DEF: MacKenzie Realty Capital Sets 2025 Annual Meeting Agenda

MacKenzie Realty Capital, Inc. announced its 2025 Annual Meeting of Stockholders to elect directors and ratify its independent registered public accounting firm, Baker Tilly US, LLP.

Summary

• The 2025 Annual Meeting of Stockholders is scheduled for November 17, 2025, at 10 a.m. Pacific Time, to elect four directors and ratify Baker Tilly US, LLP as the independent registered public accounting firm for the fiscal year ending June 30, 2026.
• The Board of Directors, including the independent directors, recommends voting FOR all director nominees and FOR the ratification of Baker Tilly US, LLP.
• As of the September 29, 2025 record date, 1,769,284.00 shares of common stock were outstanding, following a 1-for-10 reverse stock split effective August 4, 2025.
• Executive officers do not receive direct compensation from the company; instead, they are compensated through affiliated Advisers and the Manager.
• For Fiscal Year 2025, the company incurred $3,449,487 in Asset Management Fees and $292,000 in Acquisition Fees.
• A $10,000,000 line of credit with Patterson Real Estate Services, LP, an affiliate of the company's Adviser, was established on January 22, 2025, bearing 10% annual interest and a 2% origination fee. The full $10,000,000 was outstanding as of September 29, 2025, with $284,693.33 of accrued interest unpaid as of June 30, 2025.
• Moss Adams LLP merged with Baker Tilly US, LLP in June 2025, leading to Baker Tilly US, LLP's appointment as the new independent registered public accounting firm, with no reported disagreements during the transition.

Sentiment

Score: 6

Explanation: The filing is largely procedural, detailing the annual meeting and corporate governance. Positives include strong governance policies and a new independent director. Negatives include the extent of related-party transactions and the non-independent board chair, which introduce potential conflicts and financial obligations to affiliates. The unpaid interest on the related-party line of credit is a minor concern. Overall, it's a neutral-to-slightly-positive sentiment due to governance improvements and routine nature, but with notable related-party concerns.

Positives

• The Board of Directors, including independent directors, recommends approval of all proposals, indicating internal alignment on key governance matters.
• The company has established robust corporate governance policies, including regular executive sessions for independent directors and committees composed solely of independent directors.
• The Audit Committee chair, Tim Dozois, has been deemed an audit committee financial expert under SEC rules.
• The company adopted a clawback policy for executive compensation, demonstrating a commitment to accountability, even though no incentive-based compensation is currently paid.
• The company successfully transitioned its independent auditor following a merger, with no reported disagreements or reportable events with the previous firm.

Negatives

• The Chair of the Board, Chip Patterson, is a non-independent director due to extensive relationships with the Advisers and Manager, which could raise potential conflicts of interest.
• Significant related-party transactions exist, including advisory and administration agreements, and a $10,000,000 line of credit with an affiliate (Patterson Real Estate Services, LP), which bears 10% annual interest and a 2% origination fee.
• A substantial portion of the interest accrued on the related-party line of credit ($284,693.33 out of $324,643.33) remained unpaid as of June 30, 2025.
• The company does not currently have a designated lead Independent Director, which is a governance practice often recommended when the Board Chair is non-independent.
• The company hopes to save expense by not retaining a firm for proxy solicitation this year, but expects to engage Alliance Advisors, LLC for approximately $5,000 plus variable costs if needed, indicating potential cost sensitivity or uncertainty in proxy solicitation efforts.

Risks

• Potential conflicts of interest due to the non-independent Chair of the Board and the extensive relationships between executive officers and affiliated Advisers and Manager.
• Reliance on related parties for key services (advisory, administration) and financing (line of credit), which could impact terms and conditions compared to arm's-length transactions.
• The company's ability to manage and repay the $10,000,000 line of credit, especially given the unpaid interest balance of $284,693.33 as of June 30, 2025.
• The risk of not achieving a quorum or sufficient votes for proposals at the annual meeting, potentially leading to adjournments and further solicitation costs.
• The company's dependence on the Advisers for investment operations and the Manager for administrative services, with executive officers being employees of these entities.

Future Outlook

The company intends to re-examine its corporate governance policies on an ongoing basis to ensure they continue to meet its needs. It also expects to announce preliminary voting results at the Annual Meeting and publish final results in a Current Report on Form 8-K within four business days after the Annual Meeting.

Management Comments

• We encourage stockholders to approve these proposals.
• It is important that your shares be represented, either in person or by proxy, at the annual meeting.
• Your vote and participation in our governance are very important to us.
• The Board believes that it is necessary for each of the Company's directors to possess many qualities and skills.
• The Board believes that each of our directors nominated for re-election is highly qualified to serve as a member of the Board.
• We intend to re-examine our corporate governance policies on an ongoing basis to ensure that they continue to meet our needs.
• We believe that our Board's role in risk oversight is effective, and appropriate given the extensive regulation to which we are already subject as a public reporting company.

