10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q/A

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

For the quarterly period ended June 30, 2011

or

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

For the transition period from                      to                     

Commission File Number 001-09240

TRANSCONTINENTAL REALTY INVESTORS, INC.

(Exact Name of Registrant as Specified in Its Charter)

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

1800 Valley View Lane, Suite 300, Dallas, Texas 75234

(Address of principal executive offices)

(Zip Code)

(469) 522-4200

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).*

¨Yes    ¨No

* The registrant has not yet been phased into the interactive data requirements

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

Large accelerated filer  ¨	Accelerated filer	¨
Non-accelerated filer    ¨ (do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨Yes    xNo.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value	8,413,469
(Class)	(Outstanding at August 5, 2011)

EXPLANATORY NOTE

The purpose of this Amendment No. 1 to Transcontinental Realty Investors Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, filed with the Securities and Exchange Commission on August 15, 2011, is solely to furnish Exhibit 101 to the Form 10-Q and make conforming changes to Item 6. Exhibits. Exhibit 101 provides the financial statements and related notes from the form 10-Q formatted in XBRL (eXtensible Business Reporting Language). No other substantive changes have been made to the Form 10-Q. This Amendment does not reflect events that may have occurred subsequent to the original filing date.

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ITEM 6. EXHIBITS

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

Exhibit Number	Description
3.0	Articles of Incorporation of Transcontinental Realty Investors, Inc., (incorporated by reference to Exhibit No. 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991).
3.1	Certificate of Amendment to the Articles of Incorporation of Transcontinental Realty Investors, Inc., (incorporated by reference to the Registrant’s Current Report on Form 8-K, dated June 3, 1996).
3.2	Certificate of Amendment of Articles of Incorporation of Transcontinental Realty Investors, Inc., dated October 10, 2000 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
3.3	Articles of Amendment to the Articles of Incorporation of Transcontinental Realty Investors, Inc., setting forth the Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible Preferred Stock, dated October 20, 1998 (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998).
3.4	Certificate of Designation of Transcontinental Realty Investors, Inc., setting forth the Voting Powers, Designations, References, Limitations, Restriction and Relative Rights of Series B Cumulative Convertible Preferred Stock, dated October 23, 2000 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
3.5	Certificate of Designation of Transcontinental Realty Investors, Inc., setting forth the Voting Powers, Designating, Preferences, Limitations, Restrictions and Relative Rights of Series C Cumulative Convertible Preferred Stock, dated September 28, 2001 (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).
3.6	Articles of Amendment to the Articles of Incorporation of Transcontinental Realty Investors, Inc., Decreasing the Number of Authorized Shares of and Eliminating Series B Preferred Stock dated December 14, 2001 (incorporated by reference to Exhibit 3.7 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
3.7	By-Laws of Transcontinental Realty Investors, Inc. (incorporated by reference to Exhibit No. 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991).
3.8	Certificate of Designation of Transcontinental Realty Investors, Inc., setting forth the Voting Powers, Designations, Preferences, Limitations, Restrictions and Relative Rights of Series D Cumulative Preferred Stock filed August 14, 2006 with the Secretary of State of Nevada (incorporated by reference to Registrant’s Current Report on Form 8-K for event dated November 21, 2006 at Exhibit 3.8 thereof).
10.1	Advisory Agreement dated as of April 30, 2011, between Transcontinental Realty Investors, Inc., and Pillar Income Asset Management, Inc. (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K for event occurring May 2, 2011).
31.1	Certification of the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
31.2	Certification by the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
32.1	Certification pursuant to 18 U.S.C. 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Interactive date files pursuant to Rule 405 of Regulation S-T

3

SIGNATURE PAGE

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

	TRANSCONTINENTAL REALTY INVESTORS, INC.
Date: September 13, 2011	By:	/s/ Daniel J. Moos
		Daniel J. Moos
		President and Chief Executive Officer (Principal Executive Officer)
Date: September 13, 2011	By:	/s/ Gene S. Bertcher
		Gene S. Bertcher
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

4

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data	Jun. 30, 2011	Dec. 31, 2010
Real estate subject to sales contracts at cost, depreciation	$ 54,940	$ 58,579
Performing, affiliates and related parties	58,246	66,011
Allowance for estimated losses, affiliates and related parties	2,097	3,061
Accounts payable and other liabilities, affiliates and related parties	$ 1,680	$ 1,466
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	10,000,000	10,000,000
Common stock, shares issued	8,413,669	8,113,669
Common stock, shares outstanding	8,413,469	8,113,469
Treasury stock, shares	200	200
Series C Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	30,000	30,000
Preferred stock, shares outstanding	30,000	30,000
Preferred stock, liquidation preference per share	$ 100	$ 100
Series D Preferred Stock [Member]
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	100,000	100,000
Preferred stock, shares issued	100,000	100,000
Preferred stock, shares outstanding	100,000	100,000

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Consolidated Statements Of Operations (USD $) In Thousands, except Share data	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Revenues:
Rental and other property revenues (including $358 and $908 for the three months and $730 and $1,766 for the six months ended 2011 and 2010 respectively from affiliates and related parties)	$ 31,785	$ 30,589	$ 61,439	$ 61,287
Expenses:
Property operating expenses (including $403 and $429 for the three months and $675 and $884 for the six months ended 2011 and 2010 respectively from affiliates and related parties)	16,200	18,129	32,675	35,338
Depreciation and amortization	5,970	6,353	12,032	12,214
General and administrative (including $906 and $786 for the three months and $1,748 and $1,677 for the six months ended 2011 and 2010 respectively from affiliates and related parties)	2,588	1,793	4,730	3,619
Provision on impairment of notes receivable and real estate assets	25,444		31,503
Advisory fee to affiliate	2,626	2,962	5,246	6,058
Total operating expenses	52,828	29,237	86,186	57,229
Operating income (loss)	(21,043)	1,352	(24,747)	4,058
Other income (expense):
Interest income (including $700 and $567 for the three months and $1,051 and $1,220 for the six months ended 2011 and 2010 respectively from affiliates and related parties)	704	832	1,130	1,691
Other income	100	249	1,314	914
Mortgage and loan interest (including $1,269 and $883 for the three months and $1,567 and $1,721 for the six months ended 2011 and 2010 respectively from affiliates and related parties)	(14,611)	(15,663)	(28,035)	(30,377)
Earnings from unconsolidated subsidiaries and investees	117	(50)	57	(112)
Total other expenses	(13,690)	(14,632)	(25,534)	(27,884)
Loss before gain on land sales, non-controlling interest, and tax	(34,733)	(13,280)	(50,281)	(23,826)
Gain (loss) on land sales	1,285	(5,640)	2,081	(5,634)
Loss from continuing operations before tax	(33,448)	(18,920)	(48,200)	(29,460)
Income tax benefit	2,584	554	1,637	431
Net loss from continuing operations	(30,864)	(18,366)	(46,563)	(29,029)
Discontinued operations:
Loss from discontinued operations	(469)	(1,444)	(1,440)	(956)
Loss on sale of real estate from discontinued operations	(6,914)	(139)	(3,238)	(139)
Income tax expense from discontinued operations	(2,584)	(554)	(1,637)	(383)
Net loss from discontinued operations	(9,967)	(2,137)	(6,315)	(1,478)
Net loss	(40,831)	(20,503)	(52,878)	(30,507)
Net (income) loss attributable to non-controlling interest	46	113	130	(160)
Net loss attributable to Transcontinental Realty Investors, Inc.	(40,785)	(20,390)	(52,748)	(30,667)
Preferred dividend requirement	(277)	(264)	(551)	(527)
Net loss applicable to common shares	(41,062)	(20,654)	(53,299)	(31,194)
Earnings per share - basic
Loss from continuing operations	$ (3.70)	$ (2.28)	$ (5.64)	$ (3.66)
Loss from discontinued operations	$ (1.18)	$ (0.26)	$ (0.76)	$ (0.18)
Net loss applicable to common shares	$ (4.88)	$ (2.54)	$ (6.40)	$ (3.84)
Earnings per share - diluted
Loss from continuing operations	$ (3.70)	$ (2.28)	$ (5.64)	$ (3.66)
Loss from discontinued operations	$ (1.18)	$ (0.26)	$ (0.76)	$ (0.18)
Net loss applicable to common shares	$ (4.88)	$ (2.54)	$ (6.40)	$ (3.84)
Weighted average common share used in computing earnings per share	8,413,469	8,113,669	8,327,281	8,113,669
Weighted average common share used in computing diluted earnings per share	8,413,469	8,113,669	8,327,281	8,113,669
Amounts attributable to Transcontinental Realty Investors, Inc.
Loss from continuing operations	(30,818)	(18,253)	(46,433)	(29,189)
Loss from discontinued operations	(9,967)	(2,137)	(6,315)	(1,478)
Net loss	$ (40,785)	$ (20,390)	$ (52,748)	$ (30,667)

