10-Q 1 mrc10q12312018.htm FORM 10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
(Mark one)
 
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the quarterly period ended December 31, 2018
 
 
 
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from _________ to __________
 
 
Commission file number 000-55006
 
 
MacKenzie Realty Capital, Inc.
(Exact name of registrant as specified in its charter)
 
 
Maryland
45-4355424
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
 
 
89 Davis Road, Suite 100, Orinda, CA 94563
(Address of principal executive offices)
 
 
(925) 631-9100
(Registrant's telephone number, including area code)
 
 
 
________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
 
 
Indicate by check mark whether the registrant has (1) 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 or Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.)  Yes   No
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer               Accelerated filer               Non-accelerated filer      Smaller reporting company 
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  No    
 
The number of the shares of issuer's Common Stock outstanding as of February 12, 2019 was 10,338,571.26.
 




TABLE OF CONTENTS


 
 
 
Page
 
     
Item 1.
 
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     
     
     
     
 
     
     
   
 
     
     
   
     
   
 




Part I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

MacKenzie Realty Capital, Inc.
Consolidated Statements of Assets and Liabilities


 
 
December 31, 2018
   
June 30, 2018
 
 
 
(Unaudited)
       
Assets
           
Investments, at fair value
           
Non-controlled/non-affiliated investments (cost of $58,764,253 and $57,459,205, respectively)
 
$
62,062,419
   
$
64,899,356
 
Affiliated investments (cost of $6,156,533 and $3,605,859, respectively)
   
6,887,765
     
4,096,928
 
Controlled investments (cost of $24,040,158 and $3,549,901, respectively)
   
26,773,561
     
5,588,222
 
Total investments, at fair value (cost of $88,960,944 and $64,614,965, respectively)
   
95,723,745
     
74,584,506
 
Cash and cash equivalents
   
4,444,293
     
8,442,249
 
Accounts receivable
   
437,185
     
5,878,293
 
Other assets
   
391,095
     
374,634
 
Deferred offering costs, net
   
452,628
     
286,614
 
Total assets
 
$
101,448,946
   
$
89,566,296
 
 
               
 
               
Liabilities
               
Accounts payable and accrued liabilities
 
$
268,708
   
$
38,170
 
Income tax payable
   
1,280
     
37,153
 
Dividend payable
   
1,994,973
     
1,438,808
 
Capital pending acceptance
   
1,107,187
     
646,300
 
Due to related entities
   
1,836,005
     
1,807,028
 
Deferred tax liability, net
   
-
     
3,518
 
Total liabilities
   
5,208,153
     
3,970,977
 
 
               
Net assets
               
Common stock, $0.0001 par value, 80,000,000 shares authorized; 9,832,230.73 and 8,496,141.57 shares issued and outstanding, respectively
   
983
     
850
 
Capital in excess of par value
   
89,230,480
     
77,205,361
 
Accumulated undistributed net investment income
   
246,529
     
(1,580,433
)
Accumulated undistributed net unrealized gain
   
6,762,801
     
9,969,541
 
Total net assets
   
96,240,793
     
85,595,319
 
 
               
Total liabilities and net assets
 
$
101,448,946
   
$
89,566,296
 
 
               
Net asset value per share
 
$
9.79
   
$
10.07
 




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


MacKenzie Realty Capital, Inc.
Consolidated Schedule of Investments
December 31, 2018
(Unaudited)
 

Name
 
 
Asset Type
 
 Shares/Units
   
 Cost Basis
   
 Total Fair Value
 
 % of Net Assets
American Finance Trust Inc., Class A
(3)
 
Publicly Traded Company
 
         233,562.40
  $
                      3,490,077
  $
                     3,111,051
 
          3.24
American Finance Trust Inc., Class B2
(4)
 
Publicly Traded Company
 
         105,346.32
   
        1,437,599
   
             1,403,211
 
          1.46
Apartment Investment and Management Company
(3)
 
Publicly Traded Company
 
           30,000.00
   
        1,325,822
   
             1,316,400
 
          1.37
Bluerock Residential Growth 8.25% PFD
(3)
 
Publicly Traded Company
 
           10,000.00
   
           252,510
   
                253,000
 
          0.26
Braemar Hotels & Resorts Inc.
(3)
 
Publicly Traded Company
 
           53,000.00
   
           607,232
   
                473,290
 
          0.49
City Office REIT, Inc.
(3)
 
Publicly Traded Company
 
         100,000.00
   
        1,223,467
   
             1,025,000
 
          1.07
City Office REIT, Inc. 6.625%, PFDA
(3)
 
Publicly Traded Company
 
           10,000.00
   
           240,315
   
                225,500
 
          0.23
Equity Commonwealth 6.5% PFD
(3)
 
Publicly Traded Company
 
              8,057.00
   
           207,012
   
                203,439
 
          0.21
Global Net Lease 7.25% PFD A
(3)
 
Publicly Traded Company
 
           10,000.00
   
           250,259
   
                246,800
 
          0.26
Investors Real Estate Trust 6.625% PFDA
(3)
 
Publicly Traded Company
 
              8,000.00
   
           191,906
   
                184,640
 
          0.19
Pebblebrook Hotel Trust PFDC
(3)
 
Publicly Traded Company
 
           10,000.00
   
           244,369
   
                235,100
 
          0.24
Public Storage 5.625% PFDU
(3)
 
Publicly Traded Company
 
           10,000.00
   
           245,870
   
                244,900
 
          0.25
Rexford Industrial 5.875% Preferred B
(3)
 
Publicly Traded Company
 
           10,000.00
   
           231,186
   
                218,800
 
          0.23
RLJ Lodging Trust
(3)
 
Publicly Traded Company
 
           20,000.00
   
           429,619
   
                328,000
 
          0.34
Sabra Health Care REIT, Inc.
(3)
 
Publicly Traded Company
 
           25,000.00
   
           579,972
   
                412,000
 
          0.43
VEREIT, Inc. 6.7% PFD
(3)
 
Publicly Traded Company
 
           77,000.00
   
        1,914,201
   
             1,821,820
 
          1.89
WP Carey, Inc.
 
 
Publicly Traded Company
 
           34,250.00
   
        1,751,220
   
             2,237,895
 
          2.33
Total Publicly Traded Company
 
 
 
 
 
