8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act

Date of Report (Date of earliest event reported): April 2, 2007

TRANSCONTINENTAL REALTY INVESTORS, INC.

(Exact Name of Registrant as Specified in its Charter)

Nevada	001-09240	94-6565852
(State or other	(Commission	(I.R.S. Employer
jurisdiction of incorporation)	File No.)	Identification No.)

1800 Valley View Lane, Suite 300
Dallas, Texas	75234
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code 469-522-4200

     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 2 — Financial Information

Item 2.02. Results of Operations and Financial Condition

     On April 2, 2007, Transcontinental Realty Investors, Inc. (“TCI” or the “Company”) announced its operational results for the fiscal year ended December 31, 2006. A copy of the announcement is attached as Exhibit “99.1.”

     The information furnished pursuant to Item 2.02 in this Form 8-K, including Exhibit “99.1” attached hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, unless we specifically incorporate it by reference in a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934. We undertake no duty or obligation to publicly-update or revise the information furnished pursuant to Item 2.02 of this Current Report on Form 8-K.

Section 9 — Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits

     (c) Exhibits.

     The following exhibit is furnished with this Report:

Exhibit
Designation	Description of Exhibit
99.1*	Press Release dated April 2, 2007.

*Furnished herewith.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly-caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly-authorized.

Dated: April 4, 2007	TRANSCONTINENTAL REALTY INVESTORS, INC.
	By:	/s/ Steven A. Abney
		Steven A. Abney, Executive Vice
		President and Chief Financial Officer

EX-99.1

EXHIBIT 99.1

NEWS RELEASE
FOR IMMEDIATE RELEASE	Contact:
	Transcontinental Realty Investors, Inc.
	Investor Relations
	(800) 400-6407
	investor.relations@primeasset.com

Transcontinental Realty Investors, Inc. Reports Fourth Quarter 2006 Results

DALLAS (April 2, 2007) — Transcontinental Realty Investors. Inc. (NYSE: TCI), a Dallas-based real estate investment company, today reported net income applicable to common shares of $115 million, or $1.42 per diluted share for the fourth quarter ended December 31, 2006, compared to net income of $12.0 million, or $1.52 per diluted share for the fourth quarter ended December 31, 2005.

TCI also reported net income applicable to common shares of $3.3 million or $0.40 per diluted share for the year ended December 31, 2006 compared to net income of $8.9 million or $1.12 per diluted share for the year ended December 31, 2005.

Results for the fourth quarter ended December 31, 2006:

• Increases in rents and other property revenues of $6.1 million, from $29.5 million in 2005 to $35.6 million in 2006. The increase was primarily attributable to the continued leaseup of developed residential apartment communities, 2006 acquisitions of existing apartment communities and increased hotel revenues driven by higher room rates and average occupancies.

• Increases in property operations expenses of $5.8 million, from $16.7 million in 2005 to $22.5 million in 2006. The increase was primarily attributable to the continued leaseup of developed residential apartment communities, 2006 acquisitions of existing apartment communities and increases in hotel and land operating expenses.

• Although net operating income from real estate activities increased $200,000, from $12.8 million in 2005 to $13.0 million in 2006, overall operating income decreased $800,000 from 2005 due to higher depreciation charges in 2006 (due primarily to completed development projects and acquisitions) and higher asset-based advisory fees expense.

• 2006 gain on involuntary conversion of $20.5 million relates to hurricane damage sustained at the Company’s New Orleans office buildings from Hurricane Katrina in 2005. In 2006, the Company received $45.0 million (including business interruption) in insurance proceeds and has spent $7.3 million to repair the New Orleans properties: $7.2 million has been reserved to fund remaining repairs. Two of the three New Orleans properties have reopened; the third building is closed. TCI has reduced the carrying value of the closed property to an amount equal to the value of the underlying land.

• Interest expense increased $2.8 million, from $11.3 million in 2005 to $14.1 million in 2006. The increase was primarily attributable to 2006 land acquisitions and refinancings of existing land loans, certain apartment projects and hotels. Rising interest payments on the Company’s variable-rate debt also contributed to the overall increase.

• Gain on land sales decreased $3.5 million in 2006 compared to 2005. In 2005, the company sold 6.4 acres at an average sales price of $727,000 per acre, generating net cash proceeds of $1.2 million. There were no land sales during the comparable period in 2006.

