10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020

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.)

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

(Address of principal executive offices) (Zip Code)

(469) 522-4200

(Registrant’s telephone number, including area code)

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

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

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

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

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

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

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

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

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	8,717,767
(Class)	(Outstanding at November 12, 2020)

TRANSCONTINENTAL REALTY INVESTORS, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		PAGE
Item 1.	Financial Statements	3
	Consolidated Balance Sheets at September 30, 2020 and December 31, 2019	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019	4
	Consolidated Statement of Equity for the three and nine months ended September 30, 2020 and 2019	5
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	25
Item 4.	Controls and Procedures	25
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
Signatures		29

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS 

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

(Unaudited)

	September 30, 2020			December 31, 2019
Assets
Real estate, net	$	380,715		$	387,790
Notes receivable (including $66.287 in 2020 and $57,817 in 2019 from related parties)		123,854			112,357
Cash and cash equivalents		32,967			51,179
Restricted cash		28,030			32,082
Investment in unconsolidated joint ventures		71,171			81,780
Receivable from related parties		140,050			141,541
Other assets		68,558			59,189
Total assets	$	845,345		$	865,918
Liabilities and Equity
Liabilities:
Mortgages and notes payable	$	242,300		$	245,773
Bonds payable		203,192			223,265
Accounts payable and other liabilities (including $937 in 2020 and $935 in 2019 to related parties)		24,642			26,115
Accrued interest payable		3,281			7,230
Deferred revenue		9,315			9,468
Total liabilities		482,730			511,851
Equity
Shareholders' Equity:
Common stock, $0.01 par value, authorized 10,000,000 shares; issued 8,717,967 shares at September 30, 2020 and December 31, 2019.		87			87
Treasury stock at cost, 200 shares in 2020 and 2019		(2	)		(2	)
Paid-in capital		257,853			257,853
Retained earnings		82,813			74,665
Total shareholders' equity		340,751			332,603
Non-controlling interest		21,864			21,464
Total equity		362,615			354,067
Total liabilities and equity	$	845,345		$	865,918

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

3

TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share amounts)

(Unaudited)

	For the Three Months Ended  September 30,						For the Nine Months Ended  September 30,
	2020			2019			2020			2019
Revenues:
Rental revenues (including $262 and $212 for the three months and $673 and $527 for the nine months ended 2020 and 2019, respectively, from related parties)	$	11,453		$	11,407		$	34,461		$	34,352
Other income		706			1,990			3,885			7,394
Total revenues		12,159			13,397			38,346			41,746
Expenses:
Property operating expenses (including $254 and $237 for the three months ended and $750 and $741 for the nine months ended 2020 and 2019, respectively, from related parties)		6,388			5,403			18,507			18,722
Depreciation and amortization		3,526			3,416			10,338			9,964
General and administrative (including $1,017 and $935 for the three months ended and $2,783 and $3,355 for the nine months ended 2020 and 2019, respectively, from related parties)		1,643			1,929			7,063			6,468
Advisory fee to related party		2,139			2,200			6,483			6,196
Total operating expenses		13,696			12,948			42,391			41,350
Net operating (loss) income		(1,537	)		449			(4,045	)		396
Interest income (including $3,752 and $4,618 for the three months ended and $11,255 and $13,483 for the nine months ended 2020  and 2019, respectively, from related parties)		4,348			5,232			13,102			14,668
Interest expense (including $380 and $514 for the three months ended and $1,193 and $1,517 for the nine months ended 2020 and 2019, respectively, from related parties)		(6,291	)		(8,037	)		(21,999	)		(23,642	)
(Loss) gain on foreign currency transaction		(1,470	)		(5,153	)		774			(13,296	)
Loss on extinguishment of debt		—			(5,219	)		—			(5,219	)
Income (losses) from unconsolidated joint ventures		365			(178	)		(740	)		(1,474	)
Gain on sales or write-down of assets		12,328			5,140			21,802			9,409
Income tax expense		(50	)		—			(346	)		—
Net income (loss)		7,693			(7,766	)		8,548			(19,158	)
Net income attributable to non-controlling interest		—			(21	)		(400	)		(583	)
Net income (loss) attributable to common shares	$	7,693		$	(7,787	)	$	8,148		$	(19,741	)
Earnings (loss)  per share - attributable to common shares
Basic and diluted	$	0.88		$	(0.89	)	$	0.93		$	(2.26	)
Weighted-average number of common shares outstanding:
Basic and diluted		8,717,767			8,717,767			8,717,767			8,717,767

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

4

TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED STATEMENT OF EQUITY 

(dollars in thousands, except share amounts)

(Unaudited)

	Common Stock				Treasury			Paid-in			Retained			Total Shareholders'			Non-controlling		Total
	Shares		Amount		Stock			Capital			Earnings			Equity			Interest		Equity
For the three months ended September 30, 2020
Balance, June 30, 2020		8,717,967	$	87	$	(2	)	$	257,853		$	75,120		$	333,058		$	21,864	$	354,922
Net income		—		—		—			—			7,693			7,693			—		7,693
Balance, September 30, 2020		8,717,967	$	87	$	(2	)	$	257,853		$	82,813		$	340,751		$	21,864	$	362,615
For the three months ended September 30, 2019
Balance, June 30, 2019		8,717,967	$	87	$	(2	)	$	257,938		$	89,631		$	347,654		$	21,243	$	368,897
Distribution to equity partner		—		—		—			(85	)		—			(85	)		—		(85	)
Net loss		—		—		—			—			(7,787	)		(7,787	)		21		(7,766	)
Balance, September 30, 2019		8,717,967	$	87	$	(2	)	$	257,853		$	81,844		$	339,670		$	21,264	$	361,046
For the nine months ended September 30, 2020
Balance, December 31, 2019		8,717,967	$	87	$	(2	)	$	257,853		$	74,665		$	332,603		$	21,464	$	354,067
Net income		—		—		—			—			8,148			8,148			400		8,548
Balance, September 30, 2020		8,717,967	$	87	$	(2	)	$	257,853		$	82,813		$	340,751		$	21,864	$	362,615
For the nine months ended September 30, 2019
Balance, December 31, 2018		8,717,967	$	87	$	(2	)	$	258,050		$	101,585		$	359,720		$	20,681	$	380,401
Distribution to equity partner		—		—		—			(197	)		—			(197	)		—		(197	)
Net loss		—		—		—			—			(19,741	)		(19,741	)		583		(19,158	)
Balance, September 30, 2019		8,717,967	$	87	$	(2	)	$	257,853		$	81,844		$	339,782		$	21,264	$	361,046

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

5

TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

	For the Nine Months Ended September 30,
	2020			2019
Cash Flow From Operating Activities:
Net income (loss)	$	8,548		$	(19,158	)
Adjustments to reconcile net income (loss) to used in operating activities:
(Gain) loss on foreign currency transactions		(774	)		13,296
Loss on debt extinguishment		—			5,219
Gain on sales or write-down of assets		(21,802	)		(9,409	)
Depreciation and amortization		13,023			12,818
Loss from unconsolidated joint ventures		740			1,474
Distribution of income from unconsolidated joint ventures		1,782			—
Changes in assets and liabilities, net of dispositions:
Other assets		(14,179	)		12,888
Related party receivables		1,491			(35,257	)
Accrued interest payable		(94	)		(1,557	)
Accounts payable and other liabilities		(3,745	)		5,441
Deferred revenue		(153	)		4,957
Net cash used in operating activities		(15,163	)		(9,288	)
Cash Flow From Investing Activities:
Collection of notes receivables		3,467			255
Origination and advances on notes receivable		(15,718	)		(7,262	)
Acquisition of real estate		(2,664	)		(3,422	)
Development and renovation of real estate		(12,488	)		(31,311	)
Deferred leasing costs		(96	)		—
Proceeds from sale of real estate		31,768			23,030
Distributions from unconsolidated joint ventures		8,086			1,928
Net cash provided by (used in) investing activities		12,355			(16,782	)
Cash Flow From Financing Activities:
Proceeds from mortgages and notes payable		10,234			16,934
Payments on mortgages and notes payable		(7,912	)		(45,623	)
Proceeds from bonds payable		—			78,125
Payments on bonds payable		(21,724	)		(21,742	)
Debt extinguishment costs		—			(3,799	)
Deferred finance costs		(54	)		(4,241	)
Distributions to equity partner		—			(197	)
Net cash (used in) provided by financing activities		(19,456	)		19,457
Net decrease in cash, cash equivalents and restricted cash		(22,264	)		(6,613	)
Cash, cash equivalents and restricted cash, beginning of period		83,261			106,565
Cash, cash equivalents and restricted cash, end of period	$	60,997		$	99,952
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized	$	21,109		$	27,470
Schedule of noncash investing and financing activities:
Land acquired in exchange for note payable	$	3,350		$	—
Note receiveable issued in exchange for property	$	1,761		$	—
Debt assumed in sale of properties	$	8,238		$	—
Land received in exhange for note receivable	$	—		$	1,800

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

6

TRANSCONTINENTAL REALTY INVESTORS, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

1. Organization

As used herein, the terms “the Company”, “We”, “Our”, or “Us” refer to Transcontinental Realty Investors, Inc. a Nevada corporation which was formed in 1984. Our common stock is listed and trades on the New York Stock Exchange (“NYSE”) under the symbol “TCI”.

We are a “C” corporation for U.S. federal income tax purposes and files an annual consolidated income tax return with American Realty Investors, Inc. (“ARL”), whose common stock is traded on the NYSE under the symbol “ARL”. ARL owns 78.38% and the parent of ARL owns 7.20% of the Company.

Our primary business is the acquisition, development and ownership of income-producing multifamily apartment communities and commercial real estate properties. In addition, we opportunistically acquire land for future development in in-fill or high-growth suburban markets. From time to time and when we believe it appropriate to do so, we will also sell land and income-producing properties. We generate revenues by leasing apartment units to residents, and leasing office, industrial and retail space to various for-profit businesses as well as certain local, state and federal agencies. We also generate revenues from gains on sales of income-producing properties and land.

At September 30, 2020, our portfolio of income-producing properties consisted of:

● Six commercial properties consisting of five office buildings and one retail property comprising in aggregate of approximately 1.6 million square feet;

● Ten multifamily apartment communities owned directly by us comprising in 1,639 units, excluding apartments being developed;

● Approximately 1,980 acres of developed and undeveloped land; and

● Fifty-one multifamily apartment communities totaling 10,137 units owned by our 50% owned investee Victory Abode Apartments, LLC (“VAA”).

Our day to day operations are managed by Pillar Income Asset Management, Inc. (“Pillar”). Their duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities and arranging debt and equity financing with third party lenders and investors. All of the Companies employees are Pillar employees.

Our commercial properties are managed by Regis Realty Prime, LLC (“Regis”). Regis provides leasing, construction management and brokerage services. Our multifamily apartment communities are managed by outside management companies.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.

The consolidated balance sheet at December 31, 2019 was derived from the audited consolidated financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2019. Certain 2019 consolidated financial statement amounts have been reclassified to conform to the current presentation.

7

TRANSCONTINENTAL REALTY INVESTORS, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

We consolidate entities in which we are considered to be the primary beneficiary of a variable interest entity (“VIE”) or have a majority of the voting interest of the entity. We have determined that we are a primary beneficiary of the VIE when we have (i) the power to direct the activities of a VIE that most significantly impacts its economic performance, and (ii) the obligations to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether we are the primary beneficiary, we consider qualitative and quantitative factors, including ownership interest, management representation, ability to control decision and other contractual rights.

We account for entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary under the equity method of accounting. Accordingly, we include our share of the net earnings or losses of these entities in our results of operations.

Newly Issued Accounting Standards

In October 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This standard is intended to improve the accounting when considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. The effective date of the amendments is for fiscal years, and interim periods within those years, beginning after December 15, 2019. The adoption of the standard on January 1, 2020, did not have a material impact on our financial position and results of operations.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard provides guidance, optional expedients and exceptions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The standard was effective upon issuance and can be applied through December 31, 2022. We have mortgage notes payable with interest rates that reference LIBOR, and therefore, we will adopt this standard when LIBOR is discontinued.

On April 10, 2020, the FASB issued a Staff Q&A (“Q&A”) related to the application of the lease guidance in ASC 842 for the accounting impact of lease concessions related to the COVID-19 pandemic. The Q&A, allows an entity to make an election to account for lease concessions related to the effects of the COVID-19 as though enforceable rights and obligations for those concessions existed. As a result of this election, an entity will not have to analyze each lease to determine whether enforceable rights and obligations for concessions exist in the lease and can elect to apply or not apply the lease modification guidance in ASC 842, as long as the concessions do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. Our adoption of the guidance of the Q&A did not have a significant impact on our consolidated financial statements during the nine months ended September 30, 2020.

8

TRANSCONTINENTAL REALTY INVESTORS, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

3. Earnings per Share

Earnings per share (“EPS”) have been computed by dividing income available to common shares 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.

The following table details our basic and diluted earnings per common share calculation:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2020		2019			2020			2019
Net income (loss)	$	7,693	$	(7,766	)	$	8,548		$	(19,158	)
Net (income) attributable to non-controlling interest		—		(21	)		(400	)		(583	)
Net income (loss) attributable to common shares	$	7,693	$	(7,787	)	$	8,148		$	(19,741	)
Weighted-average common shares outstanding — basic and diluted		8,717,767		8,717,767			8,717,767			8,717,767
EPS - attributable to common shares — basic and diluted	$	0.88	$	(0.89	)	$	0.93		$	(2.26	)

4. Supplemental Cash Flow Information

The following is a reconciliation of our cash and cash equivalents, and restricted cash to the total presented in the consolidated statement of cash flows:

	For the Period Ended September 30,
	2020		2019
Beginning of period
Cash and cash equivalents	$	51,179	$	36,358
Restricted cash		32,082		70,207
Cash, cash equivalents and restricted cash	$	83,261	$	106,565
End of period
Cash and cash equivalents	$	32,967	$	63,069
Restricted cash		28,030		36,883
Cash, cash equivalents and restricted cash	$	60,997	$	99,952

Amounts included in restricted cash represent funds required to be set aside to meet contractual obligations with certain financial institutions for the payment of reserve replacement, tax and insurance escrow. In addition, restricted cash includes funds for bond principle and interest payments (See Note 11 – Bonds Payable).

9

TRANSCONTINENTAL REALTY INVESTORS, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

5. Operating Segments

Our segments are based on the internal reporting that we review for operational decision-making purposes. We operate in two reportable segments: (i) the acquisition, development, ownership and management of multifamily apartment communities and (ii) the acquisition, ownership and management of commercial real estate properties. The services for our multifamily segment include rental of apartments and other tenant services, including parking and storage space rental. Asset information by segment is not reported because we do not use this measure to assess performance or make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments. General and administrative expenses, advisory fees, interest income and interest expense are not included in segment profit as our internal reporting addresses these items on a corporate level.

The following table presents our reportable segments for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Multifamily Segment
Revenues	$	3,683		$	3,383		$	10,943		$	10,077
Operating expenses		(2,412	)		(2,243	)		(6,466	)		(6,363	)
Profit from segment		1,271			1,140			4,477			3,714
Commercial Segment
Revenues		7,770			8,024			23,518			24,275
Operating expenses		(3,976	)		(3,160	)		(12,041	)		(12,359	)
Profit from segment		3,794			4,864			11,477			11,916
Total profit from segments	$	5,065		$	6,004		$	15,954		$	15,630

The table below reflects the reconciliation of total profit from segments to net income (loss) for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Total profit from segments	$	5,065		$	6,004		$	15,954		$	15,630
Other non-segment items of income (expense)
Depreciation		(3,526	)		(3,416	)		(10,338	)		(9,964	)
General and administrative		(1,643	)		(1,930	)		(7,063	)		(6,468	)
Advisory fee to related party		(2,139	)		(2,199	)		(6,483	)		(6,196	)
Interest income		4,348			5,232			13,102			14,668
Other income		706			1,990			3,885			7,394
Interest expense		(6,291	)		(8,037	)		(21,999	)		(23,642	)
(Loss) gain on foreign currency transaction		(1,470	)		(5,153	)		774			(13,296	)
Loss on extinguishment of debt		—			(5,219	)		—			(5,219	)
Income (losses) from unconsolidated joint ventures		365			(178	)		(740	)		(1,474	)
Gain on sales or write-down of assets		12,328			5,140			21,802			9,409
Income tax expense		(50	)		—			(346	)		—
Net income (loss)	$	7,693		$	(7,766	)	$	8,548		$	(19,158	)

10

TRANSCONTINENTAL REALTY INVESTORS, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

6. Leases

We lease our multifamily apartment communities and commercial properties under agreements that are classified as operating leases. Our multifamily leases generally include minimum rents and charges for ancillary services. Our commercial property leases generally included minimum rents and recoveries for property taxes and common area maintenance. Minimum rental revenues are recognized on a straight-line basis over the terms of the related leases.

