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TRANSCONTINENTAL REALTY INVESTORS INC

TRANSCONTINENTAL REALTY INVESTORS INCTCIEarnings & Financial Report

NYSE · Financials · Real Estate Investment Trusts

Transcontinental Realty Investors Inc. (TCI) is a U.S.-based real estate investment firm that owns, operates and develops a diversified portfolio of residential, commercial and mixed-use properties across core U.S. regional markets. It pursues long-term value growth via strategic property acquisitions, efficient asset management and tailored leasing solutions for individual and business tenants.

What changed in TRANSCONTINENTAL REALTY INVESTORS INC's 10-K — 2023 vs 2024

Top changes in TRANSCONTINENTAL REALTY INVESTORS INC's 2024 10-K

91 paragraphs added · 103 removed · 75 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

17 edited+2 added−10 removed23 unchanged
The services for our multifamily segment include primarily rental of apartments and other tenant services, including parking and storage space rental. See Note 5 to our consolidated financial statements in Item 8 of this Report for more information regarding our segments. 6 Human Capital We have no employees.
The services for our multifamily segment include primarily rental of apartments and other tenant services, including parking and storage space rental. See Note 5 to our consolidated financial statements in Item 8 of this Report for more information regarding our segments. Human Capital We have no employees.
We believe that beyond general economic circumstances and trends, the degree to which properties are renovated or new properties are developed in the competing submarket are also competitive factors. Refer to Part I, Item1A. “Risk Factors”.
We believe that beyond general economic circumstances and trends, the degree to 5 which properties are renovated or new properties are developed in the competing submarket are also competitive factors. Refer to Part I, Item1A. “Risk Factors”.
When we sell properties, we may carry a portion of the sales price, generally in the form of a 5 short-term interest bearing seller-financed note receivable, secured by the property being sold.
When we sell properties, we may carry a portion of the sales price, generally in the form of a short-term interest bearing seller-financed note receivable, secured by the property being sold.
We will also provide a copy of these documents free of charge to stockholders upon written request. We issue Annual Reports containing audited financial statements to our stockholders.
We will also provide a copy of these documents free of charge to stockholders upon written request. We issue Annual Reports containing audited financial statements to our stockholders. 6
From time to time and when we believe it appropriate to do so, we sell land and income-producing properties. We also invest in mortgage receivables. Our income producing real estate is managed by external management companies.
In addition, we also opportunistically acquire land for future development. From time to time and when we believe it appropriate to do so, we sell land and income-producing properties. We also invest in mortgage receivables. Our income producing real estate is managed by external management companies.
Employees of Pillar render services to us in accordance with the terms of the Advisory Agreement. Available Information We maintain an internet site at www.transconrealty-invest.com.
Employees of Pillar render services to us in accordance with the terms of the Advisory Agreement. Available Information We maintain a website at www.transconrealty-invest.com.
We also invest in notes receivables that are collateralized by investments in land and/or multifamily properties. These investments have included notes receivables from Unified Housing Foundation, Inc. ("UHF"). Due to our ongoing relationship and significant investment in the performance of the collateral secured under the notes receivable, we consider UHF to be a related party.
These investments have included notes receivables from Unified Housing Foundation, Inc. ("UHF"). Due to our ongoing relationship and significant investment in the performance of the collateral secured under the notes receivable, we consider UHF to be a related party.
Our officers and directors owe fiduciary duties to both ARL and us under applicable law. In determining whether a particular investment opportunity will be allocated to ARL or us, management considers the respective investment objectives of each company and the appropriateness of a particular investment in light of each company’s existing real estate and mortgage notes receivable portfolio.
In determining whether a particular investment opportunity will be allocated to ARL or us, management considers the respective investment objectives of each company and the appropriateness of a particular investment in light of each company’s existing real estate and mortgage notes receivable portfolio.
We seek to maximize the current income and the value of our real estate by maintaining high occupancy levels while charging competitive rents and controlling costs. In the past we have opportunistically acquired commercial properties for income and appreciation. In addition, we also opportunistically acquire land for future development.
We generally hold our investments in real estate for the long term. We seek to maximize the current income and the value of our real estate by maintaining high occupancy levels while charging competitive rents and controlling costs. In the past we have opportunistically acquired commercial properties for income and appreciation.
Portfolio Composition At December 31, 2023, our property portfolio consisted of: • Commercial pr operties , consisting of four office buildings with an aggregate of approximately 1,056,793 square feet; • Fourteen multifamily properties, comprising in 2,328 units; and • Approximately 1,843 acres of developed and undeveloped land.
