Share DALLAS--(BUSINESS WIRE)--Transcontinental Realty Investors, Inc. (NYSE:TCI) is reporting its results of operations for the three months ended September 30, 2025. For the three months ended September 30, 2025, we reported net income attributable to common shares of $0.7 million or $0.08 per diluted share, compared to $1.7 million or $0.20 per diluted share for the same period in 2024. Financial Highlights Nov 6, 2025 5:15 PM Eastern Standard Time Transcontinental Realty Investors, Inc. Reports Earnings ...

Financial Performance - Net income for Q3 2025 decreased to $884,000, down 53.7% from $1,910,000 in Q3 2024[107] - Nine-month net income for 2025 was $5,989,000, a decrease of 5.9% compared to $6,363,000 in 2024[107] - Funds From Operations (FFO) for Q3 2025 was $3,660,000, down 24.1% from $4,827,000 in Q3 2024[120] Revenue Growth - Multifamily segment revenue for Q3 2025 was $8,528,000, a 3.2% increase from $8,266,000 in Q3 2024[107] - Commercial segment revenue for Q3 2025 was $4,307,000, a 28.9% increase from $3,341,000 in Q3 2024[107] Cash Flow - Cash used in operating activities for the nine months ended September 30, 2025, was $(2,175,000), a decrease of $19,232,000 from $17,057,000 in 2024[112] - Cash used in investing activities increased by $22,121,000 to $(49,203,000) in 2025, primarily due to a $37.2 million increase in development and renovation of real estate[113] - Cash provided by financing activities increased by $40,546,000 in 2025, driven by a $44.2 million increase in borrowings on construction loans[114] Development Projects - The company has four ongoing development projects with a total projected cost of $206.8 million, of which $151.9 million has been incurred as of September 30, 2025[94] - During the nine months ended September 30, 2025, the company incurred $59.2 million in development costs, funded in part by $54.9 million in construction loans[95] - The company has entered into a $27.5 million construction loan for the development of Mountain Creek, maturing on June 17, 2027[93] Asset Transactions - The company sold 30 single-family lots for $1.4 million on December 13, 2024, resulting in a gain of $1.1 million[93] - The company sold Villas at Bon Secour, a 200-unit multifamily property, for $28.0 million on October 10, 2025[93] - The company acquired 21,678 shares of IOR for $0.5 million during the Tender Offer completed on January 29, 2025[96] - The company purchased an additional 32,845 common shares of IOR for $0.6 million during the nine months ended September 30, 2025[97] Legal and Settlement Gains - The company received $3.5 million from a condemnation settlement, resulting in a gain of $3.1 million on March 25, 2025[93] Liquidity and Financial Strategy - The company anticipates that cash and cash equivalents as of September 30, 2025, will be sufficient to meet all cash requirements[111] - The company plans to selectively sell land and income-producing assets to meet liquidity requirements[111] Debt Management - The company extended the maturity of its loan on Windmill Farms to February 28, 2026, at an interest rate of 7.50%[93] - As of September 30, 2025, the company has $55.7 million in District Receivables related to the Windmill Farms project[91]

Financial Performance - Net income attributable to the Company decreased to $0.7 million or $0.08 per diluted share for Q3 2025, down from $1.7 million or $0.20 per diluted share in Q3 2024[1][5] - Total revenues increased by $1.2 million to $12.8 million in Q3 2025, compared to $11.6 million in Q3 2024, driven by a $1.0 million increase from commercial properties[3] - Net operating loss decreased to $1.4 million in Q3 2025 from $1.7 million in Q3 2024, attributed to increased revenue offset by higher operating expenses[4] - Interest income decreased to $4.748 million in Q3 2025 from $5.917 million in Q3 2024[10] - General and administrative expenses increased to $1.594 million in Q3 2025 from $1.223 million in Q3 2024[10] - The company reported a total operating expense of $14.231 million in Q3 2025, up from $13.276 million in Q3 2024[10] - Earnings per share decreased to $0.08 in Q3 2025 from $0.20 in Q3 2024[10] Asset Management - The company sold Villas at Bon Secour, a 200-unit multifamily property, for $28 million, using proceeds to pay off an $18.767 million loan[7] - Gain on sale of assets was $755,000 in Q3 2025, contributing to overall financial performance[10] Occupancy Rates - Total occupancy was reported at 82% as of September 30, 2025, with multifamily properties at 94% and commercial properties at 58%[7]

[Executive Summary & Q2 2025 Financial Performance](index=1&type=section&id=Executive%20Summary%20%26%20Q2%202025%20Financial%20Performance) [Q2 2025 Earnings Announcement](index=1&type=section&id=Q2%202025%20Earnings%20Announcement) Transcontinental Realty Investors, Inc. reported a significant decrease in net income and diluted earnings per share for the second quarter of 2025 compared to the same period in 2024 Q2 2025 vs. Q2 2024 Earnings Summary | Metric | Q2 2025 | Q2 2024 | | :----------------------------------- | :---------- | :---------- | | Net Income Attributable to Common Shares | $0.2 million | $1.5 million | | Diluted EPS | $0.02 | $0.17 | - Net income attributable to common shares decreased by **$1.3 million**, and diluted EPS decreased by **$0.15**[1](index=1&type=chunk) [Financial Highlights - Q2 2025](index=1&type=section&id=Financial%20Highlights%20-%20Q2%202025) Key financial movements for Q2 2025 included an increase in rental revenues, a decrease in net operating loss, but an overall decrease in net income attributable to the company due to various factors Rental Revenues (Q2 2025 vs. Q2 2024) | Period | Amount ($ millions) | Change ($ millions) | Primary Reason | | :----- | :------------------ | :------------------ | :------------- | | Q2 2025 | 11.5 | +0.3 | Increase in occupancy at Stanford Center | | Q2 2024 | 11.2 | | | Net Operating Loss (Q2 2025 vs. Q2 2024) | Period | Amount ($ millions) | Change ($ millions) | Primary Reason | | :----- | :------------------ | :------------------ | :------------- | | Q2 2025 | 0.8 | -0.3 | $0.1 million decrease in operating expenses (cost of insurance and property taxes) | | Q2 2024 | 1.1 | | | Net Income Attributable to the Company (Q2 2025 vs. Q2 2024) | Period | Amount ($ millions) | Change ($ millions) | Primary Reasons | | :----- | :------------------ | :------------------ | :-------------- | | Q2 2025 | 0.2 | -1.3 | Decrease in interest income, increase in tax provision, offset by increase in gain on real estate transactions | | Q2 2024 | 1.5 | | | [Company Profile](index=1&type=section&id=Company%20Profile) [About Transcontinental Realty Investors, Inc.](index=1&type=section&id=About%20Transcontinental%20Realty%20Investors%2C%20Inc.) Transcontinental Realty Investors, Inc. is a Dallas-based real estate investment company with a diversified portfolio across the U.S., engaging in various investment methods - The company is a Dallas-based real estate investment firm with a diverse portfolio including office buildings, apartments, shopping centers, and developed/undeveloped land across the U.S.[6](index=6&type=chunk) - Investments are made through direct ownership, leases, partnerships, and mortgage loans on real estate, and the company also holds mortgage receivables[6](index=6&type=chunk) [Operational & Strategic Updates](index=1&type=section&id=Operational%20%26%20Strategic%20Updates) [Key Operational Highlights](index=1&type=section&id=Key%20Operational%20Highlights) Operational highlights for Q2 2025 include specific occupancy rates for different property types, successful asset dispositions, and strategic debt repayment Occupancy Rates (June 30, 2025) | Property Type | Occupancy | | :------------ | :-------- | | Total | 82% | | Multifamily | 94% | | Commercial | 57% | Asset Sale (Q2 2025) | Item | Value | | :-------------------- | :------------ | | Single Family Lots Sold | 30 | | Sale Proceeds | $1.4 million | | Gain on Sale | $1.1 million | - On May 30, 2025, the company paid off a **$10.8 million** loan on 770 South Post Oak using cash on hand[7](index=7&type=chunk) [Consolidated Statements of Operations](index=2&type=section&id=Consolidated%20Statements%20of%20Operations) [Three Months Ended June 30, 2025 vs. 2024](index=2&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20vs.%202024) The consolidated statements of operations for the three months ended June 30, 2025, show detailed changes in revenues, expenses, and net income compared to the prior year, highlighting a decrease in net income attributable to the Company Consolidated Statements of Operations (Three Months Ended June 30) | Item | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | | :----------------------------------- | :-------------------- | :-------------------- | | **Revenues:** | | | | Rental revenues | 11,510 | 11,188 | | Other income | 650 | 585 | | Total revenue | 12,160 | 11,773 | | **Expenses:** | | | | Property operating expenses | 6,535 | 6,624 | | Depreciation and amortization | 3,062 | 3,137 | | General and administrative | 1,383 | 1,414 | | Advisory fee to related party | 2,005 | 1,680 | | Total operating expenses | 12,985 | 12,855 | | Net operating loss | (825) | (1,082) | | Interest income | 3,982 | 5,200 | | Interest expense | (1,738) | (1,862) | | Equity in income from unconsolidated joint venture | — | 109 | | Gain on sale or write down of assets, net | 947 | — | | Income tax provision | (2,042) | (669) | | Net income | 324 | 1,696 | | Net income attributable to noncontrolling interest | (155) | (198) | | Net income attributable to the Company | 169 | 1,498 | | **Earnings per share:** | | | | Basic and diluted | 0.02 | 0.17 | | Weighted average common shares used in computing earnings per share (Basic and diluted) | 8,639,316 | 8,639,316 | [Six Months Ended June 30, 2025 vs. 2024](index=2&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20vs.%202024) The year-to-date consolidated statements of operations for the six months ended June 30, 2025, indicate an increase in total revenue and net income attributable to the Company, despite a higher income tax provision Consolidated Statements of Operations (Six Months Ended June 30) | Item | YTD 2025 ($ thousands) | YTD 2024 ($ thousands) | | :----------------------------------- | :--------------------- | :--------------------- | | **Revenues:** | | | | Rental revenues | 22,937 | 22,467 | | Other income | 1,231 | 1,205 | | Total revenue | 24,168 | 23,672 | | **Expenses:** | | | | Property operating expenses | 12,512 | 13,258 | | Depreciation and amortization | 5,945 | 6,309 | | General and administrative | 2,735 | 2,675 | | Advisory fee to related party | 4,436 | 3,845 | | Total operating expenses | 25,628 | 26,087 | | Net operating loss | (1,460) | (2,415) | | Interest income | 8,610 | 11,327 | | Interest expense | (3,519) | (3,731) | | Equity in income from unconsolidated joint venture | — | 544 | | Gain on sale or write down of assets, net | 4,838 | — | | Income tax provision | (3,364) | (1,272) | | Net income | 5,105 | 4,453 | | Net income attributable to noncontrolling interest | (318) | (406) | | Net income attributable to the Company | 4,787 | 4,047 | | **Earnings per share:** | | | | Basic and diluted | 0.55 | 0.47 | | Weighted average common shares used in computing earnings per share (Basic and diluted) | 8,639,316 | 8,639,316 |