   
     14,622,636
   
           13,940,846
 
        14.49
 
 
 
 
 
 
   
 
   
 
 
 
American Realty Capital Healthcare Trust III, Inc.
(4)(5)
 
Non Traded Company
 
           25,972.41
   
             40,851
   
                  50,127
 
          0.04
American Realty Capital New York City REIT, Inc.
(4)(5)
 
Non Traded Company
 
         209,359.75
   
        2,653,173
   
             2,771,923
 
          2.88
Benefit Street Partners Realty Trust, Inc.
(4)
 
Non Traded Company
 
         136,182.30
   
        1,972,384
   
             2,042,735
 
          2.12
BRE Select Hotels Corp. - Preferred A
(4)
 
Non Traded Company
 
         527,458.00
   
           913,263
   
                912,502
 
          0.95
Carter Validus Mission Critical REIT
(4)
 
Non Traded Company
 
           73,685.43
   
           275,334
   
                341,900
 
          0.36
Cole Credit Property Trust IV, Inc.
(4)
 
Non Traded Company
 
         157,976.61
   
           959,155
   
             1,263,813
 
          1.31
Cole Credit Property Trust V, Inc.
(4)
 
Non Traded Company
 
              8,631.50
   
           117,849
   
                107,894
 
          0.11
Cole Credit Property Trust V, Inc. Class T
(4)
 
Non Traded Company
 
                 395.88
   
               5,492
   
                     4,949
 
          0.01
Hines Global REIT, Inc.
(4)
 
Non Traded Company
 
           12,373.22
   
           104,945
   
                  76,095
 
          0.08
Corporate Property Associates  18 Global A Inc.
(4)
 
Non Traded Company
 
              4,695.14
   
             39,627
   
                  38,688
 
          0.04
First Capital Real Estate Trust, Inc.
(4)(5)
 
Non Traded Company
 
              3,792.51
   
             15,161
   
                  21,276
 
          0.02
FSP 1441 Main Street
(4)(5)
 
Non Traded Company
 
                   15.73
   
               8,559
   
                  30,289
 
          0.03
FSP 303 East Wacker Drive Corp. Liquidating Trust
(4)(5)
 
Non Traded Company
 
                     3.00
   
                     30
   
                          30
 
              -
FSP Energy Tower
(2)(4)(5)
 
Non Traded Company
 
                   18.35
   
           684,299
   
                808,003
 
          0.84
FSP Grand Boulevard Liquidating Trust
(4)(5)
 
Non Traded Company
 
                     7.50
   
             42,929
   
                  15,034
 
          0.02
FSP Satellite Place
(4)(5)
 
Non Traded Company
 
                   13.78
   
           395,313
   
                530,493
 
          0.55
Griffin-American Healthcare REIT III, Inc.
(4)
 
Non Traded Company
 
                 686.48
   
               4,494
   
                     5,492
 
          0.01
Griffin Capital Essential Asset REIT, Inc.
(4)
 
Non Traded Company
 
           28,641.60
   
           196,636
   
                250,041
 
          0.26
GTJ REIT, Inc.
(4)
 
Non Traded Company
 
              1,000.00
   
             11,620
   
                  11,730
 
          0.01
Healthcare Trust, Inc.
(4)
 
Non Traded Company
 
         304,034.25
   
        3,459,195
   
             4,134,866
 
          4.30
Highlands REIT Inc.
(4)(5)
 
Non Traded Company
 
    20,190,117.16
   
        3,796,883
   
             3,634,221
 
          3.78
Hospitality Investors Trust, Inc.
(4)(5)
 
Non Traded Company
 
                 716.18
   
               5,232
   
                     6,267
 
          0.01
InvenTrust Properties Corp.
(4)
 
Non Traded Company
 
           14,799.52
   
             22,603
   
                  27,527
 
          0.03
KBS Real Estate Investment Trust II, Inc.
(4)
 
Non Traded Company
 
      2,178,046.09
   
        7,905,833
   
             8,799,306
 
          9.14
KBS Real Estate Investment Trust III, Inc.
(4)
 
Non Traded Company
 
           52,415.44
   
           439,522
   
                498,471
 
          0.52
NorthStar Healthcare Income, Inc.
(4)
 
Non Traded Company
 
           73,573.29
   
           275,223
   
                367,866
 
          0.38
Phillips Edison & Company, Inc
(4)
 
Non Traded Company
 
         409,116.32
   
        3,011,709
   
             3,747,506
 
          3.89
Steadfast Apartment REIT
(4)
 
Non Traded Company
 
              2,083.29
   
             17,197
   
                  27,104
 
          0.03
Steadfast Income REIT
(4)
 
Non Traded Company
 
         109,381.94
   
           734,930
   
                841,147
 
          0.87
Strategic Realty Trust, Inc.
 
 
Non Traded Company
 
         148,104.91
   
           581,147
   
                681,283
 
          0.71
Summit Healthcare REIT, Inc.
(2)(4)(5)
 
Non Traded Company
 
      1,362,256.55
   
        1,849,058
   
             2,261,346
 
          2.35
The Parking REIT Inc.
(4)(5)
 
Non Traded Company
 
           17,989.90
   
           230,880
   
                207,424
 
          0.22
Total Non Traded Company (1)
 
 
 
 
 
   
     30,770,526
   
           34,517,348
 
        35.87
 
 
 
 
 
 
   
 
   
 
 
 
3100 Airport Way South LP
(4)
 
LP Interest
 
                     1.00
   
           355,000
   
                382,831
 
          0.37
5210 Fountaingate, LP
(2)(4)
 