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Document And Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 05, 2011
Document And Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Entity Filer Category	Smaller Reporting Company
Entity Registrant Name	TRANSCONTINENTAL REALTY INVESTORS INC
Entity Central Index Key	0000733590
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		8,413,469

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Notes And Interest Receivable

6 Months Ended

Jun. 30, 2011

Notes And Interest Receivable

Notes And Interest Receivable

NOTE 3. NOTES AND INTEREST RECEIVABLE

A portion of our assets are invested in mortgage notes receivable, principally secured by real estate. We may originate mortgage loans in conjunction with providing purchase money financing of property sales. Notes receivable are generally collateralized by real estate or interests in real estate and personal guarantees of the borrower and, unless noted otherwise, are so secured. Management intends to service and hold for investment the mortgage notes in our portfolio. A majority of the notes receivable provide for principal to be paid at maturity. Our mortgage notes receivable consist of first, wraparound and junior mortgage loans (dollars in thousands):

Borrower	Maturity Date		Interest Rate			Amount			Security
Performing loans:
Dallas Fund XVII L.P.(2)		10/09		9.00	%	$	1,432		Assignment of partnership interest
Garden Centura, L.P. (1)		N/A		7.00	%		3,767		Excess cash flow from partnership
Miscellaneous non-related party notes		Various		Various			889		Various secured interest
Miscellaneous related party notes (1)		Various		Various			665		Various secured interest
Ocean Beach Partners, L.P. (1)		12/11		7.00	%		3,279		Folsom Land (36 acres in Farmers Branch, TX)
Unified Housing Foundation, Inc. (Cliffs of El Dorado) (1)		12/27		5.25	%		2,990		100% Interest in Unified Housing of McKinney, LLC
Unified Housing Foundation, Inc. (Echo Station) (1)		12/27		5.25	%		1,481		100% Interest in Unified Housing of Temple, LLC
Unified Housing Foundation, Inc. (Lakeshore Villas) (1)		12/27		5.25	%		2,000		Unsecured
Unified Housing Foundation, Inc. (Lakeshore Villas) (1)		12/27		5.25	%		6,363		Membership interest in Housing for Seniors of Humble, LLC
Unified Housing Foundation, Inc. (Limestone Canyon) (1)		07/15		5.25	%		3,057		100% Interest in Unified Housing of Austin, LLC
Unified Housing Foundation, Inc. (Limestone Canyon) (1)		12/27		5.25	%		4,663		100% Interest in Unified Housing of Austin, LLC
Unified Housing Foundation, Inc. (Limestone Ranch) (1)		07/15		5.25	%		2,250		100% Interest in Unified Housing of Vista Ridge,LLC
Unified Housing Foundation, Inc. (Limestone Ranch) (1)		12/27		5.25	%		6,000		100% Interest in Unified Housing of Vista Ridge,LLC
Unified Housing Foundation, Inc. (Parkside Crossing) (1)		12/27		5.25	%		1,936		100% Interest in Unified Housing of Parkside Crossing, LLC
Unified Housing Foundation, Inc. (Sendero Ridge) (1)		12/27		5.25	%		4,812		100% Interest in Unified Housing of Sendero Ridge, LLC
Unified Housing Foundation, Inc. (Sendero Ridge) (1)		07/15		5.25	%		5,174		100% Interest in Unified Housing of Sendero Ridge, LLC
Unified Housing Foundation, Inc. (Timbers of Terrell) (1)		12/27		5.25	%		1,323		100% Interest in Unified Housing of Terrell, LLC
Unified Housing Foundation, Inc. (Tivoli) (1)		12/27		5.25	%		7,966		100% Interest in Unified Housing of Tivoli, LLC
Accrued interest							567
Total Performing						$	60,614
Allowance for estimated losses							(3,777	)
Total						$	56,837

⁽¹⁾ Related party notes

⁽²⁾ Note matured and an allowance was taken for estimated losses at full value of note

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Discontinued Operations

6 Months Ended

Jun. 30, 2011

Discontinued Operations

Discontinued Operations

NOTE 8. DISCONTINUED OPERATIONS

We apply the provisions of ASC Topic 360 "Property, Plant and Equipment". ASC Topic 360 requires that long-lived assets that are to be disposed of by sale be measured at the lesser of (1) book value or (2) fair value less cost to sell. In addition, it requires that one accounting model be used for long-lived assets to be disposed of by sale and broadens the presentation of discontinued operations to include more disposal transactions.

Discontinued operations relates to properties that were either sold or held for sale as of the period ended June 30, 2011. Included in discontinued operations are a total of four and 17 properties for 2011 and 2010, respectively. Properties sold in 2011 have been reclassified to discontinued operations for current and prior year reporting periods. In 2011, we sold four commercial properties (Alpenloan, Fenton Center, Teleport Blvd and Westgrove Air Plaza). In 2010, we sold 11 apartment complexes (Baywalk, Foxwood, Island Bay, Kingsland Ranch, Limestone Canyon, Limestone Ranch, Longfellow Arms, Marina Landing, Mason Park, Sendero Ridge and Tivoli), one commercial building (217 Rampart) and transferred our limited partnership interest in a consolidated entity that owned an apartment complex (Quail Oaks). The gain on sale of the properties is also included in discontinued operations for those years. The following table summarizes revenue and expense information for the properties sold and held for sale (dollars in thousands):

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2011		2010		2011		2010
Revenue
Rental	$	1,842	$	5,041	$	3,877	$	12,685
Property operations		1,293		3,208		2,792		6,703
	$	549	$	1,833		1,085		5,982
Expenses
Interest		(573)		(2,160)		(1,436)		(4,610)
General and administrative		(143)		(26)		(211)		(43)
Depreciation		(373)		(1,091)		(949)		(2,285)
	$	(1,089)	$	(3,277)		(2,596)		(6,938)
Net loss from discontinued operations before gains on sale of real estate, taxes, and fees		(540)		(1,444)		(1,511)		(956)
Loss on sale of discontinued operations		(6,914)		(139)		(3,238)		(139)
Equity in earnings of investees		71		-		71		-
Loss from discontinued operations	$	(7,383)	$	(1,583)		(4,678)		(1,095)
Tax expense		(2,584)		(554)		(1,637)		(383)
Net loss from discontinued operations	$	(9,967)	$	(2,137)	$	(6,315)	$	(1,478)

Our application of ASC Topic 360 results in the presentation of the net operating results of these qualifying properties sold or held for sale during 2010 as income from discontinued operations. This does not have an impact on net income available to common shareholders and only impacts the presentation of these properties within the Consolidated Statements of Operations.

