Transcontinental Realty Investors Inc. Files Q1 2024 10-Q Report

TL;DR

<b>Transcontinental Realty Investors Inc. filed its Q1 2024 10-Q report detailing its financial status and operations.</b>

AI Summary

TRANSCONTINENTAL REALTY INVESTORS INC (TCI) filed a Quarterly Report (10-Q) with the SEC on May 9, 2024. Filed a 10-Q report for the period ending March 31, 2024. The company was formerly known as Johnstown Consolidated Realty Trust. Incorporated in Nevada with a fiscal year end of December 31. Business and mailing address located at 1603 LBJ Freeway, Suite 800, Dallas, TX 75234. Phone number is 469-522-4200.

Why It Matters

For investors and stakeholders tracking TRANSCONTINENTAL REALTY INVESTORS INC, this filing contains several important signals. This filing provides investors with an update on the company's financial performance and strategic positioning for the first quarter of 2024. Understanding the details within this 10-Q is crucial for assessing the company's current health and future prospects in the real estate investment trust sector.

Risk Assessment

Risk Level: low — TRANSCONTINENTAL REALTY INVESTORS INC shows low risk based on this filing. The filing is a standard quarterly report (10-Q) with no immediate red flags or significant negative disclosures, indicating a routine update.

Analyst Insight

Review the detailed financial statements and segment performance within the 10-Q to identify any emerging trends or specific areas of concern/opportunity.

Key Numbers

• 2024-03-31 — Report Period End Date (Conformed period of report)
• 2024-05-09 — Filing Date (Filed as of date)
• 1231 — Fiscal Year End (Fiscal year end)
• 6798 — SIC Code (Standard Industrial Classification)

Key Players & Entities

• TRANSCONTINENTAL REALTY INVESTORS INC (company) — Filer
• JOHNSTOWN CONSOLIDATED REALTY TRUST (company) — Former company name
• DALLAS (company) — Business address city
• NV (company) — State of incorporation
• 469-522-4200 (dollar_amount) — Business phone

FAQ

Industry Context

Transcontinental Realty Investors Inc. operates within the Real Estate Investment Trusts (REITs) sector, which is characterized by companies that own, operate, or finance income-producing real estate.

Regulatory Implications

As a publicly traded company, Transcontinental Realty Investors Inc. is subject to SEC regulations, including the requirement to file quarterly reports (10-Q) to ensure transparency and provide investors with timely financial information.

What Investors Should Do

1. Analyze the financial statements for revenue, expenses, and net income for Q1 2024.
2. Examine any disclosures related to properties, segments, or significant transactions.
3. Compare current quarter performance to historical data if available in the full filing.

Key Dates

• 2024-03-31: Quarterly Period End — End of the reporting period for the 10-Q filing.
• 2024-05-09: Filing Date — Date the 10-Q report was officially filed with the SEC.

Glossary

10-Q

A quarterly report required by the U.S. Securities and Exchange Commission (SEC). (Provides an update on the company's financial performance and operations for the quarter.)

REIT

Real Estate Investment Trust. (Indicates the company's business model focuses on owning, operating, or financing income-producing real estate.)

Year-Over-Year Comparison

This is the initial filing analyzed for the current period, so a direct comparison to a previous filing's specific data points is not possible from this extract.

Filing Documents

• tci-20240331.htm (10-Q) — 767KB
• tci2024033110-qex311.htm (EX-31.1) — 10KB
• tci2024033110-qex321.htm (EX-32.1) — 5KB
• 0000733590-24-000011.txt (&nbsp;) — 5004KB
• tci-20240331.xsd (EX-101.SCH) — 44KB
• tci-20240331_cal.xml (EX-101.CAL) — 52KB
• tci-20240331_def.xml (EX-101.DEF) — 147KB
• tci-20240331_lab.xml (EX-101.LAB) — 451KB
• tci-20240331_pre.xml (EX-101.PRE) — 325KB
• tci-20240331_htm.xml (XML) — 704KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1.

Financial Statements

Financial Statements Consolidated Balance Sheets at March 31, 2024 and December 31, 2023 3 Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 4 Consolidated Statements of Equity for the three months ended March 31, 2024 and 2023 5 Consolidated Statements of Cash Flows for the three months ended March 31, 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 18 Item 3.

