WASHINGTON,
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
2021
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
TRANSCONTINENTAL REALTY INVESTORS, INC.
Nevada | 94-6565852 | ||||
| (State or Other Jurisdiction of
| (I.R.S. Employer
| ||||
We are ARL. the Tel-Aviv Stock Exchange ("TASE"). investors, and providing various administrative services. Our commercial properties are managed by Regis Realty Prime, LLC (“Regis”). Regis provides leasing, construction management and brokerage services. Our multifamily Pillar and Regis are considered to be related parties (See Note 12 – Related Party Transactions). 2020. 2020: 2020: 2020: We by UHF. The trial for this matter is set for November 2022. In addition, we sold 13.2 acres of land from our holdings in Mercer Crossing for $8.4 million, resulting in a gain on sale of $6.0 million. loan borrowing costs. Fair Value of Financial Instruments 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. Executive Vice President and Chief Financial OfficerTitle of each class Trading Symbol(s) Name of each exchange on which registered Common Stock TCI NYSE ☒x Yes ☐¨ No☒x Yes ☐¨ Nocompany. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company”company in Rule 12b-2 of the Exchange Act:Act.Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐☒Smaller reporting company ☒ Emerging growth companyCompany ☐ ☐¨☒x No.Indicate the number outstanding of each of the issuer’s classes of common stock as of the latest practicable date.outstanding.Common Stock, $.01 par value8,717,767(Class)(Outstanding at November 12, 2020)PAGE 31825252525262626262729PART I. FINANCIAL INFORMATIONItem 1.Financial StatementsTRANSCONTINENTAL REALTY INVESTORS, INC. (dollars in thousands, except share and par value amounts)(Unaudited) September 30, 2020 December 31, 2019 Assets Real estate, net $ 380,715 $ 387,790 Notes receivable (including $66.287 in 2020 and $57,817 in 2019 from related parties) 123,854 112,357 Cash and cash equivalents 32,967 51,179 Restricted cash 28,030 32,082 Investment in unconsolidated joint ventures 71,171 81,780 Receivable from related parties 140,050 141,541 Other assets 68,558 59,189 Total assets $ 845,345 $ 865,918 Liabilities and Equity Liabilities: Mortgages and notes payable $ 242,300 $ 245,773 Bonds payable 203,192 223,265 Accounts payable and other liabilities (including $937 in 2020 and $935 in 2019 to related parties) 24,642 26,115 Accrued interest payable 3,281 7,230 Deferred revenue 9,315 9,468 Total liabilities 482,730 511,851 Equity Shareholders' Equity: Common stock, $0.01 par value, authorized 10,000,000 shares; issued 8,717,967 shares at September 30, 2020 and December 31, 2019. 87 87 Treasury stock at cost, 200 shares in 2020 and 2019 (2 ) (2 ) Paid-in capital 257,853 257,853 Retained earnings 82,813 74,665 Total shareholders' equity 340,751 332,603 Non-controlling interest 21,864 21,464 Total equity 362,615 354,067 Total liabilities and equity $ 845,345 $ 865,918 September 30, 2021 December 31, 2020 Assets Real estate, net $ 300,015 $ 377,383 Notes receivable (including $68,989 at September 30, 2021 and $62,448 at December 31, 2020 from related parties) 133,892 123,556 Cash and cash equivalents 63,848 36,761 Restricted cash 20,090 50,206 Investment in unconsolidated joint ventures 49,883 51,786 Receivable from related parties 139,944 159,777 Other assets 83,569 79,613 Total assets $ 791,241 $ 879,082 Liabilities and Equity Liabilities: Mortgages and notes payable $ 178,362 $ 236,069 Bonds payable 184,198 237,888 Accounts payable and other liabilities (including $894 at September 30, 2021 and $930 at December 31, 2020 to related parties) 44,583 26,729 Accrued interest payable 3,297 7,550 Deferred revenue 581 9,315 Total liabilities 411,021 517,551 Equity Shareholders' Equity: Common stock, $0.01 par value, 10,000,000 shares authorized; 8,639,316 shares issued, 8,639,116 outstanding 86 86 Treasury stock, 200 shares at December 31, 2020 — (2) Paid-in capital 260,387 260,389 Retained earnings 99,479 81,334 Total shareholders' equity 359,952 341,807 Noncontrolling interest 20,268 19,724 Total equity 380,220 361,531 Total liabilities and equity $ 791,241 $ 879,082 For the Three Months Ended
September 30, For the Nine Months Ended
September 30, 2020 2019 2020 2019 Revenues: Rental revenues (including $262 and $212 for the three months and $673 and $527 for the nine months ended 2020 and 2019, respectively, from related parties) $ 11,453 $ 11,407 $ 34,461 $ 34,352 Other income 706 1,990 3,885 7,394 Total revenues 12,159 13,397 38,346 41,746 Expenses: Property operating expenses (including $254 and $237 for the three months ended and $750 and $741 for the nine months ended 2020 and 2019, respectively, from related parties) 6,388 5,403 18,507 18,722 Depreciation and amortization 3,526 3,416 10,338 9,964 General and administrative (including $1,017 and $935 for the three months ended and $2,783 and $3,355 for the nine months ended 2020 and 2019, respectively, from related parties) 1,643 1,929 7,063 6,468 Advisory fee to related party 2,139 2,200 6,483 6,196 Total operating expenses 13,696 12,948 42,391 41,350 Net operating (loss) income (1,537 ) 449 (4,045 ) 396 Interest income (including $3,752 and $4,618 for the three months ended and $11,255 and $13,483 for the nine months ended 2020 and 2019, respectively, from related parties) 4,348 5,232 13,102 14,668 Interest expense (including $380 and $514 for the three months ended and $1,193 and $1,517 for the nine months ended 2020 and 2019, respectively, from related parties) (6,291 ) (8,037 ) (21,999 ) (23,642 ) (Loss) gain on foreign currency transaction (1,470 ) (5,153 ) 774 (13,296 ) Loss on extinguishment of debt — (5,219 ) — (5,219 ) Income (losses) from unconsolidated joint ventures 365 (178 ) (740 ) (1,474 ) Gain on sales or write-down of assets 12,328 5,140 21,802 9,409 Income tax expense (50 ) — (346 ) — Net income (loss) 7,693 (7,766 ) 8,548 (19,158 ) Net income attributable to non-controlling interest — (21 ) (400 ) (583 ) Net income (loss) attributable to common shares $ 7,693 $ (7,787 ) $ 8,148 $ (19,741 ) Earnings (loss) per share - attributable to common shares Basic and diluted $ 0.88 $ (0.89 ) $ 0.93 $ (2.26 ) Weighted-average number of common shares outstanding: Basic and diluted 8,717,767 8,717,767 8,717,767 8,717,767 Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenues: Rental revenues (including $312 and $262 for the three months ended September 30, 2021 and 2020, respectively, and $867 and $808 for nine months ended September 30, 2021 and 2020, respectively, from related parties) $ 9,628 $ 11,454 $ 30,183 $ 34,461 Other income 406 708 2,474 3,885 Total revenue 10,034 12,162 32,657 38,346 Expenses: Property operating expenses (including $178 and $254 for the three months ended September 30, 2021 and 2020, respectively, and $755 and $750 for nine months ended September 30, 2021 and 2020, respectively, from related parties) 5,610 6,388 16,500 18,507 Depreciation and amortization 2,935 3,526 9,473 10,338 General and administrative (including $947 and $1,017 for three months ended September 30, 2021 and 2020, respectively, and $3,195 and $2,783 for nine months ended September 30, 2021 and 2020, respectively, from related parties) 2,813 1,646 8,549 7,063 Advisory fee to related party 3,234 2,139 10,144 6,483 Total operating expenses 14,592 13,699 44,666 42,391 Net operating loss (4,558) (1,537) (12,009) (4,045) Interest income (including $4,337 and $3,752 for the three months ended September 30, 2021 and 2020, respectively, and $11,961 and $11,255 for the nine months ended September 30, 2021 and 2020, respectively, from related parties) 5,155 4,348 14,518 13,102 Interest expense (including $413 and $380 for the three months ended September 30, 2021 and 2020, respectively, and $1,200 and $1,193 for the nine months ended September 30, 2021 and 2020, respectively, from related parties) (5,910) (6,291) (19,096) (21,999) (Loss) gain on foreign currency transactions (1,639) (1,470) 1,185 774 Loss on extinguishment of debt (1,451) — (1,451) — Equity in income (loss) from unconsolidated joint venture 3,627 365 11,535 (740) Gain on sale or write-down of assets, net 31,312 12,328 22,970 21,802 Income tax provision (156) (50) 1,037 (346) Net income 26,380 7,693 18,689 8,548 Net income attributable to noncontrolling interest (134) — (544) (400) Net income attributable to the Company $ 26,246 $ 7,693 $ 18,145 $ 8,148 Earnings per share - basic Basic and diluted $ 3.04 $ 0.88 $ 2.10 $ 0.93 Weighted average common shares used in computing earnings per share Basic and diluted 8,639,316 8,717,767 8,639,316 8,717,677 TRANSCONTINENTAL REALTY INVESTORS, INC.CONSOLIDATED STATEMENT OF EQUITY (dollars in thousands, except share amounts)(Unaudited) Common Stock Treasury Paid-in Retained Total Shareholders' Non-controlling Total Shares Amount Stock Capital Earnings Equity Interest Equity For the three months ended