LP Interest
 
                     9.89
   
           500,000
   
                565,232
 
          0.59
Addison NC, LLC
(2)(4)(5)
 
LP Interest
 
         200,000.00
   
        2,000,000
   
             3,300,000
 
          3.43
Addison Property Member, LLC
(2)(4)(5)
 
LP Interest
 
         731,485.60
   
        7,316,326
   
             7,314,856
 
          7.60
Arrowpoint Burlington LLC
(2)(4)
 
LP Interest
 
                     7.50
   
           750,000
   
                871,282
 
          0.91
Bandon PV Holdings, LLC
(2)(4)
 
LP Interest
 
      5,250,000.00
   
        5,250,000
   
             5,250,000
 
          5.46
BP3 Affliliate, LLC
(2)(4)(5)
 
LP Interest
 
              1,050.00
   
        1,050,000
   
             1,050,000
 
          1.09
BR Cabrillo LLC
(4)(5)
 
LP Interest
 
         346,723.32
   
           104,942
   
                  83,214
 
          0.09
BR Jefferson Place Investment Co, LLC
(4)
 
LP Interest
 
      2,766,697.28
   
           364,006
   
                359,671
 
          0.37
Britannia Preferred Members, LLC -Class 1
(2)(4)(5)
 
LP Interest
 
                 103.88
   
        2,597,000
   
             2,726,850
 
          2.83
Britannia Preferred Members, LLC -Class 2
(2)(4)(5)
 
LP Interest
 
         514,858.30
   
        6,826,931
   
             8,139,910
 
          8.46
Capitol Hill Partners, LLC
(4)(5)
 
LP Interest
 
         190,000.00
   
        1,900,000
   
             1,939,900
 
          2.02
CRP I Roll Up, LLC
(4)
 
LP Interest
 
      4,500,000.00
   
        4,500,000
   
             4,860,000
 
          5.05
CRP III Roll Up, LLC
(4)
 
LP Interest
 
      6,000,000.00
   
        6,000,000
   
             6,360,000
 
          6.61
Lakemont Partners, LLC
(2)(4)
 
LP Interest
 
              1,000.00
   
        1,000,000
   
             1,000,000
 
          1.04
MPF Pacific Gateway - Class B
(2)(4)(5)
 
LP Interest
 
                   23.20
   
               6,287
   
                     6,613
 
          0.01
Redwood Mortgage Investors VIII
(4)
 
LP Interest
 
           56,300.04
   
             29,700
   
                  37,158
 
          0.04
Satellite Investment Holdings, LLC - Class A
(4)
 
LP Interest
 
                   22.00
   
        2,200,000
   
             2,200,000
 
          2.29
Secured Income, LP
(2)(4)(5)
 
LP Interest
 
           64,670.00
   
           316,890
   
                325,290
 
          0.34
The Weatherly Building, LLC
(4)(5)
 
LP Interest
 
                   17.50
   
           118,721
   
                118,721
 
          0.12
The Weatherly, LTD
(4)(5)
 
LP Interest
 
                   60.00
   
           184,761
   
                184,761
 
          0.19
Uniprop Manufactured Housing Income Fund II, LP
(4)
 
LP Interest
 
         155,070.00
   
           147,317
   
                147,317
 
          0.15
Total LP Interest
 
 
 
 
 
   
     43,517,881
   
           47,223,606
 
        49.06
 
 
 
 
 
 
   
 
   
 
 
 
Coastal Realty Business Trust, REEP, Inc. - A
(2)(4)(5)
 
Investment Trust
 
           72,320.00
   
             49,901
   
                  41,945
 
          0.04
Total Investment Trust
 
 
 
 
 
   
             49,901
   
                  41,945
 
          0.04
 
 
 
 
 
 
   
 
   
 
 
 
Total Investments
 
 
 
 
 
  $
                    88,960,944
  $
               95,723,745
 
        99.46

(1) Investments primarily in non-traded public REITs or their successors.
(2) Under the 1940 Act, the Company generally is deemed to be an “affiliated person” of a portfolio company if it owns 5% or more of the portfolio company’s voting securities and generally is deemed to “control” a portfolio company if it owns more than 25% of the portfolio company’s voting securities or it has the power to exercise control over the management or policies of such portfolio company. As of December 31, 2018, the Company is deemed to be either “affiliated” with, or in “control” of, these portfolio companies despite that fact that the Company does not have the power to exercise control over the management or policies of such portfolio companies. See additional disclosures in Note 5.
(3) Non-qualifying assets under Section 55(a) of the 1940 Act. As of December 31, 2018, the total percentage of non-qualifying assets is 10.15%, and, as a business development company, non-qualifying assets may not exceed 30% of our total assets.
(4) Investments in illiquid securities, or securities that are not traded on a national exchange. As of December 31, 2018, 81.33% of the Company's total assets are in illiquid securities.
(5) Investments in non-income producing securities. As of December 31, 2018, 35.06% of the Company's total assets are in non-income producing securities.
 

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


MacKenzie Realty Capital, Inc.
Consolidated Schedule of Investments
June 30, 2018

 
Name
 
 
Asset Type
 
 Shares/Units
   
 Cost Basis
   
 Total Fair Value
 
 % of Net Assets
Ashford Hospitality Trust, Inc.
(3)
 
Publicly Traded Company
 
     175,000.00
  $
                         1,406,834
  $
                    1,417,501
 
          1.65
Bluerock Residential Growth REIT, Inc.
(3)
 
Publicly Traded Company
 
       20,600.00
   
           182,202
   
                183,752
 
          0.21
Braemar Hotels & Resorts Inc.
(3)
 
Publicly Traded Company
 
       26,627.00
   
           302,176
   
                304,080
 
          0.36
CBL & Associates Properties, Inc.
(3)
 
Publicly Traded Company
 
       90,000.00
   
           499,361
   
                501,300
 
          0.59
Independence Realty Trust, Inc.
(3)
 
Publicly Traded Company
 
       75,000.00
   
           775,750
   
                773,250
 
          0.90
Omega Healthcare Investors, Inc.
(3)
 
Publicly Traded Company
 
       40,000.00
   
        1,240,862
   
             1,240,000
 
          1.45
RLJ Lodging Trust
(3)
 
Publicly Traded Company
 
       22,000.00
   
           485,195
   
                485,100
 
          0.57
Sabra Health Care REIT, Inc.
(3)
 
Publicly Traded Company
 
       50,000.00
   
        1,089,260
   
             1,086,500
 
          1.27
VEREIT Inc.
(3)
 
Publicly Traded Company
 
       90,000.00
   
           671,176
   
                669,600
 
          0.78
Total Publicly Traded Company
 
 
 
 
 
   
        6,652,816
   
             6,661,083
 
          7.78
 
 
 
 
 
 
   
 
   
 
 
 
American Finance Trust, Inc.
(4)
 