Quantitative and Qualitative Disclosures About Market Risks

Quantitative and Qualitative Disclosures About Market Risks 23 Item 4.

Controls and Procedures

Controls and Procedures 23

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1.

Legal Proceedings

Legal Proceedings 24 Item 1A.

Risk Factors

Risk Factors 24 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24 Item 3. Defaults Upon Senior Securities 24 Item 4. Mine Safety Disclosures 24 Item 5. Other Information 24 Item 6. Exhibits 25

Signatures

Signatures 27 2 Table of Contents TRANSCONTINENTAL REALTY INVESTORS, INC. CONSOLIDATED BALANCE SHEETS (dollars in thousands, except share and par value amounts) (Unaudited) March 31, 2024 December 31, 2023 Assets Real estate $ 503,139 $ 501,586 Cash and cash equivalents 54,662 36,700 Restricted cash 38,352 42,327 Short-term investments 76,153 90,448 Notes receivable (including $ 63,012 and $ 65,057 at March 31, 2024 and December 31, 2023, respectively, from related parties) 130,831 133,837 Investment in unconsolidated joint venture 989 555 Receivables from related party 137,218 136,211 Other assets (including $ 890 and $ 1,742 at March 31, 2024 and December 31, 2023, respectively, from related parties) 100,963 101,380 Total assets $ 1,042,307 $ 1,043,044 Liabilities and Equity Liabilities: Mortgages and other notes payable $ 178,285 $ 179,141 Accounts payable and other liabilities (including $ 1,022 and $ 1,016 at March 31, 2024 and December 31, 2023, respectively, to related parties) 11,542 13,735 Accrued interest 2,775 2,633 Deferred revenue 581 581 Total liabilities 193,183 196,090 Equity Shareholders' Equity: Common stock, $ 0.01 par value, 10,000,000 shares authorized; 8,639,316 shares issued and outstanding 86 86 Additional paid-in capital 261,289 260,990 Retained earnings 567,480 564,931 Total shareholders' equity 828,855 826,007 Noncontrolling interest 20,269 20,947 Total equity 849,124 846,954 Total liabilities and equity $ 1,042,307 $ 1,043,044 The accompanying notes are an integral part of these consolidated financial statements. 3 Table of Contents TRANSCONTINENTAL REALTY INVESTORS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2024 2023 Revenues: Rental revenues (including $ 178 and $ 268 for the three months ended March 31, 2024 and 2023, respectively, from related parties) $ 11,279 $ 11,009 Other income 620

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (Unaudited) 1. Organization As used herein, the terms "the Company", "we", "our", or "us" refer to Transcontinental Realty Investors, Inc., a Nevada corporation, which was formed in 1984. Our common stock is listed on the New York Stock Exchange ("NYSE") under the symbol "TCI". We are owned approximately 78 % by American Realty Investors, Inc. ("ARL"), whose common stock is listed on the NYSE under the symbol "ARL", and 7 % by the controlling shareholder of ARL. Our primary business is the acquisition, development and ownership of income-producing residential and commercial real estate properties. In addition, we opportunistically acquire land for future development in in-fill or high-growth suburban markets. From time to time, and when we believe it appropriate to do so, we will also sell land and income-producing properties. We generate revenues by leasing apartment units to residents, and leasing office, industrial and retail space to various for-profit businesses as well as certain local, state and federal agencies. We also generate income from the sales of income-producing properties and land. Substantially all of our assets are held by our wholly-owned subsidiary, Southern Properties Capital Ltd. ("SPC"), which was formed for the purpose of raising funds by issuing non-convertible bonds that were listed on the Tel Aviv Stock Exchange ("TASE"). At March 31, 2024, our portfolio of properties consisted of: Four office buildings comprising in aggregate of approximately 1,056,793 square feet; Fourteen multifamily properties, owned directly by us, comprising of 2,328 units; and Approx imately 1,843 acres of devel oped and undeveloped land. Our day to day operations are managed by Pillar Income Asset Management, Inc. ("Pillar"). Pillar's duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment oppo