September 30, 2020 Balance, June 30, 2020 8,717,967 $ 87 $ (2 ) $ 257,853 $ 75,120 $ 333,058 $ 21,864 $ 354,922 Net income — — — — 7,693 7,693 — 7,693 Balance, September 30, 2020 8,717,967 $ 87 $ (2 ) $ 257,853 $ 82,813 $ 340,751 $ 21,864 $ 362,615 For the three months ended
September 30, 2019 Balance, June 30, 2019 8,717,967 $ 87 $ (2 ) $ 257,938 $ 89,631 $ 347,654 $ 21,243 $ 368,897 Distribution to equity partner — — — (85 ) — (85 ) — (85 ) Net loss — — — — (7,787 ) (7,787 ) 21 (7,766 ) Balance, September 30, 2019 8,717,967 $ 87 $ (2 ) $ 257,853 $ 81,844 $ 339,670 $ 21,264 $ 361,046 For the nine months ended
September 30, 2020 Balance, December 31, 2019 8,717,967 $ 87 $ (2 ) $ 257,853 $ 74,665 $ 332,603 $ 21,464 $ 354,067 Net income — — — — 8,148 8,148 400 8,548 Balance, September 30, 2020 8,717,967 $ 87 $ (2 ) $ 257,853 $ 82,813 $ 340,751 $ 21,864 $ 362,615 For the nine months ended
September 30, 2019 Balance, December 31, 2018 8,717,967 $ 87 $ (2 ) $ 258,050 $ 101,585 $ 359,720 $ 20,681 $ 380,401 Distribution to equity partner — — — (197 ) — (197 ) — (197 ) Net loss — — — — (19,741 ) (19,741 ) 583 (19,158 ) Balance, September 30, 2019 8,717,967 $ 87 $ (2 ) $ 257,853 $ 81,844 $ 339,782 $ 21,264 $ 361,046 Common Stock Treasury
StockPaid-in
CapitalRetained
EarningsTotal Shareholders' Equity Noncontrolling
InterestTotal Equity Three Months Ended September 30, 2021 Balance, July 1, 2021 $ 86 $ — $ 260,387 $ 73,233 $ 333,706 $ 20,134 $ 353,840 Net income — — — 26,246 26,246 134 26,380 Balance, September 30, 2021 $ 86 $ — $ 260,387 $ 99,479 $ 359,952 $ 20,268 $ 380,220 Three Months Ended September 30, 2020 Balance, July 1, 2020 $ 86 $ (2) $ 257,854 $ 75,120 $ 333,058 $ 21,864 $ 354,922 Net income — — — 7,693 7,693 — 7,693 Balance, September 30, 2020 $ 86 $ (2) $ 257,854 $ 82,813 $ 340,751 $ 21,864 $ 362,615 Nine Months Ended September 30, 2021 Balance, January 1, 2021 $ 86 $ (2) $ 260,389 $ 81,334 $ 341,807 $ 19,724 $ 361,531 Net income — — — 18,145 18,145 544 18,689 Cancellation of treasury shares — 2 (2) — — — — Balance, September 30, 2021 $ 86 $ — $ 260,387 $ 99,479 $ 359,952 $ 20,268 $ 380,220 Nine Months Ended September 30, 2020 Balance, January 1, 2020 $ 86 $ (2) $ 257,854 $ 74,665 $ 332,603 $ 21,464 $ 354,067 Net income — — — 8,148 8,148 400 8,548 Balance, September 30, 2020 $ 86 $ (2) $ 257,854 $ 82,813 $ 340,751 $ 21,864 $ 362,615 For the Nine Months Ended September 30, 2020 2019 Cash Flow From Operating Activities: Net income (loss) $ 8,548 $ (19,158 ) Adjustments to reconcile net income (loss) to used in operating activities: (Gain) loss on foreign currency transactions (774 ) 13,296 Loss on debt extinguishment — 5,219 Gain on sales or write-down of assets (21,802 ) (9,409 ) Depreciation and amortization 13,023 12,818 Loss from unconsolidated joint ventures 740 1,474 Distribution of income from unconsolidated joint ventures 1,782 — Changes in assets and liabilities, net of dispositions: Other assets (14,179 ) 12,888 Related party receivables 1,491 (35,257 ) Accrued interest payable (94 ) (1,557 ) Accounts payable and other liabilities (3,745 ) 5,441 Deferred revenue (153 ) 4,957 Net cash used in operating activities (15,163 ) (9,288 ) Cash Flow From Investing Activities: Collection of notes receivables 3,467 255 Origination and advances on notes receivable (15,718 ) (7,262 ) Acquisition of real estate (2,664 ) (3,422 ) Development and renovation of real estate (12,488 ) (31,311 ) Deferred leasing costs (96 ) — Proceeds from sale of real estate 31,768 23,030 Distributions from unconsolidated joint ventures 8,086 1,928 Net cash provided by (used in) investing activities 12,355 (16,782 ) Cash Flow From Financing Activities: Proceeds from mortgages and notes payable 10,234 16,934 Payments on mortgages and notes payable (7,912 ) (45,623 ) Proceeds from bonds payable — 78,125 Payments on bonds payable (21,724 ) (21,742 ) Debt extinguishment costs — (3,799 ) Deferred finance costs (54 ) (4,241 ) Distributions to equity partner — (197 ) Net cash (used in) provided by financing activities (19,456 ) 19,457 Net decrease in cash, cash equivalents and restricted cash (22,264 ) (6,613 ) Cash, cash equivalents and restricted cash, beginning of period 83,261 106,565 Cash, cash equivalents and restricted cash, end of period $ 60,997 $ 99,952 Supplemental disclosures of cash flow information: Cash paid for interest, net of amounts capitalized $ 21,109 $ 27,470 Schedule of noncash investing and financing activities: Land acquired in exchange for note payable $ 3,350 $ — Note receiveable issued in exchange for property $ 1,761 $ — Debt assumed in sale of properties $ 8,238 $ — Land received in exhange for note receivable $ — $ 1,800 Nine Months Ended September 30, 2021 2020 Cash Flow From Operating Activities: Net income $ 18,689 $ 8,548 Adjustments to reconcile net income to net cash used in operating activities: Gain on sale or write down of assets (22,970) (21,802) Gain on foreign currency transactions (1,185) (774) Loss on extinguishment of debt 1,451 — Depreciation and amortization 11,699 13,023 Recovery of bad debts (1,017) — Equity in (income) loss from unconsolidated joint venture (11,535) 740 Distribution of income from unconsolidated joint venture 3,157 1,729 Changes in assets and liabilities, net of dispositions: Other assets (8,009) (14,180) Related party receivables 9,343 1,491 Accrued interest payable (1,928) (3,898) Accounts payable and other liabilities (4,893) (94) Net cash used in operating activities (7,198) (15,217) Cash Flow From Investing Activities: Collection of notes receivable 8,822 3,467 Originations and advances on notes receivable (3,882) (15,718) Acquisition of real estate — (2,664) Development and renovation of real estate (8,770) (12,488) Deferred leasing costs (877) (96) Proceeds from sale of assets 103,727 31,768 Contribution to unconsolidated joint venture (411) — Distribution from unconsolidated joint venture 7,430 8,140 Net cash provided by investing activities 106,039 12,409 Cash Flow From Financing Activities: Proceeds from mortgages, other notes and bonds payable 20,015 10,234 Payments on mortgages, other notes and bonds payable (117,193) (29,636) Debt extinguishment costs (4,086) — Deferred financing costs (606) (54) Net cash used in financing activities (101,870) (19,456) Net decrease in cash, cash equivalents and restricted cash (3,029) (22,264) Cash, cash equivalents and restricted cash, beginning of period 86,967 83,261 Cash, cash equivalents and restricted cash, end of period $ 83,938 $ 60,997 1.Organization“We”“we”, “Our”“our”, or “Us”“us” refer to Transcontinental Realty Investors, Inc., a Nevada corporation, which was formed in 1984. Our common stock is listed and trades on the New York Stock Exchange (“NYSE”) under the symbol “TCI”.a “C” corporation for U.S. federal income tax purposes and files an annual consolidated income tax return withowned approximately 78% by American Realty Investors, Inc. (“ARL”), whose common stock is tradedlisted on the NYSE under the symbol “ARL”. ARL owns 78.38%, and 7% by the parentcontrolling shareholder of ARL owns 7.20% of the Company.apartment communities and commercial real estate properties. In addition, we opportunistically acquire land for future development in in-fill or high-growth suburban markets. From time to time and when we believe it appropriate to do so, we will also sell land and income-producing properties. We generate revenues by leasing apartment units to residents, and leasing office, industrial and retail space to various for-profit businesses as well as certain local, state and federal agencies. We also generate revenuesincome from gainsthe sale of land.sales of income-producing properties and land.2020,2021, our portfolio of income-producing properties consisted of:●Six commercial properties consisting of five office buildings and one retail property comprising in aggregate of approximately 1.6 million square feet;●Ten multifamily apartment communities owned directly by us comprising in 1,639 units, excluding apartments being developed;●Approximately 1,980 acres of developed and undeveloped land; and●Fifty-one multifamily apartment communities totaling 10,137 units owned by our 50% owned investee Victory Abode Apartments, LLC (“VAA”).day to dayday-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 the Companies employees are Pillar employees.apartment communitiesproperties are managed by outside management companies.2.Summary of Significant Accounting Policies20192020 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 theour Annual Report on Form 10-K for the year ended December 31, 2019.2020. Certain 20192020 consolidated financial statement amounts have been reclassified to conform to the current presentation.In October 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This standard is intended to improve the accounting when considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. The effective date of the amendments is for fiscal years, and interim periods within those years, beginning after December 15, 2019. The adoption of the standard on January 1, 2020, did not have a material impact on our financial position and results of operations.2020.TRANSCONTINENTAL REALTY INVESTORS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share2021 and square foot amounts)(Unaudited)3.Earnings per Sharehave beenis computed by dividing net income available to common shares by the weighted-average number of common shares outstanding during the period. Shares issued during the period shall beare weighted for the portion of the period that they were outstanding. For the Three Months Ended
