[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the company's consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, along with detailed notes and management's discussion and analysis [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements for the quarter ended March 31, 2023, show a decrease in total assets to $1.11 billion, primarily due to a significant reduction in liabilities from $385.3 million to $297.0 million following bond repayments, while total revenue increased to $11.7 million from $7.8 million year-over-year, net income attributable to the company fell sharply to $3.0 million from $11.3 million, largely because of a significant gain on asset sales in the prior-year period that did not recur, and cash flow from operations turned positive, but significant cash was used for investing and financing activities, including bond repayments [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | **Total Assets** | **$1,113,420** | **$1,197,479** | **($84,059)** | | Cash and cash equivalents | $55,340 | $113,445 | ($58,105) | | Real estate, net | $502,941 | $493,821 | $9,120 | | **Total Liabilities** | **$297,033** | **$385,311** | **($88,278)** | | Mortgages and other notes payable | $187,179 | $188,004 | ($825) | | Bonds payable | $41,672 | $129,218 | ($87,546) | | **Total Equity** | **$816,387** | **$812,168** | **$4,219** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Three Months Ended March 31, (in thousands, except per share) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $11,688 | $7,787 | +$3,901 | | Net Operating Loss | ($3,086) | ($4,495) | +$1,409 | | Gain on sale or write-down of assets, net | $0 | $11,148 | ($11,148) | | **Net Income** | **$4,219** | **$14,567** | **($10,348)** | | Net Income Attributable to the Company | $2,978 | $11,314 | ($8,336) | | **EPS - basic and diluted** | **$0.18** | **$0.70** | **($0.52)** | - The significant decrease in net income year-over-year is primarily attributable to a **$11.1 million gain on the sale of assets** in Q1 2022, which was not repeated in Q1 2023[21](index=21&type=chunk) [Consolidated Statements of Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Equity) - For the three months ended March 31, 2023, total equity increased from **$812.2 million to $816.4 million**, driven by a net income of **$4.2 million** for the period[24](index=24&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Three Months Ended March 31, (in thousands) | Cash Flow Category | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $1,539 | ($4,186) | +$5,725 | | Net cash (used in) provided by investing activities | ($24,212) | $5,646 | ($29,858) | | Net cash used in financing activities | ($89,127) | ($38,769) | ($50,358) | | **Net decrease in cash** | **($111,800)** | **($37,309)** | **($74,491)** | - The significant increase in cash used for financing activities was primarily due to payments on bonds payable, which rose to **$88.3 million** in Q1 2023 from **$22.9 million** in Q1 2022[28](index=28&type=chunk)[41](index=41&type=chunk) [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the company's business structure, segment performance, and significant transactions, including its portfolio composition of multifamily and commercial properties, a significant increase in multifamily segment profit, the initiation of a new $55.3 million development project, distributions from the VAA joint venture, and substantial bond repayments leading to a withdrawal from the Tel-Aviv Stock Exchange subsequent to the quarter's end - The company's primary business is the acquisition, development, and ownership of income-producing multifamily and commercial properties, with its portfolio as of March 31, 2023, including **four office buildings**, **fourteen multifamily properties (2,328 units)**, and approximately **1,858 acres of land**[31](index=31&type=chunk)[32](index=32&type=chunk) Segment Profit (in thousands) | Segment | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Multifamily | $3,665 | $1,508 | +$2,157 | | Commercial | $1,238 | $1,945 | ($707) | | **Total Profit from Segments** | **$4,903** | **$3,453** | **+$1,450** | - On March 15, 2023, the company began development of a **240-unit multifamily property** in Lake Wales, Florida, with an expected total cost of **$55.3 million**, partially funded by a new **$33.0 million construction loan**[55](index=55&type=chunk)[83](index=83&type=chunk) - The company received a final distribution of **$17.976 million** from its VAA joint venture on March 23, 2023, representing the remaining proceeds from the 2022 sale of the VAA Sale Portfolio[66](index=66&type=chunk) - In January 2023, the company repaid its Series C bonds totaling **$88.3 million**, and subsequent to the quarter end, on May 4, 2023, it paid off the remaining Series A and Series B Bonds and withdrew from the Tel-Aviv Stock Exchange (TASE)[89](index=89&type=chunk)[101](index=101&type=chunk) - The company engages in significant transactions with related parties Pillar and Regis for advisory, management, and other services, with advisory fees to Pillar totaling **$2.4 million** and G&A expenses payable to Pillar totaling **$1.5 million** for Q1 2023[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations%20%28MD%26A%29) Management attributes the $10.3 million year-over-year decrease in net income primarily to the non-recurrence of an $11.1 million gain on asset sales and a $2.8 million decrease in income from joint ventures from the prior year, partially offset by improved performance in the multifamily segment and higher net interest income, while highlighting recent strategic activities including significant debt reduction through bond repayments, acquisition of seven multifamily properties, and the start of a new development project, despite the drop in net income, Funds From Operations (FFO) showed substantial growth, increasing from $1.9 million to $6.1 million [Management's Overview](index=23&type=section&id=Management%27s%20Overview) - Recent financing activities include the full repayment of Series C bonds in January 2023 and the subsequent payoff of Series A and B bonds in May 2023, along with securing a new **$33.0 million construction loan** for a development project[112](index=112&type=chunk) - On November 1, 2022, the company acquired **seven multifamily properties** (the "VAA Holdback Portfolio") from its VAA joint venture[110](index=110&type=chunk)[114](index=114&type=chunk) - A new development project for a **240-unit multifamily property** in Lake Wales, Florida, began on March 15, 2023, with an expected completion in 2025 at a total cost of approximately **$55.3 million**[113](index=113&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) - The **$10.3 million decrease in net income** from Q1 2022 to Q1 2023 was primarily driven by the absence of a **$9.4 million gain** on the sale of the Toulon property and a **$2.0 million gain** on land sales that occurred in 2022[124](index=124&type=chunk) - Profit from the multifamily segment increased by **$2.2 million**, mainly due to contributions from newly acquired properties, while profit from the commercial segment decreased by **$0.7 million** due to lower occupancy at Stanford Center[124](index=124&type=chunk) - Net interest income improved by **$4.5 million**, resulting from a **$4.0 million increase** in interest income (due to higher rates and larger short-term investments) and a **$1.0 million decrease** in interest expense (due to debt repayments)[124](index=124&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash from operating activities increased by **$5.7 million** year-over-year, primarily due to higher interest income and rents from acquired properties[127](index=127&type=chunk) - Cash used in investing activities increased by **$29.9 million**, mainly because of **$28.5 million** in proceeds from real estate sales in 2022 and a net increase in short-term investment purchases in 2023[128](index=128&type=chunk) - Cash used in financing activities increased by **$50.4 million**, driven by the **$67.4 million payoff** of Series C Bonds in 2023[128](index=128&type=chunk) [Funds From Operations (FFO)](index=27&type=section&id=Funds%20From%20Operations%20%28FFO%29) FFO Reconciliation (in thousands) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Net income attributable to the Company | $2,978 | $11,314 | ($8,336) | | Adjustments (Depreciation, Gain on Sale, etc.) | $3,151 | ($11,389) | +$14,540 | | **FFO-Basic and Diluted** | **$6,129** | **$1,925** | **+$4,204** | | **FFO-adjusted** | **$5,158** | **($208)** | **+$5,366** | - Despite a sharp decline in net income, FFO increased significantly, which management believes provides a more meaningful measure of operating results by excluding items like real estate depreciation and gains/losses from property sales[130](index=130&type=chunk)[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risks](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) This section is optional for the registrant and was not included in the report - The company has elected not to include quantitative and qualitative disclosures about market risks in this report[135](index=135&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Principal Executive Officer and Principal