UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~June 30, 2022


¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to________

Commission File Number 001-09240

TRANSCONTINENTAL REALTY INVESTORS, INC.

(Exact Name of Registrant as Specified in Its Charter)


Nevada			94-6565852
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

1603 Lyndon B. Johnson Freeway, Suite 800, Dallas, Texas 75234

(Address of principal executive offices) (Zip Code)

(469) 522-4200

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	TCI	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes x No.

As of ~~May 13,~~August 12, 2022, there were 8,639,316 shares of common stock outstanding.

Table of Contents

TRANSCONTINENTAL REALTY INVESTORS, INC.

FORM 10-Q

TABLE OF CONTENTS


		PAGE

PART I. FINANCIAL INFORMATION		~~PAGE~~

Item 1.	Financial Statements	3

	Consolidated Balance Sheets at ~~March 31,~~June 30, 2022 and December 31, 2021	3

	Consolidated Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2022 and 2021	4

	Consolidated ~~Statement~~Statements of Equity for the three and six months ended ~~March 31,~~June 30, 2022 and 2021	5

	Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1820

Item 3.	Quantitative and Qualitative Disclosures About Market Risks	2426

Item 4.	Controls and Procedures	2427

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	2427

Item 1A.	Risk Factors	2427

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2527

Item 3.	Defaults Upon Senior Securities	2527

Item 4.	Mine Safety Disclosures	2527

Item 5.	Other Information	2528

Item 6.	Exhibits	2629

Signatures		2831

Table of Contents

TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share and par value amounts)

(Unaudited)


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Assets	Assets					Assets
Real estate	Real estate	$	284,480	$	296,363	Real estate	$	283,696	$	296,363
Cash and cash equivalents	Cash and cash equivalents	13,789		50,735		Cash and cash equivalents	38,199		50,735
Restricted cash	Restricted cash	21,631		21,986		Restricted cash	19,460		21,986
Short-term investments	Short-term investments	32,585		16,001		Short-term investments	7,883		16,001
Notes receivable (including $66,635 at March 31, 2022 and $68,991 at December 31, 2021 from related parties)		129,631		129,726
Notes receivable (including $66,632 at June 30, 2022 and $68,991 at December 31, 2021 from related parties)						Notes receivable (including $66,632 at June 30, 2022 and $68,991 at December 31, 2021 from related parties)	129,420		129,726
Investment in unconsolidated joint venture	Investment in unconsolidated joint venture	50,573		52,879		Investment in unconsolidated joint venture	52,210		52,879
Receivables from related parties		141,251		136,715
Other assets (including $2,428 at March 31, 2022 and $4,223 at December 31, 2021 to related parties)		77,019		84,004
Receivables from related parties, net						Receivables from related parties, net	143,240		136,715
Other assets (including $3,963 at June 30, 2022 and $4,223 at December 31, 2021 to related parties)						Other assets (including $3,963 at June 30, 2022 and $4,223 at December 31, 2021 to related parties)	80,358		84,004
Total assets	Total assets	$	750,959	$	788,409	Total assets	$	754,466	$	788,409
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Liabilities:	Liabilities:					Liabilities:
Mortgages and other notes payable	Mortgages and other notes payable	$	165,663	$	176,750	Mortgages and other notes payable	$	164,618	$	176,750
Bonds payable	Bonds payable	163,571		189,452		Bonds payable	148,834		189,452
Accounts payable and other liabilities (including $611 at March 31, 2022 and $616 at December 31, 2021 to related parties)		31,644		43,602
Accounts payable and other liabilities (including $599 at June 30, 2022 and $616 at December 31, 2021 to related parties)						Accounts payable and other liabilities (including $599 at June 30, 2022 and $616 at December 31, 2021 to related parties)	32,025		43,602
Accrued interest	Accrued interest	3,272		6,416		Accrued interest	5,559		6,416
Deferred revenue	Deferred revenue	581		581		Deferred revenue	581		581
Total liabilities	Total liabilities	364,731		416,801		Total liabilities	351,617		416,801
Equity	Equity					Equity
Shareholders' Equity:	Shareholders' Equity:					Shareholders' Equity:
Common stock, $0.01 par value, 10,000,000 shares authorized; 8,639,316 shares issued and outstanding	Common stock, $0.01 par value, 10,000,000 shares authorized; 8,639,316 shares issued and outstanding	86		86		Common stock, $0.01 par value, 10,000,000 shares authorized; 8,639,316 shares issued and outstanding	86		86
Additional paid-in capital	Additional paid-in capital	260,387		260,387		Additional paid-in capital	260,387		260,387
Retained earnings	Retained earnings	105,234		90,732		Retained earnings	121,695		90,732
Total shareholders' equity	Total shareholders' equity	365,707		351,205		Total shareholders' equity	382,168		351,205
Noncontrolling interest	Noncontrolling interest	20,521		20,403		Noncontrolling interest	20,681		20,403
Total equity	Total equity	386,228		371,608		Total equity	402,849		371,608
Total liabilities and equity	Total liabilities and equity	$	750,959	$	788,409	Total liabilities and equity	$	754,466	$	788,409

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended March 31,
2022 2021
Revenues:
Rental revenues (including $256 and $242 for three months ended March 31, 2022 and 2021, respectively, from related parties) $ 7,481 $ 10,361
Other income 306 1,467
   Total revenue 7,787 11,828
Expenses:
Property operating expenses (including $117 and $382 for three months ended March 31, 2022 and 2021, respectively, from related parties) 4,028 5,832
Depreciation and amortization 2,349 3,327
General and administrative (including $1,292 and $1,553 for three months ended March 31, 2022 and 2021, respectively, from related parties) 2,531 2,646
Advisory fee to related party 3,005 2,249
   Total operating expenses 11,913 14,054
   Net operating loss (4,126) (2,226)
Interest income (including $3,963 and $3,826 for the three months ended March 31, 2022 and 2021, respectively, from related parties) 5,814 4,701
Interest expense (including $418 and $387 for the three months ended March 31, 2022 and 2021, respectively, from related parties) (5,027) (6,604)
Gain on foreign currency transactions 3,772 7,617
Loss on extinguishment of debt (1,639) —
Equity in income from unconsolidated joint venture 4,706 3,336
Gain on sale or write-down of assets, net 11,148 16,103
Income tax provision (28) (40)
Net income 14,620 22,887
Net income attributable to noncontrolling interest (118) (255)
Net income attributable to the Company $ 14,502 $ 22,632
Earnings per share - basic
Basic and diluted $ 1.68 $ 2.62
Weighted average common shares used in computing earnings per share
Basic and diluted 8,639,316 8,639,316


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues:
Rental revenues (including $223 and $313 for the three months ended June 30, 2022 and 2021, respectively, and $479 and $555 for six months ended June 30, 2022 and 2021, respectively, from related parties)	$	7,259	$	10,194	$	14,740	$	20,555
Other income	511		601		817		2,068
Total revenue	7,770		10,795		15,557		22,623
Expenses:
Property operating expenses (including $110 and $195 for the three months ended June 30, 2022 and 2021, respectively, and $227 and $577 for six months ended June 30, 2022 and 2021, respectively, from related parties)	3,812		5,058		7,840		10,890
Depreciation and amortization	2,298		3,211		4,647		6,538
General and administrative (including $642 and $694 for the three months ended June 30, 2022 and 2021, respectively, and $1,934 and $2,247 for six months ended June 30, 2022 and 2021, respectively, from related parties)	2,061		3,090		4,592		5,736
Advisory fee to related party	2,446		4,661		5,451		6,910
Total operating expenses	10,617		16,020		22,530		30,074
Net operating loss	(2,847)		(5,225)		(6,973)		(7,451)
Interest income (including $4,272 and $3,798 for the three months ended June 30, 2022 and 2021, respectively, and $8,235 and $7,624 for the six months ended June 30, 2022 and 2021, respectively, from related parties)	4,906		4,662		10,720		9,363
Interest expense (including $519 and $400 for the three months ended June 30, 2022 and 2021, respectively, and $937 and $787 for the six months ended June 30, 2022 and 2021, respectively, from related parties)	(5,060)		(6,582)		(10,087)		(13,186)
Gain (loss) on foreign currency transactions	14,132		(4,793)		17,904		2,824
Loss on extinguishment of debt	—		—		(1,639)		—
Equity in income from unconsolidated joint venture	1,637		4,572		6,343		7,908
Gain (loss) on sale or write-down of assets, net	3,893		(24,445)		15,041		(8,342)
Income tax provision	(40)		1,233		(68)		1,193
Net income (loss)	16,621		(30,578)		31,241		(7,691)
Net income attributable to noncontrolling interest	(160)		(155)		(278)		(410)
Net income (loss) attributable to the Company	$	16,461	$	(30,733)	$	30,963	$	(8,101)

Earnings per share - basic and diluted	$	1.91	$	(3.56)	$	3.58	$	(0.94)
Weighted average common shares used in computing earnings per share - basic and diluted	8,639,316		8,639,316		8,639,316		8,639,316

The accompanying notes are an integral part of these consolidated financial statements.