September 30, For the Nine Months Ended
September 30, 2020 2019 2020 2019 Net income (loss) $ 7,693 $ (7,766 ) $ 8,548 $ (19,158 ) Net (income) attributable to non-controlling interest — (21 ) (400 ) (583 ) Net income (loss) attributable to common shares $ 7,693 $ (7,787 ) $ 8,148 $ (19,741 ) Weighted-average common shares outstanding — basic and diluted 8,717,767 8,717,767 8,717,767 8,717,767 EPS - attributable to common shares — basic and diluted $ 0.88 $ (0.89 ) $ 0.93 $ (2.26 ) 4.Supplemental Cash Flow InformationThe following is a reconciliationThree Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income $ 26,380 $ 7,693 $ 18,689 $ 8,548 Net income attributable to noncontrolling interest (134) — (544) (400) Net income attributable to common shares $ 26,246 $ 7,693 $ 18,145 $ 8,148 Weighted-average common shares outstanding — basic and diluted 8,639,316 8,717,767 8,639,316 8,717,677 EPS - attributable to common shares — basic and diluted $ 3.04 $ 0.88 $ 2.10 $ 0.93 5.Operating SegmentsNine Months Ended September 30, 2021 2020 Cash paid for interest $ 23,019 $ 21,109 Cash - beginning of period Cash and cash equivalents $ 36,761 $ 51,179 Restricted cash 50,206 32,082 $ 86,967 $ 83,261 Cash - end of period Cash and cash equivalents $ 63,848 $ 32,967 Restricted cash 20,090 28,030 $ 83,938 $ 60,997 Proceeds from mortgages, notes and bonds payable Proceeds from mortgages and notes payable $ 20,015 $ 10,234 Proceeds from bonds — — $ 20,015 $ 10,234 Payments on mortgages, notes and bonds payable Payments on mortgages and notes payable $ 63,535 $ 7,912 Payments on bond payable 53,658 21,724 $ 117,193 $ 29,636 Nine Months Ended September 30, 2021 2020 Assets contributed to joint venture $ 18,608 $ — Liabilities assumed by joint venture $ 15,606 $ — Notes receivable received in exchange for related party receivable $ 9,259 $ — Distribution from joint venture applied to Earn Out Obligation $ 5,441 $ — Property acquired in exchange for note payable $ — $ 3,350 Note receivable issued in exchange for property $ — $ 1,761 Debt assumed in sale of property $ — $ 8,238 two2 reportable segments: (i) the acquisition, development, ownership and management of multifamily apartment communitiesproperties and (ii) the acquisition, ownership and management of commercial real estate 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.20202021 and 2019: For the Three Months Ended
September 30, For the Nine Months Ended
September 30, 2020 2019 2020 2019 Multifamily Segment Revenues $ 3,683 $ 3,383 $ 10,943 $ 10,077 Operating expenses (2,412 ) (2,243 ) (6,466 ) (6,363 ) Profit from segment 1,271 1,140 4,477 3,714 Commercial Segment Revenues 7,770 8,024 23,518 24,275 Operating expenses (3,976 ) (3,160 ) (12,041 ) (12,359 ) Profit from segment 3,794 4,864 11,477 11,916 Total profit from segments $ 5,065 $ 6,004 $ 15,954 $ 15,630 Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Multifamily Segment Revenues $ 3,703 $ 3,685 $ 11,068 $ 10,943 Operating expenses (2,072) (2,413) (6,306) (6,466) Profit from segment 1,631 1,272 4,762 4,477 Commercial Segment Revenues 5,925 7,769 19,115 23,518 Operating expenses (3,538) (3,975) (10,194) (12,041) Profit from segment 2,387 3,794 8,921 11,477 Total profit from segments $ 4,018 $ 5,066 $ 13,683 $ 15,954 (loss) for the three and nine months ended September 30, 20202021 and 2019: For the Three Months Ended
September 30, For the Nine Months Ended
September 30, 2020 2019 2020 2019 Total profit from segments $ 5,065 $ 6,004 $ 15,954 $ 15,630 Other non-segment items of income (expense) Depreciation (3,526 ) (3,416 ) (10,338 ) (9,964 ) General and administrative (1,643 ) (1,930 ) (7,063 ) (6,468 ) Advisory fee to related party (2,139 ) (2,199 ) (6,483 ) (6,196 ) Interest income 4,348 5,232 13,102 14,668 Other income 706 1,990 3,885 7,394 Interest expense (6,291 ) (8,037 ) (21,999 ) (23,642 ) (Loss) gain on foreign currency transaction (1,470 ) (5,153 ) 774 (13,296 ) Loss on extinguishment of debt — (5,219 ) — (5,219 ) Income (losses) from unconsolidated joint ventures 365 (178 ) (740 ) (1,474 ) Gain on sales or write-down of assets 12,328 5,140 21,802 9,409 Income tax expense (50 ) — (346 ) — Net income (loss) $ 7,693 $ (7,766 ) $ 8,548 $ (19,158 ) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Total profit from segments $ 4,018 $ 5,066 $ 13,683 $ 15,954 Other non-segment items of income (expense) Depreciation (2,935) (3,526) (9,473) (10,338) General and administrative (2,813) (1,646) (8,549) (7,063) Advisory fee to related party (3,234) (2,139) (10,144) (6,483) Other income 5,155 4,348 2,474 3,885 Interest income 406 708 14,518 13,102 Interest expense (5,910) (6,291) (19,096) (21,999) (Loss) gain on foreign currency transaction (1,639) (1,470) 1,185 774 Loss on extinguishment of debt (1,451) — (1,451) — Income (losses) from unconsolidated joint venture 3,627 365 11,535 (740) Gain on sales or write-down of assets 31,312 12,328 22,970 21,802 Income tax provision (156) (50) 1,037 (346) Net income $ 26,380 $ 7,693 $ 18,689 $ 8,548 TRANSCONTINENTAL REALTY INVESTORS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share and square foot amounts)(Unaudited)6.Leasesapartment communitiesproperties 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.20202021 and 2019: For the Three Months Ended
September 30, For the Nine Months Ended
September 30, 2020 2019 2020 2019 Fixed component $ 11,107 $ 10,827 $ 33,111 $ 32,963 Variable component 346 580 1,350 1,389 $ 11,453 $ 11,407 $ 34,461 $ 34,352 Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Fixed component $ 9,124 $ 11,107 $ 28,287 $ 33,111 Variable component 504 347 1,896 1,350 $ 9,628 $ 11,454 $ 30,183 $ 34,461 under non-cancelable leases. The table excludeexcludes multifamily leases, which typically have a term of one-year or less:Twelve months ended September 30, 2020 Amount 2021 $ 6,444 2022 23,155 2023 20,038 2024 14,606 2025 8,737 Thereafter 7,071 $ 80,051 7.Real Estate Activity2021 $ 3,794 2022 13,431 2023 9,188 2024 5,674 2025 5,261 Thereafter 26,499 $ 63,847 theour real estate owned as of September 30, 20202021 and December 31, 2019: September 30, December 31, 2020 2019 Land $ 50,759 $ 49,887 Building and improvements 297,068 286,280 Tenant improvements 49,423 49,431 Construction in progress 77,116 84,399 474,366 469,997 Less accumulated deprecation (97,883 ) (90,173 ) 376,483 379,824 Property held for sale 4,232 7,966 Total $ 380,715 $ 387,790 September 30, 2021 December 31, 2020 Land $ 42,625 $ 50,759 Building and improvements 225,375 297,644 Tenant improvements 21,364 30,935 Construction in progress 71,044 77,891 Total cost 360,408 457,229 Less accumulated deprecation (60,725) (82,418) Total real estate, net 299,683 374,811 Property held for sale 332 2,572 Total real estate $ 300,015 $ 377,383 TRANSCONTINENTAL REALTY INVESTORS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share and square foot amounts)(Unaudited) (loss) on sale or write-down of assets, net for the three and nine months ended September 30, 20202021 and 20192020 consist of the following: For the Three Months Ended
September 30, For the Nine Months Ended