Portfolio Composition At December 31, 2024, our property portfolio consisted of: • Commercial pr operties , consisting of four office buildings with an aggregate of approximately 1,060,236 rentable square feet; • Fourteen multifamily properties in operation, comprising 2,328 units; • Four multifamily properties under development, comprising 906 units; and • Approximately 1,804 acres of developed and undeveloped land.
Accordingly, we include IOR’s financial results in our consolidated financial statements. IOR’s primary business is investing in mortgage loans and real estate. Controlling Stockholder American Realty Investors, Inc. (“ARL”), a Nevada Corporation, whose common stock is listed and traded on the NYSE under the symbol “ARL”, and its affiliates own more than 80% of our common stock.
As of December 31, 2024, we owned approximately 83.2% of the common stock of Income Opportunity Realty Investors, Inc. (“IOR”), a Nevada Corporation, whose common stock is listed and traded on the NYSE American under the symbol “IOR”. Accordingly, we include IOR’s financial results in our consolidated financial statements. IOR’s primary business is investing in mortgage loans and real estate.
Business Plan and Investment Policy Our business strategy is to maximize long-term value for our stockholders by the acquisition, development and ownership of income-producing multifamily properties in the secondary markets of the Southern United States. We generally hold our investments in real estate for the long term.
As of December 31, 2024, we have incurred a total of $5.0 million in development costs. 4 Business Plan and Investment Policy Our business strategy is to maximize long-term value for our stockholders by the acquisition, development and ownership of income-producing multifamily properties in the secondary markets of the Southern United States.
The cost of construction will be funded in part by a $33.0 million construction loan (See "Financing Activities") . The development agreement provides for a $1.6 million fee that will be paid to Pillar over the construction period.
The development agreement provides for a $1.6 million fee that will be paid to Pillar over the construction period.
Regis receives property management fees, construction management fees and leasing commissions in accordance with the terms of its property-level management agreement and is also entitled to receive real estate brokerage commissions in accordance with the terms of a non-exclusive brokerage agreement. Refer to Part III, Item 10. “Directors, Executive Officers and Corporate Governance – Property Management and Real Estate Brokerage”.
Regis receives property management fees in accordance with the terms of its property-level management agreement. Refer to Part III, Item 10. “Directors, Executive Officers and Corporate Governance – Property Management and Real Estate Brokerage”. We also invest in notes receivables that are collateralized by investments in land and/or multifamily properties.
On December 15, 2023, we entered into a development agreement with Pillar to build a 216 unit multifamily property in Temple , Texas (" Bandera Ridge ") that is expected to be completed in 2025 for a total cost of approximately $49.6 million.
Development Activities On October 21, 2024, we entered into a development agreement with Pillar to build a 234 unit multifamily property in Dallas , Texas (" Mountain Creek ") that is expected to be completed in 2026 for a total cost of approximately $49.8 million. The cost of construction will be funded in part by a $27.5 million construction loan.
Accordingly, our financial results are included in the consolidated financial statements of ARL’s Form 10-K and tax filings. As described in Part III, Item 13. “Certain Relationships and Related Transactions, and Director Independence”, our officers and directors also serve as officers and directors of ARL. ARL has business objectives similar to ours.
“Certain Relationships and Related Transactions, and Director Independence”, our officers and directors also serve as officers and directors of ARL. ARL has business objectives similar to ours. Our officers and directors owe fiduciary duties to both ARL and us under applicable law.
Recent Activity Financing Activities • On January 31, 2023 , we paid off our $67.5 million of Series C bonds. • On February 28, 2023 , we extended the maturity of our loan on Windmill Farms until February 28, 2024 at a revised interest rate of 7.75%. • On March 15, 2023 , we entered into a $33.0 million construction loan to finance the development of Lake Wales (See "Development Activities") that bears interest at the Secured Overnight Financing Rate ("SOFR") plus 3% and matures on March 15, 2026 , with two one-year extension options. • On May 4, 2023, we paid off the remaining $14.0 million of our Series A Bonds and $28.9 million of our Series B Bonds, which resulted in a loss on early extinguishment of debt of $1.7 million. • On August 28, 2023, we paid off our $1.2 million loan on Athens . • On November 6, 2023 , we entered into a $25.4 million construction loan to finance the development of Merano (See "Development Activities") that bears interest at prime plus 0.25% and matures on November 6, 2028 . • On December 15, 2023 , we entered into a $23.5 million construction loan to finance the development of Bandera Ridge (See "Development Activities") that bears interest at SOFR plus 3% and matures on December 15, 2028 . • On February 8, 2024, we extended the maturity of our loan on Windmill Farms to February 28, 2026 at an interest rate of 7.50%. 4 Development Activities We have agreements to develop two land parcels or " PODs " of our land holdings in Windmill Farms .