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (Unaudited) The consolidated balance sheet at December 31, 2023 was derived from the audited consolidated financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023. We consolidate entities in which we are considered to be the primary beneficiary of a variable interest entity ("VIE") or have a majority of the voting interest of the entity. We have determined that we are a primary beneficiary of the VIE when we have (i) the power to direct the activities of a VIE that most significantly impacts its economic performance, and (ii) the obligations to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether we are the primary beneficiary, we consider qualitative and quantitative factors, including ownership interest, management representation, ability to control decision and other contractual rights. We account for entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary under the equity method of accounting. Accordingly, we include our share of the net earnings or losses of these entities in our results of operations . 3. Earnings Per Share Earnings per share ("EPS") is computed by dividing net income attributable to the Company by the weighted-average number of common shares outstanding during the period. The following table details our basic and diluted earnings per common share calculation: Three Months Ended March 31, 2024 2023 Net income $ 2,757 $ 3,715 Net income attributable to noncontrolling interest ( 208 ) ( 198 ) Net income attributable to the Company $ 2,549 $

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (Unaudited) 4. Supplemental Cash Flow Information The following presents the schedule of interest paid and other supplemental cash flow information: Three Months Ended March 31, 2024 2023 Cash paid for interest $ 1,544 $ 6,403 Cash - beginning of period Cash and cash equivalents $ 36,700 $ 113,424 Restricted cash 42,327 108,883 $ 79,027 $ 222,307 Cash - end of period Cash and cash equivalents $ 54,662 $ 55,313 Restricted cash 38,352 55,188 $ 93,014 $ 110,501 Payments on mortgages, other notes and bonds payable Payments on mortgages and other notes payable $ 858 $ 832 Payments on bond payable — 88,279 $ 858 $ 89,111 The following is a schedule of noncash investing activity: Three Months Ended March 31, 2024 2023 Property acquired in exchange for reduction of related party receivable $ — $ 5,487 5. Operating Segments Our segments are based on the internal reporting that we review for operational decision-making purposes. We operate in two reportable segments: (i) the acquisition, development, ownership and management of multifamily properties and (ii) the acquisition, ownership and management of commercial properties. The services for our multifamily segment include rental of apartments and other tenant services, including parking and storage space rental. Asset information by segment is not reported because we do not use this measure to assess performance or make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments. General and administrative expenses, advisory fees, interest income and interest expense are not included in segment profit as our internal reporting addresses these items on a corporate level. 9 Table of Contents TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (Unaudited) The following table presents our reportable segments for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 Multifamily Segment Revenues $ 8,053 $ 7,373 Operating expenses ( 4,219 ) ( 3,708 ) Profit from segment 3,834 3,665 Commercial Segment Revenues 3,226 3,636 Operating expenses ( 2,415 ) ( 2,398 ) Profit from segment 811 1,238 Total profit from segments $ 4,645 $ 4,903 The table below reflects the reconciliation of total profit from segments to net income for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 Total profit from segments $ 4,645 $ 4,903 Other non-segment items of income (expense) Depreciation and amortization ( 3,172 ) ( 3,102 ) General and administrative ( 1,261 ) ( 2,883 ) Advisory fee to related party ( 2,165 ) ( 2,170 ) Other income 620 679 Interest income 6,127 8,828 Interest expense ( 1,869 ) ( 3,087 ) Gain on foreign currency transactions — 971 Income from unconsolidated joint venture 435 688 Income tax provision ( 603 ) ( 1,112 ) Net income $ 2,757 $ 3,715 6. Lease Revenue We lease our multifamily properties and commercial properties under agreements that are classified as operating leases. Our multifamily property leases generally include minimum rents and charges for ancillary services. Our commercial property leases generally include minimum rents and recoveries for property taxes and common area maintenance. Minimum rental revenues are recognized on a straight-line basis over the terms of the related leases. 10 Table of Contents TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (Unaudited) The following table summarizes the components of our rental revenue for the three months ended March 31, 2024 and 2023: Three Months Ended March 31, 2024 2023 Fixed component $ 10,999 $ 10,708 Variable component 280 301 $ 11,279 $ 11,009 The following table summarizes the future rental payments that are payable to us from non-cancelable leases. The table excludes multifamily leases, which typically have a term of one-year or less: 2024 $ 11,441 2025 11,067 2026 10,700 2027 10,408 2028 9,681 Thereafter 16,393 $ 69,690 7. Real Estate Activity Below is a summary of our real estate as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Land $ 104,156 $ 104,156 Building and improvements 373,020 372,399 Tenant improvements 16,234 16,286 Construction in progress 79,873 76,110 Total cost 573,283 568,951 Less accumulated depreciation ( 70,144 ) ( 67,365 ) Total real estate $ 503,139 $ 501,586 On March 15, 2023, we entered into a development agreement with Pillar to build a 240 unit multifamily property in Lake Wales, Florida (" Lake Wales ") that is expected to be completed in 2025 for a total cost of approximately $ 55,330 . The cost of construction will be funded in part by a $ 33,000 construction loan (See Note 11 – Mortgages and Other Notes Payable). The development agreement provides for a $ 1,637 fee that will be paid to Pillar over the construction period. As of March 31, 2024, we have incurred a total of $ 18,888 in development costs. On November 6, 2023, we entered into a development agreement with Pillar to build a 216 unit multifamily property in McKinney , Texas (" Merano ") that is expected to be completed in 2025 for a total cost of approximately $ 51,910 . The cost of construction will be funded in part by a $ 25,407 construction loan (See Note 11 – Mortgages and Other Notes Payable ). The development