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Consolidated Statements Of Comprehensive Income (Loss) (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Consolidated Statements Of Comprehensive Income (Loss)
Net loss	$ (52,878)	$ (30,507)
Other comprehensive income (loss)
Total other comprehensive income (loss)
Comprehensive loss attributable to Transcontinental Realty Investors, Inc.	(52,878)	(30,507)
Comprehensive (income) loss attributable to non-controlling interest	130	(160)
Comprehensive loss attributable to Transcontinental Realty Investors, Inc.	$ (52,748)	$ (30,667)

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Notes Payable

6 Months Ended

Jun. 30, 2011

Notes Payable

Notes Payable

NOTE 5. NOTES PAYABLE

On February 28, 2011, we refinanced the existing mortgage on Vistas of Vance Jackson apartments, a 240-unit complex located in San Antonio, Texas, for a new mortgage of $16.1 million. We received $0.1 million in cash after paying off the existing mortgage of $15.4 million and $0.6 million in closing costs. The note accrues interest at 4.80% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on March 1, 2051.

On February 28, 2011, a loan with a commercial lender in the amount of $1.3 million was taken out to fund real estate property taxes. The loan accrues interest at 12.5%, payable monthly as interest only, until August 1, 2013. Thereafter, payments of interest and principal are due monthly based upon an 8-year amortization schedule, maturing on July 1, 2021.

On April 28, 2011, we refinanced the existing mortgage on Mariposa Villas apartments, a 216-unit complex located in Dallas, Texas, for a new mortgage of $12.4 million. We paid off the existing mortgage of $11.8 million and $0.6 million in closing costs. The note accrues interest at 3.90% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on May 1, 2051.

On April 28, 2011, we refinanced the existing mortgage on Verandas at City View apartments, a 314-unit complex located in Fort Worth, Texas, for a new mortgage of $18.5 million. We paid off the existing mortgage of $17.3 million and $1.2 million in closing costs. The note accrues interest at 4.20% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on May 1, 2051.

On May 31, 2011, we refinanced the existing mortgage on Stonebridge at City Park apartments, a 240-unit complex located in Houston, Texas, for a new mortgage of $14.6 million. We paid off the existing mortgage of $13.9 million and $0.7 million in closing costs. The note accrues interest at 3.90% and payments of interest and principal are due monthly based upon a 40-year amortization schedule, maturing on June 1, 2051.

In conjunction with the development of various apartment projects and other developments, we drew down $29.1 million in construction loans during the six months ended June 30, 2011.

The properties that we have sold to a related party under common control and have deferred the recognition of the sale are treated as "subject to sales contract" on the Consolidated Balance Sheets. These properties were sold to a related party in order to help facilitate an appropriate debt or organizational restructure and may or may not be transferred back to the seller upon resolution. These properties have mortgages that are secured by the property and many have corporate guarantees. According to the loan documents, we are currently in default on these mortgages primarily due to lack of payment although we are actively involved in discussions with every lender in order to settle or cure the default situation. We have reviewed each asset and taken impairment to the extent we feel the value of the property was less than our current basis.

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Earnings Per Share

6 Months Ended

Jun. 30, 2011

Earnings Per Share

Earnings Per Share

NOTE 10. EARNINGS PER SHARE

Earnings per share ("EPS") have been computed pursuant to the provisions of ASC Topic 260 "Earnings Per Share". The computation of basic EPS is calculated by dividing income available to common shareholders from continuing operations, adjusted for preferred dividends, by the weighted-average number of common shares outstanding during the period. Shares issued during the period shall be weighted for the portion of the period that they were outstanding. As of June 30, 2011, we have 10,000 shares of stock options outstanding, 5,000 of which will expire on January 12, 2012, and 5,000 of which will expire on January 1, 2015 if not exercised. These options are considered in the computation of diluted earnings per share if the effect of applying the "treasury stock" method is dilutive. We have 30,000 shares of Series C Cumulative Convertible Preferred Stock issued and outstanding. The stock has a liquidation preference of $100.00 per share. After September 30, 2006, the stock may be converted into common stock at 90% of the daily average closing price of the common stock for the prior five trading days. The effects of the Series C Cumulative Convertible Preferred Stock are included in the dilutive earnings per share if applying the if-converted method is dilutive. As of June 30, 2011, the preferred stock and the stock options were anti-dilutive and thus not included in the EPS calculation.

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Related Party Transactions

6 Months Ended

Jun. 30, 2011

Related Party Transactions

Related Party Transactions

NOTE 6. RELATED PARTY TRANSACTIONS

The following table reconciles the beginning and ending balances of accounts receivable from and (accounts payable) to affiliates as of June 30, 2011 (dollars in thousands):

	Prime		Pillar		ARL		Total
Balance, December 31, 2010	$	-	$	-	$	(47,261)	$	(47,261)
Cash transfers		3,588		2,467		-		6,055
Advisory fees		(3,528)		(1,720)		-		(5,248)
Cost reimbursements		(1,658)		-		-		(1,658)
Interest to advisor		(926)		-		-		(926)
POA fees		(10)		-		-		(10)
Expenses paid by advisor		(1,240)		378		-		(862)
Financing (mortgage payments)		(382)		(5,045)		-		(5,427)
Note receivable with affiliate		8,016		2,726		-		10,742
Sales/Purchases transactions		888		(261)		-		627
Intercompany property transfers		8,543		1,540		-		10,083
Purchase of obligations		(13,291)		(85)		13,376		-
Balance, June 30, 2011	$	-	$	-	$	(33,885)	$	(33,885)

During the ordinary course of business, we have related party transactions that include, but are not limited to rent income, interest income, interest expense, general and administrative costs, commissions, management fees, and property expenses. In addition, we have assets and liabilities that include related party amounts. The affiliated amounts included in assets and liabilities, and the affiliated revenues and expenses received/paid are shown on the face of the financial statements.

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Investment In Unconsolidated Subsidiaries And Investees

6 Months Ended

Jun. 30, 2011

Investment In Unconsolidated Subsidiaries And Investees

Investment In Unconsolidated Subsidiaries And Investees

NOTE 4. INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES AND INVESTEES

Investments in unconsolidated subsidiaries, jointly owned companies and other investees in which we have a 20% to 50% interest or otherwise exercise significant influence are carried at cost, adjusted for the Company's proportionate share of their undistributed earnings or losses, via the equity method of accounting. ARL is our parent company and is considered as an unconsolidated subsidiary.

Investments accounted for via the equity method consists of the following:

	Percentage Ownership
	at June 30, 2011			at June 30, 2010
American Realty Investors, Inc.(1)		2.09	%		2.47	%
Garden Centura, L.P.(2)		5.00	%		5.00	%

⁽¹⁾ Unconsolidated subsidiary

⁽²⁾ Other investees

Our interest in the common stock of ARL and our partnership interest in Garden Centura, L.P., in the amount of 2.09% and 5.0%, respectively, are accounted for under the equity method because we exercise significant influence over the operations and financial activities. Accordingly, the investments are carried at cost, adjusted for the companies' proportionate share of earnings or losses. The following is a summary of the financial position and results of operations from our unconsolidated subsidiaries and investees (dollars in thousands):

For the Six Months Ended June 30, 2011	Unconsolidated         Subsidiaries		Other         Investees		Total
Real estate, net of accumulated depreciation	$	178,689	$	73,280	$	251,969
Notes receivable		23,718		-		23,718
Other assets		188,975		4,485		193,460
Notes payable		(216,643)		(47,989)		(264,632)
Other liabilities		(106,940)		(2,182)		(109,122)
Shareholders' equity/partners capital		(67,799)		(27,594)		(95,393)
Revenue	$	13,156	$	3,638	$	16,794
Depreciation		(901)		(1,571)		(2,472)
Operating expenses		(14,660)		(2,149)		(16,809)
Gain on land sales		15,009		-		15,009
Interest expense		(6,755)		(1,156)		(7,911)
Gain (loss) from continuing operations	$	5,849	$	(1,238)	$	4,611
Income from discontinued operations		-		-		-
Net income (loss)	$	5,849	$	(1,238)	$	4,611
Company's proportionate share of earnings	$	122	$	(62)	$	60
For the Six Months Ended June 30, 2010	Unconsolidated         Subsidiaries		Other         Investees		Total
Real estate, net of accumulated depreciation	$	243,655	$	75,880	$	319,535
Notes Receivable		41,564		-		41,564
Other assets		165,274		5,709		170,983
Notes payable		(230,991)		(48,231)		(279,222)
Other liabilities		(117,736)		(1,984)		(119,720)
Shareholders equity/partners capital		(101,766)		(31,374)		(133,140)
Rents and interest and other income	$	17,041	$	4,078	$	21,119
Depreciation		(1,194)		(1,556)		(2,750)
Operating expenses		(15,175)		(1,966)		(17,141)
Gain on land sales		1,519		-		1,519
Interest expense		(8,546)		(1,805)		(10,351)
Loss from continuing operations		(6,355)		(1,249)		(7,604)
Income from discontinued operations		5,821		-		5,821
Net loss	$	(534)	$	(1,249)	$	(1,783)
Company's proportionate share of earnings	$	(13)	$	(62)	$	(75)