PART I. FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements and management's discussion and analysis for the period [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements and accompanying notes for Transcontinental Realty Investors, Inc. for the periods ended June 30, 2025, and December 31, 2024 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | Percentage Change | | :-------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------------------ | | Total Assets | $1,126,526 | $1,070,545 | $55,981 | 5.23% | | Real Estate | $605,862 | $557,388 | $48,474 | 8.70% | | Total Liabilities | $269,635 | $217,734 | $51,901 | 23.84% | | Total Equity | $856,891 | $852,811 | $4,080 | 0.48% | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) This section outlines the company's financial performance over specific periods, including revenues and net income Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Total Revenue | $12,160 | $11,773 | $24,168 | $23,672 | | Net Income Attributable to the Company | $169 | $1,498 | $4,787 | $4,047 | | Earnings per share - basic and diluted | $0.02 | $0.17 | $0.55 | $0.47 | - Net income attributable to the Company decreased by **$1,329 thousand** for the three months ended June 30, 2025, compared to the same period in 2024, but increased by **$740 thousand** for the six months ended June 30, 2025, compared to the same period in 2024[12](index=12&type=chunk) [Consolidated Statements of Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Equity) This section details changes in the company's equity, including shareholder and noncontrolling interests Consolidated Statements of Equity (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Shareholders' Equity | $837,673 | $832,278 | | Noncontrolling Interest | $19,218 | $20,533 | | Total Equity | $856,891 | $852,811 | - The company purchased IOR shares totaling **$1,025 thousand** during the six months ended June 30, 2025, impacting noncontrolling interest[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents the cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | Variance (in thousands) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :---------------------- | | Net cash (used in) provided by operating activities | $(10,340) | $3,358 | $(13,698) | | Net cash used in investing activities | $(25,431) | $(3,017) | $(22,414) | | Net cash provided by (used in) financing activities | $29,494 | $(2,354) | $31,848 | | Net decrease in cash, cash equivalents and restricted cash | $(6,277) | $(2,013) | $(4,264) | | Cash, cash equivalents and restricted cash, end of period | $34,195 | $77,014 | $(42,819) | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements [1. Organization](index=7&type=section&id=1.%20Organization) This note describes Transcontinental Realty Investors, Inc.'s corporate structure, business activities, and real estate portfolio - Transcontinental Realty Investors, Inc. (TCI) is a Nevada corporation, approximately **78% owned** by American Realty Investors, Inc. (ARL)[18](index=18&type=chunk) - TCI's primary business involves the acquisition, development, and ownership of income-producing residential and commercial real estate, including opportunistic land acquisitions and sales[19](index=19&type=chunk) - As of June 30, 2025, TCI's portfolio included **four office buildings (1,060,236 sq ft)**, **fourteen directly-owned multifamily properties (2,328 units)**, **four multifamily properties in development (906 units)**, and approximately **1,792 acres of land**[20](index=20&type=chunk)[25](index=25&type=chunk) - Day-to-day operations are managed by Pillar Income Asset Management, Inc. ('Pillar'), a related party, which handles investment opportunities, asset management, development, construction, and financing[20](index=20&type=chunk) [2. Summary of Significant Accounting Policies](index=7&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and policies used in preparing the financial statements - The unaudited consolidated financial statements are prepared in accordance with Form 10-Q and Article 10 of Regulation S-X, with certain GAAP disclosures condensed or omitted[21](index=21&type=chunk) - The company consolidates entities where it is the primary beneficiary of a variable interest entity (VIE) or holds a majority voting interest[24](index=24&type=chunk) - Recent accounting pronouncements include ASU 2023-09 (Improvements to Income Tax Disclosures, effective after Dec 15, 2024) and ASU 2024-03 (Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, effective after Dec 15, 2026), both of which the company is evaluating for impact[28](index=28&type=chunk)[29](index=29&type=chunk) [3. Earnings Per Share](index=8&type=section&id=3.%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per share for the reporting periods Earnings Per Share (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to the Company (in thousands) | $169 | $1,498 | $4,787 | $4,047 | | Weighted-average common shares outstanding | 8,639,316 | 8,639,316 | 8,639,316 | 8,639,316 | | EPS - attributable to common shares — basic and diluted | $0.02 | $0.17 | $0.55 | $0.47 | [4. Supplemental Cash Flow Information](index=9&type=section&id=4.%20Supplemental%20Cash%20Flow%20Information) This note provides additional details on non-cash investing and financing activities and cash paid for interest and taxes Supplemental Cash Flow Information (in thousands) | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------ | :-------------------------------------------- | :-------------------------------------------- | | Cash paid for interest | $3,000 | $3,066 | | Cash paid for taxes | $166 | $2,200 | | Accrued development costs | $13,738 | $1,664 | [5. Operating Segments](index=9&type=section&id=5.%20Operating%20Segments) This note presents financial information by the company's operating segments: Multifamily and Commercial properties - The company operates in two reportable segments: Multifamily (Residential) and Commercial properties, with Net Operating Income (NOI) as the key operating metric[33](index=33&type=chunk) Operating Segments (in thousands) | Segment | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Multifamily | Revenues | $8,493 | $8,675 | $17,257 | $17,185 | | | Profit from segment | $3,962 | $4,177 | $8,686 | $8,469 | | Commercial | Revenues | $3,667 | $3,098 | $6,911 | $6,487 | | | Profit from segment | $1,663 | $972 | $2,970 | $1,945 | | Total | Profit from segments | $5,625 | $5,149 | $11,656 | $10,414 | [6. Lease Revenue](index=11&type=section&id=6.%20Lease%20Revenue) This note details the components of lease revenue and future rental payments from non-cancelable leases Lease Revenue Components (in thousands) | Component | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Fixed component | $11,232 | $10,827 | $22,394 | $21,826 | | Variable component | $278 | $361 | $543 | $641 | | Total rental revenue | $11,510 | $11,188 | $22,937 | $22,467 | Future Rental Payments from Non-Cancelable Leases (excluding multifamily, in thousands) | Year | Amount | | :-------- | :----- | | 2025 | $12,936 | | 2026 | $12,944 | | 2027 | $12,563 | | 2028 | $11,622 | | 2029 | $9,624 | | Thereafter | $20,963 | | **Total** | **$80,652** | [7. Real Estate Activity](index=11&type=section&id=7.%20Real%20Estate%20Activity) This note provides a breakdown of real estate assets, construction in progress, and gains on asset sales Real Estate Components (in thousands) | Real Estate Component | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------- | :----------------------------- | :------------------------------- | | Land | $104,076 | $104,076 | | Building and improvements | $375,689 | $375,430 | | Tenant improvements | $18,677 | $16,629 | | Construction in progress | $191,814 | $140,046 | | Total cost | $690,256 | $636,181 | | Less accumulated depreciation | $(84,394) | $(78,793) | | Total real estate | $605,862 | $557,388 | - Construction in progress increased by **$51,768 thousand**, primarily due to the development of Windmill Farms and ground-up multifamily projects[39](index=39&type=chunk)[40](index=40&type=chunk) Multifamily Development Projects (as of June 30, 2025, in thousands) | Project | Units | Location | Total Project Cost | Costs Incurred | | :------------- | :---- | :------------- | :----------------- | :------------- | | Alera | 240 | Lake Wales, FL | $55,330 | $51,047 | | Bandera Ridge | 216 | Temple, TX | $49,603 | $44,045 | | Merano | 216 | McKinney, TX | $51,910 | $44,470 | | Mountain Creek | 234 | Dallas, TX | $49,971 | $5,171 | | **Total** | **906** | | **$206,814** | **$144,733** | Gain on Sale or Write-down of Assets, Net (in thousands) | Asset | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :---- | :------------------------------- | :----------------------------- | | Land | $947 | $4,092 | | Other | — | $746 | | Total | $947 | $4,838 | [8. Short-term Investments](index=12&type=section&id=8.