def14a_082713.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.)

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MACKENZIE REALTY CAPITAL, INC.

(Name of Registrant as Specified In Its Charter)


	(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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MACKENZIE REALTY CAPITAL, INC.

1640 SCHOOL STREET

MORAGA, CA 94556

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To the Stockholders of MacKenzie Realty Capital, Inc.:

NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of MacKenzie Realty Capital, Inc., a Maryland Corporation (the “Company”), will be held on September 13, 2013, at 1:30 p.m. Pacific Time at 1640 School Street, Moraga, CA for the following purposes:

To grant the Company authority to sell its common shares for less than net asset value in its initial public offering, subject to certain conditions; and

To transact any other business that may properly come before the meeting or any adjournment or postponement thereof.

The foregoing items of business are more fully described in the proxy statement accompanying this notice.

Stockholders may also transact any other business that properly comes before the meeting.

Stockholders of record as of the close of business on July 30, 2013, are entitled to notice of and to vote at the meeting (or any adjournment or postponement of the meeting).

		By Order of the Board of Directors of the Company,

		/s/ Chip Patterson
		Chip Patterson
		Secretary

August 28, 2013

Moraga, California

All stockholders are cordially invited to attend the special meeting in person.

MACKENZIE REALTY CAPITAL, INC.

1640 SCHOOL STREET

MORAGA, CA 94556

PROXY STATEMENT

SPECIAL MEETING OF STOCKHOLDERS

September 13, 2013

This proxy statement is being sent to you by the Board of Directors of MacKenzie Realty Capital, Inc. (the “Company,” “we” or “us”). The Board of Directors is asking you to vote at a special meeting of stockholders to be held on September 13, 2013. Stockholders of record at the close of business on July 30, 2013 (the “Record Date”) are entitled to vote at the meeting as set forth in this proxy statement. This proxy statement is first being mailed to stockholders on or about August 28, 2013.

PROPOSAL ONE

APPROVAL TO SELL COMMON SHARES

BELOW NET ASSET VALUE

Our initial public offering (the “IPO”) of our common shares (the “Common Shares”) has begun. We have registered our Common Shares for sale in the IPO under a registration statement on Form N-2 (the “Registration Statement”), which includes a prospectus (the “Prospectus”). We have elected to be regulated as a business development company under the Investment Company Act of 1940 (the “1940 Act”). As a result, we may sell our Common Shares in our IPO, so long as the net sale price to us (after the deduction of offering expenses) is at least equal to the net asset value share (the “NAV”) of our Common Shares. The 1940 Act permits us to sell our Common Shares below NAV with the consent of a majority of our common stockholders or under certain other circumstances. We are seeking the consent of a majority of our common stockholders so that we may, in our IPO, sell our Common Shares at a price below our then-current NAV per share, subject to certain conditions discussed below. If approved, the authorization would be effective for a period expiring on the date of our 2014 Annual Meeting of Stockholders, which is expected to be held in April 2014.

The Board of Directors believes that our having the ability to issue our Common Shares below NAV in the IPO will benefit all of our stockholders by enabling us to sell more Common Shares in the IPO at a sales price of $10 per share. As discussed in the Prospectus, if our Common Shares are sold at $10 per share with selling expenses estimated to be 13%, we will sell the Common Shares below NAV per share. No public market currently exists to establish the market value of our Common Shares. Absent the approval of this proposal by a majority of our common stockholders, we may not be able to raise our targeted amount of $50,000,000 in the IPO. The Board of Directors has approved submitting this proposal to our stockholders for their approval.

To the extent we issue Common Shares above or below NAV in the IPO, our market capitalization and number of our Common Shares will increase, thus affording all stockholders ownership in a company with a larger asset base, which could decrease the per-share expense load and result in a more diversified portfolio.

Upon stockholder approval, we will only sell Common Shares below NAV in the IPO if the following condition is met: all of our independent directors make a determination, based on information and a recommendation from our investment adviser, MCM Advisers, LP (the “Adviser”), that they reasonably expect that the investment(s) to be made with the net proceeds of such issuance will lead to our long-term distribution growth.

The base management fee we pay to our Adviser is based on our “Managed Funds,” which are defined in our Investment Advisory Agreement (“Advisory Agreement”) with our Adviser as the number of Common Shares issued, multiplied by their sale price, plus any borrowed funds. Our Adviser is controlled directly or indirectly by our officers and certain of our directors, among others. Therefore, our Adviser’s interest in determining whether to recommend that we issue Common Shares below NAV may conflict with our interests and the interests of our stockholders.

