MacKenzie Realty Capital, Inc. - FORM 10-Q

Attached files

file	filename
EX-32.2 - CFO EXHIBIT 32.2 - MacKenzie Realty Capital, Inc.	exhibit32cfo.htm
EX-32.1 - CEO EXHIBIT 32.1 - MacKenzie Realty Capital, Inc.	exhibit32ceo.htm
EX-31.2 - CFO EXHIBIT 31.2 - MacKenzie Realty Capital, Inc.	exhibit31cfo.htm
EX-31.1 - CEO EXHIBIT 31.1 - MacKenzie Realty Capital, Inc.	exhibit31ceo.htm

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 September 30, 2020

☐	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)

Securities registered pursuant to Section 12(b) of the Act: None 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 November 13, 2020 was 12,858,328.09.

TABLE OF CONTENTS

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited)

	Consolidated Statements of Assets and Liabilities as of September 30, 2020 (Unaudited) and June 30, 2020	1

	Consolidated Schedule of Investments as of September 30, 2020 (Unaudited)	2

	Consolidated Schedule of Investments as of June 30, 2020	3

	Consolidated Statements of Operations for the three months ended September 30, 2020 and 2019 (Unaudited)	4

	Consolidated Statements of Changes in Net Assets for the three months ended September 30, 2020 and 2019 (Unaudited)	5

	Consolidated Statements of Cash Flows for the three months ended September 30, 2020 and 2019 (Unaudited)	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4.	Controls and Procedures	28

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

SIGNATURES		31

TABLE OF CONTENTS

Part I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

MacKenzie Realty Capital, Inc.

Consolidated Statements of Assets and Liabilities

	September 30, 2020		June 30, 2020
	(Unaudited)
Assets
Investments, at fair value
Non-controlled/non-affiliated investments (cost of $47,656,794 and $48,895,786, respectively)	$	33,153,573	$	38,081,970
Affiliated investments (cost of $12,605,580 and $12,426,110, respectively)		12,158,035		12,107,884
Controlled investments (cost of $43,370,752 and $43,370,752, respectively)		44,157,951		43,515,291
Total investments, at fair value (cost of $103,633,126 and $104,692,648, respectively)		89,469,559		93,705,145
Cash and cash equivalents		10,862,550		8,957,393
Accounts receivable		911,540		1,087,432
Due from related entities		154,865		-
Other assets		99,723		138,773
Deferred offering costs, net		161,521		278,021
Total assets	$	101,659,758	$	104,166,764


Liabilities
Accounts payable and accrued liabilities	$	49,649	$	135,040
Capital pending acceptance		9,000		87,739
Due to related entities		677,034		718,264
Total liabilities		735,683		941,043

Net assets
Common stock, $0.0001 par value, 80,000,000 shares authorized; 12,852,386.91 and 12,836,608.02 shares issued and outstanding, respectively		1,285		1,284
Capital in excess of par value		116,601,166		116,455,600
Total distributable earnings (distributions in excess of earnings)		(15,678,376)		(13,231,163)
Total net assets		100,924,075		103,225,721

Total liabilities and net assets	$	101,659,758	$	104,166,764

Net asset value per share	$	7.85	$	8.04

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

TABLE OF CONTENTS

MacKenzie Realty Capital, Inc.

Consolidated Schedule of Investments

September 30, 2020

(Unaudited)

Name		Asset Type	Shares/Units	Cost Basis	Total Fair Value	% of Net Assets

American Finance Trust 7.5% PFD	(4)	Publicly Traded Company	13,500.00	$ 323,077	$ 327,780	0.31
American Finance Trust Inc., Class A	(4)	Publicly Traded Company	72,000.00	498,397	451,440	0.45
Apartment Investment & Management Company- Class A	(4)	Publicly Traded Company	26,200.00	999,945	883,464	0.88
Ashford Hospitality Trust, Inc.	(4)	Publicly Traded Company	36,000.00	244,092	59,400	0.06
Bluerock Residential Growth REIT, Inc.	(4)	Publicly Traded Company	70,000.00	513,940	530,600	0.53
CBL & Associates Properties, Inc. - Preferred D	(4)	Publicly Traded Company	188,000.00	1,707,042	142,880	0.14
CorEnergy Infrastructure 7.375% PFD A	(4)	Publicly Traded Company	36,031.00	621,401	595,953	0.59
Host Hotels & Resorts Inc	(4)	Publicly Traded Company	18,800.00	229,354	202,852	0.20
Independence Realty Trust, Inc.	(4)	Publicly Traded Company	24,400.00	288,996	282,796	0.28
Mid-America Apartment Communities, Inc.	(4)	Publicly Traded Company	3,700.00	445,175	429,015	0.43
NexPoint Residential Trust, Inc.	(4)	Publicly Traded Company	6,300.00	278,811	279,405	0.28
New York City REIT, Inc. Class A	(6)	Publicly Traded Company	32,821.00	950,229	400,416	0.40
One Liberty Properties, Inc.	(4)	Publicly Traded Company	17,640.00	255,805	288,590	0.29
RLJ Lodging Trust	(4)	Publicly Traded Company	23,300.00	238,527	201,778	0.20
The Macerich Company	(4)	Publicly Traded Company	59,943.00	1,018,578	407,013	0.40
VEREIT, Inc	(4)	Publicly Traded Company	40,700.00	289,353	264,550	0.26
WP Carey, Inc.	(4)	Publicly Traded Company	4,300.00	300,084	280,188	0.28
Total Publicly Traded Companies				9,202,806	6,028,120	5.98

Benefit Street Partners Realty Trust, Inc.	(5)	Non Traded Company	239,401.33	3,488,167	2,334,165	2.29
Carter Validus Mission Critical REIT II, Inc. Class A	(5)	Non Traded Company	303,831.45	1,735,829	1,908,061	1.89
CIM Real Estate Finance Trust, Inc.	(5)	Non Traded Company	522,521.37	3,044,542	2,387,923	2.37
CNL Healthcare Properties, Inc.	(5)	Non Traded Company	268,532.71	1,562,429	1,251,362	1.24
Cole Credit Property Trust V, Inc.	(5)	Non Traded Company	55,455.36	693,789	631,636	0.63
Cole Credit Property Trust V, Inc. Class T	(5)	Non Traded Company	1,466.55	18,438	16,704	0.02
Cole Office & Industrial REIT (CCIT II), Inc. Class A	(5)	Non Traded Company	55,471.46	293,545	389,964	0.39
Cole Office & Industrial REIT (CCIT II), Inc. Class T	(5)	Non Traded Company	1,441.84	6,906	10,136	0.01
Corporate Property Associates 18 Global A Inc.	(5)	Non Traded Company	4,695.14	39,627	29,720	0.03
First Capital Real Estate Trust, Inc.	(5)(6)	Non Traded Company	3,792.51	15,161	13,388	0.01
FSP 303 East Wacker Drive Corp. Liquidating Trust	(5)(6)	Non Traded Company	3.00	30	702	-
FSP Energy Tower I Corp. Liquidating Trust	(2)(5)(6)	Non Traded Company	19.35	7,929	9,977	0.01
FSP Grand Boulevard Liquidating Trust	(5)(6)	Non Traded Company	7.50	8	2,948	-
FSP Satellite Place	(2)(5)(6)	Non Traded Company	19.60	588,176	544,017	0.54
Griffin Capital Essential Asset REIT, Inc.	(5)	Non Traded Company	50.00	467	320	-
Griffin-American Healthcare REIT III, Inc.	(5)	Non Traded Company	59,480.45	324,537	315,841	0.31
GTJ REIT, Inc.	(5)	Non Traded Company	1,000.00	11,530	10,110	0.01
Healthcare Trust, Inc.	(5)	Non Traded Company	482,626.54	4,826,296	2,205,603	2.19
Highlands REIT Inc.	(5)(6)	Non Traded Company	23,313,870.21	4,124,419	3,497,081	3.47
HGR Liquidating Trust	(5)(6)	Non Traded Company	73,170.41	51,951	51,951	0.05
Hospitality Investors Trust, Inc.	(5)(6)	Non Traded Company	22,604.61	91,693	11,528	0.01
InvenTrust Properties Corp.	(5)	Non Traded Company	2,409,500.08	2,877,410	3,011,875	2.98
KBS Real Estate Investment Trust II, Inc.	(5)(6)	Non Traded Company	1,365,338.22	3,413,034	1,993,394	1.98
KBS Real Estate Investment Trust III, Inc.	(5)	Non Traded Company	65,717.13	550,359	530,994	0.53
Moody National REIT II, Inc.	(5)	Non Traded Company	1,924.03	18,866	14,449	0.01
New York City REIT, Inc.	(5)(6)	Non Traded Company	-	-	-	-
New York City REIT, Inc. Class B	(5)(6)	Non Traded Company	98,464.24	2,850,705	804,453	0.80
NorthStar Healthcare Income, Inc.	(5)(6)	Non Traded Company	23,573.29	87,643	29,702	0.03
Phillips Edison & Company, Inc	(5)	Non Traded Company	851,563.96	6,286,760	4,402,586	4.36
SmartStop Self Storage REIT, Inc.	(5)	Non Traded Company	7,834.42	57,239	64,086	0.06
Steadfast Apartment REIT	(5)	Non Traded Company	50.00	476	530	-
Strategic Realty Trust, Inc.	(5)	Non Traded Company	327,376.03	1,261,587	661,300	0.66
Summit Healthcare REIT, Inc.	(2)(5)(6)	Non Traded Company	1,409,436.22	1,926,736	1,761,795	1.75
The Parking REIT Inc.	(5)(6)	Non Traded Company	17,989.90	230,880	90,129	0.09
Total Non Traded Companies (1)				40,487,164	28,988,430	28.72