%20Short-term%20Investments) This note details the company's short-term investment portfolio, including corporate bonds and demand notes Short-term Investments (in thousands) | Investment Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------- | :----------------------------- | :------------------------------- | | Corporate bonds | $58,000 | $80,000 | | Demand notes | $332 | $325 | | Less discount | $(284) | $(525) | | **Total** | **$58,048** | **$79,800** | - Total short-term investments decreased by **$21,752 thousand** from December 31, 2024, to June 30, 2025[46](index=46&type=chunk) - The average interest rate on investments decreased from **5.20%** at December 31, 2024, to **4.89%** at June 30, 2025[46](index=46&type=chunk) [9. Notes Receivable](index=13&type=section&id=9.%20Notes%20Receivable) This note outlines the company's notes receivable, including those from related parties and their maturity status Notes Receivable (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------- | | Total Notes Receivable | $126,564 | $128,229 | | Related Party Notes (UHF) | $59,846 | $61,245 | - Two notes, Parc at Opelika Phase II and Parc at Windmill Farms, matured in January 2023 and November 2022, respectively, with the company working to extend maturity or exercise conversion options[51](index=51&type=chunk) [10. Other Assets](index=14&type=section&id=10.%20Other%20Assets) This note provides a breakdown of other assets, including acquisition deposits, receivables, and prepaid expenses Other Asset Components (in thousands) | Other Asset Component | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------- | :----------------------------- | :------------------------------- | | Acquisition deposits | $15,409 | $15,824 | | District receivables | $55,450 | $54,518 | | Interest receivable | $17,297 | $16,388 | | Tenant and other receivables | $4,364 | $3,989 | | Prepaid expenses and other assets | $10,000 | $7,964 | | Income tax receivable | $29,376 | — | | Deferred tax assets | — | $2,455 | | **Total** | **$131,896** | **$101,138** | - Total other assets increased by **$30,758 thousand**, primarily driven by a new income tax receivable of **$29,376 thousand**[53](index=53&type=chunk) - District receivables, related to Windmill Farms infrastructure costs, increased slightly to **$55,450 thousand**[53](index=53&type=chunk) [11. Mortgages and Other Notes Payable](index=15&type=section&id=11.%20Mortgages%20and%20Other%20Notes%20Payable) This note details the company's mortgage and other notes payable, including new construction loans and covenant compliance Mortgages and Other Notes Payable (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Mortgages and Other Notes Payable | $212,409 | $181,856 | - The company paid off a **$10,939 thousand** loan on 770 South Post Oak on May 30, 2025[57](index=57&type=chunk) - New construction loans for development projects include Alera (**$23,051 thousand** borrowed), Bandera Ridge (**$12,477 thousand** borrowed), and Merano (**$16,054 thousand** borrowed); a **$27,500 thousand** construction loan for Mountain Creek had no borrowings as of June 30, 2025[58](index=58&type=chunk)[59](index=59&type=chunk) - As of June 30, 2025, the company was in compliance with all loan covenants[60](index=60&type=chunk) [12. Related Party Transactions](index=16&type=section&id=12.%20Related%20Party%20Transactions) This note discloses transactions and balances with related parties, including advisory and development fees - Pillar Income Asset Management, Inc. and Regis Realty Prime, LLC are related parties due to common ownership with American Realty Investors, Inc. (ARL), TCI's controlling shareholder[64](index=64&type=chunk) Related Party Expenses and Income (in thousands) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Advisory fees paid to Pillar | $2,005 | $1,680 | $4,436 | $3,845 | | Development fees paid to Pillar | $488 | $587 | $1,218 | $1,625 | | Interest income on UHF notes and Pillar Receivable | $2,521 | $2,681 | $5,038 | $5,373 | [13. Noncontrolling Interests](index=16&type=section&id=13.%20Noncontrolling%20Interests) This note explains the noncontrolling interest in Income Opportunity Realty Investors, Inc. and changes in ownership - Noncontrolling interest represents third-party ownership in Income Opportunity Realty Investors, Inc. (IOR)[69](index=69&type=chunk) - The company's ownership in IOR increased from approximately **83.2%** at December 31, 2024, to **84.5%** at June 30, 2025[71](index=71&type=chunk) - TCI acquired **21,678 IOR shares** for **$454 thousand** through a tender offer completed on January 29, 2025, and an additional **32,161 shares** for **$571 thousand** in the open market during the six months ended June 30, 2025[70](index=70&type=chunk) [14. Deferred Income](index=17&type=section&id=14.%20Deferred%20Income) This note describes deferred gains from property sales to related parties awaiting recognition - The company had a deferred gain of **$581 thousand** as of June 30, 2025, and December 31, 2024, from property sales to related parties, which will be recognized upon sale to a non-related third party[73](index=73&type=chunk) [15. Income Taxes](index=17&type=section&id=15.%20Income%20Taxes) This note outlines the company's income tax provision and its tax sharing agreement with related entities - The company is part of a tax sharing and compensating agreement with MRHI, ARL, and IOR, with expense calculated based on absorbed losses multiplied by a **21% statutory tax rate**[74](index=74&type=chunk) Income Tax Provision (in thousands) | Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Current | $(499) | $669 | $1,954 | $1,272 | | Deferred | $2,541 | — | $1,410 | — | | **Total** | **$2,042** | **$669** | **$3,364** | **$1,272** | [16. Commitments and Contingencies](index=17&type=section&id=16.%20Commitments%20and%20Contingencies) This note details the company's liquidity plans and ongoing legal proceedings - The company plans to meet liquidity requirements by selling income-producing assets, refinancing real estate, and obtaining additional borrowings[76](index=76&type=chunk) - An ongoing litigation related to a 2008 property sale (Nixdorf) saw a jury verdict in the company's favor reversed on January 7, 2025, with the case remanded for a new trial; the company has filed a Petition for Writ of Mandamus[77](index=77&type=chunk) [17. Subsequent Events](index=17&type=section&id=17.%20Subsequent%20Events) This note reports on events occurring after the balance sheet date that may require disclosure - Events occurring after June 30, 2025, have been evaluated for financial statement adjustments or disclosure up to August 7, 2025[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial condition, results of operations, liquidity, and capital resources - The report contains forward-looking statements, and investors are cautioned that actual results may vary materially due to various risks and uncertainties, including those affecting the real estate industry, financing, demand, and development[80](index=80&type=chunk)[81](index=81&type=chunk)[82](index=82&type=chunk) [Management's Overview](index=19&type=section&id=Management's%20Overview) This section provides an overview of the company's business model, investment strategy, and management structure - Transcontinental Realty Investors, Inc. is an externally advised and managed real estate investment company with a diverse portfolio of income-producing properties and land in the Southern United States[83](index=83&type=chunk) - The company's investment strategy includes acquiring existing income-producing properties and developing new properties on owned or acquired land[83](index=83&type=chunk) - Operations are managed by Pillar Income Asset Management, Inc., a related party, which handles investment opportunities and financing arrangements[84](index=84&type=chunk) [Acquisitions and Dispositions](index=19&type=section&id=Acquisitions%20and%20Dispositions) This section details recent property sales and condemnation settlements, including associated gains - On December 13, 2024, the company sold **30 single-family lots** from Windmill Farms for **$1.4 million**, generating a gain on sale of **$1.1 million**[90](index=90&type=chunk) - On March 25, 2025, the company received **$3.5 million** from a condemnation settlement for **11.2 acres** in Windmill Farms, resulting in a gain on sale of **$3.1 million**[90](index=90&type=chunk) [Financing Activities](index=19&type=section&id=Financing%20Activities) This section outlines recent financing arrangements, including loan extensions and repayments - The cash management agreement with Pillar was amended on January 1, 2024, changing the interest rate on the related party receivable from prime plus one to SOFR[90](index=90&type=chunk) - The loan on Windmill Farms was extended to February 28, 2026, at an interest rate of **7.50%** on February 8, 2024[90](index=90&type=chunk) - A **$10.8 million** loan on 770 South Post Oak was paid off with cash on hand on May 30, 2025[90](index=90&type=chunk) [Development Activities](index=19&type=section&id=Development%20Activities) This section describes ongoing real estate development projects, including multifamily properties and infrastructure - Development activities include the Windmill Farms project in Kaufman County, Texas, which involves developing infrastructure for single-family lots, multifamily properties, and retail properties, with **$55.5 million** in District Receivables as of June 30, 2025[87](index=87&type=chunk)[88](index=88&type=chunk) - The company is developing four multifamily properties (Alera, Bandera Ridge, Merano, Mountain Creek) with Pillar, funded in part by construction loans[89](index=89&type=chunk) Multifamily Development Projects (as of June 30, 2025, in