September 30, 2020 2019 2020 2019 Land(1) $ 5,774 $ 5,140 $ 15,248 $ 9,489 Residential Properties(2) 3,704 — 3,704 (80 ) Commercial Properties(3) 4,609 — 4,609 — Other(4) (1,759 ) — (1,759 ) — Total $ 12,328 $ 5,140 $ 21,802 $ 9,409 (1)Includes the sale of lots related to our investment in Windmill Farms, Mercer Crossing and other land holdings.(2)On September 14, 2020, we sold Bridgeview Plaza, a 122,205 square foot retail center in La Crosse, Wisconsin for $5,250, resulting in a gain on sale of $4,744. The proceeds from the sale were used to pay off the $3,375 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable) and for general corporate purposes.(3)On May 1, 2020, we sold Villager Apartments, a 33 unit multifamily apartment community in Pensacola, Florida for $2,426, resulting in a gain on sale of $898. The sales price was funded by the issuance of a $1,761 note receivable and the assumption of the $665 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable). On July 16, 2020, we sold Farnham Park Apartments, a 144 unit multifamily apartment community in Port Arthur, Texas for $13,300, resulting in a gain on the sale of of $2,684. The sales price was funded by cash payment of $4,215 and the assumption of the $9,085 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable).(4)Includes the write-off of development costs.Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Land(1) $ 4,042 $ 5,774 $ 15,153 $ 15,248 Multifamily Properties(2) — 3,704 10,146 3,704 Commercial Properties(3) 27,270 4,609 27,270 4,609 Other(4) — (1,759) (29,599) (1,759) Total $ 31,312 $ 12,328 $ 22,970 $ 21,802 8.Notes Receivable20202021 and December 31, 2019: Carrying value Property/Borrower September 30, 2020 December 31, 2019 Interest Rate Maturity Date ABC Land and Development, Inc. $ 7,408 $ 7,408 9.50 % 06/21 ABC Paradise, LLC 1,210 1,210 9.50 % 06/21 Autumn Breeze(1) 1,807 1,302 5.00 % 10/21 Bellwether Ridge(1) 3,559 3,765 5.00 % 11/20 Big River NV LLC 344 — — 07/20 Forest Pines Phase I(1) 2,869 2,868 5.00 % 11/20 JEM Holdings, Inc. 300 300 6.00 % 07/16 One Realco Land Holding, Inc. 1,728 1,728 9.50 % 06/21 Oulad-Chikh Family Trust 174 174 8.00 % 03/21 Parc at Ingleside(1) 2,294 1,531 5.00 % 12/21 Parc at Windmill Farms(1) 7,949 7,602 5.00 % 11/20 Phillips Foundation for Better Living, Inc. — 314 12.00 % 03/22 Plum Tree(1) 792 413 5.00 % 10/21 Prospectus Endeavors 4, LLC 5,907 5,907 12.00 % 01/23 Prospectus Endeavors 6, LLC 496 496 12.00 % 10/22 Riverview on the Park Land, LLC 1,045 1,045 9.50 % 06/21 RNC Revolving Line of Credit 8,853 8,802 5.00 % 09/24 Spyglass of Ennis(1) 5,359 5,288 5.00 % 11/20 Steeple Crest(1) 6,498 6,665 5.00 % 08/21 TPS Income, Inc. 4,554 4,554 6.00 % 09/20 Unified Housing Foundation, Inc. (2) 10,401 10,401 12.00 % 12/21 Unified Housing Foundation, Inc. (2) 10,096 10,096 12.00 % 03/22 Unified Housing Foundation, Inc. (2) 2,882 3,795 12.00 % 07/21 Unified Housing Foundation, Inc. (2) 212 212 12.00 % 08/21 Unified Housing Foundation, Inc. (2) 7,051 6,831 12.00 % 03/23 Unified Housing Foundation, Inc. (2) 3,615 — 12.00 % 05/23 Unified Housing Foundation, Inc. (2) 6,831 — 12.00 % 10/21 Unified Housing Foundation, Inc. (2) 495 525 12.00 % 12/21 Unified Housing Foundation, Inc. (2) 19,125 19,125 12.00 % 12/32 Total $ 123,854 $ 112,357 (1)The note is convertible, at our option, into a 100% ownership interest in the underlying development property, and are collateralized by the underlying development property.
2020:(2)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. UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable.Carrying value Property/Borrower September 30, 2021 December 31, 2020 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) 2,344 1,867 5.00 % 7/1/22 Bellwether Ridge(1) 3,950 3,858 5.00 % 11/1/26 Forest Pines(1) 2,872 2,869 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) 3,122 2,523 5.00 % 11/1/26 Parc at Opelika(1) 2,098 — 10.00 % 1/13/23 Parc at Windmill Farms(1) 7,830 7,803 5.00 % 11/1/22 Phillips Foundation for Better Living, Inc.(2) — 61 12.00 % 3/31/23 Phillips Foundation for Better Living, Inc.(2) 813 — 12.00 % 3/31/24 Plum Tree(1) 1,353 857 5.00 % 4/26/26 Riverview on the Park Land, LLC 1,045 1,045 9.50 % 6/30/26 RNC Portfolio, Inc. 8,853 8,853 5.00 % 9/1/24 Spartan Land 5,907 5,907 12.00 % 1/16/23 Spyglass of Ennis(1) 5,363 5,360 5.00 % 11/1/22 Steeple Crest(1) 6,498 6,498 5.00 % 8/1/26 Unified Housing Foundation, Inc. (2)(3) 2,881 2,880 12.00 % 6/30/23 Unified Housing Foundation, Inc. (2)(3) 212 212 12.00 % 6/30/23 Unified Housing Foundation, Inc. (2)(3) 6,831 6,831 12.00 % 6/30/23 Unified Housing Foundation, Inc. (2)(3) 10,401 10,896 12.00 % 6/30/23 Unified Housing Foundation, Inc. (2)(3) 10,096 10,096 12.00 % 3/31/22 Unified Housing Foundation, Inc. (2)(3) 6,990 6,990 12.00 % 3/31/23 Unified Housing Foundation, Inc. (2)(3) 3,615 3,615 12.00 % 5/31/23 Unified Housing Foundation, Inc. (2)(3) 17,172 19,139 12.00 % 12/31/32 Unified Housing Foundation, Inc. (2)(3) 6,521 — 12.00 % 3/31/24 Unified Housing Foundation, Inc.(2)(3) 1,549 — 12.00 % 4/30/24 Unified Housing Foundation, Inc.(2)(3) 180 — 12.00 % 6/30/24 $ 133,892 $ 123,556 9.Investment in Unconsolidated Joint VenturesThe following is a summaryfinancialunderlying properties and are cross collateralized to the extent that any surplus cash available from any of the properties underlying the notes.resultsclaims were declined, and the position of operationsMacquarie 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 nine months ended September 30, 2021 (See Note 7 – Real Estate Activity).unconsolidated joint ventures: September 30, 2020 December 31, 2019 VAA ARL Total VAA ARL Total Assets Property, net $ 1,224,905 $ 31,719 $ 1,256,624 $ 1,242,957 $ 35,213 $ 1,278,170 Other assets 56,660 69,165 125,825 62,222 67,441 129,663 Total Assets $ 1,281,565 $ 100,884 $ 1,382,449 $ 1,305,179 $ 102,654 $ 1,407,833 Liabilities and partners' capital Mortgage and other notes payable $ 832,819 $ 6,702 $ 839,521 $ 832,779 $ 8,327 $ 841,106 Other liabilities 270,534 23,599 294,133 271,290 26,947 298,237 Company's capital 89,106 635 89,741 100,555 606 101,161 Outside partner's capital 89,106 69,948 159,054 100,555 66,774 167,329 Total liabilties and partners' capital $ 1,281,565 $ 100,884 $ 1,382,449 $ 1,305,179 $ 102,654 $ 1,407,833 Investments in unconsolidated joint ventures Company's capital $ 89,106 $ 635 $ 89,741 $ 100,555 $ 606 $ 101,161 Basis adjustments (40,601 ) 22,031 (18,570 ) (41,407 ) 22,026 (19,381 ) Investment in unconsolidated joint ventures $ 48,505 $ 22,666 $ 71,171 $ 59,148 $ 22,632 $ 81,780 For the Three Months Ended September 30, 2020 2019 VAA ARL Total VAA ARL Total Revenue Rents $ 29,998 $ — $ 29,998 $ 27,347 $ 60 $ 27,407 Other 1,593 3,000 4,593 2,310 114 2,424 Interest 1 1,075 1,076 56 1,622 1,678 Total revenue 31,592 4,075 35,667 29,713 1,796 31,509 Expenses Operating 16,172 (470 ) 15,702 14,138 860 14,998 Depreciation and amortization 7,832 — 7,832 16,036 — 16,036 Interest 13,839 1,331 15,170 15,424 2,383 17,807 Other expenses (income) (556 ) — (556 ) 699 — 699 Total expenses 37,287 861 38,148 46,297 3,243 49,540 Net (loss) income $ (5,695 ) $ 3,214 $ (2,481 ) $ (16,584 ) $ (1,447 ) $ (18,031 ) Company's equity in net (loss) income $ 336 $ 29 $ 365 $ (165 ) $ (13 ) $ (178 ) For the Nine Months Ended September 30, 2020 2019 VAA ARL Total VAA ARL Total Revenue Rents $ 86,841 $ — $ 86,841 $ 79,435 $ 60 $ 79,495 Other 4,034 5,269 9,303 6,550 4,262 10,812 Interest 38 3,358 3,396 139 4,845 4,984 Total revenue 90,913 8,627 99,540 86,124 9,167 95,291 Expenses Operating 47,463 453 47,916 42,345 2,339 44,684 Depreciation and amortization 23,253 — 23,253 46,792 — 46,792 Interest 43,107 4,296 47,403 45,294 6,154 51,448 Other expenses (income) (1,453 ) — (1,453 ) 2,058 — 2,058 Total expenses 112,370 4,749 117,119 136,489 8,493 144,982 Net (loss) income $ (21,457 ) $ 3,878 $ (17,579 ) $ (50,365 ) $ 674 $ (49,691 ) Company's equity in net (loss) income $ (775 ) $ 35 $ (740 ) $ (1,480 ) $ 6 $ (1,474 ) 10.Mortgages and Notes PayableSeptember 30, 2021 December 31, 2020 Condensed balance sheet of joint venture Assets Real estate $ 1,216,196 $ 1,217,725 Other assets 60,873 61,472 Total assets $ 1,277,069 $ 1,279,197 Liabilities and Partners' Capital Mortgage notes payable $ 856,318 $ 830,721 Mezzanine notes payable 242,942 239,878 Other liabilities 29,008 35,632 Our share of partners' capital 73,110 84,983 Outside partner's capital 75,691 87,983 Total liabilities and partners' capital $ 1,277,069 $ 1,279,197 Investment in unconsolidated joint venture Our share of partners' capital $ 73,110 $ 84,983 Our share of Mezzanine note payable 121,471 119,939 Basis adjustment (1) (144,698) (153,136) Total investment in unconsolidated joint ventures $ 49,883 $ 51,786 Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenue Rental revenue $ 33,563 $ 29,999 $ 96,670 $ 86,841 Other revenue 2,009 1,592 5,733 4,034 Total revenue 35,572 31,591 102,403 90,875 Expenses Operating expenses 18,311 15,615 51,390 46,011 Depreciation and amortization 7,792 7,414 23,273 22,834 Other income — — (2,356) — Interest 13,777 14,258 41,578 43,488 Total expenses 39,880 37,287 113,885 112,333 Net loss $ (4,308) $ (5,696) $ (11,482) $ (21,458) Our equity in the income (loss) in unconsolidated joint ventures $ 3,627 $ 365 $ 11,535 $ (740) 20202021 and December 31, 2019: Carrying value Property / Entity September 30, 2020 December 31, 2019 Effective