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TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(dollars in thousands)

(Unaudited)


		Common Stock			Treasury Stock		Paid-in Capital		Retained Earnings		Total Shareholders' Equity		Noncontrolling Interest		Total Equity			Common Stock			Treasury Stock		Additional Paid-in Capital		Retained Earnings		Total Shareholders' Equity		Noncontrolling Interest		Total Equity

Three Months Ended March 31, 2022
Three Months Ended June 30, 2022																	Three Months Ended June 30, 2022
Balance, April 1, 2022																	Balance, April 1, 2022		$	86	$	—	$	260,387	$	105,234	$	365,707	$	20,521	$	386,228
Net income																	Net income		—		—		—		16,461		16,461		160		16,621
Balance, June 30, 2022																	Balance, June 30, 2022		$	86	$	—	$	260,387	$	121,695	$	382,168	$	20,681	$	402,849
Three Months Ended June 30, 2021																	Three Months Ended June 30, 2021
Balance, April 1, 2021																	Balance, April 1, 2021		$	86	$	(2)	$	260,389	$	103,966	$	364,439	$	19,979	$	384,418
Net loss																	Net loss		—		—		—		(30,733)		(30,733)		155		(30,578)
Cancellation of treasury shares																	Cancellation of treasury shares		—		2		(2)		—		—		—		—
Balance, June 30, 2021																	Balance, June 30, 2021		$	86	$	—	$	260,387	$	73,233	$	333,706	$	20,134	$	353,840
Six Months Ended June 30, 2022																	Six Months Ended June 30, 2022
Balance, January 1, 2022	Balance, January 1, 2022		$	86	$	—	$	260,387	$	90,732	$	351,205	$	20,403	$	371,608	Balance, January 1, 2022		$	86	$	—	$	260,387	$	90,732	$	351,205	$	20,403	$	371,608
Net income	Net income		—		—		—		14,502		14,502		118		14,620		Net income		—		—		—		30,963		30,963		278		31,241

Balance, March 31, 2022			$	86	$	—	$	260,387	$	105,234	$	365,707	$	20,521	$	386,228
Three Months Ended March 31, 2021
Balance, June 30, 2022																	Balance, June 30, 2022		$	86	$	—	$	260,387	$	121,695	$	382,168	$	20,681	$	402,849
Six Months Ended June 30, 2021																	Six Months Ended June 30, 2021
Balance, January 1, 2021	Balance, January 1, 2021		$	87	$	(2)	$	260,388	$	81,334	$	341,807	$	19,724	$	361,531	Balance, January 1, 2021		$	86	$	(2)	$	260,389	$	81,334	$	341,807	$	19,724	$	361,531
Net income			—		—		—		22,632		22,632		255		22,887
Balance, March 31, 2021			$	87	$	(2)	$	260,388	$	103,966	$	364,439	$	19,979	$	384,418
Net loss																	Net loss		—		—		—		(8,101)		(8,101)		410		(7,691)
Cancellation of treasury shares																	Cancellation of treasury shares		—		2		(2)		—		—		—		—
Balance, June 30, 2021																	Balance, June 30, 2021		$	86	$	—	$	260,387	$	73,233	$	333,706	$	20,134	$	353,840

The accompanying notes are an integral part of these consolidated financial statements.

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TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
Cash Flow From Operating Activities:	Cash Flow From Operating Activities:					Cash Flow From Operating Activities:
Net income		$	14,620	$	22,887
Adjustments to reconcile net income to net cash used in operating activities:
Gain on sale or write down of assets		(11,148)		(16,103)
Net income (loss)						Net income (loss)	$	31,241	$	(7,691)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:						Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
(Gain) loss on sale or write down of assets						(Gain) loss on sale or write down of assets	(15,041)		8,342
Gain on foreign currency transactions	Gain on foreign currency transactions	(3,772)		(7,617)		Gain on foreign currency transactions	(17,904)		(2,824)
Loss on extinguishment of debt	Loss on extinguishment of debt	1,639		—		Loss on extinguishment of debt	1,639		—
Depreciation and amortization	Depreciation and amortization	3,210		3,953		Depreciation and amortization	6,363		7,755
Provision (recovery) of bad debts	Provision (recovery) of bad debts	139		(1,017)		Provision (recovery) of bad debts	21		(1,017)
Equity in income from unconsolidated joint venture	Equity in income from unconsolidated joint venture	(4,706)		(3,336)		Equity in income from unconsolidated joint venture	(6,343)		(7,908)
Distribution of income from unconsolidated joint venture	Distribution of income from unconsolidated joint venture	—		3,157		Distribution of income from unconsolidated joint venture	—		3,157
Changes in assets and liabilities, net of dispositions:	Changes in assets and liabilities, net of dispositions:					Changes in assets and liabilities, net of dispositions:
Other assets	Other assets	5,393		2,632		Other assets	2,816		(8,892)
Related party receivables	Related party receivables	(1,436)		2,375		Related party receivables	(3,425)		10,726
Interest payable	Interest payable	(4,955)		(4,221)		Interest payable	(4,574)		(234)
Accounts payable and other liabilities	Accounts payable and other liabilities	(3,162)		(3,611)		Accounts payable and other liabilities	(2,310)		(965)
Net cash used in operating activities		(4,178)		(901)
Net cash (used in) provided by operating activities						Net cash (used in) provided by operating activities	(7,517)		449
Cash Flow From Investing Activities:	Cash Flow From Investing Activities:					Cash Flow From Investing Activities:
Collection of notes receivable	Collection of notes receivable	632		8,876		Collection of notes receivable	1,295		8,822
Originations and advances on notes receivable	Originations and advances on notes receivable	(537)		(10,448)		Originations and advances on notes receivable	(989)		(3,504)
Purchase of short-term investment	Purchase of short-term investment	(16,584)		—		Purchase of short-term investment	(31,500)		—
Redemption of short-term investment						Redemption of short-term investment	39,750		—

Development and renovation of real estate	Development and renovation of real estate	(6,388)		(4,978)		Development and renovation of real estate	(8,215)		(6,990)
Deferred leasing costs	Deferred leasing costs	—		(755)		Deferred leasing costs	(922)		(755)
Proceeds from sale of assets	Proceeds from sale of assets	28,523		14,434		Proceeds from sale of assets	32,875		24,440
Contribution to unconsolidated joint venture	Contribution to unconsolidated joint venture	—		(411)		Contribution to unconsolidated joint venture	—		(411)
Distribution from unconsolidated joint venture	Distribution from unconsolidated joint venture	—		7,430		Distribution from unconsolidated joint venture	—		7,430
Net cash provided by investing activities	Net cash provided by investing activities	5,646		14,148		Net cash provided by investing activities	32,294		29,032
Cash Flow From Financing Activities:	Cash Flow From Financing Activities:					Cash Flow From Financing Activities:

Payments on mortgages, other notes and bonds payable	Payments on mortgages, other notes and bonds payable	(38,179)		(25,133)		Payments on mortgages, other notes and bonds payable	(39,249)		(48,431)
Debt extinguishment costs	Debt extinguishment costs	(590)		—		Debt extinguishment costs	(590)		—
Deferred financing costs	Deferred financing costs	—		(22)		Deferred financing costs	—		(22)

Net cash used in financing activities	Net cash used in financing activities	(38,769)		(25,155)		Net cash used in financing activities	(39,839)		(48,453)
Net decrease in cash, cash equivalents and restricted cash	Net decrease in cash, cash equivalents and restricted cash	(37,301)		(11,908)		Net decrease in cash, cash equivalents and restricted cash	(15,062)		(18,972)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	72,721		86,967		Cash, cash equivalents and restricted cash, beginning of period	72,721		86,967
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	35,420	$	75,059	Cash, cash equivalents and restricted cash, end of period	$	57,659	$	67,995

The accompanying notes are an integral part of these consolidated financial statements.

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TRANSCONTINENTAL REALTY INVESTORS, INC.

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 multifamily and commercial 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 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 sale of 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 are listed on the Tel-Aviv Stock Exchange ("TASE").

At ~~March 31,~~June 30, 2022, our portfolio of properties consisted of:

● NaN ~~commercial properties, consisting of 4~~ office buildings ~~and 1 retail property,~~ comprising in aggregate of approximately ~~1,063,515~~1,056,793 square feet;

● NaN multifamily properties, owned directly by us, comprising of 1,252 units;

● Approximately ~~1,877~~1,847 acres of developed and undeveloped land; and

● NaN multifamily properties, totaling 10,281 units, owned by our joint venture.

Our day to day operations are managed by Pillar Income Asset Management, Inc. (“Pillar”). Their duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities and arranging debt and equity financing with third party lenders and investors. All of our employees are Pillar employees. NaN of our commercial properties are managed by Regis Realty Prime, LLC (“Regis”). Regis provides leasing, construction management and brokerage services. Our multifamily properties are managed by outside management companies. Pillar and Regis are considered to be related parties (See Note 13 – Related Party Transactions).

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and 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 opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.

The consolidated balance sheet at December 31, 2021 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, 2021. Certain 2021 consolidated financial statement amounts have been reclassified to conform to the current presentation.

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TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(Unaudited)

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.

Newly Issued Accounting Standards

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard provides guidance, optional expedients and exceptions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The adoption of the standard ~~was effective upon issuance and can be applied through December 31, 2022. We~~on January 1, 2022, did not have ~~mortgage notes payable with interest rates that reference LIBOR, and therefore, we will adopt this standard when LIBOR is discontinued.~~an impact on our consolidated financial statements.

3. Earnings Per Share

Earnings per share (“EPS”) is computed by dividing net income (loss) 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,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021
Net income			$	14,620		$	22,887
Net income (loss)								Net income (loss)	$	16,621	$	(30,578)	$	31,241	$	(7,691)
Net income attributable to noncontrolling interest	Net income attributable to noncontrolling interest		(118)			(255)		Net income attributable to noncontrolling interest	(160)		(155)		(278)		(410)
Net income attributable to the Company			$	14,502		$	22,632
Net income (loss) attributable to the Company								Net income (loss) attributable to the Company	$	16,461	$	(30,733)	$	30,963	$	(8,101)

Weighted-average common shares outstanding — basic and diluted	Weighted-average common shares outstanding — basic and diluted		8,639,316			8,639,316		Weighted-average common shares outstanding — basic and diluted	8,639,316		8,639,316		8,639,316		8,639,316

EPS - attributable to common shares — basic and diluted	EPS - attributable to common shares — basic and diluted		$	1.68		$	2.62	EPS - attributable to common shares — basic and diluted	$	1.91	$	(3.56)	$	3.58	$	(0.94)

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TRANSCONTINENTAL REALTY INVESTORS, INC.