Financial Officer, evaluated the company's disclosure controls and procedures and concluded they were effective as of the end of the period, with no material changes to the company's internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2023[136](index=136&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[137](index=137&type=chunk) [PART II. OTHER INFORMATION](index=29&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers other required disclosures, including legal proceedings, risk factors, unregistered sales of equity securities, and a list of exhibits [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no legal proceedings in this section, however, Note 18 in the financial statements discloses ongoing litigation with David Clapper, which is currently under appeal in the US Fifth Circuit Court of Appeals - The company reports "None" under this item[138](index=138&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors that were previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes from the risk factors disclosed in the 2022 10-K were reported[139](index=139&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company did not repurchase any of its shares during the three months ended March 31, 2023, and under its existing share repurchase program, 263,250 shares remain available for purchase - No shares were repurchased during the three months ended March 31, 2023, and as of the end of the quarter, **263,250 shares** may still be purchased under the existing repurchase program[140](index=140&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with or incorporated by reference into the Form 10-Q, including corporate governance documents, material agreements, and officer certifications - A list of exhibits filed with the report is provided, including certifications by the Principal Executive and Financial Officer and XBRL data files[143](index=143&type=chunk)[144](index=144&type=chunk)

[Part I](index=3&type=section&id=PART%20I) [Business](index=3&type=section&id=Item%201.%20Business) ARL, an externally managed real estate company operating through TCI, focuses on multifamily, commercial, and land investments, with 2022 marked by major property sales and acquisitions - The company is an externally managed real estate firm operating through its **majority-owned subsidiary**, Transcontinental Realty Investors, Inc. (TCI), managed by Pillar Income Asset Management, Inc., with ARL itself having **no employees**[6](index=6&type=chunk)[7](index=7&type=chunk)[11](index=11&type=chunk) Portfolio Composition as of December 31, 2022 | Property Type | Details | | :--- | :--- | | **Commercial Properties** | 4 office buildings, ~1,056,793 sq ft | | **Multifamily Properties** | 14 properties, 2,328 units | | **Land** | ~1,858 acres (developed and undeveloped) | - A major 2022 event was the VAA joint venture's sale of 45 properties for **$1.8 billion**, resulting in ARL receiving an initial cash distribution of **$182.8 million**, a subsequent distribution of **$204.0 million**, and **full operational control** of the seven remaining VAA properties[17](index=17&type=chunk)[18](index=18&type=chunk) - The company's business strategy is to **maximize long-term value** by **acquiring, developing, and owning income-producing multifamily properties** in the secondary markets of the Southern United States, while also opportunistically investing in commercial properties and land[19](index=19&type=chunk) [Risk Factors](index=7&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks to the company's business, categorized by factors affecting its assets and the broader real estate industry [Factors Affecting Our Assets](index=7&type=section&id=FACTORS%20AFFECTING%20OUR%20ASSETS) Risks directly impacting the company's assets include potential future disease outbreaks, tenant financial instability, intense competition, development activity risks, high leverage of approximately **$317.2 million**, and geographic concentration - The company's operating results are highly dependent on tenants' ability to pay rent, which can be adversely affected by economic challenges, such as those created by the COVID-19 pandemic, and potential shifts in residents' views on their rent obligations[35](index=35&type=chunk) - As of December 31, 2022, the company had total indebtedness of approximately **$317.2 million**, with substantially all real estate assets pledged as collateral, increasing risk of loss and vulnerability to economic declines[48](index=48&type=chunk) - The company's properties are concentrated in the southwestern, southeastern, and mid-western United States, making its performance heavily dependent on the economic conditions in these regions[47](index=47&type=chunk) [Factors Affecting the Industry](index=11&type=section&id=FACTORS%20AFFECTING%20THE%20INDUSTRY) The company is subject to industry-wide risks including real estate illiquidity, economic downturns, interest rate changes, competition, increased operating costs, and regulatory changes like rent control laws - Real estate investments are generally **illiquid**, meaning properties cannot be sold quickly, which may limit the company's ability to respond to changing economic conditions or realize full asset value[55](index=55&type=chunk)[63](index=63&type=chunk) - Adverse economic conditions, such as a recession or pandemic effects, could lead to reduced rental rates, lower occupancy, decreased property valuations, and difficulty in obtaining financing[62](index=62&type=chunk)[68](index=68&type=chunk) - The company faces risks from competition, changes in rent control or stabilization laws, and shifts in tenant demand, particularly with the increase in 'work from home' arrangements[64](index=64&type=chunk)[66](index=66&type=chunk) [Unresolved Staff Comments](index=13&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[69](index=69&type=chunk) [Properties](index=14&type=section&id=Item%202.%20Properties) As of December 31, 2022, the company's portfolio includes 14 residential properties with **2,328 units**, four commercial properties totaling approximately **1.06 million square feet**, and significant land investments of approximately **1,858 acres** Residential Property Portfolio Summary (Dec 31, 2022) | Location | No. of Properties | Units | | :--- | :--- | :--- | | Alabama | 1 | 200 | | Colorado | 2 | 260 | | Louisiana | 3 | 608 | | Mississippi | 1 | 160 | | Texas | 7 | 1,100 | | **Total** | **14** | **2,328** | Commercial Property Portfolio Summary (Dec 31, 2022) | Property | Location | Square Feet | Occupancy | | :--- | :--- | :--- | :--- | | 770 South Post Oak | Houston, TX | 95,450 | 55.2% | | Browning Place | Dallas, TX | 625,297 | 71.7% | | Senlac | Dallas, TX | 2,812 | 100.0% | | Stanford Center | Dallas, TX | 333,234 | 61.6% | | **Total** | | **1,056,793** | | - A significant portion of commercial leases are set to expire in the near term, with **36% of total leased square footage expiring in 2023**[75](index=75&type=chunk) - The company holds **1,710 acres of land for development** and an additional **148 acres held subject to sales contracts**, with the largest project being Windmill Farms in Kaufman County, TX[77](index=77&type=chunk) [Legal Proceedings](index=16&type=section&id=Item%203.%20Legal%20Proceedings) The company reports on three key legal matters: a favorable jury verdict in the 'Nixdorf' case, an ongoing appeal in the 'Clapper' case, and the dismissal of the 'Berger' suit - In the 'Nixdorf' property sale litigation, a jury returned a **\"Plaintiff take nothing\" verdict** in the company's favor on March 18, 2023[78](index=78&type=chunk) - In the 'Clapper' litigation, a jury found the defendants owed nothing, and the court issued a take-nothing judgment, with the case currently under appeal to the US Fifth Circuit Court of Appeals[78](index=78&type=chunk) - The 'Berger' suit, which alleged improper property sales, was voluntarily dismissed by the plaintiff and formally **dismissed with prejudice** by the court on January 4, 2023[78](index=78&type=chunk) [Mine Safety Disclosures](index=16&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[79](index=79&type=chunk) [Part II](index=17&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=17&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock (NYSE: ARL) showed significant volatility in 2022, with no dividends paid for 2020-2022, and no shares repurchased in 2022 under its program Quarterly Common Stock Price Range (NYSE: ARL) | Quarter | 2022 High | 2022 Low | 2021 High | 2021 Low | | :--- | :--- | :--- | :--- | :--- | | First | $15.70 | $11.90 | $11.50 | $8.50 | | Second | $23.02 | $13.75 | $13.31 | $7.71 | | Third | $16.74 | $13.35 | $20.38 | $9.20 | | Fourth | $27.76 | $15.26 | $13.67 | $11.04 | - The Board of Directors determined **not to pay any dividends** on common stock in 2022, 2021, or 2020[82](index=82&type=chunk) - Under its stock repurchase program, the company **did not repurchase any shares in 2022**, with **19,465 shares** remaining authorized for repurchase as of December 31, 2022[82](index=82&type=chunk) [Selected Financial Data](index=17&type=section&id=Item%206.