were $4.55 million and $1.80 million, respectively. The increase in other operating expenses was due to the acquisition of one commercial property (Green Valley Medical Center) since June 30, 2024, resulting in a higher amount of general and administrative operating expenses, and new consulting and marketing services expenses incurred by the Company during the year ended June 30, 2025.

Net realized gain (loss) on sale of investments:

During the year ended June 30, 2025, we recorded a net realized gain of $0.13 million as compared to $3.02 million net realized loss during the year ended June 30, 2024. Total realized gain for year ended June 30, 2025, was realized from the sale of three non-traded REIT securities and a limited partnership interest. Total net realized loss for the year ended June 30, 2024, was realized from the write-off of two limited partnership interests (BP3 Affiliate, LLC and Capitol Hill Partners, LLC) with a realized loss of $3.06 million offset by the sale of four non-traded REIT securities with a net realized gain of $0.04 million.

Net unrealized gain (loss) on investments:

During the year ended June 30, 2025, we recorded a net unrealized loss of $0.72 million, which was net of $0.17 million of unrealized gain reclassification adjustment. The reclassification adjustments are the accumulated unrealized gains or losses as of the end of the prior period that are realized during the current period. Accordingly, the net unrealized losses excluding the reclassification adjustment for the year ended June 30, 2025, were $0.55 million, which resulted from fair value depreciations of $0.69 million from general partnership interests, $0.08 million from limited partnership interests and fair value appreciations of $0.22 million from non-traded REIT securities.

During the year ended June 30, 2024, we recorded a net unrealized gain of $0.86 million, which was net of a $2.32 million unrealized loss reclassification adjustments. The reclassification adjustments are the accumulated unrealized gains or losses as of the end of the prior period that are realized during the current period. Accordingly, the net unrealized loss excluding the reclassification adjustment for the year ended June 30, 2024 was $1.46 million, which resulted from fair value of $1.06 million from non-traded REIT securities, $0.36 million from general partnership interests and $0.04 million from limited partnership interest.

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.

46
The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax year ended December 31, 2024. Therefore, it did not incur any tax expense or excise tax on its income from operations during the quarterly periods within the tax year 2024. In addition, for the tax year 2025, the Parent Company intends to pay the requisite amounts of dividends during the year and meet other REIT requirements such that the Parent Company will not owe any income taxes. Therefore, the Parent Company did not record any income tax provisions during any fiscal periods within the tax year 2025.

MacKenzie NY 2 and MRC QRS are subject to corporate federal and state income tax on their taxable income at regular statutory rates. As of June 30, 2025, they did not have any taxable income for tax year 2024 and 2025. Therefore, we did not record any tax provisions during any fiscal periods within the tax year 2024 and 2025. MacKenzie Satellite and MRC QRS are qualified REIT subsidiaries of the Parent Company. Therefore, they do 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, GVEC and Innovate Napa are limited liability companies. First & Main, 1300 Main, Woodland Corporate Center Two, Main Street West, One Harbor Center, LP and Green Valley Medical Center, LP 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.

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 June 30, 2025. 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 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 $18.74 million through the sale of our Series A preferred stock and $3.11 million Series B preferred stock pursuant to the Offering Circular as of June 30, 2025. In addition, we have raised $0.45 million from the issuance of shares of Series A and Series B preferred stock under the preferred stock DRIP. In January 2025, the Second Offering Circular was qualified by the SEC for the sale of 1,286,638.62 shares of Series A and 1,267,216.17 shares of Series B preferred stock. The Second Offering Circular was amended in June 2025 to offer up to 647,991 shares of Series A Preferred Stock, 1,166,383 shares of Series B Preferred Stock, and 1,166,383 shares of Series C 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 million. As of June 30, 2025, under the ATM offering, we sold 56,948.30 shares with gross proceeds of approximately $1.50 million. In addition, on February 28, 2025, the Company offered and sold 153,403.40 shares of the Company’s common stock, pre-funded warrants to purchase up to 129,226.50 shares of common stock, and warrants to purchase up to an aggregate of 423,944.85 shares of common stock. The gross proceeds to the Company from this transaction were approximately $4.80 million before deducting the placement agent’s fees and other offering expenses payable by the Company. All share amounts are presented after giving effect to the Reverse Stock Split.

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 in the past fiscal year as we did in previous years, 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.

47
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 provided us with greater flexibility in choosing among different alternatives for raising capital through debt, equity participation features (such as warrants and convertible notes) and/or additional classes of stock (such as preferred) in order to facilitate capital formation.

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 year ended June 30, 2025, with cash and cash equivalents, and restricted cash of approximately $4.12 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, B and C 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, B and C stock, and borrowings at the underlying companies and at the Parent Company level under lines of credit.

Cash Flows:

Fiscal 2025:

For the year ended June 30, 2025, we experienced a net decrease in cash of $8.96 million. During this period, we used net cash of $1.69 million in our operating activities, used net cash of $19.12 million in our investing activities and generated net cash of $11.85 million in our financing activities.

The net cash outflow of $1.69 million from operating activities resulted from $22.29 million used in operating expenses, offset by cash inflows of $20.52 million of rental revenues and $0.08 million of investment income.

The net cash outflow of $19.12 million from investing activities resulted from $18.90 million of real estate acquisitions through our subsidiaries, and $1.18 million purchases of equity investments, offset by cash inflow of $0.96 million from sale of investments.

The net cash inflow of $11.85 million from financing activities resulted from $48.47 million of additional mortgage borrowings, $9.59 million proceeds from borrowings under the affiliated party line of credit, $5.57 million of capital contributions by non-controlling interests holders, $3.79 million of issuance of common stock, $1.94 million of issuance of pre-funded warrants, $1.65 million of issuance of Series B preferred stock, $1.12 million of additional notes payable, $0.38 million of issuance of Series A common stock warrants, $0.23 million of issuance of Series A preferred stock and $0.22 million of issuance of Series B common stock warrants, offset by cash outflows of $48.89 million payments on existing mortgage notes, $4.80 million payment of dividends to common stockholders, $2.32 million payment of financing fees, $1.88 million payment of selling commissions and fees, $1.49 million capital distributions to non-controlling interests holders, $0.95 million payment of dividends to Series A preferred stockholders, $0.28 million change in capital pending acceptance, $0.23 million repayment of finance lease liabilities, $0.22 million payment on existing notes payables, $0.04 million payment of dividends to Series B preferred stockholders and $0.01 million redemption of Series A preferred stock.

Fiscal 2024:

For the year ended June 30, 2024, we experienced a net decrease in cash of $5.06 million. During this year, we used net cash of $0.59 million in our operating activities, $1.30 million in our investing activities and $3.17 million in our financing activities.

The net cash outflow of $0.59 million from operating activities resulted from $16.73 million of cash used in operating expenses offset by cash inflow of $15.28 million of rental revenues and $0.86 million of investment income.

The net cash outflow of $1.30 million from investing activities resulted from $10.23 million real estate acquisitions through our subsidiaries, $1.51 million payment on the contingent liability and $1.06 million purchases of equity investments, offset by $10.56 million sale of investments and $0.94 million distributions received from our investments that are considered return of capital.

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The net cash outflow of $3.17 million from financing activities resulted from $5.18 million payments of dividends, $1.40 million redemption of common stock, $1.35 million payments on existing mortgage notes payables, $0.90 million payments of syndication costs, $0.89 million payments of dividends of Series A preferred stockholders, $0.88 million payment of loan extension fee, $0.83 million capital distribution to non-controlling interest holders, $0.37 million payment on note payable, $0.34 million acquisition of below market debt, $0.24 million capital pending acceptance, $0.10 million repayments of finance lease liabilities and $0.08 million redemption of Series A preferred stock, offset by $3.29 million additional mortgage borrowings, $2.53 million capital contributions by non-controlling interests holders, $2.14 million issuance of Series A preferred stock, $1.23 million issuance of Series B preferred stock and $0.20 million proceeds from notes payable.

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 in the consolidated financial statements included in this report.

Borrowings

On January 22, 2025, we entered into a revolving line of credit agreement with PRES, 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%. 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. As of the date of this report, the Company has borrowed $10 million, which includes $196,078 of loan origination fees, under the line of credit.

We used the proceeds from this credit facility on a short-term basis to bridge the gap between our asset acquisition expenditures and debt refinancing. 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 June 30, 2025 and the fiscal years those loans mature:

Fiscal Year Ending June 30, :
  
Principal
  
2026
  
$
28,553,223
  
 
        
2027
    
1,933,860
  
 
        
2028
    
29,029,695
  
 
        
2029
    
4,780,408
  
 
        
2030
    
27,471,758
  
 
        
Thereafter
    
43,569,422
  
 
        
Total
  
$
135,338,366
  

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Three of our underlying companies (Hollywood Hillview, Woodland Corporate Center Two, and Main Street West) had debts that matured during the fiscal year ending June 30, 2025. The Woodland Corporate Center Two loan was refinanced in October 2024, the Hollywood Hillview loan was refinanced in March 2025, and the Main Street West loan was refinanced in May 2025, as detailed below.

The $14.74 million note payable on Main Street West matured on November 1, 2024. Following a default, the bank initiated foreclosure proceedings in January 2025 and a court-appointed receiver took control of the property in February 2025. On March 25, 2025, the Company entered into a Forbearance Agreement with the Prior Lender. As part of the Forbearance Agreement, the Company paid down $5 million on the loan and regained control of the property from the receiver in April 2025. On May 21, 2025, the Company obtained a loan with EverTrust Bank for an amount of $9.50 million to refinance the prior loan with the Prior Lender. As of June 30, 2025, the outstanding balance on the loan with EverTrust Bank was $9.50 million.

Critical Accounting Policies and Estimates

Below is a discussion of the accounting policies and estimates that management considers critical in that they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. In addition to the discussion below, our critical accounting policies are discussed in Note 2 of our consolidated financial statements, which are part of this annual report beginning on page F-1.

Real Estate Purchase Price Allocations

In accordance with the guidance for business combinations, upon the acquisition of real estate properties, we evaluate whether the transaction is a business combination or an asset acquisition. If the transaction does not meet the definition of a business combination, we record the assets acquired, the liabilities assumed, and any non-controlling interest as of the acquisition date, measured at their relative fair values. Acquisition-related costs are capitalized in the period incurred and are added to the components of the real estate assets acquired. We assess the acquisition-date fair values of all tangible assets, identifiable intangible assets, and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on several factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant. Intangible assets include the value of in-place leases, which represents the estimated fair value of the net cash flows of leases in place at the time of acquisition, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. We amortize the value of in-place leases to expense over the remaining non-cancelable term of the respective leases, which is on average five years. Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require us to make significant assumptions to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, prevailing interest rates, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets, and assumed liabilities, which could impact the amount of our net income (loss). Differences in the amount attributed to the fair value estimate of the various assets acquired can be significant based upon the assumptions made in calculating these estimates.

Fair Value Measurements

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observables used in measuring investments at fair value. Market price is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available actively quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observables and a lesser degree of judgment used in measuring fair value.

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level I   –     Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded equity securities. We do not adjust the quoted price for these investments even in situations where we hold a large position and a sale could reasonably impact the quoted price.

50
Level II  –     Price inputs are quoted prices for similar financial instruments in active markets; quoted prices for identical or similar financial instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets. Investments which are generally included in this category are publicly traded equity securities with restrictions.

Level III –     Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair values for these investments are estimated by management using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, financial condition, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant judgment by management. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had an active market for these investments existed.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Management’s assessment of the significance of a particular input to the fair value measurement, in its entirety, requires judgment and considers factors specific to the investment.

Valuation of Investments

Our consolidated financial statements include investments that are measured at their estimated fair values in accordance with GAAP. Our valuation procedures are summarized below:

Securities for which market quotations are readily available on an exchange will be valued at such price as of the closing price on the day closest to the valuation date. Where a security is traded but in limited volume, we may instead utilize the weighted average closing price of the security over the prior 10 trading days. We may value securities that do not trade on a national exchange by using published secondary market trading information. When doing so, we first confirm that GAAP recognizes the trading price as the fair value of the security.

Securities for which reliable market data is not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or Board of Directors, does not represent fair value, are valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; and (iii) the Board of Directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser and, where appropriate and necessary, the respective third‑party valuation firms. The recommendation of fair value will generally be based on the following factors, as relevant:


 •
the nature and realizable value of any collateral;

•
the portfolio company’s ability to make payments;

•
the portfolio company’s earnings and discounted cash flow;

•
the markets in which the issuer does business; and

•
comparisons to publicly traded securities.

Securities for which market data is not readily available or for which a pricing source is not sufficient may include the following:


 •
private placements and restricted securities that do not have an active trading market;

•
securities whose trading has been suspended or for which market quotes are no longer available;

•
debt securities that have recently gone into default and for which there is no current market;

•
securities whose prices are stale;

•
securities affected by significant events; and

•
securities that the Investment Adviser believes were priced incorrectly.

51
Valuation of Real Property

When property is owned directly, the valuation process includes a full review of the property financial information. An Argus model is created using all known data such as current rent rolls, escalators, expenses, market data in the area where the property is located, cap rates, discount rates, mortgages, interest rates, and other pertinent information. We estimate future leasing and costs associated, generally over a ten-year period, to determine the fair value of the property. Once the fair value is determined, and reviewed by the Board of Directors, a determination of whether any impairment is required is made and documented. In addition, we may obtain a third-party appraisal on directly owned properties.

Determination of fair value involves subjective judgments and estimates and is reviewed by the Board of Directors. Accordingly, the notes to our consolidated financial statements will express the uncertainty of such valuations, and any change in such valuations, on our consolidated financial statements.

Below is a discussion of additional accounting policies and estimates. While management determined these to be not critical, they are still considered to be significant and relevant for understanding and evaluating our reported financial results.

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 are susceptible to change, and actual results could differ from those estimates.

Revenue Recognition

Rental revenue, net of concessions, which is derived primarily from lease contracts and includes rents that each tenant pays in accordance with the terms of each lease agreement, is recognized on a straight-line basis over the term of the lease, when collectability is determined to be probable.

Minimum rent, including rental abatements, lease incentives, and contractual fixed increases attributable to operating leases are recognized on a straight-line basis over the term of the related leases when collectability is probable. Amounts expected to be received in later years are recorded as deferred rent receivable. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or us. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive and amortized as a reduction of rental revenue over the lease term.

Tenant improvement ownership is determined based on various factors including, but not limited to:


 •
whether the lease stipulates how a tenant improvement allowance may be spent;

•
whether the lessee or lessor supervises the construction and bears the risk of cost overruns;

•
whether the amount of a tenant improvement allowance is in excess of market rates;

•
whether the tenant or landlord retains legal title to the improvements at the end of the lease term;

•
whether the tenant improvements are unique to the tenant or general purpose in nature; and

•
whether the tenant improvements are expected to have any residual value at the end of the lease.

In accordance with ASC Topic 842, we determine whether collectability of lease payments in an operating lease is probable. If we determine the lease payments are not probable of collection, we fully reserve for rent and reimbursement receivables, including deferred rent receivable, and recognize rental income on a cash basis.

Distributions received from investments are evaluated by management and recorded as dividend income or a return of capital (reduction of investment) on the ex-dividend date. Operational dividends or distributions received from portfolio investments are recorded as investment income. Distributions resulting from the sale or refinance of an investee’s underlying assets are compared to the estimated value of the remaining assets and are recorded as a return of capital or as investment income as appropriate.

52
Realized gains or losses on investments are recognized in the period of disposal, distribution, or exchange and are measured by the difference between the proceeds from the sale or distribution and the cost of the investment. Investments are disposed of on a first-in, first-out basis. Net change in unrealized gain (loss) reflects the net change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gains or losses.

Variable Interest Entities

We evaluate the need to consolidate other entities in when we have invested in their securities in accordance with ASC Topic 810, Consolidation. In determining whether we have a controlling interest in a variable interest entity that requires us to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners/members, as well as whether the entity is a variable interest entity for which we are the primary beneficiary.