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,					Six Months Ended June 30,
		2022		2021			2022		2021
Cash paid for interest	Cash paid for interest	$	9,206	$	12,105	Cash paid for interest	$	9,839	$	14,840
Cash - beginning of period	Cash - beginning of period					Cash - beginning of period
Cash and cash equivalents	Cash and cash equivalents	$	50,735	$	36,761	Cash and cash equivalents	$	50,735	$	36,761
Restricted cash	Restricted cash	21,986		50,206		Restricted cash	21,986		50,206
		$	72,721	$	86,967		$	72,721	$	86,967
Cash - end of period	Cash - end of period					Cash - end of period
Cash and cash equivalents	Cash and cash equivalents	$	13,789	$	53,863	Cash and cash equivalents	$	38,199	$	45,996
Restricted cash	Restricted cash	21,631		21,196		Restricted cash	19,460		21,999
		$	35,420	$	75,059		$	57,659	$	67,995

Payments on mortgages, notes and bonds payable	Payments on mortgages, notes and bonds payable					Payments on mortgages, notes and bonds payable
Payments on mortgages and notes payable	Payments on mortgages and notes payable	$	15,257	$	2,421	Payments on mortgages and notes payable	$	16,327	$	16,029
Payments on bond payable	Payments on bond payable	22,922		22,712		Payments on bond payable	22,922		32,402
		$	38,179	$	25,133		$	39,249	$	48,431

The following is a schedule of noncash investing and financing activities:


		Three Months Ended March 31,					Six Months Ended June 30,
		2022		2021			2022		2021
Assets contributed to joint venture	Assets contributed to joint venture	$	—	$	18,608	Assets contributed to joint venture	$	—	$	18,608
Liabilities assumed by joint venture	Liabilities assumed by joint venture	$	—	$	17,592	Liabilities assumed by joint venture	$	—	$	15,606

Notes receivable received in exchange for related party receivable						Notes receivable received in exchange for related party receivable	$	—	$	9,259
Distribution from joint venture applied to Earn Out Obligation	Distribution from joint venture applied to Earn Out Obligation	$	7,012	$	—	Distribution from joint venture applied to Earn Out Obligation	$	7,012	$	—

5. Operating Segments

Our segments are based on the internal reporting that we review for operational decision-making purposes. We operate in 2 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.

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TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(Unaudited)

The following table presents our reportable segments for the three and six months ended ~~March 31,~~June 30, 2022 and 2021:


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021
Multifamily Segment	Multifamily Segment							Multifamily Segment
Revenues	Revenues		$	3,229		$	3,836	Revenues	$	2,945	$	3,529	$	6,174	$	7,365
Operating expenses	Operating expenses		(1,721)			(2,123)		Operating expenses	(1,708)		(2,111)		(3,429)		(4,234)
Profit from segment	Profit from segment		1,508			1,713		Profit from segment	1,237		1,418		2,745		3,131

Commercial Segment	Commercial Segment							Commercial Segment
Revenues	Revenues		4,252			6,525		Revenues	4,314		6,665		8,566		13,190
Operating expenses	Operating expenses		(2,307)			(3,709)		Operating expenses	(2,104)		(2,947)		(4,411)		(6,656)
Profit from segment	Profit from segment		1,945			2,816		Profit from segment	2,210		3,718		4,155		6,534
Total profit from segments	Total profit from segments		$	3,453		$	4,529	Total profit from segments	$	3,447	$	5,136	$	6,900	$	9,665

The table below reflects the reconciliation of total profit from segments to net income for the three and six months ended ~~March 31,~~June 30, 2022 and 2021:


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021
Total profit from segments	Total profit from segments		$	3,453		$	4,529	Total profit from segments	$	3,447	$	5,136	$	6,900	$	9,665
Other non-segment items of income (expense)	Other non-segment items of income (expense)							Other non-segment items of income (expense)
Depreciation			(2,349)			(3,327)
Depreciation and amortization								Depreciation and amortization	(2,298)		(3,211)		(4,647)		(6,538)
General and administrative	General and administrative		(2,531)			(2,646)		General and administrative	(2,061)		(3,090)		(4,592)		(5,736)
Advisory fee to related party	Advisory fee to related party		(3,005)			(2,249)		Advisory fee to related party	(2,446)		(4,661)		(5,451)		(6,910)
Other income	Other income		306			1,467		Other income	511		601		817		2,068
Interest income	Interest income		5,814			4,701		Interest income	4,906		4,662		10,720		9,363
Interest expense	Interest expense		(5,027)			(6,604)		Interest expense	(5,060)		(6,582)		(10,087)		(13,186)
Gain on foreign currency transaction			3,772			7,617
Gain (loss) on foreign currency transaction								Gain (loss) on foreign currency transaction	14,132		(4,793)		17,904		2,824
Loss on extinguishment of debt	Loss on extinguishment of debt		(1,639)			—		Loss on extinguishment of debt	—		—		(1,639)		—
Income from unconsolidated joint venture	Income from unconsolidated joint venture		4,706			3,336		Income from unconsolidated joint venture	1,637		4,572		6,343		7,908
Gain on sales or write-down of assets			11,148			16,103
Gain (loss) on sales or write-down of assets								Gain (loss) on sales or write-down of assets	3,893		(24,445)		15,041		(8,342)
Income tax provision	Income tax provision		(28)			(40)		Income tax provision	(40)		1,233		(68)		1,193
Net income			$	14,620		$	22,887
Net income (loss)								Net income (loss)	$	16,621	$	(30,578)	$	31,241	$	(7,691)

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 included 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.

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TRANSCONTINENTAL REALTY INVESTORS, INC.

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 and six months ended ~~March 31,~~June 30, 2022 and 2021:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
			2022		2021				2022		2021		2022		2021
Fixed component	Fixed component		$	6,996	$	9,863		Fixed component	$	6,881	$	9,300	$	13,877	$	19,163
Variable component	Variable component		485		498			Variable component	378		894		863		1,392
			$	7,481	$	10,361			$	7,259	$	10,194	$	14,740	$	20,555

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:


2022	2022	$	12,195	2022	$	13,200
2023	2023	8,093		2023	9,384
2024	2024	5,391		2024	7,642
2025	2025	5,079		2025	7,343
2026	2026	4,911		2026	7,219
Thereafter	Thereafter	18,777		Thereafter	23,000
		$	54,446		$	67,788

7. Real Estate Activity

Below is a summary of our real estate as of ~~March 31,~~June 30, 2022 and December 31, 2021:


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Land	Land	$	65,622	$	67,514	Land	$	65,421	$	67,514
Building and improvements	Building and improvements	200,942		219,327		Building and improvements	201,998		219,327
Tenant improvements	Tenant improvements	25,099		21,364		Tenant improvements	25,123		21,364
Construction in progress	Construction in progress	52,591		51,091		Construction in progress	53,024		51,091
Total cost	Total cost	344,254		359,296		Total cost	345,566		359,296
Less accumulated deprecation		(59,774)		(62,933)
Less accumulated depreciation						Less accumulated depreciation	(61,870)		(62,933)
Total real estate	Total real estate	$	284,480	$	296,363	Total real estate	$	283,696	$	296,363

~~Our construction~~Construction in progress represents our investment in Windmill Farms.

~~Our gain~~Gain (loss) on sale or write-down of assets, net for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 ~~consist~~consists of the following:


		Three Months Ended March 31,			Three Months Ended June 30,						Six Months Ended June 30,
			2022			2021			2022		2021		2022		2021
Land(1)	Land(1)		$	1,989		$	5,957	Land(1)	$	2,763	$	5,155	$	4,752	$	11,112
Multifamily Properties(2)	Multifamily Properties(2)		9,364			10,146		Multifamily Properties(2)	—		—		9,603		10,146
Commercial Properties	Commercial Properties		(205)			—		Commercial Properties	890		—		890		—

Other(4)								Other(4)	240		(29,600)		(204)		(29,600)
Total	Total		$	11,148		$	16,103	Total	$	3,893	$	(24,445)	$	15,041	$	(8,342)

(1)Includes the gain on the sale of lots related to our investment in Windmill Farms, Mercer Crossing and other land holdings.

~~(2)On January 14, 2022, we sold~~ ~~Toulon, a 240 unit multifamily property in~~ ~~Gautier~~, ~~Mississippi~~ ~~for $26,750, resulting in gain on sale of $9,364. We used the proceeds to pay off the $14,740 mortgage note payable on the property and for general corporate purposes. The~~

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TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(Unaudited)

(2)On January 14, 2022, we sold Toulon, a 240 unit multifamily property in Gautier, Mississippi for $26,750, resulting in gain on sale of $9,364. We used the proceeds to pay off the $14,740 mortgage note payable on the property and for general corporate purposes. The 2021 amount is attributed to the gain from the sale of a 50% ownership interest in Overlook at Allensville Phase II to Macquarie in 2021 (See Note 10 – Investment in Unconsolidated Joint Ventures)and the gain on sales of various multifamily properties that had previously been deferred (See Note 15 – Deferred Income).

(3)The 2021 amount represents the $29,600 loss on remeasurement of the Earn Out Obligation in connection with our investment in VAA (See Note 10 - Investment in Unconsolidated Joint Ventures).

8. Short-term Investments

We have an investment in variable denominated floating rate notes with Toyota Motor Credit Corporation. The notes ~~are~~do not have noa stated maturity and are subject to immediate repayment at ~~the Company’s~~our option. The interest rate on the ~~note~~notes was ~~1.11%~~1.75% and 1.15% at ~~March 31,~~June 30, 2022 and December 31, 2021, respectively.

~~9. Notes Receivable~~

~~The following table summarizes our notes receivable as of March 31, 2022 and December 31, 2021:~~

Carrying value
Property/Borrower March 31, 2022 December 31, 2021 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) 2,613 2,486 5.00 % 7/1/22
Bellwether Ridge(1) 3,967 3,967 5.00 % 11/1/26
Forest Pines(1) 6,472 6,472 5.00 % 11/1/22
Lake Wales 3,000 3,000 9.50 % 6/30/26
Legacy Pleasant Grove 496 496 12.00 % 10/23/22
McKinney Ranch 4,554 4,554 6.00 % 9/15/22
One Realco Land Holding, Inc. 1,728 1,728 9.50 % 6/30/26
Parc at Ingleside(1) 3,603 3,700 5.00 % 11/1/26
Parc at Opelika(1) 2,582 2,305 10.00 % 1/13/23
Parc at Windmill Farms(1) 7,830 7,830 5.00 % 11/1/22
Phillips Foundation for Better Living, Inc.(2) 184 813 12.00 % 3/31/24
Plum Tree(1) 1,764 1,537 5.00 % 4/26/26
Riverview on the Park Land, LLC 1,045 1,045 9.50 % 6/30/26
Spartan Land 5,907 5,907 12.00 % 1/16/23
Spyglass of Ennis(1) 5,319 5,319 5.00 % 11/1/22
Steeple Crest(1) 6,498 6,498 5.00 % 8/1/26
Unified Housing Foundation(2)(3) 2,881 2,881 12.00 % 6/30/23
Unified Housing Foundation(2)(3) 212 212 12.00 % 6/30/23
Unified Housing Foundation(2)(3) 6,831 6,831 12.00 % 6/30/23
Unified Housing Foundation(2)(3) 10,401 10,401 12.00 % 6/30/23
Unified Housing Foundation(2)(3) 10,096 10,096 12.00 % 3/31/24
Unified Housing Foundation(2)(3) 6,990 6,990 12.00 % 3/31/23
Unified Housing Foundation(2)(3) 3,615 3,615 12.00 % 5/31/23
Unified Housing Foundation(2)(3) 17,172 17,172 12.00 % 12/31/32
Unified Housing Foundation(2)(3) 6,521 6,521 12.00 % 3/31/24
Unified Housing Foundation(2)(3) 1,549 1,549 12.00 % 4/30/24
Unified Housing Foundation(2)(3) 183 183 12.00 % 6/30/24
$ 129,631 $ 129,726