thousands) | Project | Units | Location | Total Projected Cost | Costs Incurred | | :------------- | :---- | :------------- | :------------------- | :------------- | | Alera | 240 | Lake Wales, FL | $55,330 | $51,047 | | Bandera Ridge | 216 | Temple, TX | $49,603 | $44,045 | | Merano | 216 | McKinney, TX | $51,910 | $44,470 | | Mountain Creek | 234 | Dallas, TX | $49,971 | $5,171 | | **Total** | **906** | | **$206,814** | **$144,733** | - During the six months ended June 30, 2025, **$52.0 million** in development costs were incurred, with **$43.0 million** funded by construction loan borrowings[92](index=92&type=chunk) [Other Developments](index=20&type=section&id=Other%20Developments) This section reports on other significant corporate activities, such as share repurchases of IOR - A tender offer to purchase up to **100,000 shares** of Income Opportunity Realty Investors, Inc. (IOR) at **$18 per share** was completed on January 29, 2025, resulting in the acquisition of **21,678 shares** for **$0.5 million**[93](index=93&type=chunk) - An additional **32,161 common shares** of IOR were purchased in the open market for **$0.6 million** during the six months ended June 30, 2025[94](index=94&type=chunk) [Critical Accounting Policies](index=20&type=section&id=Critical%20Accounting%20Policies) This section highlights key accounting policies requiring significant management estimates and judgments - Key accounting policies requiring significant management estimates include revenue recognition, accruals for common area maintenance and real estate taxes, bad debt provisions, impairment of long-lived assets, purchase price allocation, capitalization of costs, and fair value measurements[96](index=96&type=chunk) - Fair value measurements adhere to ASC Topic 820, utilizing a three-level hierarchy based on the transparency of inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[97](index=97&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - Related parties are identified using ASC Topic 805, focusing on entities where one party controls or significantly influences the decision-making of another[100](index=100&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, including segment profits and net income variances Results of Operations (in thousands) | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :-------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Multifamily Segment Profit | $3,962 | $4,177 | $8,686 | $8,469 | | Commercial Segment Profit | $1,663 | $972 | $2,970 | $1,945 | | Segment Operating Income | $5,625 | $5,149 | $11,656 | $10,414 | | Interest Income, Net | $2,244 | $3,338 | $5,091 | $7,596 | | Gain on Sale or Write Down of Assets | $947 | — | $4,838 | — | | Net Income | $324 | $1,696 | $5,105 | $4,453 | - Net income decreased by **$1.4 million** for the three months ended June 30, 2025, primarily due to a decrease in multifamily rent and an increase in income tax provision[103](index=103&type=chunk)[110](index=110&type=chunk) - Net income increased by **$0.7 million** for the six months ended June 30, 2025, mainly driven by a **$4.8 million** gain on asset sales and improved commercial segment profit, partially offset by a **$2.5 million** decrease in net interest income[104](index=104&type=chunk)[110](index=110&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash sources, liquidity needs, and plans to meet financial obligations - Principal cash sources include property operations, asset sales, notes receivable collection, refinancing, and additional borrowings[104](index=104&type=chunk) - Key liquidity needs are funding recurring expenses, debt service, capital expenditures, development costs, and potential property acquisitions[105](index=105&type=chunk) - The company anticipates sufficient cash from current balances, notes, receivables, and investments to meet cash requirements, with plans to selectively sell assets, refinance debt, and seek additional borrowings[106](index=106&type=chunk) Cash Flow Variances (Six Months Ended June 30, 2025 vs. 2024, in thousands) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | Variance (in thousands) | | :-------------------------------------- | :------------------ | :------------------ | :---------------------- | | Net cash (used in) provided by operating activities | $(10,340) | $3,358 | $(13,698) | | Net cash used in investing activities | $(25,431) | $(3,017) | $(22,414) | | Net cash provided by (used in) financing activities | $29,494 | $(2,354) | $31,848 | - The **$13.7 million** increase in cash used in operating activities was primarily due to a **$6.1 million** increase in other assets and a **$2.1 million** decrease in accounts payable and other liabilities[107](index=107&type=chunk) - The **$22.4 million** increase in cash used in investing activities was mainly due to a **$38.4 million** increase in real estate development and renovation, partially offset by a **$12.7 million** increase in net redemption of short-term investments[108](index=108&type=chunk) - The **$31.8 million** increase in cash provided by financing activities was driven by **$43.0 million** in construction loan borrowings, partially offset by a **$10.8 million** mortgage repayment[109](index=109&type=chunk) [Funds From Operations ("FFO")](index=23&type=section&id=Funds%20From%20Operations%20(%22FFO%22)) This section defines and reconciles Funds From Operations (FFO), a key non-GAAP metric for real estate companies - Funds From Operations (FFO) is a supplemental non-GAAP measure, defined by Nareit, used to evaluate the operating and financial results of real estate companies, excluding gains/losses from property sales and real estate depreciation/amortization[111](index=111&type=chunk)[112](index=112&type=chunk) - FFO is not considered cash flow from operations under GAAP and should not be used as an alternative to net income or as an indicator of cash available for all cash flow needs[113](index=113&type=chunk)[114](index=114&type=chunk) FFO-Basic and Diluted (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income attributable to the Company | $169 | $1,498 | $4,787 | $4,047 | | FFO-Basic and Diluted | $3,231 | $4,635 | $9,986 | $10,356 | [Item 3. Quantitative and Qualitative Disclosures About Market Risks](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) This section is optional and has not been included in the report [Item 4. Controls and Procedures](index=24&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Disclosure controls and procedures were deemed effective as of June 30, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[117](index=117&type=chunk) - There were no material changes in internal control over financial reporting during the most recent fiscal quarter[118](index=118&type=chunk) PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal, risk, and equity matters [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) This section reports no legal proceedings - No legal proceedings are reported in this section[119](index=119&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) This section confirms no material changes to risk factors previously disclosed in the 2024 Form 10-K - There have been no material changes from the risk factors previously disclosed in the 2024 10-K[119](index=119&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the common stock repurchase program, noting no shares were purchased during the period - The company has a common stock repurchase program authorizing the repurchase of up to **1,637,000 shares**, with no termination date[120](index=120&type=chunk) - No shares were purchased under this program during the six months ended June 30, 2025[120](index=120&type=chunk) - As of June 30, 2025, **1,230,535 shares** have been purchased, leaving **406,465 shares** available for repurchase[120](index=120&type=chunk) [Item 3. Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section reports no defaults upon senior securities - No defaults upon senior securities are reported[121](index=121&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section reports no mine safety disclosures - No mine safety disclosures are reported[121](index=121&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) This section reports no other information - No other information is reported[121](index=121&type=chunk) [Item 6. Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including corporate governance documents and certifications - Exhibits include Articles of Incorporation, Certificates of Amendment, By-Laws, and Certificates of Designation[122](index=122&type=chunk) - Section 302 Certifications from the Chief Executive Officer and Chief Accounting Officer, and Section 906 Certifications, are filed herewith[122](index=122&type=chunk) - XBRL Instance and Taxonomy Extension documents are included[122](index=122&type=chunk) [Signatures](index=26&type=section&id=Signatures) This section contains the signature of the authorized representative, confirming report submission - The report was signed by Erik L. Johnson, President and Chief Executive Officer, on August 7, 2025[125](index=125&type=chunk)