The following table summarizes the components of rental revenue for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Fixed component	$	11,107	$	10,827	$	33,111	$	32,963
Variable component		346		580		1,350		1,389
	$	11,453	$	11,407	$	34,461	$	34,352

The following table summarizes the future rental payments to us from under non-cancelable leases. The table exclude multifamily leases, which typically have a term of one-year or less:

Twelve months ended September 30, 2020	Amount
2021	$	6,444
2022		23,155
2023		20,038
2024		14,606
2025		8,737
Thereafter		7,071
	$	80,051

7. Real Estate Activity

Below is a summary of the real estate owned as of September 30, 2020 and December 31, 2019:

	September 30,			December 31,
	2020			2019
Land	$	50,759		$	49,887
Building and improvements		297,068			286,280
Tenant improvements		49,423			49,431
Construction in progress		77,116			84,399
		474,366			469,997
Less accumulated deprecation		(97,883	)		(90,173	)
		376,483			379,824
Property held for sale		4,232			7,966
Total	$	380,715		$	387,790

11

TRANSCONTINENTAL REALTY INVESTORS, INC. 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

The gain (loss) on sale or write-down of assets, net for the three and nine months ended September 30, 2020 and 2019 consist of the following:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2020			2019		2020			2019
Land(1)	$	5,774		$	5,140	$	15,248		$	9,489
Residential Properties(2)		3,704			—		3,704			(80	)
Commercial Properties(3)		4,609			—		4,609			—
Other(4)		(1,759	)		—		(1,759	)		—
Total	$	12,328		$	5,140	$	21,802		$	9,409

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

(2) On September 14, 2020, we sold Bridgeview Plaza, a 122,205 square foot retail center in La Crosse, Wisconsin for $5,250, resulting in a gain on sale of $4,744. The proceeds from the sale were used to pay off the $3,375 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable) and for general corporate purposes.

(3) On May 1, 2020, we sold Villager Apartments, a 33 unit multifamily apartment community in Pensacola, Florida for $2,426, resulting in a gain on sale of $898. The sales price was funded by the issuance of a $1,761 note receivable and the assumption of the $665 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable). On July 16, 2020, we sold Farnham Park Apartments, a 144 unit multifamily apartment community in Port Arthur, Texas for $13,300, resulting in a gain on the sale of of $2,684. The sales price was funded by cash payment of $4,215 and the assumption of the $9,085 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable).

(4) Includes the write-off of development costs.

12

TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

8. Notes Receivable

The following table summarizes our notes receivable as of September 30, 2020 and December 31, 2019:

	Carrying value
Property/Borrower	September 30, 2020		December 31, 2019		Interest Rate			Maturity Date
ABC Land and Development, Inc.	$	7,408	$	7,408		9.50	%		06/21
ABC Paradise, LLC		1,210		1,210		9.50	%		06/21
Autumn Breeze(1)		1,807		1,302		5.00	%		10/21
Bellwether Ridge(1)		3,559		3,765		5.00	%		11/20
Big River NV LLC		344		—		—			07/20
Forest Pines Phase I(1)		2,869		2,868		5.00	%		11/20
JEM Holdings, Inc.		300		300		6.00	%		07/16
One Realco Land Holding, Inc.		1,728		1,728		9.50	%		06/21
Oulad-Chikh Family Trust		174		174		8.00	%		03/21
Parc at Ingleside(1)		2,294		1,531		5.00	%		12/21
Parc at Windmill Farms(1)		7,949		7,602		5.00	%		11/20
Phillips Foundation for Better Living, Inc.		—		314		12.00	%		03/22
Plum Tree(1)		792		413		5.00	%		10/21
Prospectus Endeavors 4, LLC		5,907		5,907		12.00	%		01/23
Prospectus Endeavors 6, LLC		496		496		12.00	%		10/22
Riverview on the Park Land, LLC		1,045		1,045		9.50	%		06/21
RNC Revolving Line of Credit		8,853		8,802		5.00	%		09/24
Spyglass of Ennis(1)		5,359		5,288		5.00	%		11/20
Steeple Crest(1)		6,498		6,665		5.00	%		08/21
TPS Income, Inc.		4,554		4,554		6.00	%		09/20
Unified Housing Foundation, Inc. (2)		10,401		10,401		12.00	%		12/21
Unified Housing Foundation, Inc. (2)		10,096		10,096		12.00	%		03/22
Unified Housing Foundation, Inc. (2)		2,882		3,795		12.00	%		07/21
Unified Housing Foundation, Inc. (2)		212		212		12.00	%		08/21
Unified Housing Foundation, Inc. (2)		7,051		6,831		12.00	%		03/23
Unified Housing Foundation, Inc. (2)		3,615		—		12.00	%		05/23
Unified Housing Foundation, Inc. (2)		6,831		—		12.00	%		10/21
Unified Housing Foundation, Inc. (2)		495		525		12.00	%		12/21
Unified Housing Foundation, Inc. (2)		19,125		19,125		12.00	%		12/32
Total	$	123,854	$	112,357

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

(2) Principal and interest payments on the notes from Unified Housing Foundation, Inc. (“UHF”) are funded from surplus cash flow from operations, sale or refinancing of the underlying properties and are cross collateralized to the extent that any surplus cash available from any of the properties underlying the notes. UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable.

13

TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

9. Investment in Unconsolidated Joint Ventures

The following is a summary of the financial position and results of operations of our unconsolidated joint ventures:

	September 30, 2020								December 31, 2019
	VAA			ARL		Total			VAA			ARL		Total
Assets
Property, net	$	1,224,905		$	31,719	$	1,256,624		$	1,242,957		$	35,213	$	1,278,170
Other assets		56,660			69,165		125,825			62,222			67,441		129,663
Total Assets	$	1,281,565		$	100,884	$	1,382,449		$	1,305,179		$	102,654	$	1,407,833
Liabilities and partners' capital
Mortgage and other notes payable	$	832,819		$	6,702	$	839,521		$	832,779		$	8,327	$	841,106
Other liabilities		270,534			23,599		294,133			271,290			26,947		298,237
Company's capital		89,106			635		89,741			100,555			606		101,161
Outside partner's capital		89,106			69,948		159,054			100,555			66,774		167,329
Total liabilties and partners' capital	$	1,281,565		$	100,884	$	1,382,449		$	1,305,179		$	102,654	$	1,407,833
Investments in unconsolidated joint ventures
Company's capital	$	89,106		$	635	$	89,741		$	100,555		$	606	$	101,161
Basis adjustments		(40,601	)		22,031		(18,570	)		(41,407	)		22,026		(19,381	)
Investment in unconsolidated joint ventures	$	48,505		$	22,666	$	71,171		$	59,148		$	22,632	$	81,780

	For the Three Months Ended September 30,
	2020									2019
	VAA			ARL			Total			VAA			ARL			Total
Revenue
Rents	$	29,998		$	—		$	29,998		$	27,347		$	60		$	27,407
Other		1,593			3,000			4,593			2,310			114			2,424
Interest		1			1,075			1,076			56			1,622			1,678
Total revenue		31,592			4,075			35,667			29,713			1,796			31,509
Expenses
Operating		16,172			(470	)		15,702			14,138			860			14,998
Depreciation and amortization		7,832			—			7,832			16,036			—			16,036
Interest		13,839			1,331			15,170			15,424			2,383			17,807
Other expenses (income)		(556	)		—			(556	)		699			—			699
Total expenses		37,287			861			38,148			46,297			3,243			49,540
Net (loss) income	$	(5,695	)	$	3,214		$	(2,481	)	$	(16,584	)	$	(1,447	)	$	(18,031	)
Company's equity in net (loss) income	$	336		$	29		$	365		$	(165	)	$	(13	)	$	(178	)

  

	For the Nine Months Ended September 30,
	2020								2019
	VAA			ARL		Total			VAA			ARL		Total
Revenue
Rents	$	86,841		$	—	$	86,841		$	79,435		$	60	$	79,495
Other		4,034			5,269		9,303			6,550			4,262		10,812
Interest		38			3,358		3,396			139			4,845		4,984
Total revenue		90,913			8,627		99,540			86,124			9,167		95,291
Expenses
Operating		47,463			453		47,916			42,345			2,339		44,684
Depreciation and amortization		23,253			—		23,253			46,792			—		46,792
Interest		43,107			4,296		47,403			45,294			6,154		51,448
Other expenses (income)		(1,453	)		—		(1,453	)		2,058			—		2,058
Total expenses		112,370			4,749		117,119			136,489			8,493		144,982
Net (loss) income	$	(21,457	)	$	3,878	$	(17,579	)	$	(50,365	)	$	674	$	(49,691	)
Company's equity in net (loss) income	$	(775	)	$	35	$	(740	)	$	(1,480	)	$	6	$	(1,474	)

14

TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

10. Mortgages and Notes Payable

The following table summarizes our mortgages and other notes payable as of September 30, 2020 and December 31, 2019:

	Carrying value
Property / Entity	September 30, 2020		December 31, 2019		Effective Interest Rate			Maturity Date
600 Las Colinas Building	$	35,773	$	36,302		5.30	%	11/1/2023
770 South Post Oak  Building		11,924		12,077		4.40	%	6/1/2025
Bridgeview Plaza Shopping Center(1)		—		3,824		7.75	%	11/1/2020
Chelsea Apartments		8,627		8,749		3.40	%	12/1/2050
EQK Portage-Kent Ohio Land(2)		3,350		—		10.00	%	11/13/2024
Estate of Robert Shaw(3)		13,065		13,032		9.50	%	7/5/2020
Farnham Apartments(4)		—		9,144		3.39	%	12/1/2050
Forest Pines Phase II Apartments(5)		7,057		—		3.75	%	5/5/2024
Forest Pines Phase II(5)		—		1,390		3.75	%	5/5/2024
Landing Apartments		15,286		15,467		3.50	%	9/1/2053
LD Athens Lindsay Ln Land		1,155		1,155		5.90	%	2/28/2021
Legacy at Pleasant Grove Apartments		13,727		13,944		3.60	%	4/1/2048
McKinney 36 Land		856		944		8.00	%	6/30/2022
Overlook at Allensville Phase II Apartments		15,666		15,798		3.80	%	5/1/2059
Parc at Denham Spring Phase II Apartments		16,168		14,785		4.10	%	2/1/2060
Stanford Center Building		39,191		39,255		6.00	%	12/26/2021
Sugar Mill Phase III Apartments		—		5,908		4.50	%	2/1/2060
Sugar Mill Phase III Apartments		8,906		—		4.50	%	2/1/2060
Toulon Apartments		18,283		18,465		3.20	%	12/1/2051
Villager Apartments(6)		—		556		2.50	%	3/1/2043
Villas at Bon Secour Apartments		10,860		11,026		4.00	%	1/1/2022
Vista Ridge Apartments		10,015		10,122		4.00	%	8/1/2053
Windmill Farms Land		12,391		13,830		6.00	%	2/28/2021
Total	$	242,300	$	245,773

(1) On September 14, 2020, we paid off the loan in connection with the sale of the underlining property (See Note 7 – Real Estate Activity).

(2) On March 5, 2020, we acquired 49.2 acres of land in Kent, Ohio in exchange for the note payable.

(3) We are currently negotiating an extension of the loan with the lender.

(4) On July 16, 2020, the loan was assumed by a third party in connection with the sale of the underlying property (See Note 7 – Real Estate Activity).

(5) The loan bears interest at prime rate plus 0.5%.

(6) On May 1, 2020, the loan was assumed by a third party in connection to sale of the underlying property (See Note 7 – Real Estate Activity).

11. Bonds Payable

We have issued bonds through our subsidiary, Southern Properties Capital LTD, which are listed and trade on the Tel Aviv Stock Exchange. Payments of principal and interest are denominated in New Israeli Shekels. In connection with the principal and interest payments, we incurred a (loss) gain on foreign currency transactions of ($1,470) and ($5,153) for the three months ended September 30, 2020 and 2019, respectively, and $744 and ($13,296) for the nine months ended September 30, 2020 and 2019, respectively.

15

TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

The following table summarizes the bonds payable as of September 30, 2020 and December 31, 2019:

	September 30,			December 31,
	2020			2019			Maturity Date
Bonds (Series A)	$	69,747		$	92,653		7/31/2023
Bonds (Series B)		61,029			60,764		7/31/2025
Bonds (Series C)		79,919			79,572		1/31/2023
Total outstanding bonds		210,695			232,989
Less: unamortized deferred bond issuance costs		(7,503	)		(9,724	)
Total outstanding bonds, net	$	203,192		$	223,265

12. Deferred Income

In previous years, we sold properties to related parties where we have had continuing involvement in the form of management or financial assistance associated with the sale of the properties. Because of the continuing involvement associated with the sale, the sales criteria for the full accrual method is not met, and as such we deferred some or all of the gain recognition and accounted for the sale by applying the finance, deposit, installment or cost recovery methods, as appropriate, until the sales criteria is met. The gain on these transactions have been deferred until the properties are sold to a non-related third party. As of September 30, 2020 and December 31, 2019, we had deferred gain of $9,315 and $9,468, respectively.

13. Related Party Transactions

Rental income includes $262 and $212 for the three months ended September 30, 2020 and 2019, respectively, and $673 and $527 for the nine months ended September 30, 2020 and 2019, respectively, for office space leased to Pillar, Regis and VAA.

Property operating expense includes $254 and $237 for the three months ended September 30, 2020 and 2019, respectively, and $750 and $741 for the nine months ended September 30, 2020 and 2019, respectively, for management fees on commercial properties payable to Regis.

General and administrative expense includes $1,017 and $935 for the three months ended September 30, 2020 and 2019, respectively, and $2,783 and $3,355 for the nine months ended September 30, 2020 and 2019, respectively, for employee compensation and other reimbursable costs payable to Pillar.

Advisor fees are were $2,139 and $2,200 for the three months ended September 30, 2020 and 2019, respectively, and $6,483 and $6,196 for the nine months ended September 30, 2020 and 2019, respectively.

Interest income on notes receivable issued by UHF and Pillar (See Note 8 – Notes Receivable) was $3,752 and $4,618 for the three months ended September 30, 2020 and 2019, respectively, and $11,255 and $13,483 for the nine months ended September 30, 2020 and 2019, respectively.

Interest expense on these notes payable to Pillar was $380 and $514 for the three months ended September 30, 2020 and 2019, respectively, and $1,193 and $1,517 for the nine months ended September 30, 2020 and 2019, respectively.

16

TRANSCONTINENTAL REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share and square foot amounts)
(Unaudited)

Related party receivables represents amounts outstanding from advances to related parties in addition to unreimbursed fees, expenses and costs as provided above. The net amounts outstanding consist of the following:

	As of
	September 30,			December 31,
	2020			2019
ARL	$	146,215		$	142,117
Pillar		(6,165	)		(576	)
Total	$	140,050		$	141,541

14. Commitments and Contingencies

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

We are the primary guarantor, on a $24,300 mezzanine loan between UHF and a lender. In addition, ARL is limited recourse guarantors of the loan. As of September 30, 2020 UHF was in compliance with the covenants to the loan agreement.

We were the plaintiff in a lawsuit against Dynex Commercial, Inc. (“Dynex”) for failure to fulfill certain loan commitments. In January 2015, the court awarded us with a judgment of $24,800. We are pursuing all legal means to collect this award. However, due to the uncertainty of the collectability of the award, the receivable has been fully reserved.