%20Selected%20Financial%20Data) This section is optional and has not been included in the report - Optional and not included[83](index=83&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section details the company's financial performance and condition, highlighting the significant impact of the VAA Sale Portfolio on 2022 net income and discussing liquidity, critical accounting policies, and FFO reconciliation [Management's Overview](index=17&type=section&id=Management%27s%20Overview) The company, an externally managed real estate firm, saw its 2022 activities dominated by the **$1.8 billion** VAA Sale Portfolio transaction, generating a **$738.4 million** gain for the JV and significant cash distributions to ARL - On September 16, 2022, the VAA joint venture completed the sale of the VAA Sale Portfolio for **$1.8 billion**, generating a gain of **$738.4 million** for the JV[92](index=92&type=chunk) - Following the VAA sale, the company received cash distributions totaling **$386.8 million** and acquired **full operational control** of the seven-property VAA Holdback Portfolio[92](index=92&type=chunk)[93](index=93&type=chunk) - Financing activities in 2022 included paying off mortgage loans on Toulon (**$14.7 million**), Sugar Mill Phase III (**$9.6 million**), and Stanford Center (**$38.5 million**), and assuming **$70.3 million** in mortgages on the acquired VAA Holdback Portfolio[90](index=90&type=chunk) [Critical Accounting Policies](index=20&type=section&id=Critical%20Accounting%20Policies) Management identifies critical accounting policies requiring significant estimates and judgments, including fair value measurements using a three-level hierarchy, related party transactions, and environmental liabilities - The company applies ASC Topic 820 for fair value measurements, using a three-level hierarchy to prioritize inputs, where Level 1 uses quoted prices in active markets and Level 3 uses unobservable data requiring the most judgment[97](index=97&type=chunk) - The company is not aware of any environmental liabilities that would have a material adverse effect on its business, assets, or results of operations[99](index=99&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) Net income for 2022 dramatically increased by **$468.9 million** year-over-year, primarily driven by a **$454.6 million** increase in joint venture income from the VAA Sale Portfolio and a **$62.5 million** gain on remeasurement of assets Comparison of Results of Operations (Years Ended Dec 31, in thousands) | (In thousands) | 2022 | 2021 | Variance | | :--- | :--- | :--- | :--- | | **Total Revenue** | $37,544 | $42,039 | ($4,495) | | **Segment Operating Income** | $15,741 | $16,948 | ($1,207) | | **Income from Joint Ventures** | $469,268 | $14,634 | $454,634 | | **Gain on sale/remeasurement** | $87,132 | $24,647 | $62,485 | | **Net Income** | **$475,317** | **$6,445** | **$468,872** | - The **$468.9 million increase in net income** was primarily due to the company's share of the gain on the sale of the VAA Sale Portfolio and a **$73.2 million gain** on the remeasurement of the VAA Holdback Portfolio[105](index=105&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) The company's cash sources include operations, asset sales, and financing, with 2022 seeing increased net cash used in operating activities due to tax payments and substantially higher net cash from investing activities due to VAA distributions - Principal sources of cash include property operations, proceeds from property sales, collection of notes receivable, and debt/equity financing[107](index=107&type=chunk) Cash Flow Summary (Years Ended Dec 31, in thousands) | Activity | 2022 | 2021 | Variance | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | $(45,386) | $(11,523) | $(33,863) | | Net cash provided by investing activities | $307,357 | $100,822 | $206,535 | | Net cash used in financing activities | $(112,377) | $(103,585) | $(8,792) | - The increase in cash from investing activities was primarily due to a **$376.9 million increase** in distributions from the VAA joint venture following the sale of the VAA Sale Portfolio[111](index=111&type=chunk) [Funds From Operations (FFO)](index=24&type=section&id=Funds%20From%20Operations%20(FFO)) The company uses FFO, a non-GAAP measure defined by Nareit, as a supplemental financial metric, with FFO-adjusted increasing to **$41.3 million** in 2022 from **$26.4 million** in 2021 - FFO is used as a supplemental measure to GAAP net income to provide a meaningful comparison of operating results, as it excludes items like real estate depreciation and gains from property sales[113](index=113&type=chunk)[114](index=114&type=chunk) Reconciliation of Net Income to FFO-adjusted (in thousands) | | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | **Net income attributable to the Company** | $373,349 | $3,347 | $9,030 | | Adjustments for depreciation, gains on sale, etc. | ... | ... | ... | | **FFO-Basic and Diluted** | $43,275 | $18,819 | $23,350 | | Adjustments for debt extinguishment, currency | ... | ... | ... | | **FFO-adjusted** | **$41,267** | **$26,445** | **$36,730** | [Quantitative and Qualitative Disclosures About Market Risk](index=24&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is optional and has not been included in the report - Optional and not included[118](index=118&type=chunk) [Consolidated Financial Statements and Supplementary Data](index=25&type=section&id=Item%208.%20Consolidated%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2020-2022, including the independent auditor's report highlighting critical audit matters, and detailed notes on key events, accounting policies, debt, and related party transactions [Report of Independent Registered Public Accounting Firm](index=26&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor issued an unqualified opinion on the consolidated financial statements, identifying real estate impairment, notes receivable collectability, and straight-line revenue recognition as critical audit matters - The auditor expressed an **unqualified opinion** on the consolidated financial statements for the three-year period ended December 31, 2022[125](index=125&type=chunk) - Critical Audit Matters identified were: **Impairment of investment in real estate**, **Collectability of Notes Receivable**, and **Revenue Recognition (straight-line)** for commercial tenants[129](index=129&type=chunk) [Consolidated Financial Statements](index=29&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets increased to **$1.2 billion** in 2022, total liabilities decreased, and total equity grew substantially to **$812.2 million**, with net income surging to **$475.3 million** and EPS to **$23.11** due to the VAA transaction Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Assets** | $1,197,479 | $770,569 | | **Total Liabilities** | $385,311 | $433,718 | | **Total Equity** | $812,168 | $336,851 | Consolidated Statement of Operations Highlights (in thousands, except per share) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | **Total Revenue** | $37,544 | $42,039 | | **Net Income** | $475,317 | $6,445 | | **EPS (Basic and Diluted)** | $23.11 | $0.21 | [Notes to Consolidated Financial Statements](index=33&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail the VAA joint venture transaction, including the **$1.81 billion** sale of 45 properties and the **$73.2 million** remeasurement gain on the acquired VAA Holdback Portfolio, alongside disclosures on **$188.0 million** in mortgages, **$129.2 million** in bonds payable, and significant related party transactions - Note 10: On September 16, 2022, the VAA joint venture sold 45 properties for **$1.81 billion**, resulting in a gain of **$738.4 million** to the JV, with the company receiving substantial cash distributions and the remaining seven properties[206](index=206&type=chunk) - Note 11: On November 1, 2022, the company acquired the VAA Holdback Portfolio, resulting in a **gain on remeasurement of assets of $73.2 million**[196](index=196&type=chunk)[215](index=215&type=chunk) Debt Summary (as of Dec 31, 2022, in thousands) | Debt Type | Carrying Value | | :--- | :--- | | Mortgages and other notes payable | $188,004 | | Bonds payable | $129,218 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=56&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on any matter of accounting principles or practices, or financial statement disclosure - None[267](index=267&type=chunk) [Controls and Procedures](index=56&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022, with no material changes identified during the fourth quarter - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the period covered by the report[268](index=268&type=chunk) - Based on an assessment using the COSO framework, management concluded that the company's internal control over financial reporting was **effective** as of December 31, 2022[270](index=270&type=chunk) - No changes in internal control over financial reporting occurred during the fourth quarter of 2022 that materially affected, or are reasonably likely to materially affect, these controls[271](index=271&type=chunk) [Other Information](index=56&type=section&id=Item%209B.