3100 Airport Way South LP	(5)	LP Interest	1.00	355,000	327,328	0.34
5210 Fountaingate, LP	(2)(5)(6)	LP Interest	9.89	500,000	424,544	0.42
Bishop Berkeley, LLC	(3)(5)	LP Interest	4,050.00	4,050,000	3,875,688	3.84
BP3 Affiliate, LLC	(2)(5)(6)	LP Interest	1,668.00	1,668,000	1,668,000	1.65
BR Cabrillo LLC	(5)(6)	LP Interest	346,723.23	104,944	104,017	0.10
BR Sunrise Parc Investment Co, LLC	(2)(5)	LP Interest	6,656,668.02	6,656,668	6,656,668	6.60
Britannia Preferred Members, LLC -Class 1	(3)(5)(6)	LP Interest	103.88	2,597,000	3,635,800	3.60
Britannia Preferred Members, LLC -Class 2	(3)(5)(6)	LP Interest	514,858.30	6,826,931	7,038,113	6.97
Capitol Hill Partners, LLC	(3)(5)(6)	LP Interest	190,000.00	1,900,000	1,485,800	1.47
Citrus Park Hotel Holdings, LLC	(3)(5)	LP Interest	5,000,000.00	5,000,000	5,000,000	4.95
Dimensions28 LLP	(3)(5)	LP Interest	10,800.00	10,801,015	11,373,804	11.27
Lakemont Partners, LLC	(2)(5)	LP Interest	1,000.00	941,180	831,120	0.82
MacKenzie Realty Operating Partnership, LP	(3)(5)(6)	LP Interest	1,451,642.63	12,145,905	11,714,756	11.61
Redwood Mortgage Investors VIII	(5)	LP Interest	56,300.04	29,700	12,949	0.01
Satellite Investment Holdings, LLC - Class B	(5)(6)	LP Interest	0.31	22	8,518	0.01
Secured Income, LP	(2)(5)(6)	LP Interest	64,670.00	316,890	261,914	0.26
Total LP Interest				53,893,255	54,419,019	53.92

Coastal Realty Business Trust, REEP, Inc. - A	(3)(5)(6)	Investment Trust	72,320.00	49,901	33,990	0.03
Total Investment Trust				49,901	33,990	0.03

Total Investments				$ 103,633,126	$ 89,469,559	88.65

(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 between 5% and 25% of the portfolio company’s voting securities. As of September 30, 2020, the Company is deemed to be “affiliated” with 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) Under the 1940 Act, the Company 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 September 30, 2020, the Company is deemed to be 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.

(4) Non-qualifying assets under Section 55(a) of the 1940 Act. As of September 30, 2020, the total percentage of non-qualifying assets is 5.54%, and, as a business development company, non-qualifying assets may not exceed 30% of our total assets.

(5) Investments in illiquid securities, or securities that are not traded on a national exchange. As of September 30, 2020, 82.08% of the Company's total assets are in illiquid securities.

(6) Investments in non-income producing securities. As of September 30, 2020, 35.01% 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.

TABLE OF CONTENTS

MacKenzie Realty Capital, Inc.

Consolidated Schedule of Investments

June 30, 2020

Name		Asset Type	Shares/Units	Cost Basis	Total Fair Value	% of Net Assets

American Finance Trust 7.5% PFD	(4)	Publicly Traded Company	34,000.00	$ 610,229	$ 797,980	0.78
American Finance Trust Inc., Class A	(4)	Publicly Traded Company	86,500.00	500,619	686,378	0.66
Apartment Investment & Management Company- Class A	(4)	Publicly Traded Company	26,200.00	999,945	986,168	0.96
Ashford Hospitality Trust, Inc.	(4)	Publicly Traded Company	360,000.00	244,092	260,136	0.25
Bluerock Residential Growth REIT, Inc.	(4)	Publicly Traded Company	70,000.00	513,940	565,600	0.55
CBL & Associates Properties, Inc. - Preferred D	(4)	Publicly Traded Company	188,000.00	1,707,042	169,200	0.16
City Office REIT, Inc. - Preferred A	(4)	Publicly Traded Company	12,196.00	201,436	288,679	0.28
CorEnergy Infrastructure 7.375% PFD A	(4)	Publicly Traded Company	36,031.00	621,401	487,139	0.47
Host Hotels & Resorts Inc	(4)	Publicly Traded Company	24,500.00	237,354	264,355	0.26
Independence Realty Trust, Inc.	(4)	Publicly Traded Company	33,000.00	295,551	379,170	0.37
NexPoint Residential Trust, Inc.	(4)	Publicly Traded Company	8,000.00	294,490	282,800	0.27
One Liberty Properties, Inc.	(4)	Publicly Traded Company	24,500.00	370,318	431,690	0.42
RLJ Lodging Trust	(4)	Publicly Traded Company	42,000.00	243,541	396,480	0.38
The Macerich Company	(4)	Publicly Traded Company	59,943.00	1,018,578	537,689	0.52
VEREIT, Inc	(4)	Publicly Traded Company	58,000.00	294,437	372,940	0.36
WP Carey, Inc.	(4)	Publicly Traded Company	5,000.00	301,375	338,250	0.33
Total Publicly Traded Companies				8,454,348	7,244,654	7.02

Benefit Street Partners Realty Trust, Inc.	(5)	Non Traded Company	239,401.33	3,488,167	2,496,956	2.41
Carter Validus Mission Critical REIT II, Inc. Class A	(5)	Non Traded Company	288,506.00	1,666,123	1,632,944	1.58
CIM Real Estate Finance Trust, Inc.	(5)	Non Traded Company	522,144.54	3,043,423	2,349,650	2.28
CNL Healthcare Properties, Inc.	(5)	Non Traded Company	268,532.71	1,562,429	1,176,173	1.14
Cole Credit Property Trust V, Inc.	(5)	Non Traded Company	55,455.36	693,789	610,009	0.59
Cole Credit Property Trust V, Inc. Class T	(5)	Non Traded Company	1,466.55	18,438	16,132	0.02
Cole Office & Industrial REIT (CCIT II), Inc. Class A	(5)	Non Traded Company	17,792.56	114,700	124,370	0.12
Cole Office & Industrial REIT (CCIT II), Inc. Class T	(5)	Non Traded Company	1,441.84	6,906	10,078	0.01
Corporate Property Associates 18 Global A Inc.	(5)	Non Traded Company	4,695.14	39,627	30,471	0.03
First Capital Real Estate Trust, Inc.	(5)(6)	Non Traded Company	3,792.51	15,161	13,388	0.01
FSP 1441 Main Street	(5)(6)	Non Traded Company	15.73	8,559	39,128	0.04
FSP 303 East Wacker Drive Corp. Liquidating Trust	(5)(6)	Non Traded Company	3.00	30	679	-
FSP Energy Tower I Corp. Liquidating Trust	(2)(5)(6)	Non Traded Company	19.35	7,929	9,810	0.01
FSP Grand Boulevard Liquidating Trust	(5)(6)	Non Traded Company	7.50	8	2,851	-
FSP Satellite Place	(2)(5)(6)	Non Traded Company	19.60	588,176	532,579	0.52
Griffin Capital Essential Asset REIT, Inc.	(5)	Non Traded Company	23,044.28	151,802	144,027	0.14
Griffin-American Healthcare REIT III, Inc.	(5)	Non Traded Company	59,480.45	324,537	312,272	0.30
GTJ REIT, Inc.	(5)	Non Traded Company	1,000.00	11,530	9,280	0.01
Healthcare Trust, Inc.	(5)	Non Traded Company	479,718.92	4,806,568	3,271,683	3.17
Highlands REIT Inc.	(5)(6)	Non Traded Company	23,225,520.45	4,120,660	3,019,318	2.92
HGR Liquidating Trust	(5)(6)	Non Traded Company	73,170.41	244,648	292,682	0.28
Hospitality Investors Trust, Inc.	(5)(6)	Non Traded Company	20,493.11	90,607	20,083	0.02
InvenTrust Properties Corp.	(5)	Non Traded Company	2,235,413.80	2,710,159	2,749,559	2.66
KBS Real Estate Investment Trust II, Inc.	(5)(6)	Non Traded Company	1,365,338.22	3,754,369	2,266,461	2.20
KBS Real Estate Investment Trust III, Inc.	(5)	Non Traded Company	65,717.13	550,359	529,680	0.51
New York City REIT, Inc.	(5)(6)	Non Traded Company	319,024.14	3,800,940	3,110,485	3.01
NorthStar Healthcare Income, Inc.	(5)(6)	Non Traded Company	23,573.29	87,643	35,596	0.03
Phillips Edison & Company, Inc	(5)	Non Traded Company	851,563.96	6,286,760	4,589,930	4.45
SmartStop Self Storage REIT, Inc.	(5)	Non Traded Company	7,304.42	54,166	57,048	0.06
Steadfast Apartment REIT	(5)	Non Traded Company	73,226.79	815,995	741,055	0.72
Strategic Realty Trust, Inc.	(5)	Non Traded Company	321,296.92	1,252,790	649,020	0.63
Summit Healthcare REIT, Inc.	(2)(5)(6)	Non Traded Company	1,409,436.22	1,926,736	1,874,550	1.82
The Parking REIT Inc.	(5)(6)	Non Traded Company	17,989.90	230,880	90,129	0.09
Total Non Traded Companies (1)				42,474,614	32,808,076	31.78

3100 Airport Way South LP	(5)	LP Interest	1.00	355,000	320,253	0.31
5210 Fountaingate, LP	(2)(5)(6)	LP Interest	9.89	500,000	425,796	0.41
Bishop Berkeley, LLC	(3)(5)	LP Interest	4,050.00	4,050,000	3,854,223	3.73
BP3 Affiliate, LLC	(2)(5)(6)	LP Interest	1,668.00	1,668,000	1,668,000	1.62
BR Cabrillo LLC	(5)(6)	LP Interest	346,723.23	104,944	104,017	0.10
BR Everwood Investment Co, LLC	(2)(5)	LP Interest	3,750,000.00	3,750,000	3,750,000	3.63
BR Sunrise Parc Investment Co, LLC	(2)(5)	LP Interest	2,720,911.00	2,720,911	2,720,911	2.64
Britannia Preferred Members, LLC -Class 1	(3)(5)(6)	LP Interest	103.88	2,597,000	3,505,950	3.40
Britannia Preferred Members, LLC -Class 2	(3)(5)(6)	LP Interest	514,858.30	6,826,931	7,089,599	6.87
Capitol Hill Partners, LLC	(3)(5)(6)	LP Interest	190,000.00	1,900,000	1,468,700	1.42
Citrus Park Hotel Holdings, LLC	(3)(5)	LP Interest	5,000,000.00	5,000,000	5,000,000	4.84
Dimensions28 LLP	(3)(5)	LP Interest	10,800.00	10,801,015	10,949,688	10.61
Lakemont Partners, LLC	(2)(5)	LP Interest	1,000.00	941,180	857,160	0.83
MacKenzie Realty Operating Partnership, LP	(3)(5)(6)	LP Interest	1,451,642.63	12,145,905	11,613,141	11.25
MPF Pacific Gateway - Class B	(2)(5)(6)	LP Interest	23.20	6,287	7,164	0.01
Redwood Mortgage Investors VIII	(5)	LP Interest	56,300.04	29,700	12,949	0.01
Satellite Investment Holdings, LLC - Class B	(5)(6)	LP Interest	0.31	22	8,960	0.01
Secured Income, LP	(2)(5)(6)	LP Interest	64,670.00	316,890	261,914	0.25
Total LP Interest				53,713,785	53,618,425	51.94

Coastal Realty Business Trust, REEP, Inc. - A	(3)(5)(6)	Investment Trust	72,320.00	49,901	33,990	0.03
Total Investment Trust				49,901	33,990	0.03


Total Investments				$ 104,692,648	$ 93,705,145	90.77

(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 between 5% and 25% of the portfolio company’s voting securities. As of June 30, 2020, the Company is deemed to be “affiliated” with 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) Under the 1940 Act, the Company 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 June 30, 2020, the Company is deemed to be 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.

