MKZR.NASDAQMackenzie Realty Capital, INC
10-Q: MacKenzie Realty Capital Reports Q3 2024 Results, Net Loss Attributable to Common Stockholders at $3.5 Million
Sentiment:
Quarterly Report
MacKenzie Realty Capital reported a net loss attributable to common stockholders of $3.5 million for the quarter ended March 31, 2024, alongside updates on property acquisitions and financial performance.
Capital raiseThe company plans to raise $10 million in preferred capital to fund the development of the Aurora project.The company commenced selling preferred units in February 2024.The company closed on a construction loan of $17.15 million on February 21, 2024.
Worse than expectedThe company reported a net loss attributable to common stockholders of $3.5 million for the quarter ended March 31, 2024, which is worse than the same period last year.Rental and reimbursement revenue decreased to $4.08 million for the quarter, down from $4.47 million in the same period last year.The company realized a net loss of $0.27 million from investments during the quarter.
Summary
- MacKenzie Realty Capital, Inc. reported a net loss attributable to common stockholders of $3.5 million for the three months ended March 31, 2024, or $0.26 per share.
- The company's total assets were $226.1 million as of March 31, 2024, compared to $213.2 million as of June 30, 2023.
- Total liabilities were $118.4 million as of March 31, 2024, compared to $102.1 million as of June 30, 2023.
- Rental and reimbursement revenue for the quarter was $4.08 million, down from $4.47 million in the same period last year.
- The company's operating loss for the quarter was $2.68 million, compared to $9.23 million in the same period last year.
- The company realized a net loss of $0.27 million from investments during the quarter.
- For the nine months ended March 31, 2024, the net loss attributable to common stockholders was $10.03 million, or $0.75 per share.
- The company's total revenue for the nine months ended March 31, 2024 was $11.22 million, compared to $11.21 million for the same period last year.
- The company's operating loss for the nine months ended March 31, 2024 was $7.29 million, compared to $16.44 million for the same period last year.
- The company realized a net loss of $1.55 million from investments during the nine months ended March 31, 2024.
Sentiment
Score: 4
Explanation: The document presents a mixed picture with some positive developments like improved operating loss and OTCQX listing, but the net loss and decreased revenue indicate a negative sentiment overall. The company is also facing significant economic headwinds.
Positives
- The operating loss for the quarter improved to $2.68 million, compared to $9.23 million in the same period last year.
- The operating loss for the nine months ended March 31, 2024 was $7.29 million, compared to $16.44 million for the same period last year.
- The company's common stock became eligible for trading on the OTCQX Best Market on April 29, 2024.
Negatives
- The company reported a net loss attributable to common stockholders of $3.5 million for the quarter ended March 31, 2024.
- Rental and reimbursement revenue decreased to $4.08 million for the quarter, down from $4.47 million in the same period last year.
- The company realized a net loss of $0.27 million from investments during the quarter.
- The company realized a net loss of $1.55 million from investments during the nine months ended March 31, 2024.
Risks
- The company's investments are considered speculative and subject to risk of loss.
- The company is exposed to interest rate risk with respect to its variable-rate indebtedness.
- The company's properties operate in highly competitive markets and face unique challenges based on local economic, political, and legal factors.
- Rent control laws can restrict the company's ability to raise rents significantly.
- The company faces uncertainty regarding workers returning to the office after COVID-19.
- The broader economy is experiencing increased levels of inflation, higher interest rates, and tightening monetary and fiscal policies, which could adversely impact real estate asset values and the company's expenses.
- The current market and economic conditions could have a material impact on the company's business, cash flow, and results of operations.
Future Outlook
The company plans to fund future investments with the net proceeds raised from its preferred equity offering and any future offerings of securities and cash flows from operations. The company also may fund a portion of its investments through borrowings from banks and issuances of senior securities. The company intends to utilize leverage to enhance the total returns of its portfolio.
Management Comments
- The company's management believes that the current market and economic conditions could have a material impact on the company's business, cash flow, and results of operations.
- Management believes that it is probable that the stabilization thresholds will be reached for each of the property companies that did not meet this threshold at the acquisition date.
Industry Context
The company operates in a competitive real estate market, facing challenges from local economic, political, and legal factors. The company's multi-family properties are subject to rent control laws, which can limit rent increases. The company's office properties face competition from other office properties and the uncertainty of workers returning to the office after COVID-19. The company's hotel investment competes for business and leisure travel. The broader economy is experiencing increased levels of inflation, higher interest rates, and tightening monetary and fiscal policies, which could adversely impact real estate asset values and the company's expenses.
Comparison to Industry Standards
- The company's performance is compared to its own historical results, with a focus on changes in revenue, expenses, and profitability.
- The document does not provide specific comparisons to industry benchmarks or competitors, but it does note that the company's properties operate in highly competitive markets.
- The company's strategy of acquiring distressed real properties is mentioned, which is a common strategy in the real estate industry, but no specific comparisons to other companies using this strategy are provided.
- The company's use of leverage is mentioned, which is a common practice in the real estate industry, but no specific comparisons to other companies' leverage ratios are provided.
Related Party Transactions
- The company has advisory agreements with the Real Estate Adviser and the Investment Adviser.
- The company reimburses MacKenzie for its allocable portion of overhead and other expenses.
- The company pays asset management fees to the Real Estate Adviser based on invested capital.
- The company reimburses MacKenzie for administrative costs and transfer agent services.
- The company's Real Estate Adviser's subsidiary, WCM, provides property management and leasing services to the company's properties.
