MKZR.NASDAQMackenzie Realty Capital, INC
10-Q: MacKenzie Realty Capital Reports Net Loss Attributable to Common Stockholders of $13.4 Million for Six Months Ended December 31, 2024
Sentiment:
Quarterly Report
MacKenzie Realty Capital reports a net loss attributable to common stockholders of $13.4 million for the six months ended December 31, 2024, driven by increased operating expenses and an impairment loss.
Capital raiseThe company has a shelf registration statement on Form S-3 for the sale of up to $75 million in common stock, preferred stock, warrants, and units.The company entered into an equity distribution agreement with Maxim to issue and sell common stock for an aggregate gross sales price of $20 million pursuant to the at-the-market offering described in the ATM Prospectus.
Worse than expectedThe net loss attributable to common stockholders increased significantly compared to the same period last year.The operating loss also increased compared to the same period last year.An impairment loss was recorded, negatively impacting the financial results.
Summary
- MacKenzie Realty Capital, Inc. reported its financial results for the quarter and six months ended December 31, 2024.
- The company is focused on investing in real estate assets and, to a lesser extent, in illiquid or non-traded debt and equity securities.
- For the three months ended December 31, 2024, the company reported rental, reimbursements, and other property income of $8.03 million, compared to $3.58 million for the same period in 2023.
- The operating loss for the three months ended December 31, 2024, was $(4.55) million, compared to $(2.36) million for the same period in 2023.
- Net loss attributable to common stockholders for the three months ended December 31, 2024, was $(5.28) million, or $(0.39) per share, compared to $(1.94) million, or $(0.15) per share, for the same period in 2023.
- For the six months ended December 31, 2024, the company reported rental, reimbursements, and other property income of $12.98 million, compared to $7.14 million for the same period in 2023.
- The operating loss for the six months ended December 31, 2024, was $(12.00) million, compared to $(4.61) million for the same period in 2023.
- Net loss attributable to common stockholders for the six months ended December 31, 2024, was $(13.42) million, or $(1.00) per share, compared to $(6.54) million, or $(0.49) per share, for the same period in 2023.
- An impairment loss of $5.09 million and $9.50 million was recorded for the three and six months ended December 31, 2024, respectively, related to the Main Street West Office Building.
- As of December 31, 2024, the company had $7.29 million in cash, cash equivalents, and restricted cash.
- The company has a revolving line of credit agreement with Patterson Real Estate Services, LP, an affiliate of the Adviser, of up to $10 million, with interest accruing at a fixed annual rate of 10.00%.
Sentiment
Score: 4
Explanation: The document presents a mixed sentiment. While there is revenue growth, the increased net losses and impairment losses indicate financial challenges. The potential capital raise and new credit facility could be seen as positive steps, but also highlight the need for additional funding.
Positives
- Rental and reimbursement revenues increased significantly due to property acquisitions and an early lease termination income.
- The company has secured a new revolving line of credit agreement for up to $10 million.
Negatives
- The company experienced a net loss attributable to common stockholders of $5.28 million and $13.42 million for the three and six months ended December 31, 2024, respectively.
- An impairment loss of $5.09 million and $9.50 million was recorded for the three and six months ended December 31, 2024, respectively, related to the Main Street West Office Building.
- The company is currently in default under the note terms for Main Street West, and foreclosure proceedings have been initiated.
Risks
- The company is currently in default under the note terms for Main Street West, and foreclosure proceedings have been initiated.
- Previous issuances of common shares under the dividend reinvestment program may have violated certain federal and/or state securities laws, and shareholders could file suit to seek rescission of such securities.
Future Outlook
The company plans to fund future investments with net proceeds from equity offerings, cash flows from operations, and borrowings.
Industry Context
The report provides insight into the performance of a REIT focused on real estate assets and securities, operating in a competitive market influenced by economic conditions, interest rates, and rent control regulations.
Comparison to Industry Standards
- The document does not provide enough information to make a detailed comparison to industry standards.
- To compare to industry standards, more information is needed about the company's specific investment strategy, portfolio composition, and financial metrics relative to its peers.
- Comparable companies could include other small-capitalization publicly traded REITs or real estate investment firms with similar investment strategies.
Legal Proceedings
- The bank has initiated foreclosure proceedings and filed a notice of default against Main Street West, LP.
Related Party Transactions
- The company has a revolving line of credit agreement with Patterson Real Estate Services, LP, an affiliate of the Adviser.
- The company reimburses MacKenzie for its allocable portion of overhead and other expenses under the Administration Agreement.
- Property management and leasing services are provided by Wiseman Company Management, LLC (WCM), a wholly owned subsidiary of the Real Estate Adviser.
Stakeholder Impact
- Shareholders are impacted by the net losses and potential dilution from equity offerings.
