MKZR

Mackenzie Realty ($MKZR) CEO Buying Aggressively Despite 80% Stock Plunge - Insider Confidence vs Financial Risks

10/06/2025 19:55

Mackenzie Realty Capital ($MKZR) is sending mixed signals to investors. While the stock has plummeted nearly 80% from $33.63 in November to the current $6.65, insiders have been aggressively buying shares, creating an intriguing contradiction. Mackenzie Realty Capital is a small-cap real estate investment trust (REIT) founded in 2013 and headquartered in Orinda, California. The company focuses on multifamily residential properties and boutique Class A office buildings along the U.S. West Coast. Its current portfolio includes 4 multifamily properties, 8 office buildings, and 2 multifamily development projects, with the recently completed Aurora at Green Valley project achieving a 31% lease rate. The most notable development is CEO Robert Dixon's persistent buying pattern. From January 16 to April 3, Dixon executed 15 separate stock purchases, continuing to average down even as shares fell from the $30s to the teens. He bought over 150,000 shares at prices ranging from $2.85 to $1.43, demonstrating unwavering confidence in the company's prospects. Even more intriguing is the coordinated buying pattern that emerged in August. CFO Angche Sherpa, CCO Jeri Bluth, officer Christine Simpson, and Charles Patterson II executed identical purchases on the same dates, at identical prices, for identical share quantities from August 6 through October 3. This suggests an organized buying strategy or corporate-level share price defense initiative. However, the financial reality paints a starkly different picture. While fiscal 2025 revenue increased 40% to $22.06 million, net losses more than doubled to $23.97 million from $11.22 million the previous year. The debt-to-equity ratio of 144% far exceeds industry averages of 40-60%, and the current ratio of just 0.14 raises serious short-term liquidity concerns. These financial challenges forced the company to suspend quarterly dividends after Q3 2025, breaking a tradition of annual dividend payments since inception. With only $3.79 million in cash against $134.69 million in debt, the financial burden is substantial. Yet some positive signals exist. Funds From Operations (FFO) improved 53% to negative $2.32 million, while Adjusted FFO improved 84% to negative $0.69 million. Levered free cash flow remains positive at $4.36 million, indicating some cash generation capability after debt service. The key insight for investors lies in the timing and scale of insider buying. CEO Dixon's purchases throughout the decline and the August coordinated buying at the $4-5 price range, coinciding with apparent bottom formation, strongly suggest insiders view current prices as deeply undervalued. However, the high leverage and persistent losses make this a risky proposition based solely on insider activity. While the price-to-book ratio of 0.15 indicates significant undervaluation relative to assets, whether this represents opportunity or a value trap depends on operational improvements over the coming quarters. Key metrics to monitor include the Aurora at Green Valley project's lease-up progress and overall portfolio occupancy rates. If the current 31% lease rate reaches 70-80%, substantial revenue and cash flow improvements should follow. Debt restructuring plans and additional fundraising success will also be critical variables. While insider buying signals are encouraging, the current financial situation demands caution. Given small-cap REIT volatility and real estate market uncertainties, this appears suitable only for high-risk tolerance investors seeking potential turnaround opportunities.