Income Opportunity Realty Investors Inc. Files Q3 2024 10-Q

Ticker: IOR · Form: 10-Q · Filed: Nov 7, 2024 · CIK: 949961

Sentiment: neutral

Topics: real-estate, 10-q, financials

TL;DR

IOR filed its Q3 2024 10-Q, showing updated financials and operations.

AI Summary

Income Opportunity Realty Investors Inc. (IOR) filed its 10-Q for the period ending September 30, 2024. The filing details financial performance and operational updates for the third quarter of 2024. Specific financial figures and operational highlights are presented within the report.

Why It Matters

This filing provides investors with the latest financial health and operational status of Income Opportunity Realty Investors Inc., crucial for making informed investment decisions.

Risk Assessment

Risk Level: medium — As a real estate investment trust, the company is subject to market fluctuations and interest rate risks inherent in the real estate sector.

Key Numbers

Key Players & Entities

FAQ

What is the primary business of Income Opportunity Realty Investors Inc.?

Income Opportunity Realty Investors Inc. is classified under Standard Industrial Classification code 6798, which pertains to Real Estate Investment Trusts.

In which state was Income Opportunity Realty Investors Inc. incorporated?

The company was incorporated in Nevada (NV).

What is the fiscal year end for Income Opportunity Realty Investors Inc.?

The company's fiscal year ends on December 31 (1231).

What is the SEC file number for Income Opportunity Realty Investors Inc.?

The SEC file number is 001-14784.

What is the address of Income Opportunity Realty Investors Inc.?

The company's business and mail address is 1603 LBJ FREEWAY, SUITE 800, DALLAS, TX 75234.

Filing Stats: 4,595 words · 18 min read · ~15 pages · Grade level 14.2 · Accepted 2024-11-07 13:07:19

Filing Documents

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION PAGE Item 1.

Financial Statements

Financial Statements 3 Consolidated Balance Sheets at September 30, 2024 and December 31, 2023 3 Consolidated Statements of Operations for the three and nine months ended September 30, 2024 and 2023 4 Consolidated Statements of Equity for the three and nine months ended September 30, 2024 and 2023 5 Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 6

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3.

Quantitative and Qualitative Disclosures About Market Risks

Quantitative and Qualitative Disclosures About Market Risks 11 Item 4.

Controls and Procedures

Controls and Procedures 11

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 12 Item 1A.

Risk Factors

Risk Factors 12 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Mine Safety Disclosures 12 Item 5. Other Information 12 Item 6. Exhibits 12

Signatures

Signatures 13 2 INCOME OPPORTUNITY REALTY INVESTORS, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share and par value amounts) (Unaudited) September 30, 2024 December 31, 2023 Assets Current assets Cash and cash equivalents $ 14 $ 71 Interest receivable from related parties 164 293 Receivable from related parties 109,493 106,541 Total current assets 109,671 106,905 Non-current assets Notes receivable from related parties 11,146 11,173 Total assets $ 120,817 $ 118,078 Liabilities and Equity Liabilities: Accounts payable $ 3 $ — Shareholders' equity Common stock, $ 0.01 par value, 10,000,000 shares authorized; 4,173,675 shares issued, 4,066,178 and 4,110,714 shares outstanding at September 30, 2024 and December 31, 2023, respectively. 42 42 Treasury stock at cost, 107,497 shares at September 30, 2024 and 62,961 shares at December 31, 2023 ( 1,749 ) ( 947 ) Additional paid-in capital 61,955 61,955 Retained earnings 60,566 57,028 Total shareholders' equity 120,814 118,078 Total liabilities and equity $ 120,817 $ 118,078 The accompanying notes are an integral part of these consolidated financial statements. 3 INCOME OPPORTUNITY REALTY INVESTORS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share amounts) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues: Other income $ — $ — $ — $ — Expenses: General and administrative (including $ 11 and $ 54 for the three months ended September 30, 2024 and 2023, respectively, and $ 34 and $ 196 for the nine months ended September 30, 2024 and 2023, respectively, from related parties) 71 91 230 385 Advisory fee to related party 26 346 76 1,045 Total operating expenses 97 437 306 1,430 Net operating loss ( 97 ) ( 437 ) ( 306 ) ( 1,430 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share and square foot amounts) (Unaudited) 1. Organization Income Opportunity Investors, Inc. (the "Company") is an externally managed company that invests in mortgage notes receivables. As used herein, the terms "IOR", "the Company", "We", "Our", or "Us" refer to the Company. Transcontinental Realty Investors, Inc. ("TCI"), whose common stock is traded on the NYSE under the symbol "TCI", owns 83.2 % of our stock and with its affiliates owns approximately 89.8 % of our common stock. Accordingly, our financial results are included in the consolidated financial statements of TCI's in their Form 10-K and in their tax filings. American Realty Investors, Inc. ("ARL"), whose common stock is traded on the NYSE under the symbol "ARL", in turn, owns approximately 78.4 % of TCI. Our business is managed by Pillar Income Asset Management, Inc. ("Pillar") in accordance with an Advisory Agreement that is reviewed annually by our Board of Directors. Pillar is considered to be a related party (See Note 4 – Related Party Transactions). Pillar's duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges our debt and equity financing with third party lenders and investors. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the o