Real Estate Assets, Capital Additions, Depreciation and Amortization

We capitalize costs, including certain indirect costs, incurred for capital additions, including redevelopment, development, and construction projects. We also allocate certain department costs, including payroll, at the corporate levels as “indirect costs” of capital additions, if such costs clearly relate to capital additions. We also capitalize interest, property taxes, and insurance during periods in which redevelopment, development, and construction projects are in progress. Cost capitalization begins once the development or construction activity commences and ceases when the asset is ready for its intended use. Repair and maintenance and tenant turnover costs are expensed as incurred. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset. Depreciation and amortization expense are computed on the straight-line method over the asset’s estimated useful life. We consider the period of future benefit of an asset to determine its appropriate useful life and anticipate the estimated useful lives of assets by class to be generally as follows:

Buildings
16 – 45 years
   
Buildings improvements
1 – 15 years
   
Land improvent
5 – 15 years
   
Furniture, fixtures and equipment
3 – 11 years
   
In-place leases
1 – 10 years

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.

During the year ended June 30, 2025, we recorded an impairment loss of $9,500,167, 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.

Assets and Liabilities Held for Sale
 
We classify long-lived assets 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);

53

 •
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.

Item 7A.
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 June 30, 2025, financial instruments that subjected us to concentrations of market risk consisted principally of equity investments, which represented approximately 1.60% of our total assets as of that date. As discussed in Note 4, 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 June 30, 2025, $17.65 million, $14.99 million and $15.13 million of our total outstanding loan balance was under variable-rate debt indexed to the Secured Overnight Financing Rate (“SOFR”), Prime rate, and U.S Treasury yield, respectively. For the Prime rate, a hypothetical increase or decrease of 100 basis points would result in a corresponding increase or decrease in our annual interest expense of approximately $0.15 million. As of June 30, 2025, the applicable variable rates were 7.50% for the Prime rate, 4.15% for SOFR, and 3.96% for the U.S. Treasury yield.

Variable interest under the SOFR and U.S. Treasury–indexed loans are not yet applicable as of June 30, 2025. These payments are scheduled to commence on May 1, 2027, and May 1, 2026, respectively.

Item 8.
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and notes to the consolidated financial statements are set forth beginning on page F-1 in this annual report on Form 10-K and are incorporated herein by reference.

Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

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Item 9A.
CONTROLS AND PROCEDURES

Evaluation of disclosure 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 year ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Exchange Act Rules 13a-15(f) and 15d-15(f), internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP.

Our internal control over financial reporting includes those policies and procedures that:

1.
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and the dispositions of our assets;
2.
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and
3.
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assurance with respect to financial statement preparation and presentation and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management’s assessment of the effectiveness of our internal control system as of June 30, 2025, was based on the framework for effective internal control over financial reporting described in Internal Control- Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on management’s assessment, as of June 30, 2025, our system of internal control over financial reporting was effective at the reasonable assurance level.

This annual report does not include an attestation report of our independent registered public accounting firm regarding control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to Section 989G of the Dodd-Frank Wall Street and Consumer Protection Act, which exempts non-accelerated filers from the auditor attestation requirement of section 404 (b) of the Sarbanes-Oxley Act.

Changes in Internal Control over Financial Reporting
 
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) that occurred during the fourth quarter of the Company’s fiscal year ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Item 9B.
OTHER INFORMATION

None.

Item 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

56
PART III

Item 10.
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

The information called for by this item, other than the information set forth below, is set forth under the headings “Information About the Directors,” “Meetings of the Board of Directors & Committees,” “Corporate Governance,” “Information About Our Executive Officers,” and “Delinquent Section 16(a) Reports” in our definitive proxy statement on Schedule 14A in connection with our 2025 Annual Meeting of Stockholders, to be filed within 120 days after June 30, 2025 (the “Annual Meeting Proxy Statement”).

Code of Ethics

We have adopted a Code of Ethics which applies to, among others, our senior officers, including our Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Code of Ethics. A copy of the Code, as amended from time to time, has been posted to the “Corporate Documents” section of our web site at http://www.mackenziecapital.com/sec-filings.

Insider Trading Policy

We have adopted a policy regarding insider trading (the “Insider Trading Policy”) that governs the purchase, sale, and other dispositions of the our securities by all officers of the Company and its subsidiaries, all members of the Board and all employees of the Company and its subsidiaries, that is designed to promote awareness and compliance with insider trading laws, rules, and regulations, and applicable Nasdaq listing standards. Our Insider Trading Policy is filed as Exhibit 19 to this Annual Report on Form 10-K for the year ended June 30, 2025.

Item 11.
EXECUTIVE COMPENSATION

The information called for by this item, other than the information set forth below, is set forth under the heading “Compensation Discussion & Analysis” and under the subheadings “Compensation of Directors,” “Compensation of Executive Officers,” and “Compensation Committee Interlocks and Insider Participation” in our Annual Meeting Proxy Statement.

Executive Compensation Clawback Policy

The Board of Directors has adopted a clawback policy (the “Clawback Policy”), effective October 2, 2023, which, if we ever pay incentive-based compensation (which we currently do not), would require recoupment of erroneously awarded executive compensation from current and former executive officers in the event we are required to prepare an accounting restatement due to our material noncompliance with any financial reporting requirement under the securities laws. Our Clawback Policy is attached as Exhibit 97.1 to this Annual Report on Form 10-K. As of June 30, 2025, there have been no restatements that would require recovery of erroneously awarded compensation under the Clawback Policy.

Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
The information called for by this item is set forth under the heading “Security Ownership of Certain Beneficial Owners & Management” in our Annual Meeting Proxy Statement.
 
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information called for by this item is set forth under the headings “Certain Relationships & Related Transactions” and “Corporate Governance—Annual Director Independence Evaluation” in our Annual Meeting Proxy Statement.

Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information called for by this item is set forth under the heading “Information about the Audit Committee & the Principal Accountant” in our Annual Meeting Proxy Statement.

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PART IV

Item 15.
EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this annual report on Form 10-K:

1. The Consolidated Financial Statements listed in the Index to Consolidated Financial Statements on Page F-1.

2. Consolidated Financial Statement Schedule: Schedule III- Real Estate Operating Properties and Accumulated Depreciation is set forth beginning on page S-1 hereof.

3. The Exhibits listed in the Exhibit Index below.

Exhibit No.
Description of Document
     
 
Contribution Agreement by and between MacKenzie Realty Operating Partnership, LP and the Addison Group, dated June 8, 2020 (incorporated by reference to the Registrant’s Form 8-K (File No. 814-00961), filed on June 9, 2020)
     
 
Membership Interest Purchase Agreement with The Wiseman Company, LLC, dated April 12, 2022 (incorporated by reference to the Registrant’s Form 8-K (File No. 000-55006), filed on April 18, 2022)
     
 
Articles of Amendment and Restatement (incorporated by reference to Registrant’s Post-Effective Amendment No. 3 to Registrant’s Registration Statement on Form N-2 (File No. 333-181853), filed on May 14, 2014)
     
 
Series A Preferred Articles Supplementary (incorporated by reference to Registrant’s Form 1-A (File No. 000-55006), filed on April 12, 2021)
     
 
Series A and B Preferred Articles Supplementary (incorporated by reference to Registrant’s Form 1-A POS (File No. 024-11503), filed on November 13, 2023)
     
 
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)
     
 
Second Amended & Restated Bylaws (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on January 12, 2021)
     
 
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)
     
 
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)
     
 
First Amendment of Charter Dated August 1, 2025 (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on August 1, 2025)
     
 
Second Amendment of Charter Dated August 1, 2025 (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on August 1, 2025)
     
 
Description of Securities (incorporated by reference to Registrant’s Form 10-K (File No. 000-55006), filed on September 28, 2022)

58
 4.2  
Partnership Unit Designation of the Series A Preferred Limited Partnership Units of MacKenzie Realty Operating Partnership, LP (incorporated by reference to Registrant’s Form 10-K (File No. 000-55006), filed on September 28, 2022)
     
   
Amended and Restated Investment Advisory Agreement with MCM Advisers, LP dated as of October 1, 2017 (incorporated by reference to Registrant’s Post-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-212804), filed on November 9, 2017)
     
   
Amendment to the Amended and Restated Investment Advisory Agreement dated as of October 1, 2018 (incorporated by reference to Registrant’s Post-Effective Amendment No. 5 to the Registration Statement on Form N-2 (File No. 333-212804), filed on October 29, 2018)
     
   
Agreement of general financial advisory and investment banking services with Maxim Group LLC (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on August 27, 2024)
     
   
Agreement of Limited Partnership of MacKenzie Realty Operating Partnership, LP, Dated May 20, 2020 (incorporated by reference to the Registrant’s Form 8-K (File No. 814-00961 filed on June 9, 2020)
     
   
Operating Agreement of PVT-Madison Partners LLC (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on March 11, 2021)
     
 
Operating Agreement of Madison-PVT Partners LLC (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on March 11, 2021)
     
 
Form of Investment Adviser Introducing Agreement (pre-December 2016) (incorporated by reference to the Registration Statement on Form N-2 (File No. 333-212804) filed on August 1, 2016)
     
 
Amended Administration Agreement with MacKenzie Capital Management, LP (incorporated by reference to Registrant’s Form 10-K (File No. 000-55006), filed on September 28, 2021)
     
 
Form of Investor Services Agreement with MacKenzie Capital Management, LP dated November 1, 2018 (incorporated by reference to Post-Effective Amendment No. 6 to the Registration Statement on Form N-2 (File No. 333-212804), filed on May 10, 2019)
     
 
Advisory Management Agreement (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on January 27, 2021)
     
 
Amended And Restated Investment Advisory Agreement (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on January 27, 2021)
     
 
Operating Agreement by and between MacKenzie Realty Operating Partnership, LP and the Hollywood Hillview Owner LLC, dated October 4, 2021 (incorporated by reference to the Registrant’s Form 8-K (File No. 000-55006 filed on October 5, 2021)
     
 
Dividend Reinvestment Plan (incorporated by reference to Registrant’s Form S-3 (File No. 000-55006), filed on December 22, 2021)
     
 
Operating Agreement by and between MacKenzie Realty Operating Partnership, LP and the MacKenzie-BAA IG Shoreline LLC, dated January 25, 2022 (incorporated by reference to the Registrant’s Form 8-K (File No. 000-55006 filed on May 20, 2022)
     
 
Operating Agreement of MacKenzie Satellite Place Corp (incorporated by reference to Registrant’s Form 8-K (File No. 000-55006), filed on June 3, 2022)
     
 
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)

59
 
Securities Purchase Agreement, dated November 18, 2024, between the company and purchaser (incorporated by reference to the Company’s Form 8-K, filed on March 3, 2025)
     
 
Forbearance, Settlement, and Release Agreement dated March 25, 2025, related to Main Street West Property Indebtedness (incorporated by reference to the Company’s Form 8-K, filed on March 31, 2025)
     
 
Note Purchase Agreement dated June 11, 2025 by and between the Company and Streeterville Capital, LLC (incorporated by reference to the Company’s Form 8-K, filed on June 11, 2025)
     
 
Secured Promissory Note #1 dated June 11, 2025 issued by the Company in favor of Streeterville Capital, LLC (incorporated by reference to the Company’s Form 8-K, filed on June 11, 2025)
     
 
Security Agreement dated June 11, 2025 by MRC QRS, Inc. in favor of Streeterville Capital, LLC (incorporated by reference to the Company’s Form 8-K, filed on June 11, 2025)
     
 
Guaranty dated June 11, 2025 by MRC QRS, Inc. for the benefit of Streeterville Capital, LLC (incorporated by reference to the Company’s Form 8-K, filed on June 11, 2025)
     
 
Stock Pledge Agreement dated June 11, 2025 by and between the Company and Streeterville Capital, LLC (incorporated by reference to the Company’s Form 8-K, filed on June 11, 2025)
     
 
Letter dated June 9, 2025 from Moss Adams to the Securities and Exchange Commission confirming the disclosures contained in Item 4.01 of the report on Form 8-K (incorporated by reference to the Company’s Form 8-K, filed on June 10, 2025)
     
 
Insider Trading Policy of MacKenzie Realty Capital, Inc.
     
 
List of Subsidiaries of the Registrant
     
 
Consent of Independent Registered Public Accounting Firm
     
 
Section 302 Certification of Robert Dixon (President and Chief Executive Officer)
     
 
Section 302 Certification of Angche Sherpa (Treasurer and Chief Financial Officer)
     
 
Section 1350 Certification of Robert Dixon (President and Chief Executive Officer)
     
 
Section 1350 Certification of Angche Sherpa (Treasurer and Chief Financial Officer)
     
 
MacKenzie Realty Capital, Inc. Executive Compensation Clawback Policy, effective as of October 2, 2023.
     
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 in Exhibit 101)

* Filed Herewith

60
All other exhibits for which provision is made in the applicable regulations of the Securities and Exchange Commission are not required under the related instruction or are inapplicable and therefore have been omitted.

Item 16.
FORM 10-K SUMMARY

None.

61
TABLE OF CONTENTS
 
Index to Audited Consolidated Financial Statements
 
 
 
Consolidated Financial Statements
 
 
 
F-2
 
 
F-5
 
 
F-6
 
 
F-7
 
 
F-8
 
 
F-9

F-1
Report of Independent Registered Public Accounting Firm

The Shareholders and the Board of Directors

MacKenzie Realty Capital, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Mackenzie Realty Capital, Inc. (the Company), as of June 30, 2025 and 2024, the related consolidated statements of operations, changes in equity, and cash flows for the years then ended, and the related notes and financial statement schedule III - Real Estate Properties and Accumulated Depreciation (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2025 and 2024, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
 
F-2

Purchase Price Allocation for an Acquisition

As described in Notes 2 and 3 to the consolidated financial statements, the Company acquired a real estate property during the year ended June 30, 2025, which was accounted for as an asset acquisition. The Company records the acquisition-date fair values of all tangible assets, identifiable intangible assets, and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) which utilize appropriate discount and/or capitalization rates and other available market information to allocate the purchase price at their relative fair values.  Estimates of the fair values of the tangible assets, identifiable intangibles, and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, carrying costs during lease-up periods, discount rates, capitalization rates, and market absorption periods.

We identified the fair value measurements used in the purchase price allocation of the Company’s real estate acquisition is a critical audit matter are as follows (i) the significant judgment by management to determine the fair value measurements of tangible assets (land and buildings), used in the purchase price allocation; (ii) significant auditor judgment, subjectivity and effort in evaluating audit evidence related to the significant assumptions used in the fair value measurement; and (iii) use of professionals with specialized skill and knowledge to assist in performing the procedures and evaluating the audit evidence obtained.

Our audit procedures related to the purchase price allocation for an acquisition, included the following, among others:

•
With the assistance of our valuation specialists, we evaluated the reasonableness of critical significant fair value inputs used in the purchase price allocation related to an acquired real estate asset which were market lease rates, carrying costs during lease-up periods, capitalization rates, discount rates, and market absorption periods. The evaluation included comparison of Company assumptions to independently developed ranges using market data from industry transaction databases and published industry reports.

•
Tested the mathematical accuracy of the valuation model and performed procedures over the completeness and accuracy of the data provided by management.
 
F-3
Impairment of Real Estate Asset

As described in Note 2 to the consolidated financial statements, the Company monitors events and changes in circumstances that could indicate the carrying value of real estate may not be recoverable.  If indicators of impairment emerge, the Company assesses whether the carrying value of the asset through its undiscounted future cash flows and eventual disposition, is recoverable.  An impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate assets is recorded. The Company utilized inputs from a recent third-party appraisal and potential new leases to estimate the fair value of the property to determine the impairment amount.  For the year ended June 30, 2025, the Company recorded $9,500,167 of impairment related to a real estate assets.

The principal consideration in our determination that the impairment of real estate is a critical audit matter are (i) the significant judgment by management to determine the fair value measurement of the real estate asset; (ii) significant auditor judgment, subjectivity and effort in evaluating audit evidence related to the significant assumptions used in the fair value measurement of a real estate asset; and (iii) use of professionals with specialized skill and knowledge to assist in performing the procedures and evaluating the audit evidence obtained.

Our audit procedures related to the impairment of a real estate asset included the following, among others:

•
With the assistance of valuation specialists, we evaluated the reasonableness of the valuation methodology and significant assumptions used in management’s valuation models such as future cash flows, associated with the underlying real property, generally over the relevant hold period, risk-adjusted discount rates, cap rates, and consideration of the market where the property is located. The evaluation included comparison of the Company’s assumptions to market data from industry transaction databases and published industry reports.

•
Tested the mathematical accuracy of the valuation model and performed procedures over the completeness and accuracy of the data provided by management.


/s/ Baker Tilly US, LLP

Campbell, California
September 29, 2025

We have served as the Company’s auditor since 2012.