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Consolidated Statement Of Shareholders' Equity (USD $) In Thousands, except Share data	Preferred Stock [Member]	Series C Preferred Stock [Member] Paid-in Capital [Member]	Series C Preferred Stock [Member] Accumulated Other Comprehensive Income (Loss) [Member]	Series C Preferred Stock [Member]	Series D Preferred Stock [Member] Paid-in Capital [Member]	Series D Preferred Stock [Member] Accumulated Other Comprehensive Income (Loss) [Member]	Series D Preferred Stock [Member]	Comprehensive Loss [Member]	Common Stock [Member]	Treasury Stock [Member]	Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Noncontrolling Interest [Member]	Total
Balance at Dec. 31, 2010	$ 1							$ (105,122)	$ 81	$ (2)	$ 271,682	$ (101,914)		$ 13,600	$ 183,448
Balance, shares at Dec. 31, 2010									8,113,669
Preferred stock dividends		(105)		(105)	(446)		(446)								551
Net loss								(52,878)				(52,748)		(130)	(52,878)
Issuance of common stock									3		1,527				1,530
Issuance of common stock, shares									300,000
Sale of controlling interest											1,747			233	1,980
Distributions to non-controlling interests														(7)	(7)
Balance at Jun. 30, 2011	$ 1							$ (158,000)	$ 84	$ (2)	$ 274,405	$ (154,662)		$ 13,696	$ 133,522
Balance, shares at Jun. 30, 2011									8,413,669

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Consolidated Statements Of Cash Flows (USD $) In Thousands	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash Flow From Operating Activities:
Net loss	$ (52,878)	$ (30,507)
Adjustments to reconcile net loss applicable to common shares to net cash used in operating activities:
Gain on sale of land	(2,081)	5,634
Gain on sale of income producing properties	3,238	139
Depreciation and amortization	12,981	14,491
Provision on impairment of notes receivable and real estate assets	31,503
Amortization of deferred borrowing costs	1,767	1,074
Earnings from unconsolidated subsidiaries and investees	128	(112)
(Increase) decrease in assets:
Accrued interest receivable	28	(128)
Other assets	(964)	7,333
Prepaid expense	2,176	52
Escrow	10,546	8,664
Earnest money	(75)	315
Rent receivables	647	(2,356)
Increase (decrease) in liabilities:
Accrued interest payable	4,045	624
Affiliate payables	(13,377)	(893)
Other liabilities	(10,432)	(8,836)
Net cash used in operating activities	(13,004)	(4,282)
Cash Flow From Investing Activities:
Proceeds from notes receivable	12,109	1,438
Originations or advances on notes receivable	(986)
Acquisition of land held for development		(2,259)
Acquisition of income producing properties	(13,002)
Proceeds from sale of income producing properties	60,852	30,043
Proceeds from sale of land	78,757	12,325
Proceeds from sale of investment in unconsolidated real estate entities	(9)
Proceeds from sale of investments	554
Investment in unconsolidated real estate entities	279	213
Improvement of land held for development	(1,101)	(1,319)
Improvement of income producing properties	(340)	(1,185)
Acquisition of non-controlling interest
Sales of controlling interest	1,980
Construction and development of new properties	(30,298)	(10,294)
Net cash provided by investing activities	108,795	28,962
Cash Flow From Financing Activities:
Proceeds from notes payable	102,534	93,753
Recurring amortization of principal on notes payable	(7,764)	(5,974)
Payments on or debt assumed on maturing notes payable	(195,386)	(110,607)
Deferred financing costs	(353)	(2,627)
Distributions to non-controlling interests	7
Common stock issuance	1,530
Net cash used in financing activities	(99,983)	(25,982)
Net decrease in cash and cash equivalents	(4,192)	(1,302)
Cash and cash equivalents, beginning of period	11,259	5,665
Cash and cash equivalents, end of period	7,067	4,363
Supplemental disclosures of cash flow information:
Cash paid for interest	26,023	32,240
Cash received for income taxes, net of payments		(48)
Series C Preferred Stock [Member]
Cash Flow From Financing Activities:
Preferred stock dividends	(105)	(105)
Series D Preferred Stock [Member]
Cash Flow From Financing Activities:
Preferred stock dividends	$ (446)	$ (422)

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Organization And Basis Of Presentation

6 Months Ended

Jun. 30, 2011

Organization And Basis Of Presentation

Organization And Basis Of Presentation

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Organization

As used herein, the terms "TCI", "the Company", "we", "our" or "us" refer to Transcontinental Realty Investors, Inc., a Nevada corporation. TCI is the successor to a California business trust which was organized on September 6, 1983, and commenced operations on January 31, 1984. Effective March 31, 2003, TCI's financial results were consolidated in American Realty Investors, Inc. ("ARL") Form 10-K and related consolidated financial statements.

The Company is headquartered in Dallas, Texas and its common stock trades on the New York Stock Exchange under the symbol "NYSE: TCI". Subsidiaries of ARL own approximately 82.7% of the Company's common stock. TCI is a "C" corporation for U.S. federal income tax purposes and files an annual consolidated income tax return with ARL, whose common stock trades on the New York Stock Exchange under the symbol "NYSE: ARL".

TCI owns approximately 83.3% of the common stock of Income Opportunity Realty Investors, Inc. ("IOT"). Effective July 17, 2009, IOT's financial results were consolidated with those of ARL and TCI and their subsidiaries. Shares of IOT are traded on the American Stock Exchange under the symbol "AMEX: IOT".

TCI invests in real estate through direct ownership, leases and partnerships and it also invests in mortgage loans on real estate. Prior to April 30, 2011, Prime Income Asset Management, LLC ("Prime") was the Company's external Advisor and Cash Manager. Prime also served as an Advisor and Cash Manager to ARL and IOT. Effective April 30, 2011, Pillar Income Asset Management, Inc. ("Pillar") became the Company's external Advisor and Cash Manager under the same terms as the previous agreement with Prime. Pillar also serves as an Advisor and Cash Manager to ARL and IOT. Prior to December 31, 2010, Triad Realty Services, L.P. ("Triad") managed the Company's commercial properties and Regis Realty I, LLC ("Regis Realty") provided brokerage services. Triad and Regis Realty are affiliates of Prime. Effective January 1, 2011, Regis Realty Prime, LLC ("Regis"), an affiliate of Prime, manages our commercial properties and provides brokerage services under the same terms as the previous agreements with Triad and Regis Realty for a term of five years. TCI engages third-party companies to lease and manage its apartment properties. We have no employees.

Properties

We own or had interests in a total property portfolio of 71 income producing properties as of June 30, 2011. The properties consisted of:

• 23 commercial buildings totaling 4.2 million leasable square feet, consisting of 15 office buildings, five industrial properties, and three retail properties;

• 48 apartment communities totaling 8,919 units; excluding apartments being developed; and

• 4,891 acres of developed and undeveloped land.