In February 2019, we were charged in a lawsuit brought by Paul Berger (“Berger”) that alleges that we completed improper sales and/or transfers of property with Income Opportunity Realty Investors, Inc. (“IOR”), our consolidated subsidiary. Berger requests that we pay off various related party loans to IOR and that IOR then distribute the funds to its shareholders. We intend to vigorously defend against the allegations.

15. Subsequent Events

The date to which events occurring after September 30, 2020, the date of the most recent balance sheet, have been evaluated for possible adjustment to the consolidated financial statements or disclosure is November 12, 2020, which is the date on which the consolidated financial statements were available to be issued.

17

ITEM 2.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis by management should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes included in this Quarterly Report on Form 10-Q (the “Quarterly Report”) and in our Form 10-K for the year ended December 31, 2019 (the “Annual Report”).

This Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, principally, but not only, under the captions “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. We caution investors that any forward-looking statements in this report, or which management may make orally or in writing from time to time, are based on management’s beliefs and on assumptions made by, and information currently available to, management. When used, the words “anticipate”, “believe”, “expect”, “intend”, “may”, “might”, “plan”, “estimate”, “project”, “should”, “will”, “result” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you that, while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

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

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

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

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

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

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

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

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

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

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

● potential liability for uninsured losses and environmental contamination;

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

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

18

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

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and our property portfolio. While we did not incur significant disruptions during the three months ended September 30, 2020 from the COVID-19 pandemic, we are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The pandemic is having a significant impact on the U.S. economy and on the local markets in which our properties are located. Nearly every industry has been impacted directly or indirectly, and the commercial real estate market has come under pressure due to numerous factors, including preventative measures taken by local, state and federal authorities to alleviate the public health crisis such as mandatory business closures, quarantines, and restrictions on travel and “shelter-in-place” or “stay-at-home” orders.

The following provides an overview of the impact of COVID-19 on our financial condition, results of operations and cash flows.

● We have collected approximately 96% of our third quarter rents, comprised of approximately 95% from multi-family tenants and 97% from office tenants.

● We have not granted any abatements or granted any significant deferments of contractual rents.

● Occupancy remains stable at 91% at September 30, 2020 and 2019.

● We continue to obtain positive leasing spreads for new leases and renewals at properties.

● Our ground up development work continues unabated and thus far we have not experienced any work stoppages.

In addition, we believe that our financing activities will not be significantly impacted by COVID-19, as most of our mortgage notes payable are secured by HUD guarantees which have long-term maturities.

The future impact of COVID-19 on our business and financial activities will depend on future developments, which at this stage are unpredictable considering the fluctuations of COVID-19 outbreaks and the resulting changes in the markets.

Other sections of this report may also include suggested factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time-to-time and it is not possible for management to predict all such matters; nor can we assess the impact of all such matters on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as prediction of actual results. Investors should also refer to our quarterly reports on Form 10-Q for future periods and to other materials we may furnish to the public from time to time through Forms 8-K or otherwise as we file them with the SEC.

Management Overview and Summary

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

We acquire land primarily in urban in-fill locations or high-growth suburban markets and are an active buyer and seller of real estate.

19

As of September 30, 2020, we owned (i) six commercial properties consisting of five office buildings and one retail property comprising on aggregate of 1.6 million square feet, (ii) 1,639 units in ten multifamily apartment communities, excluding apartment communities being developed, (iii) approximately 1,980 acres of developed and undeveloped land, and (iv) fifty-one multifamily apartment communities totaling 10,137 units owned by our 50% owned investee VAA. We currently own income-producing properties and land in eight states.

During the nine months ended September 30, 2020, we sold (i) a total of 62.0 acres of land from our holdings in Windmill Farms for $20.2 million, in aggregate, resulting in gains on sale of $15.2 million; (ii) Bridgeview Plaza, a retail property in La Crosse, Wisconsin for $5.3 million, resulting in a gain on sale of $4.8 million; and (iii) Farnham Park Apartments, a 144 unit multifamily apartment community in Port Arthur, Texas for $13.3 million, resulting in a gain on sale of $2.7 million.

During the nine months ended September 30, 2020, we acquired (i) 49.2 acres of land in Kent, Ohio for $5.4 million that was funded by a $2.0 million cash payment and a $3.4 million note payable that bares interest at 10% and matures on November 13, 2024; (ii) 0.7 acres of commercial land in Lewisville, Texas for $0.1 million, and (iii) 1.3 acres of land in McKinney, Texas for $0.5 million.

We finance our acquisitions primarily through operating cash flow, proceeds from the sale of land and income-producing properties and debt financing primarily in the form of property-specific first-lien mortgage loans from commercial banks and institutional lenders. We finance our development projects principally with variable interest rate construction loans that are converted to long-term, fixed rate amortizing mortgages when the development project is completed and occupancy has been stabilized. We will, from time to time, also enter into partnerships with various investors to acquire income-producing properties or land and to sell interests in certain of our wholly-owned properties. When we sell assets, we may carry a portion of the sales price generally in the form of a short-term, interest bearing seller-financed note receivable. We generate operating revenues primarily by leasing apartment units to residents and leasing office, retail and industrial space to commercial tenants. We have no employees.

We have historically engaged in and may continue to engage in certain business transactions with related parties, including, but not limited to, asset acquisition and dispositions. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in our best interest.

Our day to day operations are managed by Pillar Income Asset Management, Inc. (“Pillar”). Their duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities and arranging debt and equity financing with third party lenders and investors. All of the Companies employees are Pillar employees.

Our commercial properties are managed by Regis Realty Prime, LLC (“Regis”). Regis provides leasing, construction management and brokerage services. Our multifamily apartment communities are managed by outside management companies.

Critical Accounting Policies

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

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

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Fair Value of Financial Instruments

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

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

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

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

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

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

Related Parties

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

Results of Operations

The following discussion and analysis is based on our Consolidated Statements of Operations for the three months ended September 30, 2020 and 2019, as included in Part I, Item 1. “Financial Statements” of this report. At September 30, 2020 and 2019, we owned or had interests in a portfolio of ten and nine income-producing properties, respectively.

Comparison of the three months ended September 30, 2020 to the same period ended 2019:

We reported a net income attributable to common shares of $7.7 million or $0.88 per diluted share for 2020, compared to a net loss applicable to common shares of $7.8 million or $0.89 per diluted share for 2019.

Rental revenues were $11.5 million for 2020, compared to $11.4 for 2019. For 2020, we generated revenues of $7.8 million and $3.7 million from our commercial and multifamily segments, respectively.

Property operating expenses increased by $1.0 million to $6.4 for 2020 as compared to $5.4 million for 2019.

Depreciation and amortization increased by $0.1 million to $3.5 million for 2020 as compared to $3.4 million for 2019.

21

General and administrative expense was $1.6 million for 2020, compared to $1.9 million for 2019. The decrease of $0.3 million in general and administrative expenses was primarily due to decrease in professional and other expenses.

Interest income was $4.3 million for 2020, compared to $5.2 million for 2019. The decrease of $0.9 million was due to decrease in interest income of $0.9 million on notes receivable from related parties.

Mortgage and loan interest expense was $6.3 million for 2020 as compared to $8.0 million for 2019.

Loss on foreign currency transactions was $1.5 million for 2020 as compared to a loss of $5.2 million for 2019. The decrease in loss was the result of the strengthening of the US Dollar against the Israel Shekels due to economic uncertainties most likely as a result of the global pandemic outbreak in 2020.

Income (loss) from unconsolidated joint ventures was $0.4 million for 2020 as compared ($0.2) million for 2019.

Gain sale or write-down of assets was $12.3 million for 2020, compared to $5.1 million for 2019. In 2020, we sold (i) approximately 17.1 acres of land for $8.0 million, resulting in a gain of $5.7 million, (ii) Bridgeview Plaza for a $5.3 million, resulting in a gain of $4.8 million, (iii) Farnham Park Apartments for $13.3 million, resulting in a gain of $2.7 million. For 2019, we sold 16.2 acres of land for $7.0 million, resulting in a gain of $5.1 million.

Comparison of the nine months ended September 30, 2020 to the same period ended 2019:

For 2020, we reported a net income attributable to common shares of $8.1 million or $0.93 per diluted share, compared to a net loss applicable to common shares of $19.7 million or $2.26 per diluted share for 2019.

Rental revenues were $34.5 million for 2020, compared to $34.4 million for 2019. For 2020, rental revenues consisted of $23.5 million and $11.0 million from our commercial and multifamily segments, respectively.

Property operating expenses decreased by $0.2 million to $18.5 million for 2020 as compared to $18.7 million for 2019. The decrease in property operating expenses was primarily attributable to reduction in property replacements cost.

Depreciation and amortization increased by $0.4 million to $10.3 million for 2020 as compared to $9.9 million for 2019. The increase was primarily due to increase of depreciation expense in multifamily segment by $0.4 million.

General and administrative expense was $7.0 million for 2020, compared to $6.4 million for 2019. The increase of $0.6 million in general and administrative expenses was primarily due to increase in franchise taxes and legal services, partially offset by decrease in other expenses.

Interest income was $13.1 million for 2020, compared to $14.7 million for 2019. The decrease of $1.6 million was due to decrease in interest of $1.6 on notes receivable from other related parties.

Mortgage and loan interest expense was $22.0 million for 2020 as compared to $23.6 million for 2019.

Gain (loss) on foreign currency transactions was $0.8 million for 2020 as compared to ($13.3) million for 2019. The change in gain (loss) on foreign currency transactions is primarily attributed to the strengthening of the U.S. Dollar against the Israel Shekels due to perceived liquidity issues in Israel as a result of the global pandemic outbreak in 2020.

Loss from unconsolidated joint ventures was a net of $0.7 million for 2020 as compared to a loss of $1.5 million for 2019.

22

Gain on sale or write-down of assets was $21.8 million for 2020, compared to $9.4 million for 2019. In 2020, we sold (i) approximately 62.0 acres of land for $20.2 million, resulting in a gain of $15.2 million, (ii) Bridgeview Plaza for $5.3 million, resulting in a gain of $4.8 million, and (iii) Farnham Park Apartments for $13.3 million, resulting in a gain of $2.7 million. In 2019, we sold 80.1 acres of land for $23.3 million, resulting in a gain of $9.4 million.

Liquidity and Capital Resources

Our principal liquidity needs are:

● fund normal recurring expenses;

● meet debt service and principal repayment obligations including balloon payments on maturing debt;

● fund capital expenditures, including tenant improvements and leasing costs;

● fund development costs not covered under construction loans; and

● fund possible property acquisitions.

Our principal sources of cash have been and will continue to be:

● property operations;

● proceeds from land and income-producing property sales;

● collection of mortgage notes receivable;

● collection of receivables from related party companies;

● refinancing of existing debt; and

● additional borrowing, including mortgage notes, mezzanine financing and lines of credit.

We draw on multiple financing sources to fund our long-term capital needs. We generally fund our development projects with construction loans. Management anticipates that our available cash from property operations may not be sufficient to meet all of our cash requirements. Management intends to selectively sell land and income-producing assets, refinance or extend real estate debt and seek additional borrowing secured by real estate to meet our liquidity requirements. Although the past cannot predict the future, historically, management has been successful at extending a portion of our current maturity obligations and selling assets as necessary to meet current obligations.

Cash Flow Summary

The following summary discussion of our cash flows is based on the consolidated statements of cash flows as presented in Part I, Item 1. “Financial Statements” and is not meant to be an all-inclusive discussion of the changes in our cash flow:

	For the Nine Months Ended September 30,
	2020			2019			Incr /(Decr)
Net cash (used in) operating activities	$	(15,163	)	$	(9,288	)	$	(5,875	)
Net cash provided by (used in) investing activities	$	12,355		$	(16,782	)	$	29,137
Net cash (used in) provided by financing activities	$	(19,456	)	$	19,457		$	(38,913	)

Our primary use of cash for operations is daily operating costs, general and administrative expenses, advisory fees, and land holding costs. Our primary source of cash from operating activities is from rental income on properties. In addition, we have a related party account in which excess cash is transferred to or from.

Our primary cash outlays for investing activities are for construction and development, acquisition of land and income-producing properties, and capital improvements to existing properties. During the nine months ended September 30, 2020, we advanced $15.7 million on various notes receivable, purchased real estate for development for $2.7 million, and invested approximately $12.5 million for the development and renovation of real estate. For the nine months ended September 30, 2019, we advanced $7.3 million on various notes receivable, purchased real estate for development for $3.4 million, and invested approximately $31.3 million for the development and renovation of real estate.

23

Our primary sources of cash from investing activities are from the proceeds on the sale of land and income-producing properties. During the nine months ended September 30, 2020, we received sales proceeds of $31.8 million from the sale of real estate and recorded a gain of $21.8 million. In addition, collected $3.5 million on note receivables and received $8.0 million on distributions from one of our unconsolidated joint ventures. For the nine months ended September 30, 2019, we received aggregate sales proceeds of $23.0 million from the sale of real estate and recorded a gain of $9.4 million. In addition, collected $0.3 million on note receivables and received $1.9 million on distributions from one of our unconsolidated joint ventures.

Our primary sources of cash from financing activities are from proceeds on notes payables either through refinancing our existing loans or by obtaining new financing. Our primary cash outlays are for recurring debt payments and payments on maturing notes payable.

During the nine months ended September 30, 2020, the decrease in cash flow from financing activities is primarily due to a payment on bond principal of $21.7 million, and payments on our outstanding notes of $7.9 million, partially offset by proceeds from borrowings of approximately $10.2 million. During the nine months ended September 30, 2019, we received $78.1 million from the sale of nonconvertible Series C Bonds by Southern and from borrowings of approximately $10.2 million, which were partially offset by payments on bond principal of $21.7 million and mortgage debt of $45.6 million.

Environmental Matters

Under various federal, state and local environmental laws, ordinances and regulations, we may be potentially liable for removal or remediation costs, as well as certain other potential costs relating to hazardous or toxic substances (including governmental fines and injuries to persons and property) where property-level managers have arranged for the removal, disposal or treatment of hazardous or toxic substances. In addition, certain environmental laws impose liability for release of asbestos-containing materials into the air, and third parties may seek recovery for personal injury associated with such materials.

Management is not aware of any environmental liability relating to the above matters that would have a material adverse effect on our business, assets or results of operations.

Inflation

The effects of inflation on our operations are not quantifiable. Revenues from property operations tend to fluctuate proportionately with inflationary increases, market conditions and decreases in real estate costs. Fluctuations in the rate of inflation also affect sales values of properties and the ultimate gain to be realized from property sales. To the extent that inflation affects interest rates, earnings from short-term investments, the cost of new financings and the cost of variable interest rate debt will be affected.

Tax Matters

We are a member of the May Realty Holdings, Inc., (“MRHI”) consolidated group for federal income tax reporting. There is a tax sharing and compensating agreement between American Realty Investors, Inc. (“ARL”), Income Opportunities Realty Investors, Inc. (“IOR”), and the Company.

Financial statement income varies from taxable income principally due to the accounting for income and losses of investees, gains and losses from asset sales, depreciation on owned properties, amortization of discounts on notes receivable and payable and the difference in the allowance for estimated losses.

For the quarter ended September 30, 2020, we had income before income taxes of $8.9 million driven mostly by the gains from sale of assets of $21.8 million.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We may be exposed to interest rate changes primarily as a result of long-term debt used to acquire properties and make loans and other permitted investments. Our management’s objectives, with regard to interest rate risks, are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we will borrow primarily at fixed rates or variable rates with the lowest margins available and in some cases, with the ability to convert variable rates to fixed rates.

As of September 30, 2020, our outstanding notes payable balance was $242.3 million, out of which $235.2 million were notes with fixed interest rates and $7.1 million represented a note with a variable interest rate of 3.75%. If our variable interest rates increased 100 basis points, we estimate that total annual interest cost, would increase by $0.02 million, and would result in a decrease of $0.003 in our earnings per share.

At September 30, 2020, our weighted average borrowing rate was approximately 5.35%. Our variable rate exposure is mitigated through the ability to secure long-term fixed rate HUD financing on the multifamily apartment communities.

ITEM 4. CONTROLS AND PROCEDURES

Based on an evaluation by our management (with the participation of our Principal Executive Officer and Principal Financial Officer), as of the end of the period covered by this report, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.

There has been no change in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

Except as set forth below, there have been no material changes from the risk factors previously disclosed in the 2019 10-K. For a discussion on these risk factors, please see “Item 1A. Risk Factors” contained in the 2019 10-K.