F-4
MacKenzie Realty Capital, Inc.
Consolidated Balance Sheets

    June 30, 2025     June 30, 2024  
Assets
            
Real estate assets
            
Land
  
$
44,406,724
     $ 42,758,142  
Building, fixtures and improvements
    
193,170,429
       171,487,907  
Intangible lease assets
    
13,015,058
       11,440,998  
Less: accumulated depreciation and amortization
    
(26,058,639
)
     (14,421,966 )
Total real estate assets, net
    
224,533,572
       211,265,081  
Cash and cash equivalents
    
3,788,082
       11,854,946  
Restricted cash
    
328,239
       1,222,393  
Investments, at fair value
    
1,749,528
       1,341,164  
Equity method investments, at fair value
    
2,125,451
       4,703,266
  
Investments income, rents and other receivables
    
2,273,527
       1,415,943  
Prepaid expenses and other assets
    
1,193,779
       1,284,975  
Total assets
  
$
235,992,178
     $ 233,087,768  
                 
Liabilities
                
Mortgage notes payable, net
  
$
120,417,074
     $ 113,687,699  
Line of credit and notes payable, net
     12,016,507       1,635,773  
Deferred rent and other liabilities     1,600,585       1,434,476  
Finance lease liabilities
     2,253,875       1,887,984  
Dividend payable     715,498       2,313,822  
Accounts payable and accrued liabilities     4,562,376       2,425,471  
Below-market lease liabilities, net
    
703,645
       1,284,832  
Due to related entities
    
167,764
       171,619  
Capital pending acceptance     13,411       297,000  
Total liabilities
    
142,450,735
       125,138,676  
                 
Equity
                
Common stock, $0.0001 par value, 80,000,000 shares authorized; 1,578,192.98 and 1,330,257.30 shares issued and outstanding as of June 30, 2025 and June 30, 2024, respectively. *
    
158
       133  
Preferred stock, $0.0001 par value, 20,000,000 shares authorized:
                
Series A Preferred stock, 766,176.57 and 761,370.46 shares issued and outstanding as of June 30, 2025 and June 30, 2024, respectively.
     77       76  
Series B Preferred stock, 116,112.32 and 49,564.56 shares issued and outstanding as of June 30, 2025 and June 30, 2024, respectively.
     12       5  
Additional paid-in capital *
    
145,050,643
       137,073,480  
Accumulated deficit
    
(85,192,267
)
     (54,715,347 )
Total stockholders’ equity
    
59,858,623
       82,358,347  
Non-controlling interests
    
33,682,820
       25,590,745  
Total equity
    
93,541,443
       107,949,092  
                 
Total liabilities and equity
  
$
235,992,178
     $ 233,087,768  

*After giving effect to the 1-for-10 Reverse Stock Split that was effective August 4, 2025.
 
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

F-5
MacKenzie Realty Capital, Inc.
Consolidated Statements of Operations


  
Year Ended June 30,
  
   
2025
    
2024
  
Revenue
            
Rental, reimbursements and other property income
   $ 22,059,843     $ 15,736,103  

               
Expenses
                
Depreciation and amortization
    
11,432,557
      
7,153,411
  
Interest expense
     8,524,581
       6,124,395  
Property operating and maintenance
    
7,386,050
      
6,523,406
  
Asset management fees to related party (Note 8)
    
3,449,487
      
3,224,834
  
General and administrative
    
2,583,047
      
1,060,039
  
Professional fees
    
1,820,775
      
639,696
  
Administrative cost reimbursements to related party (Note 8)
    
669,855
      
756,733
  
Directors’ fees
    
149,223
      
105,000
  
Transfer agent cost reimbursements to related party (Note 8)
    
6,145
      
66,267
  
Impairment loss
    
9,500,167
      
-
  
Total operating expenses
    
45,521,887
      
25,653,781
  

               
Operating loss
    
(23,462,044
)
    
(9,917,678
)

               
Other income (loss)
                
Dividend and distribution income from equity securities at fair value
    
74,837
      
581,030
  
Net unrealized gain (loss) on equity securities at fair value
    
49,407
      
(697,644
)
Net income (loss) from equity method investments at fair value
    
(764,911
)
    
1,827,232
  
Net realized income (loss) from investments
    
132,434
      
(3,016,772
)

               
Net loss
    
(23,970,277
)
    
(11,223,832
)
Net income attributable to non-controlling interests
    
(1,945,403
)
    
(853,665
)
Net income attributable to preferred stockholders Series A and B
    
(1,421,200
)
    
(1,153,486
)
Net loss attributable to common stockholders
  
$
(27,336,880
)
  
$
(13,230,983
)

               
Basic and diluted net loss per share attributable to common stockholders *
   $ (18.66 )   $ (9.95 )

               
Basic and diluted weighted average common shares outstanding *
    
1,465,095
       1,329,322
  

*After giving effect to the 1-for-10 Reverse Stock Split that was effective August 4, 2025.
 
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

F-6
MacKenzie Realty Capital, Inc.
Consolidated Statements of Changes in Equity

   
Common Stock
    
Series A Preferred Stock
    
Series B Preferred Stock
                 Total
             

 
Number of
Shares **
    
Par
Value **
    
Number of
Shares
    
Par
Value
    
Number of
Shares
    
Par
Value
    
Additional Paid-
in Capital **
    
Accumulated
Deficit
    
Stockholders’
Equity
    
Non-controlling
Interests
    
Total Equity
  
Year Ended June 30, 2025
                                                                   
Balance, June 30, 2024
    
1,330,257.30
    
$
133
      
761,370.46
    
$
76
      
49,564.56
    
$
5
    
$
137,073,480
    
$
(54,715,347
)
  
$
82,358,347
    
$
25,590,745
    
$
107,949,092
  
Contributions by non-controlling interest holders
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
5,574,804
      
5,574,804
  
Distributions to non-controlling interest holders
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(1,735,944
)
    
(1,735,944
)
Dividends to common stockholders
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(3,140,040
)
    
(3,140,040
)
    
-
      
(3,140,040
)
Dividends to Series A preferred stockholders
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(1,148,019
)
    
(1,148,019
)
    
-
      
(1,148,019
)
Dividends to Series B preferred stockholders
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(273,181
)
    
(273,181
)
    
-
      
(273,181
)
Net income (loss)
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
(25,915,680
)
    
(25,915,680
)
    
1,945,403
      
(23,970,277
)
Operating Partnership Class A conversion to
   common stock
    
32.18
      
-
*
    
-
      
-
      
-
      
-
      
3,301
      
-
      
3,301
      
(3,301
)
    
-
  
Preferred Series A conversion to   common stock
     15,668.10       2       (12,805.38 )     (1 )     -       -       (1 )     -       -       -       -  
Issuance of common stock     210,351.70       21       -       -       -       -       3,794,239       -       3,794,260       -       3,794,260  
Issuance of pre-funded warrants     -       -       -       -       -       -       1,935,455       -       1,935,455       -       1,935,455  
Issuance of Series A common stock warrants
     -       -       -       -       -       -       376,268       -       376,268       -       376,268  
Issuance of Series B common stock warrants
     -       -       -       -       -       -       223,409       -       223,409       -       223,409  
Stock-based compensation    
21,883.70
      
2
      
-
      
-
      
-
      
-
      
665,498
      
-
      
665,500
      
-
      
665,500
  
Issuance of Series A preferred stock through
   reinvestment of dividends
    
-
      
-
      
8,567.49
      
1
      
-
      
-
      
192,769
      
-
      
192,770
      
-
      
192,770
  
Issuance of Series B preferred stock through
   reinvestment of dividends
    
-
      
-
      
-
      
-
      
644.60
      
-
*
    
14,503
      
-
      
14,503
      
-
      
14,503
  
Issuance of Series A preferred stock
    
-
      
-
      
9,044.00
      
1
      
-
      
-
      
226,099
      
-
      
226,100
      
-
      
226,100
  
Issuance of Series B preferred stock
    
-
      
-
      
-
      
-
      
65,903.16
      
7
      
1,647,572
      
-
      
1,647,579
      
-
      
1,647,579
  
Increase in liquidation preference - Series B preferred
   stock
    
-
      
-
      
-
      
-
      
-
      
-
      
204,889
      
-
      
204,889
      
-
      
204,889
  
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
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
98,968
      
98,968
  
Increase in liquidation preference of Operating Partnership
    Series B Preferred Units
    
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
-
      
97,229
      
97,229
  
Payment of selling commissions and fees
    
-
      
-
      
-
      
-
      
-
      
-
      
(1,301,283
)
    
-
      
(1,301,283
)
    
(597,278
)
    
(1,898,561
)
Redemptions of common stock
    
-
      
-
      
-
      
-
      
-
      
-
      
(24
)
    
-
      
(24
)
    
-
      
(24
)
Redemptions of Series A preferred stock
    
-
      
-
      
-
      
-

   
-
       -      
(5,531
)
    
-
      
(5,531
)
    
-
      
(5,531
)
 
                                                                                        
Balance, June 30, 2025
    
1,578,192.98
    
$
158
      
766,176.57
    
$
77
      
116,112.32
    
$
12
    
$
145,050,643
    
$
(85,192,267
)
  
$
59,858,623
    
$
33,682,820
    
$
93,541,443
  

   
Common Stock
    
Series A Preferred Stock
     Series B Preferred Stock                 Total
             

 
Number of
Shares **
    
Par
Value **
    
Number of
Shares
    
Par
Value
    
Number of
Shares
    
Par
Value
    
Additional Paid-
in Capital **
    
Accumulated
Deficit
    
Stockholders’
Equity
    
Non-controlling
Interests
    
Total Equity
  
Year Ended June 30, 2024
                                                                   
Balance, June 30, 2023
    
1,324,328.00
    
$
132
      
671,340.45
    
$
67
     -     $ -    
$
133,764,191
    
$
(34,856,258
)
  
$
98,908,132
    
$
12,103,874
    
$
111,012,006
  
Contributions by non-controlling interest holders
    
-
      
-
      
-
       -       -       -      
-
      
-
      
-
      
2,532,429
      
2,532,429
  
Distributions to non-controlling interest holders
    
-
      
-
      
-
      
-
       -       -      
-
      
-
      
-
      
(1,105,408
)
    
(1,105,408
)
Dividends to common stockholders
    
-
      
-
      
-
      
-
       -       -      
-
      
(6,628,106
)
    
(6,628,106
)
    
-
      
(6,628,106
)
Dividends to Series A preferred stockholders
    
-
      
-
      
-
      
-
       -       -      
-
      
(1,111,490
)
    
(1,111,490
)
    
-
      
(1,111,490
)
Dividends to Series B preferred stockholders
     -       -       -       -       -       -       -       (41,996 )     (41,996 )     -       (41,996 )
Net income (loss)
    
-
      
-
      
-
      
-
       -       -      
-
      
(12,077,497
)
    
(12,077,497
)
    
853,665
      
(11,223,832
)
Operating Partnership Class A conversion to
   common stock
    
301.14
      
-
*
    
-
      
-
       -       -      
30,866
      
-
      
30,866
      
(30,866
)
    
-
  
Issuance of common stock through reinvestment of dividends
     18,581.97       2       -       -       -       -       1,371,349       -       1,371,351       -       1,371,351  
Issuance of Series A preferred stock through
   reinvestment of dividends
    
-
      
-
      
7,741.20
      
1
     -       -      
174,178
      
-
      
174,179
      
-
      
174,179
  
Issuance of Series B preferred stock through reinvestment of dividends
     -       -       -       -       2.11
    - *
    48       -       48       -       48  
Issuance of Series A preferred stock
     -       -       85,688.31       8       -       -       2,140,941       -       2,140,949       -       2,140,949  
Issuance of Series B preferred stock
     -       -       -       -       49,562.45       5       1,227,945       -       1,227,950       -       1,227,950  
Increase in liquidation preference - Series B preferred stock
     -       -       -       -       -       -       31,497       -       31,497       -       31,497  
Operating Partnership Series A Preferred Units issued
     -       -       -       -       -       -       -       -       -       10,378,457       10,378,457  
Operating Partnership Series B Preferred Units issued
     -       -       -       -       -       -       -       -       -       972,290       972,290  
Issuance of Operating Partnership Series A Preferred Units through reinvestment of dividends
     -       -       -       -       -       -       -       -       -       83,883       83,883  
Increase in liquidation preference of Operating  Partnership Series B Preferred Units
     -       -       -       -       -       -       -       -       -       16,205       16,205  
Payment of selling commissions and fees
    
-
      
-
      
-
      
-
       -       -      
(637,490
)
    
-
      
(637,490
)
    
(213,784
)
    
(851,274
)
Redemptions of common stock
    
(12,953.81
)
    
(1
)
  
-
     
-
       -       -      
(954,206
)
    
-
      
(954,207
)
    
-
      
(954,207
)
Redemptions of Series A preferred stock
    
-
      
-
      
(3,399.50
)
    
-
*
     -       -      
(75,839
)
    
-
      
(75,839
)
    
-
      
(75,839
)
 
                                                                                        
Balance, June 30, 2024
    
1,330,257.30
    
$
133
      
761,370.46
    
$
76
       49,564.56     $ 5    
$
137,073,480
    
$
(54,715,347
)
  
$
82,358,347
    
$
25,590,745
    
$
107,949,092
  

*Amount is less than $1.
**After giving effect to the 1-for-10 Reverse Stock Split that was effective August 4, 2025.
 
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.

F-7
MacKenzie Realty Capital, Inc.
Consolidated Statements of Cash Flows

   
Year Ended June 30,
  

 
2025
    
2024
  
Cash flows from operating activities:
            
Net loss
  
$
(23,970,277
)
  
$
(11,223,832
)
Adjustments to reconcile net loss to net cash from operating activities:
                
Net unrealized (gain) loss on equity securities at fair value
    
(49,407
)
    
697,644
  
Net (income) loss from equity method investments at fair value
    
767,066
      
(1,556,115
)
Net realized (gain) loss on investments
    
(132,434
)
    
3,016,772
  
Impairment loss
    
9,500,167
      
-
  
Straight-line rent
    
(154,952
)
    
(132,635
)
Depreciation and amortization
    
11,432,557
      
7,153,411
  
Amortization of deferred financing costs and debt mark-to-market
    
1,377,272
      
1,427,349
  
Accretion of above (below) market lease, net
    
(544,103
)
    
(339,767
)
Stock-based compensation
     628,137       -  
Changes in assets and liabilities:
                
Investments income, rents and other receivables
    
(890,103
)
    
67,547
  
Due from related entities
    
-
      
17,000
  
Prepaid expenses and other assets
    
125,104
      
(401,222
)
Deferred rent and other liabilities
    
50,398
      
(49,924
)
Accounts payable and accrued liabilities
    
144,376
      
743,499
  
Due to related entities
    
26,097
      
(15,244
)
Net cash from operating activities
    
(1,690,102
)
    
(595,517
)
                 
Cash flows from investing activities:
                
Proceeds from sale of investments
    
962,721
      
10,564,732
  
Investments in real estate assets
    
(18,899,433
)
    
(10,237,605
)
Purchase of investments
    
(1,183,597
)
    
(1,062,163
)
Return of capital distributions
    
-
      
938,296
  
Payment on contingent liability
    
-
      
(1,503,000
)
Net cash from investing activities
    
(19,120,309
)
    
(1,299,740
)
                 
Cash flows from financing activities:
                
Borrowing under mortgage notes payable
    
48,477,670
      
3,288,715
  
Payments on mortgage notes payable
    
(48,876,780
)
    
(1,337,498
)
Borrowing under line of credit
     9,588,000       -  
Proceeds from notes payable
    
1,115,000
      
200,000
  
Payments on notes payable
    
(223,898
)
    
(368,164
)
Payment of financing fees
     (2,321,155 )     (876,500 )
Acquisition cost of below market debt
     -       (343,000 )
Dividends to common stockholders
     (4,802,866 )     (5,180,792 )
Dividends to Series A preferred stockholders
     (952,669 )     (894,748 )
Dividends to Series B preferred stockholders
     (40,449 )     (2,526 )
Proceeds from issuance of Series A preferred stock
    
226,100
      
2,140,949
  
Proceeds from issuance of Series B preferred stock
     1,647,579       1,227,950  
Proceeds from issuance of common stock
     3,794,260       -  
Proceeds from issuance of pre-funded warrants
     1,935,455       -  
Proceeds from issuance of Series A common stock warrants
     376,268       -  
Proceeds from issuance of Series B common stock warrants
     223,409       -  
Payment on finance lease liabilities
    
(234,109
)
    
(104,416
)
Payment of selling commissions and fees
    
(1,876,917
)
    