Interest Rate Maturity Date 600 Las Colinas Building $ 35,773 $ 36,302 5.30 % 11/1/2023 770 South Post Oak Building 11,924 12,077 4.40 % 6/1/2025 Bridgeview Plaza Shopping Center(1) — 3,824 7.75 % 11/1/2020 Chelsea Apartments 8,627 8,749 3.40 % 12/1/2050 EQK Portage-Kent Ohio Land(2) 3,350 — 10.00 % 11/13/2024 Estate of Robert Shaw(3) 13,065 13,032 9.50 % 7/5/2020 Farnham Apartments(4) — 9,144 3.39 % 12/1/2050 Forest Pines Phase II Apartments(5) 7,057 — 3.75 % 5/5/2024 Forest Pines Phase II(5) — 1,390 3.75 % 5/5/2024 Landing Apartments 15,286 15,467 3.50 % 9/1/2053 LD Athens Lindsay Ln Land 1,155 1,155 5.90 % 2/28/2021 Legacy at Pleasant Grove Apartments 13,727 13,944 3.60 % 4/1/2048 McKinney 36 Land 856 944 8.00 % 6/30/2022 Overlook at Allensville Phase II Apartments 15,666 15,798 3.80 % 5/1/2059 Parc at Denham Spring Phase II Apartments 16,168 14,785 4.10 % 2/1/2060 Stanford Center Building 39,191 39,255 6.00 % 12/26/2021 Sugar Mill Phase III Apartments — 5,908 4.50 % 2/1/2060 Sugar Mill Phase III Apartments 8,906 — 4.50 % 2/1/2060 Toulon Apartments 18,283 18,465 3.20 % 12/1/2051 Villager Apartments(6) — 556 2.50 % 3/1/2043 Villas at Bon Secour Apartments 10,860 11,026 4.00 % 1/1/2022 Vista Ridge Apartments 10,015 10,122 4.00 % 8/1/2053 Windmill Farms Land 12,391 13,830 6.00 % 2/28/2021 Total $ 242,300 $ 245,773 (1)On September 14, 2020, we paid off the loan in connection with the sale of the underlining property (See Note 7 – Real Estate Activity).(2)On March 5, 2020, we acquired 49.2 acres of land in Kent, Ohio in exchange for the note payable.(3)We are currently negotiating an extension of the loan with the lender.(4)On July 16, 2020, the loan was assumed by a third party in connection with the sale of the underlying property (See Note 7 – Real Estate Activity).(5)The loan bears interest at prime rate plus 0.5%.(6)On May 1, 2020, the loan was assumed by a third party in connection to sale of the underlying property (See Note 7 – Real Estate Activity).11.Bonds PayableCarrying value Property / Entity September 30, 2021 December 31, 2020 Effective
Interest RateMaturity Date 600 Las Colinas(1) $ — $ 35,589 5.30 % 11/1/2023 770 South Post Oak 11,709 11,871 4.40 % 6/1/2025 Parc at Athens(2) 1,155 1,155 5.90 % 8/28/2022 Chelsea 8,077 8,194 3.40 % 12/1/2050 EQK Portage - Land 3,350 3,350 10.00 % 11/13/2024 HSW Partners — 14,690 9.50 % 6/17/2021 Forest Grove(3) 7,295 7,333 3.75 % 5/5/2024 Landing Bayou 14,467 14,643 3.50 % 9/1/2053 Legacy at Pleasant Grove 13,428 13,653 3.60 % 4/1/2048 McKinney 36 Land 705 820 8.00 % 6/30/2022 Overlook at Allensville Phase II(4) — 15,621 3.80 % 5/1/2059 Parc at Denham Springs Phase II 16,004 16,128 4.10 % 2/1/2060 RCM HC Enterprises(5) 1,986 — 9.50 % 12/17/2026 Stanford Center 39,044 39,093 6.00 % 2/26/2022 Sugar Mill Phase III 9,237 9,298 4.50 % 2/1/2060 Toulon 13,786 13,975 3.20 % 12/1/2051 Villas at Bon Secour(6) 19,495 10,280 4.00 % 8/25/2028 Vista Ridge 9,868 9,979 4.00 % 8/1/2053 Windmill Farms(7) 8,756 10,397 6.00 % 2/28/2023 $ 178,362 $ 236,069 our subsidiary, Southern Properties Capital LTD,SPC, which are listed and tradetraded on the Tel Aviv Stock Exchange. Payments of principal and interestTASE. The Bonds are denominated in New Israeli Shekels. Shekels ("NIS") and provide for semiannual principal and interest payments through maturity.principal and interest payments,Bonds, we incurred a (loss) gain on foreign currency transactions of ($1,470)$(1,639) and ($5,153)$(1,470) for the three months ended September 30, 20202021 and 2019,2020, respectively, and $744$1,185 and ($13,296)$774 for the nine months ended September 30, 2021 and 2020, respectively.2019,December 31, 2020 is as follows:Bond Issuance September 30, 2021 December 31, 2020 Interest Rate Maturity Series A Bonds(1) $ 63,147 $ 95,133 7.30 % 7/31/23 Series B Bonds(1) 52,029 65,318 6.80 % 7/31/25 Series C Bonds(2) 75,281 85,537 4.65 % 1/31/23 190,457 245,988 Less unamortized deferred issuance costs (6,259) (8,100) $ 184,198 $ 237,888 The following table summarizesbonds payable asperformance of the collateral secured by the notes receivable. Interest income on these notes was $4,337 and $3,752 for the three months ended September 30, 20202021 and December 31, 2019: September 30, December 31, 2020 2019 Maturity Date Bonds (Series A) $ 69,747 $ 92,653 7/31/2023 Bonds (Series B) 61,029 60,764 7/31/2025 Bonds (Series C) 79,919 79,572 1/31/2023 Total outstanding bonds 210,695 232,989 Less: unamortized deferred bond issuance costs (7,503 ) (9,724 ) Total outstanding bonds, net $ 203,192 $ 223,265
2020, respectively, and $11,961 and $11,255 for the nine months ended September 30, 2021 and 2020, respectively.12.Deferred Incomewhere we have had continuing involvement in the form of management or financial assistance associated with the sale of the properties. Because of the continuing involvement associated with the sale,at a gain, and therefore the sales criteria for the full accrual method iswas not met, and as such, we deferred some or all of the gain recognition and accounted for the salesales by applying the finance, deposit, installment or cost recovery methods, as appropriate, until the sales criteria is met.appropriate. The gain on these transactions have beenis deferred until the properties are sold to a non-related third party.September 30, 2020 and December 31, 2019,the sale, we had deferredrecognized a gain of $9,315 and $9,468, respectively.13.Related Party TransactionsRental income includes $262 and $212 for the three months ended September 30, 2020 and 2019, respectively, and $673 and $527 for$8,730 during the nine months ended September 30, 2020 and 2019, respectively, for office space leased to Pillar, Regis and VAA.Property operating expense includes $254 and $237 for the three months ended2021 that had previously been deferred.2019, respectively,$9,315, respectively.$750compensating 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%.Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Current $ 156 $ 50 $ (1,037) $ 346 Deferred — — — — $ 156 $ 50 $ (1,037) $ 346 $741 for the nine months ended September 30, 2020 and 2019, respectively, for management fees on commercial properties payable to Regis.General and administrative expense includes $1,017 and $935 for the three months ended September 30, 2020 and 2019, respectively, and $2,783 and $3,355 for the nine months ended September 30, 2020 and 2019, respectively, for employee compensation and other reimbursable costs payable to Pillar.Advisor fees are were $2,139 and $2,200 for the three months ended September 30, 2020 and 2019, respectively, and $6,483 and $6,196 for the nine months ended September 30, 2020 and 2019, respectively.Interest income on notes receivable issued by UHF and Pillar (See Note 8 – Notes Receivable) was $3,752 and $4,618 for the three months ended September 30, 2020 and 2019, respectively, and $11,255 and $13,483 for the nine months ended September 30, 2020 and 2019, respectively.Interest expense on these notes payable to Pillar was $380 and $514 for the three months ended September 30, 2020 and 2019, respectively, and $1,193 and $1,517 for the nine months ended September 30, 2020 and 2019, respectively.TRANSCONTINENTAL REALTY INVESTORS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(dollars in thousands, except per share and square foot amounts)(Unaudited)Related party receivables represents amounts outstanding from advances to related parties in addition to unreimbursed fees, expenses and costs as provided above. The net amounts outstanding consist of the following: As of September 30, December 31, 2020 2019 ARL $ 146,215 $ 142,117 Pillar (6,165 ) (576 ) Total $ 140,050 $ 141,541 14.Commitments and Contingenciesbelievesbelieve 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.arewere the primary guarantor, on a $24,300 mezzanine loan between UHF and a lender. In addition, ARL is limited recourse guarantorsThe guarantee was removed on January 29, 2021, concurrent with the repayment of the loan. As of September 30, 2020 UHF was in compliance with the covenants to the loan agreement.We were the plaintiff in a lawsuit against Dynex Commercial, Inc. (“Dynex”) for failure to fulfill certain loan commitments. In January 2015, the court awarded us with a judgment of $24,800. We are pursuing all legal means to collect this award. However, due to the uncertainty of the collectability of the award, the receivable has been fully reserved.we were charged in a lawsuit was brought by Paul Berger (“Berger”) against us and others that alleges that we completed improper sales and/or transfers of property with Income Opportunity Realty Investors, Inc. (“IOR”), our consolidated subsidiary.IOR. Berger requests that we pay off various related party loans to IOR and that IOR then distribute the funds to its shareholders. We intend to vigorously defend against the allegations.15.Subsequent Events2020,2021, the date of the most recent balance sheet, have been evaluated for possible adjustment to the consolidated financial statements or disclosure is November 12, 2020,10, 2021, which is the date on which the consolidated financial statements were available to be issued.20192020 (the “Annual Report”).