Risks Related to COVID-19 Pandemic

We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business and our property portfolio. While we did not incur significant disruptions during the three months ended September 30, 2020 from the COVID-19 pandemic, we are unable to predict the impact that the COVID-19 pandemic will have on our financial condition, results of operations and cash flows due to numerous uncertainties. These uncertainties include the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact and the direct and indirect economic effects of the pandemic and containment measures, among others. The pandemic is having a significant impact on the U.S. economy and on the local markets in which our properties are located. Nearly every industry has been impacted directly or indirectly, and the commercial real estate market has come under pressure due to numerous factors, including preventative measures taken by local, state and federal authorities to alleviate the public health crisis such as mandatory business closures, quarantines, and restrictions on travel and “shelter-in-place” or “stay-at-home” orders.

25

The following provides an overview of the impact of COVID-19 on our financial condition, results of operations and cash flows.

● We have collected approximately 96% of our third quarter rents, comprised of approximately 95% from multi-family tenants and 97% from office tenants.

● We have not granted any abatements or granted any significant deferments of contractual rents.

● Occupancy remains stable at 91% at September 30, 2020 and 2019.

● We continue to obtain positive leasing spreads for new leases and renewals at properties.

● Our ground up development work continues unabated and thus far we have not experienced any work stoppages.

In addition, we believe that our financing activities will not be significantly impacted by COVID-19, as most of our mortgage notes payable are secured by HUD guarantees which have long-term maturities.

The future impact of COVID-19 on our business and financial activities will depend on future developments, which at this stage are unpredictable considering the fluctuations of COVID-19 outbreaks and the resulting changes in the markets.

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

In December 1989, the Board of Directors approved a share repurchase program, authorizing the repurchase of a total of 687,000 shares of our common stock. In September 2000, the Board increased this authorization to 1,387,000 shares. On August 10, 2010, the Board of Directors approved an increase in the share repurchase program for up to an additional 250,000 shares of common stock which results in a total authorization under the repurchase program for up to 1,637,000 shares of our common stock. This repurchase program has no termination date. There were no shares purchased under this program during the first nine months ended September 30, 2020. As of September 30, 2020, 1,230,535 shares have been purchased and 406,465 shares may be purchased under the program.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

ITEM 5. OTHER INFORMATION

None

26

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.

27

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

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

28

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: November 12, 2020	By:	/s/ Erik L. Johnson
		Erik L. Johnson
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

29

EX-31.1

Transcontinental Realty Investors, Inc. 10-Q

Exhibit 31.1

CERTIFICATION

I, Erik L. Johnson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Transcontinental Realty Investors, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

4. The registrant’s other certifying officers(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and

(d) Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2020	By:	/s/ Erik L. Johnson
		Erik Johnson
		Executive Vice President and Chief Financial Officer (Principal Executive and Financial Officer)

EX-32.1

Transcontinental Realty Investors, Inc. 10-Q

Exhibit 32.1

Certification pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906

Of the Sarbanes-Oxley Act of 2002

The undersigned officers of Transcontinental Realty Investors, Inc., a Nevada corporation (the “Company”) hereby certifies that:

(i) The Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2020 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

(ii) The information contained in the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2020 fairly presents in all material respects, the financial condition and results of operations of the Company, at and for the period indicated.

		TRANSCONTINENTAL REALTY INVESTORS, INC.
Date: November 12, 2020	By:	/s/ Erik L. Johnson
		Erik L. Johnson
		Executive Vice President and Chief Financial Officer (Principal Executive and Financial Officer)

XML

Cover - shares	9 Months Ended
	Sep. 30, 2020	Nov. 12, 2020
Cover [Abstract]
Entity Registrant Name	TRANSCONTINENTAL REALTY INVESTORS INC
Entity Central Index Key	0000733590
Document Type	10-Q
Document Period End Date	Sep. 30, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity File Number	001-09240
Entity Incorporation, State or Country Code	NV
Entity Reporting Status Current	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		8,717,767
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Assets
Real estate, net	$ 380,715	$ 387,790
Notes receivable (including $66.287 in 2020 and $57,817 in 2019 from related parties)	123,854	112,357
Cash and cash equivalents	32,967	51,179
Restricted cash	28,030	32,082
Investment in unconsolidated joint ventures	71,171	81,780
Receivable from related parties	140,050	141,541
Other assets	68,558	59,189
Total assets	845,345	865,918
Liabilities:
Mortgages and notes payable	242,300	245,773
Bonds payable	203,192	223,265
Accounts payable and other liabilities (including $937 in 2020 and $935 in 2019 to related parties)	24,642	26,115
Accrued interest payable	3,281	7,230
Deferred revenue	9,315	9,468
Total liabilities	482,730	511,851
Shareholders' Equity:
Common stock, $0.01 par value, authorized 10,000,000 shares; issued 8,717,967 shares at September 30, 2020 and December 31, 2019.	87	87
Treasury stock at cost, 200 shares in 2020 and 2019	(2)	(2)
Paid-in capital	257,853	257,853
Retained earnings	82,813	74,665
Total shareholders' equity	340,751	332,603
Non-controlling interest	21,864	21,464
Total equity	362,615	354,067
Total liabilities and equity	$ 845,345	$ 865,918

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Notes receivable	$ 123,854	$ 112,357
Accounts payable and other liabilities	$ 24,642	$ 26,115
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized	10,000,000	10,000,000
Common stock, issued	8,717,967	8,717,967
Treasury stock, shares	200	200
Related Party [Member]
Notes receivable	$ 66,287	$ 57,817
Accounts payable and other liabilities	$ 937	$ 935

XML

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues:
Rental revenues (including $262 and $212 for the three months and $673 and $527 for the nine months ended 2020 and 2019, respectively, from related parties)	$ 11,453	$ 11,407	$ 34,461	$ 34,352
Other income	706	1,990	3,885	7,394
Total revenues	12,159	13,397	38,346	41,746
Expenses:
Property operating expenses (including $254 and $237 for the three months ended and $750 and $741 for the nine months ended 2020 and 2019, respectively, from related parties)	6,388	5,403	18,507	18,722
Depreciation and amortization	3,526	3,416	10,338	9,964
General and administrative (including $1,017 and $935 for the three months ended and $2,783 and $3,355 for the nine months ended 2020 and 2019, respectively, from related parties)	1,643	1,929	7,063	6,468
Advisory fee to related party	2,139	2,200	6,483	6,196
Total operating expenses	13,696	12,948	42,391	41,350
Net operating (loss) income	(1,537)	449	(4,045)	396
Interest income (including $3,752 and $4,618 for the three months ended and $11,255 and $13,483 for the nine months ended 2020 and 2019, respectively, from related parties)	4,348	5,232	13,102	14,668
Interest expense (including $380 and $514 for the three months ended and $1,193 and $1,517 for the nine months ended 2020 and 2019, respectively, from related parties)	(6,291)	(8,037)	(21,999)	(23,642)
(Loss) gain on foreign currency transaction	(1,470)	(5,153)	774	(13,296)
Loss on extinguishment of debt		(5,219)		(5,219)
Income (losses) from unconsolidated joint ventures	365	(178)	(740)	(1,474)
Gain on sales or write-down of assets	12,328	5,140	21,802	9,409
Income tax expense	(50)		(346)
Net income (loss)	7,693	(7,766)	8,548	(19,158)
Net income attributable to non-controlling interest		(21)	(400)	(583)
Net income (loss) attributable to common shares	$ 7,693	$ (7,787)	$ 8,148	$ (19,741)
Earnings (loss) per share - attributable to common shares
Basic and diluted (in dollars per share)	$ 0.88	$ (0.89)	$ 0.93	$ (2.26)
Weighted-average number of common shares outstanding:
Basic and diluted (in shares)	8,717,767	8,717,767	8,717,767	8,717,767

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Rental and other property revenues	$ 12,159	$ 13,397	$ 38,346	$ 41,746
Property operating expenses	6,388	5,403	18,507	18,722
General and administrative	1,643	1,929	7,063	6,468
Interest income	4,348	5,232	13,102	14,668
Interest expense	6,291	8,037	21,999	23,642
Related Party [Member]
Rental and other property revenues	262	212	673	527
Property operating expenses	254	237	750	741
Interest income	3,752	4,618	11,255	13,483
Interest expense	$ 380	$ 514	$ 1,193	$ 1,517

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CONSOLIDATED STATEMENT OF EQUITY (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Treasury Stock [Member]	Paid-in Capital [Member]	Retained Earnings [Member]	Total Shareholders' Equity [Member]	Non-controlling Interest [Member]	Total
Balance at beginning at Dec. 31, 2018	$ 87	$ (2)	$ 258,050	$ 101,585	$ 359,720	$ 20,681	$ 380,401
Balance at beginnng (in shares) at Dec. 31, 2018	8,717,967
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Distribution to equity partner			(197)		(197)		(197)
Net income (loss)				(19,741)	(19,741)	583	(19,158)
Balance at ending at Sep. 30, 2019	$ 87	(2)	257,853	81,844	339,670	21,264	361,046
Balance at ending (in shares) at Sep. 30, 2019	8,717,967
Balance at beginning at Jun. 30, 2019	$ 87	(2)	257,938	89,631	347,654	21,243	368,897
Balance at beginnng (in shares) at Jun. 30, 2019	8,717,967
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Distribution to equity partner			(85)		(85)		(85)
Net income (loss)				(7,787)	(7,787)	21	(7,766)
Balance at ending at Sep. 30, 2019	$ 87	(2)	257,853	81,844	339,670	21,264	361,046
Balance at ending (in shares) at Sep. 30, 2019	8,717,967
Balance at beginning at Dec. 31, 2019	$ 87	(2)	257,853	74,665	332,603	21,464	354,067
Balance at beginnng (in shares) at Dec. 31, 2019	8,717,967
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)				8,148	8,148	400	8,548
Balance at ending at Sep. 30, 2020	$ 87	(2)	257,853	82,813	340,751	21,864	362,615
Balance at ending (in shares) at Sep. 30, 2020	8,717,967
Balance at beginning at Jun. 30, 2020	$ 87	(2)	257,853	75,120	333,058	21,864	354,922
Balance at beginnng (in shares) at Jun. 30, 2020	8,717,967
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income (loss)				7,693	7,693		7,693
Balance at ending at Sep. 30, 2020	$ 87	$ (2)	$ 257,853	$ 82,813	$ 340,751	$ 21,864	$ 362,615
Balance at ending (in shares) at Sep. 30, 2020	8,717,967

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Cash Flow From Operating Activities:
Net income (loss)	$ 8,548	$ (19,158)
Adjustments to reconcile net income (loss) to used in operating activities:
(Gain) loss on foreign currency transactions	(774)	13,296
Loss on debt extinguishment		5,219
Gain on sales or write-down of assets	(21,802)	(9,409)
Depreciation and amortization	13,023	12,818
Loss from unconsolidated joint ventures	740	1,474
Distribution of income from unconsolidated joint ventures	1,782
Changes in assets and liabilities, net of dispositions:
Other assets	(14,179)	12,888
Related party receivables	1,491	(35,257)
Accrued interest payable	(94)	(1,557)
Accounts payable and other liabilities	(3,745)	5,441
Deferred revenue	(153)	4,957
Net cash used in operating activities	(15,163)	(9,288)
Cash Flow From Investing Activities:
Collection of notes receivables	3,467	255
Origination and advances on notes receivable	(15,718)	(7,262)
Acquisition of real estate	(2,664)	(3,422)
Development and renovation of real estate	(12,488)	(31,311)
Deferred leasing costs	(96)
Proceeds from sale of real estate	31,768	23,030
Distributions from unconsolidated joint ventures	8,086	1,928
Net cash provided by (used in) investing activities	12,355	(16,782)
Cash Flow From Financing Activities:
Proceeds from mortgages and notes payable	10,234	16,934
Payments on mortgages and notes payable	(7,912)	(45,623)
Proceeds from bonds payable		78,125
Payments on bonds payable	(21,724)	(21,742)
Debt extinguishment costs		(3,799)
Deferred finance costs	(54)	(4,241)
Distributions to equity partner		(197)
Net cash (used in) provided by financing activities	(19,456)	19,457
Net decrease in cash, cash equivalents and restricted cash	(22,264)	(6,613)
Cash, cash equivalents and restricted cash, beginning of period	83,261	106,565
Cash, cash equivalents and restricted cash, end of period	60,997	99,952
Supplemental disclosures of cash flow information:
Cash paid for interest, net of amounts capitalized	21,109	27,470
Schedule of noncash investing and financing activities:
Land acquired in exchange for note payable	3,350
Note receiveable issued in exchange for property	1,761
Debt assumed in sale of properties	$ 8,238
Land received in exhange for note receivable		$ 1,800

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Organization

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization

1. Organization

As used herein, the terms “the Company”, “We”, “Our”, or “Us” refer to Transcontinental Realty Investors, Inc. a Nevada corporation which was formed in 1984. Our common stock is listed and trades on the New York Stock Exchange (“NYSE”) under the symbol “TCI”.

We are a “C” corporation for U.S. federal income tax purposes and files an annual consolidated income tax return with American Realty Investors, Inc. (“ARL”), whose common stock is traded on the NYSE under the symbol “ARL”. ARL owns 78.38% and the parent of ARL owns 7.20% of the Company.

Our primary business is the acquisition, development and ownership of income-producing multifamily apartment communities and commercial real estate properties. In addition, we opportunistically acquire land for future development in in-fill or high-growth suburban markets. From time to time and when we believe it appropriate to do so, we will also sell land and income-producing properties. We generate revenues by leasing apartment units to residents, and leasing office, industrial and retail space to various for-profit businesses as well as certain local, state and federal agencies. We also generate revenues from gains on sales of income-producing properties and land.

At September 30, 2020, our portfolio of income-producing properties consisted of:

● Six commercial properties consisting of five office buildings and one retail property comprising in aggregate of approximately 1.6 million square feet;

● Ten multifamily apartment communities owned directly by us comprising in 1,639 units, excluding apartments being developed;

● Approximately 1,980 acres of developed and undeveloped land; and

● Fifty-one multifamily apartment communities totaling 10,137 units owned by our 50% owned investee Victory Abode Apartments, LLC (“VAA”).

Our day to day operations are managed by Pillar Income Asset Management, Inc. (“Pillar”). Their duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities and arranging debt and equity financing with third party lenders and investors. All of the Companies employees are Pillar employees.

Our commercial properties are managed by Regis Realty Prime, LLC (“Regis”). Regis provides leasing, construction management and brokerage services. Our multifamily apartment communities are managed by outside management companies.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.

The consolidated balance sheet at December 31, 2019 was derived from the audited consolidated financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2019. Certain 2019 consolidated financial statement amounts have been reclassified to conform to the current presentation.

We consolidate entities in which we are considered to be the primary beneficiary of a variable interest entity (“VIE”) or have a majority of the voting interest of the entity. We have determined that we are a primary beneficiary of the VIE when we have (i) the power to direct the activities of a VIE that most significantly impacts its economic performance, and (ii) the obligations to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether we are the primary beneficiary, we consider qualitative and quantitative factors, including ownership interest, management representation, ability to control decision and other contractual rights.

We account for entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary under the equity method of accounting. Accordingly, we include our share of the net earnings or losses of these entities in our results of operations.

Newly Issued Accounting Standards

In October 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This standard is intended to improve the accounting when considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. The effective date of the amendments is for fiscal years, and interim periods within those years, beginning after December 15, 2019. The adoption of the standard on January 1, 2020, did not have a material impact on our financial position and results of operations.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard provides guidance, optional expedients and exceptions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The standard was effective upon issuance and can be applied through December 31, 2022. We have mortgage notes payable with interest rates that reference LIBOR, and therefore, we will adopt this standard when LIBOR is discontinued.

On April 10, 2020, the FASB issued a Staff Q&A (“Q&A”) related to the application of the lease guidance in ASC 842 for the accounting impact of lease concessions related to the COVID-19 pandemic. The Q&A, allows an entity to make an election to account for lease concessions related to the effects of the COVID-19 as though enforceable rights and obligations for those concessions existed. As a result of this election, an entity will not have to analyze each lease to determine whether enforceable rights and obligations for concessions exist in the lease and can elect to apply or not apply the lease modification guidance in ASC 842, as long as the concessions do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. Our adoption of the guidance of the Q&A did not have a significant impact on our consolidated financial statements during the nine months ended September 30, 2020.