(899,372
)
Contributions by non-controlling interests holders
    
5,574,804
      
2,532,427
  
Distributions to non-controlling interests holders
    
(1,491,165
)
    
(834,804
)
Redemptions of common stock
    
(24
)
    
(1,399,205
)
Redemptions of Series A preferred stock
     (5,531 )     (75,839 )
Capital pending acceptance
    
(283,589
)
    
(241,600
)
Net cash from financing activities
    
11,849,393
      
(3,168,423
)
                 
Net decrease in cash, cash equivalents and restricted cash
    
(8,961,018
)
    
(5,063,680
)
Cash, cash equivalents and restricted cash at beginning of the year
    
13,077,339
      
18,141,019
  
Cash, cash equivalents and restricted cash at end of the year
  
$
4,116,321
    
$
13,077,339
  

               
Cash and cash equivalents at end of the year
   $ 3,788,082     $ 11,854,946  
Restricted cash at end of the year
     328,239       1,222,393  
Total cash, cash equivalents and restricted cash at end of the year
   $ 4,116,321     $ 13,077,339  

               
Supplemental disclosure of non-cash financing activities and other cash flow information:
                
Issuance of Series A preferred stock through reinvestment of dividends
   $ 192,770     $ 174,179  
Issuance of Series B preferred stock through reinvestment of dividends
   $ 14,503     $ 48  
Increase in liquidation preference of Series B preferred stock
   $ 204,889     $ 31,497  
Issuance Operating Partnership Preferred Units - Series A through reinvestment of dividends
   $ 98,968     $ 83,884  
Cash paid for interest
   $ 7,203,282     $ 4,577,961  
Increase in liquidation preference of Operating Partnership Preferred Units - Series B
   $ 97,229     $ 16,205  
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
   $ 665,500     $ -  
Operating Partnership Class A conversion to common stock
  
$
3,301
    
$
-
  
Capitalized construction in progress outstanding as accounts payable and accrued expenses
  
$
1,912,673
    
$
-
  
Conversion of notes receivable to preferred equity of Martin Plaza Associates, LP   $ 200,000     $ -  
Issuance of common stock through reinvestment of dividends
   $ -     $ 1,371,351  
Issuance of the Operating Partnership Preferred units for the purchase of GV Executive Center, LLC (Note 1)
   $ -     $ 8,703,127  
Issuance of the Operating Partnership Preferred units for the purchase of One Harbor Center, LP (Note 1)
   $ -     $ 2,647,620  
Fair value of assets acquired from consolidation of GV Executive Center, LLC
  
$
-
    
$
22,765,656
  
Fair value of liabilities assumed from consolidation of GV Executive Center, LLC
  
$
-
    
$
14,062,529
  
Fair value of assets acquired from consolidation of One Harbor Center, LP
   $ -     $ 14,950,638  
Fair value of liabilities assumed from consolidation of One Harbor Center, LP
   $ -     $ 8,797,634  

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

F-8
MacKenzie Realty Capital, Inc.
Notes to Consolidated Financial Statements
June 30, 2025

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 are registered under Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), and we will continue to file periodic reports on Form 10-K, Form 10-Q, and Form 8-K, as well as file proxy statements and other reports required under the Exchange Act.

We filed our initial registration statement with the Securities and Exchange Commission (“SEC”) in 2012 and have since completed multiple public offerings of our common stock. On April 29, 2024, our common stock became eligible for trading on the OTCQX Best Market under the ticker symbol “MKZR”. Subsequently, on November 6, 2024, The Nasdaq Stock Market (“Nasdaq”) approved the listing of our common stock, and trading commenced on the Nasdaq Capital Market 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 June 30, 2025, we own all limited partnership units of the Operating Partnership except for 81,909.89 Class A Limited Partnership units, 1,063,504.34 Series A preferred units and 43,212.86 Series B preferred units. Upon a limited partner’s request for redemption or upon liquidation of the Operating Partnership, 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 or, at the Company’s election, for cash based upon the 10-day average trading price of the Company’s common stock on a 1:1 basis. As a result of the Company’s 1-for-10 common stock reverse stock split (the “Reverse Stock Split”) on August 4, 2025, discussed below, the Class A Limited Partnership units are convertible into the Company’s common stock on a 10:1 basis subsequent to the Reverse Stock Split. Upon a request of a holder of Series A or Series B preferred units, the Company may elect to repurchase such units with the Company’s common stock based upon the volume weighted average price per share of  common stock for the twenty (20) trading days prior to the repurchase date, or at the Company’s election or upon liquidation, the 1,063,504.34 Series A preferred units are entitled to a liquidation preference of $26,587,609 (based on the stated value of $25 per share for the Series A preferred units) and 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 $98,692,635 in capital to the Operating Partnership since inception; thus, the Class A, Series A and Series B preferred units represent approximately 22.41% of all capital contributions.

F-9
Table of Contents
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% of 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.

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 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. 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 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 $71.30 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 June 2025, we filed a post-effective amendment to the Second Offering Circular to permit the sale of up to $72.90 million of Series A, Series B, and Series C preferred stock, at an offering price of $22.50 per Series A share and $25.00 per Series B or Series C share.

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 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 February 28, 2025, we entered into a securities purchase agreement with a single institutional investor. Under the agreement, the Company offered and sold in a registered direct offering (the “Registered Offering”), 153,403.40 shares of the Company’s common stock, $0.0001 par value per share, and pre-funded warrants to purchase up to 129,226.50 shares of common stock; and, in a concurrent private placement and together with the Registered Offering, warrants to purchase up to an aggregate of 423,944.85 shares of common stock. The purchase price for each share and the exercise price for each warrant was $17.10 per share, and the purchase price for each pre-funded warrant was $17.099 per share. The common stock warrants consist of Series A common stock warrants and Series B common stock warrants. The Series A common stock warrants to purchase up to 141,314.95 shares of common stock became exercisable six months after the closing date of the offering and expire 18 months from the date of issuance. The Series B common stock warrants to purchase up to 282,629.90 shares of common stock became exercisable six months after the date of issuance and expire five years from the date of issuance. The Company and the single institutional investor have no other material relationships. All share and warrant amounts described have been adjusted to give effect to the Reverse Stock Split that became effective on August 4, 2025.
 

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 (“True USA”). 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.


F-10

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.


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 partnerships on the following dates: First & Main, LP (“First & 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 in May 2024 and Green Valley Medical Center, LP 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, and renovating certain real property and building and improvements located at 5000 Wiseman Way, Fairfield, California (the “Aurora Land”), and thereafter leasing, managing, renting, and potentially selling the completed project (the “Aurora at Green Valley”). The Parent Company is the manager and the Operating Partnership is the sole common member of MRC Aurora. The Operating Partnership contributed the Aurora Land to MRC Aurora in exchange for the common membership interest in MRC Aurora. Construction of the Aurora at Green Valley, which consists of three residential buildings and a clubhouse, began in September 2024. The clubhouse opened in June 2025 for pre-leasing activities and the first residential building was completed in July 2025, with leasing commencing in August 2025. The remaining two buildings were completed in September 2025, with leasing expected to commence shortly thereafter. The construction of Aurora at Green Valley was financed through $10 million of preferred capital ($7.23 million from outside investors and $2.77 million from the Operating Partnership) and a $17.15 million construction loan from Valley Strong Credit Union. The Operating Partnership holds 100% of the voting rights, and we, as the manager, have the managing and operating rights of MRC Aurora. Therefore, we consolidate the financial statements of MRC Aurora. As of June 30, 2025, the Operating Partnership has contributed $4.60 million (including the value of the Aurora Land) in exchange for common units and $2.77 million in exchange for preferred units in MRC Aurora and we have raised $7.23 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. Our goal is to commence construction in spring 2026; however, this is subject to the city’s approval of our development application submitted in April 2024 and to securing the necessary financial resources. The Campus Lane Residential development project is now known as Blue Ridge at Suisun Valley (“Blue Ridge”). We own 100% of 220 Campus Lane and Campus Lane Residential; therefore, we consolidated the financial statements of these companies after the acquisitions were completed on September 8, 2023.

F-11
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 Patterson Real Estate Services LP (“PRES”), 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 issued to Maxim’s affiliate in a private placement 13,300 shares of common stock, representing approximately 1% of the Company’s outstanding stock. The common stock does not have any conversion rights.

On January 30, 2025, the Company entered into a letter agreement with Outside The Box Capital Inc. (“OTB Capital”) to provide marketing and distribution services to communicate information about the Company. In connection with the agreement, the Company issued 8,583.70 shares of common stock to OTB Capital in a private placement. The common stock issued to OTB Capital does not have any conversion rights.

On May 8, 2025, we formed a new wholly owned subsidiary, Innovate Napa, LLC (“Innovate Napa”), to enter into a master lease of a portion of the Main Street West Office Building in connection with the refinancing of the Main Street West loan.

Our wholly owned subsidiary, MRC QRS, Inc. (“MRC QRS”), a qualified REIT subsidiary incorporated in Delaware on May 22, 2025, was formed to acquire and hold non-traded REIT shares.

On August 4, 2025, the Company effected a 1-for-10 Reverse Stock Split of its common stock, increasing the par value from $0.0001 per share to $0.001 per share. However, on the same date, the Company amended its charter to decrease the par value back to $0.0001. The Reverse Stock Split did not change the number of authorized shares of common stock. Prior to the Reverse Stock Split, the Company had 16,760,978 shares of common stock outstanding. Immediately following the Reverse Stock Split (and after giving effect to the payment of cash in lieu of fractional shares), the Company had 1,675,776 shares of common stock outstanding. No fractional shares were issued as a result of the Reverse Stock Split. Stockholders entitled to receive a fractional share instead received a cash payment equal to the fraction of a share multiplied by the closing price of the Company’s common stock on The Nasdaq Capital Market on August 1, 2025, as adjusted for the Reverse Stock Split, without interest. All common share and per-share information in the accompanying consolidated financial statements and notes have been retroactively adjusted to reflect the Reverse Stock Split.

As of June 30, 2025, we have raised approximately $125.44 million from our common stock public offerings (including $4.80 million from our Registered Offering and the concurrent private placement, and $1.50 million from the ATM offering), $18.74 million from our Series A preferred stock offering and $3.11 million from our Series B preferred stock offering pursuant to the Second Offering Circular. As of June 30, 2025, we have issued shares of common stock, Series A preferred stock and Series B preferred stock with gross proceeds of $15.56 million, $0.44 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 June 30, 2025, 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 June 30, 2025, we have 1,578,192.98 shares of common stock, 766,176.57 shares of Series A preferred stock and 116,112.32 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-K 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 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.

F-12
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 are susceptible to change, and actual results could differ from those estimates.

Variable Interest Entities

We evaluate the need to consolidate our investments in securities in accordance with Accounting Standards Codification (“ASC”) 810. In determining whether we have a controlling interest in a variable interest entity and whether to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the partners, as well as whether the entity is a variable interest entity for which we are the primary beneficiary. Refer to Note 7 for additional information.

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 investment income receivable balances outstanding as of June 30, 2025 and 2024, are collectible and do not require recording any uncollectible allowance.

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 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 year ended June 30, 2025, 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 June 30, 2025 and 2024, we recognized an allowance for doubtful accounts of $259,590 and $213,797, respectively.

F-13
Capital Pending Acceptance

We conduct closings for new issuance of our Series A, Series B and Series C 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 June 30, 2025, capital pending acceptance related to our preferred stock was $13,411 and as of June 30, 2024, capital pending acceptance related to MRC Aurora preferred units was $297,000.

Organization and Offering Costs

Organization costs include, among other things, the cost of legal services pertaining to the organization and incorporation of the business, incorporation fees, and audit fees relating to the public offerings and the initial statement of assets and liabilities. These costs are expensed as incurred. Offering costs include, among other things, legal fees and other costs pertaining to the preparation of the registration statements and pre and post-effective amendments. Offering costs incurred in connection with our offering circulars to sell the Series A, Series B and Series C preferred stock are classified as a reduction of equity.

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, 2024. Therefore, it did not incur any tax expense or excise tax on its income from operations during the quarterly periods within the tax year 2024. In addition, for the tax year 2025, the Parent Company intends to pay the requisite amounts of dividends during the year and meet other REIT requirements such that the Parent Company will not owe any income taxes. Therefore, the Parent Company did not record any income tax provisions during any fiscal periods within the tax year 2025.

MacKenzie NY 2 is subject to corporate federal and state income tax on its taxable income at regular statutory rates. As of June 30, 2025, it did not have any taxable income for tax year 2024 and 2025. Therefore, we did not record any tax provisions during any fiscal periods within the tax year 2024 and 2025. 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, GVEC and Innovate Napa are limited liability companies. First & Main, 1300 Main, Woodland Corporate Center Two, Main Street West, One Harbor Center, LP and Green Valley Medical Center, LP 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 June 30, 2025 and 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.

F-14
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, net, line of credit and notes payable, net, 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.

Revenue Recognition

Rental revenue, net of concessions, which is derived primarily from lease contracts and include rents that each tenant pays in accordance with the terms of each lease agreement, is recognized on a straight-line basis over the term of the lease, when collectability is determined to be probable.

Minimum rent, including rental abatements, lease incentives, and contractual fixed increases attributable to operating leases are recognized on a straight-line basis over the term of the related leases when collectability is probable. Amounts expected to be received in later years are recorded as deferred rent receivable. If the lease provides for tenant improvements, we determine whether the tenant improvements, for accounting purposes, are owned by the tenant or the Company. When we are the owner of the tenant improvements, the tenant is not considered to have taken physical possession or have control of the physical use of the leased asset until the tenant improvements are substantially completed. When the tenant is the owner of the tenant improvements, any tenant improvement allowance (including amounts that can be taken in the form of cash or a credit against the tenant’s rent) that is funded is treated as a lease incentive and amortized as a reduction of rental revenue over the lease term.

Tenant improvement ownership is determined based on various factors including, but not limited to:

  •
whether the lease stipulates how a tenant improvement allowance may be spent;
  •
whether the lessee or lessor supervises the construction and bears the risk of cost overruns;
  •
whether the amount of a tenant improvement allowance is in excess of market rates;
  •
whether the tenant or landlord retains legal title to the improvements at the end of the lease term;
  •
whether the tenant improvements are unique to the tenant or general purpose in nature; and
  •
whether the tenant improvements are expected to have any residual value at the end of the lease.

In accordance with ASC Topic 842, we determine whether collectability of lease payments in an operating lease is probable. If we determine the lease payments are not probable of collection, we fully reserve for rent and reimbursement receivables, including deferred rent receivable, and recognize rental income on a cash basis.

Distributions received from investments are evaluated by management and recorded as dividend income or a return of capital (reduction of investment) on the ex-dividend date. Operational dividends or distributions received from portfolio investments are recorded as investment income. Distributions resulting from the sale or refinance of an investee’s underlying assets are compared to the estimated value of the remaining assets and are recorded as a return of capital or as investment income as appropriate.

Realized gains or losses on investments are recognized in the period of disposal, distribution, or exchange and are measured by the difference between the proceeds from the sale or distribution and the cost of the investment. Investments are disposed of on a first-in, first-out basis. Net change in unrealized gain (loss) reflects the net change in portfolio investment values during the reporting period, including the reversal of previously recorded unrealized gains or losses.

F-15
Dividends and Distributions

Dividends (and distributions, if any) to stockholders are recorded on the date of declaration. The amount, if any, to be paid as a quarterly dividend (or distribution, if any) is approved quarterly by the Board of Directors and is generally based upon management’s estimate of our earnings for the quarter.

Fair Value Measurements

GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of market price observables used in measuring investments at fair value. Market price is impacted by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available actively quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observables and a lesser degree of judgment used in measuring fair value.

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

  Level I –
Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I are publicly traded equity securities. We do not adjust the quoted price for these investments even in situations where we hold a large position and a sale could reasonably impact the quoted price.

  Level II –
Price inputs are quoted prices for similar financial instruments in active markets; quoted prices for identical or similar financial instruments in markets that are not active; and model-derived valuations in which all significant inputs or significant value-drivers are observable in active markets. Investments which are generally included in this category are publicly traded equity securities with restrictions.

  Level III –
Pricing inputs are unobservable and include situations where there is little, if any, market activity for the investment. Fair values for these investments are estimated by management using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, financial condition, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant judgment by management. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had an active market for these investments existed.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement.

Management’s assessment of the significance of a particular input to the fair value measurement, in its entirety, requires judgment and considers factors specific to the investment.