Non Traded Company
 
       30,640.52
   
           396,760
   
                528,550
 
          0.63
American Realty Capital Healthcare Trust III, Inc.
(4)(5)
 
Non Traded Company
 
         3,365.50
   
               6,024
   
                     6,495
 
          0.01
American Realty Capital New York City REIT, Inc.
(4)(5)
 
Non Traded Company
 
       94,009.22
   
        1,248,021
   
             1,222,120
 
          1.43
Behringer Harvard Opportunity REIT I, Inc.
(4)(5)
 
Non Traded Company
 
  1,174,053.09
   
        1,361,313
   
             2,289,404
 
          2.67
Benefit Street Partners Realty Trust, Inc.
(4)
 
Non Traded Company
 
       61,599.19
   
           786,860
   
                830,357
 
          0.97
BRE Select Hotels Corp. - Preferred A
(4)
 
Non Traded Company
 
     271,720.00
   
           472,572
   
                472,793
 
          0.55
Carter Validus Mission Critical REIT
(4)
 
Non Traded Company
 
         1,750.00
   
               9,636
   
                     8,330
 
          0.01
Cole Credit Property Trust IV, Inc.
(4)
 
Non Traded Company
 
         4,146.04
   
             32,235
   
                  35,863
 
          0.04
First Capital Real Estate Trust, Inc.
(4)(5)
 
Non Traded Company
 
         3,792.51
   
             15,161
   
                  21,883
 
          0.03
FSP 1441 Main Street
(4)(5)
 
Non Traded Company
 
               15.73
   
               8,559
   
                  28,847
 
          0.03
FSP 303 East Wacker Drive Corp.
(4)
 
Non Traded Company
 
                 3.00
   
             87,115
   
                188,760
 
          0.22
FSP Energy Tower
(2)(4)(5)
 
Non Traded Company
 
                 7.25
   
           303,500
   
                301,373
 
          0.35
FSP Grand Boulevard
(4)
 
Non Traded Company
 
                 7.50
   
           294,179
   
                239,625
 
          0.28
FSP Satellite Place
(4)(5)
 
Non Traded Company
 
               13.78
   
           395,313
   
                499,140
 
          0.58
Griffin-American Healthcare REIT III, Inc.
(4)
 
Non Traded Company
 
             686.48
   
               4,494
   
                     4,469
 
          0.01
Griffin Capital Essential Asset REIT, Inc.
(4)
 
Non Traded Company
 
       28,641.60
   
           196,636
   
                245,745
 
          0.29
GTJ REIT, Inc.
(4)
 
Non Traded Company
 
         1,000.00
   
             11,620
   
                  11,750
 
          0.01
Healthcare Trust, Inc.
(4)
 
Non Traded Company
 
     166,597.06
   
        1,932,444
   
             2,329,027
 
          2.72
Highlands REIT Inc.
(4)(5)
 
Non Traded Company
 
  14,105,177.43
   
        2,798,421
   
             2,397,880
 
          2.80
Hospitality Investors Trust, Inc.
(4)
 
Non Traded Company
 
     154,881.43
   
        1,084,916
   
             1,355,213
 
          1.58
InvenTrust Properties Corp.
(4)
 
Non Traded Company
 
  5,250,278.49
   
        9,319,713
   
             9,292,993
 
        10.86
KBS Legacy Partners Apartment REIT, Inc.
(4)(5)
 
Non Traded Company
 
       79,630.53
   
             15,926
   
                  15,926
 
          0.02
KBS Real Estate Investment Trust II, Inc.
(4)
 
Non Traded Company
 
  1,556,922.33
   
        5,699,860
   
             6,336,674
 
          7.40
KBS Real Estate Investment Trust III, Inc.
(4)
 
Non Traded Company
 
       46,397.55
   
           368,523
   
                400,411
 
          0.47
NorthStar Healthcare Income, Inc.
(4)
 
Non Traded Company
 
             800.00
   
               5,608
   
                     5,360
 
          0.01
Phillips Edison & Company, Inc
(4)
 
Non Traded Company
 
       57,695.27
   
           419,976
   
                534,258
 
          0.62
Phillips Edison Grocery Center REIT II, Inc.
(4)
 
Non Traded Company
 
       13,845.24
   
           203,263
   
                257,383
 
          0.30
Steadfast Income REIT
(4)
 
Non Traded Company
 
       49,904.48
   
           377,718
   
                448,641
 
          0.52
Strategic Realty Trust, Inc.
(4)
 
Non Traded Company
 
     123,181.24
   
           484,741
   
                561,706
 
          0.66
Summit Healthcare REIT, Inc.
(2)(4)(5)
 
Non Traded Company
 
  1,293,278.16
   
        1,729,182
   
             2,043,379
 
          2.39
The Parking REIT Inc.
(4)
 
Non Traded Company
 
       13,045.00
   
           164,282
   
                182,760
 
          0.21
Total Non Traded Company (1)
 
 
 
 
 
   
     30,234,571
   
           33,097,115
 
        38.67
 
 
 
 
 
 
   
 
   
 
 
 
3100 Airport Way South LP
(4)
 
LP Interest
 
                 1.00
   
           355,000
   
                378,060
 
          0.44
5210 Fountaingate, LP
(2)(4)
 