(4) Non-qualifying assets under Section 55(a) of the 1940 Act. As of June 30, 2020, the total percentage of non-qualifying assets is 6.95%, and as a business development company non-qualifying assets may not exceed 30% of our total assets.

(5) Investments in illiquid securities, or securities that are not traded on a national exchange. As of June 30, 2020, 83.00% of the Company's total assets are in illiquid securities.

(6) Investments in non-income producing securities. As of June 30, 2020, 36.00 % 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.

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MacKenzie Realty Capital, Inc.

Consolidated Statements of Operations

(Unaudited)


	Three Months Ended September 30,
	2020		2019
Investment income
Non-controlled/non-affiliated investments:
Dividend and operational/sales distributions	$	412,206	$	961,792
Interest and other income		203		178,385
Affiliated investments:
Dividend and operational/sales distributions		116,213		218,771
Controlled investments:
Dividend and operational/sales distributions		336,011		582,947
Total investment income		864,633		1,941,895

Operating expenses
Base management fee (note 5)		657,886		609,995
Portfolio structuring fee (note 5)		4,852		195,611
Administrative cost reimbursements (note 5)		155,200		170,000
Transfer agent cost reimbursements (note 5)		30,800		20,000
Amortization of deferred offering costs		141,889		193,692
Professional fees		98,404		117,602
Directors' fees		16,500		15,500
Printing and mailing		31,702		37,450
Other general and administrative		14,900		15,112
Total operating expenses		1,152,133		1,374,962

Net investment income (loss)		(287,500)		566,933

Realized and unrealized gain (loss) on investments
Net realized gain (loss)
Non-controlled/non-affiliated investments		1,022,409		109,014
Affiliated investments:		(6,057)		-
Total net realized gain		1,016,352		109,014
Net unrealized gain (loss)
Non-controlled/non-affiliated investments		(3,689,407)		(609,427)
Affiliated investments		(129,318)		118,820
Controlled investments		642,660		1,547,381
Total net unrealized gain (loss)		(3,176,065)		1,056,774

Total net realized and unrealized gain (loss) on investments		(2,159,713)		1,165,788

Net increase (decrease) in net assets resulting from operations	$	(2,447,213)	$	1,732,721

Net increase (decrease) in net assets resulting from operations per share	$	(0.19)	$	0.15

Weighted average common shares outstanding		12,849,527		11,391,769

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

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MacKenzie Realty Capital, Inc.

Consolidated Statements of Changes in Net Assets

(Unaudited)

	Three Months Ended
	September 30, 2020		September 30, 2019
Operations
Net investment income (loss)	$	(287,500)	$	566,933
Net realized gain		1,016,352		109,014
Net unrealized gain (loss)		(3,176,065)		1,056,774
Net increase (decrease) in net assets resulting from operations		(2,447,213)		1,732,721

Dividends
Dividends to stockholders		-		(1,983,801)

Capital share transactions
Issuance of common stock		160,739		6,465,979
Issuance of common stock through reinvestment of dividends		-		815,931
Redemption of common stock		-		(631,026)
Selling commissions and fees		(15,172)		(588,024)
Net increase in net assets resulting from capital share transactions		145,567		6,062,860

Total increase (decrease) in net assets		(2,301,646)		5,811,780

Net assets at beginning of the period		103,225,721		103,115,381

Net assets at end of the period	$	100,924,075	$	108,927,161

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

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MacKenzie Realty Capital, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended September 30,
	2020		2019
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	(2,447,213)	$	1,732,721
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash from operating activities:
Proceeds from sale of investments, net		5,204,809		1,956,636
Return of capital		4,284,031		8,340,149
Purchase of investments		(7,412,967)		(7,218,665)
Net realized gain on investments		(1,016,352)		(109,014)
Net unrealized (gain) loss on investments		3,176,065		(1,056,774)
Amortization of deferred offering costs		141,889		193,692
Changes in assets and liabilities:
Accounts receivable		175,892		1,633,018
Due from related entities		(154,865)		-
Other assets		30,065		(100,441)
Payment of deferred offering costs		(25,389)		(236,212)
Accounts payable and accrued liabilities		(85,179)		(50,174)
Due to related entities		(41,230)		(1,678,560)
Net cash from operating activities		1,829,556		3,406,376

Cash flows from financing activities:
Proceeds from issuance of common stock		160,739		6,465,979
Redemption of common stock		-		(631,026)
Dividends to stockholders		-		(1,061,170)
Payment of selling commissions and fees		(6,399)		(685,012)
Change in capital pending acceptance		(78,739)		878,533
Net cash from financing activities		75,601		4,967,304

Net increase in cash and cash equivalents		1,905,157		8,373,680

Cash and cash equivalents at beginning of the period		8,957,393		1,278,668

Cash and cash equivalents at end of the period	$	10,862,550	$	9,652,348

Non-cash financing activities:
Issuance of common stock through reinvestment of dividends	$	-	$	815,931

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

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MacKenzie Realty Capital, Inc.

Notes to Consolidated Financial Statements

September 30, 2020

(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. The second offering commenced in December 2016 and concluded on October 28, 2019. The Parent Company filed a third registration statement with the SEC to register a public offering of 15,000,000 shares of its common stock that was declared effective by the SEC on October 31, 2019. The third offering commenced shortly thereafter and expired on October 31, 2020.

On October 23, 2020, holders of a majority of the outstanding common stock of the Company approved the authorization of the Company’s Board of Directors to withdraw the Company’s election to be regulated as a business development company under the Investment Company Act of 1940, effective when the Company files the appropriate form with the SEC. The Company expects to submit the withdrawal to be effective with the SEC by the end of December 2020.

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. 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. The financial statements of TRS and MacKenzie NY 2 have been consolidated with the Parent Company.

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"). MacKenzie manages all Company 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 September 30, 2020, the Company has raised approximately $130.20 million from the public offerings, including proceeds from the Company’s dividend reinvestment plan ("DRIP") of approximately $11.16 million. Of the shares issued by the Company in exchange for the total capital raised as of September 30, 2020, approximately $9.46 million worth of shares have been repurchased under the Company’s share repurchase program.

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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, 2020, 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, 2020, 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 September 30, 2020, and June 30, 2020.

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 September 30, 2020, 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 September 30, 2020, and June 30, 2020, capital pending acceptance was $9,000 and $87,739, respectively.

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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 by the Company on the second and third public offering are each limited to $1,650,000 plus the savings realized by the Company to the extent that broker fees incurred are less than 10%. Offering costs incurred in excess of these amounts will be reimbursed by the Adviser as discussed in Note 5. The offering costs incurred in connection with the third public offering through September 30, 2020 and June 30, 2020 were $585,583 and $560,194, respectively. These offering costs are deferred and expensed over a twelve-month period beginning from the date the registration was declared effective by the SEC. Total amortization of these deferred costs for the three months ended September 30, 2020, and 2019 were $141,889 and $193,692, respectively.

Income Taxes and Deferred Tax Liability

The Parent Company has elected to be treated as a REIT for tax purposes under the Code and as a REIT, is not subject to federal income taxes on amounts that it distributes to the stockholders, provided that, on an annual basis, it 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 year ended December 31, 2019. Therefore, it did not incur any tax expense or excise tax on its income from operations during the quarterly periods within the tax year 2019. Similarly, for the tax year 2020, the Parent Company will pay the requisite amounts of dividends by end of the year or through catch-up distributions in tax year 2021 such that it 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 2020.

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 September 30, 2020, they did not have any taxable income for tax years 2019 or 2020. Therefore, TRS and MacKenzie NY 2 did not record any income tax provisions during any fiscal period within the tax year 2019 and 2020.

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 recognizing, measuring, presenting, and disclosing uncertain tax positions in the financial statements. As of September 30, 2020, and June 30, 2020, 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

SEC issued amendments to modernize the Regulation S-K disclosure requirements about description of business, legal proceedings and risk factors. The amendments permit registrants to take a more principles-based approach to tailor business and risk factors disclosures to their circumstances and calls for enhanced disclosures. The amendments, which became effective on November 9, 2020, are designed to improve the readability of these disclosures and discourage the repetition of non-material information. The adoption of this new guidance did not have a material impact on this Form 10-Q.

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NOTE 3 –INVESTMENTS

The following table summarizes the composition of the Company's investments at cost and fair value as of September 30, 2020, and June 30, 2020:

	September 30, 2020				June 30, 2020
Asset Type	Cost		Fair Value		Cost		Fair Value
Publicly Traded Companies	$	9,202,806	$	6,028,120	$	8,454,348	$	7,244,654
Non Traded Companies		40,487,164		28,988,430		42,474,614		32,808,076
LP Interests		53,893,255		54,419,019		53,713,785		53,618,425
Investment Trust		49,901		33,990		49,901		33,990
Total	$	103,633,126	$	89,469,559	$	104,692,648	$	93,705,145

The following table presents fair value measurements of the Company's investments as of September 30, 2020, 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	$	6,028,120	$	6,028,120	$	-	$	-
Non Traded Companies		28,988,430		-		-		28,988,430
LP Interests		54,419,019		-		-		54,419,019
Investment Trust		33,990		-		-		33,990
Total	$	89,469,559	$	6,028,120	$	-	$	83,441,439

The following table presents fair value measurements of the Company's investments as of June 30, 2020, 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	$	7,244,654	$	7,244,654	$	-	$	-
Non Traded Companies		32,808,076		-		-		32,808,076
LP Interests		53,618,425		-		-		53,618,425
Investment Trust		33,990		-		-		33,990
Total	$	93,705,145	$	7,244,654	$	-	$	86,460,491

The following is a reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using significant unobservable inputs (Level III of the fair value hierarchy) for the three months ended September 30, 2020:

Balance at July 1, 2020	$	86,460,491
Purchases of investments		4,407,988
Transfers to Level I		(950,235)
Proceeds from sales, net		(1,011,748)
Return of capital		(4,284,031)
Net realized gains		30,048
Net unrealized losses		(1,211,074)
Ending balance at September 30, 2020	$	83,441,439

The transfers of $950,235 from Level III to Level I category during the three months ended September 30, 2020 resulted from one of the Company's investments converting from a non-traded REIT to publicly traded REIT. Transfers are assumed to have occurred at the beginning of the period.