%20Other%20Information) This item is not applicable - Not applicable[272](index=272&type=chunk) [Part III](index=57&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=57&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details the company's governance structure, including its six-member Board with five independent directors, and describes the extensive Advisory Agreement with Pillar, which employs all executive officers and receives various fees - The Board of Directors has **six members**, with **five deemed independent**: Henry A. Butler, William J. Hogan, Robert A. Jakuszewski, Ted R. Munselle, and Raymond D. Roberts, Sr[277](index=277&type=chunk)[279](index=279&type=chunk)[281](index=281&type=chunk)[291](index=291&type=chunk) - All executive officers, including the CEO and CFO, are employed by Pillar Income Asset Management, Inc. (Pillar), the company's external advisor, and the company has **no direct employees**[292](index=292&type=chunk)[299](index=299&type=chunk) - Pillar's compensation includes a monthly gross asset fee (**0.75% annually**), a **7.5% net income fee**, a **10% incentive sales fee**, up to **1% acquisition commission**, and a **6% construction fee** on hard costs[301](index=301&type=chunk)[302](index=302&type=chunk)[304](index=304&type=chunk) [Executive Compensation](index=64&type=section&id=Item%2011.%20Executive%20Compensation) The company has no employees and does not directly compensate its executive officers, who are paid by the advisor Pillar; only independent directors receive remuneration, totaling **$90,238** in 2022 - The company has **no employees or payroll** and pays **no compensation to its executive officers**, who are compensated by the external advisor, Pillar[317](index=317&type=chunk) - Non-affiliated Directors are entitled to an annual retainer of **$12,000**, with the Chairman of the Audit Committee receiving an additional annual fee of **$500**[318](index=318&type=chunk) - Total director fees paid to non-employee directors for the year ended December 31, 2022, was **$90,238**[319](index=319&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=65&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of March 23, 2023, The May Trust, through its affiliates, beneficially owned approximately **90.8%** of the company's common stock, while ownership by directors and executive officers remains minimal - The May Trust, along with its affiliates May Realty Holdings, Inc. and Realty Advisors, Inc., is the largest beneficial owner, holding **14,669,820 shares**, which represents **90.8% of the outstanding common stock**[322](index=322&type=chunk) - Security ownership by management is very low, with only one of nine listed directors and executive officers, Bradford A. Phillips, holding shares (**4,315 shares**, or **0.02%**), owned indirectly[324](index=324&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=66&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company details extensive related party relationships, primarily with its advisor Pillar and property manager Regis, requiring independent director approval for all such transactions, and reported a **$108.2 million** receivable from related parties at year-end 2022 - The company's policy requires that any transaction with a related party must be determined to be fair and be authorized or ratified by a **majority of independent directors**[327](index=327&type=chunk) - In 2022, the company paid its advisor, Pillar, **$8.8 million** in advisory fees and **$3.6 million** in cost reimbursements, and paid Regis **$0.4 million** in property management and other fees[335](index=335&type=chunk)[336](index=336&type=chunk) - As of December 31, 2022, the company had a receivable from related parties of **$108.2 million**, which accrues interest at the prime rate plus **1.0%**[337](index=337&type=chunk) [Principal Accounting Fees and Services](index=67&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) This section details fees billed by the independent auditor, Farmer, Fuqua and Huff, L.P., with audit fees totaling **$104,042** in 2022, and confirms the Audit Committee's policy for pre-approval of all audit and permissible non-audit services Auditor Fees Billed | Fee Category | 2022 | 2021 | | :--- | :--- | :--- | | Audit Fees | $104,042 | $183,333 | | Audit-Related Fees | $0 | $0 | | All Other Fees | $0 | $0 | - The Audit Committee has established policies and procedures for the **pre-approval of all audit and permitted non-audit services** performed by the independent auditor[343](index=343&type=chunk) [Part IV](index=69&type=section&id=PART%20IV) [Exhibits, Financial Statement Schedules](index=69&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Form 10-K report, including consolidated financial statements, specific schedules for real estate and mortgage loans, and various exhibits such as the Advisory Agreement and officer certifications - The filing includes financial statements and two key schedules: **Schedule III—Real Estate and Accumulated Depreciation**, and **Schedule IV—Mortgage Loan Receivables on Real Estate**[346](index=346&type=chunk) - Key exhibits filed with the report include the **Advisory Agreement with Pillar Income Asset Management (Exhibit 10.1)** and **certifications by the Principal Executive Officer and Principal Financial Officer** as required by the Sarbanes-Oxley Act[348](index=348&type=chunk) [Form 10-K Summary](index=71&type=section&id=Item%2016.%20Form%2010-K%20Summary) This section is optional and has not been included in the report - Optional and not included herein[349](index=349&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the quarterly period ended March 31, 2022 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The company's balance sheet shows a decrease in total assets and liabilities, with an increase in total equity - Total assets decreased to **$729.4 million** from $770.6 million, driven by lower real estate and cash balances[15](index=15&type=chunk) - Total liabilities decreased to **$378.0 million** from $433.7 million, mainly due to reduced mortgage and bond payables[16](index=16&type=chunk) - Total equity increased to **$351.4 million** from $336.9 million, supported by higher retained earnings[17](index=17&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Real estate | $284,480 | $296,363 | | Cash and cash equivalents | $13,794 | $50,748 | | **Total Assets** | **$729,438** | **$770,569** | | **Liabilities** | | | | Mortgages and other notes payable | $169,205 | $183,392 | | Bonds payable | $163,571 | $189,452 | | **Total Liabilities** | **$378,020** | **$433,718** | | **Equity** | | | | Total shareholders' equity | $251,452 | $240,138 | | **Total Equity** | **$351,418** | **$336,851** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2022 net income declined year-over-year due to lower total revenues and smaller gains on asset sales - Net income attributable to the Company decreased to **$11.3 million** in Q1 2022 from $18.1 million in Q1 2021[20](index=20&type=chunk) - The decline was driven by lower total revenues, which fell to **$7.8 million**, and a smaller gain on asset sales[20](index=20&type=chunk) Q1 2022 vs Q1 2021 Performance (in thousands, except per share) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Revenue | $7,787 | $11,828 | | Net Operating Loss | ($4,495) | ($3,002) | | Gain on sale or write-down of assets, net | $11,148 | $17,398 | | Net Income | $14,567 | $23,215 | | Net Income Attributable to the Company | $11,314 | $18,068 | | Basic and Diluted EPS | $0.70 | $1.12 | [Consolidated Statements of Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Equity) Total equity grew during Q1 2022, primarily driven by the period's net income - Total equity increased to **$351.4 million** in Q1 2022, primarily due to net income of $14.6 million[23](index=23&type=chunk) - Retained earnings grew by **$11.3 million** during the quarter, reaching $187.4 million[23](index=23&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The company experienced negative cash flow from operations and financing, leading to a net decrease in cash - Net cash used in operating activities was **$4.2 million** in Q1 2022, an increase from $1.4 million in Q1 2021[27](index=27&type=chunk) - Net cash from investing activities decreased to **$5.6 million** from $14.6 million year-over-year, mainly due to lower collections on notes receivable[27](index=27&type=chunk) - Net cash used in financing activities increased to **$38.8 million**, driven by higher payments on mortgages, notes, and bonds[27](index=27&type=chunk) - The company saw a net decrease in cash of **$37.3 million**, ending the quarter with a $35.4 million balance[27](index=27&type=chunk) [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail business segments, significant property sales, joint venture activities, and related-party transactions - The company's primary business is income-producing properties, with significant ownership by related parties and a **78.4%** stake in TCI[30](index=30&type=chunk)[31](index=31&type=chunk) - The Multifamily and Commercial segments generated profits of **$1.5 million** and **$1.9 million** respectively in Q1 2022[46](index=46&type=chunk)[49](index=49&type=chunk) - A multifamily property was sold for **$26.75 million**, generating a **$9.4 million** gain on sale[59](index=59&type=chunk)[104](index=104&type=chunk) - The VAA joint venture portfolio, valued at approximately **$1.4 billion**, is