Industry Context

As a REIT, MacKenzie Realty Capital operates in a highly regulated environment, and its corporate governance structure, including the composition of its board and committees, is crucial for investor confidence. The transition of its independent auditor due to a merger reflects a common occurrence in the accounting industry, requiring diligent oversight to ensure continuity and compliance. The company's reliance on affiliated entities for management and financing is a characteristic often seen in externally managed REITs or investment vehicles, necessitating robust related-party transaction policies and independent board oversight to mitigate potential conflicts.

Comparison to Industry Standards

• The company's board structure, with a majority of independent directors and independent audit, nominating, and compensation committees, aligns with general corporate governance best practices for publicly traded companies, particularly those anticipating a Nasdaq listing.
• The adoption of a clawback policy, even without current incentive-based compensation, demonstrates proactive alignment with evolving regulatory standards like those from the SEC, which are becoming standard for many public companies.
• The use of a related-party line of credit with a 10% interest rate and 2% origination fee should be compared against prevailing market rates for similar credit facilities available to companies of comparable size and risk profile in the real estate investment sector to assess its competitiveness and fairness to shareholders.
• The level of related-party transactions, including advisory and administration fees, should be benchmarked against industry averages for externally managed REITs to ensure that the cost structure is competitive and aligned with shareholder interests.

Management Changes

Corporate Governance

Related Party Transactions

• Advisory Agreements with MCM Advisers, LP and MacKenzie Real Estate Advisers, LP, where executive officers are employees and beneficial owners.
• Administration Agreement with MacKenzie Capital Management, LP, where executive officers are employees and beneficial owners, for office facilities, equipment, clerical, bookkeeping, recordkeeping, and administrative services.
• License Agreement granting a non-exclusive, royalty-free license to use the 'MacKenzie' name as long as the Advisers serve as investment adviser.
• Line of Credit agreement with Patterson Real Estate Services, LP (PRES), an affiliate of the Company's Adviser, for up to $10,000,000 at 10% annual interest and a 2% origination fee. The largest amount outstanding in Fiscal 2025 was $10,000,000, and $284,693.33 of accrued interest was unpaid as of June 30, 2025.
• Executive officers, through their indirect financial interest in the Advisers, are entitled to a portion of any investment advisory fees paid by the company.
• Family relationships exist among some executive officers and directors (e.g., Robert Dixon is Berniece Patterson's son-in-law and brother-in-law to Chip Patterson and Glen Fuller).

Stakeholder Impact

• Shareholders will vote on key governance matters (director elections, auditor ratification). The reverse stock split and related-party transactions could impact shareholder value and perception. The line of credit with an affiliate at 10% interest and 2% origination fee directly impacts financial performance and could be a point of concern regarding shareholder value.
• Management and employees of the Advisers/Manager are compensated through affiliated entities, not directly by the company, which aligns their interests with the Advisers/Manager.
• The Advisers and Manager continue to receive asset management fees and reimbursements, and benefit from the related-party line of credit.
• Baker Tilly US, LLP benefits from the engagement as the independent registered public accounting firm.

Next Steps

• Stockholders are to vote on director elections and auditor ratification by November 17, 2025.
• The company will announce preliminary voting results at the Annual Meeting.
• Final voting results will be published in a Current Report on Form 8-K within four business days after the Annual Meeting.
• The Board expects to conduct a similar review of director independence at its annual meeting to be held on October 13, 2025.
• The Audit Committee will reconsider Baker Tilly US, LLP's retention if stockholders fail to ratify their selection.
• Stockholders interested in submitting proposals for the 2026 Annual Meeting under SEC Rule 14a-8 must do so by June 8, 2026.

Key Dates

Recommendation

The filing primarily addresses routine corporate governance matters for the upcoming annual meeting, including director elections and auditor ratification. While the company demonstrates commitment to governance best practices through independent committees and a clawback policy, the extensive related-party transactions, particularly the $10 million line of credit with an affiliate at a 10% interest rate and a 2% origination fee, and the non-independent board chair, introduce potential conflicts of interest and warrant careful monitoring. The lack of direct compensation for executive officers from the company, instead being compensated through affiliated Advisers, is a common structure for externally managed entities but also requires scrutiny. Given the procedural nature of the filing and the mix of governance strengths and related-party concerns, a 'hold' recommendation is appropriate, suggesting investors maintain their current position while closely observing future financial disclosures and related-party dealings.

Keywords

MacKenzie Realty Capital, SEC Filing, Proxy Statement, Annual Meeting, Corporate Governance, Director Election, Auditor Ratification, Related Party Transactions, Real Estate Investment, REIT, Financial Reporting, Board of Directors, Independent Directors, Audit Committee, Compensation Committee, Nominating Committee, Reverse Stock Split, Baker Tilly US, LLP, Line of Credit