For the three months ended September 30, 2020, changes in unrealized losses, net included in earnings relating to Level III investments still held at September 30, 2020, were $1,870,083.

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Balance at July 1, 2019	$	101,094,142
Purchases of investments		7,218,665
Proceeds from sales, net		(1,494,978)
Return of capital		(8,340,149)
Net realized gains		112,412
Net unrealized losses		546,258
Ending balance at September 30, 2019	$	99,136,350

For the three months ended September 30, 2019, changes in unrealized gains, net included in earnings relating to Level III investments still held at September 30, 2019 were $852,217.

The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at September 30, 2020:

Asset Type	Fair Value		Primary Valuation Techniques	Unobservable Inputs Used	Range		Wt. Average

Non Traded Companies	$	554,126	Direct Capitalization Method	Capitalization rate		6.5% - 7.4%		7.4%
				Liquidity discount		30.0% - 32.0%		32.0%
Non Traded Companies		27,015	Estimated Liquidation Value	Sponsor provided value
				Liquidity discount		9.0% - 78.0%		44.0%
Non Traded Companies		28,407,289	Market Activity	Secondary market industry publication
				Liquidity discount *		15.0% - 33.0%		19.8%

LP Interests		25,364,915	Direct Capitalization Method	Capitalization rate		3.4% - 6.8%		5.2%
				Liquidity discount		5.0% - 40.0%		15.6%
LP Interests		15,292,468	Discounted Cash Flow	Discount rate		9.0% - 20.0%		11.6%
				Discount term (months)		6.0 - 9.0		4.1
LP Interests		13,486,773	Estimated Liquidation Value	Sponsor provided value
				Underlying property sales contract
				Underlying property appraisal
				Liquidity discount		43.0%
LP Interests		274,863	Market Activity	Underlying security sales contract
				Secondary market industry publication
				Contributed capital

Investment Trust		33,990	Market Activity	Underlying security sales contract

	$	83,441,439

* In the past years, the Company valued Level III investments primarily by reference to secondary market activities. However, due to the COVID-19 pandemic, secondary market activities significantly declined during the second and third quarters of 2020. While the most active of these securities had transactions reported based on new COVID-19 occupancy and financial information, one of the Level III investments only had earlier reported transactions. Therefore, to determine the fair values of these non-traded securities as of September 30, 2020, management reviewed and evaluated multiple data sources as part of management’s Level III valuation process and applied significant subjective judgment about the effects of overall market declines during times of economic uncertainty to arrive at these valuations.

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The following table shows quantitative information about significant unobservable inputs related to the Level III fair value measurements used at June 30, 2020:

Asset Type	Fair Value		Primary Valuation Techniques	Unobservable Inputs Used	Range		Wt. Average

Non Traded Companies	$	541,858	Direct Capitalization Method	Capitalization rate		6.5% - 7.6%		7.5%
				Liquidity discount		32.0% - 35.0%		32.1%
Non Traded Companies		65,856	Estimated Liquidation Value	Sponsor provided value
				Liquidity discount		12.0% - 78.0%		45.1%
Non Traded Companies		32,200,362	Market Activity	Secondary market industry publication
				Liquidity discount *		7.5% - 12.5%		7.6%

LP Interests		24,974,379	Direct Capitalization Method	Capitalization rate		3.4% - 6.8%		5.2%
				Liquidity discount		5.0% - 40.0%		15.5%
LP Interests		14,976,861	Discounted Cash Flow	Discount rate		9.0% - 20.0%		11.6%
				Discount term (months)		6.0 - 9.0		7.1
LP Interests		11,724,322	Estimated Liquidation Value	Sponsor provided value
				Underlying property sales contract
				Underlying property appraisal
				Liquidity discount		19.0% - 43.0%		41.5%
LP Interests		1,942,863	Market Activity	Underlying security sales contract
				Secondary market industry publication
				Contributed capital

Investment Trust		33,990	Market Activity	Underlying security sales contract

	$	86,460,491

* In the past years, the Company valued Level III investments primarily by reference to secondary market activities. However, due to the COVID-19 pandemic, secondary market activities significantly declined during the second quarter of 2020. While the most active of these securities had transactions reported based on new COVID-19 occupancy and financial information, two of the Level III investments only had earlier reported transactions. Therefore, to determine the fair values of these non-traded securities as of June 30, 2020, management reviewed and evaluated multiple data sources as part of management’s Level III valuation process and applied significant subjective judgment about the effects of overall market declines during times of economic turmoil to arrive at these valuations.

Impact of COVID-19 Pandemic

The COVID-19 pandemic has adversely impacted the fair value of our investments as of September 30, and June 30, 2020, and the values assigned as of this date may differ materially from the values that we may ultimately realize with respect to our investments. The impact of the COVID-19 pandemic may not yet be fully reflected in the valuation of our investments as our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that is often from a time period earlier, generally two to three months, than the quarter for which we are reporting. Additionally, we may not have yet received information or certifications from our portfolio companies that indicate any or the full extent of declining performance or non-compliance with debt covenants, as applicable, as a result of the COVID-19 pandemic. As a result, our valuations at September 30, and June 30, 2020 may not show the complete or continuing impact of the COVID-19 pandemic and the resulting measures taken in response thereto. In addition, write downs in the value of our investments have reduced, and any additional write downs may further reduce, our net asset value. Accordingly, we may continue to incur additional net unrealized losses or may incur realized losses subsequent to September 30, 2020, which could have a material adverse effect on our business, financial condition and results of operations.

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Unconsolidated Significant Subsidiaries

Our investments are generally in small and mid-sized companies in a variety of industries. In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, we must determine which of our unconsolidated controlled investments are considered “significant subsidiaries,” if any. In evaluating these investments, there are three tests utilized to determine if any of our controlled investments are considered significant subsidiaries: the investment test, the asset test, and the income test. Rule 3-09 of Regulation S-X requires separate audited financial statements for any unconsolidated majority-owned subsidiary in an annual report if any of the three tests exceed 20%. Rule 4-08(g) of Regulation S-X requires summarized financial information in an annual report if any of the three tests exceeds 10%.

As of September 30, and June 30, 2020, none of our investments was considered a significant subsidiary under Rule 3-09 and 4-08(g) with the exception of MacKenzie Realty Operating Partnership, LP, which was determined to be a significant subsidiary under the asset test as the partnership’s total assets exceeded 20% of the Company’s total assets as of September 30 and June 30, 2020. Under the Rule 3-09, separate audited financial statements are required to be included in the Company’s annual report. However, as disclosed below under Note 5, the partnership was formed in May 2020 and its fiscal year does not end until December 31, 2020. Therefore, separate audited financial statements of this partnership for its year ended December 31, 2020 will be included in the Company’s annual report for the fiscal year ended June 30, 2021. The summarized financial information of the partnership as of September 30, 2020 is as follows:

Total Assets	$	45,360,529
Total Liabilities	$	25,763,939
Total Equity	$	19,596,590

NOTE 4—MARGIN LOANS

The Company has a brokerage account through which it buys and sells publicly traded securities. The provisions of the account allow the Company 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 September 30, 2020, the Company had $2,519,992 of margin credit available for cash withdrawal or the ability to purchase up to $19,287,335 in additional shares. As of June 30, 2020, the Company had $2,655,155 of margin credit available for cash withdrawal or the ability to purchase up to $18,770,519 in additional publicly traded securities. As of September 30, 2020 and June 30, 2020, there was no amount outstanding under this short-term credit line.

NOTE 5 –RELATED PARTY TRANSACTIONS

Amended and Restated Investment Advisory Agreement:

Under the Amended and Restated Investment Advisory Agreement, the Company will pay the Adviser a fee for its services consisting of three components — a portfolio structuring fee, a base management fee, and a subordinated incentive fee.

The portfolio structuring fee is for the Adviser's initial work performed in identifying, evaluating and structuring the acquisition of assets. The fee equals 3.0% of the gross invested capital (“Gross Invested Capital”), which equals the number of shares issued, multiplied by the offering price of the shares sold (regardless of whether or not shares were issued with volume or commission discounts), plus any borrowed funds. These services are performed on an ongoing basis in anticipation of deploying new capital, generally within 15 days of the receipt of capital. Therefore, this fee is expensed in the period the capital is accepted.

The base management fee is calculated based on the Company's Gross Invested Capital plus any borrowing for investment purposes. The base management fees range from 1.5% to 3.0%, depending on the level of Gross Invested Capital.

The subordinated incentive fee has two parts—income and capital gains. The incentive fee components (other than during liquidation) are designed so that neither the income incentive fee nor the capital gains incentive fee is payable to the Adviser unless our stockholders have first received dividends at a rate of at least 7.0% per annum for the relevant measurement period (a fiscal quarter, for the income incentive fee; a fiscal year, for the capital gains incentive fee).

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The income incentive fee (“Income Fee”) is calculated and payable quarterly in arrears as follows: (i) the sum of preliminary net investment income for each fiscal quarter since the effective date of the Amended and Restated Investment Advisory Agreement (October 1, 2017) exceeding 7% of the “Contributed Capital” (which equals the number of shares issued multiplied by the maximum public offering price at the time such shares were sold, regardless of whether or not shares were issued with volume or commission discounts or through the DRIP, as such amount is computed from time to time) on an annualized basis up to 8.75% of Contributed Capital; and (ii) 20.0% of our preliminary net investment income for each fiscal quarter after the effective date exceeding 8.75% of Contributed Capital at an annualized rate; minus (iii) the sum of all previously paid income incentive fees since the effective date, plus (iv) any incremental income incentive fee payable resulting from the reanalysis after calculation of the capital gains incentive fee.