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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 June 30, 2022 and December 31, 2021:


	Carrying value
Property/Borrower	June 30, 2022		December 31, 2021		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)	2,626		2,486		5.00	%	7/1/25
Bellwether Ridge(1)	3,973		3,967		5.00	%	11/1/26
Forest Pines(1)	6,472		6,472		5.00	%	11/1/22
Lake Wales	3,000		3,000		9.50	%	6/30/26
Legacy Pleasant Grove	496		496		12.00	%	10/23/22
McKinney Ranch	3,926		4,554		6.00	%	9/15/22
One Realco Land Holding, Inc.	1,728		1,728		9.50	%	6/30/26
Parc at Ingleside(1)	3,663		3,700		5.00	%	11/1/26
Parc at Opelika Phase II(1)	2,914		2,305		10.00	%	1/13/23
Parc at Windmill Farms(1)	7,836		7,830		5.00	%	11/1/22
Phillips Foundation for Better Living, Inc.(2)	182		813		12.00	%	3/31/24
Plum Tree(1)	1,767		1,537		5.00	%	4/26/26
Riverview on the Park Land, LLC	1,045		1,045		9.50	%	6/30/26
Spartan Land	5,907		5,907		12.00	%	1/16/23
Spyglass of Ennis(1)	5,319		5,319		5.00	%	11/1/22
Steeple Crest(1)	6,498		6,498		5.00	%	8/1/26
Unified Housing Foundation(2)(3)	2,881		2,881		12.00	%	6/30/23
Unified Housing Foundation(2)(3)	212		212		12.00	%	6/30/23
Unified Housing Foundation(2)(3)	6,831		6,831		12.00	%	6/30/23
Unified Housing Foundation(2)(3)	10,401		10,401		12.00	%	6/30/23
Unified Housing Foundation(2)(3)	10,096		10,096		12.00	%	3/31/24
Unified Housing Foundation(2)(3)	6,990		6,990		12.00	%	3/31/23
Unified Housing Foundation(2)(3)	3,615		3,615		12.00	%	5/31/23
Unified Housing Foundation(2)(3)	17,172		17,172		12.00	%	12/31/32
Unified Housing Foundation(2)(3)	6,521		6,521		12.00	%	3/31/24
Unified Housing Foundation(2)(3)	1,549		1,549		12.00	%	4/30/24
Unified Housing Foundation(2)(3)	182		183		12.00	%	6/30/24
	$	129,420	$	129,726

(1)The note is convertible, at our option, into a 100% ownership interest in the underlying development property, and is collateralized by the underlying development property.

(2) The borrower is determined to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable.

(3) Principal and interest payments on the notes from Unified Housing Foundation, Inc. (“UHF”) are funded from surplus cash flow from operations, sale or refinancing of the underlying properties and are cross collateralized to the extent that any surplus cash available from any of the properties underlying the notes.

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TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(Unaudited)

10. Investment in Unconsolidated Joint Ventures

On November 16, 2018, we formed Victory Abode Apartments, LLC ("VAA"), a joint venture with the Macquarie Group (“Macquarie”). VAA was formed as a result of a sale of the 50% ownership interest in 51 multifamily properties owned by us in exchange for a 50% voting interest / 49% profit participation interest ("Class A interest") in VAA and a note payable (“Mezzanine Loan”). Concurrent with the Contribution, VAA issued Class B interests with a 2% profits participation interest and no voting rights to Daniel J. Moos, our former President and Chief Executive Officer (“Class B Member”). The Class B Member serves as the Manager of VAA.

Interest on the Mezzanine loan is limited to cash generated from the properties and matures concurrently with the termination of VAA. Accordingly, we account for our interest in the Mezzanine Loan as additional equity interest and include any interest payments accrued as income from unconsolidated joint ~~ventures.In~~ventures. In connection with the formation of VAA, 10 ~~out~~ of the initial properties were subject to an earn-out provision ("Earn Out") that ~~provides~~provided for a remeasurement of value after a two-year period following the completion of construction. Upon the formation of VAA, we recorded aan initial liability ("Earn Out Obligation") for the $10,000 advance on the Earn Out that we received from Macquarie.

On March 30, 2021, we sold a 50% ownership interest in Overlook at Allensville Phase II, a 144 unit multifamily property in Sevierville, Tennessee to Macquarie for $2,551 resulting in gain on sale of $1,417. Concurrent with the sale, we each contributed our 50% ownership interests in Overlook at Allensville Phase II into VAA.

On July 13, 2021, we received the arbitration result of a dispute regarding the measurement of the Earn Out Obligation. Our position and claims were declined, and the position of Macquarie was fully accepted. As a result, we are required to pay approximately $39,600 to Macquarie to satisfy the Earn Out Obligation, and therefore, recorded a charge of $29,600 during the three and six months ended ~~March 31,~~June 30, 2022 (See Note 7 – Real Estate Activity). In accordance with the joint venture operating agreement, the Earn Out Obligation will be paid from our share of future distributions from VAA, which generally occur each six months. ~~As of~~At ~~March 31,~~June 30, 2022, we ~~owe~~owed $27,147 under the Earn Out Obligation.

On July 16, 2022, our $10,178 distribution from VAA was paid directly to Macquarie as an additional reduction of the Earn Out Obligation.

On November 17, 2021,, we entered into ~~a Major Decision~~an agreement with Macquarie to ~~engage~~pursue a ~~broker and initiate a sale~~sell NaN properties ("Sale Portfolio") owned by VAA in accordance with the provisions of ~~all~~the joint venture agreement. The parties further agreed that we would be able to acquire the remaining 7 of the properties ~~held by~~(“Holdback Properties”) from the joint venture at an agreed upon market price.

~~VAA.~~On June 17, 2022, VAA entered into an agreement (“PSA”) to sell the Sale Portfolio to 2 private equity funds (collectively, the “Buyer”) for $1,825,000. In connection with the ~~sale,~~transaction, we also plan to sell ~~VAA~~Sugar Mill Phase III ~~will~~to the Buyer. The PSA provides for an inspection period in which the Buyer may decrease the number of properties acquired by up to 5 properties. In connection with the PSA, the Buyer deposited $50,000 into escrow. The sale is expected to be completed in the third quarter of 2022. VAA intends to distribute ~~7 of its existing properties to us (referred to herein as~~ the ~~"Holdback Properties")~~net proceeds and ~~we in turn, will contribute one of our properties ("Contributed Property") into the portfolio offered for sale to third-parties. The remaining NaN properties are referred to herein as the~~ ~~VAA Portfolio.~~ ~~The sales price for~~ the Holdback Properties ~~and Contributed Property will be~~to the ~~estimated value of these properties as stated in~~Members immediately following the ~~agreement, multiplied by the ratio~~completion of the ~~actual sales price of the~~ ~~VAA Portfolio~~ ~~over the estimated value of the portfolio as stated in the agreement.~~

~~Each of the properties in the~~ ~~VAA Portfolio~~ ~~is appraised on an annual basis as part of our filing requirement with the TASE. As of March 31, 2022, the fair value of the~~ ~~VAA Portfolio,~~ ~~based on these appraisals was $1.4 billion. The appraised value reflects an aggregate of individual property appraised value and does not reflect a premium that is sometimes offered in a portfolio~~ sale. These values reflect a compression of cap rates for multifamily properties during the last year. However, there can be no assurances that these values will be realized. The Major Decision agreement will terminate on ~~August 1, 2022,~~ ~~if the~~ ~~VAA Portfolio~~ ~~has not been sold.~~

1314

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(Unaudited)

The following is a summary of our investment in VAA:


		March 31, 2022		December 31, 2021			June 30, 2022		December 31, 2021
Condensed balance sheet of VAA	Condensed balance sheet of VAA					Condensed balance sheet of VAA
Assets	Assets					Assets
Assets held for sale						Assets held for sale	$	1,119,125	$	1,135,769
Real estate	Real estate	$	1,201,083	$	1,208,716	Real estate	129,349		130,954
Other assets	Other assets	54,307		72,151		Other assets	13,173		14,144
Total assets		$	1,255,390	$	1,280,867
							$	1,261,647	$	1,280,867
Liabilities and partners' capital	Liabilities and partners' capital					Liabilities and partners' capital
Liabilities on assets held for sale						Liabilities on assets held for sale	$	796,076	$	807,382
Mortgage notes payable	Mortgage notes payable	$	851,348	$	854,015	Mortgage notes payable	69,887		70,540
Mezzanine notes payable	Mezzanine notes payable	238,952		242,942		Mezzanine notes payable	238,952		242,942
Other liabilities	Other liabilities	23,166		40,316		Other liabilities	23,514		16,409
Our share of partners' capital	Our share of partners' capital	70,965		71,800		Our share of partners' capital	66,612		71,800
Outside partner's capital	Outside partner's capital	70,959		71,794		Outside partner's capital	66,606		71,794
Total liabilities and partners' capital		$	1,255,390	$	1,280,867
							$	1,261,647	$	1,280,867
Investment in VAA	Investment in VAA					Investment in VAA
Our share of partners' capital	Our share of partners' capital	$	70,965	$	71,800	Our share of partners' capital	$	66,612	$	71,800
Our share of Mezzanine note payable and accrued interest	Our share of Mezzanine note payable and accrued interest	120,842		125,306		Our share of Mezzanine note payable and accrued interest	123,512		125,306
Basis adjustment (1)	Basis adjustment (1)	(141,234)		(144,227)		Basis adjustment (1)	(137,914)		(144,227)
Total investment in VAA	Total investment in VAA	$	50,573	$	52,879	Total investment in VAA	$	52,210	$	52,879

(1) We amortize the difference between the cost of our investment in unconsolidated joint ventures and the book value of our underlying equity into income on a straight-line basis consistent with the lives of the underlying assets.