As a result, the interest rate on the related party receivable (" Pillar Receivable ") changed from prime plus one to the Secured Overnight Financing Rate (" SOFR"). • On February 8, 2024, we extended the maturity of our loan on Windmill Farms to February 28, 2026 at an interest rate of 7.50%. • On July 10, 2024, we replaced the existing loan on Forest Grove with a $6.6 million loan that bears interest at SOFR plus 2.15% and matures on August 1, 2031. • On October 21, 2024 , we entered into a $27.5 million construction loan to finance the development of Mountain Creek (See "Development Activities") that bears interest at SOFR plus 3.45% and matures on October 20, 2026.
Removed
On November 19, 2018, we formed the Victory Abode Apartments, LLC (“VAA”) joint venture with the Macquarie Group (“Macquarie”). In connection with the formation of VAA, we sold a 50% ownership interest in 51 multifamily properties. We account for our in vestment in VAA under the equity method.
Added
Controlling Stockholder American Realty Investors, Inc. (“ARL”), a Nevada Corporation, whose common stock is listed and traded on the NYSE under the symbol “ARL”, and its affiliates own approximately 90.8% of our common stock. Accordingly, our financial results are included in the consolidated financial statements of ARL’s Form 10-K and tax filings. As described in Part III, Item 13.
Removed
In 2022, VAA sold 45 of its properties to a third party and distributed the remaining seven properties to us in a liquidating distribution. We own approximately 82.3% of the common stock of Income Opportunity Realty Investors, Inc. (“IOR”), a Nevada Corporation, whose common stock is listed and traded on the NYSE American under the symbol “IOR”.
Added
Recent Activity Acquisitions and Dispositions • On December 13, 2024 , we sold 30 single family lots from our holdings in Windmill Farms for $1.4 million, resulting in a gain on sale of $1.1 million. Financing Activities • On January 1, 2024, we amended our cash management agreement with Pillar .
Removed
The agreements provide for the development of 125 acres of raw land into approximately 470 lands lots to used for single family homes for a total of $24.3 million. We estimate that we will complete the development of these PODs over a two-year period starting in the third quarter of 2024.
Removed
During 2023, we spent $5.0 million on the project, which included $0.5 million on lot development and $4.5 million on reimbursable infrastructure investments.
Removed
On March 15, 2023, we entered into a development agreement with Pillar to build a 240 unit multifamily property in Lake Wales, Florida (" Lake Wales ") that is expected to be completed in 2025 for a total cost of approximately $55.3 million.
Removed
In connection with the closing of the loan, we purchased the land and certain entitlement costs from a related party at an appraised value of $6.1 million. As of December 31, 2023, we have incurred a total of $16.9 million in development costs.
Removed
On November 6, 2023, we entered into a development agreement with Pillar to build a 216 unit multifamily property in McKinney , Texas (" Merano ") that is expected to be completed in 2025 for a total cost of approximately $51.9 million.
Removed
The cost of construction will be funded in part by a $25.4 million construction loan (See "Financing Activities") . The development agreement provides for a $1.6 million fee that will be paid to Pillar over the construction period. As of December 31, 2023, we have incurred a total of $7.2 million in development costs.
Removed
The cost of construction will be funded in part by a $23.5 million construction loan (See "Financing Activities") . The development agreement provides for a $1.6 million fee that will be paid to Pillar over the construction period.
Removed
In connection with the closing of the loan, we purchased the land from a related party at an appraised value of $2.7 million. As of December 31, 2023, we have incurred a total of $3.1 million in development costs.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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We may experience increased operating costs which could adversely affect our financial results and the value of our properties. Our properties are subject to increases in operating expenses such as insurance, cleaning, electricity, heating, ventilation and air conditioning, administrative costs and other costs associated with security, landscaping, repairs, and maintenance of the properties.
We may experience increased operating costs which could adversely affect our financial results and the value of our properties. Our properties are subject to increases in operating expenses such as insurance, cleaning, maintenance, electricity, heating, ventilation and air conditioning, administrative costs and other costs associated with security, landscaping, repairs, and maintenance of the properties.
