RELATED PARTY TRANSACTIONS

12 Months Ended

Jun. 30, 2023

RELATED PARTY TRANSACTIONS [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 8 – RELATED PARTY TRANSACTIONS

Advisory Agreements Effective January 1, 2021:

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

The terms of the Advisory Management Agreement with the Real Estate Adviser provide that we will continue to pay an Asset Management Fee on essentially the same terms as we were paying the Investment Adviser prior to 2021, namely based upon a percentage of Invested Capital (3% of the first $20 million, 2% of the next $80 million, and 1.5% over $100 million). Invested Capital is equal to the amount calculated by multiplying the total number of outstanding shares, preferred shares, and the partnership units (units in our operating partnership issued by us and held by persons other than us) issued by us by the price paid for each or the value ascribed to each in connection with their issuance. The Advisory Management Agreement also provides for a 2.5% Acquisition Fee on new (non-security) purchases, subject to certain limitations designed to eliminate incentives to “churn” our assets. The new Advisory Management Agreement also provides for an incentive management fee that is equal to 15% of all distributions once shareholders have received cumulative distributions equal to 6% from the effective date of the Agreement. We will not pay any Property Management Fees, Debt Financing Fees, or Disposition Fees to the Real Estate Adviser.

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 year ended June 30, 2023, we incurred asset management fees of $3,004,725. During the year ended June 30, 2022, we incurred asset management fees of $2,725,588.

The asset management and base 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, 2022	$	20,000,000	$	80,000,000	$	48,639,649	$	148,639,649
December 31, 2022	$	20,000,000	$	80,000,000	$	52,470,792	$	152,470,792
March 31, 2023	$	20,000,000	$	80,000,000	$	60,153,751	$	160,153,751
June 30, 2023	$	20,000,000	$	80,000,000	$	62,313,487	$	162,313,487
Quarter ended:
September 30, 2021	$	20,000,000	$	80,000,000	$	33,927,634	$	133,927,634
December 31, 2021	$	20,000,000	$	80,000,000	$	34,242,127	$	134,242,127
March 31, 2022	$	20,000,000	$	80,000,000	$	35,848,952	$	135,848,952
June 30, 2022	$	20,000,000	$	80,000,000	$	41,870,274	$	141,870,274

During the years ended June 31, 2023 and 2022, we did not incur or accrue any incentive management fee under the new Advisory Management Agreement.

Property Management and Leasing Services:

On May 6, 2022, the Real Estate Adviser’s newly formed wholly owned subsidiary, Wiseman Company Management, LLC (“WCM”), purchased the property management and leasing services rights from Wiseman. Therefore, effective the acquisition date, WCM has been providing property management and leasing services to the eight property limited partnerships in accordance with the pre-existing agreements. There have been no changes to any of the management services agreements terms with the property limited partnerships since the acquisition of the property management service rights.

During the year ended June 30, 2023, the eight limited partnerships paid total property management fees of $489,387 and leasing commissions of $591,596 to WCM. In addition, during the year ended June 30, 2023, the eight partnerships also paid $1,963,432 to WCM for direct operating costs and construction of tenant improvements.

Organization and Offering Costs Reimbursement:

As provided in the Offering Circular, offering costs incurred and paid by us in excess of $550,000 in connection with the offering will be reimbursed by the Advisers except to the extent that 10% in broker fees are not incurred. In such case, the broker savings were available to be paid by us for marketing expenses or other non-cash compensation. As of June 30, 2022, we incurred $600,130 of offering costs on our Offering Circular to sell the preferred stock, of which $501,917 relates to syndication cost paid by Mackenzie on behalf of us in connection with the preferred stock offering. Total offering costs incurred as of June 30, 2022, were in an excess of the total offering cost reimbursement threshold including the broker savings by $21,841. However, we increased the offering costs reimbursement threshold from $550,000 to $825,000 as noted in our updated Offering Circular filed on October 14, 2022. Therefore, the cumulative offering costs as of June 30, 2022 were below the reimbursement threshold. As of June 30, 2023, we incurred $1,099,189 of offering costs on our Offering Circular to sell the preferred stocks, of which $1,000,667 relates to syndication cost paid by Mackenzie on behalf of us in connection with the preferred stock offering. Total offering costs incurred as of June 30, 2023 were below the offering cost reimbursement threshold including the broker savings.

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.

Effective November 1, 2018, transfer agent services are also provided by MacKenzie and the costs incurred by MacKenzie in providing the services are reimbursed by us. No fee (only cost reimbursement) is being paid by us to MacKenzie for this service.

The administrative cost reimbursements for the years ended June 30, 2023 and 2022 were $726,000 and $609,600, respectively. The transfer agent services cost reimbursement for the years ended June 30, 2023 and 2022 were $92,000 and $106,401.

The table below outlines the related party expenses incurred for the years ended June 30, 2023 and 2022, and unpaid as of June 30, 2023 and 2022.

	Year ended				Unpaid as of
Types and Recipient	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Asset management fees- the Real Estate Adviser	$	3,004,725	$	2,725,588	$	-	$	-
Asset acquisition fees- the Real Estate Adviser (3)		1,878,356		793,919		-		-
Administrative cost reimbursements- MacKenzie		726,000		609,600		-		-
Transfer agent cost reimbursements - MacKenzie		92,000		106,401		-		-
Organization & Offering Cost (2) - MacKenzie		499,689		480,076		151,132		141,397
Other expenses (1)- MacKenzie and Subsidiary’s GPs		-		-		5,232		72,697
Due to related entities					$	156,364	$	214,094

⁽¹⁾ Expenses paid by MacKenzie and General Partner of a subsidiary on behalf of us and subsidiary.

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

⁽³⁾ 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, 2023 was for the acquisition of First & Main in July 2022, 1300 Main in October 2022, Woodland Corporate Center Two in January 2023 and Main Street West in February 2023.

Affiliated Investments:

Coastal Realty Business Trust (“CRBT”):

CRBT is a Nevada business trust whose trustee is MacKenzie. Each series of the trust has its own beneficiaries and own assets. We own the following series of CRBT and we are the only beneficiary of that series. Under the terms of the agreement, there are no redemption rights to any of the series participants.

• CRBT, REEP, Inc.– A has an ownership interest in one of three general partners of a limited partnership which owns one multi-family property located in Frederick, Maryland. During the year ended June 30, 2023, the series sold the underlying investments, distributed the proceeds to us and dissolved the series. We received total proceeds of $81,627 and realized a gain of $47,637.