We are involved in the construction of three apartment complexes as of June 30, 2011. In addition, we invest in several tracts of land and are at various stages of predevelopment on many of these properties. We partner with several third-party developers to construct residential projects. The third-party developer typically takes a general partner and majority limited partner interest in the development partnership while we take a minority limited partner interest. We are required to fund the equity contributions. The third-party developer is responsible for obtaining financing, for hiring a general contractor and for the overall management and delivery of the project, and is compensated with a fee equal to a certain percentage of the construction costs.

Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included. The results of operations for the six months ended June 30, 2011, are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.

The year-end Consolidated Balance Sheet at December 31, 2010, was derived from the audited 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 financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010. Certain 2010 financial statement amounts have been reclassified to conform to the 2011 presentation, including adjustments for discontinued operations.

Principles of consolidation

The accompanying Consolidated Financial Statements include the accounts of the Company, its subsidiaries, generally all of which are wholly-owned, and all entities in which we have a controlling interest. Arrangements that are not controlled through voting or similar rights are accounted for as a Variable Interest Entity (VIE), in accordance with the provisions and guidance of ASC Topic 810 "Consolidation", whereby we have determined that we are a primary beneficiary of the VIE and meet certain criteria of a sole general partner or managing member as identified in accordance with Emerging Issues Task Force ("EITF") Issue 04-5, Investor's Accounting for an Investment in a Limited Partnership when the Investor is the Sole General Partner and the Limited Partners have Certain Rights ("EITF 04-5"). VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders as a group lack adequate decision making ability, the obligation to absorb expected losses or residual returns of the entity, or have voting rights that are not proportional to their economic interests. The primary beneficiary generally is the entity that provides financial support and bears a majority of the financial risks, authorizes certain capital transactions, or makes operating decisions that materially affect the entity's financial results. All significant intercompany balances and transactions have been eliminated in consolidation.

In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; our and the other investors' ability to control or significantly influence key decisions for the VIE; and the similarity with and significance to the business activities of us and the other investors. Significant judgments related to these determinations include estimates about the current future fair values and performance of real estate held by these VIEs and general market conditions.

For entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary, the entities are accounted for using the equity method of accounting. Accordingly, our share of the net earnings or losses of these entities is included in consolidated net income. Our investments in ARL and Garden Centura, L.P. are accounted for under the equity method.

During the second quarter of 2011, we evaluated the non-controlling equity interests and made certain reclassifications among equity accounts to correctly reflect non-controlling interest. In connection with that evaluation, we reclassified approximately $6.3 million of deferred gain to non-controlling interest related to the 2009 acquisition of the controlling interest in IOT, a consolidated entity. These amounts have been reclassified for all periods presented in the consolidated financial.

Real estate, depreciation, and impairment

Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and improvements – 10-40 years; furniture, fixtures and equipment – 5-10 years). The Company continually evaluates the recoverability of the carrying value of its real estate assets using the methodology prescribed in ASC Topic 360, "Property, Plant and Equipment". Factors considered by management in evaluating impairment of its existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Under ASC Topic 360, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding period are in excess of the asset's net book value at the balance sheet date. If any real estate asset held for investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value.

Real estate held for sale

We periodically classify real estate assets as "held for sale". An asset is classified as held for sale after the approval of our board of directors and after an active program to sell the asset has commenced. Upon the classification of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded. Real estate assets held for sale are stated separately on the accompanying Consolidated Balance Sheets. Upon a decision to no longer market as an asset for sale, the asset is classified as an operating asset and depreciation expense is reinstated. The operating results of real estate assets held for sale and sold are reported as discontinued operations in the accompanying statements of operations. Income from discontinued operations includes the revenues and expenses, including depreciation and interest expense, associated with the assets. This classification of operating results as discontinued operations applies retroactively for all periods presented. Additionally, gains and losses on assets designated as held for sale are classified as part of discontinued operations.

Cost capitalization

Costs related to planning, developing, leasing and constructing a property are capitalized and classified as Real Estate in the Consolidated Balance Sheets. We capitalize interest to qualifying assets under development based on average accumulated expenditures outstanding during the period. In capitalizing interest to qualifying assets, we first use the interest incurred on specific project debt, if any, and next use the weighted average interest rate of non-project specific debt. We capitalize interest, real estate taxes and certain operating expenses until building construction is substantially complete and the building is ready for its intended use, but no later than one year from the cessation of major construction activity.

We capitalize leasing costs which include commissions paid to outside brokers, legal costs incurred to negotiate and document a lease agreement and any internal costs that may be applicable. We allocate these costs to individual tenant leases and amortize them over the related lease term.

Fair value measurement

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

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

Level 1	–	Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets.
Level 2	–	Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3	–	Unobservable inputs that are significant to the fair value measurement.

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

Newly issued accounting pronouncements

We have considered all other newly issued accounting guidance that is applicable to our operations and the preparation of our consolidated statements, including that which we have not yet adopted. We do not believe that any such guidance will have a material effect on our financial position or results of operations.

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Commitments And Contingencies And Liquidity

6 Months Ended

Jun. 30, 2011

Commitments And Contingencies And Liquidity

Commitments And Contingencies And Liquidity

NOTE 9. COMMITMENTS AND CONTINGENCIES AND LIQUIDITY

Liquidity. Management believes that TCI will generate excess cash from property operations in 2011; such excess, however, will not be sufficient to discharge all of TCI's obligations as they become due. Management intends to sell income producing assets, refinance real estate and obtain additional borrowings primarily secured by real estate to meet its liquidity requirements.

Partnership Buyouts. TCI is the limited partner in three partnerships that are currently constructing residential properties and two partnerships in which the residential properties are substantially complete. As permitted in the respective partnership agreements, TCI intends to purchase the interests of the general and any other limited partners in these partnerships subsequent to the completion of these projects. The amounts paid to buy out the non-affiliated partners are limited to development fees earned by the non-affiliated partners, and are set forth in the respective partnership agreements.

Other Litigation. The ownership of property and provision of services to the public as tenants entails an inherent risk of liability. Although the Company and its subsidiaries are involved in various items of litigation incidental to and in the ordinary course of its business, in the opinion of Management, the outcome of such litigation will not have a material adverse impact upon the Company's financial condition, results of operation or liquidity.

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Real Estate Activity

6 Months Ended

Jun. 30, 2011

Real Estate Activity

Real Estate Activity

NOTE 2. REAL ESTATE ACTIVITY

The highlights of our significant real estate transactions for the six months ended June 30, 2011 are listed below:

On January 4, 2011, we recognized the 2010 sale of 18.84 acres of land known as Archon land located in Las Colinas, Texas to FRE Real Estate, Inc., a related party under common control, for a sales price of $5.5 million. The buyer assumed the existing mortgage of $4.0 million secured by the property. We recorded a gain of $0.1 million when ownership of the property transferred to the existing lender.

The Company had a 75.0% limited partner interest in Woodmont TCI Group X, LP, a partnership that owned 7.19 acres of land known as Galleria West Lofts land located in Dallas, Texas. The partnership was consolidated in accordance with ASC 810. On January 4, 2011 the partnership transferred ownership of the property to the existing lender and there was no gain or loss recorded on the transfer.

The Company had a 75.0% limited partner interest in Woodmont TCI Group XI, LP, a partnership that owned 1.97 acres of land known as Galleria West Hotel land located in Dallas, Texas. The partnership was consolidated in accordance with ASC 810. On January 4, 2011 the partnership transferred ownership of the property to the existing lender and there was no gain or loss recorded on the transfer.

On January 4, 2011, we recognized the 2010 sale of 9.96 acres of land known as Limestone Canyon II land located in Austin, Texas to FRE Real Estate, Inc., a related party under common control, for a sales price of $0.6 million. We recorded a gain on sale of $0.2 million when ownership of the property transferred to the existing lender.