While we hope to continue utilizing HUD insured loans in the future, should we not be able to access such loans, or should HUD cease to permit us to access or assume HUD insured debt, we would likely incur significantly increased interest costs and shorter term conventional loans (assuming we are able to obtain conventional loans) and possibly need to utilize funds from disposal of investments or other properties to finance such activities.
While we hope to continue utilizing HUD insured loans in the future, should we not be able to access such loans, or should HUD cease to permit us to access or assume HUD insured debt, we would likely incur significantly increased interest costs and shorter term conventional loans (assuming we are able to obtain conventional loans) and possibly will need to utilize funds from disposal of investments or other properties to finance such activities.
To the extent that we do so, we are subject to certain risks, including the following: • We may not complete a development or redevelopment project on schedule or within budgeted amounts (as a result of risks beyond our control, such as weather, labor conditions, permitting issues, material shortages and price increases); • We may be unable to lease the developed or redeveloped properties at budgeted rental rates or lease up the property within budgeted time frames; • We may devote time and expend funds on development or redevelopment of properties that we may not complete; • We may encounter delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, and building, occupancy and other required governmental permits and authorizations, and our costs to comply with the conditions imposed by such permits and authorizations could increase; • We may encounter delays, refusals and unforeseen cost increases resulting from third-party litigation or objections; and • We may fail to obtain the financial results expected from properties we develop or redevelop; ITEM 1B.
To the extent that we do so, we are subject to certain risks, including the following: • we may not complete a development or redevelopment project on schedule or within budgeted amounts (as a result of risks beyond our control, such as weather, labor conditions, permitting issues, material shortages and price increases); • we may be unable to lease the developed or redeveloped properties at budgeted rental rates or lease up the property within budgeted time frames; • we may devote time and expend funds on development or redevelopment of properties that we may not complete; • we may encounter delays or refusals in obtaining all necessary zoning, land use, and other required entitlements, and building, occupancy and other required governmental permits and authorizations, and our costs to comply with the conditions imposed by such permits and authorizations could increase; • we may encounter delays, refusals and unforeseen cost increases resulting from third-party litigation or objections; and • we may fail to obtain the financial results expected from properties we develop or redevelop.
HUD insured loans allow Lenders to extend loans at a relatively low interest rate for terms of up to 40 years for properties under new construction, or up to 35 years for acquisition or refinancing of existing properties. In return for lower interest rates and favorable terms, HUD loans involve extensive regulatory compliance.
HUD insured loans allow Lenders to extend loans at a relatively low interest rate for terms of up to 40 years for properties under new construction, or up to 35 years 10 for acquisition or refinancing of existing properties. In return for lower interest rates and favorable terms, HUD loans involve extensive regulatory compliance.
These events include, but are not limited to: • adverse changes in international, national or local economic conditions; • inability to rent space on favorable terms, including possible market pressures to offer tenants rent abatements, tenant improvements, early termination rights or below-market renewal options; • adverse changes in financial conditions of actual or potential investors, buyers, sellers or tenants; • inability to collect rent from tenants; • competition from other real estate investors, including other real estate operating companies, publicly-traded REITs and institutional investment funds; • reduced tenant demand for office space and residential units from matters such as: (i) trends in space utilization, (ii) changes in the relative popularity of our properties, (iii) the type of space we lease, (iv) purchasing versus leasing, (v) increasing crime or homelessness in our submarkets or (vi) economic recessions; • increases in the supply of office space and residential units; • fluctuations in interest rates and the availability of credit, which could adversely affect our ability to obtain financing on favorable terms or at all; • increases in operating costs, including: (i) insurance costs, (ii) labor costs, (iii) energy prices, (iv) property taxes, and (v) costs of compliance with laws, regulations and governmental policies; • utility disruptions; • changes in, and changes in enforcement of, laws, regulations and governmental policies, including, without limitation, health, safety, environmental, zoning and tax laws, governmental fiscal policies and the ADA; • difficulty in operating properties effectively; • acquiring undesirable properties; and • inability to dispose of properties at appropriate times or at favorable prices.
