MacKenzie Realty Capital Inc., formerly a non-traded business development company that was taxed as a real estate investment trust, has officially withdrawn its BDC designation to focus on real asset investments instead of securities investments. Yesterday, the company also reported that it has continued the suspension of its regular quarterly distributions.
MacKenzie is best known for purchasing shares of illiquid investments, such as non-traded REITs, directly from investors in unsolicited tender offers at prices lower than the estimated net asset value per share.
The company suspended distributions in March 2020, citing “numerous factors relating to the global COVID-19 pandemic.”
“We intend to continue to qualify as a real estate investment trust, and thus we intend to meet the related requirement that we distribute at least 90 percent of our taxable income, once such amounts are reasonably determinable,” the company stated in a filing with the Securities and Exchange Commission. “The company determined that it had paid out at least this much of its taxable income for 2020, so no further dividend is necessary or advisable at this time.”
MacKenzie noted that its board will revisit this decision on a regular basis.
The company indicated that its dividends have generally been supported by two things, distributions of income from investments and liquidity events.
MacKenzie claims to generate the largest portion of income from “earning” the discount at which it purchases assets. Many of its investments have suspended or reduced distributions, causing the company to have “far fewer” liquidity events.
“We believe this to be temporary and, as the markets stabilize, we will return to generating income as we have previously,” the company said.
In May 2020, MacKenzie suspended its share repurchase program to focus on retaining cash to purchase real estate assets. The following month, the firm purchased Addison Corporate Center, a Class A office campus totaling nearly 588,500 square feet located in Windsor, Connecticut.
Regarding its investment shift, MacKenzie previously pointed to “significant opportunities” for investment in real estate assets, as well as greater access to capital and flexibility in raising capital for an investment strategy geared toward direct investment in real estate.
MacKenzie launched its initial public offering in August 2013 and as of September 30, 2020, had raised approximately $130.2 million from its public offerings and dividend reinvestment plan.