On January 4, 2011, we recognized the sale of 72.14 acres of land known as Manhattan land located in Farmers Branch, Texas to ABCLD Income, LLC, a related party under common control, for a sales price of $4.1 million. The buyer assumed the existing mortgage of $2.4 million secured by the property. We recorded the sale when ownership of the property transferred to the existing lender.

On January 4, 2011, we recognized the 2010 sale of Teleport Blvd., a 6,833 square foot building and 3.70 acres of land, located in Irving, Texas to FRE Real Estate, Inc., a related party under common control, for a sales price of $0.7 million. We recorded a gain on sale of $0.4 million when ownership of the property transferred to the existing lender.

On January 4, 2011, we recognized the 2010 sale of Westgrove Air Plaza, a 79,652 square foot building, located in Addison, Texas to FRE Real Estate, Inc., a related party under common control, for a sales price of $4.5 million. The buyer assumed the existing mortgage of $2.3 million secured by the property. We recorded a gain of $3.3 million due to recognition of prior period deferred gain when ownership of the property transferred to the existing lender.

On January 26, 2011, we sold 100% of our common stock in TCI Willowbrook Village, Inc. to TX LTS Investments, Inc., a related party under common control, for a sales price of $7.8 million. This entity owns a 179,741 square foot retail shopping center located in Coldwater, Michigan known as Willowbrook Village. We provided $2.2 million in seller financing with a five-year note receivable. The note accrues interest at 6% and is payable at maturity on January 26, 2016. The buyer assumed the existing mortgage of $5.6 million, secured by the property. We have deferred the recognition of the sale in accordance with ASC 360-20 due to our continuing involvement, inadequate initial investment and questionable recovery of investment cost.

The Company had a 75.0% limited partner interest in Woodmont TCI Group XIII, LP, a partnership that owned 8.91 acres of land known as Las Colinas Station land located in Irving, Texas. The partnership was consolidated in accordance with ASC 810. On February 4, 2011 the partnership transferred ownership of the property to the existing lender and there was no gain or loss recorded on the transfer.

The Company had a 75.0% limited partner interest in Woodmont TCI Group IX, LP, a partnership that owned 15.0 acres of land known as Galleria East Center Retail land located in Dallas, Texas. The partnership was consolidated in accordance with ASC 810. On February 4, 2011 the partnership transferred ownership of the property to the existing lender and there was no gain or loss recorded on the transfer.

On March 23, 2011, we sold 82.20 acres of land known as Denton Coonrod land located in Denton, Texas and 23.24 acres of land known as Cooks Lane land located in Tarrant County, Texas to Cross County National Associates, LP, a related party under common control, for a sales price of $2.9 million. We provided $1.6 million in seller-financing with a five-year note receivable. The note accrues interest at 6% and is payable at maturity on March 23, 2016. The buyer assumed the existing mortgage of $1.3 million, secured by the property. We have deferred the recognition of the sale in accordance with ASC 360-20 due to our continuing involvement, inadequate initial investment and questionable recovery of investment cost.

On March 23, 2011, we sold our membership interest in 1340 Poydras Corp. to ABCLD Real Estate, LLC, a related party under common control, for a sales price of $23.5 million. This entity owns a 378,895 square foot building located in New Orleans, Louisiana known as Amoco. The buyer assumed the existing mortgage of $19.5 million, secured by the property. This transaction was rescinded as of the original transaction date and ownership transferred back to TCI.

On March 23, 2011, we sold our investment in TCI Courtyard, Inc. to One Realco Corporation, a related party under common control, for a sales price of $11.2 million. This entity owns Quail Hollow at the Lakes apartments, a 200-unit complex located in Holland, Ohio. The buyer assumed the existing mortgage of $11.2 million, secured by the property. We have deferred the recognition of the sale in accordance with ASC 360-20 due to our continuing involvement, inadequate initial investment and questionable recovery of investment cost.

On March 28, 2011, we sold our investment in ART One Hickory Corporation and ART Two Hickory Corporation to ABCLD Real Estate, LLC, a related party under common control, for a sales price of $19.5 million. These entities own a 97,361 square foot office building known as One Hickory Center and a 96,539 square foot office building known as Two Hickory Center, both located in Dallas, Texas. We provided $0.7 million in seller-financing with a five-year note receivable. The note accrues interest at 6% and is payable at maturity on March 28, 2016. The buyer assumed the existing mortgage of $18.8 million, secured by the property. We have deferred the recognition of the sale in accordance with ASC 360-20 due to our continuing involvement, inadequate initial investment and questionable recovery of investment cost.

On April 1, 2011, we purchased 100% of the general and limited partnership interest in Garden Whispening Pines, LP, which owns Whispering Pines apartments, a 390-unit complex located in Topeka, Kansas, from ARL, a related party under common control, for $11.0 million. We assumed the current mortgage of $9.5 million.

On April 1, 2011, we purchased 100% of the membership interest in EQK Sesame Square, LLC, which owns Sesame Square, a 20,715 square-foot office building located in Anchorage, Alaska, from ARL, a related party under common control, for $2.0 million. We assumed the current mortgage of $1.1 million.

On April 5, 2011, we recognized the sale of 13.22 acres of land known as Hackberry land located in Irving, Texas to One Realco Land Holdings, Inc., a related party under common control, for a sales price of $3.9 million. The buyer assumed the existing mortgage of $3.9 million secured by the property. We recorded a gain on sale of $2.4 million when ownership of the property transferred to the existing lender.

On April 5, 2011, we recognized the sale of 14.43 acres of land known as Fortune Drive land located in Irving, Texas to One Realco Land Holdings, Inc., a related party under common control, for a sales price of $1.7 million. The buyer assumed the existing mortgage of $1.1 million secured by the property. We recorded a loss on sale of $0.4 million when ownership of the property transferred to the existing lender.

On April 5, 2011, we recognized the 2010 sale of 10.69 acres of land known as Temple land, located in Irving, Texas to FRE Real Estate, Inc., a related party under common control, for a sales price of $0.4 million. We recorded a loss on sale of $0.1 million when ownership of the property transferred to the existing lender.

On April 5, 2011, we recognized the sale of 7.11 acres of land known as Pac Trust land located in Irving, Texas to One Realco Land Holdings, Inc., a related party under common control, for a sales price of $1.4 million. The buyer assumed the existing mortgage of $1.4 million secured by the property. We recorded a loss on sale of $0.2 million when ownership of the property transferred to the existing lender.

The Company had a 75.0% limited partner interest in Woodmont TCI Group III, LP, a partnership that owned 5.87 acres of land known as Polo Estates at Bent Tree land located in Dallas, Texas. The partnership was consolidated in accordance with ASC 810. On April 5, 2011 the partnership transferred ownership of the property to the existing lender and we recorded a gain of $3.0 million due to recognition of a prior period deferred gain.

On April 5, 2011, we recognized the sale of 87.62 acres of land known as Wilmer 88 land located in Dallas, Texas, 24.91acres of land known as Crowley land located in Dallas, Texas and 30.07 acres of land known as Creekside land located in Fort Worth, Texas to T Sorrento, Inc., a related party under common control, for a sales price of $4.4 million. The buyer assumed the existing mortgage of $2.4 million secured by the property. We recorded a loss on sale of $2.0 million when ownership of the property transferred to the existing lender.

On June 7, 2011, we recognized the sale of Alpenloan, a 28,594 square foot building and 8.16 acres of land, located in Dallas, Texas to One Realco Retail, Inc., a related party under common control, for a sales price of $0.4 million. We recorded a loss on sale of $0.9 million when ownership of the property transferred to the existing lender.

On June 7, 2011, we recognized the sale of 5.34 acres of land known as Archon land located in Irving, Texas and 1.31 acres of land known as Ackerley land located in Dallas, Texas to One Realco Retail, Inc., a related party under common control, for a sales price of $0.7 million. The buyer assumed the existing mortgage of $0.7 million secured by the property. We recorded a loss on sale of $0.7 million when ownership of the property transferred to the existing lender.