These events include, but are not limited to: • adverse changes in international, national or local economic conditions; • inability to rent space on favorable terms, including possible market pressures to offer tenants rent abatements, tenant improvements, early termination rights or below-market renewal options; • adverse changes in financial conditions of actual or potential investors, buyers, sellers or tenants; • inability to collect rent from tenants; • competition from other real estate investors, including other real estate operating companies, publicly-traded REITs and institutional investment funds; • reduced tenant demand for office space and residential units from matters such as: (i) trends in space utilization, (ii) changes in the relative popularity of our properties, (iii) the type of space we lease, (iv) purchasing versus leasing, (v) increasing crime or homelessness in our submarkets or (vi) economic recessions; • increases in the supply of office space and residential units; • fluctuations in interest rates and the availability of credit, which could adversely affect our ability to obtain financing on favorable terms or at all; • increases in operating costs, including: (i) insurance costs, (ii) labor costs, (iii) energy prices, (iv) property taxes, and (v) costs of compliance with laws, regulations and governmental policies; • utility disruptions; • changes in, and changes in enforcement of, laws, regulations and governmental policies, including, without limitation, health, safety, environmental, zoning and tax laws, governmental fiscal policies and the ADA; • difficulty in operating properties effectively; • acquiring undesirable properties; and • inability to dispose of properties at appropriate times or at favorable prices. 7 We may not be able to compete successfully with other entities that operate in our industry.
Malicious damage (such as the introduction of viruses and cyber-attacks) or a large-scale malfunction may adversely affect the group's business and results, including damage to the group's reputation, and the group's financial condition.
Malicious damage (such as the introduction of viruses and cyber-attacks) or a large-scale malfunction may adversely affect our business and results, including damage to our reputation, and our financial condition.
If we determine to alter or discontinue its development efforts, future costs of the investment may be expensed as incurred rather than capitalized and we may determine the investment is impaired resulting in a loss; • we may expend funds on and devote management’s time to projects which will not be completed; and • occupancy rates and rents at newly-completed properties may fluctuate depending on various factors including market and economic conditions, and may result in lower than projected rental rates and reduced income from operations. 9 We face risks associated with property acquisitions.
If we determine to alter or discontinue its development efforts, future costs of the investment may be expensed as incurred rather than capitalized and we may determine the investment is impaired resulting in a loss; • we may expend funds on and devote management’s time to projects which will not be completed; and 9 • occupancy rates and rents at newly-completed properties may fluctuate depending on various factors including market and economic conditions, and may result in lower than projected rental rates and reduced income from operations.
The extent to which our financial condition or operating results will be effected in the future by any future pandemic will largely depend on future demand and developments, which are highly uncertain and cannot be accurately predicted.
The extent to which our financial condition or operating results will be effected in the future by any future pandemic will largely depend on future demand and developments, which are highly uncertain and cannot be accurately predicted with any degree of accuracy.
A significant portion of the costs of owning property, such as real estate taxes, insurance, and debt service payments, are not necessarily reduced when circumstances cause a decrease in rental income from the properties. 8 Our reliance on third-party management companies s to operate certain of our properties may harm our business.
A significant portion of the costs of owning property, such as real estate taxes, insurance, and debt service payments, are not necessarily reduced or able to be recouped when circumstances cause a decrease in rental income from the properties. Our reliance on third-party management companies to operate certain of our properties may harm our business.
We could be adversely affected by various facts and events over which we have limited or no control, such as: • lack of demand for space in areas where the properties are located; • inability to retain existing tenants and attract new tenants; • oversupply of or reduced demand for space and changes in market rental rates; • defaults by tenants or failure to pay rent on a timely basis; • the need to periodically renovate and repair marketable space; • physical damage to properties; • economic or physical decline of the areas where properties are located; and • potential risk of functional obsolescence of properties over time.
We could be adversely affected by various facts and events over which we have limited or no control, such as: • lack of demand for space in areas where the properties are located; • inability to retain existing tenants and attract new tenants; • oversupply of or reduced demand for space and changes in market rental rates; • defaults by tenants or failure to pay rent on a timely basis; • the need to periodically renovate and repair marketable space; • physical damage to properties; • economic or physical decline of the areas where properties are located; and • potential risk of functional obsolescence of properties over time. 8 If tenants do not renew their leases as they expire, we may not be able to rent the space.
We are leveraged and may not be able to meet our debt service obligations. We had total indebtedness at December 31, 2023 of approximately $179.1 million. Substantially all of our multifamily real estate has been pledged to secure debt.
We are leveraged and may not be able to meet our debt service obligations. We had total indebtedness at December 31, 2024 of approximately $181.9 million. Substantially all of our multifamily real estate has been pledged to secure debt.
ITEM 1A. RISK FACTORS An investment in our securities involves various risks. All investors should carefully consider the following risk factors in conjunction with the other information in this report before trading our securities. FACTORS AFFECTING THE INDUSTRY Our operating performance is subject to risks associated with the real estate industry.
All investors should carefully consider the following risk factors in conjunction with the other information in this report before trading our securities. FACTORS AFFECTING THE INDUSTRY Our operating performance is subject to risks associated with the real estate industry.