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Earnings per Share

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Earnings per Share

3. Earnings per Share

Earnings per share (“EPS”) have been computed by dividing income available to common shares 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.

The following table details our basic and diluted earnings per common share calculation:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2020		2019			2020			2019
Net income (loss)	$	7,693	$	(7,766	)	$	8,548		$	(19,158	)
Net (income) attributable to non-controlling interest		—		(21	)		(400	)		(583	)
Net income (loss) attributable to common shares	$	7,693	$	(7,787	)	$	8,148		$	(19,741	)
Weighted-average common shares outstanding — basic and diluted		8,717,767		8,717,767			8,717,767			8,717,767
EPS - attributable to common shares — basic and diluted	$	0.88	$	(0.89	)	$	0.93		$	(2.26	)

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Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2020

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

4. Supplemental Cash Flow Information

The following is a reconciliation of our cash and cash equivalents, and restricted cash to the total presented in the consolidated statement of cash flows:

	For the Period Ended September 30,
	2020		2019
Beginning of period
Cash and cash equivalents	$	51,179	$	36,358
Restricted cash		32,082		70,207
Cash, cash equivalents and restricted cash	$	83,261	$	106,565
End of period
Cash and cash equivalents	$	32,967	$	63,069
Restricted cash		28,030		36,883
Cash, cash equivalents and restricted cash	$	60,997	$	99,952

Amounts included in restricted cash represent funds required to be set aside to meet contractual obligations with certain financial institutions for the payment of reserve replacement, tax and insurance escrow. In addition, restricted cash includes funds for bond principle and interest payments (See Note 11 – Bonds Payable).

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Operating Segments

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Operating Segments

5. Operating Segments

Our segments are based on the internal reporting that we review for operational decision-making purposes. We operate in two reportable segments: (i) the acquisition, development, ownership and management of multifamily apartment communities and (ii) the acquisition, ownership and management of commercial real estate properties. The services for our multifamily segment include rental of apartments and other tenant services, including parking and storage space rental. Asset information by segment is not reported because we do not use this measure to assess performance or make decisions to allocate resources. Therefore, depreciation and amortization expense is not allocated among segments. General and administrative expenses, advisory fees, interest income and interest expense are not included in segment profit as our internal reporting addresses these items on a corporate level.

The following table presents our reportable segments for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Multifamily Segment
Revenues	$	3,683		$	3,383		$	10,943		$	10,077
Operating expenses		(2,412	)		(2,243	)		(6,466	)		(6,363	)
Profit from segment		1,271			1,140			4,477			3,714
Commercial Segment
Revenues		7,770			8,024			23,518			24,275
Operating expenses		(3,976	)		(3,160	)		(12,041	)		(12,359	)
Profit from segment		3,794			4,864			11,477			11,916
Total profit from segments	$	5,065		$	6,004		$	15,954		$	15,630

The table below reflects the reconciliation of total profit from segments to net income (loss) for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Total profit from segments	$	5,065		$	6,004		$	15,954		$	15,630
Other non-segment items of income (expense)
Depreciation		(3,526	)		(3,416	)		(10,338	)		(9,964	)
General and administrative		(1,643	)		(1,930	)		(7,063	)		(6,468	)
Advisory fee to related party		(2,139	)		(2,199	)		(6,483	)		(6,196	)
Interest income		4,348			5,232			13,102			14,668
Other income		706			1,990			3,885			7,394
Interest expense		(6,291	)		(8,037	)		(21,999	)		(23,642	)
(Loss) gain on foreign currency transaction		(1,470	)		(5,153	)		774			(13,296	)
Loss on extinguishment of debt		—			(5,219	)		—			(5,219	)
Income (losses) from unconsolidated joint ventures		365			(178	)		(740	)		(1,474	)
Gain on sales or write-down of assets		12,328			5,140			21,802			9,409
Income tax expense		(50	)		—			(346	)		—
Net income (loss)	$	7,693		$	(7,766	)	$	8,548		$	(19,158	)

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Leases

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Leases

6. Leases

We lease our multifamily apartment communities and commercial properties under agreements that are classified as operating leases. Our multifamily leases generally include minimum rents and charges for ancillary services. Our commercial property leases generally included minimum rents and recoveries for property taxes and common area maintenance. Minimum rental revenues are recognized on a straight-line basis over the terms of the related leases.

The following table summarizes the components of rental revenue for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Fixed component	$	11,107	$	10,827	$	33,111	$	32,963
Variable component		346		580		1,350		1,389
	$	11,453	$	11,407	$	34,461	$	34,352

The following table summarizes the future rental payments to us from under non-cancelable leases. The table exclude multifamily leases, which typically have a term of one-year or less:

Twelve months ended September 30, 2020	Amount
2021	$	6,444
2022		23,155
2023		20,038
2024		14,606
2025		8,737
Thereafter		7,071
	$	80,051

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Real Estate Activity

9 Months Ended

Sep. 30, 2020

Real Estate [Abstract]

Real Estate Activity

7. Real Estate Activity

Below is a summary of the real estate owned as of September 30, 2020 and December 31, 2019:

	September 30,			December 31,
	2020			2019
Land	$	50,759		$	49,887
Building and improvements		297,068			286,280
Tenant improvements		49,423			49,431
Construction in progress		77,116			84,399
		474,366			469,997
Less accumulated deprecation		(97,883	)		(90,173	)
		376,483			379,824
Property held for sale		4,232			7,966
Total	$	380,715		$	387,790

The gain (loss) on sale or write-down of assets, net for the three and nine months ended September 30, 2020 and 2019 consist of the following:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2020			2019		2020			2019
Land(1)	$	5,774		$	5,140	$	15,248		$	9,489
Residential Properties(2)		3,704			—		3,704			(80	)
Commercial Properties(3)		4,609			—		4,609			—
Other(4)		(1,759	)		—		(1,759	)		—
Total	$	12,328		$	5,140	$	21,802		$	9,409

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

(2) On September 14, 2020, we sold Bridgeview Plaza, a 122,205 square foot retail center in La Crosse, Wisconsin for $5,250, resulting in a gain on sale of $4,744. The proceeds from the sale were used to pay off the $3,375 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable) and for general corporate purposes.

(3) On May 1, 2020, we sold Villager Apartments, a 33 unit multifamily apartment community in Pensacola, Florida for $2,426, resulting in a gain on sale of $898. The sales price was funded by the issuance of a $1,761 note receivable and the assumption of the $665 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable). On July 16, 2020, we sold Farnham Park Apartments, a 144 unit multifamily apartment community in Port Arthur, Texas for $13,300, resulting in a gain on the sale of of $2,684. The sales price was funded by cash payment of $4,215 and the assumption of the $9,085 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable).

(4) Includes the write-off of development costs.

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Notes Receivable

9 Months Ended

Sep. 30, 2020

Receivables [Abstract]

Notes Receivable

8. Notes Receivable

The following table summarizes our notes receivable as of September 30, 2020 and December 31, 2019:

	Carrying value
Property/Borrower	September 30, 2020		December 31, 2019		Interest Rate			Maturity Date
ABC Land and Development, Inc.	$	7,408	$	7,408		9.50	%		06/21
ABC Paradise, LLC		1,210		1,210		9.50	%		06/21
Autumn Breeze(1)		1,807		1,302		5.00	%		10/21
Bellwether Ridge(1)		3,559		3,765		5.00	%		11/20
Big River NV LLC		344		—		—			07/20
Forest Pines Phase I(1)		2,869		2,868		5.00	%		11/20
JEM Holdings, Inc.		300		300		6.00	%		07/16
One Realco Land Holding, Inc.		1,728		1,728		9.50	%		06/21
Oulad-Chikh Family Trust		174		174		8.00	%		03/21
Parc at Ingleside(1)		2,294		1,531		5.00	%		12/21
Parc at Windmill Farms(1)		7,949		7,602		5.00	%		11/20
Phillips Foundation for Better Living, Inc.		—		314		12.00	%		03/22
Plum Tree(1)		792		413		5.00	%		10/21
Prospectus Endeavors 4, LLC		5,907		5,907		12.00	%		01/23
Prospectus Endeavors 6, LLC		496		496		12.00	%		10/22
Riverview on the Park Land, LLC		1,045		1,045		9.50	%		06/21
RNC Revolving Line of Credit		8,853		8,802		5.00	%		09/24
Spyglass of Ennis(1)		5,359		5,288		5.00	%		11/20
Steeple Crest(1)		6,498		6,665		5.00	%		08/21
TPS Income, Inc.		4,554		4,554		6.00	%		09/20
Unified Housing Foundation, Inc. (2)		10,401		10,401		12.00	%		12/21
Unified Housing Foundation, Inc. (2)		10,096		10,096		12.00	%		03/22
Unified Housing Foundation, Inc. (2)		2,882		3,795		12.00	%		07/21
Unified Housing Foundation, Inc. (2)		212		212		12.00	%		08/21
Unified Housing Foundation, Inc. (2)		7,051		6,831		12.00	%		03/23
Unified Housing Foundation, Inc. (2)		3,615		—		12.00	%		05/23
Unified Housing Foundation, Inc. (2)		6,831		—		12.00	%		10/21
Unified Housing Foundation, Inc. (2)		495		525		12.00	%		12/21
Unified Housing Foundation, Inc. (2)		19,125		19,125		12.00	%		12/32
Total	$	123,854	$	112,357

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

(2) Principal and interest payments on the notes from Unified Housing Foundation, Inc. (“UHF”) are funded from surplus cash flow from operations, sale or refinancing of the underlying properties and are cross collateralized to the extent that any surplus cash available from any of the properties underlying the notes. UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable.

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Investment in Unconsolidated Joint Ventures

9 Months Ended

Sep. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Joint Ventures

9. Investment in Unconsolidated Joint Ventures

The following is a summary of the financial position and results of operations of our unconsolidated joint ventures:

	September 30, 2020								December 31, 2019
	VAA			ARL		Total			VAA			ARL		Total
Assets
Property, net	$	1,224,905		$	31,719	$	1,256,624		$	1,242,957		$	35,213	$	1,278,170
Other assets		56,660			69,165		125,825			62,222			67,441		129,663
Total Assets	$	1,281,565		$	100,884	$	1,382,449		$	1,305,179		$	102,654	$	1,407,833
Liabilities and partners' capital
Mortgage and other notes payable	$	832,819		$	6,702	$	839,521		$	832,779		$	8,327	$	841,106
Other liabilities		270,534			23,599		294,133			271,290			26,947		298,237
Company's capital		89,106			635		89,741			100,555			606		101,161
Outside partner's capital		89,106			69,948		159,054			100,555			66,774		167,329
Total liabilties and partners' capital	$	1,281,565		$	100,884	$	1,382,449		$	1,305,179		$	102,654	$	1,407,833
Investments in unconsolidated joint ventures
Company's capital	$	89,106		$	635	$	89,741		$	100,555		$	606	$	101,161
Basis adjustments		(40,601	)		22,031		(18,570	)		(41,407	)		22,026		(19,381	)
Investment in unconsolidated joint ventures	$	48,505		$	22,666	$	71,171		$	59,148		$	22,632	$	81,780

	For the Three Months Ended September 30,
	2020									2019
	VAA			ARL			Total			VAA			ARL			Total
Revenue
Rents	$	29,998		$	—		$	29,998		$	27,347		$	60		$	27,407
Other		1,593			3,000			4,593			2,310			114			2,424
Interest		1			1,075			1,076			56			1,622			1,678
Total revenue		31,592			4,075			35,667			29,713			1,796			31,509
Expenses
Operating		16,172			(470	)		15,702			14,138			860			14,998
Depreciation and amortization		7,832			—			7,832			16,036			—			16,036
Interest		13,839			1,331			15,170			15,424			2,383			17,807
Other expenses (income)		(556	)		—			(556	)		699			—			699
Total expenses		37,287			861			38,148			46,297			3,243			49,540
Net (loss) income	$	(5,695	)	$	3,214		$	(2,481	)	$	(16,584	)	$	(1,447	)	$	(18,031	)
Company's equity in net (loss) income	$	336		$	29		$	365		$	(165	)	$	(13	)	$	(178	)

  

	For the Nine Months Ended September 30,
	2020								2019
	VAA			ARL		Total			VAA			ARL		Total
Revenue
Rents	$	86,841		$	—	$	86,841		$	79,435		$	60	$	79,495
Other		4,034			5,269		9,303			6,550			4,262		10,812
Interest		38			3,358		3,396			139			4,845		4,984
Total revenue		90,913			8,627		99,540			86,124			9,167		95,291
Expenses
Operating		47,463			453		47,916			42,345			2,339		44,684
Depreciation and amortization		23,253			—		23,253			46,792			—		46,792
Interest		43,107			4,296		47,403			45,294			6,154		51,448
Other expenses (income)		(1,453	)		—		(1,453	)		2,058			—		2,058
Total expenses		112,370			4,749		117,119			136,489			8,493		144,982
Net (loss) income	$	(21,457	)	$	3,878	$	(17,579	)	$	(50,365	)	$	674	$	(49,691	)
Company's equity in net (loss) income	$	(775	)	$	35	$	(740	)	$	(1,480	)	$	6	$	(1,474	)

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Mortgages and Notes Payable

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Mortgages and Notes Payable

10. Mortgages and Notes Payable

The following table summarizes our mortgages and other notes payable as of September 30, 2020 and December 31, 2019:

	Carrying value
Property / Entity	September 30, 2020		December 31, 2019		Effective Interest Rate			Maturity Date
600 Las Colinas Building	$	35,773	$	36,302		5.30	%	11/1/2023
770 South Post Oak  Building		11,924		12,077		4.40	%	6/1/2025
Bridgeview Plaza Shopping Center(1)		—		3,824		7.75	%	11/1/2020
Chelsea Apartments		8,627		8,749		3.40	%	12/1/2050
EQK Portage-Kent Ohio Land(2)		3,350		—		10.00	%	11/13/2024
Estate of Robert Shaw(3)		13,065		13,032		9.50	%	7/5/2020
Farnham Apartments(4)		—		9,144		3.39	%	12/1/2050
Forest Pines Phase II Apartments(5)		7,057		—		3.75	%	5/5/2024
Forest Pines Phase II(5)		—		1,390		3.75	%	5/5/2024
Landing Apartments		15,286		15,467		3.50	%	9/1/2053
LD Athens Lindsay Ln Land		1,155		1,155		5.90	%	2/28/2021
Legacy at Pleasant Grove Apartments		13,727		13,944		3.60	%	4/1/2048
McKinney 36 Land		856		944		8.00	%	6/30/2022
Overlook at Allensville Phase II Apartments		15,666		15,798		3.80	%	5/1/2059
Parc at Denham Spring Phase II Apartments		16,168		14,785		4.10	%	2/1/2060
Stanford Center Building		39,191		39,255		6.00	%	12/26/2021
Sugar Mill Phase III Apartments		—		5,908		4.50	%	2/1/2060
Sugar Mill Phase III Apartments		8,906		—		4.50	%	2/1/2060
Toulon Apartments		18,283		18,465		3.20	%	12/1/2051
Villager Apartments(6)		—		556		2.50	%	3/1/2043
Villas at Bon Secour Apartments		10,860		11,026		4.00	%	1/1/2022
Vista Ridge Apartments		10,015		10,122		4.00	%	8/1/2053
Windmill Farms Land		12,391		13,830		6.00	%	2/28/2021
Total	$	242,300	$	245,773

(1) On September 14, 2020, we paid off the loan in connection with the sale of the underlining property (See Note 7 – Real Estate Activity).

(2) On March 5, 2020, we acquired 49.2 acres of land in Kent, Ohio in exchange for the note payable.

(3) We are currently negotiating an extension of the loan with the lender.

(4) On July 16, 2020, the loan was assumed by a third party in connection with the sale of the underlying property (See Note 7 – Real Estate Activity).

(5) The loan bears interest at prime rate plus 0.5%.

(6) On May 1, 2020, the loan was assumed by a third party in connection to sale of the underlying property (See Note 7 – Real Estate Activity).