On June 7, 2011, we recognized the sale of Fenton Center, a 707,559 square foot building and 4.70 acres of land, located in Dallas, Texas to ABCLD Properties, LLC, a related party under common control, for a sales price of $67.0 million. We recorded a loss on sale of $7.0 million when ownership of the property transferred to the existing lender.

On June 7, 2011, we recognized the sale of 27.11 acres of land known as Kinwest land located in Irving, Texas to Fenton Real Estate, Inc., a related party under common control, for a sales price of $4.1 million. The buyer assumed the existing mortgage of $4.0 million secured by the property. We recorded a gain on sale of $1.1 million when ownership of the property transferred to the existing lender.

On June 7, 2011, we recognized the sale of 20.85 acres of land known as McKinney Ranch land located in McKinney, Texas to Fenton Real Estate, Inc., a related party under common control, for a sales price of $5.4 million. The buyer assumed the existing mortgage of $5.4 million secured by the property. We recorded a gain on sale of $0.8 million when ownership of the property transferred to the existing lender.

On June 7, 2011, we recognized the sale of 109.85 acres of land known as Payne North land located in Irving, Texas to FRE Real Estate, Inc., a related party under common control, for a sales price of $14.1 million. The buyer assumed the existing mortgage of $12.0 million secured by the property. We recorded a loss on sale of $1.9 million when ownership of the property transferred to the existing lender.

In December 2010, TCI sold 32 properties, which consisted of six commercial buildings comprising an aggregate of 1.4 million square feet, approximately 3,325 acres of undeveloped land, and one ground lease to FRE Real Estate, Inc., a related party under common control, for an aggregate sales price of $191.9 million. During the first three months of 2011, many of these transactions were rescinded as of the original transaction date and were subsequently sold to related parties under the same ownership as FRE Real Estate, Inc. The sales of the ground lease and 210.70 acres of the undeveloped land were rescinded and ownership transferred back to TCI. We have deferred the recognition of the sales in accordance with ASC 360-20 due to our continuing involvement, inadequate initial investment and questionable recovery of investment cost.

We continue to invest in the development of apartment projects. During the six months ended June 30, 2011, we have expended $30.3 million on the construction of various apartment complexes and capitalized $1.8 million of interest costs.

The properties that we have sold to a related party under common control and have deferred the recognition of the sale are treated as "subject to sales contract" on the Consolidated Balance Sheets. These properties were sold to a related party in order to help facilitate an appropriate debt or organizational restructure and may or may not be transferred back to the seller upon resolution. These properties have mortgages that are secured by the property and many have corporate guarantees. According to the loan documents, we are currently in default on these mortgages primarily due to lack of payment although we are actively involved in discussions with every lender in order to settle or cure the default situation. We have reviewed each asset and taken impairment to the extent we feel the value of the property was less than our current basis.

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Consolidated Statements Of Operations (Parenthetical) (USD $) In Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Consolidated Statements Of Operations
Rental and other property revenues, affiliates and related parties	$ 358	$ 908	$ 730	$ 1,766
Property operating expenses, affiliates and related parties	403	429	675	884
General and administrative expenses, affiliates and related parties	906	786	1,748	1,677
Interest income from affiliates and related parties	700	567	1,051	1,220
Mortgage and loan interest, affiliates and related parties	$ 1,269	$ 883	$ 1,567	$ 1,721

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Consolidated Statement Of Shareholders' Equity (Parenthetical)	6 Months Ended
	Jun. 30, 2011
Series C Preferred Stock [Member]
Preferred stock, dividends percentage rate	7.00%
Series D Preferred Stock [Member]
Preferred stock, dividends percentage rate	8.50%

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Operating Segments

6 Months Ended

Jun. 30, 2011

Operating Segments

Operating Segments

NOTE 7. OPERATING SEGMENTS

Our segments are based on our method of internal reporting which classifies our operations by property type. Our property types are grouped into commercial, apartments, land and other operating segments. Significant differences between and among the accounting policies of the operating segments as compared to the Consolidated Financial Statements principally involve the calculation and allocation of administrative expenses. We evaluate the performance of each of the operating segments and allocate resources to them based on their operating income and cash flow.

Items of income that are not reflected in the segments are interest, other income, gain on debt extinguishment, gain on condemnation award, equity in partnerships, and gains on sale of real estate. Expenses that are not reflected in the segments are provision for losses, advisory, net income and incentive fees, general and administrative, non-controlling interests and net loss from discontinued operations before gains on sale of real estate.

Presented below is our reportable segments' operating income for the three and six months ended June 30, 2011 and 2010, including segment assets and expenditures (dollars in thousands):

For the Three Months Ended June 30, 2011	Commercial Properties		Apartments		Land		Other		Total
Operating revenue	$	12,323	$	19,372	$	86	$	4	$	31,785
Operating expenses		5,915		9,873		344		68		16,200
Depreciation and amortization		2,156		3,814		-		-		5,970
Mortgage and loan interest		2,582		8,479		1,995		1,555		14,611
Interest income		-		-		-		704		704
Gain on land sales		-		-		1,285		-		1,285
Segment operating income (loss)	$	1,670	$	(2,794)	$	(968)	$	(915)	$	(3,007)
Capital expenditures		190		89		-		-		279
Assets		232,430		622,628		217,162		-		1,072,220
Property Sales
Sales price	$	67,397	$	-	$	40,141	$	-	$	107,538
Cost of sale		75,274		-		41,846		-		117,120
Deferred current gain		-		-		-		-		-
Recognized prior deferred gain		-		963		2,990		-		3,953
Gain (loss) on sale	$	(7,877)	$	963	$	1,285	$	-	$	(5,629)
For the Three Months Ended June 30, 2010	Commercial Properties		Apartments		Land		Other		Total
Operating revenue	$	11,849	$	18,659	$	92	$	(11)	$	30,589
Operating expenses		6,446		10,513		1,163		7		18,129
Depreciation and amortization		2,364		3,989		-		-		6,353
Mortgage and loan interest		3,495		8,794		2,443		931		15,663
Interest income		-		-		-		832		832
Loss on land sales		-		-		(5,640)		-		(5,640)
Segment operating loss	$	(456)	$	(4,637)	$	(9,154)	$	(117)	$	(14,364)
Capital expenditures		318		-		-		-		318
Assets		244,117		570,011		379,054		-		1,193,182
Property Sales
Sales price	$	5,970	$	25,092	$	17,660	$	-	$	48,722
Cost of sale		6,184		21,418		23,300		-		50,902
Deferred current gain		-		3,599		-		-		3,599
Recognized prior deferred gain		-		-		-		-		-
Gain (loss) on sale	$	(214)	$	75	$	(5,640)	$	-	$	(5,779)

The table below reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations:

	For Three Months Ended June 30,
	2011		2010
Segment operating loss	$	(3,007)	$	(14,364)
Other non-segment items of income (expense)
General and administrative		(2,588)		(1,793)
Advisory fees		(2,626)		(2,962)
Provision on impairment of notes receivable and real estate assets		(25,444)		-
Other income		100		249
Equity in earnings of investees		117		(50)
Deferred tax benefit		2,584		554
Loss from continuing operations	$	(30,864)	$	(18,366)

The table below reconciles the segment information to the corresponding amounts in the Consolidated Balance Sheets:

	For Three Months Ended June 30,
	2011		2010
Segment assets	$	1,072,220	$	1,193,182
Investments in real estate partnerships		7,441		8,938
Other assets		134,414		136,970
Assets held for sale		-		210,021
Total assets	$	1,214,075	$	1,549,111