LP Interest
 
                 9.89
   
           500,000
   
                555,728
 
          0.65
Addison NC, LLC
(2)(4)(5)
 
LP Interest
 
     200,000.00
   
        2,000,000
   
             3,000,000
 
          3.50
Arrowpoint Burlington LLC
(2)(4)
 
LP Interest
 
                 7.50
   
           750,000
   
                869,072
 
          1.02
BR Axis West Investment Co. LLC
(4)
 
LP Interest
 
  3,403,633.00
   
        3,403,633
   
             3,403,633
 
          3.98
BR Cabrillo LLC
(4)(5)
 
LP Interest
 
     346,723.32
   
           104,942
   
                  86,681
 
          0.10
Britannia Preferred Members, LLC -Class 2
(2)(4)(5)
 
LP Interest
 
     150,000.00
   
        1,500,000
   
             2,547,000
 
          2.98
Capitol Hill Partners, LLC
(4)
 
LP Interest
 
     190,000.00
   
        1,900,000
   
             1,919,000
 
          2.24
CRP I Roll Up, LLC
(4)
 
LP Interest
 
  4,500,000.00
   
        4,500,000
   
             4,672,350
 
          5.46
CRP III Roll Up, LLC
(4)
 
LP Interest
 
  6,000,000.00
   
        6,000,000
   
             6,101,400
 
          7.13
MPF Pacific Gateway - Class B
(2)(4)(5)
 
LP Interest
 
               23.20
   
               6,287
   
                     6,613
 
          0.01
Redwood Mortgage Investors VIII
(4)
 
LP Interest
 
       56,300.04
   
             29,700
   
                  37,158
 
          0.04
Rosewood Hillsboro Holdings, LLC
(4)
 
LP Interest
 
  3,200,000.00
   
        1,300,000
   
             1,300,000
 
          1.52
Satellite Investment Holdings, LLC - Class A
(4)
 
LP Interest
 
               22.00
   
        2,200,000
   
             2,200,000
 
          2.57
Secured Income, LP
(2)(4)(5)
 
LP Interest
 
       64,670.00
   
           316,890
   
                320,763
 
          0.37
The Weatherly Building, LLC
(4)(5)
 
LP Interest
 
               17.50
   
           392,000
   
             1,784,033
 
          2.08
The Weatherly, LTD
(4)(5)
 
LP Interest
 
               60.00
   
           672,000
   
             3,058,343
 
          3.57
Uniprop Manufactured Housing Income Fund II, LP
(4)
 
LP Interest
 
     155,070.00
   
           647,225
   
             1,445,252
 
          1.69
Total LP Interest
 
 
 
 
 
   
     26,577,677
   
           33,685,086
 
        39.35
 
 
 
 
 
 
   
 
   
 
 
 
Coastal Realty Business Trust, REEP, Inc. - A
(2)(4)(5)
 
Investment Trust
 
       72,320.00
   
             49,901
   
                  41,222
 
          0.05
Total Investment Trust
 
 
 
 
 
   
             49,901
   
                  41,222
 
          0.05
 
 
 
 
 
 
   
 
   
 
 
 
OrCal and MIC Promissory Note
(4)
 
Note
 
 
   
        1,100,000
   
             1,100,000
 
          1.29
Total Note
 
 
 
 
 
   
        1,100,000
   
             1,100,000
 
          1.29
 
 
 
 
 
 
   
 
   
 
 
 
Total Investments
 
 
 
 
 
  $
                        64,614,965
  $
             74,584,506
 
        87.14


(1) Investments primarily in non-traded public REITs or their successors.
(2) Investments in affiliated companies. See additional disclosures in note 5.
(3) Non-qualifying assets under Section 55(a) of the 1940 Act. As of June 30, 2018, the total percentage of non-qualifying assets is 7.44%, and as a business development company non-qualifying assets may not exceed 30% of our total assets.
(4) Investments in illiquid securities, or securities that are not traded on a national exchange. As of June 30, 2018, 75.84 % of the Company's total assets are in illiquid securities.
(5) Investments in non-income producing securities. As of June 30, 2018, 21.96% of the Company's total assets are in non-income producing securities.
 


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

MacKenzie Realty Capital, Inc.
Consolidated Statements of Operations
(Unaudited)

 
           
 
 
Three Months Ended
December 31,
   
Six Months Ended
December 31,
 
 
 
2018
   
2017
   
2018
   
2017
 
Investment income
                       
Non-controlled/non-affiliated investments:
                       
Dividend and operational/sales distributions
 
$
1,102,669
   
$
1,768,846
   
$
6,502,498
   
$
2,371,865
 
Interest and other income
   
68,310
     
211,559
     
212,188
     
240,412
 
Affiliated investments:
                               
Dividend and operational/sales distributions
   
20,000
     
-
     
57,312
     
789
 
Total investment income
   
1,190,979
     
1,980,405
     
6,771,998
     
2,613,066
 
 
                               
Operating expenses
                               
Base management fee (note 5)
   
541,612
     
419,074
     
1,053,791
     
807,991
 
Portfolio structuring fee (note 5)
   
159,331
     
171,219
     
371,023
     
373,121
 
Subordinated incentive fee (reversal) (note 5)
   
(356,181
)
   
-
     
1,209,548
     
-
 
Administrative cost reimbursements (note 5)
   
156,000
     
108,000
     
312,000
     
216,000
 
Amortization of deferred offering costs
   
129,623
     
141,411
     
234,802
     
264,113
 
Professional fees
   
25,953
     
25,798
     
112,028
     
136,795
 
Directors' fees
   
15,500
     
15,500
     
31,000
     
34,000
 
Printing and mailing
   
11,407
     
19,669
     
41,498
     
34,386
 
Other general and administrative
   
32,449
     
30,554
     
59,323
     
57,616
 
Total operating expenses
   
715,694
     
931,225
     
3,425,013
     
1,924,022
 
 
                               
Net investment income before taxes
   
475,285
     
1,049,180
     
3,346,985
     
689,044
 
Income tax benefit - (note 2)
   
(12,968
)
   
(17,305
)
   
(12,968
)
   
(4,095
)
Net investment income
   
488,253
     
1,066,485
     
3,359,953
     
693,139
 
 
                               
Realized and unrealized gain (loss) on investments
                               
Net realized gain (loss)
                               
Non-controlled/non-affiliated investments
   
(1,604,128
)
   
904,303
     
2,033,532
     
1,752,886
 
Controlled investments
   
-
     
(54,413
)
   
-
     
(54,413
)
Total net realized gain
   
(1,604,128
)
   
849,890
     
2,033,532
     
1,698,473
 
Net unrealized gain (loss)
                               
Non-controlled/non-affiliated investments
   
784,042
     
(443,132
)
   
(4,141,984
)
   
206,114
 
Affiliated investments:
   
88,015
     
-
     
240,162
     
(696
)
Controlled investments
   
566,859
     
250,175
     
695,082
     
563,398
 
Total net unrealized gain (loss)
   
1,438,916
     
(192,957
)
   
(3,206,740
)
   
768,816
 
 
                               
Total net realized and unrealized gain (loss) on investments
   
(165,212
)
   
656,933
     
(1,173,208
)
   
2,467,289
 
 
                               
Net increase in net assets resulting from operations
 
$
323,041
   
$
1,723,418
   
$
2,186,745
   
$
3,160,428
 
 
                               
Net increase in net assets resulting from operations per share
 
$
0.03
   
$
0.24
   
$
0.23
   
$
0.46
 
 
                               