Valuation of Investments

Our consolidated financial statements include investments that are measured at their estimated fair values in accordance with GAAP. Our valuation procedures are summarized below:

Securities for which market quotations are readily available on an exchange will be valued at such price as of the closing price on the day closest to the valuation date. Where a security is traded but in limited volume, we may instead utilize the weighted average closing price of the security over the prior 10 trading days. We may value securities that do not trade on a national exchange by using published secondary market trading information. When doing so, we first confirm that GAAP recognizes the trading price as the fair value of the security.

F-16
Securities for which reliable market data are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Investment Adviser or Board of Directors, does not represent fair value, are valued as follows: (i) each portfolio company or investment is initially valued by the investment professionals responsible for the portfolio investment; (ii) preliminary valuation conclusions are documented and discussed with our senior management; and (iii) the Board of Directors will discuss valuations and determine the fair value of each investment in our portfolio in good faith based on the input of the Investment Adviser and, where appropriate and necessary, the respective third party valuation firms. The recommendation of fair value will generally be based on the following factors, as relevant:


•
the nature and realizable value of any collateral;

•
the portfolio company’s ability to make payments;

•
the portfolio company’s earnings and discounted cash flow;

•
the markets in which the issuer does business; and

•
comparisons to publicly traded securities.

Securities for which market data is not readily available or for which a pricing source is not sufficient may include the following:


•
private placements and restricted securities that do not have an active trading market;

•
securities whose trading has been suspended or for which market quotes are no longer available;

•
debt securities that have recently gone into default and for which there is no current market;

•
securities whose prices are stale;

•
securities affected by significant events; and

•
securities that the Investment Adviser believes were priced incorrectly.


Valuation of Real Property



When property is owned directly, the valuation process includes a full review of the property financial information. An Argus model is created using all known data such as current rent rolls, escalators, expenses, market data in the area where the property is located, cap rates, discount rates, mortgages, interest rates, and other pertinent information. We estimate future leasing and costs associated, generally over a ten-year period, to determine the fair value of the property. Once the fair value is determined, and reviewed by the Board of Directors, a determination of whether any impairment is required is made and documented. In addition, we may obtain a third-party appraisal on directly owned properties.
 
Determination of fair value involves subjective judgments and estimates and is reviewed by the Board of Directors. Accordingly, the notes to our consolidated financial statements will express the uncertainty of such valuations, and any change in such valuations, on our consolidated financial statements.

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.

F-17
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 investments would have been accounted for under the equity method if the fair value method had not been elected as of June 30, 2025 and 2024:

Investee
Legal Form
Asset Type
  
% Ownership
    
Fair Value as of
June 30, 2025
  
Lakemont Partners, LLC
Limited Liability Company
LP Interest
    
17.02
%
     $
 711,740  
Martin Plaza Associates, LP
 Limited Partnership GP and LP Interest     25.00 %
    531,544  
Westside Professional Center I, LP
 Limited Partnership GP Interest     1.00 % *     882,167  
 Total
 
 
            
$
2,125,451
  

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.

Lease Accounting Topic 842

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 Leases (Topic 842) (“ASU 2016-02”). Under ASU 2016-02, an entity is required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor, and parties to sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to facilitate assessment the amount, timing, and uncertainty of cash flows arising from leases.

In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”). ASU 2018-11 provides lessors with a practical expedient to not separate lease and non-lease components if both (i) the timing and pattern of revenue recognition for the non-lease component and the related lease component are the same and (ii) the combined single lease component would be classified as an operating lease. We adopted the practical expedient as of July 1, 2019, to account for lease and non-lease components as a single component in lease contracts where we or one of our subsidiaries is the lessor.

Our current portfolio consists of commercial office properties and residential apartment buildings whereby we generate rental revenue by leasing office space and apartment units to the building’s tenants. These tenant leases fall under the scope of 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. Non-lease components of our leases are combined with the related lease components and accounted for as a single lease component under Topic 842. The balances of net real estate investments and related depreciation on our consolidated financial statements relate to assets for which we are the lessor.

F-18
Real Estate Assets, Capital Additions, Depreciation and Amortization

We capitalize costs, including certain indirect costs, incurred for capital additions, including redevelopment, development, and construction projects. We also allocate certain department costs, including payroll, at the corporate levels as “indirect costs” of capital additions, if such costs clearly relate to capital additions. We also capitalize interest, property taxes and insurance during periods in which redevelopment, development, and construction projects are in progress. Cost capitalization begins once the development or construction activity commences and ceases when the asset is ready for its intended use. Repair and maintenance and tenant turnover costs are expensed as incurred. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset. Depreciation and amortization expense are computed on the straight-line method over the asset’s estimated useful life. We consider the period of future benefit of an asset to determine its appropriate useful life and anticipates the estimated useful lives of assets by class to be generally as follows:

Buildings
16 – 45 years
   
Building improvements
  1 – 15 years
   
Land improvements
  5 – 15 years
   
Furniture, fixtures and equipment
  3 – 11 years
   
In-place leases
  1 – 10 years

Assets and Liabilities Held for Sale

We classify long-lived assets 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.
Real Estate Purchase Price Allocations

In accordance with the guidance for business combinations, upon the acquisition of real estate properties, we evaluate whether the transaction is a business combination or an asset acquisition. If the transaction does not meet the definition of a business combination, we record the assets acquired, the liabilities assumed, and any non-controlling interest as of the acquisition date, measured at their relative fair values. Acquisition-related costs are capitalized in the period incurred and are added to the components of the real estate assets acquired. We assess the acquisition-date fair values of all tangible assets, identifiable intangible assets, and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on several factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant. Intangible assets include the value of in-place leases, which represents the estimated fair value of the net cash flows of leases in place at the time of acquisition, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up. We amortize the value of in-place leases to expense over the remaining non-cancelable term of the respective leases, which is on average five years. Estimates of the fair values of the tangible assets, identifiable intangibles and assumed liabilities require us to make significant assumptions to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, prevailing interest rates, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets, and assumed liabilities, which could impact the amount of our net income (loss). Differences in the amount attributed to the fair value estimate of the various assets acquired can be significant based upon the assumptions made in calculating these estimates.


Contingent Consideration in an Asset Acquisition

 

Contingent consideration recognized is included in the initial cost of the assets acquired. Subsequent changes in the recorded amount of contingent consideration will generally be recognized as an adjustment to the cost basis of the acquired assets, in accordance with ASC 323-10-35-14a and ASC 360-10-30-1. The subsequent changes will be allocated to the acquired assets based on their relative fair value at the date of acquisition.



Subsequent change in contingent consideration impacts the cost basis of acquired assets, which may also impact the statements of operations through subsequent accounting for the acquired asset. We are aware of diversity in practice regarding the subsequent treatment of the statement of operations effect of changes to the cost basis of the acquired assets. We generally believe the depreciation or amortization of these assets should be recognized as a cumulative “catch up” adjustment, as if the additional amount of consideration that is no longer contingent had been accrued from the outset of the arrangement.

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.

F-20
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.

During the year ended June 30, 2025, we recorded an impairment loss of $9,500,167, 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 13,300 shares of common stock issued to Maxim discussed in Note 1 at fair value as compensation for services rendered to the Company. 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. Additionally, we recorded the 8,583.70 shares of common stock issued to OTB Capital discussed in Note 1 at fair value in consideration for their marketing and distribution services. The fair value is computed based on the public trading price of the common stock at the grant date of February 3, 2025.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting – Improvements to Reportable Segments Disclosures (“ASU 2023-07”), to enhance reportable segment disclosure requirements, primarily through increased disclosures about significant segment expenses. This ASU requires that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to an entity’s CODM, a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. 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. The Company adopted ASU 2023-07 effective June 30, 2025, for the annual period beginning July 1, 2024. While the adoption has no impact on our consolidated financial statements, it has resulted in incremental disclosures within the footnotes to our consolidated financial statements. Refer to Note 16 for the inclusion of the new required disclosures.

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.

F-21

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
The Park View 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:
47
37
47
 78
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
8
 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 7 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: 14      
Year Built: 2002      
Ownership Interest: 100%      
 
The following table presents the purchase price allocation of real estate asset acquired during the year ended June 30, 2025 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 capital assets acquired
    
13,752,525
  

       
Net leasehold liability
    
(74,271
)

       
Total capital assets acquired, net
  
$
13,678,254
  

The total depreciation expense of our operating properties for the years ended June 30, 2025 and 2024 was $7,902,429 and $5,109,524, respectively.

F-22
Table of Contents
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 June 30, 2025 and 2024.
 
The following table presents the components of income from real estate operations for the year ended June 30, 2025 and 2024:
 
 
  
Year Ended June 30,
  
 
  
2025
    
2024
  
 
            
Lease income - Operating leases
  
$
20,781,843
    
$
14,755,307
  
Variable lease income (1)
    
1,278,000
      
980,796
  
 
  
$
22,059,843
    
$
15,736,103
  


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

As of June 30, 2025, the future minimum rental income from our real estate properties under non-cancelable operating leases are as follows:

Year ended June 30, :
  
Rental Income
  
2026
  
$
10,845,093
  
2027
    
8,110,057
  
2028
    
6,615,387
  
2029
    
5,165,968
  
2030
    
3,184,029
  
Thereafter
    
8,935,362
  
Total
  
$
42,855,896
  

Lease Intangibles, Above-Market Lease Assets and Below-Market Lease Liabilities, Net
 
As of June 30, 2025 and 2024, our acquired lease intangibles, above-market lease assets, and below-market lease liabilities were as follows:
 
 
  
As of June 30, 2025
  
 
  
Lease Intangibles
    
Above-Market
Lease Assets
    
Below-Market
Lease Liabilities
  
 
                  
Cost
  
$
12,316,603
    
$
824,869
    
$
2,914,037
  
Accumulated amortization
    
(7,698,820
)
    
(430,744
)
    
(2,180,537
)
Accumulated impairment loss
     (121,974 )     (4,440 )     (29,855 )
Total
  
$
4,495,809
    
$
389,685
    
$
703,645
  
 
                        
Weighted average amortization period (years)
    
4.8
      
4.6
      
4.8
  
 
F-23
Table of Contents
 
  
As of June 30, 2024
  
 
  
Lease Intangibles
    
Above-Market
Lease Assets
    
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 year ended June 30, 2025, were as follows:
 
 
  
Lease
Intangibles
    
Above-Market
Lease Assets
    
Below-Market
Lease Liabilities
  
Amortization
  
$
3,530,128
    
$
204,116
    
$
(748,219
)
 
Our amortization of lease intangibles, above-market lease assets and below-market lease liabilities for the year ended June 30, 2024, were as follows:
 
 
  
Lease
Intangibles
    
Above-Market
Lease Assets
    
Below-Market
Lease Liabilities
  
Amortization
  
$
2,043,893
    
$
155,975
    
$
(495,742
)
 
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,
 
 
  
2026
    
2027
    
2028
    
2029
    
2030
    
Thereafter
  
In-place leases, to be included in amortization
  
$
1,648,568
    
$
991,723
    
$
582,709
    
$
433,500
    
$
339,144
    
$
500,165
  
 
                                                
Above-market lease intangibles
  
$
133,134
    
$
99,803
    
$
53,296
    
$
43,298
    
$
36,175
    
$
23,979
  
Below-market lease liabilities
    
(280,958
)
    
(190,660
)
    
(95,285
)
    
(65,768
)
    
(35,080
)
    
(35,894
)

 
$
(147,824
)
  
$
(90,857
)
  
$
(41,989
)
  
$
(22,470
)
  
$
1,095
 
$
(11,915
)

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 June 30, 2025 and 2024. On the consolidated balance sheets, these investments are reflected in two separate lines: (i) investments at fair value, which are classified as equity securities under ASC Topic 321, and (ii) equity method investments with fair value option election.

   
Fair Value
     Fair Value  
Asset Type
  
June 30, 2025
     June 30, 2024  
Non Traded Companies
  
$
1,749,528
     $ 1,341,164  
GP Interests (Equity method investment with fair value option election)     1,213,711
 		      3,906,326
 		 
LP Interests (Equity method investment with fair value option election)
    911,740
 		      796,940
 		 
Total
  
$
3,874,979
     $ 6,044,430  

During the year ended June 30, 2025, we realized a total net gain of $132,434 from four investment liquidations and disposals (Blackstone Real Estate Income Trust, Inc., Highlands REIT, Inc., National Healthcare Properties, Inc., and 5210 Fountaingate, LP).

During the year ended June 30, 2024, we realized a total net loss of $3,016,772 from five investment liquidations and disposals (Citrus Park Hotel Holdings, LLC, Highland REIT, Inc., SmartStop Self Storage REIT, Inc., Strategic Realty Trust, Inc., and Summit Healthcare REIT, Inc.) and two investment write-offs (BP3 Affiliates, LLC and Capitol Hill Partners, LLC).

F-24
The following table presents fair value measurements of our investments as of June 30, 2025 and 2024, according to the fair value hierarchy:

    As of June 30, 2025  
Asset Type
  
Total
    
Level I
    
Level II
    
Level III
  
Non Traded Companies
  
$
1,749,528
    
$
-
    
$
-
    
$
1,749,528
  
GP Interests     1,213,711       -       -       1,213,711  
LP Interests
    
911,740
      
-
      
-
      
911,740
  
Total
  
$
3,874,979
    
$
-
    
$
-
    
$
3,874,979
  

    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
  

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 year ended June 30, 2025:

Balance at July 1, 2024
  
$
6,044,430
  
Purchases of investments
    
1,383,597
  
Transfer to Investments in Real Estate
     (2,627,725 )
Proceeds from sales, net
    
(962,721
)
Net realized gain
    
132,434
  
Net unrealized gain
    
(95,036
)
Ending balance at June 30, 2025
  
$
3,874,979
  
 
For the year ended June 30, 2025, net change in unrealized losses included in earnings relating to Level III investments still held at June 30, 2025 were $2,680,923.

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 year ended June 30, 2024:

Balance at July 1, 2023
  
$
22,148,980
  
Purchases of investments
    
1,062,163
  
Transfer to Investments in Real Estate
    (3,892,813 )
Proceeds from sales, net
    
(10,564,732
)
Return of capital distributions
    
(938,296
)
Net realized loss
    
(3,016,772
)
Net unrealized gain
   
1,245,900
  
Ending balance at June 30, 2024
  
$
6,044,430
  

For the year ended June 30, 2024, net change in unrealized losses included in earnings relating to Level III investments still held at June 30, 2024 were $1,215,172.
 
F-25
The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2025:

Asset Type
  
Fair Value
  
Primary Valuation
Techniques
Unobservable Inputs Used
  
Range
    
Weighted Average
  
 
      
 
 
            
Non Traded Companies
  
$
1,749,528
 
Market Activity
Acquisition cost
           
              Security sales
 		           

       
 
Secondary market industry publication
            
         
Estimated Liquidation Value
  
Sponsor provided value
            
                           
GP Interests
    
1,213,711
 
Direct Capitalization Method
Capitalization rate
  
6.3% - 6.5%

   
6.4%


       
  
Discount rate
  
6.8% - 7.0%

   
6.9%
















LP Interests
    
711,740
 
Discounted Cash Flow
Discount rate
  
7.0%

   
7.0%

LP Interests
    
200,000
 
Market Activity
Acquisition cost
 


   

















 
  
$
3,874,979
 
 
 
              
 
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 were determined to be individually significant under any of the tests as of June 30, 2025. Furthermore, our equity method investments accounted under the fair value option in aggregate were not material as of June 30, 2025.

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%.

F-26
As of June 30, 2025 and 2024, none of our investments in securities were 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,LP 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 determined the property met the criteria to be classified as held for sale. However, in February 2025, management decided to discontinue marketing the property for sale and opted to retain ownership and continue operations. As a result, it no longer qualifies as held for sale.