The capital gains incentive fee (“Capital Gains Fee”) is calculated and payable in arrears as of the end of each fiscal year as follows: (i) the sum of all "capital gains" (calculated as net realized capital gains less unrealized capital depreciation) for each fiscal year after the effective date exceeding 7% of Contributed Capital on an annualized basis up to 8.75% of Contributed Capital, which thresholds are reduced by (but not below zero) the cumulative preliminary net investment income for each fiscal quarter since the effective date (or, increased, in the case of negative cumulative preliminary net investment income); and (ii) 20.0% of all capital gains for each fiscal quarter after the effective date exceeding 8.75% of Contributed Capital at an annualized rate, which threshold is reduced by (but not below zero) the cumulative preliminary net investment income for each fiscal quarter since the effective date (or, increased, in the case of negative cumulative preliminary net investment income); minus (iii) the sum of all previously paid income incentive fees since the effective date and prior to the end of such fiscal year; less (iv) the aggregate amount of all capital gains incentive fees paid in prior fiscal years ending after the effective date. To the extent that such calculation would result in a capital gains incentive fee that exceeds 20% of all realized capital gains for the measurement period, the capital gains incentive fee shall be capped so that under no circumstance does it exceed 20% of the realized capital gains for the measurement period.

The portfolio structuring fees for the three months ended September 30, 2020 and 2019, were $4,852 and $195,611, respectively.

The base management fees for the three ended September 30, 2020 and 2019 were $657,886 and $609,995, respectively. These base management fees were based on the following quarter ended Gross Invested Capital segregated in two columns based on the annual fee rate:

Base Management Fee Annual %		3.0%		2.0%		1.5%	Total Gross Invested Capital

Quarter ended:
September 30, 2020	$	20,000,000	$	80,000,000	$	28,769,486	$	128,769,486

Quarter ended:
September 30, 2019	$	20,000,000	$	80,000,000	$	15,998,789	$	115,998,789

The Company records the Capital Gains Fee accrual on the consolidated statements of operations and statements of assets and liabilities when net realized capital gains less unrealized capital depreciation on its investments exceed the incentive fee threshold of 7% of Contributed Capital. However, the actual incentive fee payable to the Adviser related to capital gains will be determined and payable in arrears at the end of each fiscal year. Accordingly, the Company accrues the capital gains fees in the quarter it exceeds the threshold and increases or decreases the accrual in subsequent quarters if the fiscal year-to-date fee changes.

There was neither Income Fee nor Capital Gains Fee accrual for the three months ended September 30, 2020 and 2019.

Organization and Offering Costs Reimbursement:

As provided in the Amended and Restated Investment Advisory Agreement and the prospectus of the Company, offering costs incurred and paid by the Company in excess of $1,650,000 on the third public offering will be reimbursed by the Adviser except to the extent that 10% in broker fees are not incurred (the “broker savings”). In such case, the broker savings will be available to be paid by the Company for marketing expenses or other non‑cash compensation. Total offering costs incurred on the third public offering as of September 30, and June 30, 2020, were $585,583 and $560,194, respectively, both of which were also below the reimbursement threshold. Therefore, there were no amounts reimbursable from the Adviser as of September 30, 2020 and June 30, 2020.

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Of the cumulative offering costs incurred on the third public offering by the Company as of September 30 and June 30, 2020, MacKenzie had paid on behalf of the Company a total of $318,933 and $300,212, respectively. Of the amounts paid by MacKenzie, as of September 30 and June 30, 2020, the Company had not reimbursed MacKenzie in the amounts of $18,721and $52,492. Therefore, those amounts were recorded as payable to MacKenzie and included as a part of due to related entities in the statements of assets and liabilities as of September 30, and June 30, 2020.

During the three months ended September 30, 2020 and 2019, total offering costs paid by MacKenzie on behalf of the Company were $25,388 and $143,230, respectively.

Administration Agreement:

Under the Administration Agreement, the Company reimburses MacKenzie for its allocable portion of overhead and other expenses it incurs in performing its obligations under the Administration Agreement, including furnishing the Company with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities, as well as providing the Company with other administrative services, subject to the Independent Directors' approval. In addition, the Company reimburses MacKenzie for the fees and expenses associated with performing compliance functions, and its allocable portion of the compensation of the Company's 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 the Company. No fee (only cost reimbursement) is being paid by the Company to MacKenzie for this service.

The administrative cost reimbursements for the three months ended September 30, 2020 and 2019, were $155,200 and $170,000, respectively. Transfer agent services cost reimbursement for the three months ended September 30, 2020 and 2019 was $30,800 and $20,000, respectively.

The table below outlines the related party expenses incurred for the three months ended September 30, 2020, and 2019 and unpaid as of September 30, 2020, and June 30, 2020.

	Three Months Ended				Unpaid as of
Types and Recipient	September 30, 2020		September 30, 2019		September 30, 2020		June 30, 2020

Base Management fees- the Adviser	$	657,886		609,995	$	657,886	$	657,280
Portfolio Structuring fee- the Adviser		4,852		195,611		-		-
Administrative Cost Reimbursements- MacKenzie		155,200		170,000		-		-
Transfer agent cost reimbursements - MacKenzie		30,800		20,000		-		-
Organization & Offering Cost ⁽²⁾ - MacKenzie		25,388		143,230		18,721		52,492
Other expenses ⁽¹⁾- MacKenzie						427		8,492
Due to related entities					$	677,034	$	718,264

⁽¹⁾Expenses paid by MacKenzie on behalf of the Company to be reimbursed to MacKenzie.

⁽²⁾Offering costs paid by MacKenzie- discussed in Note 5 under organization and offering costs reimbursements. These are amortized over twelve-month period as discussed in Note 2.

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Controlled or Affiliated Investments:

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 September 30, 2020, the Company is deemed to be either “affiliated” with, or in “control” of, the below portfolio companies despite the fact that the Company does not have the power to exercise control over the management or policies of these portfolio companies.

September 30, 2020
Name of issuer and title of issue	Fair Value at June 30, 2020		Gross Additions		Transfers		Gross Reductions ⁽¹⁾			Net Realized Gains (losses)			Net Change in Unrealized Gains/(Losses)			Fair Value at September 30, 2020		Interest/Dividend/Other income Three Months Ended September 30, 2020

Affiliated Investments:
5210 Fountaingate, LP	$	425,796	$	-	$	-	$	-		$	-		$	(1,252	)	$	424,544	$	-
BP3 Affiliate, LLC		1,668,000		-		-		-			-			-			1,668,000		-
BR Everwood Investment Co, LLC		3,750,000		-		-		(3,750,000	)		-			-			-		5,200
BR Sunrise Parc Investment Co, LLC		2,720,911		3,935,757		-		-			-			-			6,656,668		104,698
FSP Energy Tower I Corp. Liquidating Trust		9,810		-		-		-			-			167			9,977		-
FSP Satellite Place		532,579		-		-		-			-			11,438			544,017		-
Lakemont Partners, LLC		857,160		-		-		-			-			(26,040	)		831,120		6,315
MPF Pacific Gateway - Class B		7,164		-		-		(231	)		(6,057	)		(876	)		-		-
Secured Income, LP		261,914		-		-		-			-			-			261,914		-
Summit Healthcare REIT, Inc.		1,874,550		-		-		-			-			(112,755	)		1,761,795		-

	$	12,107,884	$	3,935,757	$	-	$	(3,750,231	)	$	(6,057	)	$	(129,318	)	$	12,158,035	$	116,213
Controlled Investments:
Bishop Berkeley, LLC	$	3,854,223	$	-	$	-	$	-		$	-		$	21,465		$	3,875,688	$	23,011
Britannia Preferred Members, LLC -Class 1		3,505,950		-		-		-			-			129,850			3,635,800		-
Britannia Preferred Members, LLC -Class 2		7,089,599		-		-		-			-			(51,486	)		7,038,113		-
Capitol Hill Partners, LLC		1,468,700		-		-		-			-			17,100			1,485,800		-
Citrus Park Hotel Holdings, LLC		5,000,000		-		-		-			-			-			5,000,000		115,000
Coastal Realty Business Trust, REEP, Inc. - A		33,990		-		-		-			-			-			33,990		-
Dimensions28 LLP		10,949,688		-		-		-			-			424,116			11,373,804		198,000
MacKenzie Realty Operating Partnership, LP		11,613,141		-		-		-			-			101,615			11,714,756		-

	$	43,515,291	$	-	$	-	$	-		$	-		$	642,660		$	44,157,951	$	336,011

June 30, 2020
Name of issuer and title of issue	Fair Value at June 30, 2019		Gross Additions		Transfers			Gross Reductions ⁽¹⁾			Net Realized Gains (losses)		Net Change in Unrealized Gains/(Losses)			Fair Value at June 30, 2020		Interest/Dividend/Other income Year Ended June 30, 2020

Affiliated Investments:
5210 Fountaingate, LP	$	552,693	$	-	$	-		$	-		$	-	$	(126,897	)	$	425,796	$	-
Arrowpoint Burlington LLC		1,088,910		-		-			(1,333,331	)		583,331		(338,910	)		-		-
BP3 Affiliate, LLC		1,350,000		318,000		-			-			-		-			1,668,000		-
BR Desota Investment Co, LLC		4,250,000		-		-			(4,250,000	)		-		-			-		46,623
BR Everwood Investment Co, LLC		-		3,750,000		-			-			-		-			3,750,000		479,871
BR Quinn35 Investment Co, LLC		4,000,000		-		-			(4,000,000	)		-		-			-		167,768
BR Sunrise Parc Investment Co, LLC		-		2,720,911		-			-			-		-			2,720,911		253,410
BR Westerly Investment Co, LLC		-		4,120,667		-			(4,120,667	)		-		-			-		-
FSP Energy Tower I Corp. Liquidating Trust		57,566		-		-			(49,637	)		-		1,881			9,810		37,438
FSP Satellite Place		712,585		41,693		-			-			-		(221,699	)		532,579		-
Lakemont Partners, LLC		1,007,700		-		-			(58,820	)		-		(91,720	)		857,160		26,135
MPF Pacific Gateway - Class B		7,316		-		-			-			-		(152	)		7,164		-
Secured Income, LP		302,009		-		-			-			-		(40,095	)		261,914		-
Summit Healthcare REIT, Inc.		2,587,408		4,488		-			-			-		(717,346	)		1,874,550		-

	$	15,916,187	$	10,955,759	$	-		$	(13,812,455	)	$	583,331	$	(1,534,938	)	$	12,107,884	$	1,011,245
Controlled Investments:
Addison NC, LLC		3,600,000	$	-	$	(2,000,000	)	$	-		$	-	$	(1,600,000	)	$	-	$	-
Addison Property Member, LLC		7,314,855		-		(7,316,326	)		-			-		1,471			-		1,176,187
Bishop Berkeley, LLC		4,051,013		-		-			-			-		(196,790	)		3,854,223		69,034
Britannia Preferred Members, LLC -Class 1		2,986,550		-		-			-			-		519,400			3,505,950		-
Britannia Preferred Members, LLC -Class 2		7,758,915		-		-			-			-		(669,316	)		7,089,599		-
Capitol Hill Partners, LLC		1,852,500		-		-			-			-		(383,800	)		1,468,700		-
Citrus Park Hotel Holdings, LLC		-		5,000,000		-			-			-		-			5,000,000		287,500
Coastal Realty Business Trust, REEP, Inc. - A		39,053		-		-			-			-		(5,063	)		33,990		-
Dimensions28 LLP		10,886,076		-		-			-			-		63,612			10,949,688		485,321
MacKenzie Realty Operating Partnership, LP		-		2,829,579		9,316,326			-			-		(532,764	)		11,613,141		-
Sunlit Holdings, LLC		-		5,000,000		-			(5,000,000	)		-		-			-		334,111

	$	38,488,962	$	12,829,579	$	-		$	(5,000,000	)	$	-	$	(2,803,250	)	$	43,515,291	$	2,352,153

(1)	Gross reductions include decreases in the cost basis of investments resulting from return of capital distributions.