Weighted average common shares outstanding
   
9,660,553
     
7,205,816
     
9,332,478
     
6,891,512
 




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

MacKenzie Realty Capital, Inc.
Consolidated Statements of Changes in Net Assets

 
 
Six Months Ended
   
Year Ended
 
 
 
December 31, 2018
   
June 30, 2018
 
 
 
(Unaudited)
       
Operations
           
Net investment income
 
$
3,359,953
   
$
2,227,199
 
Net realized gain
   
2,033,532
     
2,691,773
 
Net unrealized gain (loss)
   
(3,206,740
)
   
5,846,839
 
Net increase in net assets resulting from operations
   
2,186,745
     
10,765,811
 
 
               
Dividends
               
Dividends to stockholders
   
(3,566,523
)
   
(6,759,484
)
 
               
Capital share transactions
               
Issuance of common stock
   
12,258,448
     
23,007,310
 
Issuance of common stock through reinvestment of dividends
   
1,353,191
     
2,340,042
 
Redemption of common stock
   
(463,635
)
   
(1,454,120
)
Selling commissions and fees
   
(1,122,752
)
   
(2,293,765
)
Net increase in net assets resulting from capital share transactions
   
12,025,252
     
21,599,467
 
 
               
Total increase in net assets
   
10,645,474
     
25,605,794
 
 
               
Net assets at beginning of the period
   
85,595,319
     
59,989,525
 
 
               
Net assets at end of the period
 
$
96,240,793
   
$
85,595,319
 



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

MacKenzie Realty Capital, Inc.
Consolidated Statements of Cash Flows
 (Unaudited)
 
 
 
 
 
 
 
 
Six Months Ended
December 31,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2018
 
2017
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities:
 
 
 
Net increase in net assets resulting from operations
 $             2,186,745
 
 $                3,160,428
Adjustments to reconcile net increase in net assets resulting from
 
 
 
operations to net cash from operating activities:
 
 
 
Proceeds from sale of investments, net
          37,407,048
 
          21,350,928
Return of capital
            9,805,754
 
            6,492,837
Purchase of investments
        (69,525,249)
 
        (48,032,142)
Net realized gain on investments
          (2,033,532)
 
          (1,698,473)
Net unrealized (gain) loss on investments
            3,206,740
 
             (768,816)
Amortization of deferred offering costs
               234,802
 
               264,113
Changes in assets and liabilities:
 
 
 
Accounts receivable
            5,441,108
 
             (299,954)
Other assets
                  (6,211)
 
             (245,980)
Payment of deferred offering costs
             (400,816)
 
             (161,889)
Accounts payable and accrued liabilities
               232,872
 
               139,837
Income tax payable
     
                (35,873)
 
                  26,209
Due to related entities
                  28,977
 
             (165,352)
Deferred tax liability
                  (3,518)
 
                (31,101)
Net cash from operating activities
        (13,461,153)
 
        (19,969,355)
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings on margin loan
                          -
 
            6,012,413
Proceeds from issuance of common stock
          12,258,448
 
          12,437,349
Redemption of common stock
 
 
 
 
 
             (463,635)
 
             (558,837)
Dividends to stockholders
          (1,657,167)
 
          (1,251,007)
Payment of selling commissions and fees
          (1,135,336)
 
          (1,142,868)
Change in capital pending acceptance
               460,887
 
          (1,044,890)
       Net cash from financing activities
            9,463,197
 
          14,452,160
 
 
 
 
 
 
 
 
 
 
Net decrease in cash and cash equivalents
          (3,997,956)
 
          (5,517,195)
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents at beginning of the period
            8,442,249
 
          11,849,712
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents at end of the period
 $              4,444,293
 
 $                6,332,517
 
 
 
 
 
 
 
 
 
 
Non-cash financing activities:
 
 
 
Issuance of common stock through reinvestment of dividends
 $               1,353,191
 
 $                   927,663




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


MacKenzie Realty Capital, Inc.
Notes to Consolidated Financial Statements
December 31, 2018
(Unaudited)


NOTE 1 – PRINCIPAL BUSINESS AND ORGANIZATION

MacKenzie Realty Capital, Inc. (the "Parent Company" together with its subsidiary as discussed below, the "Company") was incorporated under the general corporation laws of the State of Maryland on January 25, 2012. It is a non-diversified, closed-end investment company that has elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended ("1940 Act"). The Parent Company has 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"). The Parent Company is 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. The Parent Company commenced its operations on February 28, 2013, and its fiscal year-end is June 30.

The Parent Company filed its initial registration statement in June 2012 with the Securities and Exchange Commission ("SEC") to register the initial public offering (“IPO”) of 5,000,000 shares of its common stock. The IPO commenced in January 2014 and concluded in October 2016. The Parent Company filed a second registration statement with the SEC to register a subsequent public offering of 15,000,000 shares of its common stock that was declared effective by the SEC on December 20, 2016, and the offering commenced shortly thereafter.

The Parent Company’s wholly owned subsidiary, MRC TRS, Inc., (“TRS”) was incorporated under the general corporation laws of the State of California on February 22, 2016, and operates as a taxable REIT subsidiary. TRS started its operation on January 1, 2017, and the financial statements of TRS have been consolidated with the Parent Company beginning with the year ended June 30, 2017. On December 20, 2017, a wholly owned subsidiary of TRS, MacKenzie NY Real Estate 2 Corp., (“MacKenzie NY 2”), was formed for the purpose of making certain limited investments in New York companies. The financial statements of MacKenzie NY 2 have been consolidated with the Company beginning with the quarter ended March 31, 2018.
The Company is externally managed by MacKenzie Capital Management, LP ("MacKenzie") under the administration agreement dated and effective as of February 28, 2013 (the "Administration Agreement"). Pursuant to the Administration Agreement, MacKenzie manages all of the Company's affairs except for providing investment advice. The Company is advised by MCM Advisers, LP (the "Adviser") under the advisory agreement amended and restated effective October 1, 2017, and subsequently amended October 23, 2018 (the "Amended and Restated Investment Advisory Agreement"). The Company pursues a strategy focused on investing primarily 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.