●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.”18threenine months ended September 30, 20202021 from the COVID-19 pandemic, weour commercial properties have experienced a decline in occupancy. We believe this decline to be temporary and do not expect a significant decrease in rental revenue.is having a significantcontinues 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.The following provides an overview of the impact of COVID-19 on our financial condition, results of operations and cash flows.●We have collected approximately 96% of our third quarter rents, comprised of approximately 95% from multi-family tenants and 97% from office tenants.●We have not granted any abatements or granted any significant deferments of contractual rents.●Occupancy remains stable at 91% at September 30, 2020 and 2019.●We continue to obtain positive leasing spreads for new leases and renewals at properties.●Our ground up development work continues unabated and thus far we have not experienced any work stoppages.In addition, we believe that our financing activities will not be significantly impacted by COVID-19, as most of our mortgage notes payable are secured by HUD guarantees which have long-term maturities.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.Other sections of this report may also include suggested factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time-to-time and it is not possible for management to predict all such matters; nor can we assess the impact of all such matters on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as prediction of actual results. Investors should also refer to our quarterly reports on Form 10-Q for future periods and to other materials we may furnish to the public from time to time through Forms 8-K or otherwise as we file them with the SEC.Management and Summarydevelopment.development throughout the Southern United States. Our portfolio of income-producing properties includes multifamilyresidential apartment communities ("multifamily properties"), office buildings and other retail properties ("commercial properties.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.acquire land primarilyhave no employees. Employees of Pillar render services to us in urban in-fill locations or high-growth suburban marketsaccordance 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.are an active buyerdevelopment activities:seller of real estate.19As of September 30, 2020, we owned (i) six commercial properties consisting of five office buildings and one retail property comprising on aggregate of 1.6 million square feet, (ii) 1,639 units in ten multifamily apartment communities, excluding apartment communities being developed, (iii) approximately 1,980 acres of developed and undeveloped land, and (iv) fifty-one multifamily apartment communities totaling 10,137 units owned by our 50% owned investee VAA. We currently own income-producing properties and land in eight states.During the nine months ended September 30, 2020, we sold (i) a total of 62.0 acres of land from our holdings in Windmill Farms for $20.2 million, in aggregate, resulting in gains on sale of $15.2 million; (ii) Bridgeview Plaza, a retail property in La Crosse, Wisconsin for $5.3 million, resulting in a gain on sale of $4.8 million; and (iii) Farnham Park Apartments, a 144 unit multifamily apartment community in Port Arthur, Texas for $13.3 million, resulting in a gain on sale of $2.7 million.During the nine months ended September 30,•On March 5, 2020, we acquired (i)a 49.2 acres of land parcel in Kent, Ohio for $5.4 million that was funded by a $2.0 million cash payment and a $3.4 million note payable that baresbears interest at 10% and matures on November 13, 2024; (ii) 0.7 acres2024.commercial land$1.0 million.Lewisville,Port Arthur, Texas for $0.1$13.3 million, resulting in a gain on sale of $2.7 million.(iii) 1.3for general corporate purposes.McKinney, TexasWindmill Farms for $0.5$19.0 million, in aggregate, resulting in gains on sale of $9.2 million.financeused the proceeds to fund our acquisitions primarily through operating cash flow, proceedsbond payments that were due on January 30, 2021.Property Location No. of Units Costs to Date (1) Total Projected Costs (1) Parc at Athens Athens, AL 232 $ 2,465 $ 34,800 Heritage McKinney McKinney, TX 170 3,251 24,650 402 $ 5,716 $ 59,450 income-producing propertiesconstruction hard costs, construction soft costs and debt financing primarily in the form of property-specific first-lien mortgage loans from commercial banks and institutional lenders. We finance our development projects principally with variable interest rate construction loans that are converted to long-term, fixed rate amortizing mortgages when the development project is completed and occupancy has been stabilized. We will, from time to time, also enter into partnerships with various investors to acquire income-producing properties or land and to sell interests in certain of our wholly-owned properties. When we sell assets, we may carry a portion of the sales price generally in the form of a short-term, interest bearing seller-financed note receivable. We generate operating revenues primarily by leasing apartment units to residents and leasing office, retail and industrial space to commercial tenants. We have no employees.We have historically engaged in and may continue to engage in certain business transactions with related parties, including, but not limited to, asset acquisition and dispositions. 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.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 the Companies employees are Pillar employees.Our commercial properties are managed by Regis Realty Prime, LLC (“Regis”). Regis provides leasing, construction management and brokerage services. Our multifamily apartment communities are managed by outside management companies.statements.statements in the Annual Report. However, the following policies are deemed to be critical.20Level 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.discussiontable summarizes our results of operations for the three and analysis is based on our Consolidated Statementsnine months ended September 30, 2021 and 2020:Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 Variance 2021 2020 Variance Multifamily Segment Revenue $ 3,703 $ 3,685 $ 18 $ 11,068 $ 10,943 $ 125 Operating expenses (2,072) (2,413) 341 (6,306) (6,466) 160 1,631 1,272 359 4,762 4,477 285 Commercial Segment Revenue 5,925 7,769 (1,844) 19,115 23,518 (4,403) Operating expenses (3,538) (3,975) 437 (10,194) (12,041) 1,847 2,387 3,794 (1,407) 8,921 11,477 (2,556) Segment operating income 4,018 5,066 (1,048) 13,683 15,954 (2,271) Other non-segment items of income (expense) Depreciation and amortization (2,935) (3,526) 591 (9,473) (10,338) 865 General, administrative and advisory (6,047) (3,785) (2,262) (18,693) (13,546) (5,147) Interest, net (755) (1,943) 1,188 (4,578) (8,897) 4,319 Loss on extinguishment of debt (1,451) — (1,451) (1,451) — (1,451) (Loss) gain on foreign currency transactions (1,639) (1,470) (169) 1,185 774 411 (Loss) gain sale or write down of assets 31,312 12,328 18,984 22,970 21,802 1,168 Income (loss) from joint ventures 3,627 365 3,262 11,535 (740) 12,275 Other income 250 658 (408) 3,511 3,539 (28) Net (loss) income $ 26,380 $ 7,693 $ 18,687 $ 18,689 $ 8,548 $ 10,141 Operations forthe three months ended September 30, 2021 to the three months ended September 30, 2020 and 2019, as included:Part I, Item 1. “Financial Statements” of this report. At September 30, 2020 and 2019, we owned or had interests in a portfolio of ten and nine income-producing properties, respectively.Comparison ofnet income during the three months ended September 30, 20202021 is primarily attributed to the same period ended 2019:We reported a net income attributablefollowing:common shares of $7.7the Disposition Properties.or $0.88 per diluted share for 2020, comparedincrease in general, administrative and advisory expenses is primarily due to a net loss applicablean increase in advisory fees related to common sharesthe sale of $7.8600 Las Colinas, the refinance of Villas at Bon Secour (See "Acquisitions and Dispositions" and "Financing Activities" in Management's Overview), and legal costs associated with the Clapper litigation and the VAA Earn Out arbitration.