Before voting on this proposal, common stockholders should consider the potentially dilutive effect of the issuance of Common Shares at less than NAV per share on the NAV per outstanding Common Share. Any sale of Common Shares at a price below NAV would result in an immediate dilution on the NAV per outstanding Common Share to existing common stockholders of as much as 7%. The 1940 Act establishes a connection between common share sale price and NAV because when stock is sold at a sale price below NAV per share, the resulting increase in the number of outstanding shares is not accompanied by a proportionate increase in our net assets. Our current common stockholders should also consider that they have no subscription, preferential or preemptive rights to acquire additional Common Shares proposed to be authorized for issuance in the IPO, and thus any issuance of Common Shares in the IPO will dilute such stockholders’ holdings of Common Shares as a percentage of Common Shares outstanding. Further, because our current stockholders may not purchase any Common Shares in our IPO (due to separate restrictions in the 1940 Act), regardless of whether such offering is above or below the then current NAV, their voting power will be diluted. Please find below an example of the amount of dilution that could occur based upon the number of Common Shares sold:

DILUTION

The potential per-Share dilution to investors in the IPO would be represented by the amount by which the offering price per Common Share exceeds our pro forma NAV per Share after the completion of the IPO offering. Net asset value per Common Share is determined by dividing our NAV, which is our gross assets less total liabilities, by the number of outstanding Common Shares.

Our February 28, 2013 NAV was $6,859,373, or $9.42 per Common Share. This amount is net of $422,797 of “Organization and Offering Expenses” (as defined in the Prospectus) paid through that date. After accounting for the remaining $127,203 of Organization and Offering Expenses we have paid (amounts above $550,000 are paid by our Adviser), and after giving effect to the sale of 5,000,000 Common Shares in the IPO at a public offering price of $10 per Share, and after deducting the selling commissions, the “Dealer Manager Fee” (as defined in the Prospectus), diligence payments and the “Portfolio Structuring Fee” (as defined in the Advisory Agreement) aggregating (a maximum of) $6,500,000, our pro forma NAV is expected to be approximately $50,232,169, or approximately $8.77 per Common Share.

Examples of Dilutive Effect of the Issuance of Common Shares Below NAV

The following table illustrates the reduction to NAV and dilution that would be experienced by a stockholder if we issued 1,500,000, 3,000,000 and 4,000,000 Common Shares in the IPO, at a discount to the then-current NAV.

The examples are based upon our NAV following the “Legacy Portfolio Acquisition” (as discussed in the Prospectus), after which we had 728,217 Common Shares outstanding, with net assets of $6,859,373, or NAV per Common Share of $9.42. The table illustrates the dilutive effect on a stockholder of (i) the sale of an additional 1,500,000 Common Shares in the IPO, (ii) the sale of another 1,500,000 Common Shares in the IPO, and (iii) the sale of another 1,000,000 Common Shares in the IPO. The table assumes

all Common Shares are sold at $10 per Share and that the aggregate offering expenses and commissions, in addition to the Portfolio Structuring Fee, are 13%.

	Following Legacy Portfolio Acquisition		Example 1 1,500,000 Shares Sold		Example 2 3,000,000 Shares Sold		Example 3 4,000,000 Shares Sold

Price per Share	$	10.00	$	10.00	$	10.00	$	10.00
Net Proceeds per Share to MRC	$	10.00	$	8.70	$	8.70	$	8.70

Net Assets After Transactions
NAV	$	6,859,373	$	19,909,373	$	32,959,373	$	41,659,373
Total Shares Outstanding		728,217		2,228,217		3,728,217		4,728,217
NAV per Share	$	9.42	$	8.94	$	8.84	$	8.81
Change		--		(5.15%)		(6.15%)		(6.47%)

REQUIRED VOTE

The proposal must be approved by (a) the affirmative vote of a majority of all common stockholders of record as of the Record Date, and (b) the affirmative vote of a majority of the votes cast by the holders of Common Shares.

Solely for the purpose of determining whether a majority of the number of common stockholders of record approved the matter, the number of Common Shares held by any single stockholder will not be relevant. For the purpose of determining whether a majority of the number of common stockholders of record approved this proposal, abstentions and broker non-votes, if any, recorded by record owners will have the effect of a vote against the proposal.

Solely for the purposes of determining whether a majority of the votes cast approved this proposal, each Common Share is entitled to one vote, and abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote.

BOARD RECOMMENDATION

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY VOTE FOR THE PROPOSAL TO ALLOW US TO SELL OUR COMMON SHARES BELOW NET ASSET VALUE.

MORE INFORMATION ABOUT THE MEETING

How To Vote. Stockholders will vote at the special meeting and the Board of Directors is not soliciting proxies from common stockholders.

Meeting Expenses. The expenses of preparing, printing and mailing the accompanying notice and this proxy statement and all other costs in connection with the special meeting will be borne by us. We will not pay any representatives of ours or of our Adviser any additional compensation for their efforts to supplement this solicitation.

Quorum. The presence of holders of Common Shares entitled to cast a majority of the votes entitled to be cast constitutes a quorum. For purposes of determining the presence or absence of a quorum, Common Shares present at the special meeting that are not voted will be treated as Common Shares that are present at the meeting but have not been voted.

If a quorum is not present in person at the special meeting, the chairman of the meeting shall have the power to adjourn the special meeting to a date not more than 120 days after the original Record Date without notice other than announcement at the special meeting.

		By Order of the Board of Directors

		/s/ Chip Patterson
		Chip Patterson
		Secretary

August 28, 2013