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Of the investments listed above, the Company (or its affiliates) has the power to exercise control over the management or policies of the portfolio companies listed below:

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. The Company owns two series of CRBT and is the only beneficiary of such series. Under the terms of the agreement, there are no redemption rights to any of the series participants. The Company and TRS are the sole beneficiaries of the following series as of September 30, 2020, and June 30, 2020:

•	CRBT, REEP, Inc.-A, which has an ownership interest in one of three general partners of a limited partnership which owns one multi-family property located in Frederick, Maryland.

MacKenzie Realty Operating Partnership, LP (the “OP”):

On May 20, 2020, the Company formed an operating partnership, MacKenzie Realty Operating Partnership, LP (the “OP”). Prior to the formation of the OP, the Company had preferred equity interests in Addison NC, LLC (“Addison NC”) and Addison Property Member, LLC (“Addison Member”). Both companies had ownership interests in Addison Property Owner, LLC (“Property Owner”), which owned an office and industrial development real estate property called Addison Corporate Center. On June 8, 2020, the Company and the OP entered into and closed on a Contribution Agreement with Addison Member, Addison NC, the managing members and other affiliates of these two entities (collectively referred to as the “Addison Group”) whereby the Addison Group and the Company agreed to contribute all of their interests in Property Owner to the OP in exchange for partnership Units in the OP (“OP Units”). At closing, the OP issued 516,144 of Class A OP units to the Addison Group.

At closing, the Company also contributed $1,555,861 in cash to the OP, of which $1,311,458 was directly paid to the lender to pay down principal, fees, and reserve deposits in order to secure an extension of Property Owner’s $24.4 million existing mortgage debt (the “Loan”) for up to 2 years, and pursuant to which the lender agreed to the assignment of the membership interests in Property Owner to the OP and to have the Company be the replacement guarantor of the recourse obligations under the Loan. The Loan is secured by the properties owned by Property Owner. In exchange for the cash contributed to the OP and the contribution of the Company’s previously owned indirect equity interest in the Property Owner to the OP, the Company received 1,451,642.63 Class B units in the OP. As a result of these transactions, the Company became the general partner and the majority owner of the OP, which is now the sole owner of the Addison Corporate Center.

At closing, the parties also entered into the Agreement of Limited Partnership of the OP that provides for redemption rights for the contributors (and its permitted transferees) to redeem the Class A OP Units for cash or shares of the Company, at the Company’s election. The OP Units will also receive distributions at the same rate paid to holders of the Company’s common stock.

During the three months ended September 30, 2020, the Company provided short term advances to the OP in the amount of $154,865, which were recorded as due from related entities in the consolidated statements of assets and liabilities.

MPF Pacific Gateway:

MPF Pacific Gateway, which is managed by MacKenzie, is a holding company that owns an investment in a REIT Liquidating Trust. During the three months ended September 30, 2020, the company made the final liquidating distributions of $230 and dissolved. The Company’s remaining cost basis in the company as of the liquidation date was $6,287.

NOTE 6 – DEBT GUARANTY

On June 8, 2020, as part of the Contribution Agreement discussed above under Note 5, the Company replaced as the loan guarantor and the maturity date of the Loan was extended to April 30, 2021, with an option to further extend the maturity date to April 30, 2022. Under the Loan Modification Agreement and Replacement Guaranty, the Company guaranteed only the “Recourse Obligations” under the Loan, typically referred to as “Bad Boy Acts” (such as fraud, intentional misrepresentation, willful misconduct, waste, conversion, intentional failure to pay taxes or maintain insurance, filing for bankruptcy, etc.). As of September 30, 2020, the Company has not recorded any debt guaranty obligation since the borrower, Property Owner, was current on the Loan payments and has sufficient cash flow to meet its monthly payments and there have been no inappropriate actions that would give rise to a guaranty obligation. In addition, the appraised value of the collateral was higher than the loan balance of $24.4 million as of September 30, 2020.

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NOTE 7 – FINANCIAL HIGHLIGHTS

The following is a schedule of financial highlights of the Company for the three months ended September 30, 2020, and the year ended June 30, 2020.

	For The Three Months Ended			For The Year Ended
	September 30, 2020			June 30, 2020
Per Share Data:	(Unaudited)

Beginning net asset value ("NAV")	$	8.04		$	9.44

Net investment income (loss) ⁽¹⁾		(0.02	)		0.28
Net realized gain ⁽¹⁾		0.08			0.15
Net unrealized loss ⁽¹⁾		(0.25	)		(1.39	)
Net increase in net assets resulting from operations		(0.19	)		(0.96	)

Redemption of common stock below NAV ^{(1) (6)}		-			0.01
Dividends to stockholders ^{(1) (5)}		-			(0.45	)
Ending NAV	$	7.85		$	8.04

Weighted average common Shares outstanding		12,849,527			12,198,040
Shares outstanding at the end of period		12,852,387			12,836,608
Net assets at the end of period	$	100,924,075		$	103,225,721
Average net assets ⁽²⁾	$	102,074,898		$	103,170,551

Ratios to average net assets
Total expenses ⁽⁷⁾		1.13	%		5.10	%
Net investment loss⁽⁷⁾		(0.28	)%		3.36	%
Total rate of return ^{(2) (3) (7)}		(2.40	)%		(11.37	)%

(1) Based on weighted average number of shares of common stock outstanding for the period.
(2) Average net assets were derived from the beginning and ending period-end net assets.
(3) Total rate of return is based on net increases (decreases) in net assets resulting from operations. An individual stockholder’s return may vary from this return based on the time of capital transactions.
(4) Net of sales commissions and dealer manager fees of $1.00 per share as of October 30, 2019 and $1.03 per share thereafter.
(5) Dividends are determined based on taxable income calculated in accordance with income tax regulations which may differ from amounts determined under GAAP.
(6) Amounts based on differences between the actual redemption price and the NAVs preceding the redemptions.
(7) Not annualized for interim reporting periods.

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NOTE 8 – SHARE OFFERINGS AND FEES

During the three months ended September 30, 2020, the Company issued 15,778.89 shares with gross proceeds of $160,739. For the three months ended September 30, 2020, the Company incurred selling commissions and fees of $15,172.

During the three months ended September 30, 2019, the Company issued 653,014 shares with gross proceeds of $6,465,979 and 90,659 shares pursuant to the DRIP at $9 per share with gross proceeds of $815,931. For the three months ended September 30, 2019, the Company incurred selling commissions and fees of $588,024.

NOTE 9 – SHARE REPURCHASE PLAN

On May 11, 2020, after assessing the impacts of the Covid-19 pandemic, the Company’s board of directors unanimously approved the suspension of the Company’s Share Repurchase Program, effective immediately. As a result, the Company did not repurchase any shares during the three months ended September 30, 2020.

During the three months ended September 30, 2019, the Company made tender offers to purchase its own shares as noted in the below table:

Period	Total Number of shares Repurchased		Repurchase Price Per Share		Total Repurchase Consideration
During the year ended June 30, 2020:
August 13, 2019 through September 16, 2019		70,114.03	$	9.00	$	631,026
		70,114.04			$	631,026

NOTE 10 –STOCKHOLDER DIVIDENDS AND INCOME TAXES

The following table reflects the dividends the Company declared on its common stock during the three months ended September 30, 2019:

	Dividends
During the Quarter Ended	Per Share		Amount
September 30, 2019	$	0.175	$	1,983,801
	$	0.175	$	1,983,801

Of the total $1,983,801 of dividends declared during the three months ended September 30, 2019, $813,102 was the DRIP portion of the dividend that was declared but not accrued as of September 30, 2019. The amount was included with the dividends declared during the three months ended December 31, 2019.

During the three months ended September 30, 2019, the Company paid dividends of $1,877,101, of which $815,931 were reinvested in the DRIP. Total cash dividends paid during the three months ended June 30, 2019 was $1,061,070.

Income Taxes

While our fiscal year end for financial reporting purposes is June 30, of each year, our tax year end is December 31 of each year. The information presented in this footnote is based on our tax year end for each period presented, unless otherwise specified.

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For income tax purposes, dividends paid to stockholders are reported as ordinary income, capital gains, non-taxable return of capital, or a combination thereof. The tax character of dividends paid to stockholders for the tax year ended December 31, 2019, (the most recent tax year end completed and filed) were as follows:

	December 31, 2019
Capital gain	$	2,415,285
Ordinary income		3,085,298
Return of capital		24,521
Total dividends	$	5,525,104

Because of the difference between our fiscal and tax year ends, the final determination of the tax character of dividends paid during the tax year 2020 will not be made until we file our tax return for the tax year ended December 31, 2020.

The components of undistributed earnings on a tax basis as of December 31, 2019 (the most recent tax year end completed and filed) were as follows:

	December 31, 2019
Undistributed long term capital gain	$	-
Unrealized fair value appreciation		4,813,649
	$	4,813,649

The following table presents the aggregate gross unrealized appreciation, depreciation, and cost basis of investments for income tax purposes as of:

	September 30, 2020		June 30, 2020
Aggregate gross unrealized appreciation	$	3,919,583	$	4,054,329
Aggregate gross unrealized depreciation		(15,231,042)		(12,067,004)
Net unrealized appreciation (depreciation)	$	(11,311,459)	$	(8,012,675)

Aggregate cost (tax basis)	$	100,781,020	$	101,717,821

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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Statements by MacKenzie Realty Capital, Inc. and its wholly owned subsidiary MRC TRS, Inc. (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, you 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, including an economic downturn could impair our portfolio companies' ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies; a contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities; and interest rate volatility could adversely affect our results, particularly if we elect to use leverage as a part of our investment strategy. For a discussion of factors that could cause our actual results to differ from forward-looking statements contained herein, please see the discussion under the heading "Risk Factors" in our Annual Report on Form 10-K.