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Bonds Payable

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Bonds Payable

11. Bonds Payable

We have issued bonds through our subsidiary, Southern Properties Capital LTD, which are listed and trade on the Tel Aviv Stock Exchange. Payments of principal and interest are denominated in New Israeli Shekels. In connection with the principal and interest payments, we incurred a (loss) gain on foreign currency transactions of ($1,470) and ($5,153) for the three months ended September 30, 2020 and 2019, respectively, and $744 and ($13,296) for the nine months ended September 30, 2020 and 2019, respectively.

The following table summarizes the bonds payable as of September 30, 2020 and December 31, 2019:

	September 30,			December 31,
	2020			2019			Maturity Date
Bonds (Series A)	$	69,747		$	92,653		7/31/2023
Bonds (Series B)		61,029			60,764		7/31/2025
Bonds (Series C)		79,919			79,572		1/31/2023
Total outstanding bonds		210,695			232,989
Less: unamortized deferred bond issuance costs		(7,503	)		(9,724	)
Total outstanding bonds, net	$	203,192		$	223,265

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Deferred Income

9 Months Ended

Sep. 30, 2020

Deferred Income

Deferred Income

12. Deferred Income

In previous years, we sold properties to related parties where we have had continuing involvement in the form of management or financial assistance associated with the sale of the properties. Because of the continuing involvement associated with the sale, the sales criteria for the full accrual method is not met, and as such we deferred some or all of the gain recognition and accounted for the sale by applying the finance, deposit, installment or cost recovery methods, as appropriate, until the sales criteria is met. The gain on these transactions have been deferred until the properties are sold to a non-related third party. As of September 30, 2020 and December 31, 2019, we had deferred gain of $9,315 and $9,468, respectively.

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Related Party Transactions

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Related Party Transactions

13. Related Party Transactions

Rental income includes $262 and $212 for the three months ended September 30, 2020 and 2019, respectively, and $673 and $527 for the nine months ended September 30, 2020 and 2019, respectively, for office space leased to Pillar, Regis and VAA.

Property operating expense includes $254 and $237 for the three months ended September 30, 2020 and 2019, respectively, and $750 and $741 for the nine months ended September 30, 2020 and 2019, respectively, for management fees on commercial properties payable to Regis.

General and administrative expense includes $1,017 and $935 for the three months ended September 30, 2020 and 2019, respectively, and $2,783 and $3,355 for the nine months ended September 30, 2020 and 2019, respectively, for employee compensation and other reimbursable costs payable to Pillar.

Advisor fees are were $2,139 and $2,200 for the three months ended September 30, 2020 and 2019, respectively, and $6,483 and $6,196 for the nine months ended September 30, 2020 and 2019, respectively.

Interest income on notes receivable issued by UHF and Pillar (See Note 8 – Notes Receivable) was $3,752 and $4,618 for the three months ended September 30, 2020 and 2019, respectively, and $11,255 and $13,483 for the nine months ended September 30, 2020 and 2019, respectively.

Interest expense on these notes payable to Pillar was $380 and $514 for the three months ended September 30, 2020 and 2019, respectively, and $1,193 and $1,517 for the nine months ended September 30, 2020 and 2019, respectively.

Related party receivables represents amounts outstanding from advances to related parties in addition to unreimbursed fees, expenses and costs as provided above. The net amounts outstanding consist of the following:

	As of
	September 30,			December 31,
	2020			2019
ARL	$	146,215		$	142,117
Pillar		(6,165	)		(576	)
Total	$	140,050		$	141,541

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

14. Commitments and Contingencies

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

We are the primary guarantor, on a $24,300 mezzanine loan between UHF and a lender. In addition, ARL is limited recourse guarantors of the loan. As of September 30, 2020 UHF was in compliance with the covenants to the loan agreement.

We were the plaintiff in a lawsuit against Dynex Commercial, Inc. (“Dynex”) for failure to fulfill certain loan commitments. In January 2015, the court awarded us with a judgment of $24,800. We are pursuing all legal means to collect this award. However, due to the uncertainty of the collectability of the award, the receivable has been fully reserved.

In February 2019, we were charged in a lawsuit brought by Paul Berger (“Berger”) that alleges that we completed improper sales and/or transfers of property with Income Opportunity Realty Investors, Inc. (“IOR”), our consolidated subsidiary. Berger requests that we pay off various related party loans to IOR and that IOR then distribute the funds to its shareholders. We intend to vigorously defend against the allegations.

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Subsequent Events

9 Months Ended

Sep. 30, 2020

Subsequent Events [Abstract]

Subsequent Events

15. Subsequent Events

The date to which events occurring after September 30, 2020, the date of the most recent balance sheet, have been evaluated for possible adjustment to the consolidated financial statements or disclosure is November 12, 2020, which is the date on which the consolidated financial statements were available to be issued.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.

The consolidated balance sheet at December 31, 2019 was derived from the audited consolidated financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2019. Certain 2019 consolidated financial statement amounts have been reclassified to conform to the current presentation.

We consolidate entities in which we are considered to be the primary beneficiary of a variable interest entity (“VIE”) or have a majority of the voting interest of the entity. We have determined that we are a primary beneficiary of the VIE when we have (i) the power to direct the activities of a VIE that most significantly impacts its economic performance, and (ii) the obligations to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether we are the primary beneficiary, we consider qualitative and quantitative factors, including ownership interest, management representation, ability to control decision and other contractual rights.

We account for entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary under the equity method of accounting. Accordingly, we include our share of the net earnings or losses of these entities in our results of operations.

Newly Issued Accounting Standards

Newly Issued Accounting Standards

In October 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. This standard is intended to improve the accounting when considering indirect interests held through related parties under common control for determining whether fees paid to decision makers and service providers are variable interests. The effective date of the amendments is for fiscal years, and interim periods within those years, beginning after December 15, 2019. The adoption of the standard on January 1, 2020, did not have a material impact on our financial position and results of operations.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The standard provides guidance, optional expedients and exceptions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The standard was effective upon issuance and can be applied through December 31, 2022. We have mortgage notes payable with interest rates that reference LIBOR, and therefore, we will adopt this standard when LIBOR is discontinued.

On April 10, 2020, the FASB issued a Staff Q&A (“Q&A”) related to the application of the lease guidance in ASC 842 for the accounting impact of lease concessions related to the COVID-19 pandemic. The Q&A, allows an entity to make an election to account for lease concessions related to the effects of the COVID-19 as though enforceable rights and obligations for those concessions existed. As a result of this election, an entity will not have to analyze each lease to determine whether enforceable rights and obligations for concessions exist in the lease and can elect to apply or not apply the lease modification guidance in ASC 842, as long as the concessions do not result in a substantial increase in the rights of the lessor or the obligations of the lessee. Our adoption of the guidance of the Q&A did not have a significant impact on our consolidated financial statements during the nine months ended September 30, 2020.

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Earnings per Share (Tables)

9 Months Ended

Sep. 30, 2020

Earnings Per Share [Abstract]

Schedule of earnings per share

The following table details our basic and diluted earnings per common share calculation:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2020		2019			2020			2019
Net income (loss)	$	7,693	$	(7,766	)	$	8,548		$	(19,158	)
Net (income) attributable to non-controlling interest		—		(21	)		(400	)		(583	)
Net income (loss) attributable to common shares	$	7,693	$	(7,787	)	$	8,148		$	(19,741	)
Weighted-average common shares outstanding — basic and diluted		8,717,767		8,717,767			8,717,767			8,717,767
EPS - attributable to common shares — basic and diluted	$	0.88	$	(0.89	)	$	0.93		$	(2.26	)

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2020

Supplemental Cash Flow Elements [Abstract]

Schedule of reconciliation of cash and cash equivalents and restricted cash

The following is a reconciliation of our cash and cash equivalents, and restricted cash to the total presented in the consolidated statement of cash flows:

	For the Period Ended September 30,
	2020		2019
Beginning of period
Cash and cash equivalents	$	51,179	$	36,358
Restricted cash		32,082		70,207
Cash, cash equivalents and restricted cash	$	83,261	$	106,565
End of period
Cash and cash equivalents	$	32,967	$	63,069
Restricted cash		28,030		36,883
Cash, cash equivalents and restricted cash	$	60,997	$	99,952

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Operating Segments (Tables)

9 Months Ended

Sep. 30, 2020

Segment Reporting [Abstract]

Schedule of reportable segments

The following table presents our reportable segments for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Multifamily Segment
Revenues	$	3,683		$	3,383		$	10,943		$	10,077
Operating expenses		(2,412	)		(2,243	)		(6,466	)		(6,363	)
Profit from segment		1,271			1,140			4,477			3,714
Commercial Segment
Revenues		7,770			8,024			23,518			24,275
Operating expenses		(3,976	)		(3,160	)		(12,041	)		(12,359	)
Profit from segment		3,794			4,864			11,477			11,916
Total profit from segments	$	5,065		$	6,004		$	15,954		$	15,630

Schedule of reconciliaton of total profit from segments to net income (loss)

The table below reflects the reconciliation of total profit from segments to net income (loss) for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Total profit from segments	$	5,065		$	6,004		$	15,954		$	15,630
Other non-segment items of income (expense)
Depreciation		(3,526	)		(3,416	)		(10,338	)		(9,964	)
General and administrative		(1,643	)		(1,930	)		(7,063	)		(6,468	)
Advisory fee to related party		(2,139	)		(2,199	)		(6,483	)		(6,196	)
Interest income		4,348			5,232			13,102			14,668
Other income		706			1,990			3,885			7,394
Interest expense		(6,291	)		(8,037	)		(21,999	)		(23,642	)
(Loss) gain on foreign currency transaction		(1,470	)		(5,153	)		774			(13,296	)
Loss on extinguishment of debt		—			(5,219	)		—			(5,219	)
Income (losses) from unconsolidated joint ventures		365			(178	)		(740	)		(1,474	)
Gain on sales or write-down of assets		12,328			5,140			21,802			9,409
Income tax expense		(50	)		—			(346	)		—
Net income (loss)	$	7,693		$	(7,766	)	$	8,548		$	(19,158	)

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Leases (Tables)

9 Months Ended

Sep. 30, 2020

Leases [Abstract]

Schedule of rental revenue

The following table summarizes the components of rental revenue for the three and nine months ended September 30, 2020 and 2019:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
Fixed component	$	11,107	$	10,827	$	33,111	$	32,963
Variable component		346		580		1,350		1,389
	$	11,453	$	11,407	$	34,461	$	34,352

Schedule of future rental payments

The following table summarizes the future rental payments to us from under non-cancelable leases. The table exclude multifamily leases, which typically have a term of one-year or less:

Twelve months ended September 30, 2020	Amount
2021	$	6,444
2022		23,155
2023		20,038
2024		14,606
2025		8,737
Thereafter		7,071
	$	80,051

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Real Estate Activity (Tables)

9 Months Ended

Sep. 30, 2020

Real Estate [Abstract]

Schedule of the real estate owned

Below is a summary of the real estate owned as of September 30, 2020 and December 31, 2019:

	September 30,			December 31,
	2020			2019
Land	$	50,759		$	49,887
Building and improvements		297,068			286,280
Tenant improvements		49,423			49,431
Construction in progress		77,116			84,399
		474,366			469,997
Less accumulated deprecation		(97,883	)		(90,173	)
		376,483			379,824
Property held for sale		4,232			7,966
Total	$	380,715		$	387,790

Schedule of gain (loss) on sale or write-down of assets

The gain (loss) on sale or write-down of assets, net for the three and nine months ended September 30, 2020 and 2019 consist of the following:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2020			2019		2020			2019
Land(1)	$	5,774		$	5,140	$	15,248		$	9,489
Residential Properties(2)		3,704			—		3,704			(80	)
Commercial Properties(3)		4,609			—		4,609			—
Other(4)		(1,759	)		—		(1,759	)		—
Total	$	12,328		$	5,140	$	21,802		$	9,409

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

(2) On September 14, 2020, we sold Bridgeview Plaza, a 122,205 square foot retail center in La Crosse, Wisconsin for $5,250, resulting in a gain on sale of $4,744. The proceeds from the sale were used to pay off the $3,375 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable) and for general corporate purposes.

(3) On May 1, 2020, we sold Villager Apartments, a 33 unit multifamily apartment community in Pensacola, Florida for $2,426, resulting in a gain on sale of $898. The sales price was funded by the issuance of a $1,761 note receivable and the assumption of the $665 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable). On July 16, 2020, we sold Farnham Park Apartments, a 144 unit multifamily apartment community in Port Arthur, Texas for $13,300, resulting in a gain on the sale of of $2,684. The sales price was funded by cash payment of $4,215 and the assumption of the $9,085 mortgage note payable on the property (See Note 10 – Mortgages and Notes Payable).

(4) Includes the write-off of development costs.

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Notes Receivable (Tables)

9 Months Ended

Sep. 30, 2020

Receivables [Abstract]

Schedule of notes receivable

The following table summarizes our notes receivable as of September 30, 2020 and December 31, 2019:

	Carrying value
Property/Borrower	September 30, 2020		December 31, 2019		Interest Rate			Maturity Date
ABC Land and Development, Inc.	$	7,408	$	7,408		9.50	%		06/21
ABC Paradise, LLC		1,210		1,210		9.50	%		06/21
Autumn Breeze(1)		1,807		1,302		5.00	%		10/21
Bellwether Ridge(1)		3,559		3,765		5.00	%		11/20
Big River NV LLC		344		—		—			07/20
Forest Pines Phase I(1)		2,869		2,868		5.00	%		11/20
JEM Holdings, Inc.		300		300		6.00	%		07/16
One Realco Land Holding, Inc.		1,728		1,728		9.50	%		06/21
Oulad-Chikh Family Trust		174		174		8.00	%		03/21
Parc at Ingleside(1)		2,294		1,531		5.00	%		12/21
Parc at Windmill Farms(1)		7,949		7,602		5.00	%		11/20
Phillips Foundation for Better Living, Inc.		—		314		12.00	%		03/22
Plum Tree(1)		792		413		5.00	%		10/21
Prospectus Endeavors 4, LLC		5,907		5,907		12.00	%		01/23
Prospectus Endeavors 6, LLC		496		496		12.00	%		10/22
Riverview on the Park Land, LLC		1,045		1,045		9.50	%		06/21
RNC Revolving Line of Credit		8,853		8,802		5.00	%		09/24
Spyglass of Ennis(1)		5,359		5,288		5.00	%		11/20
Steeple Crest(1)		6,498		6,665		5.00	%		08/21
TPS Income, Inc.		4,554		4,554		6.00	%		09/20
Unified Housing Foundation, Inc. (2)		10,401		10,401		12.00	%		12/21
Unified Housing Foundation, Inc. (2)		10,096		10,096		12.00	%		03/22
Unified Housing Foundation, Inc. (2)		2,882		3,795		12.00	%		07/21
Unified Housing Foundation, Inc. (2)		212		212		12.00	%		08/21
Unified Housing Foundation, Inc. (2)		7,051		6,831		12.00	%		03/23
Unified Housing Foundation, Inc. (2)		3,615		—		12.00	%		05/23
Unified Housing Foundation, Inc. (2)		6,831		—		12.00	%		10/21
Unified Housing Foundation, Inc. (2)		495		525		12.00	%		12/21
Unified Housing Foundation, Inc. (2)		19,125		19,125		12.00	%		12/32
Total	$	123,854	$	112,357

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

(2) Principal and interest payments on the notes from Unified Housing Foundation, Inc. (“UHF”) are funded from surplus cash flow from operations, sale or refinancing of the underlying properties and are cross collateralized to the extent that any surplus cash available from any of the properties underlying the notes. UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable.