being marketed for sale[69](index=69&type=chunk)[70](index=70&type=chunk)[109](index=109&type=chunk) - The company was non-compliant with the DSCR for one property loan, risking a 'Cash Trap' event[78](index=78&type=chunk) - Significant related-party transactions include **$3.2 million** in Q1 2022 advisory fees paid to Pillar[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) - The company faces ongoing litigation concerning property transfers, with a trial scheduled for November 2022[94](index=94&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial results, liquidity, capital resources, and the impact of recent transactions and COVID-19 - Management notes a temporary decline in commercial property occupancy due to COVID-19, with future impact remaining uncertain[100](index=100&type=chunk)[133](index=133&type=chunk) - Significant Q1 transactions include a property sale for **$26.8 million** generating a **$9.4 million** gain[104](index=104&type=chunk)[105](index=105&type=chunk) - The company plans to sell its VAA joint venture portfolio, appraised at approximately **$1.4 billion**, though realization of this value is not assured[109](index=109&type=chunk)[110](index=110&type=chunk) - The **$8.6 million** year-over-year decrease in net income is attributed to lower asset sale gains and foreign currency changes[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) - Management is confident in meeting liquidity needs through operations, asset sales, and refinancing[121](index=121&type=chunk) FFO Reconciliation (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income attributable to the Company | $11,314 | $18,068 | | Depreciation and amortization | $2,349 | $3,327 | | Gain on sale or write down of assets | ($11,148) | ($17,398) | | FFO-Basic and Diluted | $1,925 | $8,084 | | FFO-adjusted (after currency & debt extinguishment) | ($208) | $467 | [Quantitative and Qualitative Disclosures About Market Risks](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) This section is included as a placeholder, but no specific market risk disclosures are provided - The report includes the heading for this item but does not contain any substantive disclosures[128](index=128&type=chunk) [Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2022 - Management concluded that disclosure controls and procedures were **effective** as of the quarter-end[128](index=128&type=chunk) - No material changes to internal controls over financial reporting occurred during the quarter[129](index=129&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in ongoing litigation, including an appeal and a lawsuit concerning property transfers - The company is defending an appeal in a case where a jury previously found in its favor[93](index=93&type=chunk) - A lawsuit alleging improper property sales is scheduled for trial in November 2022[94](index=94&type=chunk) [Risk Factors](index=25&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors are reported, except for ongoing uncertainty from the COVID-19 pandemic - The company highlights ongoing risks from the COVID-19 pandemic, particularly its unpredictable impact on commercial real estate[133](index=133&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased during the quarter, with 263,250 shares remaining available under the program - No shares were repurchased during the three months ended March 31, 2022[134](index=134&type=chunk) - The company has authorization to repurchase an additional **263,250 shares** under its existing program[134](index=134&type=chunk) [Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults were reported[135](index=135&type=chunk) [Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[135](index=135&type=chunk) [Other Information](index=26&type=section&id=Item%205.%20Other%20Information) The company reported no other information for this item - No other information was reported[135](index=135&type=chunk) [Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including required SOX certifications and interactive data files - The filing includes officer certifications as required by Sarbanes-Oxley Act Rules 13a-14 and 15d-14[138](index=138&type=chunk) - A certification pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act) is also included[138](index=138&type=chunk) - Interactive Data Files (XBRL) are furnished as part of the filing[139](index=139&type=chunk)

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2021 [Item 1. Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of American Realty Investors, Inc. for the quarter ended March 31, 2021, including balance sheets, statements of operations, equity, and cash flows, along with detailed notes explaining accounting policies, segment performance, real estate activities, debt, related party transactions, and commitments [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show a decrease in total assets and liabilities from December 31, 2020, to March 31, 2021, while total equity increased | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :---------------------- | :---------------------------- | :------------------------------- | | Total Assets | $823,137 | $865,764 | | Total Liabilities | $469,516 | $535,358 | | Total Equity | $353,621 | $330,406 | | Retained Earnings | $190,806 | $172,738 | | Non-controlling Interest | $98,762 | $93,615 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The company reported a significant increase in net income attributable to the Company for Q1 2021, driven by asset sales and joint venture income | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Total Revenue | $11,828 | $13,130 | | Total Operating Expenses | $14,830 | $16,368 | | Net Operating Loss | $(3,002) | $(3,238) | | Gain on Sale or Write-Down of Assets, Net | $17,398 | $4,138 | | Equity in Income (Loss) from Unconsolidated Joint Ventures | $3,336 | $(260) | | Net Income Attributable to the Company | $18,068 | $2,946 | | Basic and Diluted EPS | $1.12 | $0.18 | [Consolidated Statement of Equity](index=5&type=section&id=Consolidated%20Statement%20of%20Equity) The consolidated statement of equity shows an increase in total equity from December 31, 2020, to March 31, 2021, primarily due to net income | Metric | December 31, 2020 (in thousands) | March 31, 2021 (in thousands) | | :------------------------------------ | :------------------------------- | :---------------------------- | | Total Shareholders' Equity | $236,791 | $254,859 | | Noncontrolling Interest | $93,615 | $98,762 | | Total Equity | $330,406 | $353,621 | | Net Income (attributable to Company) | N/A | $18,068 | | Net Income (attributable to Noncontrolling Interest) | N/A | $5,147 | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 2021 saw net cash used in operations, provided by investing, and used in financing, resulting in a net decrease in cash | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :------------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net Cash Used in Operating Activities | $(1,449) | $(11,602) | | Net Cash Provided by Investing Activities | $14,645 | $5,434 | | Net Cash Used in Financing Activities | $(25,155) | $(9,039) | | Net Decrease in Cash, Cash Equivalents and Restricted Cash | $(11,959) | $(15,207) | | Cash, Cash Equivalents and Restricted Cash, End of Period | $75,061 | $68,104 | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed notes explain organization, accounting policies, EPS, cash flow, segments, real estate, debt, related parties, and contingencies [1. Organization](index=7&type=section&id=1.%20Organization) ARL is a Nevada corporation focused on acquiring, developing, and owning income-producing properties, managed by a related party - ARL's primary business involves the acquisition, development, and ownership of income-producing multifamily and commercial properties, and opportunistic land acquisition for future development[29](index=29&type=chunk) - The company owns approximately **78.4%** of Transcontinental Realty Investors, Inc. (TCI), and substantially all operations are conducted through TCI[30](index=30&type=chunk) | Property Type | Details | | :---------------------- | :--------------------------------------- | | Commercial Properties | 6 properties (5 office, 1 retail), ~1.58M sq ft | | Directly Owned Multifamily | 9 properties, 1,492 units | | Land | ~1,922 acres (developed & undeveloped) | | VAA Owned Multifamily | 52 properties, 10,032 units (50% owned investment) | - Operations are managed by Pillar Income Asset Management, Inc. and commercial properties by Regis Realty Prime, LLC, both considered related parties[31](index=31&type=chunk) [2. Summary of Significant Accounting Policies](index=7&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements are unaudited, prepared under Form 10-Q, consolidating entities where the company is the primary beneficiary - Financial statements are unaudited and prepared in accordance with Form 10-Q and Article 10 of Regulation S-X, with certain GAAP disclosures condensed or omitted[32](index=32&type=chunk) - The company consolidates entities where it is the primary beneficiary of a variable interest entity (VIE) or has a majority voting interest[35](index=35&type=chunk) - Newly issued accounting standards, ASU 2020-04 (Reference Rate Reform) and FASB Staff Q&A on COVID-19 lease concessions, did not have a significant impact on the consolidated financial statements for the three months ended March 31, 2021 and 2020[37](index=37&type=chunk)[38](index=38&type=chunk) [3. Earnings Per Share](index=8&type=section&id=3.