MacKenzie Realty Capital's $3M Loan: A Strategic Gamble in Real Estate Liquidity Management?

The commercial real estate sector has faced heightened volatility in recent years, with liquidity management emerging as a critical challenge for players seeking to capitalize on discounted assets. MacKenzie Realty Capital's June 2025 announcement of a $3 million loan facility to acquire non-traded REIT shares underscores a bold strategy to navigate these conditions—but one that carries significant risks.

The Loan's Strategic Purpose: Building Liquidity Through Opportunistic Buying

The $3 million loan, secured from institutional investor Streeterville Capital, LLC, is explicitly earmarked for purchasing non-traded REIT shares, particularly those of Starwood REIT. This aligns with MacKenzie's long-standing practice of capitalizing on discounted REIT share prices. In 2024, the company's affiliate acquired 700,000 Starwood Class S shares at $17.50 each—a 24% discount to Starwood's estimated net asset value (NAV) of $22.94. A follow-up tender in May / 2025, funded by the new loan, saw shares bought at $15.30, underscoring a deepening discount.

The strategic rationale is clear: non-traded REIT shares often trade at steep discounts to underlying asset values due to illiquidity, offering potential arbitrage opportunities. By deploying the loan to acquire these shares, MacKenzie aims to bolster its balance sheet, diversify its real estate exposure, and enhance cash flow through eventual NAV convergence or asset sales. CEO Robert Dixon emphasized the loan's role in “proactively managing liquidity” to drive long-term growth.

Risks in the Liquidity Play: High Leverage and Profitability Woes

However, the loan amplifies MacKenzie's already elevated leverage. The company's Q3 2025 net loss of $6.1 million and suspension of dividends—a first since its 2013 founding—highlight financial fragility. TipRanks' AI analyst Spark assigns a “Underperform” rating to MKZR stock, citing negative profitability and a market cap of just $12.19 million, dwarfed by its debt obligations.

The loan's terms—unspecified in interest rate or maturity—add uncertainty. While the facility provides flexibility, it may strain MacKenzie's cash reserves if NAV discounts persist longer than anticipated or if broader real estate markets weaken further.

The Broader Real Estate Liquidity Landscape

MacKenzie's strategy reflects a broader trend: investors are increasingly targeting non-traded REITs and other illiquid assets to exploit valuation gaps. Yet, success hinges on two factors: (1) the ability to time exits as liquidity returns, and (2) avoiding over-leverage in a tightening credit environment.

The company's portfolio—80% real property (multifamily and Class A offices) plus 20% illiquid securities—provides a foundation. However, its small size and narrow geographic focus (West Coast) limit diversification. Competitors like larger REITs with broader portfolios may outpace MacKenzie in capitalizing on opportunities.

Investment Considerations: A High-Risk, High-Reward Bet

For investors, MacKenzie's loan represents a gamble. On one hand, its disciplined focus on discounted REIT shares could yield outsized returns if asset values rebound. The Starwood purchases, for instance, could generate significant upside if the NAV gap narrows.

On the other hand, the company's financial health is precarious. A reveals it lags behind competitors, while its high leverage ratio (projected ~0.8x debt-to-equity post-loan) leaves little margin for error.
Backtest the performance of MKZR (MacKenzie Realty Capital) when 'buy condition' is positive quarterly earnings announcements and 'holding until' the next negative earnings report, from 2020 to 2025.

Final Analysis

MacKenzie Realty Capital's $3 million loan is a calculated move to exploit illiquidity in the REIT market—but it's far from risk-free. Investors must weigh the potential rewards of its opportunistic strategy against its fragile balance sheet and macroeconomic headwinds.

Investment Advice:
- Aggressive Investors: Consider a small position in MKZR if you believe real estate liquidity will improve, but set strict stop-loss limits due to high volatility.
- Conservative Investors: Avoid MKZR until profitability stabilizes and leverage ratios decline.
- Monitor: Watch for Starwood NAV updates and MacKenzie's refinancing activity (e.g., its $9.5M Napa property loan) for clues on liquidity resilience.

In a sector where liquidity is both a weapon and a vulnerability, MacKenzie's bet may pay off—if the market delivers the timing it needs.