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 3.17 to 7.75 years. Right-of-use assets and lease liabilities by lease type, and the associated balance sheet classifications, are as follows:

Balance Sheet Classification
  
June 30, 2025
    
June 30, 2024
  
Right-of-use assets:
 
            
Finance leases
Real estate assets, net
  
$
1,904,883
    
$
 1,799,962
  
 
 
                
Lease liabilities:
 
                
Finance leases
Finance lease liabilities
  
$
2,253,875
    
$
1,887,984
  
 
We have included these leases in real estate assets, net as follows:


 
June 30, 2025
     June 30, 2024  
Building, fixtures and improvements
  
$
2,622,675
     $ 2,022,675  
Accumulated depreciation
    
(717,792
)
     (222,713 )
Real estate assets, net
  
$
1,904,883
     $ 1,799,962  

Lease Expense

The components of total lease cost were as follows for the years ended June 30, 2025 and 2024:

        Year ended June 30,
  
 
  
2025
     2024
  
Finance lease cost
            
Right-of-use asset amortization
  
$
495,079
     $ 180,659  
Interest expense
    
114,723
       40,594  
Total lease cost
  
$
609,802
     $ 221,253  
 
F-27
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
  
2026
  
$
378,742
  
2027
    
388,783
  
2028
    
399,268
  
2029
    
563,133
  
2030
    
504,940
  
Thereafter
    
406,425
  
Total undiscounted lease payments
    
2,641,291
  
Less: Imputed interest
    
(387,416
)
Net lease liabilities
  
$
2,253,875
  
 
Supplemental Lease Information


 
June 30, 2025
    
June 30, 2024
  
Finance lease weighted average remaining lease term (years)
  
5.32 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
  
$
234,109
     $ 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.

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 June 30, 2025 and 2024, one and two of our unconsolidated VIEs, respectively, 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 June 30, 2025 and 2024, consolidated balance sheets.

F-28
The table below presents a summary of the nonconsolidated VIEs in which we hold variable interests:

Total Nonconsolidated VIEs
  
As of June 30, 2025
     As of June 30, 2024  
Fair value of investments in VIEs
   $ 711,740    
$
796,940
  
Carrying value of variable interests - assets
   $ 861,710    
$
867,358
  
Maximum Exposure to Loss:
                
Limited Partnership Interest
   $ 861,710    
$
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 1.50% 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 2.50% 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 years ended June 30, 2025 and 2024, we incurred asset management fees of $3,449,487 and $3,224,834, respectively.

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
  
March 31, 2025
   $
20,000,000
     $
80,000,000
     $
84,816,443
     $
184,816,443
  
June 30, 2025
   $
20,000,000
     $
80,000,000
     $
87,749,115
     $
187,749,115
  
                                 
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
  
March 31, 2024
   $
20,000,000
     $
80,000,000
     $
74,236,629
     $
174,236,629
  
June 30, 2024
   $
20,000,000
     $
80,000,000
     $
78,833,574
     $
178,833,574
  

During the years ended June 30, 2025 and 2024, we did not incur or accrue any incentive management fee under the new Advisory Management Agreement.

F-29
Property Management and Leasing Services:

When we acquired the Wiseman Properties on May 6, 2022, our Real Estate Adviser’s newly formed wholly owned subsidiary − Wiseman Company Management, LLC, which is now known as Wiseman Commercial, Inc. (“Wiseman Commercial”) − purchased the property management and leasing services rights from Wiseman. As a result, effective as of the acquisition date, Wiseman Commercial has been providing property management and leasing services to the Wiseman Partnerships under the pre-existing agreements. Since the acquisition of these service rights, there have been no changes to the terms of the management services agreements with these limited partnerships. In addition, Wiseman Commercial also provides the property management and leasing services to 220 Campus Lane under a similar term as the Wiseman Partnerships.

During the year ended June 30, 2025, these Wiseman Commercial managed limited partnerships paid total property management fees of $771,574 and total leasing commissions of $567,783 to Wiseman Commercial. In addition, during the year ended June 30, 2025, eleven of the limited partnerships also paid $1,549,793 to Wiseman Commercial for direct operating costs and construction of tenant improvements.

During the year ended June 30, 2024, these Wiseman Commercial managed limited partnerships paid total property management fees of $596,268 and total leasing commissions of $489,571 to Wiseman Commercial. In addition, during the year ended June 30, 2024, eleven of the limited partnerships also paid $1,702,616 to Wiseman Commercial for direct operating costs and construction of tenant improvements.

Organization and Offering Costs Reimbursement:

As detailed in the Offering Circular, which terminated on November 1, 2024, offering costs incurred and paid by us in excess of $825,000 (excluding legal fees) in connection with the preferred stock offering were reimbursable by the Advisers. If broker fees of 10% were not incurred during the issuance of preferred stock, the resulting savings could be applied to marketing expenses or other non-cash compensation. In such cases, the broker fee savings increased the reimbursement threshold from the Advisers. As of the termination date, we had incurred total offering costs of $1,465,754 (excluding legal fees), of which $1,443,519 was paid by MacKenzie on our behalf in connection with the preferred stock offering. The total offering costs exceeded the reimbursement threshold, including the broker fee savings, by $328,970. This amount was fully reimbursed by the Advisers as of June 30, 2024.

Similarly, under our Second Offering Circular, which the SEC qualified on January 29, 2025, offering costs incurred and paid by us in excess of $825,000 (excluding legal fees) in connection with the preferred stock offering are reimbursable by the Advisers. If broker fees of 10% are not incurred during the issuance of the preferred shares, the resulting savings may be applied to marketing expenses or other non-cash compensation. In such cases, the broker fee savings increase the reimbursement threshold from the Advisers. As of June 30, 2025, we had incurred total offering costs of $61,023 (excluding legal fees), of which $44,023 was paid by MacKenzie on our behalf in connection with the preferred stock offering. The total offering costs incurred were below the reimbursable threshold as of that date.

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.
 
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 years ended June 30, 2025 and 2024 were $669,855 and $756,733, respectively. The transfer agent services cost reimbursements for the years ended June 30, 2025 and 2024 were $6,145 and $66,267, respectively.

F-30
The table below outlines the related party expenses incurred for the years ended June 30, 2025 and 2024, and unpaid as of June 30, 2025 and 2024.

   
Year ended
    
Unpaid as of
  
Types and Recipient
  
June 30, 2025
    
June 30, 2024
    
June 30, 2025
    
June 30, 2024
  
                         
Asset management fees- the Real Estate Adviser
  
$
3,449,487
    
$
3,224,834
    
$
-
    
$
-
  
Administrative cost reimbursements- MacKenzie
    
669,855
      
756,733
      
-
      
-
  
Asset acquisition fees- the Real Estate Adviser (1)
    
292,000
      
1,075,048
      
-
      
-
  
Transfer agent cost reimbursements - MacKenzie
    
6,145
      
66,267
      
-
      
-
  
Organization & Offering Cost (2) - MacKenzie
    
49,680
      
102,871
      
49,680
      
79,632
  
Other expenses (3)- MacKenzie and Subsidiary’s GPs
    
-
      
-
      
118,084
      
91,987
  
Due to related entities
                 
$
167,764
    
$
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 year ended June 30, 2025 was for the acquisition of Green Valley Medical Center in August 2024. The acquisition fee paid during the year ended June 30, 2024 was for the acquisition of 220 Campus Lane Office Building and Campus Lane Land in September 2023, Green Valley Executive Center in January 2024 and One Harbor Center in May 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 June 30, 2025 and 2024, we had no margin credit available for cash withdrawal or the ability to purchase in additional securities. Accordingly, as of June 30, 2025 and 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% 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 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 interest are due based on 360 months of amortization period. The remaining unpaid principal balance is due at maturity date. Accordingly, as of both June 30, 2025 and 2024, the outstanding balances of the loans were $6,737,500 for the Madison mortgage loan and $8,387,500 for the PVT mortgage loan. The mortgage notes payable balances are disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.

F-31
The following table provides the projected principal payments on Madison’s loan for the next five years:

Fiscal Year Ending June 30, :
  
Principal
  
2026
  
$
47,849
  
 
        
2027
    
286,731
  
 
        
2028
    
282,865
  
 
        
2029
    
281,354
  
 
        
2030
    
278,698
  
 
        
Thereafter
    
5,560,003
  
 
        
Total
  
$
6,737,500
  

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

Fiscal Year Ending June 30, :
  
Principal
  
2026
  
$
5,716
  
 
        
2027
    
82,415
  
 
        
2028
    
86,637
  
 
        
2029
    
94,281
  
 
        
2030
    
100,899
  
 
        
Thereafter
    
8,017,552
  
 
        
Total
  
$
8,387,500
  

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 5.50% plus LIBOR, and (ii) 5.75%. The loan was obtained to finance the acquisition of Hollywood Apartments. The loan was secured by Hollywood Apartments and has an initial maturity date of October 6, 2023, which could be extended for two successive 12-month terms. On August 14, 2023, PT Hillview exercised the first extension option to extend the term of the loan to October 6, 2024. The loan required interest-only monthly payments with the principal balance due at maturity date. Interest was due based on a 360-day amortization period. Accordingly, the outstanding balance as of June 30, 2024 was $17,500,000, which was disclosed as a part of the mortgage notes payable, net 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 and it matured on February 2, 2025. We did not record the fair value and the changes in the fair value of the contract in our consolidated financial statements because the amounts were insignificant to our consolidated financial statements.

On October 3, 2024, the loan agreement was amended to include extension options with principal paydowns. PT Hillview exercised the extension options pursuant to the amended agreement and the maturity date was extended until April 6, 2025 with total principal paydown of $3,975,000.

F-32
On March 28, 2025, PT Hillview entered into a loan agreement with Wells Fargo Bank, National Association, in the amount of $11,660,000 at a fixed annual interest rate of 5.87%. The loan was obtained to refinance the prior $17,500,000 loan with Ladder Capital Finance which matured on April 6, 2025. The new loan matures in April 2030, is secured by Hollywood Apartments, and requires interest-only monthly payments with the principal balance due at maturity. The outstanding balance of the loan as of June 30, 2025 was $11,660,000, which is disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.

In connection with the refinancing, the Operating Partnership contributed $5,683,503 to PT Hillview to fund the principal paydown, replenish reserves, and pay loan fees. Of this amount, $568,350 (10%) represented the share of the non-controlling interest holder, True USA. Accordingly, as of June 30, 2025, this amount has been recorded as a note receivable from True USA and is included in investments, income, rents, and other receivables in the consolidated balance sheet.

We (along with three other principals of True USA) guaranteed 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.). As of June 30, 2025, we have not recorded any guaranty obligations.

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 SOFR 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 June 30, 2025 and 2024, was $17,650,000, which is disclosed as a part of the mortgage notes payable, net 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
  
2026
  
$
-
  
 
        
2027
    
-
  
 
        
2028
    
152,349
  
 
        
2029
    
167,342
  
 
        
2030
    
179,884
  
 
        
Thereafter
    
17,150,425
  
 
        
Total
  
$
17,650,000
  

First & Main Mortgage Notes Payable

As of the acquisition date, First & Main had a loan agreement with Exchange Bank, in the amount of $12,000,000 at a fixed annual interest rate of 3.75%, which the Company assumed. 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. The outstanding balance of the loan as of June 30, 2025 and 2024, was $10,626,226 and $10,963,355, respectively, which is disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.

F-33
The following table provides the projected principal payment on the loan for the next year:

Fiscal Year Ending June 30, :
  
Principal
  
2026
  $
10,626,226
  
 
        
Total
  
$
10,626,226
  

First & Main Other Note Payables:

Junior Debt

As of the acquisition date, First & Main had $1,000,000 in interest-only junior promissory notes outstanding, which the Company assumed. 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 total 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 line of credit and notes payable, net in the consolidated balance sheets.

In March 2024, the partnership obtained an additional 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 8.50% per annum. The $200,000 note was repaid in full as of March 31, 2025.
 
Small Business Administration (“SBA”) Loan
 
As of the acquisition date, First & Main had an outstanding $151,000 loan from the SBA under the Economic Injury Disaster Loan program, which the Company assumed. 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 line of credit and notes payable, net in the consolidated balance sheets.
 
Solar System Loan (First & Main)
 
As of the acquisition date, First & Main had an outstanding $220,000 loan from The Wiseman Family Trust, which the Company assumed. The loan was used to finance the installation of a solar power system at the 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 June 30, 2025 and 2024, the outstanding balance of the loan amounted to $143,384 and $163,362, respectively, and is disclosed as a part of line of credit and notes payable, net in the consolidated balance sheets.
 
1300 Main Mortgage Notes Payable

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 originally obtained by 1300 Main under its previous ownership. The new 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 June 30, 2025 was $7,972,744, which is disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.

F-34
The following table provides the projected principal payments on the loan for the next five years:
 
Fiscal Year Ending June 30, :
  
Principal
  
2026
 
$
95,047
  
 
        
2027
   
93,657
  
 
        
2028
   
98,803
  
 
        
2029
   
107,262
  
 
        
2030
   
7,577,975
  
 
        
Total
  
$
7,972,744
  

1300 Main Other Notes Payable:

SBA Loan
 
As of the acquisition date, 1300 Main had an outstanding $150,000 loan from the SBA under the Economic Injury Disaster Loan program, which the Company assumed. 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 June 30, 2025 and 2024 was $161,300 and $ 160,111, respectively, which is disclosed as a part of the line of credit and notes payable, net in the consolidated balance sheets.
 
Woodland Corporate Center Two Mortgage Notes Payable

As of the acquisition date, Woodland Corporate Center Two had a loan agreement with Western Alliance Bank, in the amount of $7,500,000 at a fixed annual interest rate of 4.15%, which the Company assumed. The loan matured on October 7, 2024 and was secured by Woodland Corporate Center. The loan was 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 $6,626,543, which was disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.

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 6.50%. 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 June 30, 2025 was $5,932,794, which is disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.

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

Fiscal Year Ending June 30, :
  
Principal
  
2026
  $
98,925
  
 
        
2027
     109,244
 
         
2028
     5,724,625
 
         
Total
  
$
5,932,794
  

Main Street West Mortgage Notes Payable

As of the acquisition date, Main Street West had a $16,600,000 loan with First Northern Bank of Dixon (the “Prior Lender”) at a fixed annual interest rate of 4%, which the Company assumed. The loan was secured by the Main Street West Office Building and was guaranteed by Wiseman, who was subsequently indemnified by the Operating Partnership on July 1, 2022.

F-35
The loan matured on November 1, 2024, and the Company was unable to reach agreement with the Prior Lender on extension terms. As a result, the loan went into maturity default. Although negotiations continued, the Prior Lender initiated foreclosure proceedings, and in February 2025 a court-appointed receiver assumed control of the property. On March 25, 2025, the Company entered into a Forbearance, Settlement, and Release Agreement (the “Forbearance Agreement”) and a related indemnity agreement with the Prior Lender.

At the date of the Forbearance Agreement, the loan had an aggregate balance of $15,797,328, consisting of $14,742,049 of principal, $867,812 of accrued interest (including COVID-19 deferred interest), and $187,467 of default-related costs incurred by the Prior Lender. Under the terms of the Forbearance Agreement, the Company agreed to pay these default-related costs. Pursuant to the Forbearance Agreement, the Company paid $5,000,000 toward the loan and regained control of the property from the receiver in April 2025. This payment reduced the loan balance and resolved the foreclosure action, allowing the Company to proceed with refinancing.

On June 6, 2025, the Company refinanced the loan it had with the Prior Lender for the indebtedness secured by the Main Street West Office Building that was in maturity default and subject to the Forbearance Agreement. The loan from the Prior Lender was paid off on June 6, 2025, with a new loan from EverTrust Bank.

The new loan has a principal amount of $9,500,000, with an interest rate equal to the Wall Street Journal Prime Rate, currently at 7.50% annually, with a 6.50% floor. The loan requires monthly payments of principal and interest based on a 300-month amortization schedule. The remaining unpaid principal balance is due at maturity. The loan matures on May 30, 2028, and is guaranteed by the Parent Company.

The Company also formed a wholly owned subsidiary, Innovate Napa, to enter into a master lease covering approximately 36.2% (13,806 square feet) of the rentable square feet of the Main Street West Office Building. The Operating Partnership will contribute $500,000 of capital in Innovate Napa in order for it to pay on the master lease. Innovate Napa does not occupy the space; rather, the arrangement was established in connection with the refinancing of the Main Street West loan to satisfy the lender’s occupancy requirements. Lease payments from Innovate Napa to Main Street West are intercompany in nature and eliminated in consolidation. This related-party arrangement is temporary and is expected to remain in place until the space is leased to third-party tenants. For the year ended June 30, 2025, rental revenue of $62,127 receivable from Innovate Napa was eliminated in the Parent Company’s books for consolidation purposes.

Accordingly, as of June 30, 2025 and 2024, the outstanding balances of the loans were $9,500,000 for the new loan and $14,893,842 for the old loan, respectively. The mortgage notes payable balances are disclosed as part of the mortgage notes payable, net in the consolidated balance sheets. Total accrued interest on the loan as of June 30, 2025 and 2024, was $51,239 and $373,873, respectively, the latter of which includes the COVID-19 deferred interest.