The following is a summary of income ~~(loss)~~ from VAA:

Three Months Ended March 31,
2022 2021
Revenue
   Rental revenue $ 34,848 $ 31,070
   Other revenue 1,818 1,615
      Total revenue 36,666 32,685
Expenses
   Operating expenses 17,024 15,706
   Depreciation and amortization 7,807 7,703
   Other income — (2,356)
   Interest 13,505 14,048
      Total expenses 38,336 35,101
Net loss $ (1,670) $ (2,416)
Our equity in the income in unconsolidated joint ventures $ 4,706 $ 3,336


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue
Rental revenue	$	4,032	$	3,613	$	7,963	$	7,135
Other revenue	236		189		378		346
Total revenue	4,268		3,802		8,341		7,481
Expenses
Operating expenses	10,521		2,544		13,142		4,644
Depreciation and amortization	845		840		1,689		1,680

Interest	6,120		5,862		11,834		11,673
Total expenses	17,486		9,246		26,665		17,997
Loss from continuing operations	(13,218)		(5,444)		(18,324)		(10,516)
Income from discontinued operations	4,512		686		7,948		3,342
Net loss	$	(8,706)	$	(4,758)	$	(10,376)	$	(7,174)
Equity in the income in unconsolidated joint ventures	$	1,637	$	4,572	$	6,343	$	7,908

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TRANSCONTINENTAL REALTY INVESTORS, INC.

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,~~June 30, 2022 and December 31, 2021:


		Carrying value								Carrying value
Property / Entity	Property / Entity	March 31, 2022		December 31, 2021		Effective Interest Rate		Maturity Date	Property / Entity	June 30, 2022		December 31, 2021		Effective Interest Rate		Maturity Date
770 South Post Oak	770 South Post Oak	11,596		11,635		4.40	%	6/1/2025	770 South Post Oak	11,541		11,635		4.40	%	6/1/2025
Athens	Athens	1,155		1,155		4.00	%	8/28/2022	Athens	1,155		1,155		4.00	%	8/28/2022
Chelsea	Chelsea	7,996		8,037		3.40	%	12/1/2050	Chelsea	7,957		8,037		3.40	%	12/1/2050
EQK Portage - Land	EQK Portage - Land	3,350		3,350		10.00	%	11/13/2024	EQK Portage - Land	3,350		3,350		10.00	%	11/13/2024
Forest Grove	Forest Grove	7,220		7,263		3.75	%	5/5/2024	Forest Grove	7,195		7,263		3.75	%	5/5/2024
Landing Bayou	Landing Bayou	14,345		14,407		3.50	%	9/1/2053	Landing Bayou	14,285		14,407		3.50	%	9/1/2053
Legacy at Pleasant Grove	Legacy at Pleasant Grove	13,275		13,352		3.60	%	4/1/2048	Legacy at Pleasant Grove	13,197		13,352		3.60	%	4/1/2048
Parc at Denham Springs Phase II	Parc at Denham Springs Phase II	15,919		15,962		4.10	%	2/1/2060	Parc at Denham Springs Phase II	15,876		15,962		4.10	%	2/1/2060
RCM HC Enterprises	RCM HC Enterprises	5,086		1,986		9.50	%	12/17/2026	RCM HC Enterprises	5,086		1,986		5.00	%	12/31/2022
Stanford Center(1)	Stanford Center(1)	38,844		38,979		6.00	%	2/26/2023	Stanford Center(1)	38,706		38,979		6.00	%	2/26/2023
Sugar Mill Phase III	Sugar Mill Phase III	9,196		9,216		4.50	%	2/1/2060	Sugar Mill Phase III	9,174		9,216		4.50	%	2/1/2060
Toulon(2)	Toulon(2)	—		13,697		3.20	%	12/1/2051	Toulon(2)	—		13,697		3.20	%	12/1/2051
Villas at Bon Secour	Villas at Bon Secour	19,496		19,492		3.08	%	9/1/2031	Villas at Bon Secour	19,501		19,492		3.08	%	9/1/2031
Vista Ridge	Vista Ridge	9,792		9,830		4.00	%	8/1/2053	Vista Ridge	9,753		9,830		4.00	%	8/1/2053
Windmill Farms	Windmill Farms	8,393		8,389		5.00	%	2/28/2023	Windmill Farms	7,842		8,389		5.00	%	2/28/2023
		$	165,663	$	176,750					$	164,618	$	176,750

(1) On March 3, 2022, the loan was extended to February 26, 2023.

(2) On January 14, 2022, the loan was paid off in connection with the sale of the underlying property (See Note 7 - Real Estate Activity).

Interest payable at ~~March 31,~~June 30, 2022 and December 31, 2021, was ~~$1,636~~$1,785 and ~~$1,147,~~$1,123, respectively. We capitalized interest of ~~$803~~$800 and ~~$858~~$1,009 during the three months ended ~~March 31,~~June 30, 2022 and 2021, respectively, and $1,603 and $1,867 during the six months ended June 30, 2022 and 2021, respectively.

As of ~~March 31,~~June 30, 2022, 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 ~~may require~~requires us to lock the surplus cash flow of the property (“Cash Trap”) into a designated deposit account controlled by them, until we are in compliance with the DSCR for a period of two consecutive quarters.

All of the above mortgages and other notes payable are collateralized by the underlying property. In addition, we have guaranteed the loans on Athens, Forest Grove, Stanford Center and Villas at Bon Secour.

There are various land mortgages, secured by the property, that are in the process of a modification or extension to the original note due to expiration of the loan. We are working with our existing lenders and new lenders to modify, extend the loans before they become due or refinancing the loans with terms that are similar to the existing agreement.

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TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(Unaudited)

12. Bonds Payable

We have issued 3 series of nonconvertible bonds ("Bonds") through SPC, which are traded on the TASE. The Bonds are denominated in New Israeli Shekels ("NIS") and provide for semiannual principal and interest payments through maturity. The Bonds are subject to a number of covenants, which include restrictions on the distribution of cash from SPC.

In connection with the Bonds, we incurred a gain (loss) on foreign currency transactions of ~~$3,772~~$14,132 and ~~$7,617 for~~$(4,793) during the three months ended June 30, 2022 and 2021, respectively, and $17,904 and $2,824 for the six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

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~~TRANSCONTINENTAL REALTY INVESTORS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

The outstanding balance of our Bonds at ~~March 31,~~June 30, 2022 and December 31, 2021 is as follows:


Bond Issuance	Bond Issuance	March 31, 2022		December 31, 2021		Interest Rate		Maturity	Bond Issuance	June 30, 2022		December 31, 2021		Interest Rate		Maturity
Series A Bonds(1)	Series A Bonds(1)	$	48,151	$	65,563	7.30	%	7/31/23	Series A Bonds(1)	$	43,694	$	65,563	7.30	%	7/31/23
Series B Bonds(1)	Series B Bonds(1)	46,285		54,019		6.80	%	7/31/25	Series B Bonds(1)	42,000		54,019		6.80	%	7/31/25
Series C Bonds(2)	Series C Bonds(2)	73,732		75,298		4.65	%	1/31/23	Series C Bonds(2)	66,907		75,298		4.65	%	1/31/23
		168,168		194,880						152,601		194,880
Less unamortized deferred issuance costs	Less unamortized deferred issuance costs	(4,597)		(5,428)					Less unamortized deferred issuance costs	(3,767)		(5,428)
		$	163,571	$	189,452					$	148,834	$	189,452

(1) The bonds are collateralized by the assets of SPC.

(2) The bonds are collateralized by a trust deed inon Browning Place, a 625,297 square foot office building in Farmers Branch, Texas.

13. Related Party Transactions

We engage in certain business transactions with related parties, including but not limited to asset acquisition and dispositions of real estate. Transactions involving related parties cannot be presumed to be carried out on an 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 and Regis are wholly owned by an affiliates of the May Realty Holdings, Inc., which also owns approximately 90.8% of ARL. Pillar is compensated for advisory services in accordance with an agreement. Regis receives property management fees and leasing commissions in accordance with the terms of its property-level management agreement. In addition, Regis is entitled to receive real estate brokerage commissions in accordance with the terms of a non-exclusive brokerage agreement.

Rental income includes ~~$256~~$223 and ~~$242~~$313 for the three months ended June 30, 2022 and 2021, respectively, and $479 and $555 for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively, for office space leased to Pillar and Regis.

Property operating expense includes ~~$117~~$110 and ~~$382~~$195 for the three months ended June 30, 2022 and 2021, respectively, and $227 and $577 for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively, for management fees on commercial properties payable to Regis.

General and administrative expense includes ~~$1,292~~$642 and ~~$1,553~~$694 for the three months ended June 30, 2022 and 2021, respectively, and $1,934 and $2,247 for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively, for employee compensation and other reimbursable costs payable to Pillar.

Advisor fees paid to Pillar were ~~$3,005~~$2,446 and ~~$2,249~~$4,661 for the three months ended June 30, 2022 and 2021, respectively, and $5,451 and $6,910 for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

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TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(Unaudited)

Notes receivable include amounts held by UHF and Pillar (See Note 9 – Notes Receivable). UHF is deemed to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable. In addition, we have receivables from related parties. Interest income on these notes and related party receivables was ~~$3,963~~$4,272 and ~~$3,826~~$3,798 for the three months ended June 30, 2022 and 2021, respectively, and $8,235 and $7,624 for the six months ended June 30, 2022 and 2021, respectively.

~~March 31,~~Interest expense on payable to Pillar was $519 and $400 for the three months ended June 30, 2022 and 2021, ~~respectively.~~

~~Interest expense on notes payable to Pillar was $418~~respectively, and ~~$387~~$937 and $787 for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021, respectively.

Related party receivables, net represents the net amounts outstanding from Pillar for loans and advances, net of unreimbursed fees, expenses and costs as provided above.

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~~TRANSCONTINENTAL REALTY INVESTORS, INC.~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(dollars in thousands, except per share amounts)~~

~~(Unaudited)~~

14. Noncontrolling Interests

The noncontrolling interest represents the third party ownership interest in Income Opportunity Realty Investors, Inc. ("IOR"). Shares of IOR are listed on the NYSE American stock exchange under the symbol of IOR. We owned 81.1% in IOR during the three and six months ended ~~March 31,~~June 30, 2022 and 2021.

15. Deferred Income

In previous years, we sold properties to related parties at a gain, and therefore the sales criteria for the full accrual method was not met, and as such, we deferred the gain recognition and accounted for the sales by applying the finance, deposit, installment or cost recovery methods, as appropriate. The gain on these transactions is deferred until the properties are sold to a non-related third party.