We may experience fluctuations in our operating results due to a number of factors, including the effect of the withdraw of our BDC election, the return on our equity investments, the interest rates payable on our debt investments, the default rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods.

Overview

We are an externally managed non-diversified closed-end management investment company that has elected to be treated as a BDC under the 1940 Act. Our objective is 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 distribute at least 90% of our REIT taxable income 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 taxable income, we will be subject to an excise tax on our undistributed taxable income. Our wholly owned subsidiary, MRC TRS, Inc., is subject to corporate federal and state income tax on its taxable income at regular statutory rates.

We are managed by the Adviser, and MacKenzie provides the non-investment management services and administrative services necessary for us to operate.

Authorization to Withdraw BDC Election

Withdrawal of our election to be regulated as a BDC will not affect our registration under Section 12(g) 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, and file proxy statements and other reports required under the Exchange Act. Following withdrawal of our election to be regulated as a BDC, the application and presentation of our financial statements under accounting principles generally accepted in the United States of America (“GAAP”) could change.

The Company has undertaken several steps to meet the requirements for withdrawal of its election to be regulated as a BDC, including (i) preparing a plan of operations in contemplation of such a change to the status of the Company, (ii) evaluating potential investments in real estate assets that will allow the Company to transition to direct real estate asset investments, (iii) reviewing the potential adjusted investment strategy with potential capital providers, and (iv) consulting with outside counsel as to the requirements for withdrawing its election as a BDC.

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During this transition period, the Company may liquidate some of its securities portfolio. By the end of the first year after withdrawal of its election, the Company anticipates that its securities portfolio will comprise less than 20% of its assets.

Investment Plan

While we remain a BDC, our investments are generally expected to range in size from $10,000 to $3 million. However, we may make smaller or larger investments from time to time on an opportunistic basis. We focus primarily on real estate-related securities. We purchase most of our securities (i) directly from existing security holders, (ii) through established securities markets, and (iii) in the case of unregistered, privately offered securities, directly from issuers. We invest primarily in debt and equity securities issued by U.S. companies that primarily own commercial real estate that are either illiquid or not listed on any exchange.

While we remain a BDC, we generally seek to invest in interests of real estate-related limited partnerships and REITs. Under normal market conditions, we invest at least 80.0% of our total assets in common stocks and other equity or debt securities issued by real estate companies, including REITs and similar REIT-like entities. A real estate company is one that (i) derives at least 50.0% 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 50.0% of its assets invested in such real estate. We do 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. We generally consider 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.

While we remain a BDC, we may also acquire (i) individual mortgages secured by real property (i.e., we may originate such loans or we may purchase outstanding loans secured by real estate), (ii) securities of issuers that own mortgages secured by income producing real property, and (iii) using no more than 20.0% of our available capital, securities of issuers that own assets other than real estate.

Investment income

We generate revenues in the form of 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) investment advisory fees to our Adviser; (ii) our allocable portion of overhead and other expenses incurred by MacKenzie in performing its obligations under the Administration Agreement; and (iii) other operating expenses as detailed below. Our investment advisory fees compensate our Investment Adviser for its 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:

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•	the cost of calculating our NAV;

•	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, and any stock exchange listing fees in the future;

•	federal, state, and local taxes, if any;

•	Independent Directors' fees and expenses;

•	brokerage commissions;

•	fidelity bond, directors and officers errors and omissions liability insurance, and other insurance premiums;

•	direct costs and expenses of administration, including printing, mailing, and staff;

•	fees and expenses associated with independent audits and outside legal costs;

•	costs associated with our reporting and compliance obligations under the 1934 Act, the 1940 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 will be 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, our Chief Financial Officer, Director of Accounting and Financial Reporting, General Counsel, and any administrative support staff.

In addition, we will bear organization and offering expenses in connection with our third public offering up to $1,650,000 plus the savings realized by the Company to the extent that broker fees incurred are less than 10%. Any additional amounts with respect to shares being sold pursuant to the third public offering will be paid by our Adviser.

Portfolio Investment Composition

The following table summarizes the composition of our investments at cost and fair value as of September 30, 2020, and June 30, 2020:

	September 30, 2020				June 30, 2020
Asset Type	Cost		Fair Value		Cost		Fair Value
Publicly Traded Companies	$	9,202,806	$	6,028,120	$	8,454,348	$	7,244,654
Non Traded Companies		40,487,164		28,988,430		42,474,614		32,808,076
LP Interests		53,893,255		54,419,019		53,713,785		53,618,425
Investment Trust		49,901		33,990		49,901		33,990
Total	$	103,633,126	$	89,469,559	$	104,692,648	$	93,705,145

Net Asset Value

September 30, 2020 vs. June 30, 2020:

Our NAV as of September 30, 2020, was $7.85 per share compared to $8.04 per share as of June 30, 2020, a $0.19 per share decrease of approximately 2.31%. The net decrease during the three months was due to (i) net unrealized loss on investments of $0.25 per share, and (ii) net investment loss of $0.02 per share. The decreases were partly offset by an increase resulting from net realized gain from sale of investments of $0.08 per share.

Results of Operations

COVID-19 pandemic

Considerable uncertainty still surrounds the COVID-19 pandemic and its potential effects, and the extent of and effectiveness of any responses taken on a national and local level. However, measures taken to limit the impact of the COVID-19 pandemic, including social distancing and other restrictions on travel, congregation, and business operations have already resulted in significant negative economic impacts, including steep declines in certain stock market segments and in the traded prices for certain real-estate related assets. As a result of these impacts, we have experienced a large decrease in fair values of some of our investments as of September 30, 2020. In addition, some of the companies in which we have invested have cancelled their quarterly dividends and distributions for the current and future quarters. The long-term impact of the COVID-19 pandemic on the United States and world economies remains uncertain, but may result in a world-wide economic downturn, the duration and scope of which cannot currently be predicted.

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MacKenzie and our Adviser have taken numerous steps, and will continue to take further actions, to address the COVID-19 pandemic. They implemented business continuity plans and the management team is in place to respond to changes in the global environment quickly and effectively. To protect the health and safety of their team members, they successfully transitioned almost their entire workforce to remote work environments. They are working closely with our clients to support them as necessary and as seamlessly as possible.

The situation surrounding the COVID-19 pandemic remains fluid, and we are actively managing our response and assessing potential impacts to our financial position and operating results. This includes the evaluation and implementation of certain efforts to help us mitigate the impact that reduced revenues from distributions and capital events may have on our 2020 financial results. We are focusing on maintaining a strong balance sheet and liquidity position and searching for opportunistic investments. In anticipation of reduced revenues and uncertain future economic conditions, the board of directors discontinued dividends starting March 2020 and share redemptions starting May 2020.

Three Months Ended September 30, 2020, and 2019:

Investment Income:

Investment income was made up of dividends, distributions from operations, distributions from sales/capital transactions, interest, and other investment income. Total investment income for the three months ended September 30, 2020, and 2019, was $0.86 million and $1.94 million, respectively. The decrease of $1.08 million or 55.7%, was primarily due to suspensions of dividends and distributions from our investments as a result of the COVID-19 pandemic. During the three months ended September 30, 2020, the Company received $0.51 million of distributions from operations, sales and liquidations as compared to $1.20 million during the three months ended September 30, 2019. During the three months ended September 30, 2020, we received dividends and other investment income of $0.35 million as compared to $0.74 million during the three months ended September 30, 2019.

Operating Expenses:

Base management fee:

The base management fee for the three months ended September 30, 2020 was $0.66 million as compared to $0.61 million for the three months ended September 30, 2019. This increase of $0.05 million, or 8.2% was due to an increase in the Gross Invested Capital by $12.77 million from $116.00 million as of September 30, 2019, to $128.77 million as of September 30, 2020.

Portfolio structuring fee:

The portfolio structuring fee for the three months ended September 30, 2020, was less than 0.01 million as compared to $0.20 million during the three months ended September 30, 2019. This decrease was because the Company raised lower amount of new capital during the three months ended September 30, 2020. During the three months ended September 30, 2020, the Company raised new capital of $0.16 million as compared to $6.47 million during the three months ended September 30, 2019 through issuance of new shares excluding the DRIP.

Subordinated incentive fee:

The subordinated incentive fee has two components; Capital Gains Fee and Income Fee. Capital Gains Fee is based on realized gains (including the distributions received from sales/capital transactions) and the Income Fee is based on net investment income.

There was neither Income Fee nor Capital Gains Fee for the three months ended September 30, 2020 and 2019. This was because the cumulative net investment income and net realized gains were below the threshold of 7% of Contributed Capital.

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Administrative cost reimbursements and Transfer agent reimbursements:

Costs reimbursed to MacKenzie for the three months ended September 30, 2020, was $0.16 million as compared to $0.17 million for the three months ended September 30, 2019. The slight decrease was due to a decrease in the allocable portion of overhead and other expenses incurred by MacKenzie in comparison to September 30, 2019, as a result of the decrease in the Company’s capital raising activities.

Transfer agent cost reimbursement paid to MacKenzie for three months ended September 30, 2020 was $0.03 million as compared to $0.02 for the three months ended September 30, 2019. The slight increase was due to additional software maintenance and implementation costs incurred by MacKenzie.

Other operating expenses:

Other operating expenses include amortization of deferred offering costs, professional fees, directors’ fees printing and mailing, and other general and administrative expenses. Other operating expenses for the three months ended September 30, 2020 and 2019, were $0.30 million and $0.39 million. The decrease of $0.09 million was mainly due a larger amount of amortization of deferred offering costs for the three months ended September 30, 2019 as compared to the same period in 2020. The decrease in amortization of deferred offering costs was due to the deferred offering costs relating to the second public offering fully amortized as of December 31, 2019 as the offering terminated in October 2019. According to our accounting policy, 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.

Net realized gain/loss on investments:

During the three months ended September 30, 2020, the Company had a net realized gain of $1.02 million as compared to net realized loss of $0.11 million during the three months ended September 30, 2019. Total realized gains for the three months ended September 30, 2020, were realized from sales of eleven publicly traded securities, one limited partnership interest and three non-traded REIT securities. Total realized gains for the three months ended September 30, 2019, were primarily realized from sales of two non-traded REIT securities.