Main Street West Other Notes Payable:

SBA Loan
 
As of the acquisition date, Main Street West had an outstanding $150,000 loan from the SBA under the Economic Injury Disaster Loan program, which the Company assumed. The loan will be paid back over 30 years at an annual interest rate of 3.75% starting on September 4, 2023. Monthly payments will be $731. The outstanding balance of the loan as of June 30, 2025 and 2024 was $161,300, which is disclosed as a part of the line of credit and notes payable, net 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 June 30, 2025 and 2024 was $2,145,000, which is disclosed as a part of the mortgage notes payable, net 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 June 30, 2025 and 2024 amounted to $142,596 and $187,196, respectively, and was netted against the total debt balance in the consolidated balance sheets.


F-36

Campus Lane Residential Mortgage Notes Payable



On September 8, 2023, Campus Lane 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 June 30, 2025 and 2024 was $1,155,000, which is disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.



Consistent with asset acquisition accounting, the debt acquired from the acquisition of Campus Lane 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 June 30, 2025 and 2024, amounted to $76,733 and $100,732, respectively, and was netted against the total debt balance in the consolidated balance sheets.



GVEC Mortgage Notes Payable



As of the acquisition date, GVEC had a $14,000,000 fixed-rate loan agreement with Columbia State Bank, which the Company assumed on January 1, 2024 from the predecessor owner. 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 outstanding balance of the loan as of June 30, 2025 and 2024 was $13,346,323 and $13,599,329, respectively, which is disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.



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 June 30, 2025 and 2024, amounted to $844,050 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
  
2026
  
$
252,616
  
 
        
2027
    
275,253
  
 
        
2028
    
250,402
  
 
        
2029
    
253,672
  
 
        
2030
    
268,076
  
 
        
Thereafter
    
12,046,304
  
 
        
Total
  
$
13,346,323
  

One Harbor Center, LP Mortgage Notes Payable

As of the acquisition date, One Harbor Center, LP had an $8,378,825 loan from Travis Credit Union, which the Company assumed. The loan bears interest at a fixed rate of 4.96% per annum, matures on June 1, 2028, and is secured by the property and the assignment of all rental revenue. Monthly principal and interest payments of $46,092 are required through maturity, with the remaining unpaid principal balance  due at the maturity date. The outstanding balance of the loan as of June 30, 2025 and 2024 was $7,704,950 and $7,846,182, respectively, which is disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.

F-37
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 June 30, 2025 and 2024 amounted to $241,222 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 three years:

Fiscal Year Ending June 30, :
  
Principal
  
2026
  
$
153,714
  
         
2027
    
161,643
  
         
2028
    
7,389,593
  
         
Total
  
$
7,704,950
  

One Harbor Center, LP Other Notes Payable:

SBA Loan

As of the acquisition date, One Harbor Center, LP had a $150,000 loan from the SBA under the Economic Injury Disaster Loan program, which the Company assumed. 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 June 30, 2025 and 2024 was $150,000, which is disclosed as a part of the line of credit and notes payable, net in the consolidated balance sheets.

MRC Aurora Construction Loan

As discussed in Note 1, on February 21, 2024, the Company closed on a $17.15 million construction loan with Valley Strong Credit Union, headquartered in Bakersfield, California, to fund the development of the Aurora at Green Valley. The loan bears interest at a variable rate equal to the  Prime Rate plus 0.25% and matures on March 1, 2026. The Company has the option to extend the construction loan for an additional six-month period or to convert it to a conventional permanent loan. The monthly accrued interest is added on the outstanding loan balance. The outstanding loan balance as of June 30, 2025 was $6,597,850, which is disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.

The following table provides the projected principal payment on the loan for the next year:

Fiscal Year Ending June 30, :
  
Principal
  
2026
  
$
6,597,850
  
         
Total
  
$
6,597,850
  

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 MacKenzie Satellite’s 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 June 30, 2025 was $5,909,606, which is disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets.

F-38
The following table provides the projected principal payments on the loan for the next three years:
Fiscal Year Ending June 30, :
  
Principal
  
2026
   $
94,310
  
         
2027
    
110,427
  
         
2028
    
5,704,869
  
         
Total
   $
5,909,606
  


Green Valley Medical Center, LP Mortgage Notes Payable



On July 15, 2024, Green Valley Medical Center, LP 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 June 30, 2025 was $7,747,998, which is disclosed as a part of the mortgage notes payable, net in the consolidated balance sheets. We consolidated Green Valley Medical Center, LP with our consolidated financial statements during the year ended June 30, 2025; accordingly, this mortgage note payable was not included in our consolidated balance sheet as of June 30, 2024.



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



Fiscal Year Ending June 30, :
  
Principal
  
2026
  
$
83,185
  
         
2027
    
88,623
  
         
2028
    
93,650
  
         
2029
    
102,032
  
         
2030
    
7,380,508
  
         
Total
  
$
7,747,998
  



Green Valley Medical Center, LP Other Notes Payable:



SBA Loan



As of the acquisition date, Green Valley Medical Center, LP had a $150,000 loan from the SBA under the Economic Injury Disaster Loan program, which the Company assumed. The loan bears interest  at 3.75% per annum and is repayable over a 30-year term. While the Company has been making interest payments, the Federal Government has not yet commenced amortization of the principal. The outstanding balance of the loan as of June 30, 2025 was $150,000, which is disclosed as a part of the line of credit and notes payable, net in the consolidated balance sheets. We consolidated Green Valley Medical Center, LP with our consolidated financial statements during the year ended June 30, 2025; accordingly, this note payable was not included in our consolidated balance sheet as of June 30, 2024.


F-39

Line of Credit Agreement



On January 22, 2025, we entered into a revolving line of credit agreement with PRES, 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%. 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. The outstanding loan balance as of June 30, 2025 was $9,588,000, which includes $188,000 of loan origination fees, and is disclosed as a part of line of credit and notes payable, net in the consolidated balance sheets. The loan origination fee is capitalized and amortized over the life of the loan. The remaining unamortized balance of $138,611 was netted against the total debt balance in the consolidated balance sheets.



For the year ended June 30, 2025, we incurred interest expense of $324,643 on the line of credit. Of this amount, $284,693 remained outstanding as of June 30, 2025 and is disclosed as a part of accounts payable and accrued liabilities in the consolidated balance sheet.



The following table provides the projected principal payment on the loan for the next year:


Fiscal Year Ending June 30, :
  
Principal
  
2026
  
$
9,588,000
  
         
Total
  
$
9,588,000
  

On September 24, 2025, the line of credit agreement with PRES was amended to extend the maturity date to December 31, 2027.

Secured Promissory Note Agreement

On June 11, 2025, the Company entered into a note purchase agreement with Streetville Capital, LLC (the “Investor”) providing for the issuance of up to $3,270,000 in secured promissory notes to fund the REIT share purchases in MRC QRS. On that date, the Investor funded $1,000,000 in cash, and the Company issued a secured promissory note in the principal amount of $1,115,000, which included an original issue discount of $90,000 and transaction expenses of $25,000. The note matures 18 months after the funding date, or on December 11, 2026.

For the first five months following issuance, the Company is required to make monthly payments equal to accrued interest. Beginning in the sixth month and continuing until maturity, the Company must make monthly payments of $93,000 plus accrued interest.

The notes are guaranteed by MRC QRS through a security agreement entered into by MRC QRS in favor of the Investor. MRC QRS granted the Investor a first-position security interest in the assets of MRC QRS.

The Company also entered into a stock pledge agreement with the Investor, where the Company pledged to the Investor as collateral and security for the secured obligations, and granted the Investor a first-position security interest in the common stock of MRC QRS. The Investor shall have the right to exercise the rights and remedies set forth in the stock pledge agreement and in the transaction documents if an event of default has occurred.

The secured note is subject to certain trigger events, which provide the Investor with the option to increase the outstanding balance by 5% to 15% depending on the severity of the trigger event. Failure of the Company to cure the trigger event may result in an event of default, which would cause the outstanding balance to become immediately due and demandable.

The outstanding balance of the loan as of June 30, 2025 was $1,115,000, which is disclosed as a part of the line of credit and notes payable, net in the consolidated balance sheets. We consolidated MRC QRS with our consolidated financial statements during the year ended June 30, 2025; accordingly, this note payable was not included in our consolidated balance sheet as of June 30, 2024.

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

Fiscal Year Ending June 30, :
  
Principal
  
2026
  
$
651,000
  
         
2027
     464,000  
         
Total
  
$
1,115,000
  

F-40
The table below presents the total loan outstanding at the underlying companies as of June 30, 2025, and the fiscal years those loans mature:

Fiscal Year Ending June 30, :
  
Principal
  
2026
  
$
28,553,223
  
         
2027
     1,933,860  
         
2028
     29,029,695  
         
2029     4,780,408  
         
2030     27,471,758  

       
Thereafter
     43,569,422  
         
Total
  
$
135,338,366
  

Debt Guaranty

The Wiseman partnerships had 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, Doyle Wiseman, the owner of 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, except for the Main Street West default discussed below, 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, except for Main Street West, 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 June 30, 2025.

As of June 30, 2025, refinancings have resulted in removal of Wiseman as guarantor at Westside Professional Center, Green Valley Medical Center, Woodland Corporate Center Two, 1300 Main and Main Street West. 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 this note, as of November 1, 2024, Main Street West was in default under its note. The bank initiated foreclosure proceedings in January 2025 and the court-appointed receiver took control of the property in February 2025. On March 25, 2025, the Company entered into a Forbearance Agreement and indemnity agreement with the Prior Lender. Effective June 6, 2025, the Company refinanced the loan it had with the Prior Lender for the indebtedness secured by the Company’s Main Street West Office Building that was in maturity default and subject to the Forbearance Agreement. The loan from the Prior Lender was paid off on June 6, 2025, with a new loan from EverTrust Bank. As of June 30, 2025, the outstanding principal balance of the new loan was $9,500,000 and accrued interest was $51,239. The new mortgage loan for Main Street West is also guaranteed by the Parent Company. However, we have determined that the Company does not need to record any liability under the loan guaranty as of June 30, 2025, since the underlying property’s appraised value exceeds the outstanding debt balance.

The mortgage loan of GVEC is guaranteed by PRES, 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. The note purchase agreement and secured note entered into in June 2025 are guaranteed by MRC QRS.

F-41
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 years ended June 30, 2025 and 2024:

   
Year Ended
    
Year Ended
  
   
June 30, 2025
    
June 30, 2024
  
             
Net loss attributable to common stockholders
  
$
(27,336,880
)
  
$
(13,230,983
)
                 
Basic and diluted weighted average common shares outstanding
    
1,465,094.94
      
1,329,322.18
  
                 
Basic and diluted earnings per share
  
$
(18.66
)
  
$
(9.95
)

The Company incurred a net loss for the year ended June 30, 2025. As a result, the dilutive securities, the common stock series A and B warrants, were considered anti-dilutive and excluded from the calculation of diluted net loss per share. As of June 30, 2025, 423,944.85 shares underlying these instruments were excluded.

In accordance with ASC Topic 260, Earnings Per Share, shares issuable for little to no consideration should be included in the number of outstanding shares used for basic earnings per share. The FASB proposed that warrants or options exercisable for little to no cost be included in the denominator of basic earnings per share (and therefore diluted earnings per share) once there were no further vesting conditions or contingencies associated with them. Accordingly, as of June 30, 2025, the Company included 129,226.50 pre-funded warrants, discussed in Note 1, in the denominator of basic earnings per share. There were no warrants issued as of June 30, 2024.

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 13,300 shares of common stock to Maxim’s affiliate, approximately 1% of the Company’s outstanding stock.

As discussed in Note 1, on January 30, 2025, in connection with our agreement with OTB Capital, the Company issued through a private placement agreement an aggregate amount of 8,583.70 shares of common stock to OTB Capital, approximately $0.20 million worth of shares.

As discussed in Note 1, on February 28, 2025, in connection with the Registered Offering, the Company issued 153,403.40 shares of the Company’s common stock, $0.0001 par value per share, pre-funded warrants to purchase up to 129,226.50 shares of common stock and, in a concurrent private placement and together with the Registered Offering, warrants to purchase up to an aggregate of 423,944.85 shares of common stock, approximately $4.80 million worth of shares.

In March 2025, we issued 32.18 shares of common stock at $102.50 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 at a 10:1 ratio, and 15,668.10 shares of common stock 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 at price per shares ranging from $11.50 to $40.20.

During the year ended June 30, 2025, we issued 9,044 shares of Series A preferred stock with total gross proceeds of $226,100 and 65,903.16 shares of Series B preferred stock with total gross proceeds of $1,647,579 under the Second Offering Circular and incurred syndication costs of $1,301,283 in relation to common and preferred stock offerings. As of the year ended June 30, 2025, we issued 8,567.49 shares of Series A preferred stock with total gross proceeds of $192,770 under the preferred stock DRIP, 644.60 shares of Series B preferred stock with total gross proceeds of $14,503 under the preferred stock DRIP, and converted 12,805.38 shares of Series A preferred stock at $1 per share to shares of our common stock.

During the year ended June 30, 2024, we issued 18,581.97 shares of common stock with total gross proceeds of $1,371,351 under the DRIP. Additionally, during the year ended June 30, 2024, we issued 301.14 shares of common stock at $102.50 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.
F-42
During the year ended June 30, 2024, we issued 85,688.31 shares of Series A preferred stock with total gross proceeds of $2,140,949 and 49,562.45 shares of Series B preferred stock with total gross proceeds of $1,227,950 under the Offering Circular and incurred syndication costs of $637,490 in relation to preferred stock offering. For the year ended June 30, 2024, we issued 7,741.20 shares of Series A preferred stock with total gross proceeds of $174,179 under the preferred stock DRIP and 2.11 Series B preferred stock with total gross proceeds of $48 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. 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 years ended June 30, 2025 and 2024, 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 year ended June 30, 2025
                  
Series A Preferred stock
                  
September 1, 2024 through December 31, 2024
  
-    
$
 -    
$
 5,530 *

*Fees paid for redemption lockup agreements.

Period
  
Total Number
of Shares Repurchased
    
Average Repurchase
Price
Per Share
    
Total Repurchase
Consideration
  
During the year ended June 30, 2024
                  
Common stock
                  
September 1, 2023 through September 30, 2023
    
6,409.20
    
$
73.80
    
$
472,999
  
December 1, 2023 through December 31, 2023
    
6,449.73
      
73.80
      
475,990
  
June 1, 2024 through June 30, 2024
    
94.88
      
55.00
      
5,218
**
     
12,953.81
            
$
954,207
  
                         
Series A Preferred stock
                        
December 1, 2023 through December 31, 2023
    
400.00
    
$
22.75
    
$
9,100
  
March 1, 2024 through March 31, 2024
    
2,000.00
      
22.00
      
44,000
  
June 1, 2024 through June 30, 2024
    
999.50
      
22.75
      
22,739
  
     
3,399.50
            
$
75,839
  

**Cash in-lieu of fractional shares payout.

F-43
Table of Contents
NOTE 14 – STOCKHOLDER DIVIDENDS AND DRIP

The following table reflects the dividends per share that we have declared on our common stock and preferred stock during the year ended June 30, 2025:

   
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
  
$
1.250
    
$
1,679,460
    
$
0.375
    
$
287,036
    
$
0.750
    
$
45,378
  
December 31, 2024
    
0.500
      
673,655
      
0.375
      
286,686
      
0.750
      
63,593
  
March 31, 2025
    
0.500
      
786,925
      
0.375
      
286,981
      
0.750
      
79,152
  
June 30, 2025
    
-
      
-
      
0.375
      
287,316
      
0.750
      
85,058
  
   
$
2.250
    
$
3,140,040
    
$
1.500
    
$
1,148,019
    
$
3.000
    
$
273,181
 *

*Of the total dividends declared for Series B during the year ended June 30, 2025, $204,889 was an increase in liquidation preference and $68,292 was the cash dividend. Series A and B preferred stock and common stock dividends declared during the quarter ended June 30, 2025, were paid in July 2025.

During the year ended June 30, 2025, we did not issue any common shares under our common stock DRIP since the plan was suspended in March 2024. During the year ended June 30, 2025, $192,770  of Series A preferred dividends and $14,503 of Series B preferred dividends were reinvested under the preferred stock DRIP.