%20Earnings%20Per%20Share) Basic and diluted EPS significantly increased to $1.12 for Q1 2021 from $0.18 in the prior year, reflecting higher net income | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net Income Attributable to the Company | $18,068 | $2,946 | | Weighted-Average Common Shares Outstanding | 16,152,043 | 15,997,076 | | EPS - Basic and Diluted | $1.12 | $0.18 | [4. Supplemental Cash Flow Information](index=9&type=section&id=4.%20Supplemental%20Cash%20Flow%20Information) Cash paid for interest decreased, with significant noncash investing activities involving asset contributions to a joint venture | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Cash Paid for Interest | $9,713 | $13,090 | | Cash and Cash Equivalents (End of Period) | $53,865 | $39,946 | | Restricted Cash (End of Period) | $21,196 | $28,158 | | Proceeds from Mortgages, Notes and Bonds Payable | $0 | $5,114 | | Payments of Mortgages, Notes and Bonds Payable | $25,133 | $14,153 | | Noncash Investing and Financing Activities | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Property Acquired for Note Payable | $0 | $3,350 | | Assets Contributed to Joint Venture | $18,608 | $0 | | Liabilities Assumed by Joint Venture | $17,592 | $0 | [5. Operating Segments](index=9&type=section&id=5.%20Operating%20Segments) The company operates in multifamily and commercial real estate segments, with overall segment profit declining in Q1 2021 - The company operates in two reportable segments: multifamily apartment communities and commercial real estate properties[46](index=46&type=chunk) | Segment | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :------------------ | :----------------------------------------------- | :----------------------------------------------- | | Multifamily Revenue | $3,836 | $3,556 | | Multifamily Profit | $1,713 | $1,611 | | Commercial Revenue | $6,525 | $7,886 | | Commercial Profit | $2,816 | $3,522 | | Total Segment Profit | $4,529 | $5,133 | [6. Lease Revenue](index=10&type=section&id=6.%20Lease%20Revenue) Rental revenue from operating leases for multifamily and commercial properties decreased in Q1 2021 compared to the prior year - Lease revenue is generated from multifamily apartment communities and commercial properties under operating leases, with minimum rents recognized on a straight-line basis[50](index=50&type=chunk) | Component | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :--------------- | :----------------------------------------------- | :----------------------------------------------- | | Fixed Component | $9,863 | $10,812 | | Variable Component | $498 | $630 | | Total Rental Revenue | $10,361 | $11,442 | [7. Real Estate Activity](index=11&type=section&id=7.%20Real%20Estate%20Activity) Total real estate, net, decreased, with a significantly higher gain on asset sales in Q1 2021 from residential properties and land | Real Estate Component | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :------------------------ | :---------------------------- | :------------------------------- | | Land | $48,357 | $50,759 | | Buildings and Improvements | $281,115 | $297,644 | | Construction in Progress | $73,656 | $77,891 | | Total Real Estate, Net | $349,460 | $374,811 | | Property Held for Sale | $1,660 | $2,572 | | Total Real Estate | $351,120 | $377,383 | | Gain/Loss on Sale or Write-Down of Assets | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :---------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Land | $5,957 | $4,138 | | Residential Properties | $11,441 | $0 | | Total | $17,398 | $4,138 | - The gain on residential properties in 2021 includes **$1.417 million** from the Overlook at Allensville Phase II transaction and **$10.026 million** from the recognition of previously deferred gains on various multifamily properties sold to a non-related third party[57](index=57&type=chunk)[85](index=85&type=chunk) [8. Notes Receivable](index=12&type=section&id=8.%20Notes%20Receivable) The company holds various notes receivable from multiple borrowers, including related parties, with varying interest rates and maturity dates | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------------- | :---------------------------- | :------------------------------- | | Notes Receivable (Total Carrying Value) | $137,718 | $130,626 | | Notes Receivable from Related Parties | $75,135 | $70,375 | - Several notes are convertible, at the company's option, into a **100% ownership interest** in the underlying development property and are collateralized by the property[60](index=60&type=chunk) - Unified Housing Foundation, Inc. (UHF) is a significant related party borrower, with principal and interest payments funded from surplus cash flow, property sales, or refinancing, and cross-collateralized across underlying properties[61](index=61&type=chunk) [9. Investment in Unconsolidated Joint Ventures](index=13&type=section&id=9.%20Investment%20in%20Unconsolidated%20Joint%20Ventures) The company's primary unconsolidated joint venture is VAA, formed with Macquarie Group, holding a 50% voting interest and 49% profit participation - The VAA joint venture, formed with Macquarie Group, holds 52 multifamily properties. The company has a **50% voting interest** and a **49% profit participation interest** (Class A interest)[63](index=63&type=chunk) - On March 30, 2021, the company sold a **50% ownership interest** in Overlook at Allensville Phase II to Macquarie for **$2.551 million**, resulting in a gain of **$1.417 million**, and then contributed both 50% interests into VAA[64](index=64&type=chunk) | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------------- | :---------------------------- | :------------------------------- | | Total Investment in Unconsolidated Joint Ventures | $55,764 | $60,425 | | Our Share of Net Income (Loss) from Unconsolidated Joint Ventures | $3,336 | $(260) | [10. Mortgages and Other Notes Payable](index=15&type=section&id=10.%20Mortgages%20and%20Other%20Notes%20Payable) The total carrying value of mortgages and other notes payable decreased, with several loans extended or assumed by joint ventures, and covenant compliance maintained | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------------- | :---------------------------- | :------------------------------- | | Mortgages and Other Notes Payable (Total Carrying Value) | $224,817 | $242,711 | - The loan on Athens was extended to August 28, 2022, and the loan on Windmill Farms was extended to February 28, 2023, at a reduced interest rate of **5%**[72](index=72&type=chunk)[73](index=73&type=chunk) - The loan for Overlook at Allensville Phase II was assumed by VAA in connection with the property's contribution to the joint venture[73](index=73&type=chunk) - The company was in compliance with all loan covenants as of March 31, 2021[74](index=74&type=chunk) [11. Bonds Payable](index=16&type=section&id=11.%20Bonds%20Payable) Bonds payable, issued through SPC and traded on TASE, decreased, with a gain on foreign currency transactions recognized - The company has issued three series of nonconvertible bonds through Southern Properties Capital Ltd. (SPC), which are traded on the Tel-Aviv Stock Exchange (TASE)[76](index=76&type=chunk) | Bond Issuance | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :------------ | :---------------------------- | :------------------------------- | | Series A Bonds | $76,448 | $95,133 | | Series B Bonds | $56,688 | $65,318 | | Series C Bonds | $82,484 | $85,537 | | Total Bonds Payable (Net) | $208,021 | $237,888 | | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Gain on Foreign Currency Transactions | $7,617 | $7,843 | [12. Related Party Transactions](index=16&type=section&id=12.%20Related%20Party%20Transactions) The company engages in various transactions with related parties, including advisory fees and interest income/expense - Pillar Income Asset Management, Inc. and Regis Realty Prime, LLC are wholly owned by affiliates of MRHI, which owns approximately **90.8%** of the company, making them related parties[80](index=80&type=chunk) | Related Party Transaction Type | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :----------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Rental Income | $242 | $221 | | Property Operating Expenses | $382 | $242 | | General and Administrative Expense | $1,670 | $1,133 | | Advisory Fees Paid to Pillar | $2,436 | $2,373 | | Interest Income on Notes Receivable | $4,769 | $5,073 | | Interest Expense on Notes Payable to Pillar | $1,395 | $1,915 | - Related party receivables represent amounts outstanding from Pillar for loans and unreimbursed fees, expenses, and costs[82](index=82&type=chunk) [13. Noncontrolling Interests](index=17&type=section&id=13.%20Noncontrolling%20Interests) Noncontrolling interests represent third-party ownership in TCI and IOR, where the company holds majority stakes - Noncontrolling interest represents third-party ownership in TCI (**78.4%** owned by the company) and IOR (**81.1%** owned by the company) during the three months ended March 31, 2021 and 2020[83](index=83&type=chunk) [14. Deferred Income](index=17&type=section&id=14.