Q1 2025 Earnings Release Overview [Q1 2025 Financial Performance Summary](index=1&type=section&id=Q1%202025%20Financial%20Performance%20Summary) Q1 2025 net income and EPS grew significantly, fueled by higher rental income, reduced operating loss, and real estate transaction gains Financial Performance Summary | Metric | Q1 2025 | Q1 2024 | Change | Change Rate | | :-------------------------------- | :------------- | :------------- | :--- | :----- | | Net Income Attributable to Common Stock | $4.6 million | $2.5 million | +$2.1 million | +84% | | Diluted Earnings Per Share | $0.53 | $0.30 | +$0.23 | +76.7% | | Rental Income | $11.4 million | $11.3 million | +$0.1 million | +0.9% | | Net Operating Loss | $0.6 million | $1.3 million | -$0.7 million | -53.8% | | Operating Expenses | - | - | -$0.6 million | - | - Rental income growth was primarily attributed to **increased rents** from multi-family residential properties[2](index=2&type=chunk) - The reduction in net operating loss was mainly due to decreased insurance and property tax costs, resulting in a **$0.6 million** decrease in operating expenses[3](index=3&type=chunk) - Net income growth was primarily attributed to **increased real estate transaction gains**, partially offset by reduced interest income and increased tax provisions[4](index=4&type=chunk) [Operational Highlights](index=1&type=section&id=Operational%20Highlights) Q1 2025 operational highlights include an **80% overall occupancy rate** and significant gains from single-family residential lot sales Occupancy Rates | Metric | As of March 31, 2025 | | :--- | :------------- | | Total Occupancy Rate | 80% | | Multi-family Occupancy Rate | 94% | | Commercial Property Occupancy Rate | 53% | - On December 13, 2024, the company sold **30 single-family residential lots** at Windmill Farms for **$1.4 million**, realizing a sales gain of **$1.1 million**[7](index=7&type=chunk) [Company Information](index=1&type=section&id=Company%20Information) This Dallas-based real estate investment company holds a diversified portfolio of properties and employs various investment approaches - The company is a **Dallas-based real estate investment firm**[5](index=5&type=chunk) - The company holds a **diversified equity real estate investment portfolio** across the United States, including office buildings, apartments, shopping centers, and developed and undeveloped land[5](index=5&type=chunk) - The company invests in real estate through **direct ownership, leases, and partnerships**, and also invests in real estate mortgages while holding mortgage receivables[5](index=5&type=chunk) [Consolidated Financial Statements](index=2&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statements of Operations (Unaudited)](index=2&type=section&id=Consolidated%20Statements%20of%20Operations%20(Unaudited)) This section details the consolidated statements of operations for Q1 2025 and 2024, outlining revenues, expenses, and net income Consolidated Statements of Operations | Item | Three Months Ended March 31, 2025 (in thousand USD) | Three Months Ended March 31, 2024 (in thousand USD) | | :--------------------------------- | :----------------------------- | :----------------------------- | | **Revenues:** | | | | Rental income | 11,427 | 11,279 | | Other income | 581 | 620 | | **Total revenues** | **12,008** | **11,899** | | **Expenses:** | | | | Property operating expenses | 5,977 | 6,634 | | Depreciation and amortization | 2,883 | 3,172 | | General and administrative expenses | 1,352 | 1,261 | | Advisory fees to affiliates | 2,431 | 2,165 | | **Total operating expenses** | **12,643** | **13,232** | | **Net operating loss** | **(635)** | **(1,333)** | | Interest income | 4,628 | 6,127 | | Interest expense | (1,781) | (1,869) | | Equity in earnings of unconsolidated joint ventures | — | 435 | | Net gain on sale or impairment of assets | 3,891 | — | | Provision for income taxes | (1,322) | (603) | | **Net income** | **4,781** | **2,757** | | Net income attributable to noncontrolling interests | (163) | (208) | | **Net income attributable to the Company** | **4,618** | **2,549** | | **Earnings per share:** | | | | Basic and diluted | $0.53 | $0.30 | | Weighted average common shares outstanding for EPS calculation | 8,639,316 | 8,639,316 |

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the company's unaudited consolidated financial statements and management's discussion and analysis for the quarter [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Unaudited consolidated financial statements and comprehensive notes for Transcontinental Realty Investors, Inc. for Q1 2025 and 2024 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The balance sheet details the company's financial position, including assets, liabilities, and equity, for Q1 2025 Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------ | :-------------------- | :------- | | **Assets:** | | | | | | Real estate | $582,232 | $557,388 | $24,844 | 4.46% | | Cash and cash equivalents | $13,779 | $19,915 | $(6,136) | -30.81% | | Restricted cash | $18,237 | $20,557 | $(2,320) | -11.28% | | Short-term investments | $74,859 | $79,800 | $(4,941) | -6.19% | | Notes receivable | $126,564 | $128,229 | $(1,665) | -1.30% | | Receivables from related party | $165,783 | $163,518 | $2,265 | 1.39% | | Other assets | $102,086 | $101,138 | $948 | 0.94% | | **Total assets** | **$1,083,540** | **$1,070,545** | **$12,945** | **1.21%** | | **Liabilities:** | | | | | | Mortgages and other notes payable | $198,153 | $181,856 | $16,297 | 8.96% | | Accounts payable and other liabilities | $24,604 | $32,103 | $(7,499) | -23.36% | | Accrued interest | $3,289 | $3,194 | $95 | 2.97% | | Deferred revenue | $581 | $581 | $0 | 0.00% | | **Total liabilities** | **$226,627** | **$217,734** | **$8,893** | **4.08%** | | **Equity:** | | | | | | Total shareholders' equity | $837,259 | $832,278 | $4,981 | 0.60% | | Noncontrolling interest | $19,654 | $20,533 | $(879) | -4.28% | | **Total equity** | **$856,913** | **$852,811** | **$4,102 | **0.48%** | | **Total liabilities and equity** | **$1,083,540** | **$1,070,545** | **$12,945** | **1.21%** | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) The statement of operations presents the company's revenues, expenses, and net income for Q1 2025 and 2024 Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | Total revenue | $12,008 | $11,899 | $109 | 0.92% | | Total operating expenses | $12,643 | $13,232 | $(589) | -4.45% | | Net operating loss | $(635) | $(1,333) | $698 | -52.36% | | Interest income | $4,628 | $6,127 | $(1,499) | -24.47% | | Interest expense | $(1,781) | $(1,869) | $88 | -4.71% | | Gain on sale or write-down of assets, net | $3,891 | $0 | $3,891 | N/A | | Income tax provision | $(1,322) | $(603) | $(719) | 119.24% | | Net income attributable to the Company | $4,618 | $2,549 | $2,069 | 81.17% | | Earnings per share - basic and diluted | $0.53 | $0.30 | $0.23 | 76.67% | [Consolidated Statements of Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Equity) This statement outlines changes in the company's total equity and noncontrolling interest for Q1 2025 Consolidated Statements of Equity (in thousands) | Metric | March 31, 2025 (in thousands) | January 1, 2025 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :---------------------------- | :-------------------- | | Total Shareholders' Equity | $837,259 | $832,278 | $4,981 | | Noncontrolling Interest | $19,654 | $20,533 | $(879) | | Total Equity | $856,913 | $852,811 | $4,102 | Key Changes (Q1 2025) - Net income attributable to the Company was **$4,618 thousand**[15](index=15&type=chunk) - Repurchase of treasury shares by IOR amounted to **$(679) thousand**[15](index=15&type=chunk) - Adjustment to noncontrolling interest was **$363 thousand**[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement summarizes cash flows from operating, investing, and financing activities for Q1 2025 and 2024 Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Net cash (used in) provided by operating activities | $(7,426) | $3,869 | $(11,295) | | Net cash (used in) provided by investing activities | $(16,630) | $11,574 | $(28,204) | | Net cash provided by (used in) financing activities | $15,600 | $(1,456) | $17,056 | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(8,456) | $13,987 | $(22,443) | | Cash, cash equivalents and restricted cash, end of period | $32,016 | $93,014 | $(60,998) | [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements [1. Organization](index=7&type=section&id=1.%20Organization) This note describes TCI's corporate structure, business activities, and management arrangements - Transcontinental Realty Investors, Inc. (TCI) is a Nevada corporation formed in 1984, listed on the NYSE under 'TCI', and approximately **78% owned by American Realty Investors, Inc. (ARL)**[20](index=20&type=chunk) - The primary business involves the acquisition, development, and ownership of income-producing residential and commercial real estate, along with opportunistic land acquisition and sales[21](index=21&type=chunk) - As of March 31, 2025, the property portfolio includes **four office buildings (1,060,236 sq ft)**, **fourteen directly owned multifamily properties (2,328 units)**, **four multifamily properties in development (906 units)**, and approximately **1,797 acres of developed and undeveloped land**[27](index=27&type=chunk) - Day-to-day operations are managed by Pillar Income Asset Management, Inc. ('Pillar'), a related party, which handles investment opportunities, asset management, development, construction management, and financing, with the company having no direct employees[22](index=22&type=chunk) [2. Summary of Significant Accounting Policies](index=7&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting principles and policies used in preparing the consolidated financial statements - The unaudited consolidated financial statements are prepared in accordance with Form 10-Q and Article 10 of Regulation S-X, with certain GAAP disclosures condensed or omitted[23](index=23&type=chunk) - The company consolidates entities where it is the primary beneficiary of a variable interest entity (VIE) or holds a majority voting interest, based on power to direct activities and obligation/right to absorb losses/benefits[26](index=26&type=chunk)[29](index=29&type=chunk) [3. Earnings Per Share](index=8&type=section&id=3.%20Earnings%20Per%20Share) This note details the calculation of basic and diluted earnings per share for the reporting periods Earnings Per Share (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net income attributable to the Company | $4,618 | $2,549 | | Weighted-average common shares outstanding | 8,639,316 | 8,639,316 | | EPS - basic and diluted | $0.53 | $0.30 | - Basic and diluted EPS increased by **$0.23 (76.67%)** from **$0.30 in Q1 2024 to $0.53 in Q1 2025**, driven by higher net income attributable to the Company[30](index=30&type=chunk) [4. Supplemental Cash Flow Information](index=8&type=section&id=4.