On May 19, 2025, following a review of the Company’s financials, the current economic climate, the potential impact of new tariffs on demand for office and retail space, and the increased likelihood of a near-term recession, the Board of Directors approved the suspension of the regular quarterly dividend on the Company’s common stock effective immediately. This decision was made to preserve liquidity, enable the Company to make further investments in its own properties and developments where prudent, and to provide financial flexibility as to near-term commitments; the suspension will remain in effect until further notice.

On May 12, 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 July 31, 2025, August 30, 2025, and September 30, 2025. The Series A preferred stock dividend declared on May 12, 2025 will be paid in October 2025.

On May 12, 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 July 31, 2025, August 30, 2025, and September 30, 2025. The Series B preferred stock dividend declared on May 12, 2025, will be paid in October 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.

On September 15, 2025, we declared the Series C Preferred stock quarterly dividend of $0.5625 per share payable at the rate of $0.1875 per month for holders of record as of July 31, 2025, August 30, 2025, and September 30, 2025. The Series C preferred stock dividend declared on May 12, 2025 will be paid in October 2025.

The following table reflects the distributions declared by the Operating Partnership for the Class A and Preferred unit holders during the year ended June 30, 2025:

   
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
  
March 31, 2025
    
0.050
      
4,095
      
0.375
      
398,388
      
0.750
      
32,410
  
June 30, 2025
    
-
      
-
      
0.375
      
398,814
      
0.750
      
32,410
  
   
$
0.225
    
$
18,459
    
$
1.500
    
$
1,577,660
    
$
3.000
    
$
129,639
 *

*Of the total distributions declared for Series B during the year ended June 30, 2025, $97,229 was an increase in liquidation preference and $32,409 was the cash dividend.

During the year ended June 30, 2025, the Operating Partnership paid Class A distributions of $28,738, none of which was reinvested. During the year ended June 30, 2025, the Operating Partnership paid Series A preferred distributions of $1,521,500, of which $98,968 have been reinvested under the preferred stock DRIP. During the year ended June 30, 2025, the Operating Partnership paid Series B preferred distributions of $29,709, none of which was reinvested.

F-44

The following table reflects the dividends per share that we have declared on our common stock and preferred stock during the year ended June 30, 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, 2023
  
$
1.250
    
$
1,652,688
    
$
0.375
    
$
268,383
    
$
-
    
$
-
  
December 31, 2023
    
1.250
      
1,652,367
      
0.375
      
276,600
      
0.750
      
2,222
  
March 31, 2024
    
1.250
      
1,660,225
      
0.375
      
281,770
      
0.750
      
8,078
  
June 30, 2024
    
1.250
      
1,662,826
      
0.375
      
284,737
      
0.750
      
31,696
  
   
$
5.000
    
$
6,628,106
    
$
1.500
    
$
1,111,490
    
$
2.250
    
$
41,996
*


*Of the total dividends declared for Series B during the year ended June 30, 2024, $31,497 was an increase in liquidation preference and $10,451 was the cash dividend.


On March 4, 2024, the Board of Directors suspended the common stock DRIP in connection with its pursuit of the listing of its common stock on a securities exchange. Prior to the suspension, during the year ended June 30, 2024, of the total dividends paid to common stockholders, $1,371,351 have been reinvested under our DRIP. During the year ended June 30, 2024, of the total dividends paid to Series A preferred stockholders, $174,179 have been reinvested under our DRIP.Similarly, during the year ended June 30, 2024, of the total dividends paid to Series B preferred stockholders, $48 have been reinvested under our preferred stock DRIP. Preferred (Series A and B), and common dividends declared during the year ended June 30, 2024 were paid in July 2024.

The following table reflects the distributions declared by the Operating Partnership for the Class A and Preferred unit holders during the year ended June 30, 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, 2023
  
$
0.125
    
$
10,372
    
$
0.375
    
$
177,930
    
$
-
    
$
-
  
December 31, 2023
    
0.125
      
10,372
      
0.375
      
178,277
      
-
      
-
  
March 31, 2024
    
0.125
      
10,373
      
0.375
      
323,681
      
-
      
-
  
June 30, 2024
    
0.125
      
10,279
      
0.375
      
342,654
      
0.750
      
21,606
  
   
$
0.500
    
$
41,396
    
$
1.500
    
$
1,022,542
    
$
0.750
    
$
 21,606
*

*Of the total dividends declared for Series B during the year ended June 30, 2024, $16,205 was an increase in liquidation preference and $5,402 was the cash dividend.

During the year ended June 30, 2024, the Operating Partnership paid Class A distributions of $41,346. Similarly, during year ended June 30, 2024 the Operating Partnership paid Series A preferred distributions of $857,477, of which $83,883 have been reinvested under our DRIP. Preferred (Series A and B), and common dividends declared during the year ended June 30, 2024 were paid in July 2024.


NOTE 15 – WARRANTS



On February 28, 2025, the Company entered into a securities purchase agreement with a single institutional investor pursuant to which the company offered and sold 153,403.40 shares of the Company’s common stock, $0.0001 par value per share, pre-funded warrants to purchase up to 129,226.50 shares of common stock, and warrants to purchase up to an aggregate of 423,944.85 shares of common stock. The purchase price for each share and the exercise price for each common stock warrant to purchase one share of common stock was $17.10 per share, and the purchase price for each pre-funded warrant to purchase one share of common stock was $17.099. The common stock warrants consist of Series A common stock warrants and Series B common stock warrants. The Series A common stock warrants to purchase up to 141,314.95 shares of common stock are exercisable following the six-month anniversary of the closing date of the offering and expire 18 months from the date of issuance. The Series B common stock warrants to purchase up to 282,629.90 shares of common stock are exercisable following the six-month anniversary of the closing date of the offering and expire five years from the date of issuance.



The gross proceeds to the Company from this offering were $2.62 million from the sale of the common stock and $2.62 million from the sale of the pre-funded warrants. Because the Series A and B warrants were issued in conjunction with the sale of the common stock and the pre-funded warrants, the total gross proceeds of $4.80 million from the sale of the common stock and pre-funded warrants were proportionally allocated between the common stock, prefunded warrants, and the Series A and B warrants based on the estimated fair values of the stock and the warrants at the time of the issuance in accordance with ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity. The total fair value allocation was: $2.30 million to common stock, $1.94 million to the pre-funded warrants, $0.38 million to Series A warrants and $0.22 million to Series B warrants.


F-45

As of June 30, 2025, there were 129,226.50, 141,314.95, and 282,629.90 in prefunded, Series A common stock warrants and Series B common stock warrants, respectively, issued and outstanding. The exercise price for the pre-funded warrants is $0.001 per share and $17.10 per share for the Series A and B warrants.



The Company evaluated the terms of the warrants under ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity, and determined that they qualify for equity classification. This conclusion was based on the fact that:


•
The warrants are indexed to the Company’s own stock;
•
The contracts require physical or net share settlement;
•
The Company has sufficient authorized and unissued shares to settle the contracts;
•
There are no settlement provisions requiring cash payment by the Company;
•
There are no variables or conditions that could cause the warrants to be reclassified as liabilities.



Accordingly, the warrants are classified as a component of stockholders’ equity, and no subsequent remeasurement is required. The proceeds from the issuance of the warrants were allocated to additional paid-in capital upon issuance.



The following table summarizes warrant activity for the year ended June 30, 2025:



 
Number of Warrants
    
Weighted average
exercise price
  
Description
  
Prefunded
    
Series A
    
Series B
    
Total
      
Outstanding as of July 1, 2024
    
-
      
-
      
-
      
-
    
$
-
  
Issued during the year
    
129,226.50
      
141,314.95
      
282,629.90
      
553,171.35
      
17.10
  
Exercised during the year
    
-
      
-
      
-
      
-
      
-
  
Expired during the year
    
-
      
-
      
-
      
-
      
-
  
Oustanding as of June 30, 2025
    
129,226.50
      
141,314.95
      
282,629.90
      
553,171.35
    
$
17.10
  



As of June 30, 2025, there were no exercisable Series A and Series B common stock warrants as they are not exercisable until after September 3, 2025.



All 129,226.50 prefunded warrants were exercised at an exercise price of $0.001 per share in July and August 2025.


NOTE 16 – SEGMENT REPORTING



ASC 280, Segment Reporting (“ASC 280”), establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments.



We operate as a single reportable segment, income-producing real estate properties, which includes activities related to acquiring, owning, developing, and managing real estate investments. Although our properties are geographically diversified throughout the United States, we do not distinguish or group our operations on a geographical basis for purposes of allocating resources or measuring performance. Our business is managed as one segment for internal purposes. The investment committee led by the Chief Executive Officer serves as the Chief Operating Decision Maker (“CODM”) and evaluates performance and makes resource allocation decisions on this basis. The CODM evaluates operating performance primarily based on the Company’s net income (loss). While our real estate portfolio could be categorized into residential and commercial properties, the CODM does not evaluate performance or allocate resources using these categories. Expenses that are significant are the same as those presented in our consolidated statements of operations. Additionally, the CODM reviews the asset information and capital expenditures on a consolidated basis that are the same as shown on the accompanying consolidated balance sheets and statements of cash flows.



Our customers in the United States accounted for 100% of our revenues and we do not have any property or equipment outside of the United States.


F-46
Table of Contents

We also have a real estate-related debt and equity securities investment portfolio; however, this portfolio does not constitute a reportable segment under ASC 280.


Segment net loss includes the direct costs of the reportable segment. Certain costs, including asset management fees to related party, administrative cost reimbursements to related party, directors’ fees, and transfer agent cost reimbursements to related party, and various other general corporate costs that are not specifically allocable to the segment, are included in unallocated corporate expenses below.



The Company’s single segment derives revenue primarily from rental and other property income. The following financial metrics are regularly reviewed by the CODM:


   
June 30, 2025
    
June 30, 2024
  
Segment revenue
  
$
22,059,843
    
$
15,736,103
  
 
                
Expenses:
                
Depreciation and amortization
    
11,432,557
      
7,153,411
  
Interest expense
    
8,139,998
      
6,124,395
  
Property operating and maintenance
    
7,386,050
      
6,523,406
  
General and administrative
    
1,645,309
      
784,131
  
Professional fees
    
-
      
18,973
  
Impairment loss
    
9,500,167
      
-
  
Segment net loss
    
(16,044,238
)
    
(4,868,213
)
 
                
Reconciliation of loss:
                
Unallocated corporate expenses(1)
     (7,417,806 )     (5,049,465 )
Other income (loss), net
    
(508,233
)
    
(1,306,154
)
Loss before income tax
   $
(23,970,277
)
   $
(11,223,832
)

(1)Unallocated corporate expenses include corporate overhead expenses that are not directly attributable to our reportable segment and include interest expense, asset management fees to related party, general and administrative, professional fees, administrative cost reimbursements to related party, directors’ fees, and transfer agent cost reimbursements to related party.



The CODM does not review disaggregated expense information beyond the categories listed above.



Entity-wide disclosures:


•
Revenue by geographic area:

•
United States: $22,059,843
•
Major customers: There is no one customer accounted for with more than 10% of total revenue, aside from the early lease termination income of $3,000,000 from one of the tenants, OS National, LLC, of our Satellite Place Office Building.


NOTE 17 – COMMITMENTS



We commenced the Aurora at Green Valley construction in September 2024. As of June 30, 2025, MRC Aurora has entered into several contracts with third parties for the construction of the project. These contracts represent MRC Aurora’s commitment to incur future expenditures for the development of the project. The total commitments as of June 30, 2025 and 2024, amounted to $5.91 million and $19.56 million, respectively. The total commitments as of June 30, 2025, will be funded by drawing on the construction loan discussed in Note 10.

F-47
Table of Contents
MacKenzie Realty Capital, Inc.
Schedule III- Real Estate Properties and Accumulated Depreciation
June 30, 2025

 
  
 
        
Initial Costs
    
Subsequent Acquisition
          
Gross Amount Carried at
        
Property:
  
Acquisition Date
  
Encumbrances at
June 30, 2025
    
Land
    
Building &
Improvements
    
Land
    
Building &
Improvements
     Accumulated
Impairment		    
June 30, 2025
    
Accumulated
Depreciation
  
 
  
 
                                      
       
Commodore Apartment Building
  
March 5, 2021
  
$
6,737,500
    
$
5,519,963
    
$
7,670,276
    
$
-
    
$
55,008
     $ -    
$
13,245,247
    
$
(1,122,435
)
The Park View Building
  
March 5, 2021
    
8,387,500
      
4,317,013
      
12,008,608
      
-
      
27,519
       -    
16,353,140
      
(1,465,909
)
Hollywood Apartments
  
October 4, 2021
    
10,889,480
      
8,704,577
      
14,236,895
      
-
      
8,550
       -    
22,950,022
      
(1,943,489
)
Shoreline Apartments
  
May 16, 2022
    
17,613,923
      
7,559,390
      
20,626,984
      
-
      
150,987
       -    
28,337,361
      
(2,521,710
)
Satellite Place Office Building
 
June 1, 2022
    
5,850,262
      
2,966,129
      
12,011,370
      
-
      
398,780
       -    
15,376,279
      
(3,579,747
)
Aurora Land
 
May 6, 2022
    
6,597,850
      
3,050,000
      
2,622,368
      
54,066
      
18,067,497
       -    
23,793,931
      
-
  
First & Main Office Building   July 23, 2022     10,626,226       966,314       16,963,752       -       19,849       -    
17,949,915       (1,311,492 )
1300 Main Office Building   October 1, 2022     7,853,849       805,575       14,649,555       -       -       -    
15,455,130       (921,800 )
Woodland Corporate Center   January 3, 2023     5,826,807       1,840,468       10,274,374       -       16,469       -    
12,131,311       (947,707 )
Main Street West Office Building   February 1, 2023     9,251,249       1,433,698       25,287,537       -       55,209       (9,403,608 )  
17,372,836       (1,575,821 )
220 Campus Lane Office Building
 		  September 1, 2023     1,998,205       1,357,288       1,421,779       -       256,294       -    
3,035,361       (69,417 )
Campus Lane Land
 		  September 1, 2023     1,075,249       1,519,996       267,451       11,999       388,705       -       2,188,151       -  
Green Valley Executive Center
 		  January 1, 2024     12,497,248       1,352,865       20,261,997       -       85,727       -    
21,700,589       (1,144,710 )
One Harbor Center
 		  May 1, 2024     7,463,728       1,364,866       13,184,961       -       40,106       -    
14,589,933       (844,350 )
Green Valley Medical Center   August 1, 2024
    7,747,998
 		      1,582,517
 		      11,386,583
 		      -
 		      128,847
 		      -
 		   
13,097,947
 		      (480,488 )
 
  
            
  
$
120,417,074
    
$
44,340,659
    
$
182,874,490
    
$
66,065
    
$
19,699,547
     $ (9,403,608 )  
$
237,577,153
    
$
(17,929,075
)

A summary of activity for real estate and accumulated depreciation for the years ended June 30, 2025 and 2024:

 
  
Year Ended June 30,
  
Real Estate
  
2025
    
2024
  
Balance at the beginning of the year
  
$
214,246,049
    
$
169,647,797
  
Additions - acquisitions
    
32,734,712
      
44,598,252
  
Impairment loss
    (9,403,608 )     -  
Balance at the end of the year
  
$
237,577,153
    
$
214,246,049
  
 
                
Accumulated Depreciation
                
Balance at the beginning of the year
  
$
10,026,646
    
$
4,917,122
  
Depreciation expense
    
7,902,429
      
5,109,524
  
Balance at end of the year
  
$
17,929,075
    
$
10,026,646
  

S-1
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
MACKENZIE REALTY CAPITAL, INC.
   
(Registrant)
 
 
 
 
 
By:
/s/ Robert Dixon
  
 
 
Robert Dixon
 
 
Chief Executive Officer
     
 
 
Date: 
September 29, 2025
  

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 Signature
Title
Date
 
 
  
/s/ Robert Dixon
Chief Executive Officer 
September 29, 2025
Robert Dixon
(Principal Executive Officer)
  
     
/s/ Angche Sherpa
Chief Financial Officer 
 September 29, 2025
Angche Sherpa
(Principal Financial and Accounting Officer)
  
     
/s/ Chip Patterson
Director
 September 29, 2025
Chip Patterson
    
     
/s/ Tim Dozois
Director
 September 29, 2025
Tim Dozois
    
     
/s/ Tom Frame
Director
 September 29, 2025
Tom Frame
    
     
/s/ Kjerstin Hatch
Director
 September 29, 2025
Kjerstin Hatch