$0.89 per diluted share for 2019.Rental revenues were $11.5 million for 2020, comparedremeasurement of assets is primarily due to $11.4 for 2019. For 2020, we generated revenuesthe gain on sale of $7.8 million and $3.7 million from oursegments, respectively.Property operating expenses increased by $1.0properties in 2020 (See "to $6.4 for 2020 as compared to $5.4 million for 2019.Depreciation and amortization increased by $0.1 million to $3.5 million for 2020 as compared to $3.4 million for 2019.21General and administrative expense was $1.6 million for 2020, compared to $1.9 million for 2019. The decrease of $0.3 millionincrease in general and administrative expenses was primarilyincome from joint ventures is due to decreasethe increase in professional and other expenses.Interest income was $4.3 million for 2020, compared to $5.2 million for 2019. The decreaseoccupancy of $0.9 million was due to decrease in interest income of $0.9 million on notes receivable from related parties.Mortgage and loan interest expense was $6.3 million for 2020 as compared to $8.0 million for 2019.Loss on foreign currency transactions was $1.5 million for 2020 as compared to a loss of $5.2 million for 2019. The decrease in loss was the resultvarious lease-up properties at VAA.strengthening of the US Dollar against the Israel Shekels duenine months ended September 30, 2021 to economic uncertainties most likely as a result of the global pandemic outbreak in 2020.Income (loss) from unconsolidated joint ventures was $0.4 million for 2020 as compared ($0.2) million for 2019.Gain sale or write-down of assets was $12.3 million for 2020, compared to $5.1 million for 2019. In 2020, we sold (i) approximately 17.1 acres of land for $8.0 million, resulting in a gain of $5.7 million, (ii) Bridgeview Plaza for a $5.3 million, resulting in a gain of $4.8 million, (iii) Farnham Park Apartments for $13.3 million, resulting in a gain of $2.7 million. For 2019, we sold 16.2 acres of land for $7.0 million, resulting in a gain of $5.1 million.Comparison of the nine months ended September 30, 2020 to the same period ended 2019:For 2020, we reported aattributable to common shares of $8.1 million or $0.93 per diluted share, compared to a net loss applicable to common shares of $19.7 million or $2.26 per diluted share for 2019.Rental revenues were $34.5 million for 2020, compared to $34.4 million for 2019. For 2020, rental revenues consisted of $23.5 million and $11.0 million from our commercial and multifamily segments, respectively.Property operating expenses decreased by $0.2 million to $18.5 million for 2020 as compared to $18.7 million for 2019. The decrease in property operating expenses was primarily attributable to reduction in property replacements cost.Depreciation and amortization increased by $0.4 million to $10.3 million for 2020 as compared to $9.9 million for 2019. The increase was primarily due to increase of depreciation expense in multifamily segment by $0.4 million.General and administrative expense was $7.0 million for 2020, compared to $6.4 million for 2019. The increase of $0.6 million in general and administrative expenses was primarily due to increase in franchise taxes and legal services, partially offset by decrease in other expenses.Interest income was $13.1 million for 2020, compared to $14.7 million for 2019. The decrease of $1.6 million was due to decrease in interest of $1.6 on notes receivable from other related parties.Mortgage and loan interest expense was $22.0 million for 2020 as compared to $23.6 million for 2019.Gain (loss) on foreign currency transactions was $0.8 million for 2020 as compared to ($13.3) million for 2019. The change in gain (loss) on foreign currency transactionsduring the nine months ended September 30, 2021 is primarily attributed to the strengthening offollowing:U.S. Dollar against the Israel Shekelscommercial segment is due to perceived liquidity issuesthe Disposition Properties.Israel asgeneral, administrative and advisory expenses is primarily due to a resultan increase in advisory fees related to the sale of 600 Las Colinas (See "Acquisitions and Dispositions" in Management's Overview),global pandemic outbreakrefinance of Villas at Bon Secour (See "Financing Activities" in 2020.LossManagement's Overview), and legal costs associated with the VAA Earn Out arbitration. unconsolidated joint ventures was a netis due to the increase in occupancy of $0.7 million for 2020 as compared to a loss of $1.5 million for 2019.22Gain on sale or write-down of assets was $21.8 million for 2020, compared to $9.4 million for 2019. In 2020, we sold (i) approximately 62.0 acres of land for $20.2 million, resulting in a gain of $15.2 million, (ii) Bridgeview Plaza for $5.3 million, resulting in a gain of $4.8 million, and (iii) Farnham Park Apartments for $13.3 million, resulting in a gain of $2.7 million. In 2019, we sold 80.1 acres of land for $23.3 million, resulting in a gain of $9.4 million.Our principal liquidity needs are:●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.be:●property operations;●proceeds from land and income-producing property sales;●collection of mortgage notes receivable;●collection of receivables from related party companies;●refinancing of existing debt; and●additional borrowing, including mortgage notes, mezzanine financing and lines of credit.We draw on multiple financing sourcesbe, 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 long-termnormal recurring expenses; meet debt service and principal repayment obligations including balloon payments on maturing debt; fund capital needs. expenditures, including tenant improvements and leasing costs; fund development costs not covered under construction loans; and fund possible property acquisitions.generally fund our development projects with construction loans. Management anticipatesanticipate that our available cash and cash equivalents as of September 30, 2021, along with cash that will be generated in the remainder of 2021 from property operations may notnotes and interest receivables, will be sufficient to meet all of our cash requirements. Management intendsWe intend to selectively sell land and income-producing assets, refinance or extend real estate debt and seek additional borrowingborrowings secured by real estate to meet our liquidity requirements. Although the pasthistory cannot predict the future, historically, management haswe have been successful at refinancing and extending a portion of our current maturity obligations and selling assets as necessary to meet current obligations.Cash Flow Summaryas presented in Part I, Item 1. “Financial Statements”our consolidated financial statements, and is not meant to be an all-inclusive discussion of the changes in our cash flow: For the Nine Months Ended September 30, 2020 2019 Incr /(Decr) Net cash (used in) operating activities $ (15,163 ) $ (9,288 ) $ (5,875 ) Net cash provided by (used in) investing activities $ 12,355 $ (16,782 ) $ 29,137 Net cash (used in) provided by financing activities $ (19,456 ) $ 19,457 $ (38,913 ) Our primary use of cashflows for operations is daily operating costs, general and administrative expenses, advisory fees, and land holding costs. Our primary source ofthe periods presented below (dollars in thousands):Nine Months Ended September 30, 2021 2020 Incr /(Decr) Net cash used in operating activities $ (7,198) $ (15,217) $ 8,019 Net cash provided by investing activities $ 106,039 $ 12,409 $ 93,630 Net cash used in financing activities $ (101,870) $ (19,456) $ (82,414) from rental income on properties. In addition, we have aprimarily due to the $7.9 million decrease in related party accountreceivables.which excess cash is transferred to or from.Our primary cash outlays forprovided by investing activities are for constructionis primarily due to a $72.0 million increase