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (Unaudited) On December 15, 2023, we entered into a development agreement with Pillar to build a 216 unit multifamily property in Temple , Texas (" Bandera Ridge ") that is expected to be completed in 2025 for a total cost of approximately $ 49,603 . The cost of construction will be funded in part by a $ 23,500 construction loan (See Note 11 – Mortgages and Other Notes Payable ). The development agreement provides for a $ 1,607 fee that will be paid to Pillar over the construction period. As of March 31, 2024, we have incurred a total of $ 3,124 in development costs. Construction in progress includes the cost of development of Windmill Farms and the costs associated with our multifamily projects. We incurred depreciation expense of $ 3,018 and $ 2,935 for the three months ended March 31, 2024 and 2023, respectively. 8. Short-term Investments The following is a summary of our short term investment as of March 31, 2024 and December 31, 2023: March 31, 2024 December 31, 2023 Corporate bonds, at par value $ 70,266 $ 90,000 Demand notes 6,413 1,484 76,679 91,484 Less discount ( 526 ) ( 1,036 ) $ 76,153 $ 90,448 The average interest rate on the investments was 5.71 % and 5.65 % at March 31, 2024 and December 31, 2023, respectively. 12 Table of Contents TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (Unaudited) 9. Notes Receivable The following table summarizes our notes receivable as of March 31, 2024 and December 31, 2023: Carrying value Property/Borrower March 31, 2024 December 31, 2023 Interest Rate Maturity Date ABC Land and Development, Inc. $ 4,408 $ 4,408 9.50 % 6/30/26 ABC Paradise, LLC 1,210 1,210 9.50 % 6/30/26 Autumn Breeze(1) 1,847 2,157 5.00 % 7/1/25 Bellwether Ridge(1) 3,798 3,798 5.00 % 11/1/26 Cascades at Spring Street(2)(3) 180 180 5.38 % 6/30/27 Dominion at Mercer Crossing(4) 6,167 6,354 9.50 % 6/7/28 Forest Pines(1) 6,472 6,472 5.00 % 5/1/27 Inwood on the Park(2)(3) 20,325 20,325 5.38 % 6/30/28 Kensington Park(2)(3) 8,217 10,262 5.38 % 3/31/27 Lake Shore Villas(2)(3) 6,000 6,000 5.38 % 12/31/32 Legacy Pleasant Grove 496 496 12.00 % 10/23/24 McKinney Ranch 3,926 3,926 6.00 % 9/15/24 Ocean Estates II(2)(3) 3,615 3,615 5.38 % 5/31/28 One Realco Land Holding, Inc. 1,728 1,728 9.50 % 6/30/26 Parc at Ingleside(1) 3,759 3,759 5.00 % 11/1/26 Parc at Opelika Phase II(1)(5) 3,190 3,190 10.00 % 1/13/23 Parc at Windmill Farms(1)(5) 7,886 7,886 5.00 % 11/1/22 Phillips Foundation for Better Living, Inc.(2) 182 182 5.38 % 3/31/28 Plaza at Chase Oaks(2)(3) 11,772 11,772 5.38 % 3/31/28 Plum Tree(1) 1,600 1,767 5.00 % 4/26/26 Polk County Land 3,000 3,000 9.50 % 6/30/26 Riverview on the Park Land, LLC 1,045 1,045 9.50 % 6/30/26 Spartan Land 5,907 5,907 6.00 % 1/16/25 Spyglass of Ennis(1) 4,882 5,179 5.00 % 11/1/24 Steeple Crest(1) 6,498 6,498 5.00 % 8/1/26 Timbers at The Park(2)(3) 11,173 11,173 5.38 % 12/31/32 Tuscany Villas(2)(3) 1,548 1,548 5.38 % 4/30/27 $ 130,831 $ 133,837 (1) The note is convertible, at our option, into a 100 % ownership interest in the underlying property, and is collateralized by the underlying property. (2) The borrower is determined to be a related party due to our significant investment in the performanc