As of December 31, 2018, the Company has raised approximately $95.0 million from the public offerings, including proceeds from the Company’s dividend reinvestment plan ("DRIP") of approximately $6.6 million. Of the shares issued by the Company in exchange for the total capital raised as of December 31, 2018, approximately $4.4 million worth of shares have been repurchased under the Company’s share repurchase program.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation Policy

The accompanying consolidated financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company’s wholly owned consolidated subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. Under the 1940 Act rules, regulations pursuant to Article 6 of Regulation S-X and Topic 946 of the Accounting Standards Codification, as amended (the "ASC"), of the Financial Accounting Standards Board ("FASB"), Financial Services-Investment Companies, the Company is precluded from consolidating portfolio company investments, including those in which the Company has a controlling interest, unless the portfolio company is an investment company or a controlled operating company which provides substantially all of its services to benefit the Company, such as an investment adviser or transfer agent. None of the Company’s investments qualifies for these exceptions. Therefore, the Company’s portfolio company investments, including those in which the Company has a controlling interest, are carried on the consolidated statements of assets and liabilities at fair value with changes to fair value recognized as net unrealized gain (loss) on the consolidated statements of operations until the investment is realized, usually upon exit, resulting in any gain or loss on exit being recognized as a realized gain or loss. However, in the event that any controlled subsidiary exceeds the tests of significance set forth in Rules 3-09 or 4-08(g) of Regulation S-X, the Company will include required financial information for such subsidiary in the notes or as an attachment to its consolidated financial statements.

The unaudited consolidated financial statements reflect all normal recurring adjustments, which are, in the opinion of management, necessary for the fair presentation of the Company’s results for the interim periods presented. The results of operations for interim periods are not indicative of results to be expected for the full year.

These unaudited consolidated financial statements should be read in conjunction with the audited financial statements for the year ended June 30, 2018, included in the Company's annual report on Form 10-K filed with the SEC.

There have been no changes in the significant accounting policies from those disclosed in the audited financial statements for the year ended June 30, 2018, other than those expanded upon and described below.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. These balances are insured by the Federal Deposit Insurance Corporation ("FDIC") up to certain limits. At times the cash balances held in financial institutions by the Company may exceed these insured limits. Cash and cash equivalents are carried at cost which approximates fair value. There were no cash equivalents held as of December 31, 2018, and June 30, 2018.
Accounts Receivable

Accounts receivable represent dividends, distributions and sales proceeds recognized in accordance with our revenue recognition policy but not yet received as of the date of the financial statements. The amounts are generally fully collectible as they are recognized based on completed transactions. The Company monitors and adjusts its receivables and those deemed to be uncollectible are written-off only after all reasonable collection efforts are exhausted. The Company has determined that all account receivable balances outstanding as of December 31, 2018, are collectible and do not require recording any uncollectible allowance.

Capital Pending Acceptance

The Company conducts closings for new purchases of the Company’s common stock twice per month and admits new stockholders effective beginning the first of each month. Subscriptions are effective only upon the Company's 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 statements of assets and liabilities. As of December 31, 2018, and June 30, 2018, capital pending acceptance was $1,107,187 and $646,300, respectively.


Organization and Deferred 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 IPO 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 are capitalized as deferred offering costs as incurred by the Company and subsequently amortized to expense over a twelve-month period. Any deferred offering costs that have not been amortized upon the expiration or earlier termination of an offering will be accelerated and expensed upon such expiration or termination.


The offering costs incurred in connection with the current public offering through December 31, 2018, was $1,376,371. These offering costs are deferred and expensed over a twelve-month period beginning from the date the registration was declared effective by the SEC. The offering costs incurred and paid by the Company in excess of $1,650,000 on this public offering will be reimbursed by the Adviser as discussed in Note 5. Amortization of these deferred costs for the six months ended December 31, 2018 and 2017 were $234,802 and $264,113, respectively. Accumulated amortization of these deferred costs as of December 31, 2018, and June 30, 2018, were $923,743 and $688,941, respectively.


Reclassifications
Certain reclassifications have been made in the presentation of prior consolidated financial statements and accompanying notes to conform to the presentation as of and for the six months ended December 31, 2018.

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, it is not subject to federal income taxes on amounts that it distributes to the stockholders, provided that, on an annual basis, it distributes at least 90% of its REIT taxable income 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 taxable income, it is either subject to U.S. federal corporate income tax on its undistributed taxable income or 4% excise tax on catch-up distributions paid in the subsequent year.

The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax years ended December 31, 2017. Therefore, it did not incur any tax expense or excise tax on its income from operations during the quarterly periods within the tax year 2017. Similarly, for the tax year 2018, we believe the Parent Company paid the requisite amounts of dividends during the year such that it will not owe any income taxes. Therefore, the Parent Company did not record any income tax provisions during the quarterly periods within the tax year 2018.

The Parent Company is subject to tax on built-in gains it realizes during the first five years following REIT election. Prior to the REIT effective date, the Parent Company recorded an estimated built-in gains liability on the entire unrealized built-in gains as deferred tax liabilities. Therefore, in each subsequent period it only records the difference between the actual and the previously recorded estimated tax liability on the built-in gains it realizes during the period as built-in gain tax adjustment. For the three months ended December 31, 2018, the Parent Company did not realize any built-in gains. As of December 31, 2018, the company recorded a tax liability of $1,280 for the built-in gains realized during tax year 2018 and reversed the remaining deferred tax liabilities of $12,968 as income tax benefit in the consolidated statements of operations since the remaining unrealized built-in gains are not taxable after December 31, 2018. The Parent Company had elected to be treated as a REIT effective January 1, 2014.

TRS and MacKenzie NY 2 are subject to corporate federal and state income tax on its taxable income at regular statutory rates. However, as of December 31, 2018, they did not have any taxable income for tax year 2018. Therefore, TRS and MacKenzie NY 2 did not record any income tax provisions during the quarterly periods within the tax year 2018.
The Company and its subsidiaries 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 consequences attributable to the net unrealized investment gain (losses) on existing investments. In estimating future tax consequences, the Company considers 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 how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. As of December 31, 2018, and June 30, 2018, there were no uncertain tax positions. Management’s determinations regarding ASC 740 may be 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.

Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014‑09, Revenue from Contracts with Customers (Topic 606). ASU 2014‑09 supersedes the revenue recognition requirements under ASC 605, Revenue Recognition, and most industry‑specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. All of the Company’s income is not within the scope of ASU 2014-09. As a result, the Company’s timing of its revenue recognition remains the same and the adoption of the standard did not have any impact on the Company’s consolidated financial statements.
In August 2018, the FASB issued guidance which changes the fair value disclosure requirements. The new guidance includes new, eliminated and modified fair value disclosures. Among other requirements, the guidance requires disclosure of the range and weighted average of the significant unobservable inputs for Level 3 fair value measurements and the way it is calculated. The guidance also eliminated the following disclosures: (1) amount and reason for transfers between Level I and Level II, (2) policy for timing of transfers between levels of the fair value hierarchy and (3) valuation processes for Level 3 fair value measurement. The guidance is effective for all entities for interim and annual periods beginning after December 15, 2019. Early adoption is permitted upon issuance of the guidance. The adoption of this guidance is not expected to have a material effect on the Company’s consolidated financial statements.
NOTE 3 –INVESTMENTS

The following table summarizes the composition of the Company's investments at cost and fair value as of December 31, 2018, and June 30, 2018
 
 
December 31, 2018
   
June 30, 2018
 
Asset Type
 
Cost
   
Fair Value
   
Cost
   
Fair Value
 
Publicly Traded Companies
 
$
14,622,636
   
$
13,940,846
   
$
6,652,816
   
$
6,661,083
 
Non Traded Companies
   
30,770,526
     
34,517,348
     
30,234,571
     
33,097,115
 
LP Interests
   
43,517,881
     
47,223,606
     
26,577,677
     
33,685,086
 
Investment Trusts
   
49,901
     
41,945
     
49,901
     
41,222
 
Note
   
-
     
-
     
1,100,000
     
1,100,000
 
Total
 
$
88,960,944
   
$
95,723,745
   
$
64,614,965
   
$
74,584,506
 

The following table presents fair value measurements of the Company's investments as of December 31, 2018, according to the fair value hierarchy that is described in our annual report on Form 10-K:

Asset Type
 
Total
   
Level I
   
Level II
   
Level III
 
Publicly Traded Companies
 
$
13,940,846
   
$
12,537,635
   
$
1,403,211
   
$
-
 
Non Traded Companies
   
34,517,348
     
-
     
-
     
34,517,348
 
LP Interests
   
47,223,606
     
-
     
-
     
47,223,606
 
Investment Trusts
   
41,945
     
-
     
-
     
41,945
 
Total
 
$
95,723,745
   
$
12,537,635
   
$
1,403,211
   
$
81,782,899
 


The following table presents fair value measurements of the Company's investments as of June 30, 2018, according to the fair value hierarchy that is described in our annual report on Form 10-K:

Asset Type
 
Total
   
Level I
   
Level II
   
Level III
 
Publicly Traded Companies
 
$
6,661,083
   
$
6,661,083
   
$
-
   
$
-
 
Non Traded Companies
   
33,097,115
     
-
     
-
     
33,097,115
 
LP Interests
   
33,685,086
     
-
     
-
     
33,685,086
 
Investment Trusts
   
41,222
     
-
     
-
     
41,222
 
Notes
   
1,100,000
     
-
     
-
     
1,100,000
 
Total
 
$
74,584,506
   
$
6,661,083
   
$
-
   
$
67,923,423
 


The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III of the fair value hierarchy) for the six months ended December 31, 2018:

Balance at July 1, 2018
 
$
67,923,423
 
Purchases of investments
   
40,621,647
 
Transfers to Level I and II
   
(1,991,230
)
Proceeds from sales, net
   
(15,386,999
)
Return of capital
   
(9,805,754
)
Net realized gains
   
2,938,497
 
Net unrealized losses
   
(2,516,685
)
Ending balance at December 31, 2018
 
$
81,782,899
 

The transfers of $1,991,230 from Level III to Level I and II categories during the six months ended December 31, 2018 resulted from two of the Company's investments converting from a private REIT to publicly traded REIT. Transfers are assumed to have occurred at the beginning of the year.

For the six months ended December 31, 2018, changes in unrealized loss included in earnings relating to Level III investments still held at December 31, 2018, were $1,402,685.

The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III of the fair value hierarchy) for the six months ended December 31, 2017:

Balance at July 1, 2017
 
$
31,023,069
 
Purchases of investments
   
34,687,453
 
Proceeds from sales, net
   
(7,619,607
)
Return of capital
   
(6,035,374
)
Net realized gains
   
2,174,577
 
Net unrealized gains
   
1,505,014
 
Ending balance at December 31, 2017
 
$
55,735,132
 

For the six months ended December 31, 2017, changes in unrealized gains included in earnings relating to Level III investments still held at December 31, 2017 were $2,370,541.


The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at December 31, 2018:
 
Asset Type
 
 Fair Value
 
Primary Valuation Techniques
 
Unobservable Inputs Used
 
Range
 
Wt. Average
 
 
 
 
 
 
 
 
 
 
 
 
 
Non Traded Companies
 
 $         1,578,928
 
Direct Capitalization Method
 
Capitalization rate
 
5.5% - 8.2%
 
7.5%
 
 
 
 
 
 
 
Liquidity discount
 
19.0% - 65.0%
 
29.4%
 
Non Traded Companies
 
            95,480
 
Estimated Liquidation Value
 
Sponsor provided value
 
 
 
 
 
 
 
 
 
 
 
Liquidity discount
 
5.0% - 16.0%
 
13.7%
 
Non Traded Companies
 
    32,842,940
 
Market Activity
 
Acquisition Cost
 
 
 
 
 
 
 
 
 
 
 
Secondary market industry publication
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LP Interests
 
    12,224,446
 
Direct Capitalization Method
 
Capitalization rate
 
5.4% - 7.5%
 
5.9%
 
 
 
 
 
 
 
Liquidity discount
 
19.0% - 25.0%
 
19.9%
 
LP Interests
 
    19,806,521
 
Discounted Cash Flow
 
Discount rate
 
9.0% - 30.0%
 
18.1%
 
 
 
 
 
 
 
Discount term (months)
 
1.0 - 24.0
 
20.9
 
LP Interests
 
         540,625
 
Estimated Liquidation Value
 
Sponsor provided value
 
 
 
 
 
 
 
 
 
 
 
Underlying contracted agreement
 
 
 
 
 
 
 
 
 
 
 
Liquidity discount
 
5.0% - 50.0%
 
13.4%
 
LP Interests
 
    14,652,014