On January 29, 2021, UHF sold El Dorado, a 208 unit multifamily property in McKinney, Texas; and Limestone Ranch, a 252 unit multifamily property in Lewisville, Texas; to a non-related third party. As a result of the sale, we recognized a gain of $8,730 during the ~~three~~six months ended ~~March 31,~~June 30, 2022 that had previously been ~~deferred.~~deferred (See Note 7 – Real Estate Activity).

As of ~~March 31,~~June 30, 2022 and December 31, 2021, we had deferred gain of $581.

16. Income Taxes

We are part of a tax sharing and compensating agreement with respect to federal income taxes with ARL. In accordance with the agreement, our expense (benefit) in each year is calculated based on the amount of losses absorbed by taxable income multiplied by the maximum statutory tax rate of 21%.

The following table summarizes our income tax provision:


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
			2022		2021				2022		2021		2022		2021
Current	Current		$	(28)	$	(40)		Current	$	40	$	(1,233)	$	68	$	(1,193)
Deferred	Deferred		—		—			Deferred	—		—		—		—
			$	(28)	$	(40)			$	40	$	(1,233)	$	68	$	(1,193)

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TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share amounts)

(Unaudited)

17. Commitments and Contingencies

We believe that we will generate excess cash from property operations in the next twelve months; such excess, however, might not be sufficient to discharge all of our obligations as they become due. We intend to sell income-producing assets, refinance real estate and obtain additional borrowings primarily secured by real estate to meet our liquidity requirements.

In February 2019, ~~a lawsuit was brought by~~ Paul Berger ~~(“Berger”~~("Berger") filed suit against us and others that ~~alleges~~alleged that weour subsidiary IOR completed improper sales and/or transfers of ~~property with IOR.~~property. Berger sought to proceed derivatively and directly, requests ~~that we pay off~~a payoff of various related party loans to IOR and that IOR then distribute the funds to its stockholders. After discovery and motions to dismiss substantial portions of the complaint, on June 28, 2022, Plaintiff Berger sought to voluntarily dismiss the action for reasons stated in the motion. The parties have not entered into any settlement, and neither Berger nor their counsel has received any consideration for the voluntary dismissal. The parties, through counsel, have stipulated to the dismissal with prejudice. On June 29, 2022, the United States District Court ordered that notice of the dismissal be provided to IOR shareholders. ~~We intend~~A copy of the required notice was filed as an exhibit to ~~vigorously defend against~~a Form 8-K of IOR for event occurring June 29, 2022 (the date of the ~~allegations. The trial for this matter~~Court’s order), and on July 7, 2022, a copy of the required notice was posted on IOR’s website. If no action is ~~set for November 2022.~~taken by one or more other stockholders of IOR prior to August 19, 2022, the Court may enter an order dismissing the Berger case with prejudice.

18. Subsequent Events

The date to which events occurring after ~~March 31,~~June 30, 2022, the date of the most recent balance sheet, have been evaluated for possible adjustment to the consolidated financial statements or disclosure is ~~May 13,~~August 12, 2022, which is the date on which the consolidated financial statements were available to be issued.

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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, 2021 (the “Annual Report”).

This Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, principally, but not only, under the captions “Business”, “Risk Factors” and “Management’s Discussion 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, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

•general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate);

•risks associated with the availability and terms of construction and mortgage financing and the use of debt to fund acquisitions and developments;

•demand for apartments and commercial properties in our markets and the effect on occupancy and rental rates;

•our ability to obtain financing, enter into joint venture arrangements in relation to or self-fund the development or acquisition of properties;

•risks associated with the timing and amount of property sales and the resulting gains/losses associated with such sales;

•failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully

•risks and uncertainties affecting property development and construction (including, without limitation, construction delays, cost overruns, inability to obtain necessary permits and public opposition to such activities);

•risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets;

•costs of compliance with the Americans with Disabilities Act and other similar laws and regulations;

•potential liability for uninsured losses and environmental contamination;

•risks associated with our dependence on key personnel whose continued service is not guaranteed; and

•the other risk factors identified in this Form 10-Q, including those described under the caption “Risk Factors.”

The risks included here are not exhaustive. Some of the risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements, include among others, the factors listed and described at Part I, Item 1A. “Risk Factors” Annual Report on Form 10-K, which investors should review.

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We are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The pandemic continues to have an impact on the U.S. economy and on the local markets in which our properties are located. Nearly every industry has been impacted directly or indirectly, and the commercial real estate market has come under pressure due to numerous factors, including preventative measures taken by local, state and federal authorities to alleviate the public health crisis such as mandatory business closures, quarantines, and restrictions on travel and “shelter-in-place” or “stay-at-home” orders.

Management's Overview

We are an externally advised and managed real estate investment company that owns a diverse portfolio of income-producing properties and land held for development throughout the Southern United States. Our portfolio of income-producing properties includes residential apartment communities ("multifamily properties"), office buildings and retail properties ("commercial properties"). Our investment strategy includes acquiring existing income-producing properties as well as developing new properties on land already owned or acquired for a specific development project.

Our operations are managed by Pillar Income Asset Management, Inc. (“Pillar”) in accordance with an Advisory Agreement. 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. We have no employees. Employees of Pillar render services to us in accordance with the terms of the Advisory Agreement. Pillar is considered to be a related party due to its common ownership with American Realty Investors, Inc. (“ARL”), who is our controlling shareholder.

The following is a summary of our recent acquisition, disposition, financing and development activities:

~~Acquisitions and~~ Dispositions

•On March 30, 2021, we sold a 50% ownership interest in Overlook at Allensville Phase II, a 144 unit multifamily property in Sevierville, Tennessee to Macquarie for $2.6 million resulting in gain on sale of $1.4 million. Concurrent with the sale, we each contributed our 50% ownership interests in Overlook at Allensville Phase II into VAA.

•On August 26, 2021, we sold 600 Las Colinas, a 512,173 square foot office building in Irving, Texas for $74.8 million, resulting in gain on sale of $27.3 million. We used the proceeds to pay off the mortgage note payable on the property (See "Financing Activities") and for general corporate purposes.

•During the year ended December 31, 2021, we sold a total of 134.7 acres of land from our holdings in Windmill Farms for $20.2 million, in aggregate, resulting in gains on sale of $10.3 million. In addition, we sold 14.1 acres of land from our holdings in Mercer Crossing for $9.0 million, resulting in a gain on sale of $6.4 million.

•On January 14, 2022, we sold Toulon, a 240 unit multifamily property in Gautier, Mississippi for $26.8 million, resulting in gain on sale of $9.4 million. We used the proceeds to pay off the $14.7 million mortgage note payable on the property and for general corporate purposes.

•On May 17, 2022, we sold Fruitland Park, a 6,722 square foot commercial building in Fruitland Park, Florida for $0.8 million, resulting in gain on sale of $0.7 million. We used the proceeds for general corporate purposes.

•During the ~~three~~six months ended ~~March 31,~~June 30, 2022, we sold a total of ~~8.6~~26.9 acres of land from our holdings in Windmill Farms for ~~$2.3~~$5.1 million, in aggregate, resulting in gains on sale of ~~$2.0~~$4.2 million.

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Financing Activities

•On March 2, 2021, we extended our $1.2 million loan on Athens to August 28, 2022.

•On March 4, 2021, we extended the maturity of our loan on Windmill Farms until February 28, 2023 at a reduced interest rate of 5%.

•On August 25, 2021, we replaced the existing loan on Villas at Bon Secour with a new $20.0 million loan that bears interest at 3.08% and matures on September 1, 2031.

•On August 26, 2021, we paid off the $35.9 million loan on 600 Las Colinas in connection with the sale of the underlying property (See ~~"Acquisitions and Dispositions"~~"Dispositions").

•On January 14, 2022, the loan on Toulon was paid off in connection with the sale of the underlying property (See ~~"Acquisitions and Dispositions"~~"Dispositions").

•On March 3, 2022, the loan on Stanford Center was extended to February 26, 2023.

Development Activities

During 2021, we spent $14.0 million on our ongoing development of Windmill Farms. Our expenditure includes $1.1 million on the development of land lots for sale to single family home developers and $13.0 million on reimbursable infrastructure investments. During the ~~three~~six months ended ~~March 31,~~June 30, 2022, we spent ~~$1.9~~$2.8 million on our ongoing development of Windmill Farms. Our expenditure includes ~~$1.1~~$1.2 million on the development of land lots for sale to single family home developers and ~~$0.8~~$1.7 million on reimbursable infrastructure investments.

We have investment in nine notes receivable that were issued to fund the development of multifamily ~~properties .~~properties. As of ~~March 31,~~June 30, 2022, one of the projects was in construction, two were in lease-up and six were stabilized. In 2022, we advanced $~~8.6~~1.0 million on these development notes. Each of these notes are convertible, at our option, into a 100% ownership interest in the underlying property.

Other Developments:

During ~~2022,~~2021, we recorded a loss of $29.6 million on the remeasurements of certain assets ("Earn Out Obligation") that were sold in connection with our investment in VAA.

On November 17, 2021,, we entered into ~~a Major Decision~~an agreement with Macquarie to ~~engage a broker and initiate~~pursue a sale of ~~all~~ the properties ~~held by~~of VAA in accordance with the provisions of the joint venture agreement. The parties further agreed that the Company would be able to acquire seven of the properties (“Holdback Properties”) from the joint venture at an agreed upon market price.

On June 17, 2022, VAA entered into an agreement (“PSA”) to sell forty-five properties to two private equity funds (collectively, the “Buyer”) for ~~VAA, which are listed in Item 2. Properties as Joint Venture properties.~~$1.8 billion. In connection with the sale, we plan to see ~~VAA~~Sugar Mill Phase III ~~will~~to the Buyer. The PSA provides for an inspection period in which the Buyer may decrease the number the properties acquired by up to five properties. In connection with the PSA, the Buyer deposited $50.0 million into escrow. The sale is expected to be completed in the third quarter of 2022. VAA intends to distribute ~~seven of its existing properties to us (referred to herein as~~ the ~~"Holdback Properties")~~net proceeds and ~~we in turn, will contribute one of our properties ("Contributed Property") into the portfolio offered for sale to third-parties. The sales price for~~ the Holdback Properties ~~and Contributed Property will be~~to the ~~estimated value of these properties as stated in~~Members immediately following the ~~agreement, multiplied by the ratio~~completion of the ~~actual sales price of the portion of the~~ ~~VAA Portfolio~~ ~~sold to a third party to the estimated value of the those properties that were provided in the agreement.~~sale.