- Tenants are impacted by the management of the properties and the ability to maintain occupancy and rental rates.
- Creditors are impacted by the company's ability to service its debt obligations.
Next Steps
- Continue construction of the Aurora Project.
- Pursue refinancing and leasing options for Main Street West.
- Manage debt obligations and interest rate risk.
- Evaluate and potentially reinstate the common stock DRIP.
Key Dates
| Date | Description |
|---|---|
| January 27, 2012 | MacKenzie Realty Capital, Inc. was incorporated. |
| February 28, 2013 | MacKenzie Realty Capital, Inc. commenced operations. |
| January 2014 | Initial public offering commenced. |
| October 2016 | Initial public offering concluded. |
| December 2016 | Second public offering commenced. |
| October 28, 2019 | Second public offering concluded. |
| October 31, 2019 | Third registration statement declared effective by the SEC. |
| October 31, 2020 | Third offering expired. |
| January 1, 2021 | Administration Agreement and Amended and Restated Investment Advisory Agreement became effective. |
| February 26, 2021 | Madison and PVT obtained mortgage loans from First Republic Bank. |
| April 13, 2021 | Preliminary offering circular filed with the SEC to sell Series A preferred stock. |
| October 4, 2021 | Operating Partnership acquired a 90% economic interest in Hollywood Hillview Owner, LLC. |
| January 25, 2022 | Operating Partnership acquired a 98% limited liability company interest in MacKenzie BAA IG Shoreline LLC. |
| April 1, 2022 | Entered into a reverse triangular merger agreement with FSP Satellite Place Corp. |
| May 6, 2022 | Operating Partnership purchased 100% of the membership interests in eight limited liability companies and one parcel of entitled land from The Wiseman Company, LLC. |
| June 1, 2022 | Merger Sub merged with and into FSP Satellite with FSP Satellite as the surviving entity, but renamed MacKenzie Satellite Place Corp. |
| July 1, 2022 | Acquired First & Main, LP. |
| October 14, 2022 | Filed a post-effective amendment to the Offering Circular and increased the offering to sell up to $75 million of shares of Series A preferred stock. |
| October 2022 | Acquired 1300 Main, LP. |
| November 13, 2022 | Post-effective amendment to the Offering Circular was declared effective. |
| December 31, 2022 | TRS was terminated. |
| January 2023 | Acquired Woodland Corporate Center Two, LP. |
| February 6, 2023 | Formed a new entity, MRC Aurora, LLC. |
| February 2023 | Acquired Main Street West, LP. |
| March 15, 2023 | Loan agreement was amended to update the interest rate on the loan. |
| May 2024 | Acquired One Harbor Center, LP. |
| April 29, 2024 | Common stock became eligible for trading on the OTCQX Best Market under the ticker symbol of MKZR. |
| August 1, 2024 | Operating Partnership completed the acquisition of 100% limited partnership interest in Green Valley Medical Center. |
| August 26, 2024 | Company entered into a letter agreement with Maxim to provide general financial advisory and investment banking services. |
| September 2024 | Commenced the Aurora Project construction. |
| November 1, 2023 | Filed a second post-effective amendment to the Offering Circular, which amended the offering to sell an aggregate of up to $75 million of shares of either Series A preferred stock or Series B preferred stock. |
| November 6, 2024 | Nasdaq approved the listing of the Company's common stock. |
| November 11, 2024 | Trading commenced on Nasdaq. |
| November 14, 2023 | Post-effective amendment to the Offering Circular was qualified by the SEC. |
| November 1, 2024 | Post-effective amendment to the Offering Circular terminated. |
| November 4, 2024 | 1300 Main entered into a loan agreement with Valley Strong Credit Union. |
| October 4, 2024 | Woodland Corporate Center Two entered into a loan agreement with Summit Bank. |
| August 21, 2024 | MacKenzie Satellite entered into a loan agreement with Summit Bank. |
| December 2024 | Filed a new offering circular to sell an aggregate of up to approximately $71.3 million of shares of either Series A preferred stock or Series B preferred stock. |
| January 15, 2025 | Form S-3 Registration Statement was declared effective by the SEC and entered into an Equity Distribution Agreement with Maxim Group LLC. |
| January 22, 2025 | Entered into a revolving line of credit agreement with Patterson Real Estate Services, LP. |
| January 29, 2025 | Second Offering Circular was qualified by the SEC. |
| February 1, 2025 | Management decided to discontinue marketing Hollywood Apartments for sale. |
| February 14, 2025 | The number of shares of issuers Common Stock outstanding as of February 14, 2025 was 13,908,244.80. |
Keywords
real estate, REIT, financial results, property income, impairment loss, mortgage notes, preferred stock, common stock, Mackenzie Realty Capital
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