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (Unaudited) 10. Investment in Unconsolidated Joint Ventures On November 16, 2018 , our SPC subsidiary formed the Victory Abode Apartments, LLC ("VAA"), a joint venture with the Macquarie Group ("Macquarie"). VAA was formed as a result of our sale of a 50 % ownership interest in a portfolio of multifamily properties to Macquarie in exchange for a 50 % voting interest in VAA a nd a note payable. On September 16, 2022, VAA sold 45 of its properties ("VAA Sale Portfolio") for $ 1,810,700 , resulting in a gain on sale of $ 738,444 to the joint venture. In connection with the sale, we received an initial distribution of $ 182,848 from VAA. On November 1, 2022, we received an additional distribution from VAA, which included the full operational control of the remaining seven properties of VAA ("VAA Holdback Portfolio") and a cash payment of $ 204,036 . On March 23, 2023, we received $ 17,976 from VAA, which represented the remaining distribution of the proceeds from the sale of the VAA Sale Portfolio. We used our share of the proceeds from the sale of the VAA Sale Portfolio to invest in short-term investments and real estate, pay down our debt and for general corporate purposes. We anticipate that the final liquidation of the joint venture will be completed during the remainder of 2024. 14 Table of Contents TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) (Unaudited) 11. Mortgages and Other Notes Payable The following table summarizes our mortgages and other notes payable as of March 31, 2024 and December 31, 2023: Carrying Value Interest Rate Maturity Date Property/ Entity March 31, 2024 December 31, 2023 770 South Post Oak $ 11,126 $ 11,187 4.40 % 6/1/2025 Blue Lake Villas 9,459 9,503 3.15 % 11/1/2055 Blue Lake Villas Phase II 3,329 3,349 2.85 % 6/1/2052 Chelsea 8,018 8,064 3.40 % 12/1/2050 EQK Portage 3,350 3,350 10.00 % 11/13/2024 Forest Grove 6,951 6,988 3.75 % 5/5/2024 Landing on Bayou Cane 14,373 14,442 3.50 % 9/1/2053 Legacy at Pleasant Grove 12,633 12,716 3.60 % 4/1/2048 Northside on Travis 11,327 11,394 2.50 % 2/1/2053 Parc at Denham Springs 16,312 16,399 3.75 % 4/1/2051 Parc at Denham Springs Phase II 15,562 15,608 4.05 % 2/1/2060 RCM HC Enterprises 5,086 5,086 5.00 % 12/31/2024 Residences at Holland Lake 10,373 10,424 3.60 % 3/1/2053 Villas at Bon Secour 19,104 19,205 3.08 % 9/1/2031 Villas of Park West I(1) 9,132 9,181 3.04 % 3/1/2053 Villas of Park West II(1) 8,290 8,334 3.18 % 3/1/2053 Vista Ridge 9,470 9,512 4.00 % 8/1/2053 Windmill Farms(2) 4,390 4,399 7.50 % 2/28/2026 $ 178,285 $ 179,141 (1) On November 1, 2022, we agreed to assume the mortgage note payable from our joint venture in connection with the acquisition of the underlying property (See Note 10 - Investment in Unconsolidated Joint Ventures) and obtained final lender approval of the assumption in 2024. (2) On February 8, 2024, we extended the maturity to February 28, 2026 at an interest rate of 7.50 %. As of March 31, 2024 , we were in compliance with all of our loan covenants except for the minimum debt service coverage ratio ("DSCR") for the loan on 770 South Post Oak. As a result, the lender requires us to lock the surplus cash flow of the property into a designated deposit account controlled by them, until we are in

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