in proceeds from sale of assets and development, acquisitiona decrease of land$11.8 million in originations and income-producing properties, and capital improvements to existing properties. During the nine months ended September 30, 2020, we advanced $15.7 millionadvances on various notes receivable, purchased real estate for development for $2.7 million, and invested approximately $12.5 million for the development and renovation of real estate. For the nine months ended September 30, 2019, we advanced $7.3 million on various notes receivable, purchased real estate for development for $3.4 million, and invested approximately $31.3 million for the development and renovation of real estate.Our primary sources ofreceivable. The increase in cash from investing activities are from the proceeds on sale of assets is primarily due the sale of landincome-producing properties. During the nine months ended September 30, 2020, we received sales proceeds of $31.8 million from the sale of real estate and recorded a gain of $21.8 million. In addition, collected $3.5 million on note receivables and received $8.0 million on distributions from one of our unconsolidated joint ventures. For the nine months ended September 30, 2019, we received aggregate sales proceeds of $23.0 million from the sale of real estate and recorded a gain of $9.4 million. In addition, collected $0.3 million on note receivables and received $1.9 million on distributions from one of our unconsolidated joint ventures.Our primary sources of cash from financing activities are from proceeds on notes payables either through refinancing our existing loans or by obtaining new financing. Our primary cash outlays are for recurring debt payments and payments on maturing notes payable.During the nine months ended September 30, 2020, the decreaseDispositionsflow fromused in financing activities is primarily due to the $87.6 million increase in 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 600 Las Colinas in 2021, the refinancing of Villas at Bon Secour in 2021 (See "Financing Activities" in Management's Overview), and a payment on bond principal of $21.7$31.9 million andincrease in payments on the bonds payable.outstanding notesoperating 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 $7.9 million, partially offsetReal 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 proceedsa 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.borrowingsforeign currency transactions provide useful supplemental information regarding our performance as they show a more meaningful and consistent comparison of approximately $10.2 million. Duringour operating performance and allows investors to more easily compare our results.2019, we received $78.1 million from the sale of nonconvertible Series C Bonds by Southern2021 and from borrowings of approximately $10.2 million, which were partially offset by payments on bond principal of $21.7 million2020 (dollars and mortgage debt of $45.6 million.Environmental MattersUnder various federal, state and local environmental laws, ordinances and regulations, we may be potentially liable for removal or remediation costs, as well as certain other potential costs relating to hazardous or toxic substances (including governmental fines and injuries to persons and property) where property-level managers have arranged for the removal, disposal or treatment of hazardous or toxic substances. In addition, certain environmental laws impose liability for release of asbestos-containing materials into the air, and third parties may seek recovery for personal injury associated with such materials.Management is not aware of any environmental liability relating to the above matters that would have a material adverse effect on our business, assets or results of operations.InflationThe effects of inflation on our operations are not quantifiable. Revenues from property operations tend to fluctuate proportionately with inflationary increases, market conditions and decreasesshares in real estate costs. Fluctuations in the rate of inflation also affect sales values of properties and the ultimate gain to be realized from property sales. To the extent that inflation affects interest rates, earnings from short-term investments, the cost of new financings and the cost of variable interest rate debt will be affected.Tax MattersWe are a member of the May Realty Holdings, Inc., (“MRHI”) consolidated group for federal income tax reporting. There is a tax sharing and compensating agreement between American Realty Investors, Inc. (“ARL”), Income Opportunities Realty Investors, Inc. (“IOR”), and the Company.Financial statement income varies from taxable income principally due to the accounting for income and losses of investees, gains and losses from asset sales, depreciation on owned properties, amortization of discounts on notes receivable and payable and the difference in the allowance for estimated losses.For the quarter ended September 30, 2020, we had income before income taxes of $8.9 million driven mostly by the gains from sale of assets of $21.8 million.24Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income attributable to the Company $ 26,246 $ 7,693 $ 18,145 $ 8,148 Depreciation and amortization 2,935 3,526 9,473 10,338 Gain on sale or write down of assets (31,312) (12,328) (22,970) (21,802) Gain on sale of land 4,042 5,774 15,153 15,248 Depreciation and amortization on unconsolidated joint ventures at pro rata share 2,984 3,417 7,016 6,913 FFO-Basic and Diluted 4,895 8,082 26,817 18,845 Loss on extinguishment of debt 1,451 — 1,451 — Loss (gain) on foreign currency transaction 1,639 1,470 (1,185) (774) FFO-adjusted $ 7,985 $ 9,552 $ 27,083 $ 18,071 ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKSWe may be exposed to interest rate changes primarily as a resultITEM 4.CONTROLS AND PROCEDURESOfficer and Principal Financial Officer), as of the end of the period covered by this report, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.ITEM 1.LEGAL PROCEEDINGSliquidityliquidity.ITEM 1A.RISK FACTORS20192020 10-K. For a discussion on these risk factors, please see “Item 1A. Risk Factors” contained in the 20192020 10-K.threenine months ended September 30, 20202021 from the COVID-19 pandemic, weour 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. The pandemic is having a significant 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.25The following provides an overview of the impact of COVID-19 on our financial condition, results of operations and cash flows.●We have collected approximately 96% of our third quarter rents, comprised of approximately 95% from multi-family tenants and 97% from office tenants.●We have not granted any abatements or granted any significant deferments of contractual rents.●Occupancy remains stable at 91% at September 30, 2020 and 2019.●We continue to obtain positive leasing spreads for new leases and renewals at properties.●Our ground up development work continues unabated and thus far we have not experienced any work stoppages.In addition, we believe that our financing activities will not be significantly impacted by COVID-19, as most of our mortgage notes payable are secured by HUD guarantees which have long-term maturities.ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSIn December 1989, the Board of Directors approvedshare repurchase program authorizingthat allows for the repurchase of a total of 687,000 shares of our common stock. In September 2000, the Board increased this authorization to 1,387,000 shares. On August 10, 2010, the Board of Directors approved an increase in the share repurchase program for up to an additional 250,000 shares of common stock which results in a total authorization under the repurchase program for 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 first nine months ended September 30, 2020.2021. As of September 30, 2020,2021, 1,230,535 shares have been purchased and 406,465 shares may be purchased under the program.ITEM 3.DEFAULTS UPON SENIOR SECURITIESITEM 4.MINE SAFETY DISCLOSURESITEM 5.None26ITEM 6.EXHIBITSExhibitNumberDescriptionExhibit
NumberDescription 3.03.0 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). 3.83.8 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). Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended. 27Certification pursuant to 18 U.S.C. 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS101.INS XBRL Instance Document 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 28TRANSCONTINENTAL REALTY INVESTORS, INC. Date: November 12, 202010, 2021By: /s/ Erik L. Johnson Erik L. Johnson
(Principal Executive and Financial Officer)29