~~Each of the properties in the~~ ~~VAA Portfolio~~ ~~is appraised on an annual basis as part of our filing requirement with the TASE. As of March 31, 2022, the fair value of the~~ ~~VAA Portfolio,~~ based on these appraisals was approximately $1.4 billion. The appraised value reflects an aggregate of individual property appraised value and does not reflect a premium that is sometimes offered in a portfolio sale. These values reflect a compression of cap rates for multifamily properties during the last year. However, there can be no assurances that these values will be realized. The Major Decision agreement will expire on ~~August 1, 2022,~~ ~~if the~~ ~~VAA Portfolio~~ ~~has not been sold.~~

Our ownership interest in VAA is held by SPC, and is therefore subject to the bond covenants of the three series of bonds that have been issued by SPC. These provisions include restrictions on the distribution of cash from SPC (See Note 12 - Bonds Payable in our consolidated financial statements).

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Critical Accounting Policies

The preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Some of these estimates and assumptions include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, the allocation of purchase price between tangible and intangible assets, capitalization of costs and fair value measurements. Our significant accounting policies are described in more detail in Note 2—Summary of Significant Accounting Policies in our notes to the consolidated financial statements in the Annual Report. However, the following policies are deemed to be critical.

Fair Value of Financial Instruments

We apply the guidance in ASC Topic 820, “Fair Value Measurements and Disclosures”, to the valuation of real estate assets. These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy. The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the reporting entity’s own data.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and includes three levels defined as follows:

Level 1 – Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets.

Level 2 – Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 – Unobservable inputs that are significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Related Parties

We apply ASC Topic 805, “Business Combinations”, to evaluate business relationships. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing our own separate interests, or affiliates of the entity.

Results of Operations

Many of the variations in the results of operations, discussed below, occurred because of the transactions affecting our properties described above, including those related to the Lease-Up Properties and the Disposition Properties (each as defined below).

For purposes of the discussion below, we define "Same Properties" as those properties that are substantially leased-up and in operation for the entirety of both periods of the comparison. Non-Same Properties for comparison purposes include those properties that have been recently constructed or leased-up (“Lease-up Properties”) and properties that have been disposed of ("Disposition Properties"). A developed property is considered leased-up, when it achieves occupancy of 80% or more.We move a property in and out of Same Properties based on whether the property is substantially leased-up and in operation for the entirety of both periods of the comparison. Accordingly, the Same Properties consist of all properties, excluding the Lease-up Properties and the Disposition Properties for the periods of comparison.

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For the comparison of the three and six months ended ~~March 31,~~June 30, 2022 to the three and six months ended ~~March 31,~~June 30, 2021, the Lease-up Properties are Forest Grove, Parc at Denham Springs Phase II and Sugar Mill Phase III; and the Disposition Properties are Overlook at Allensville Phase II, 600 Las Colinas and Toulon.

The following table summarizes our results of operations for the three and six months ended ~~March 31,~~June 30, 2022 and 2021:


		Three Months Ended March 31,			Three Months Ended June 30,								Six Months Ended June 30,
			2022			2021		Variance			2022		2021		Variance		2022		2021		Variance
Multifamily Segment	Multifamily Segment									Multifamily Segment
Revenue	Revenue		$	3,229		$	3,836	$	(607)	Revenue	$	2,945	$	3,529	$	(584)	$	6,174	$	7,365	$	(1,191)
Operating expenses	Operating expenses		(1,721)			(2,123)		402		Operating expenses	(1,708)		(2,111)		403		(3,429)		(4,234)		805
			1,508			1,713		(205)			1,237		1,418		(181)		2,745		3,131		(386)
Commercial Segment	Commercial Segment									Commercial Segment
Revenue	Revenue		4,252			6,525		(2,273)		Revenue	4,314		6,665		(2,351)		8,566		13,190		(4,624)
Operating expenses	Operating expenses		(2,307)			(3,709)		1,402		Operating expenses	(2,104)		(2,947)		843		(4,411)		(6,656)		2,245
			1,945			2,816		(871)			2,210		3,718		(1,508)		4,155		6,534		(2,379)
Segment operating income	Segment operating income		3,453			4,529		(1,076)		Segment operating income	3,447		5,136		(1,689)		6,900		9,665		(2,765)
Other non-segment items of income (expense)	Other non-segment items of income (expense)									Other non-segment items of income (expense)
Depreciation and amortization	Depreciation and amortization		(2,349)			(3,327)		978		Depreciation and amortization	(2,298)		(3,211)		913		(4,647)		(6,538)		1,891
General, administrative and advisory	General, administrative and advisory		(5,536)			(4,895)		(641)		General, administrative and advisory	(4,507)		(7,751)		3,244		(10,043)		(12,646)		2,603
Interest, net			787			(1,903)		2,690
Interest (expense) income, net										Interest (expense) income, net	(154)		(1,920)		1,766		633		(3,823)		4,456
Loss on extinguishment of debt	Loss on extinguishment of debt		(1,639)			—		(1,639)		Loss on extinguishment of debt	—		—		—		(1,639)		—		(1,639)
Gain on foreign currency transactions			3,772			7,617		(3,845)
Gain sale or write down of assets			11,148			16,103		(4,955)
Income from joint ventures			4,706			3,336		1,370
Gain (loss) on foreign currency transactions										Gain (loss) on foreign currency transactions	14,132		(4,793)		18,925		17,904		2,824		15,080
Gain (loss) on sale or write down of assets										Gain (loss) on sale or write down of assets	3,893		(24,445)		28,338		15,041		(8,342)		23,383
Income from joint venture										Income from joint venture	1,637		4,572		(2,935)		6,343		7,908		(1,565)
Other income	Other income		278			1,427		(1,149)		Other income	471		1,834		(1,363)		749		3,261		(2,512)
Net income			$	14,620		$	22,887	$	(8,267)
Net income (loss)										Net income (loss)	$	16,621	$	(30,578)	$	47,199	$	31,241	$	(7,691)	$	38,932

Comparison of the three months ended ~~March 31,~~June 30, 2022 to the three months ended ~~March 31,~~ June 30, 2021:

Our $47.2 million increase in net income during the three months ended June 30, 2022 is primarily attributed to the following:

•The decrease in profit from the multifamily and commercial segments is due to the Disposition Properties.

•The decrease in general, administrative and advisory expenses is primarily due to the decrease legal costs from the arbitration settlement in 2021 (See "Other Developments" in Management's Overview).

•The decrease in interest expense, net is primarily due to a $1.4 million decrease in interest from mortgage notes payables from the Disposition Properties.

•The increase in gain on foreign currency transactions is due to favorable changes in the U.S. Dollar and the New Israeli Shekel conversion rate.

•The change in gain (loss) on sale or write down of assets is primarily due to the arbitration settlement of Earn Out Obligation in 2021 (See "Other Developments" in Management's Overview).

•The decrease in income from joint ventures is primarily due an increase in the liquidation liability owed by VAA upon completion of the planned sale of its property portfolio (See "Other Developments" in Management's Overview).

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Comparison of the six months ended June 30, 2022 to the six months ended June 30, 2021:

Our ~~$8.3~~$38.9 million ~~decrease~~increase in net income during the ~~three~~six months ended ~~March 31,~~June 30, 2022 is primarily attributed to the following:

•The ~~$0.9 million~~ decrease in profit ~~from~~ the multifamily and commercial ~~segment~~segments is due to the Disposition Properties.

•The ~~$2.7 million increase~~decrease in general, administrative and advisory expenses is primarily due to the decrease legal costs from the arbitration settlement in 2021 (See "Other Developments" in Management's Overview).

•The decrease in interest ~~net~~expense is primarily due a ~~$1.1 million increase in interest income, a $1.0 million~~ decrease in ~~interest from mortgage notes payable and a $0.5 million decrease~~the amount of bonds outstanding in interest on bonds payable. The decrease in interest on the mortgage notes payable is due to the Disposition Properties and the decrease in interest on bonds is due to the lower principal balance outstanding.2021.

•The loss on extinguishment of debt is due to the early pay off of the mortgage note payable on Toulon in connection with sale of the underlying property (See "~~Acquisitions and~~ Dispositions" and "Financing Activities" in Management's Overview).

•The ~~decrease~~increase in ~~gains~~gain on foreign currency transactions is due to ~~changes~~a favorable change in the U.S. Dollar and the New Israeli Shekel conversion rate.

•The ~~decrease~~change in gain (loss) on sale or write down of assets is primarily due to the ~~a decrease~~arbitration settlement of Earn Out Obligation in 2021 (See "Other Developments" in Management's Overview) offset in part by the gain on the sale of ~~land at~~ ~~Windmill Farms~~.Toulon in 2022.

•The ~~$1.4 million increase~~decrease in income from joint ventures is primarily due toan increase in the liquidation liability owed by VAA as a result of the planned sale of its properties (See "Other Developments" in Management's Overview) offset in part by an increase in occupancy of ~~various~~the lease-up properties ~~at VAA.~~held by the joint venture.

•The decrease in other income relates to the recovery of bad debts in 2021.

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Liquidity and Capital Resources

Our principal sources of cash have been, and will continue to be, property operations; proceeds from land and income-producing property sales; collection of notes receivable; refinancing of existing mortgage notes payable; and additional borrowings, including mortgage notes and bonds payable, and lines of credit.

Our principal liquidity needs are to fund normal recurring expenses; meet debt service and principal repayment obligations including balloon payments on maturing debt; fund capital expenditures, including tenant improvements and leasing costs; fund development costs not covered under construction loans; and fund possible property acquisitions.

We anticipate that our cash and cash equivalents as of ~~March 31,~~June 30, 2022, along with cash that will be generated in the remainder of 2022 from notes and interest receivables, will be sufficient to meet all of our cash requirements. We ~~intend to~~may selectively sell land and income-producing assets, refinance or extend real estate debt and seek additional borrowings secured by real estate to meet our liquidity requirements. Although history cannot predict the future, historically, we have been successful at refinancing and extending a portion of our current maturity obligations.