Net unrealized gain/loss on investments:

During the three months ended September 30, 2020, we recorded net unrealized losses of $3.18 million, which were net of $0.81 million of unrealized gains reclassification adjustment. The reclassification adjustment was the accumulated unrealized gains as of June 30, 2020, that were realized during the three months ended September 30, 2020. Accordingly, the net unrealized losses excluding the reclassification adjustment for the three months ended September 30, 2020, were $2.37 million, which resulted from fair value depreciations of $1.88 million from non-traded REIT securities and $1.11 million from publicly traded REIT securities partly offset by a fair value appreciation of $0.62 million from limited partnership interests. The significant decline in the fair value during the current quarter was mainly due to the COVID-19 pandemic resulting in declines in domestic stock markets and in the traded prices for other financial assets as discussed above.

During the three months ended September 30, 2019, we recorded net unrealized gains of $1.06 million; however, this is net of $0.05 million of unrealized losses reclassification adjustment. The reclassification adjustment was the accumulated unrealized losses as of June 30, 2019, that were realized during the three months ended September 30, 2019. Accordingly, the net unrealized gains excluding the reclassification adjustment for the three months ended September 30, 2019, were $1.01 million, which resulted from fair value appreciation of $1.86 million from limited partnership interests and $0.5 million from publicly traded REIT securities offset by fair value depreciation of $1.35 million from non-traded REIT securities.

Income tax provision (benefit):

The Parent Company satisfied the annual dividend payment and other REIT requirements for the tax years ended December 31, 2019. Therefore, it did not incur any tax expense or excise tax on its income from operations during the quarterly periods within the tax year 2019. Similarly, for the tax year 2020, we believe the Parent Company will pay 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 any fiscal period within the tax year 2019.

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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 September 30, 2020, they did not have any taxable income for tax year 2019 or 2020. Therefore, TRS and MacKenzie NY 2 did not record any income tax provisions during any fiscal period within the tax year 2019 and 2020.

Liquidity and Capital Resources

Capital Resources

We offered to sell up to $150 million of shares under our second public offering which ended on October 28, 2019. In September 2019, we filed our third registration statement with the SEC for the public offering of 15 million shares with total potential gross proceeds of $153.75 million. The third registration statement was declared effective by the SEC on October 31, 2019 and the public offering commenced shortly thereafter. As of September 30, 2020, the Company has raised total gross proceeds of $119.04 million from the issuance of shares under three public offerings, $42.46 million from the IPO, which concluded in October 2016, $67.99 million from the second public offering, which concluded in October 2019, and $8.59 million from our third public offering. In addition, we have raised $11.16 million from the issuance of shares under the DRIP. Of the total capital raised from the public offerings as of September 30, 2020, we have used $9.46 million to repurchase shares under the Company’s share repurchase program. We are planning to issue preferred equity in the near future, but do not currently have any. We plan to fund future investments with the net proceeds raised from our third 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. We may also fund a portion of our investments through borrowings from banks and issuances of senior securities. While we remain as a BDC, we do not have any plans to borrow money on a long-term basis or issue debt securities at the Company level; however, after our BDC status is withdrawn, we may borrow money within the underlying companies in which we have majority ownership. In addition, from time to time we may draw on the margin line of credit on a temporary basis to bridge our investment purchases and sales or capital raising. As of September 30, 2020, we were selling our shares on a continuous basis at a price of $10.25 which may be below NAV per share from time to time, as approved by our stockholders. The third public offering ended on October 31, 2020.

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. The maximum amount of such borrowing is limited by the 1940 Act.

Our primary uses of funds are investing in portfolio companies, paying cash dividends to holders of our common stock (from investment income and realized capital gains), making payments to any lenders or senior security holders, paying operating expenses. If all shares registered in our current public offering are sold, we will receive investable cash totaling approximately $133.76 million, of which approximately $7.52 million has been received as of September 30, 2020.

The Company finished the quarter ended September 30, 2020 with substantial liquidity, including $10.86 million in cash and cash equivalents, and only $0.74 million of liabilities. However, the Company has historically relied upon distributions and capital gains from its investments to fund dividends. During and following the outbreak of COVID-19, we do not believe we can rely on our traditional sources of cash flow. Therefore, in anticipation of uncertain future economic conditions, our board of directors discontinued dividends starting March 2020 and share redemptions starting May 2020. The Company intends to continue to qualify as a REIT and to meet the associated testing requirements, including paying out at least 90% of its taxable income.

Cash Flows:

Three months ended September 30, 2020:

For the three months ended September 30, 2020, we experienced a net increase in cash of $1.91 million. During this period, we generated cash of $1.83 million from our operating activities and $0.08 million from our financing activities.

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The net cash inflow of $1.83 million from operating activities resulted from $4.28 million from distributions received from our investments that are considered return of capital and $5.26 million from sales and liquidations of investments offset by $7.41 million of cash used in purchasing investments and $0.30 million used in operating expenses, net of investment income.

The net cash inflow of $0.08 million from financing activities resulted from the sale of shares under our third public offering with gross proceeds of $0.09 million (net of $0.08 million of decrease in capital pending acceptance) offset by cash outflows of $0.01 million from payments of selling commissions and fees.

Three months ended September 30, 2019:

For the three months ended September 30, 2019, we experienced a net increase in cash of $8.37 million. During this period, we generated cash of $3.40 million from our operating activities and $4.97 from our financing activities.

The net cash inflow of $3.40 million from operating activities resulted from $8.34 million of distributions received from investments that are considered return of capital, $1.95 million from sales of investments and $0.33 million from investment income, net of operating expenses, offset by cash outflow of $8.34 million from purchases of investments.

The net cash inflow of $4.97 million from financing activities resulted from the sale of shares under our second public offering with gross proceeds of $7.35 million (adjusted for $0.88 million of increase in capital pending acceptance) offset by cash outflows of $1.06 million from payments of cash dividends, $0.63 million from share redemptions, and $0.69 million from payments of selling commissions and fees.

Contractual Obligations

We have entered into two contracts under which we have material future commitments: (i) the Amended and Restated Investment Advisory Agreement, under which the Adviser serves as our investment adviser, 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 Amended and Restated Investment Advisory Agreement in future periods (after the up-front payment of the portfolio structuring fee during the public offering) will be (i) a percentage of the value of our Gross Invested Capital; and (ii) incentive fees based on our income and our performance above specified hurdles (except in the year of liquidation). 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.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources.

Borrowings

We do not have any current plans to borrow money or issue preferred securities. In the event that we do so borrow, we would 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.

Critical Accounting Policies

The financial statements included in this report are based on the selection and application of critical accounting policies, which require management to make significant estimates and assumptions. Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management's most difficult, complex or subjective judgments. There have been no changes in the significant accounting policies from those disclosed in the audited financial statements for the year ended June 30, 2020, included in the Company's annual report on Form 10-K for the fiscal year ended June 30, 2020.

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Dividends to Stockholders

We pay quarterly dividends to stockholders to the extent that we have income from operations available. Our quarterly dividends, if any, will be determined by our Board of Directors after a review and distributed pro-rata to holders of our shares; we declare dividends on a monthly basis, but pay each quarter. Any dividends to our stockholders will be declared out of assets legally available for distribution. In no event are we permitted to borrow money to make dividends if the amount of such dividend would exceed our annual accrued and received revenues, less operating costs. Dividends 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 required to distribute at least 90% of our REIT taxable income to the stockholders and meet certain other conditions. Our current intention is to make any dividends in additional shares under our DRIP out of assets legally available therefore, unless a stockholder elects to receive dividends in cash, or their participation in our DRIP is restricted by a state securities regulator. If one holds shares in the name of a broker or financial intermediary, they should contact the broker or financial intermediary regarding their election to receive dividends in cash. We can offer no assurance that we will achieve results that will permit the payment of any cash dividends and, if we issue senior securities, we are prohibited from paying dividends if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if dividends are limited by the terms of any of our borrowings.

On March 31, 2020, after assessing the impacts of the Covid-19 pandemic, the Company’s board of directors unanimously approved the suspension of regular quarterly dividends to the Company’s stockholders, effective immediately. As a result, the Company did not pay or accrue any dividend for the quarter ended September 30, 2020. However, if there is any REIT taxable income to be distributed for tax year ended December 31, 2020, we intend to meet the REIT distribution requirements by making the requisite distributions by end of December 31, 2020 or through catch-up distributions in tax year 2021 as permitted by the REIT tax rules.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our current investment portfolio, as well as our future investments, primarily consists of equity and debt securities issued by smaller U.S. companies that primarily own commercial real estate that are either illiquid or not listed on any exchange, and our investments in these securities are considered speculative in nature. Our investments often include securities that are subject to legal or contractual restrictions on resale that adversely affect the liquidity and marketability of such securities. 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 September 30, 2020, financial instruments that subjected us to concentrations of market risk consisted principally of equity investments, which represented 88% of our total assets as of that date. As discussed in Note 3 to our financial statements ("Investments"), 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 strategy exposes us to a high degree of business and financial risk because portfolio company investments are generally illiquid and in small and middle market companies. 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.

Item 4. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the 1934 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 1934 Act. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed by us in the reports we file or submit under the 1934 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.

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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 1934 Act) during the fiscal quarter ended September 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

None.

Item 1A. RISK FACTORS

There have been no material changes to our risk factors discussed in "Risk Factors" in our annual report on Form 10-K for the fiscal year ended June 30, 2020.

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

None.

Issuer Purchases of Equity Securities

None

Item 3. DEFAULTS UPON SENIOR SECURITIES

None.

Item 4. MINE SAFETY DISCLOSURES

Not applicable.

Item 5. OTHER INFORMATION

None.

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Item 6. EXHIBITS

Exhibit	Description


31.1	Section 302 Certification of Robert Dixon (President and Chief Executive Officer)

31.2	Section 302 Certification of Paul Koslosky (Treasurer and Chief Financial Officer)

32.1	Section 1350 Certification of Robert Dixon (President and Chief Executive Officer)

32.2	Section 1350 Certification of Paul Koslosky (Treasurer and Chief Financial Officer)

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SIGNATURES

Pursuant to the requirements 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.


Date: November 13, 2020		By: /s/ Robert Dixon
		President and Chief Executive Officer

Date: November 13, 2020		By: /s/ Paul Koslosky
		Treasurer and Chief Financial Officer

MacKenzie Realty Capital, Inc. - FORM 10-Q - November 13, 2020

Attached files

MacKenzie Realty Capital, Inc. Reports