For the Six Months Ended June 30, 2011	Commercial Properties		Apartments		Land		Other		Total
Operating revenue	$	22,477	$	38,669	$	281	$	12	$	61,439
Operating expenses		12,269		19,429		883		94		32,675
Depreciation and amortization		4,518		7,514		-		-		12,032
Mortgage and loan interest		5,331		15,695		4,900		2,109		28,035
Interest income		-		-		-		1,130		1,130
Gain on land sales		-		-		2,081		-		2,081
Segment operating gain (loss)	$	359	$	(3,969)	$	(3,421)	$	(1,061)	$	(8,092)
Capital expenditures		258		82		-		-		340
Assets		232,430		622,628		217,162		-		1,072,220
Property Sales
Sales price	$	99,911	$	-	$	86,132	$	-	$	186,043
Cost of sale		107,503		-		87,426		-		194,929
Deferred current gain		-		-		-		-		-
Recognized prior deferred gain		3,391		963		3,375		-		7,729
Gain (loss) on sale	$	(4,201)	$	963	$	2,081	$	-	$	(1,157)
For the Six Months Ended June 30, 2010	Commercial Properties		Apartments		Land		Other		Total
Operating revenue	$	24,244	$	36,913	$	160	$	(30)	$	61,287
Operating expenses		12,939		20,608		1,735		56		35,338
Depreciation and amortization		4,742		7,472		-		-		12,214
Mortgage and loan interest		6,920		16,386		5,077		1,994		30,377
Interest income		-		-		-		1,691		1,691
Loss on land sales		-		-		(5,634)		-		(5,634)
Segment operating loss	$	(357)	$	(7,553)	$	(12,286)	$	(389)	$	(20,585)
Capital expenditures		540		260		121		-		921
Assets		244,117		570,011		379,054		-		1,193,182
Property Sales
Sales price	$	5,970	$	25,092	$	17,669	$	-	$	48,731
Cost of sale		6,184		21,418		23,303		-		50,905
Deferred current gain		-		3,599		-		-		3,599
Recognized prior deferred gain		-		-		-		-		-
Gain (loss) on sale	$	(214)	$	75	$	(5,634)	$	-	$	(5,773)

The table below reconciles the segment information to the corresponding amounts in the Consolidated Statements of Operations:

	For Six Months Ended June 30,
	2011		2010
Segment operating loss	$	(8,092)	$	(20,585)
Other non-segment items of income (expense)
General and administrative		(4,730)		(3,619)
Advisory fees		(5,246)		(6,058)
Provision on impairment of notes receivable and real estate assets		(31,503)		-
Other income		1,314		914
Equity in earnings of investees		57		(112)
Deferred tax benefit		1,637		431
Loss from continuing operations	$	(46,563)	$	(29,029)

The table below reconciles the segment information to the corresponding amounts in the Consolidated Balance Sheets:

	For Six Months Ended June 30,
	2011		2010
Segment assets	$	1,072,220	$	1,193,182
Investments in real estate partnerships		7,441		8,938
Other assets		134,414		136,970
Assets held for sale		-		210,021
Total assets	$	1,214,075	$	1,549,111

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Subsequent Events

6 Months Ended

Jun. 30, 2011

Subsequent Events

Subsequent Events

NOTE 11. SUBSEQUENT EVENTS

Subsequent to the period ending June 30, 2011, several properties that were sold to a related party and treated on the books as "subject to sales contract" have been transferred back to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been recorded in 2010 and 2011 and the sales that were deferred will be recognized in July and August 2011 when ownership transferred to a third party.

On July 1, 2011, we sold 12.74 acres of land known as Centurion 12 land located in Fort Worth, Texas for a sales price of $1.1 million.

On July 5, 2011, a warehouse and 13.0 acres of land known as Eagle Crest located in Farmers Branch, Texas, which was sold to a related party and treated on the books as "subject to sales contract", was transferred to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been realized in 2011 and the sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

On July 5, 2011, Three Hickory land located in Farmers Branch, Texas, which was sold to a related party and treated on the books as "subject to sales contract", was transferred to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been realized in 2011 and the sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

On July 5, 2011, One Hickory Centre and Two Hickory Centre, office buildings located in Dallas, Texas, both of which were sold to a related party and treated on the books as "subject to sales contract", were transferred to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been realized in 2011 and the sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

On July 5, 2011, Windmill Farms-Harlan land located in Kaufman County, Texas, which was sold to a related party and treated on the books as "subject to sales contract", was transferred to the lender for credit against the loan balance. The sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

On August 2, 2011, Centura land located in Dallas, Texas, which was sold to a related party and treated on the books as "subject to sales contract", was transferred to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been realized in 2011 and the sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

On August 2, 2011, seven properties comprising approximately 2,713.68 acres of undeveloped land located in Irving, Farmers Branch and Forney, Texas, all of which were sold to a related party and treated on the books as "subject to sales contract", were transferred to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been realized in 2011 and we do not anticipate any additional gain or loss. The sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

On August 2, 2011, Signature Athletic Club, an office building located in Dallas, Texas, which was sold to a related party and treated on the books as "subject to sales contract", was transferred to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been realized in 2011 and the sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

On August 2, 2011, Parkway North, an office building located in Dallas, Texas, which was sold to a related party and treated on the books as "subject to sales contract", was transferred to the lender for credit against the loan balance. Any impairment necessary related to the inability to recover our original investment has been realized in 2011 and the sale that was deferred will be recognized in the third quarter, when ownership transferred to a third party.

On August 2, 2011, Las Colinas Station land, a land parcel owned by TCI Woodmont Group XIII, LP, which the Company has a 75% limited partner interest in, was transferred to the lender for credit against the loan balance. This property was impaired in 2008 and 2009 and we do not anticipate any additional losses.

On August 5, 2011, we sold our 30% limited partner interest in a partnership that owned a 120-unit apartment complex known as Westwood apartments, located in Mary Ester, Florida for a sales price of $7.1 million.

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Consolidated Balance Sheets (USD $) In Thousands	Jun. 30, 2011	Dec. 31, 2010
Assets
Real estate, at cost	$ 1,048,466	$ 1,074,635
Real estate subject to sales contracts at cost, net of depreciation ($54,940 for 2011 and $58,579 for 2010)	131,270	232,495
Less accumulated depreciation	(107,516)	(94,016)
Total real estate	1,072,220	1,213,114
Notes and interest receivable
Performing (including $58,246 in 2011 and $66,011 in 2010 from affiliates and related parties)	60,614	71,766
Less allowance for estimated losses (including $2,097 in 2011 and $3,061 in 2010 from affiliates and related parties)	(3,777)	(4,741)
Total notes and interest receivable	56,837	67,025
Cash and cash equivalents	7,067	11,259
Investments in unconsolidated subsidiaries and investees	7,441	8,146
Other assets	70,510	85,217
Total assets	1,214,075	1,384,761
Liabilities and Shareholders' Equity
Notes and interest payable	800,362	831,322
Notes related to subject to sales contracts	125,083	190,693
Affiliate payables	33,885	47,261
Deferred gain (from sales to related parties)	80,709	82,841
Accounts payable and other liabilities (including $1,680 in 2011 and $1,466 in 2010 from affiliates and related parties)	40,514	49,196
Total liabilities	1,080,553	1,201,313
Shareholders' equity:
Preferred stock, Series C: $.01 par value, authorized 10,000,000 shares, issued and outstanding 30,000 shares in 2011 and 2010 respectively (liquidation preference $100 per share). Series D: $.01 par value, authorized, issued and outstanding 100,000 shares in 2011 and 2010 respectively	1	1
Common stock, $.01 par value, authorized 10,000,000 shares; issued 8,413,669 and 8,113,669 for 2011 and 2010 and outstanding 8,413,469 and 8,113,469 for 2011 and 2010	84	81
Treasury stock at cost; 200 shares in 2011 and 2010	(2)	(2)
Paid-in capital	274,405	271,682
Retained earnings	(154,662)	(101,914)
Total Transcontinental Realty Investors, Inc. shareholders' equity	119,826	169,848
Non-controlling interest	13,696	13,600
Total equity	133,522	183,448
Total liabilities and equity	$ 1,214,075	$ 1,384,761