%20Supplemental%20Cash%20Flow%20Information) This note provides additional details on non-cash activities and cash paid for interest and taxes Supplemental Cash Flow Information (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :----------------------- | :------------------------------------------ | :------------------------------------------ | | Cash paid for interest | $1,504 | $1,544 | | Cash paid for taxes | $3,206 | $0 | | Accrued development costs | $13,880 | $1,571 | - Cash paid for taxes significantly increased from **$0 in Q1 2024 to $3,206 thousand in Q1 2025**; accrued development costs also saw a substantial increase from **$1,571 thousand to $13,880 thousand**[31](index=31&type=chunk) [5. Operating Segments](index=10&type=section&id=5.%20Operating%20Segments) This note presents financial information for the company's Residential and Commercial operating segments - The company operates in two reportable segments: Residential (multifamily properties) and Commercial (commercial real estate properties)[33](index=33&type=chunk) Operating Segment Performance (in thousands) | Segment | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | :------- | | **Multifamily Segment:** | | | | | | Revenues | $8,764 | $8,510 | $254 | 2.98% | | Operating expenses | $(4,040) | $(4,219) | $179 | -4.24% | | Profit from segment | $4,724 | $4,291 | $433 | 10.09% | | **Commercial Segment:** | | | | | | Revenues | $3,244 | $3,389 | $(145) | -4.28% | | Operating expenses | $(1,937) | $(2,415) | $478 | -19.79% | | Profit from segment | $1,307 | $974 | $333 | 34.19% | | **Total profit from segments** | **$6,031** | **$5,265** | **$766** | **14.55%** | - Total profit from segments increased by **$766 thousand (14.55%)** year-over-year, driven by a **10.09% increase in Multifamily segment profit** and a **34.19% increase in Commercial segment profit**[34](index=34&type=chunk) [6. Lease Revenue](index=11&type=section&id=6.%20Lease%20Revenue) This note details lease revenue components and future rental payments from non-cancelable commercial leases - Lease revenues are generated from multifamily and commercial properties, classified as operating leases, with minimum rental revenues recognized on a straight-line basis[36](index=36&type=chunk) Lease Revenue Components (in thousands) | Component | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :---------------- | :------------------------------------------ | :------------------------------------------ | | Fixed component | $11,162 | $10,999 | | Variable component | $265 | $280 | | **Total** | **$11,427** | **$11,279** | Future Rental Payments from Non-Cancelable Commercial Leases (in thousands) | Year | Amount | | :--- | :----- | | 2025 | $11,726 | | 2026 | $12,478 | | 2027 | $12,366 | | 2028 | $11,569 | | 2029 | $8,886 | | Thereafter | $19,356 | | **Total** | **$76,381** | [7. Real Estate Activity](index=11&type=section&id=7.%20Real%20Estate%20Activity) This note provides a breakdown of real estate assets, construction in progress, and asset disposition gains Real Estate Components (in thousands) | Real Estate Component | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :---------------------- | :----------------------------- | :------------------------------ | | Land | $104,076 | $104,076 | | Building and improvements | $375,487 | $375,430 | | Tenant improvements | $17,784 | $16,629 | | Construction in progress | $166,399 | $140,046 | | Total cost | $663,746 | $636,181 | | Less accumulated depreciation | $(81,514) | $(78,793) | | **Total real estate** | **$582,232** | **$557,388** | - Construction in progress increased by **$26,353 thousand (18.82%)** from December 31, 2024, to March 31, 2025, primarily due to development activities at Windmill Farms and new multifamily projects[38](index=38&type=chunk)[39](index=39&type=chunk)[41](index=41&type=chunk) Multifamily Construction Projects (as of March 31, 2025, in thousands) | Project | Units | Location | Total Project Cost | Costs Incurred | Expected Completion Date | | :------------ | :---- | :----------- | :----------------- | :------------- | :----------------------- | | Alera | 240 | Lake Wales, FL | $55,330 | $43,901 | December 2025 | | Bandera Ridge | 216 | Temple, TX | $49,603 | $35,692 | November 2025 | | Merano | 216 | McKinney, TX | $51,910 | $34,323 | November 2025 | | Mountain Creek | 234 | Dallas, TX | $49,971 | $5,122 | October 2026 | | **Total** | **906** | | **$206,814** | **$119,038** | | - The company recognized a net gain on sale or write-down of assets of **$3,891 thousand** for the three months ended March 31, 2025, primarily from land dispositions in Windmill Farms and other holdings[43](index=43&type=chunk) [8. Short-term Investments](index=12&type=section&id=8.%20Short-term%20Investments) This note details the composition and changes in the company's short-term investment portfolio Short-term Investments (in thousands) | Investment Type | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------- | :----------------------------- | :------------------------------ | | Corporate bonds | $75,000 | $80,000 | | Demand notes | $329 | $325 | | Less discount | $(470) | $(525) | | **Total** | **$74,859** | **$79,800** | - Short-term investments decreased by **$4,941 thousand (6.19%)** from December 31, 2024, to March 31, 2025, mainly due to a reduction in corporate bonds[44](index=44&type=chunk) - The average interest rate on investments decreased from **5.20% at December 31, 2024, to 4.92% at March 31, 2025**[44](index=44&type=chunk) [9. Notes Receivable](index=13&type=section&id=9.%20Notes%20Receivable) This note describes the company's notes receivable, including convertible and related party receivables - Total notes receivable decreased slightly from **$128,229 thousand at December 31, 2024, to $126,564 thousand at March 31, 2025**[46](index=46&type=chunk) - Several notes are convertible into **100% ownership interest** in the underlying property at the company's option and are collateralized by the property[46](index=46&type=chunk) - Notes from Unified Housing Foundation, Inc. (UHF) are considered related party receivables, with principal and interest payments funded from surplus cash flow, property sales, or refinancing, and are cross-collateralized[47](index=47&type=chunk)[48](index=48&type=chunk) [10. Other Assets](index=14&type=section&id=10.%20Other%20Assets) This note details other assets, including district receivables and deferred tax assets Other Asset Components (in thousands) | Other Asset Component | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :------------------------------ | | Acquisition deposits | $15,409 | $17,642 | | District receivables | $55,211 | $52,700 | | Interest receivable | $16,326 | $16,388 | | Tenant and other receivables | $3,996 | $3,989 | | Prepaid expenses and other assets | $7,558 | $7,964 | | Deferred tax assets | $3,586 | $2,455 | | **Total** | **$102,086** | **$101,138** | - District receivables, related to infrastructure costs in Windmill Farms, increased by **$2,511 thousand (4.76%) to $55,211 thousand**[51](index=51&type=chunk) - Deferred tax assets increased by **$1,131 thousand (46.07%) to $3,586 thousand**[51](index=51&type=chunk) [11. Mortgages and Other Notes Payable](index=15&type=section&id=11.%20Mortgages%20and%20Other%20Notes%20Payable) This note details mortgages and other notes payable, including new borrowings and covenant compliance Mortgages and Other Notes Payable (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------- | :----------------------------- | :------------------------------ | | Mortgages and other notes payable | $198,153 | $181,856 | - Total mortgages and other notes payable increased by **$16,297 thousand (8.96%)** from December 31, 2024, to March 31, 2025, primarily due to new construction loan borrowings for Alera, Bandera Ridge, and Merano[55](index=55&type=chunk)[56](index=56&type=chunk)[60](index=60&type=chunk) - The company was not in compliance with the minimum debt service coverage ratio (DSCR) covenant for the loan on 770 South Post Oak, leading to the lender requiring surplus cash flow to be locked into a designated deposit account[58](index=58&type=chunk) - The company has guaranteed loans on Alera, Bandera Ridge, Merano, Mountain Creek, Villas at Bon Secour, and Windmill Farms[59](index=59&type=chunk) [12. Related Party Transactions](index=16&type=section&id=12.%20Related%20Party%20Transactions) This note discloses transactions with related entities, including management fees and interest income - The company engages in business transactions with related parties, including Pillar Income Asset Management, Inc. ('Pillar') and Regis Realty Prime, LLC ('Regis'), both wholly owned by a subsidiary of May Realty Holdings, Inc. ('MRHI'), which controls ARL, the company's majority shareholder[62](index=62&type=chunk)[63](index=63&type=chunk) Related Party Transactions (Three Months Ended March 31, in thousands) | Transaction Type | 2025 | 2024 | | :-------------------------- | :--- | :--- | | Rental income from Pillar/Regis | $145 | $178 | | Property operating expense to Regis | $86 | $80 | | General and administrative to Pillar | $971 | $914 | | Advisory fees paid to Pillar | $2,431 | $2,165 | | Development fees paid to Pillar | $730 | $388 | | Interest income on UHF notes/Pillar Receivable | $2,517 | $2,692 | - Advisory fees paid to Pillar increased by **$266 thousand (12.29%)** and development fees increased by **$342 thousand (88.14%)** in Q1 2025 compared to Q1 2024[65](index=65&type=chunk) [13. Noncontrolling Interests](index=16&type=section&id=13.%20Noncontrolling%20Interests) This note explains the nature of noncontrolling interests and changes in the company's ownership of IOR - Noncontrolling interest represents third-party ownership in Income Opportunity Realty Investors, Inc. ('IOR'), whose shares are listed on the NYSE American[67](index=67&type=chunk) - The company completed a tender offer on January 29, 2025, acquiring **21,678 shares of IOR for $454 thousand**, and purchased an additional **12,680 shares in the open market for $225 thousand** during Q1 2025[68](index=68&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - The company's ownership in IOR increased from approximately **83.2% at December 31, 2024, to 84.0% at March 31, 2025**[69](index=69&type=chunk) [14. Deferred Income](index=16&type=section&id=14.