In addition, provisions of the Internal Revenue Code may limit our ability to sell properties (without incurring significant tax costs) in some situations when it may be otherwise economically advantageous to do so, thereby adversely affecting returns to stockholders and adversely impacting our ability to meet our obligations.
In addition, provisions of the Internal Revenue Code may limit our ability to sell properties (without incurring significant tax costs) in some situations when it may be otherwise economically advantageous to do so, thereby adversely affecting returns to stockholders and adversely impacting our ability to meet our obligations. Our business may be impacted as a result of any health emergency.
A significant portion of our debt is insured with HUD As of December 31, 2023, we had $128.9 million in mortgage notes payable insured by the U.S. Department of Housing and Urban Development ("HUD"), which represented 72% of our total indebtedness.
A significant portion of our debt is insured with HUD As of December 31, 2024, we had $126.3 million in mortgage notes payable insured by the U.S. Department of Housing and Urban Development ("HUD"), which represented 69.5% of our total indebtedness.
Accordingly, if interest rates increase, so will the interest costs, which could adversely affect cash flow and the ability to pay principal and interest on our debt and the ability to make distributions to shareholders.
Accordingly, if interest rates increase, so will the interest costs, which could adversely affect cash flow and the ability to pay principal and interest on our debt and the ability to make distributions to shareholders. Further, rising interest rates could limit our ability to refinance existing debt when it matures.
We have acquired individual properties and various portfolios of properties in the past and intend to continue to do so.
We face risks associated with property acquisitions. We have acquired individual properties and various portfolios of properties in the past and intend to continue to do so.
Further, rising interest rates could limit our ability to refinance existing debt when it matures. 10 Unbudgeted capital expenditures or cost overruns could adversely affect business operations and cash flow. If capital expenditures for ongoing or planned development projects or renovations exceed expectations, the additional cost of these expenditures could have an adverse effect on business operations and cash flow.
Unbudgeted capital expenditures or cost overruns could adversely affect business operations and cash flow. If capital expenditures for ongoing or planned development projects or renovations exceed expectations, the additional cost of these expenditures could have an adverse effect on business operations and cash flow.
We may not be able to compete successfully with other entities that operate in our industry. We experience a great deal of competition in attracting tenants for the properties and in locating land to develop and properties to acquire.
We experience a great deal of competition in attracting tenants for the properties and in locating land to develop and properties to acquire. In our effort to lease properties, we compete for tenants with a broad spectrum of other landlords in each of the markets.
Some of these competitors may be able to offer prospective tenants more attractive financial terms than we are able to offer. 7 Real estate investments are illiquid, and we may not be able to sell properties if and when it is appropriate to do so. Real estate generally cannot be sold quickly.
Real estate investments are illiquid, and we may not be able to sell properties if and when it is appropriate to do so. Real estate generally cannot be sold quickly. We may not be able to dispose of properties promptly in response to economic or other conditions.
We may not be able to realize the full potential value of the assets and may incur costs related to the early extinguishment of the debt secured by such assets. We engage in development and redevelopment activities with respect to certain of our properties.
We may not be able to realize the full potential value of the assets and may incur costs related to the early extinguishment of the debt secured by such assets. Ownership through partnerships and joint ventures could limit property performance.
In our effort to lease properties, we compete for tenants with a broad spectrum of other landlords in each of the markets. These competitors include, among others, publicly-held REITs, privately-held entities, individual property owners and tenants who wish to sublease their space.
These competitors include, among others, publicly-held REITs, privately-held entities, individual property owners and tenants who wish to sublease their space. Some of these competitors may be able to offer prospective tenants more attractive financial terms than we are able to offer.
Removed
We may not be able to dispose of properties promptly in response to economic or other conditions.
Added
ITEM 1A. RISK FACTORS The following discusses risk factors that could affect our business, operations and financial condition. If any of these risks, as well as other risks and uncertainties that we have not yet identified or that we currently believe are not material, become realized, we could be materially adversely affected and the value of our securities could decline.
Removed
Our business may be impacted as a result of any health emergency like the pandemic impact the coronavirus.
Added
In addition, the following risk factors may contain “forward looking statements” and should be read in conjunction with Management’s Discussion and Analysis of Financial condition and Results of Operations, and the financial statements and related notes in this Annual Report on Form 10-K.
Removed
If tenants do not renew their leases as they expire, we may not be able to rent the space.
Added
We engage in development and redevelopment activities with respect to certain of our properties.