• Income from discontinued operations declined $12.1 million, from $14.7 million in 2005 to $2.6 million in 2006. In 2005, TCI sold four operating properties, comprised of 463 residential apartment units for an average of $43,000 per unit and approximately 200,000 square feet of commercial and industrial property for an average of $76 per foot. No operating properties were sold in the comparable period of 2006.

Results for the year ended December 31, 2006:

• Increases in rents and other property revenues of $25.0 million, from $103.1 million in 2005 to $128.1 million in 2006. The increase was primarily attributable to the continued leaseup of developed residential apartment communities. 2006 acquisitions of existing apartment communities, increases in rental revenues from commercial properties driven primarily by 2005 acquisitions and increased hotel revenues driven by higher room rates and average occupancies during 2006.

• Increases in property operations expenses of $16.1 million, from $62.9 million in 2005 to $79.0 million in 2006. The increase was primarily attributable to the continued leaseup of developed residential apartment communities, 2006 acquisitions of existing apartment communities, increases in property operations expenses from commercial properties driven primarily by 2005 acquisitions and increases in hotel and land operating expenses.

• Net operating income increased $8.9 million, from $40.2 million in 2005 to $49.1 million in 2006, and overall operating income increased $3.7 million from 2005 due primarily to improved operating performance in the apartment, commercial and hotel segments, which were partially offset by increased depreciation expense as a result of property additions in late 2005 and 2006.

• 2006 gain on involuntary conversion of $20.5 million relates to hurricane damage sustained at the Company’s New Orleans office buildings from Hurricane Katrina in 2005. In 2006, the Company received $45.0 million in insurance proceeds and has spent $7.3 million to repair the New Orleans properties; $7.2 million has been reserved to fund remaining repairs. Two of the three New Orleans properties have reopened; the third building is closed. TCI has reduced the carrying value of the closed property to an amount equal to the value of the underlying land.

• Interest expense increased $12.6 million, from $39.2 million in 2005 to $51.8 million in 2006. The increase was primarily attributable to 2006 land acquisitions and refinancings of existing land loans ($5.8 million), 2005 commercial property acquisitions ($3.6 million) and refinancings of certain apartment projects ($2.9 million) and hotels ($300,000). Rising interest payments on the Company’s variable-rate debt also contributed to the overall increase.

• Gain on land sales increased $3.7 million in 2006 compared to 2005. In 2006, the Company sold 192.6 acres (187.1 acres located in Texas) in seven separate transactions at an average sales price of $196,000 per acre, generating net cash proceeds of $20.4 million and recognized gains of $11.4 million. In 2005, the Company sold 66.7 acres (all located in Texas) in nine separate transactions at an average sales price of $428,000 per acre, generating net cash proceeds of $11.8 million and recognized gains of $7.7 million.

• Income from discontinued operations (net of income taxes) declined $24.2 million, from $25.8 million in 2005 to $1.6 million in 2006. The decrease was due to lower operating losses on sold (and to be sold) properties of $1.6 million, offset by a decline in gains on sales of income-producing properties of $25.8 million. In 2006 TCI sold four apartment projects containing 545 units at an average sales price of $28,000 per unit, generating net cash proceeds of $20.4 million and recognized gains of $5.7 million. In 2005, the Company sold two apartment projects, one hotel and six commercial properties for a total of $78.6 million, generating net cash proceeds of $31.3 million and recognized gains of $31.5 million.

About Transcontinental Realty Investors, Inc.
Transcontinental Realty Investors, Inc., a Dallas-based real estate investment company, invests in real estate through direct equity ownership and partnerships nationwide. For more information, visit the Company’s web site at www.transconrealty-invest.com.