%20Deferred%20Income) This note describes deferred gain recognition from property sales to related parties - The company has deferred gain recognition of **$581 thousand** from property sales to related parties, as sales criteria for the full accrual method were not met; this gain will be recognized when properties are sold to non-related third parties[70](index=70&type=chunk) [15. Income Taxes](index=17&type=section&id=15.%20Income%20Taxes) This note details the company's income tax provision and tax sharing agreement with related entities - The company is part of a tax sharing and compensating agreement with MRHI, ARL, and IOR, with expenses calculated based on losses absorbed by taxable income multiplied by a **21% statutory tax rate**[72](index=72&type=chunk) Income Tax Provision (Three Months Ended March 31, in thousands) | Component | 2025 | 2024 | | :-------- | :--- | :--- | | Current | $2,453 | $603 | | Deferred | $(1,131) | $0 | | **Total** | **$1,322** | **$603** | - The total income tax provision increased by **$719 thousand (119.24%)** in Q1 2025 compared to Q1 2024, primarily due to a significant increase in current tax provision and a deferred tax benefit in 2025[73](index=73&type=chunk) [16. Commitments and Contingencies](index=17&type=section&id=16.%20Commitments%20and%20Contingencies) This note outlines the company's liquidity plans and ongoing legal proceedings - The company plans to meet liquidity requirements by generating excess cash from property operations, selling income-producing assets, refinancing real estate, and obtaining additional borrowings[74](index=74&type=chunk) - A legal proceeding related to a 2008 property sale (Nixdorf) was reversed by the Fifth District Court of Appeals at Dallas on January 7, 2025, remanding the case for a new trial, which the company is challenging[75](index=75&type=chunk) [17. Subsequent Events](index=17&type=section&id=17.%20Subsequent%20Events) This note confirms the evaluation of events occurring after the balance sheet date - Subsequent events occurring after March 31, 2025, have been evaluated up to May 8, 2025, the date the consolidated financial statements were available for issuance[76](index=76&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operational results, business strategy, development, financing, and FFO for the period [Forward-Looking Statements](index=18&type=section&id=Forward-Looking%20Statements) This section outlines forward-looking statements based on management's beliefs, subject to inherent risks and uncertainties - The report contains forward-looking statements based on management's beliefs and assumptions, subject to risks and uncertainties that could cause actual results to differ materially[78](index=78&type=chunk) - Key risks include general real estate industry factors, availability of financing, demand for properties, ability to obtain financing for development, timing of property sales, growth management, construction delays, economic downturns, compliance costs, uninsured losses, environmental contamination, and dependence on key personnel[79](index=79&type=chunk)[80](index=80&type=chunk) [Management's Overview](index=19&type=section&id=Management's%20Overview) Management provides an overview of the company's real estate portfolio, development, and strategic actions - 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[81](index=81&type=chunk) - Operations are managed by Pillar Income Asset Management, Inc., a related party, which handles investment opportunities, asset management, and financing[82](index=82&type=chunk) - Development activities include Windmill Farms, a collection of freshwater districts in Kaufman County, Texas, being developed into single-family lots, multifamily, and retail properties, with **$55.2 million in District Receivables** as of March 31, 2025[84](index=84&type=chunk)[85](index=85&type=chunk) - Four multifamily properties (Alera, Bandera Ridge, Merano, Mountain Creek) are under development with Pillar, funded by construction loans, totaling **$119.038 million in costs incurred** as of March 31, 2025[86](index=86&type=chunk)[88](index=88&type=chunk) - Recent acquisitions and dispositions include the sale of **30 single-family lots from Windmill Farms for $1.4 million (gain of $1.1 million)** and a **$3.5 million condemnation settlement for 11.2 acres in Windmill Farms (gain of $3.1 million)**[87](index=87&type=chunk) - Financing activities include amending the cash management agreement with Pillar (interest rate change to SOFR), extending the Windmill Farms loan maturity to February 2026, and securing new construction loans for Forest Grove and Mountain Creek[87](index=87&type=chunk) - The company acquired **21,678 shares of IOR for $0.5 million** through a tender offer completed January 29, 2025, and an additional **12,680 shares for $0.2 million** in the open market during Q1 2025[90](index=90&type=chunk)[91](index=91&type=chunk) [Critical Accounting Policies](index=20&type=section&id=Critical%20Accounting%20Policies) This section discusses key accounting policies requiring significant management judgment and estimation - The preparation of financial statements requires management to make estimates and assumptions, including judgments on revenue recognition, accruals, bad debt provisions, impairment of long-lived assets, purchase price allocation, capitalization of costs, and fair value measurements[92](index=92&type=chunk)[93](index=93&type=chunk) - Fair value measurements for financial instruments follow ASC Topic 820, using a three-level hierarchy based on the transparency of inputs: Level 1 (quoted prices in active markets), Level 2 (observable inputs for similar assets/liabilities), and Level 3 (unobservable inputs)[94](index=94&type=chunk)[95](index=95&type=chunk)[96](index=96&type=chunk) - Related parties are defined by ASC Topic 805, including entities with significant equity investments, trusts, management personnel, and parties with controlling or significant influence over decision-making[97](index=97&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, covering segment revenues, expenses, and net income Results of Operations (Three Months Ended March 31, in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Variance (in thousands) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------- | | Multifamily Segment Revenue | $8,764 | $8,510 | $254 | | Multifamily Segment Operating expenses | $(4,040) | $(4,219) | $179 | | Multifamily Segment Profit | $4,724 | $4,291 | $433 | | Commercial Segment Revenue | $3,244 | $3,389 | $(145) | | Commercial Segment Operating expenses | $(1,937) | $(2,415) | $478 | | Commercial Segment Profit | $1,307 | $974 | $333 | | Segment operating income | $6,031 | $5,265 | $766 | | Depreciation and amortization | $(2,883) | $(3,172) | $289 | | General, administrative and advisory | $(3,783) | $(3,426) | $(357) | | Interest income, net | $2,847 | $4,258 | $(1,411) | | Gain on sale or write down of assets | $3,891 | $0 | $3,891 | | Income from joint venture | $0 | $435 | $(435) | | Other expense | $(1,322) | $(603) | $(719) | | **Net income** | **$4,781** | **$2,757** | **$2,024** | - Net income increased by **$2.0 million**, primarily due to increased profit from the multifamily segment (higher rents) and commercial segment (lower insurance and property taxes), and a **$3.1 million gain from a condemnation settlement**[101](index=101&type=chunk)[107](index=107&type=chunk) - Net interest income decreased by **$1.4 million** due to a **$1.5 million decrease in interest income**, partially offset by a **$0.1 million decrease in interest expense**, mainly from a lower average balance and interest rates on short-term investments[107](index=107&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash sources, liquidity needs, and capital resource management strategies - Principal cash sources include property operations, proceeds from asset sales, collection of notes receivable, refinancing, and additional borrowings[101](index=101&type=chunk) - Liquidity needs are for recurring expenses, debt service, capital expenditures, development costs not covered by loans, and potential property acquisitions[102](index=102&type=chunk) - Management anticipates that current cash, along with cash from notes, related party receivables, and investments, will be sufficient for cash requirements; the company may sell assets, refinance debt, or seek additional borrowings[103](index=103&type=chunk) Cash Flow Activities (Three Months Ended March 31, in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Variance (in thousands) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :---------------------- | | Net cash (used in) provided by operating activities | $(7,426) | $3,869 | $(11,295) | | Net cash (used in) provided by investing activities | $(16,630) | $11,574 | $(28,204) | | Net cash provided by (used in) financing activities | $15,600 | $(1,456) | $17,056 | - The **$11.3 million increase in cash used in operating activities** is primarily due to a **$5.2 million decrease in accounts payable and other liabilities** and a **$3.1 million increase in other assets**[104](index=104&type=chunk) - The **$28.2 million increase in cash used in investing activities** is mainly due to a **$20.7 million increase in real estate development and renovation** (Alera, Bandera Ridge, Merano) and a **$9.4 million increase in net redemption of short-term investments**[105](index=105&type=chunk) - The **$17.1 million increase in cash provided by financing activities** resulted from borrowings on construction loans for Alera, Bandera Ridge, and Merano[106](index=106&type=chunk) [Funds From Operations ("FFO")](index=23&type=section&id=Funds%20From%20Operations%20(%22FFO%22)) This section defines and reconciles Funds From Operations (FFO) as a supplemental real estate performance measure - FFO is used as a supplemental measure for the real estate industry, defined by Nareit as net income excluding gains/losses from property sales, plus real estate-related depreciation and amortization, impairment write-downs, and adjustments for unconsolidated joint ventures[108](index=108&type=chunk) - FFO is considered useful for comparing operating and financial results between periods, as it excludes real estate depreciation and amortization, which management believes fluctuates with market conditions rather than depreciating ratably[109](index=109&type=chunk) - FFO does not represent GAAP cash flow from operations, should not be an alternative to GAAP net income, and may not be comparable to similarly titled measures by other companies[110](index=110&type=chunk) Reconciliation of Net Income to FFO (Three Months Ended March 31, in thousands) | Metric | 2025 | 2024 | | :--------------------------------------- | :--- | :--- | | Net income attributable to the Company | $4,618 | $2,549 | | Depreciation and amortization | $2,883 | $3,172 | | Gain on sale or write down of assets, net | $(3,891) | $0 | | Gain on sale of land | $3,145 | $0 | | **FFO-Basic and Diluted** | **$6,755** | **$5,721** | - FFO-Basic and Diluted increased by **$1,034 thousand (18.07%)** from **$5,721 thousand in Q1 2024 to $6,755 thousand in Q1 2025**[112](index=112&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risks](index=23&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risks) This section is optional and not included in the report - This item is optional and not included in the current report[113](index=113&type=chunk) [Item 4. Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed effective disclosure controls and no material changes to internal control over financial reporting - Disclosure controls and procedures were deemed effective as of March 31, 2025, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[114](index=114&type=chunk) - No material changes to internal control over financial reporting occurred during the most recent fiscal quarter[115](index=115&type=chunk) [PART II. OTHER INFORMATION](index=24&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures [Item 1. Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) No legal proceedings are reported under this item - No legal proceedings are reported under this item[116](index=116&type=chunk) [Item 1A. Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the 2024 Form 10-K - No material changes have occurred to the risk factors previously disclosed in the 2024 Form 10-K[116](index=116&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company's share repurchase program has 406,465 shares remaining, with no purchases made in Q1 2025 - The company has an ongoing share repurchase program for up to **1,637,000 shares of common stock**, with no termination date[117](index=117&type=chunk) - As of March 31, 2025, **1,230,535 shares have been purchased** under the program, leaving **406,465 shares available** for future repurchase[117](index=117&type=chunk) - No shares were purchased under this program during the three months ended March 31, 2025[117](index=117&type=chunk) [Item 3. Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities are reported - No defaults upon senior securities are reported[118](index=118&type=chunk) [Item 4. Mine Safety Disclosures](index=24&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No mine safety disclosures are reported - No mine safety disclosures are reported[118](index=118&type=chunk) [Item 5. Other Information](index=24&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item - No other information is reported under this item[118](index=118&type=chunk) [Item 6. Exhibits](index=24&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the report, including corporate documents and certifications - The report includes various exhibits, such as Articles of Incorporation, Certificates of Amendment, By-Laws, and Section 302 and 906 Certifications[119](index=119&type=chunk) [Signatures](index=26&type=section&id=Signatures) The report was duly signed by Erik L. Johnson, President and CEO, on May 8, 2025 - The report was signed by Erik L. Johnson, President and Chief Executive Officer, on May 8, 2025[123](index=123&type=chunk)

Financial Performance - For Q4 2024, Transcontinental Realty Investors reported net income attributable to common shares of $0.1 million or $0.01 per diluted share, a significant improvement from a net loss of $2.6 million or $0.30 per diluted share in Q4 2023[2][6]. - The company reported a net income attributable to the Company of $5.9 million for the twelve months ended December 31, 2024, compared to $5.9 million in 2023[10]. Revenue and Occupancy - Rental revenues decreased by $1.6 million from $12.8 million in Q4 2023 to $11.2 million in Q4 2024, primarily due to a decrease in occupancy at commercial properties[4]. - Total revenue for the twelve months ended December 31, 2024, was $47.1 million, down from $49.9 million in 2023[10]. - Total occupancy was 81% as of December 31, 2024, with multifamily properties at 94% and commercial properties at 53%[7]. Operating Expenses and Losses - Net operating loss decreased by $0.4 million from $2.1 million in Q4 2023 to $1.7 million in Q4 2024, attributed to a $2.1 million decrease in operating expenses[5]. New Developments and Investments - A new lease at Stanford Center, completed on October 18, 2024, is expected to increase occupancy by 14% and rent per square foot by 20% over recent expired leases[7]. - The company secured a $27.5 million construction loan for a 234-unit multifamily property in Dallas, expected to be completed in 2026 at a total cost of approximately $49.8 million[7]. Asset Sales and Gains - The sale of 30 single-family lots from Windmill Farms generated $1.4 million, resulting in a gain of $1.1 million[7]. Interest Income and Expenses - Interest income increased to $4.6 million in Q4 2024 from $3.0 million in Q4 2023, while interest expense slightly decreased[10].

Debt and Indebtedness - Total indebtedness as of December 31, 2024, was approximately $181.9 million, with 69.5% ($126.3 million) insured by HUD[55][56]. - The company operates with a policy of incurring indebtedness only when advisable, as determined by the Board of Directors and management[64]. - Additional indebtedness could be incurred through borrowing under a line of credit, mortgaging properties, restructuring existing debt, or issuing debt securities[64]. - Indebtedness may affect the company's ability to obtain additional financing for working capital, capital expenditures, acquisitions, or other corporate purposes[65]. - The company could become more vulnerable to downturns in business or the economy due to increased indebtedness[65]. Operational Risks - The company faces risks associated with increased operating costs, including insurance, maintenance, and administrative costs, which could adversely affect cash flow and shareholder distributions[49]. - The company is reliant on third-party management companies for property operations, which may impact profitability if these managers fail to perform effectively[47][48]. - The company may experience challenges in leasing newly-completed properties, which could result in lower than projected rental rates and reduced income[51]. - The company may face challenges in achieving growth in operating income due to potential difficulties in property acquisitions and redevelopment activities[52][53]. Market and Economic Conditions - The company’s performance is significantly dependent on economic conditions in its primary markets located in the Southern United States[54]. - Rising interest rates could increase costs on variable rate debt, adversely affecting cash flow and the ability to refinance existing debt[59]. - The company is exposed to competition from other real estate investors, which may affect its ability to attract tenants and acquire properties[39][40]. Development and Project Risks - The company intends to continue developing properties where market conditions warrant, with ongoing projects that may face risks such as construction delays and cost overruns[50]. - The company may not be able to sell properties quickly due to the illiquid nature of real estate investments, impacting cash flow[41][61].

Financial Performance - Net income attributable to common shares decreased by $2.7 million from $4.5 million in Q3 2023 to $1.7 million in Q3 2024, representing a 60% decline [5]. - Rental revenues decreased by $0.8 million from $11.8 million in Q3 2023 to $11.1 million in Q3 2024, a decline of approximately 6.8% [3]. - Total revenue for Q3 2024 was $11.6 million, down from $12.5 million in Q3 2023, reflecting a decrease of approximately 7.3% [7]. - Interest income decreased from $9.7 million in Q3 2023 to $5.9 million in Q3 2024, a decline of about 39.5% [7]. - Net operating loss decreased by $0.1 million from $1.8 million in Q3 2023 to $1.7 million in Q3 2024, primarily due to reduced general and administrative expenses [4]. Occupancy and Leasing - Total occupancy was reported at 79% as of September 30, 2024, with multifamily properties at 95% and commercial properties at 48% [2]. - A new lease at Stanford Center is expected to increase occupancy by 14% and rent per square foot by 20% compared to recent expired leases, commencing in April 2025 [2]. - The company completed a major renovation at Stanford Center, leading to the first new lease at the property since the renovation [2]. Development and Financing - The company obtained a $27.5 million construction loan for a 234-unit multifamily property in Dallas, expected to be completed in 2026 at a total cost of approximately $49.8 million [2]. - The company replaced an existing loan on Forest Grove with a $6.6 million loan, maturing on August 1, 2031, at an interest rate of SOFR plus 1.85% [2].