- The company's Advisers reimburse the company for offering costs in excess of a certain threshold.
Stakeholder Impact
- Shareholders are impacted by the company's net loss and the suspension of the common stock share repurchase program and DRIP.
- Employees are impacted by the company's financial performance and any potential changes in operations.
- Tenants are impacted by the company's property management and leasing services.
- Creditors are impacted by the company's debt obligations and ability to repay loans.
- Suppliers are impacted by the company's ability to pay for goods and services.
Next Steps
- The company plans to continue to qualify as a REIT and meet the associated testing requirements, including paying out at least 90% of its taxable income.
- The company plans to continue its historical activities related to launching tender offers to purchase shares of non-traded REITs.
- The company plans to continue to develop the Aurora project and market the 220 Campus Lane Office Building for lease.
- The company will continue to monitor the market and economic conditions and their impact on the company's business.
Key Dates
| Date | Description |
|---|---|
| January 27, 2012 | MacKenzie Realty Capital, Inc. was incorporated under the laws of the State of Maryland. |
| February 28, 2013 | The company commenced operations and the Administration Agreement with MacKenzie Capital Management, LP became effective. |
| January 2014 | The initial public offering of 5,000,000 shares of common stock commenced. |
| October 2016 | The initial public offering of 5,000,000 shares of common stock concluded. |
| December 2016 | The second public offering of 15,000,000 shares of common stock commenced. |
| October 28, 2019 | The second public offering of 15,000,000 shares of common stock concluded. |
| October 31, 2019 | The third registration statement for a public offering of 15,000,000 shares of common stock was declared effective by the SEC. |
| October 31, 2020 | The third public offering of 15,000,000 shares of common stock expired. |
| December 31, 2020 | The company withdrew its election to be treated as a BDC. |
| January 1, 2021 | The Amended and Restated Investment Advisory Agreement with MCM Advisers, LP became effective. |
| February 26, 2021 | Madison and PVT obtained mortgage loans from First Republic Bank. |
| March 2021 | The company formed Madison-PVT Partners LLC and PVT-Madison Partners LLC. |
| April 13, 2021 | The company filed a preliminary offering circular to sell up to $50 million of shares of Series A preferred stock. |
| October 4, 2021 | The company acquired a 90% economic interest in Hollywood Hillview Owner, LLC. |
| January 25, 2022 | The company acquired a 98% limited liability company interest in MacKenzie BAA IG Shoreline LLC. |
| April 1, 2022 | The company entered into a reverse triangular merger agreement with FSP Satellite Place Corp. |
| May 6, 2022 | The 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 | The merger with FSP Satellite Place Corp. closed, and MacKenzie Satellite Place, Inc. became a wholly owned subsidiary. |
| June 30, 2022 | The company consolidated the financial statements of MacKenzie Shoreline and the eight limited liability companies acquired from Wiseman. |
| July 23, 2022 | The Operating Partnership completed the acquisition of 100% of the limited partnership interest in First & Main, LP. |
| August 16, 2022 | GVEC, LLC entered into a $14,000,000 fixed-rate loan agreement with Columbia State Bank. |
| October 1, 2022 | The Operating Partnership completed the acquisition of 100% of the limited partnership interest in 1300 Main, LP. |
| October 14, 2022 | The company filed a post-effective amendment to the Offering Circular, increasing the offering to sell up to $75 million of shares of Series A preferred stock. |
| November 13, 2022 | The post-effective amendment to the Offering Circular was declared effective. |
| December 31, 2022 | The company terminated TRS and transferred the ownership of MacKenzie NY 2 to the Parent Company. |
| January 3, 2023 | The Operating Partnership completed the acquisition of 100% of the limited partnership interest in Woodland Corporate Center Two, LP. |
| February 1, 2023 | The Operating Partnership completed the acquisition of 100% of the limited partnership interest in Main Street West, LP. |
| February 6, 2023 | The company formed MRC Aurora, LLC. |
| March 15, 2023 | The loan agreement with Ladder Capital Finance was amended to update the interest rate. |
| August 14, 2023 | PT Hillview exercised the first extension option to extend the term of the loan to October 6, 2024. |
| September 1, 2023 | The company formed 220 Campus Lane, LLC and Campus Lane Residential, LLC. |
| September 8, 2023 | 220 Campus Lane and Campus Lane Residential acquired the vacant 220 Campus Lane Office Building and the adjacent vacant parcel of land. |
| September 29, 2023 | The interest rate cap agreement for PT Hillview was revised. |
| November 1, 2023 | The company filed a second post-effective amendment to the Offering Circular to sell an aggregate of up to $75 million of shares of either Series A or Series B preferred stock. |
| November 14, 2023 | The second post-effective amendment to the Offering Circular was qualified by the SEC. |
| January 1, 2024 | The Operating Partnership acquired 100% membership interest in GV Executive Center, LLC. |
| February 21, 2024 | MRC Aurora closed on a construction loan of $17.15 million. |
| March 4, 2024 | The board of directors suspended the common stock share repurchase program and DRIP. |
| March 31, 2024 | End of the reporting period for the quarterly report. |
| April 1, 2024 | MRC Aurora commenced construction preparation and grading work. |
| April 29, 2024 | The company's common stock became eligible for trading on the OTCQX Best Market. |
| May 15, 2024 | Date of the quarterly report filing. |
Keywords
Real Estate, REIT, Investments, Property Management, Financial Results, Commercial Real Estate, Residential Real Estate, Operating Loss, Net Loss, Asset Management
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