Added
We have in the past, and may in the future, develop and/or acquire properties in partnerships and similar joint ventures, including those in which we may own a preferred interest, when we believe circumstances warrant this type of investment.
Added
Our organizational documents do not limit the amount of available funds that we can invest in partnerships or other joint venture structures. As of December 31, 2024, we had no active joint ventures with any investment funds at risk.
Added
Investments in partnerships and joint ventures, including limited liability companies, involve risks such as the following: • Our partners could become bankrupt, in which event we and any other remaining partners would generally remain liable for the liabilities of the venture; • Our partners could have economic or other business interests or goals which are inconsistent with our business objectives; • Our partners could be in a position to take action contrary to our instructions, requests or objectives, including our policies involving development of properties; and • Governing agreements in partnerships and joint ventures often contain restrictions on the transfer of an interest or “by-sell” or other provisions which could result in the purchase or sale of the interest at a disadvantageous time or on disadvantageous terms.
Added
We generally will seek to maintain sufficient control of partnerships or joint ventures to permit us to achieve our business objectives; however, in the event it fails to meet expectations or becomes insolvent, we could lose our investment in the partnership or joint venture. We could incur more debt.
Added
We operate with a policy of incurring indebtedness only when it is advisable in the opinion of our Board of Directors and management. We could incur additional indebtedness by borrowing under a line of credit, mortgaging properties we own, restructuring existing indebtedness, and/or issuing debt securities in public offerings or private transactions.
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The degree of 11 indebtedness could affect our ability to obtain additional financing for working capital, capital expenditures, acquisitions, or other corporate purposes and make us more vulnerable to a down turn in business or the economy in general. ITEM 1B. UNRESOLVED STAFF COMMENTS None.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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In the event of a cybersecurity incident, a detailed incident response plan is in place for contacting authorities and informing key stakeholders, including management. We do not believe we are reasonably likely to be materially affected from cybersecurity threats, including as a result of previous incidents. 11
In the event of a cybersecurity incident, a detailed incident response plan is in place for contacting authorities and informing key stakeholders, including management. We do not believe we are reasonably likely to be materially affected from cybersecurity threats, including as a result of previous incidents. 12

Item 2. Properties

Properties — owned and leased real estate

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Units Alabama 1 200 Colorado 2 260 Louisiana 3 608 Mississippi 1 160 Texas 7 1,100 14 2,328 12 Commercial Properties Count Property Location Year Constructed Square Feet Occupancy 1 770 South Post Oak Houston, TX 1970 95,450 50.4 % 2 Browning Place Dallas, TX 1984 625,297 53.2 % 3 Senlac Dallas, TX 1971 2,812 100.0 % 4 Stanford Center Dallas, TX 2007 333,234 40.8 % 1,056,793 The following table summarizes our commercial lease expirations as of December 31, 2023: Year of Lease Expiration Number of Leases Expiring Square Foot ("SF") of Leases Expiring % of Total Leased SF by Expiring Leases Ending Rent/SF of Expiring Leases % of Total Rent Represented by Expiring Leases 2024 10 35,578 7 % 21.89 6.0 % 2025 7 29,913 6 % 20.77 4.8 % 2026 5 23,668 5 % 23.86 4.3 % 2027 3 9,984 2 % 25.98 2.0 % 2028 6 35,883 7 % 24.27 6.7 % Thereafter 23 348,457 73 % 26.26 76.2 % 54 483,483 100 % 100.0 % 13 Land Investments Project Location Acres Held for development Athens Athens, AL 33 EQK Portage Kent, OH 49 McKinney 36 Collin County, TX 18 Ocean Estates Gulfport, MS 12 Willowick Pensacola, FL 40 Mercer Crossing Commercial Farmers Branch, TX 19 Windmill Farms Kaufman County, TX 1,511 Other Various 36 1,718 Held subject to sales contract Windmill Farms Kaufman County, TX 125 1,843 ITEM 3.