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Investment in Unconsolidated Joint Ventures (Tables)

9 Months Ended

Sep. 30, 2020

Equity Method Investments and Joint Ventures [Abstract]

Schedule of the financial position and results of operations - unconsolidated joint ventures

The following is a summary of the financial position and results of operations of our unconsolidated joint ventures:

	September 30, 2020								December 31, 2019
	VAA			ARL		Total			VAA			ARL		Total
Assets
Property, net	$	1,224,905		$	31,719	$	1,256,624		$	1,242,957		$	35,213	$	1,278,170
Other assets		56,660			69,165		125,825			62,222			67,441		129,663
Total Assets	$	1,281,565		$	100,884	$	1,382,449		$	1,305,179		$	102,654	$	1,407,833
Liabilities and partners' capital
Mortgage and other notes payable	$	832,819		$	6,702	$	839,521		$	832,779		$	8,327	$	841,106
Other liabilities		270,534			23,599		294,133			271,290			26,947		298,237
Company's capital		89,106			635		89,741			100,555			606		101,161
Outside partner's capital		89,106			69,948		159,054			100,555			66,774		167,329
Total liabilties and partners' capital	$	1,281,565		$	100,884	$	1,382,449		$	1,305,179		$	102,654	$	1,407,833
Investments in unconsolidated joint ventures
Company's capital	$	89,106		$	635	$	89,741		$	100,555		$	606	$	101,161
Basis adjustments		(40,601	)		22,031		(18,570	)		(41,407	)		22,026		(19,381	)
Investment in unconsolidated joint ventures	$	48,505		$	22,666	$	71,171		$	59,148		$	22,632	$	81,780

	For the Three Months Ended September 30,
	2020									2019
	VAA			ARL			Total			VAA			ARL			Total
Revenue
Rents	$	29,998		$	—		$	29,998		$	27,347		$	60		$	27,407
Other		1,593			3,000			4,593			2,310			114			2,424
Interest		1			1,075			1,076			56			1,622			1,678
Total revenue		31,592			4,075			35,667			29,713			1,796			31,509
Expenses
Operating		16,172			(470	)		15,702			14,138			860			14,998
Depreciation and amortization		7,832			—			7,832			16,036			—			16,036
Interest		13,839			1,331			15,170			15,424			2,383			17,807
Other expenses (income)		(556	)		—			(556	)		699			—			699
Total expenses		37,287			861			38,148			46,297			3,243			49,540
Net (loss) income	$	(5,695	)	$	3,214		$	(2,481	)	$	(16,584	)	$	(1,447	)	$	(18,031	)
Company's equity in net (loss) income	$	336		$	29		$	365		$	(165	)	$	(13	)	$	(178	)

  

	For the Nine Months Ended September 30,
	2020								2019
	VAA			ARL		Total			VAA			ARL		Total
Revenue
Rents	$	86,841		$	—	$	86,841		$	79,435		$	60	$	79,495
Other		4,034			5,269		9,303			6,550			4,262		10,812
Interest		38			3,358		3,396			139			4,845		4,984
Total revenue		90,913			8,627		99,540			86,124			9,167		95,291
Expenses
Operating		47,463			453		47,916			42,345			2,339		44,684
Depreciation and amortization		23,253			—		23,253			46,792			—		46,792
Interest		43,107			4,296		47,403			45,294			6,154		51,448
Other expenses (income)		(1,453	)		—		(1,453	)		2,058			—		2,058
Total expenses		112,370			4,749		117,119			136,489			8,493		144,982
Net (loss) income	$	(21,457	)	$	3,878	$	(17,579	)	$	(50,365	)	$	674	$	(49,691	)
Company's equity in net (loss) income	$	(775	)	$	35	$	(740	)	$	(1,480	)	$	6	$	(1,474	)

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Mortgages and Notes Payable (Tables)

9 Months Ended

Sep. 30, 2020

Debt Disclosure [Abstract]

Schedule of mortgages and other notes payable

The following table summarizes our mortgages and other notes payable as of September 30, 2020 and December 31, 2019:

	Carrying value
Property / Entity	September 30, 2020		December 31, 2019		Effective Interest Rate			Maturity Date
600 Las Colinas Building	$	35,773	$	36,302		5.30	%	11/1/2023
770 South Post Oak  Building		11,924		12,077		4.40	%	6/1/2025
Bridgeview Plaza Shopping Center(1)		—		3,824		7.75	%	11/1/2020
Chelsea Apartments		8,627		8,749		3.40	%	12/1/2050
EQK Portage-Kent Ohio Land(2)		3,350		—		10.00	%	11/13/2024
Estate of Robert Shaw(3)		13,065		13,032		9.50	%	7/5/2020
Farnham Apartments(4)		—		9,144		3.39	%	12/1/2050
Forest Pines Phase II Apartments(5)		7,057		—		3.75	%	5/5/2024
Forest Pines Phase II(5)		—		1,390		3.75	%	5/5/2024
Landing Apartments		15,286		15,467		3.50	%	9/1/2053
LD Athens Lindsay Ln Land		1,155		1,155		5.90	%	2/28/2021
Legacy at Pleasant Grove Apartments		13,727		13,944		3.60	%	4/1/2048
McKinney 36 Land		856		944		8.00	%	6/30/2022
Overlook at Allensville Phase II Apartments		15,666		15,798		3.80	%	5/1/2059
Parc at Denham Spring Phase II Apartments		16,168		14,785		4.10	%	2/1/2060
Stanford Center Building		39,191		39,255		6.00	%	12/26/2021
Sugar Mill Phase III Apartments		—		5,908		4.50	%	2/1/2060
Sugar Mill Phase III Apartments		8,906		—		4.50	%	2/1/2060
Toulon Apartments		18,283		18,465		3.20	%	12/1/2051
Villager Apartments(6)		—		556		2.50	%	3/1/2043
Villas at Bon Secour Apartments		10,860		11,026		4.00	%	1/1/2022
Vista Ridge Apartments		10,015		10,122		4.00	%	8/1/2053
Windmill Farms Land		12,391		13,830		6.00	%	2/28/2021
Total	$	242,300	$	245,773

(1) On September 14, 2020, we paid off the loan in connection with the sale of the underlining property (See Note 7 – Real Estate Activity).

(2) On March 5, 2020, we acquired 49.2 acres of land in Kent, Ohio in exchange for the note payable.

(3) We are currently negotiating an extension of the loan with the lender.

(4) On July 16, 2020, the loan was assumed by a third party in connection with the sale of the underlying property (See Note 7 – Real Estate Activity).

(5) The loan bears interest at prime rate plus 0.5%.

(6) On May 1, 2020, the loan was assumed by a third party in connection to sale of the underlying property (See Note 7 – Real Estate Activity).

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Bonds Payable (Tables)

9 Months Ended

Sep. 30, 2020

Notes to Financial Statements

Schedule of bonds payable

The following table summarizes the bonds payable as of September 30, 2020 and December 31, 2019:

	September 30,			December 31,
	2020			2019			Maturity Date
Bonds (Series A)	$	69,747		$	92,653		7/31/2023
Bonds (Series B)		61,029			60,764		7/31/2025
Bonds (Series C)		79,919			79,572		1/31/2023
Total outstanding bonds		210,695			232,989
Less: unamortized deferred bond issuance costs		(7,503	)		(9,724	)
Total outstanding bonds, net	$	203,192		$	223,265

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2020

Related Party Transactions [Abstract]

Schedule of related party receivables

The net amounts outstanding consist of the following:

	As of
	September 30,			December 31,
	2020			2019
ARL	$	146,215		$	142,117
Pillar		(6,165	)		(576	)
Total	$	140,050		$	141,541

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Organization (Details Narrative)	Sep. 30, 2020 a ft² Number
Acres of land | a	1,980
Commercial Properties [Member]
Number of income-producing properties	6
Rentable square feet | ft²	1,600,000
Office Buildings [Member]
Number of income-producing properties	5
Retail Properties [Member]
Number of income-producing properties	1
Apartment Buildings [Member]
Number of apartment units	1,639
Number of income-producing properties	10
American Realty Investors, Inc [Member] | TCI [Member]
Percentage of ownership by parent	78.38%
Parent of ARL [Member] | TCI [Member]
Percentage of ownership by non-controlling owners	7.20%
Victory Abode Apartment, LLC [Member]
Percentage of ownership	50.00%
Number of apartment units	10,137
Number of income-producing properties	51

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Earnings per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Earnings Per Share [Abstract]
Net income (loss)	$ 7,693	$ (7,766)	$ 8,548	$ (19,158)
Net (income) attributable to non-controlling interest		(21)	(400)	(583)
Net income (loss) attributable to common shares	$ 7,693	$ (7,787)	$ 8,148	$ (19,741)
Weighted-average common shares outstanding - basic and diluted (in shares)	8,717,767	8,717,767	8,717,767	8,717,767
EPS - attributable to common shares - basic and diluted (in dollars per share)	$ 0.88	$ (0.89)	$ 0.93	$ (2.26)

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Supplemental Cash Flow Information (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Supplemental Cash Flow Elements [Abstract]
Cash and cash equivalents	$ 32,967	$ 51,179	$ 63,069	$ 36,358
Restricted cash	28,030	32,082	36,883	70,207
Total cash, cash equivalents and restricted cash	$ 60,997	$ 83,261	$ 99,952	$ 106,565

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Operating Segments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Revenues	$ 12,159	$ 13,397	$ 38,346	$ 41,746
Total profit from segments	5,065	6,004	15,954	15,630
Multifamily Segment [Member]
Revenues	3,683	3,383	10,943	10,077
Operating expenses	(2,412)	(2,243)	(6,466)	(6,363)
Profit from segment	1,271	1,140	4,477	3,714
Commercial Segment [Member]
Revenues	7,770	8,024	23,518	24,275
Operating expenses	(3,976)	(3,160)	(12,041)	(12,359)
Profit from segment	$ 3,794	$ 4,864	$ 11,477	$ 11,916

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Operating Segments (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Segment Reporting [Abstract]
Total profit from segments	$ 5,065	$ 6,004	$ 15,954	$ 15,630
Depreciation	(3,526)	(3,416)	(10,338)	(9,964)
General and administrative	(1,643)	(1,929)	(7,063)	(6,468)
Advisory fee to related party	(2,139)	(2,200)	(6,483)	(6,196)
Interest income	4,348	5,232	13,102	14,668
Other income	706	1,990	3,885	7,394
Interest expense	(6,291)	(8,037)	(21,999)	(23,642)
(Loss) gain on foreign currency transaction	(1,470)	(5,153)	774	(13,296)
Loss on extinguishment of debt		(5,219)		(5,219)
Income (losses) from unconsolidated joint ventures	365	(178)	(740)	(1,474)
Gain on sales or write-down of assets	12,328	5,140	21,802	9,409
Income tax expense	(50)		(346)
Net income (loss)	$ 7,693	$ (7,766)	$ 8,548	$ (19,158)

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Operating Segments (Details Narrative)	9 Months Ended
	Sep. 30, 2020 Number
Segment Reporting [Abstract]
Number of reportable segments	2

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Leases (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Leases [Abstract]
Fixed component	$ 11,107	$ 10,827	$ 33,111	$ 32,963
Variable component	346	580	1,350	1,389
Total	$ 11,453	$ 11,407	$ 34,461	$ 34,352

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Leases (Details 1) $ in Thousands	Sep. 30, 2020 USD ($)
Twelve months ended September 30, 2020
2021	$ 6,444
2022	23,155
2023	20,038
2024	14,606
2025	8,737
Thereafter	7,071
Total	$ 80,051

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Real Estate Activity (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Real Estate [Abstract]
Land	$ 50,759	$ 49,887
Building and improvements	297,068	286,280
Tenant improvements	49,423	49,431
Construction in progress	77,116	84,399
Property, Plant and Equipment, Gross	474,366	469,997
Less accumulated deprecation	(97,883)	(90,173)
Property, Plant and Equipment, Net	376,483	379,824
Property held for sale	4,232	7,966
Total	$ 380,715	$ 387,790

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Real Estate Activity (Details 1) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Total		$ 12,328	$ 5,140	$ 21,802	$ 9,409
Land [Member]
Total	[1]	5,774	$ 5,140	15,248	9,489
Residential Properties [Member]
Total	[2]	3,704		3,704	$ (80)
Commercial Properties [Member]
Total	[3]	4,609		4,609
Other [Member]
Total	[4]	$ (1,759)		$ (1,759)

[1] Includes the sale of lots related to our investment in Windmill Farms, Mercer Crossing and other land holdings.

[2] On September 14, 2020, we sold Bridgeview Plaza, a 122,205 square foot retail center in La Crosse, Wisconsin for $5,250, resulting in a gain on sale of $4,744. The proceeds from the sale were used to pay off the $3,375 mortgage note payable on the property (See Note 10 - Mortgages and Notes Payable) and for general corporate purposes.

[3] On May 1, 2020, we sold Villager Apartments, a 33 unit multifamily apartment community in Pensacola, Florida for $2,426, resulting in a gain on sale of $898. The sales price was funded by the issuance of a $1,761 note receivable and the assumption of the $665 mortgage note payable on the property (See Note 10 - Mortgages and Notes Payable). On July 16, 2020, we sold Farnham Park Apartments, a 144 unit multifamily apartment community in Port Arthur, Texas for $13,300, resulting in a gain on the sale of of $2,684. The sales price was funded by cash payment of $4,215 and the assumption of the $9,085 mortgage note payable on the property (See Note 10 - Mortgages and Notes Payable).

[4] Includes the write-off of development costs.

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Real Estate Activity (Details Narrative) $ in Thousands				9 Months Ended
	Sep. 14, 2020 USD ($) ft²	Jul. 16, 2020 USD ($) Number	May 01, 2020 USD ($) Number	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)
Gain on sale				$ 21,802	$ 9,409
Port Arthur [Member]
Number of units sold | Number		144
Proceeds from sale		$ 13,300
Gain on sale		2,684
Mortgage note payable		9,085
Cash payment		$ 4,215
Villager Apartments [Member]
Number of units sold | Number			33
Proceeds from sale			$ 2,426
Gain on sale			898
Mortgage note payable			665
Note receivable and the assumption			$ 1,761
Bridgeview Plaza [Member]
Area of property sold | ft²	122,205
Proceeds from sale	$ 5,250
Gain on sale	4,744
Mortgage note payable	$ 3,375

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Notes Receivable (Details) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2020	Dec. 31, 2019
Carrying value		$ 123,854	$ 112,357
ABC Land and Development, Inc. [Member]
Carrying value		$ 7,408	7,408
Interest rate		9.50%
Description of maturity date		06/21
ABC Paradise, LLC [Member]
Carrying value		$ 1,210	1,210
Interest rate		9.50%
Description of maturity date		06/21
Autumn Breeze [Member]
Carrying value	[1]	$ 1,807	1,302
Interest rate	[1]	5.00%
Description of maturity date	[1]	10/21
Bellwether Ridge [Member]
Carrying value	[1]	$ 3,559	3,765
Interest rate	[1]	5.00%
Description of maturity date	[1]	11/20
Big River NV LLC [Member]
Carrying value		$ 344
Interest rate
Description of maturity date		07/20
Forest Pines Phase I [Member]
Carrying value	[1]	$ 2,869	2,868
Interest rate	[1]	5.00%
Description of maturity date	[1]	11/20
JEM Holdings, Inc [Member]
Carrying value		$ 300	300
Interest rate		6.00%
Description of maturity date		07/16
One Realco Land Holding, Inc [Member]
Carrying value		$ 1,728	1,728
Interest rate		9.50%
Description of maturity date		06/21
Oulad-Chikh Family Trust [Member]
Carrying value		$ 174	174
Interest rate		8.00%
Description of maturity date		03/21
Parc at Ingleside [Member]
Carrying value	[1]	$ 2,294	1,531
Interest rate	[1]	5.00%
Description of maturity date	[1]	12/21
Parc at Windmill Farms [Member]
Carrying value	[1]	$ 7,949	7,602
Interest rate	[1]	5.00%
Description of maturity date	[1]	11/20
Phillips Foundation for Better Living, Inc. [Member]
Carrying value			314
Interest rate		12.00%
Description of maturity date		03/22
Plum Tree [Member]
Carrying value	[1]	$ 792	413
Interest rate	[1]	5.00%
Description of maturity date	[1]	10/21
Prospectus Endeavors 4, LLC [Member]
Carrying value		$ 5,907	5,907
Interest rate		12.00%
Description of maturity date		01/23
Prospectus Endeavors 6, LLC [Member]
Carrying value		$ 496	496
Interest rate		12.00%
Description of maturity date		10/22
Riverview on the Park Land, LLC [Member]
Carrying value		$ 1,045	1,045
Interest rate		9.50%
Description of maturity date		06/21
RNC Revolving Line of Credit [Member]
Carrying value		$ 8,853	8,802
Interest rate		5.00%
Description of maturity date		09/24
Spyglass of Ennis [Member]
Carrying value	[1]	$ 5,359	5,288
Interest rate	[1]	5.00%
Description of maturity date	[1]	11/20
Steeple Crest [Member]
Carrying value	[1]	$ 6,498	6,665
Interest rate	[1]	5.00%
Description of maturity date	[1]	08/21
TPS Income, Inc [Member]
Carrying value		$ 4,554	4,554
Interest rate		6.00%
Description of maturity date		09/20
Unified Housing Foundation, Inc [Member]
Carrying value	[2]	$ 10,401	10,401
Interest rate	[2]	12.00%
Description of maturity date	[2]	12/21
Unified Housing Foundation, Inc [Member]
Carrying value	[2]	$ 10,096	10,096
Interest rate	[2]	12.00%
Description of maturity date	[2]	03/22
Unified Housing Foundation, Inc [Member]
Carrying value	[2]	$ 2,882	3,795
Interest rate	[2]	12.00%
Description of maturity date	[2]	07/21
Unified Housing Foundation, Inc [Member]
Carrying value	[2]	$ 212	212
Interest rate	[2]	12.00%
Description of maturity date	[2]	08/21
Unified Housing Foundation, Inc [Member]
Carrying value	[2]	$ 7,051	6,831
Interest rate	[2]	12.00%
Description of maturity date	[2]	03/23
Unified Housing Foundation, Inc [Member]
Carrying value	[2]	$ 3,615
Interest rate	[2]	12.00%
Description of maturity date	[2]	05/23
Unified Housing Foundation, Inc [Member]
Carrying value	[2]	$ 6,831
Interest rate	[2]	12.00%
Description of maturity date	[2]	10/21
Unified Housing Foundation, Inc [Member]
Carrying value	[2]	$ 495	525
Interest rate	[2]	12.00%
Description of maturity date	[2]	12/21
Unified Housing Foundation, Inc [Member]
Carrying value	[2]	$ 19,125	$ 19,125
Interest rate	[2]	12.00%
Description of maturity date	[2]	12/32

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

[2] Principal and interest payments on the notes from Unified Housing Foundation, Inc. ("UHF") are funded from surplus cash flow from operations, sale or refinancing of the underlying properties and are cross collateralized to the extent that any surplus cash available from any of the properties underlying the notes. UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable.