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TRANSCONTINENTAL REALTY INVESTORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months						For the Twelve Months
	Ended December 31,						Ended December 31,
	2006			2005			2006			2005
	(dollars in thousands, except per share)
Rental and other property revenues	$	35,557		$	29,494		$	128,064		$	103,076
Property operating expenses		22,549			16,726			78,965			62,877
Depreciation expense		6,057			5,345			21,641			16,051
Other operating expenses		2,957			2,578			12,632			12,991
Total operating expenses		31,563			24,649			113,238			91,919
Operating income (loss)		3,994			4,845			14,826			11,157
Gain on involuntary conversion		20,479			—			20,479			—
Other income		659			1,010			3,628			4,333
Interest expense		(14,132	)		(11,271	)		(51,830	)		(39,178	)
Other expenses		(2,462	)		(872	)		(2,462	)		(2,361	)
Income (loss) before gain on land sales, minority interest, and equity in earnings of investees		8,538			(6,288	)		(15,359	)		(26,049	)
Gain on land sales		(573	)		2,967			11,421			7,702
Minority interest		(151	)		(8	)		890			968
Equity in income (loss) of investees		1,216			(119	)		393			(112	)
Income (loss) from continuing operations, before tax		9,030			(3,448	)		2,655			(17,491	)
Add: Income tax benefit		35			802			4,608			802
Income (loss) from continuing operations		9,065			(2,646	)		1,953			(16,689	)
Net income (loss) from discontinued operations, net of tax		2,597			14,661			1,553			25,758
Income (loss)		11,662			12,015			3,506			9,069
Preferred dividend requirement		(52	)		(52	)		(210	)		(210	)
Net income (loss) applicable to Common shares	$	11,510		$	11,963		$	3,296		$	8,859
Basic and diluted earnings per share:
Income (loss) from continuing operations	$	1.14		$	(.34	)	$	0.22		$	(2.14	)
Discontinued operations		(.33	)		1.86			0.20			3.26
Net income (loss) applicable to Common shares	$	1.47		$	1.52		$	0.42		$	1.12
Diluted earnings per share:
Income (loss) from continuing operations	$	1.10		$	(.34	)	$	0.21		$	(2.14	)
Discontinued operations		(.32	)		1.86			0.19			3.26
Income (loss) applicable to Common shares	$	1.42		$	1.52		$	0.40		$	1.12

Weighted average Common shares used to compute earnings per share:

Basic	7,900,869	7,900,869	7,900,869	7,900,869
Diluted	8,180,401	7,900,869	8,180,401	7,900,869

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TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
	2006			2005
	(dollars in thousands)
Assets
Real estate held for investment	$	1,089,995		$	911,981
Less—accumulated depreciation		(97,541	)		(78,096	)
		991,454			833,885
Real estate held-for-sale (net of accumulated depreciation of $5,035 in 2006 and $4,476 in 2005)		54,935			40,446
Real estate subject to sales contract (net of accumulated depreciation of $7,006 in 2006 and $5,387 in 2005)		66,027			68,738
Notes and interest receivable
Performing (including $22,249 in 2006 and $34,370 in 2005 from affiliates and related parties)		39,566			59,922
Non-performing, non-accruing		—			4,896
		39,566			64,818
Investment in unconsolidated real estate entities		30,573			24,659
Marketable equity securities, at market value		9,038			7,446
Cash and cash equivalents		4,803			5,462
Other assets (including $320 in 2006 and $1,103 in 2005 from affiliates and related parties)		52,771			43,625
	$	1,250,167		$	1,089,079
Liabilities and Stockholders’ Equity
Liabilities:
Notes and interest payable (including $6,769 in 2006 and $6,885 in 2005 to affiliates and related parties)	$	799,069		$	657,481
Liabilities related to assets held for sale		43,579			53,357
Liabilities related to assets subject to sales contract		58,816			59,323
Other liabilities (including $396 in 2006 and $12,272 in 2005 to affiliates and related parties)		66,608			66,500
		968,072			836,661
Commitments and contingencies
Minority interest		16,166			1,239
Stockholders’ equity:
Preferred Stock
Series C; $.01 par value; authorized, issued and outstanding 30,000 shares (liquidation preference $100 per share)		—			—
Series D: $.01 par value: authorized, issued and outstanding 100,000 shares at December 31, 2006 (liquidation preference $100 per share)		1			—
Common Stock, $.01 par value; authorized, 10,000,000 shares: issued and outstanding 7,900,869 shares at December 31, 2006 and 2005		81			81
Paid-in capital		226,206			256,494
Treasury stock		(3,086	)		(3,086	)
Retained earnings (deficit)		1,660			(1,846	)
Accumulated other comprehensive income (loss)		1,067			(464	)
		265,929			251,179
	$	1,250,167		$	1,089,079