Transcontinental Realty Investors(TCI) - 2024 Q4 - Annual Report

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].