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Investment in Unconsolidated Joint Ventures (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Assets
Property, net	$ 376,483		$ 376,483		$ 379,824
Other assets	68,558		68,558		59,189
Total assets	845,345		845,345		865,918
Liabilities and partners' capital
Total liabilties and partners' capital	845,345		845,345		865,918
Investments in unconsolidated joint ventures
Investments in unconsolidated joint ventures	71,171		71,171		81,780
Revenue
Total revenue	12,159	$ 13,397	38,346	$ 41,746
Expenses
Depreciation and amortization	3,526	3,416	10,338	9,964
Interest	4,348	5,232	13,102	14,668
Other expenses (income)	(706)	(1,990)	(3,885)	(7,394)
Net (loss) income	7,693	(7,766)	8,548	(19,158)
Company's equity in net (loss) income	365	(178)	(740)	(1,474)
Investment in Unconsolidated Joint Ventures [Member]
Assets
Property, net	1,256,624		1,256,624		1,278,170
Other assets	125,825		125,825		129,663
Total assets	1,382,449		1,382,449		1,407,833
Liabilities and partners' capital
Mortgage and other notes payable	839,521		839,521		841,106
Other liabilities	294,133		294,133		298,237
Company's capital	89,741		89,741		101,161
Outside partner's capital	159,054		159,054		167,329
Total liabilties and partners' capital	1,382,449		1,382,449		1,407,833
Investments in unconsolidated joint ventures
Company's capital	89,741		89,741		101,161
Basis adjustments	(18,570)		(18,570)		(19,381)
Investments in unconsolidated joint ventures	71,171		71,171		81,780
Revenue
Total revenue	35,667	31,509	99,540	95,291
Expenses
Operating	15,702	14,998	47,916	44,684
Depreciation and amortization	7,832	16,036	23,253	46,792
Interest	15,170	17,807	47,403	51,448
Other expenses (income)	(556)	699	(1,453)	2,058
Total expenses	38,148	49,540	117,119	144,982
Net (loss) income	(2,481)	(18,031)	(17,579)	(49,691)
Company's equity in net (loss) income	365	(178)	(740)	(1,474)
Investment in Unconsolidated Joint Ventures [Member] | Rents [Member]
Revenue
Total revenue	29,998	27,407	86,841	79,495
Investment in Unconsolidated Joint Ventures [Member] | Other [Member]
Revenue
Total revenue	4,593	2,424	9,303	10,812
Investment in Unconsolidated Joint Ventures [Member] | Interest [Member]
Revenue
Total revenue	1,076	1,678	3,396	4,984
Investment in Unconsolidated Joint Ventures [Member] | Victory Abode Apartments, LLC [Member]
Assets
Property, net	1,224,905		1,224,905		1,242,957
Other assets	56,660		56,660		62,222
Total assets	1,281,565		1,281,565		1,305,179
Liabilities and partners' capital
Mortgage and other notes payable	832,819		832,819		832,779
Other liabilities	270,534		270,534		271,290
Company's capital	89,106		89,106		100,555
Outside partner's capital	89,106		89,106		100,555
Total liabilties and partners' capital	1,281,565		1,281,565		1,305,179
Investments in unconsolidated joint ventures
Company's capital	89,106		89,106		100,555
Basis adjustments	(40,601)		(40,601)		(41,407)
Investments in unconsolidated joint ventures	48,505		48,505		59,148
Revenue
Total revenue	31,592	29,713	90,913	86,124
Expenses
Operating	16,172	14,138	47,463	42,345
Depreciation and amortization	7,832	16,036	23,253	46,792
Interest	13,839	15,424	43,107	45,294
Other expenses (income)	(556)	699	(1,453)	2,058
Total expenses	37,287	46,297	112,370	136,489
Net (loss) income	(5,695)	(16,584)	(21,457)	(50,365)
Company's equity in net (loss) income	336	(165)	(775)	(1,480)
Investment in Unconsolidated Joint Ventures [Member] | Victory Abode Apartments, LLC [Member] | Rents [Member]
Revenue
Total revenue	29,998	27,347	86,841	79,435
Investment in Unconsolidated Joint Ventures [Member] | Victory Abode Apartments, LLC [Member] | Other [Member]
Revenue
Total revenue	1,593	2,310	4,034	6,550
Investment in Unconsolidated Joint Ventures [Member] | Victory Abode Apartments, LLC [Member] | Interest [Member]
Revenue
Total revenue	1	56	38	139
Investment in Unconsolidated Joint Ventures [Member] | American Realty Investors, Inc. [Member]
Assets
Property, net	31,719		31,719		35,213
Other assets	69,165		69,165		67,441
Total assets	100,884		100,884		102,654
Liabilities and partners' capital
Mortgage and other notes payable	6,702		6,702		8,327
Other liabilities	23,599		23,599		26,947
Company's capital	635		635		606
Outside partner's capital	69,948		69,948		66,774
Total liabilties and partners' capital	100,884		100,884		102,654
Investments in unconsolidated joint ventures
Company's capital	635		635		606
Basis adjustments	22,031		22,031		22,026
Investments in unconsolidated joint ventures	22,666		22,666		$ 22,632
Revenue
Total revenue	4,075	1,796	8,627	9,167
Expenses
Operating	(470)	860	453	2,339
Interest	1,331	2,383	4,296	6,154
Total expenses	861	3,243	4,749	8,493
Net (loss) income	3,214	(1,447)	3,878	674
Company's equity in net (loss) income	29	(13)	35	6
Investment in Unconsolidated Joint Ventures [Member] | American Realty Investors, Inc. [Member] | Rents [Member]
Revenue
Total revenue		60		60
Investment in Unconsolidated Joint Ventures [Member] | American Realty Investors, Inc. [Member] | Other [Member]
Revenue
Total revenue	3,000	114	5,269	4,262
Investment in Unconsolidated Joint Ventures [Member] | American Realty Investors, Inc. [Member] | Interest [Member]
Revenue
Total revenue	$ 1,075	$ 1,622	$ 3,358	$ 4,845

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Mortgages and Notes Payable (Details) - USD ($) $ in Thousands		9 Months Ended
		Sep. 30, 2020	Dec. 31, 2019
Carrying value		$ 242,300	$ 245,773
Mortgages and Notes Payable [Member]
Carrying value		242,300	245,772
Mortgages and Notes Payable [Member] | 600 Las Colinas Building [Member]
Carrying value		$ 35,773	36,302
Effective Interest Rate		5.30%
Maturity Date		Nov. 01, 2023
Mortgages and Notes Payable [Member] | 770 South Post Oak Building [Member]
Carrying value		$ 11,924	12,077
Effective Interest Rate		4.40%
Maturity Date		Jun. 01, 2025
Mortgages and Notes Payable [Member] | Bridgeview Plaza Shopping Center [Member]
Carrying value	[1]		3,824
Effective Interest Rate	[1]	7.75%
Maturity Date	[1]	Nov. 01, 2020
Mortgages and Notes Payable [Member] | Chelsea Apartments [Member]
Carrying value		$ 8,627	8,749
Effective Interest Rate		3.40%
Maturity Date		Dec. 01, 2050
Mortgages and Notes Payable [Member] | EQK Portage-Kent Ohio Land [Member]
Carrying value	[2]	$ 3,350
Effective Interest Rate	[2]	10.00%
Maturity Date	[2]	Nov. 13, 2024
Mortgages and Notes Payable [Member] | Estate Of Robert Shaw [Member]
Carrying value	[3]	$ 13,065	13,032
Effective Interest Rate	[3]	9.50%
Maturity Date	[3]	Jul. 05, 2020
Mortgages and Notes Payable [Member] | Farnham Apartments [Member]
Carrying value	[4]		9,144
Effective Interest Rate	[4]	3.39%
Maturity Date	[4]	Dec. 01, 2050
Mortgages and Notes Payable [Member] | Forest Pines Phase II [Member]
Carrying value	[5]		1,390
Effective Interest Rate	[5]	3.75%
Maturity Date	[5]	May 05, 2024
Mortgages and Notes Payable [Member] | Forest Pines Phase II Apartments [Member]
Carrying value	[5]	$ 7,057
Effective Interest Rate	[5]	3.75%
Maturity Date	[5]	May 05, 2024
Mortgages and Notes Payable [Member] | Landing Apartments [Member]
Carrying value		$ 15,286	15,467
Effective Interest Rate		3.50%
Maturity Date		Sep. 01, 2053
Mortgages and Notes Payable [Member] | Ld Athens Lindsay Ln Land [Member]
Carrying value		$ 1,155	1,155
Effective Interest Rate		5.90%
Maturity Date		Feb. 28, 2021
Mortgages and Notes Payable [Member] | Legacy At Pleasant Grove Apartments [Member]
Carrying value		$ 13,727	13,944
Effective Interest Rate		3.60%
Maturity Date		Apr. 01, 2048
Mortgages and Notes Payable [Member] | Mckinney 36 Land [Member]
Carrying value		$ 856	944
Effective Interest Rate		8.00%
Maturity Date		Jun. 30, 2022
Mortgages and Notes Payable [Member] | Overlook At Allensville Phase II Apartments [Member]
Carrying value		$ 15,666	15,798
Effective Interest Rate		3.80%
Maturity Date		May 01, 2059
Mortgages and Notes Payable [Member] | Parc At Denham Spring Phase II Apartments [Member]
Carrying value		$ 16,168	14,785
Effective Interest Rate		4.10%
Maturity Date		Feb. 01, 2060
Mortgages and Notes Payable [Member] | Stanford Center Building [Member]
Carrying value		$ 39,191	39,255
Effective Interest Rate		6.00%
Maturity Date		Dec. 26, 2021
Mortgages and Notes Payable [Member] | Sugar Mill Phase III Apartments [Member]
Carrying value			5,908
Effective Interest Rate		4.50%
Maturity Date		Feb. 01, 2060
Mortgages and Notes Payable [Member] | Sugar Mill Phase III Apartments [Member]
Carrying value		$ 8,906
Effective Interest Rate		4.50%
Maturity Date		Feb. 01, 2060
Mortgages and Notes Payable [Member] | Toulon Apartments [Member]
Carrying value		$ 18,283	18,465
Effective Interest Rate		3.20%
Maturity Date		Dec. 01, 2051
Mortgages and Notes Payable [Member] | Villager Apartments [Member]
Carrying value	[6]		556
Effective Interest Rate	[6]	2.50%
Maturity Date	[6]	Mar. 01, 2043
Mortgages and Notes Payable [Member] | Villas At Bon Secour Apartments [Member]
Carrying value		$ 10,860	11,026
Effective Interest Rate		4.00%
Maturity Date		Jan. 01, 2022
Mortgages and Notes Payable [Member] | Vista Ridge Apartments [Member]
Carrying value		$ 10,015	10,122
Effective Interest Rate		4.00%
Maturity Date		Aug. 01, 2053
Mortgages and Notes Payable [Member] | Windmill Farms Land [Member]
Carrying value		$ 12,391	$ 13,830
Effective Interest Rate		6.00%
Maturity Date		Feb. 28, 2021

[1] On September 14, 2020, we paid off the loan in connection with the sale of the underlining property (See Note 7 - Real Estate Activity).

[2] On March 5, 2020, we acquired 49.2 acres of land in Kent, Ohio in exchange for the note payable.

[3] We are currently negotiating an extension of the loan with the lender.

[4] On July 16, 2020, the loan was assumed by a third party in connection with the sale of the underlying property (See Note 7 - Real Estate Activity).

[5] The loan bears interest at prime rate plus 0.5%.

[6] On May 1, 2020, the loan was assumed by a third party in connection to sale of the underlying property (See Note 7 - Real Estate Activity).

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Mortgages and Notes Payable (Details Narrative) - a	9 Months Ended
	Sep. 30, 2020	Mar. 05, 2020
Area of land	1,980
Mortgages and Notes Payable [Member] | EQK Portage-Kent Ohio Land [Member]
Area of land		49.2
Mortgages and Notes Payable [Member] | Forest Pines Phase II [Member] | Prime Rate [Member]
Interest rate margin	0.50%

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Bonds Payable (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Bonds	$ 210,695	$ 232,989
Less: unamortized deferred bond issuance costs	(7,503)	(9,724)
Total outstanding bonds, net	203,192	223,265
Bonds (Series A) [Member]
Bonds	69,747	92,653
Bonds (Series B) [Member]
Bonds	61,029	60,764
Bonds (Series C) [Member]
Bonds	$ 79,919	$ 79,572

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Bonds Payable (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Notes to Financial Statements
(Loss) gain on foreign currency transactions	$ (1,470)	$ (5,153)	$ 744	$ (13,296)

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Deferred Income (Details Narrative) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Deferred Income
Deferred gain	$ 9,315	$ 9,468

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Related Party Transactions (Details) - USD ($) $ in Thousands	Sep. 30, 2020	Dec. 31, 2019
Related party transaction	$ 140,050	$ 141,541
American Realty Investors, Inc [Member]
Related party transaction	146,215	142,117
Pillar Income Asset Management, Inc [Member]
Related party transaction	$ (6,165)	$ (576)

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Related Party Transactions (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Advisory fees	$ 2,139	$ 2,200	$ 6,483	$ 6,196
General and administrative expense	1,643	1,929	7,063	6,468
Interest expense	6,291	8,037	21,999	23,642
Pillar, Regis and VAA [Member]
Rental income	262	212	673	527
Regis [Member]
Property operating expense	254	237	750	741
Pillar [Member]
General and administrative expense	1,017	935	2,783	3,355
Interest expense	380	514	1,193	1,517
UHF and Pillar [Member]
Interest income	$ 3,752	$ 4,618	$ 11,255	$ 13,483

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Commitments and Contingencies (Details narrative) - USD ($) $ in Thousands	1 Months Ended
	Jan. 30, 2015	Sep. 30, 2020
UHF Debt Guarantee [Member]
Loan guarantee amount		$ 24,300
Dynex Litigation [Member]
Damages awarded value	$ 24,800