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share and square foot amounts) (Unaudited) 4. Related Party Transactions We engage in certain business transactions with related parties, including investment in notes receivables. Transactions involving related parties cannot be presumed to be carried out on at arm's length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in our best interest. Pillar is a wholly owned by a subsidiary of the May Realty Holdings, Inc., which owns approximately 90.8 % of ARL, which owns approximately 78.4 % of TCI, which owns 83.2 % of the Company. Advisory fees paid to Pillar were $ 26 and $ 346 for the three months ended September 30, 2024 and 2023, respectively, and $ 76 and $ 1,045 for the nine months ended September 30, 2024 and 2023, respectively. Notes receivable are amounts held by UHF (See Note 3 – Notes Receivable). UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable. Interest income on these notes was $ 150 and $ 338 for the three months ended September 30, 2024 and 2023, respectively, and $ 449 and $ 1,003 for the nine months ended September 30, 2024 and 2023, respectively. Receivables from related parties were $ 109,493 and $ 106,541 at September 30, 2024 and December 31, 2023 , respectively; which represents amounts outstanding advanced to Pillar net of unreimbursed fees (" Pillar Receivable "), which bears interest in accordance with a cash management agreement. On January 1, 2024, an amendment to the cash management agreement changed the interest rate on the Pillar Receivable from prime plus one percent to SOFR. Interest income on related party receiva

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share and square foot amounts) (Unaudited)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis by management should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes included in this Quarterly Report on Form 10-Q (the "Quarterly Report") and in our Form 10-K for the year ended December 31, 2023 (the "Annual Report"). This Report on Form 10-Q may contain forward-looking and Analysis of Financial Condition and Results of Operations". We caution investors that any forward-looking statements in this report, or which management may make orally or in writing from time to time, are based on management's beliefs and on assumptions made by, and information currently available to, management. When used, the words "anticipate", "believe", "expect", "intend", "may", "might", "plan", "estimate", "project", "should", "will", "result" and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We caution you that, while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, inv

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS Optional and not included.

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES Based on an evaluation by our management (with the participation of our Principal Executive Officer and Principal Financial Officer), as of the end of the period covered by this report, our Principal Executive and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Principal Executive and Principal Financial Officer, to allow timely decisions regarding required disclosures. There has been no change in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 11

OTHER INFORMATION

PART II. OTHER INFORMATION

LEGAL PROCEEDINGS

ITEM 1. LEGAL PROCEEDINGS None

RISK FACTORS

ITEM 1A. RISK FACTORS There have been no material changes from the risk factors previously disclosed in the 2023 10-K. For a discussion on these risk factors, please see "Item 1A. Risk Factors" contained in the 2023 10-K.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS We have a program that allows for the repurchase of up to 1,650,000 shares of our common stock. This repurchase program has no termination date. There were 44,536 shares purchased under this program during the nine months ended September 30, 2024. As of September 30, 2024, 1,136,997 shares have been purchased and 513,003 shares may be purchased under the program.

DEFAULTS UPON SENIOR SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES None

MINE SAFETY DISCLOSURES

ITEM 4. MINE SAFETY DISCLOSURES Not applicable

OTHER INFORMATION

ITEM 5. OTHER INFORMATION None

EXHIBITS

ITEM 6. EXHIBITS The following exhibits are filed with this report or incorporated by reference as indicated; 3.1 By-laws of Income Opportunity Realty Investors, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant's Registration Statement on Form S-4, filed on December 30, 1999). 4.1 Certificate of Designations, Preferences and Relative Participating or Optional or Other Special Rights, and Qualifications, Limitations or Restrictions Thereof of Series F Redeemable Preferred Stock of Income Opportunity Realty Investors, Inc., dated June 11, 2001 (incorporated by reference to Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2001). 4.2 Certificate of Withdrawal of Preferred Stock, Decreasing the Number of Authorized Shares of and Eliminating Series F Redeemable Preferred Stock, dated June 18, 2002 (incorporated by reference to Exh

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