The following summary discussion of our cash flows is based on the consolidated statements of cash flows in our consolidated financial statements, and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below (dollars in thousands):


		Three Months Ended March 31,							Six Months Ended June 30,
		2022		2021		Incr /(Decr)			2022		2021		Incr /(Decr)
Net cash used in operating activities		$	(4,178)	$	(901)	$	(3,277)
Net cash (used in) provided by operating activities								Net cash (used in) provided by operating activities	$	(7,517)	$	449	$	(7,966)
Net cash provided by investing activities	Net cash provided by investing activities	$	5,646	$	14,148	$	(8,502)	Net cash provided by investing activities	$	32,294	$	29,032	$	3,262
Net cash used in financing activities	Net cash used in financing activities	$	(38,769)	$	(25,155)	$	(13,614)	Net cash used in financing activities	$	(39,839)	$	(48,453)	$	8,614

The ~~increase~~change in cash ~~used in~~from operating activities is primarily due to the ~~$3.8 million~~ decrease in distributions of income from unconsolidated joint ~~venture.~~venture and a decrease in account payable in 2022.

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The decrease in cash provided by investing activities is primarily due the net redemption of short term investments in 2022 and an increase in ~~purchase~~proceeds from the sale of ~~short-term investments of $16.6 million, a~~assets, offset in part by decrease in collection of notes receivable ~~of $8.2 million~~ and a decrease in distribution from joint venture ~~of $7.4 million offset~~ in ~~part by an increase in proceeds from sale of assets of $14.1 million and a increase in originations and advances on notes receivable of $9.9 million.~~2022.

The ~~increase~~decrease in cash used in financing activities is primarily due to the ~~$13.0~~$9.2 million ~~increase~~decrease in bond payments ~~of mortgages, notes and bonds payable. The increase~~ in ~~payments of mortgages, notes and bonds payable is due to the pay off of the loan on~~ ~~Toulon in connection with the sale of the underlying property~~ ~~(See "Financing Activities"~~ in ~~Management's Overview~~).2022.

Funds From Operations ("FFO")

We use FFO in addition to net income to report our operating and financial results and considers FFO and FFO-diluted as supplemental measures for the real estate industry and a supplement to GAAP measures. The National Association of Real Estate Investment Trusts ("Nareit") defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of properties, plus real estate related depreciation and amortization, impairment write-downs of real estate and write-downs of investments in an affiliate where the write-downs have been driven by a decrease in the value of real estate held by the affiliate and after adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis. We also present FFO excluding the impact of the effects of foreign currency transactions.

FFO and FFO on a diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization, as we believe real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. We believe that such a presentation also provides investors with a meaningful measure of our operating results in comparison to the operating results of other real estate companies. In addition, we believe that FFO excluding gain (loss) from foreign currency transactions provide useful supplemental information regarding our performance as they show a more meaningful and consistent comparison of our operating performance and allows investors to more easily compare our results.

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We believe that FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP, and is not indicative of cash available to fund all cash flow needs. We also caution that FFO, as presented, may not be comparable to similarly titled measures reported by other real estate companies.

We compensate for the limitations of FFO by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of FFO and a reconciliation of net income to FFO and FFO-diluted. We believe that to further understand our performance, FFO should be compared with our reported net income and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.

The following table reconciles ~~our~~ net income (loss) attributable to the Company to FFO and ~~FFO-basic and diluted, excluding gain from foreign currency transactions~~FFO adjusted for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 (dollars and shares in thousands):


		Three Months Ended March 31,					Three Months Ended June 30,				Six Months Ended June 30,
			2022		2021				2022		2021		2022		2021
Net income attributable to the Company			$	14,502	$	22,632
Net income (loss) attributable to the Company								Net income (loss) attributable to the Company	$	16,461	$	(30,733)	$	30,963	$	(8,101)
Depreciation and amortization	Depreciation and amortization		2,349		3,327			Depreciation and amortization	2,298		3,211		4,647		6,538
Gain on sale or write down of assets			(11,148)		(16,103)
(Gain) loss on sale or write down of assets								(Gain) loss on sale or write down of assets	(3,893)		24,445		(15,041)		8,342
Gain on sale of land	Gain on sale of land		1,989		5,957			Gain on sale of land	2,763		5,155		4,752		11,112
Depreciation and amortization on unconsolidated joint ventures at pro rata share	Depreciation and amortization on unconsolidated joint ventures at pro rata share		(2,579)		(1,870)			Depreciation and amortization on unconsolidated joint ventures at pro rata share	2,082		3,062		3,720		3,754
FFO-Basic and Diluted	FFO-Basic and Diluted		5,113		13,943			FFO-Basic and Diluted	19,711		5,140		29,041		21,645
Loss on extinguishment of debt	Loss on extinguishment of debt		1,639		—			Loss on extinguishment of debt	—		—		1,639		—
Gain on foreign currency transaction			(3,772)		(7,617)
(Gain) loss on foreign currency transaction								(Gain) loss on foreign currency transaction	(14,132)		4,793		(17,904)		(2,824)
FFO-adjusted	FFO-adjusted		$	2,980	$	6,326		FFO-adjusted	$	5,579	$	9,933	$	12,776	$	18,821

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Optional and not included.

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ITEM 4. CONTROLS AND PROCEDURES

Based on an evaluation by our management (with the participation of our Principal Executive and Financial Officer), as of the end of the period covered by this report, our Principal Executive and 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 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.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

~~None~~In February 2019, Paul Berger ("Berger") filed suit against us and others that alleged that our subsidiary IOR completed improper sales and/or transfers of property. Berger sought to proceed derivatively and directly, requests a payoff of various related party loans to IOR and that IOR then distribute the funds to its stockholders. After discovery and motions to dismiss substantial portions of the complaint, on June 28, 2022, Plaintiff Berger sought to voluntarily dismiss the action for reasons stated in the motion. The parties have not entered into any settlement, and neither Berger nor their counsel has received any consideration for the voluntary dismissal. The parties, through counsel, have stipulated to the dismissal with prejudice. On June 29, 2022, the United States District Court ordered that notice of the dismissal be provided to IOR shareholders. A copy of the required notice was filed as an exhibit to a Form 8-K of IOR for event occurring June 29, 2022 (the date of the Court’s order), and on July 7, 2022, a copy of the required notice was posted on IOR’s website. If no action is taken by one or more other stockholders of IOR prior to August 19, 2022, the Court may enter an order dismissing the Berger case with prejudice.

ITEM 1A. RISK FACTORS

Except as set forth below, there have been no material changes from the risk factors previously disclosed in the 2021 10-K. For a discussion on these risk factors, please see “Item 1A. Risk Factors” contained in the 2021 10-K.

Risks Related to COVID-19 Pandemic

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We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and our property portfolio. While we did not incur significant disruptions during the ~~three~~six months ended ~~March 31,~~June 30, 2022 from the COVID-19 pandemic, our commercial properties have experienced a decline in occupancy. We are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. Nearly every industry has been impacted directly or indirectly, and the commercial real estate market has come under pressure due to numerous factors, including preventative measures taken by local, state and federal authorities to alleviate the public health crisis such as mandatory business closures, quarantines, and restrictions on travel and “shelter-in-place” or “stay-at-home” orders. The future impact of COVID-19 on our business and financial activities will depend on future developments, which at this stage are unpredictable considering the fluctuations of COVID-19 outbreaks and the resulting changes in the markets.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We have a program that allows for the repurchase of up to 1,637,000 shares of our common stock. This repurchase program has no termination date. There were no shares purchased under this program during the ~~three~~six months ended ~~March 31,~~June 30, 2022. As of ~~March 31,~~June 30, 2022, 1,230,535 shares have been purchased and 406,465 shares may be purchased under the program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

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Not applicable

ITEM 5. OTHER INFORMATION

None

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ITEM 6. EXHIBITS

The following exhibits are filed with this report or incorporated by reference as indicated;


Exhibit Number						Description

3.0						Articles of Incorporation of Transcontinental Realty Investors, Inc., (incorporated by reference to Exhibit No. 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991).

3.1						Certificate of Amendment to the Articles of Incorporation of Transcontinental Realty Investors, Inc., (incorporated by reference to the Registrant’s Current Report on Form 8-K, dated June 3, 1996).

3.2						Certificate of Amendment of Articles of Incorporation of Transcontinental Realty Investors, Inc., dated October 10, 2000 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).

3.3						Articles of Amendment to the Articles of Incorporation of Transcontinental Realty Investors, Inc., setting forth the Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible Preferred Stock, dated October 20, 1998 (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998).

3.4						Certificate of Designation of Transcontinental Realty Investors, Inc., setting forth the Voting Powers, Designations, References, Limitations, Restriction and Relative Rights of Series B Cumulative Convertible Preferred Stock, dated October 23, 2000 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).

3.5						Certificate of Designation of Transcontinental Realty Investors, Inc., setting forth the Voting Powers, Designating, Preferences, Limitations, Restrictions and Relative Rights of Series C Cumulative Convertible Preferred Stock, dated September 28, 2001 (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).

3.6						Articles of Amendment to the Articles of Incorporation of Transcontinental Realty Investors, Inc., Decreasing the Number of Authorized Shares of and Eliminating Series B Preferred Stock dated December 14, 2001 (incorporated by reference to Exhibit 3.7 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).

3.7						By-Laws of Transcontinental Realty Investors, Inc. (incorporated by reference to Exhibit No. 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991).

3.8						Certificate of Designation of Transcontinental Realty Investors, Inc., setting forth the Voting Powers, Designations, Preferences, Limitations, Restrictions and Relative Rights of Series D Cumulative Preferred Stock filed August 14, 2006 with the Secretary of State of Nevada (incorporated by reference to Registrant’s Current Report on Form 8-K for event dated November 21, 2006 at Exhibit 3.8 thereof).

10.1						Advisory Agreement dated as of April 30, 2011, between Transcontinental Realty Investors, Inc., and Pillar Income Asset Management, Inc. (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K for event occurring May 2, 2011).

31.1*						Certification of the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.

31.2*						Certification of the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.

32.1*						Certification pursuant to 18 U.S.C. 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS						XBRL Instance Document

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101.SCH						XBRL Taxonomy Extension Schema Document

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB						XBRL Taxonomy Extension Label Linkbase Document

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

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SIGNATURE PAGE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TRANSCONTINENTAL REALTY INVESTORS, INC.

Date: ~~May 13,~~August 12, 2022	By:	/s/ ERIK L. JOHNSON
		Erik L. Johnson
		Executive Vice President and Chief Financial Officer

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