%20Deferred%20Income) Deferred gains on property sales to related parties are recognized upon sale to non-related third parties, significantly decreasing in Q1 2021 - Gains on property sales to related parties are deferred until sales criteria for the full accrual method are met, typically when properties are sold to a non-related third party[84](index=84&type=chunk) - On January 29, 2021, the company recognized a gain of **$10.026 million** from the sale of three multifamily properties (El Dorado, Limestone Ranch, and Marquis) by UHF to a non-related third party, which had been previously deferred[85](index=85&type=chunk) | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :------------- | :---------------------------- | :------------------------------- | | Deferred Gain | $9,791 | $19,821 | [15. Income Taxes](index=17&type=section&id=15.%20Income%20Taxes) The income tax provision significantly decreased in Q1 2021, calculated based on losses absorbed by taxable income - The company is part of a tax sharing and compensating agreement with ARL, with expenses calculated based on losses absorbed by taxable income at a **21% statutory tax rate**[86](index=86&type=chunk) | Income Tax Provision | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :------------------- | :----------------------------------------------- | :----------------------------------------------- | | Current | $40 | $247 | | Deferred | $0 | $0 | | Total | $40 | $247 | [16. Commitments and Contingencies](index=17&type=section&id=16.%20Commitments%20and%20Contingencies) The company faces ongoing litigation, including a $59 million award against it, and a $10 million earn-out liability in arbitration - The company is a defendant in ongoing litigation with Mr. David Clapper regarding a 1988 multifamily property transaction, with a court ruling in 2016 awarding Clapper approximately **$59 million**. The case was remanded to trial, which began in May 2021[88](index=88&type=chunk) - A lawsuit brought by Paul Berger in February 2019 alleges improper sales and/or transfers of property with IOR, requesting the company pay off related party loans to IOR for distribution to shareholders[89](index=89&type=chunk) - As of March 31, 2021, the company recorded a **$10 million liability** for an earn-out provision related to properties contributed to the VAA joint venture, with arbitration initiated due to an inability to agree on the remeasured value[90](index=90&type=chunk) - The company believes it will generate excess cash from property operations and intends to sell assets, refinance debt, and obtain additional borrowings to meet liquidity requirements[88](index=88&type=chunk) [17. Subsequent Events](index=18&type=section&id=17.%20Subsequent%20Events) Subsequent events after March 31, 2021, were evaluated up to May 13, 2021, the financial statement issuance date - Events occurring after March 31, 2021, have been evaluated up to May 13, 2021, the date the consolidated financial statements were available to be issued[91](index=91&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operations, COVID-19 impact, acquisitions, financing, development, and critical accounting policies - The company is an externally advised and managed real estate investment company owning a diverse portfolio of income-producing properties and land for development across the Southern United States[97](index=97&type=chunk) - The COVID-19 pandemic's impact on financial condition, results of operations, and cash flows remains unpredictable due to ongoing uncertainties regarding its scope, severity, and economic effects[96](index=96&type=chunk)[130](index=130&type=chunk) [Management's Overview](index=20&type=section&id=Management's%20Overview) The company is an externally advised real estate investment company with a diverse portfolio, managed by a related party - The company's investment strategy includes acquiring existing income-producing properties and developing new properties on owned or acquired land[97](index=97&type=chunk) - Pillar Income Asset Management, Inc., a related party, manages the company's operations, including locating investment opportunities and arranging debt/equity financing[98](index=98&type=chunk) [Acquisitions and Dispositions](index=20&type=section&id=Acquisitions%20and%20Dispositions) Recent activities include a land acquisition in Ohio and significant gains from multifamily and land dispositions - Acquired a **49.2-acre** land parcel in Kent, Ohio, for **$5.4 million** in March 2020[98](index=98&type=chunk) | Disposition (Date) | Property Type | Sale Price (in millions) | Gain on Sale (in millions) | | :----------------------------- | :------------ | :----------------------- | :------------------------- | | Villager (May 1, 2020) | Multifamily | $2.4 | $1.0 | | Farnham Park (July 16, 2020) | Multifamily | $13.3 | $2.7 | | Bridge View Plaza (Sept 14, 2020) | Retail | $5.3 | $4.6 | | Overlook at Allensville Phase II (March 30, 2021) | Multifamily | $2.6 | $1.4 | | Windmill Farms (Q1 2021) | Land | $9.1 | $3.7 | | Mercer Crossing (Q1 2021) | Land | $3.3 | $2.3 | [Financing Activities](index=20&type=section&id=Financing%20Activities) Recent financing includes bond issuances and extensions of several loans, some with reduced interest rates - Issued **$39.2 million** in Series B bonds in February 2018 and an additional **$19.8 million** in Series B bonds in July 2018[100](index=100&type=chunk) - Issued **$78.1 million** of Series C bonds in July 2019, collateralized by Browning Place, bearing interest at **4.65%** and maturing on January 31, 2023[101](index=101&type=chunk) - Issued **$19.7 million** in additional Series A bonds in November 2020, generating **$18.8 million** in net proceeds[101](index=101&type=chunk) - Extended the **$14.7 million** loan from HSW Partners to June 17, 2021, the **$1.2 million** loan on Athens to August 28, 2022, and the **$8.8 million** loan on Windmill Farms to February 28, 2023, at a reduced **5% interest rate**[101](index=101&type=chunk)[102](index=102&type=chunk) [Development Activities](index=21&type=section&id=Development%20Activities) Completed construction of two multifamily phases in 2020, with two ongoing projects totaling 402 units - Completed construction of Parc at Denham Springs Phase II (**$17.2 million**) and Sugar Mill Phase III (**$14.2 million**) during 2020[103](index=103&type=chunk) | Property | Location | No. of Units | Costs to Date (in thousands) | Total Projected Costs (in thousands) | | :---------------- | :------------- | :----------- | :--------------------------- | :----------------------------------- | | Athens | Athens, AL | 232 | $289 | $34,800 | | Heritage McKinney | McKinney, TX | 170 | $318 | $24,650 | | Total | | 402 | $607 | $59,450 | [Critical Accounting Policies](index=21&type=section&id=Critical%20Accounting%20Policies) Policies involve significant estimates in revenue, accruals, impairment, purchase price allocation, and fair value measurements - Critical accounting policies include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, purchase price allocation, capitalization of costs, and fair value measurements[105](index=105&type=chunk)[106](index=106&type=chunk) - Fair value measurements are applied using ASC Topic 820, categorizing inputs into Level 1 (quoted prices in active markets), Level 2 (observable inputs for similar assets/liabilities), and Level 3 (unobservable inputs)[107](index=107&type=chunk)[108](index=108&type=chunk) - Related parties are evaluated under ASC Topic 805, recognizing that transactions with them may not always be on an arm's length basis[108](index=108&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Net income increased significantly in Q1 2021, driven by asset sale gains and improved joint venture income, despite commercial segment decline | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Variance (in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :---------------------- | | Multifamily Segment Operating Income | $1,713 | $1,611 | $102 | | Commercial Segment Operating Income | $2,816 | $3,522 | $(706) | | Total Segment Operating Income | $4,529 | $5,133 | $(604) | | General, Administrative and Advisory | $(5,671) | $(6,665) | $994 | | Gain on Sale or Write-Down of Assets | $17,398 | $4,138 | $13,260 | | Income (Loss) from Joint Ventures | $3,336 | $(260) | $3,596 | | Net Income | $23,215 | $4,388 | $18,827 | - The **$0.1 million** increase in multifamily operating profits was due to a **$0.4 million** increase at Lease-Up Properties, partially offset by a **$0.3 million** decrease at Disposition Properties[114](index=114&type=chunk) - The **$0.7 million** decrease in commercial segment operating profits was primarily due to a **$0.9 million** revenue decline at Browning Place from decreased occupancy, following a tenant lease termination[114](index=114&type=chunk) - The **$13.3 million** increase in gain on sale of assets includes an **$11.4 million** gain on multifamily properties (Overlook at Allensville Phase II and previously deferred gains) and a **$1.8 million** increase in land sale gains[114](index=114&type=chunk) [Liquidity and Capital Resources](index=24&type=section&id=Liquidity%20and%20Capital%20Resources) Cash sources include operations, asset sales, and borrowings, with liquidity needs for expenses, debt, and capital expenditures - Principal cash sources are property operations, land/property sales, collection of notes receivable, related company receivables, refinancing, and additional borrowings[116](index=116&type=chunk) - Principal liquidity needs include normal expenses, debt service (including balloon payments), capital expenditures, development costs, and property acquisitions[116](index=116&type=chunk) | Cash Flow Activity | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | Variance (in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :---------------------- | | Net Cash Provided by (Used in) Operating Activities | $(1,449) | $(11,602) | $10,153 | | Net Cash Provided by (Used in) Investing Activities | $14,645 | $5,434 | $9,211 | | Net Cash (Used in) Provided by Financing Activities | $(25,155) | $(9,039) | $(16,116) | - The increase in cash from operating activities is primarily due to a **$3.5 million** increase from changes in other assets and **$3.2 million** from VAA income distributions[118](index=118&type=chunk) - The increase in cash from investing activities is mainly due to an **$8.8 million** increase in asset sale proceeds (Windmill Farms, Mercer Crossing) and a **$2.2 million** increase in VAA distributions, partially offset by a **$9.7 million** increase in notes receivable originations[119](index=119&type=chunk) [Funds From Operations ("FFO")](index=24&type=section&id=Funds%20From%20Operations%20%28%22FFO%22%29) FFO, a non-GAAP measure, improved significantly from a loss in 2020 to a positive figure in 2021, excluding property sales and depreciation - FFO is defined by Nareit as net income (loss) excluding gains/losses from property sales, plus real estate-related depreciation and amortization, impairment write-downs, and adjustments for unconsolidated joint ventures[120](index=120&type=chunk) - FFO and FFO-diluted are considered useful supplemental measures for comparing operating and financial results, especially as they exclude real estate depreciation and amortization[121](index=121&type=chunk) | Metric | Three Months Ended March 31, 2021 (in thousands) | Three Months Ended March 31, 2020 (in thousands) | | :-------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net Income Attributable to the Company | $18,068 | $2,946 | | Depreciation and Amortization on Consolidated Assets | $3,327 | $3,394 | | Gain on Sale or Write-Down of Assets | $(17,398) | $(4,138) | | FFO-Basic and Diluted | $8,084 | $6,715 | | Gain on Foreign Currency Transaction | $(7,617) | $(7,843) | | FFO-Adjusted | $467 | $(1,128) | [Item 3. Quantitative and Qualitative Disclosures About Market Risks](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) This optional section is not included in the report - This section is optional and not included in the report[124](index=124&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were effective as of March 31, 2021, with no material changes in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of March 31, 2021, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[125](index=125&type=chunk) - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[126](index=126&type=chunk) [PART II. OTHER INFORMATION](index=25&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, exhibits, and signatures [Item 1. Legal Proceedings](index=25&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various litigation matters, but management expects no material adverse impact on financials - The company is involved in various litigation incidental to its ordinary course of business[127](index=127&type=chunk) - Management believes the outcome of such litigation will not have a material adverse impact on the company's financial condition, results of operation, or liquidity[127](index=127&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors from 2020 10-K, except for an updated discussion on the unpredictable COVID-19 pandemic impact - No material changes from risk factors disclosed in the 2020 10-K, except for an updated discussion on risks related to the COVID-19 pandemic[129](index=129&type=chunk) - The impact of the COVID-19 pandemic on the company's financial condition, results of operations, and cash flows remains unpredictable due to numerous uncertainties[130](index=130&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has a share repurchase program, but no shares were purchased in Q1 2021, with 263,250 shares remaining - The company has a share repurchase program for up to **1,250,000 shares**[131](index=131&type=chunk) - No shares were purchased under the program during the three months ended March 31, 2021[131](index=131&type=chunk) - As of March 31, 2021, **986,750 shares** have been purchased, and **263,250 shares** may still be purchased under the program[131](index=131&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - No defaults upon senior securities were reported[131](index=131&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures were reported - No mine safety disclosures were reported[131](index=131&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) No other information was reported in this section - No other information was reported in this section[131](index=131&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, advisory agreements, and certifications - The exhibits include Certificate of Restatement of Articles of Incorporation, Bylaws, Certificates of Designation for various Preferred Stock series, and the Advisory Agreement with Pillar Income Asset Management, Inc[134](index=134&type=chunk) - Certifications by the Principal Executive Officer and Principal Financial Officer (31.1*) and pursuant to 18 U.S.C. 1350 (32.1*) are filed herewith[134](index=134&type=chunk) - XBRL Instance Document and Taxonomy Extension Schema, Calculation, Definition, Label, and Presentation Linkbase Documents are also included[135](index=135&type=chunk) [Signatures](index=29&type=section&id=Signatures) The report was signed by Erik L. Johnson, Executive Vice President and Chief Financial Officer, on May 13, 2021 - The report was signed by Erik L. Johnson, Executive Vice President and Chief Financial Officer (Principal Executive and Financial Officer), on May 13, 2021[137](index=137&type=chunk)

Financial Performance - The company reported a net income of $11.3 million for the year ended December 31, 2020, a significant increase of $33.0 million compared to a net loss of $21.7 million in 2019[115]. - The company reported a net income attributable to the Company of $9,030 for 2020, compared to a net loss of $(15,958) in 2019[129]. - Funds From Operations (FFO) for 2020 was $15,352, a significant recovery from $(2,261) in 2019[129]. - FFO-adjusted for 2020 was $28,730, compared to $18,066 in 2019, indicating improved operational performance[129]. Revenue Growth - Revenue from the multifamily segment increased to $14.7 million in 2020, up from $13.5 million in 2019, reflecting a variance of $1.2 million[115]. - The commercial segment revenue rose to $37.2 million in 2020, compared to $32.7 million in 2019, resulting in a variance of $4.5 million[115]. Asset Sales and Gains - The company achieved a gain on sale of assets of $36.9 million in 2020, an increase of $21.7 million from $15.2 million in 2019[115]. - The company sold a total of 58.8 acres of land for $12.9 million in 2020, resulting in gains of $11.1 million[97]. - The company reported a gain on the sale of land of $25,171 in 2020, compared to $15,272 in 2019[129]. Operating Profits - Operating profits in the multifamily segment increased by $1.5 million, primarily due to a $2.1 million increase at Lease-Up Properties[115]. - The company reported a $5.0 million increase in operating profits in the commercial segment, primarily due to a $6.0 million lease termination payment[115]. Cash Flow and Liquidity - Net cash provided by operating activities for the year ended December 31, 2020, was $3,498, compared to a net cash used of $(40,641) in 2019, representing an increase of $44,139[122]. - Net cash provided by investing activities increased to $4,196 in 2020 from $(3,705) in 2019, a change of $7,901[122]. - The increase in cash from operating activities was primarily due to a $45.9 million decrease in receivables from related parties in 2019[123]. - The company anticipates that cash and cash equivalents as of December 31, 2020, along with cash generated in 2021, will be sufficient to meet all cash requirements[120]. - The company plans to selectively sell land and income-producing assets to meet liquidity requirements[120]. Development Projects - The company has ongoing development projects with total projected costs of $59.5 million as of December 31, 2020[102]. - The company completed construction projects costing $17.2 million and $14.2 million for Parc at Denham Springs Phase II and Sugar Mill Phase III, respectively[101]. Debt and Financing - The company experienced a $73.1 million decrease in proceeds from mortgages, notes, and bonds payable in 2020[123]. - The company issued $19.7 million in additional Series A bonds on November 30, 2020, for net proceeds of $18.8 million[100].