PROPERTIES Residential Properties in Operation Count Property Location Year Constructed Units Occupancy 1 Blue Lake Villas Waxahachie, TX 2002 186 96.2 % 2 Blue Lake Villas Phase II Waxahachie, TX 2004 70 95.7 % 3 Chelsea Beaumont, TX 1999 144 93.8 % 4 Forest Grove Bryan, TX 2020 84 97.6 % 5 Landing on Bayou Cane Houma, LA 2005 240 94.2 % 6 Legacy at Pleasant Grove Texarkana, TX 2006 208 94.2 % 7 Northside on Travis Sherman, TX 2008 200 91.5 % 8 Parc at Denham Springs Denham Spring, LA 2007 224 96.4 % 9 Parc at Denham Springs Phase II Denham Springs, LA 2010 144 93.8 % 10 Residences at Holland Lake Weatherford, TX 2004 208 95.7 % 11 Villas at Bon Secour Gulf Shores, AL 2007 200 88.5 % 12 Villas of Park West I Pueblo, CO 2005 148 96.2 % 13 Villas of Park West II Pueblo, CO 2010 112 94.6 % 14 Vista Ridge Tupelo, MS 2009 160 93.8 % 2,328 Residential Properties in Construction Count Property Location Units 1 Alera Lake Wales, FL 240 2 Bandera Ridge Temple, TX 216 3 Merano McKinney, TX 216 4 Mountain Creek Dallas, TX 234 906 13 Commercial Properties Count Property Location Year Constructed Rentable Square Feet Occupancy 1 770 South Post Oak Houston, TX 1970 95,528 55.7 % 2 Browning Place Dallas, TX 1984 626,529 54.3 % 3 Senlac Dallas, TX 1971 2,812 100.0 % 4 Stanford Center Dallas, TX 2007 335,367 50.5 % 1,060,236 The following table summarizes our commercial lease expirations as of December 31, 2024: Year of Lease Expiration Number of Leases Expiring Square Foot ("SF") of Leases Expiring % of Total Leased SF by Expiring Leases Ending Rent/SF of Expiring Leases % of Total Rent Represented by Expiring Leases 2025 7 29,913 5 % 20.77 4.2 % 2026 5 23,668 4 % 23.86 3.8 % 2027 6 16,906 3 % 26.07 3.0 % 2028 7 37,360 7 % 24.46 6.2 % 2029 11 109,678 19 % 21.59 16.0 % Thereafter 26 348,171 62 % 23.20 66.8 % 62 565,696 100 % 100.0 % 14 Land Investments Project Location Acres Held for development Athens Athens, AL 33 EQK Portage Kent, OH 49 McKinney 36 Collin County, TX 18 Ocean Estates Gulfport, MS 12 Willowick Pensacola, FL 40 Mercer Crossing Commercial Farmers Branch, TX 19 Windmill Farms Kaufman County, TX 1,488 Other Various 36 1,695 Held subject to sales contract Windmill Farms Kaufman County, TX 109 1,804
Removed
PROPERTIES Residential Properties Count Property Location Year Constructed Units Occupancy 1 Blue Lake Villas Waxahachie, TX 2002 186 92.5 % 2 Blue Lake Villas Phase II Waxahachie, TX 2004 70 94.3 % 3 Chelsea Beaumont, TX 1999 144 95.1 % 4 Forest Grove Bryan, TX 2020 84 100.0 % 5 Landing on Bayou Cane Houma, LA 2005 240 94.6 % 6 Legacy at Pleasant Grove Texarkana, TX 2006 208 86.5 % 7 Northside on Travis Sherman, TX 2008 200 96.5 % 8 Parc at Denham Springs Denham Spring, LA 2007 224 90.6 % 9 Parc at Denham Springs Phase II Denham Springs, LA 2010 144 91.0 % 10 Residences at Holland Lake Weatherford, TX 2004 208 93.3 % 11 Villas at Bon Secour Gulf Shores, AL 2007 200 86.0 % 12 Villas of Park West I Pueblo, CO 2005 148 96.0 % 13 Villas of Park West II Pueblo, CO 2010 112 99.1 % 14 Vista Ridge Tupelo, MS 2009 160 94.4 % 2,328 The following table sets forth the location and number of units as of December 31, 2023: Location No.
Removed
LEGAL PROCEEDINGS None. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 14 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Our Board of Directors established a policy that dividend declarations on common stock would be determined on an annual basis following the end of each year. In accordance with that policy, the board determined not to pay any dividends on common stock in December 31, 2023, 2022 or 2021.
Our Board of Directors established a policy that dividend declarations on common stock would be determined on an annual basis following the end of each year. In accordance with that policy, the board determined not to pay any dividends on common stock in December 31, 2024, 2023 or 2022.
We have a stock repurchase program that allows for the repurchase of up to 1,637,000 shares of our common stock. This repurchase program has no termination date. There were no shares repurchased in 2023 and the program has 650,250 shares remaining that can be repurchased as of December 31, 2023 . ITEM 6. SELECTED FINANCIAL DATA Optional and not included.
We have a stock repurchase program that allows for the repurchase of up to 1,637,000 shares of our common stock. This repurchase program has no termination date. There were no shares repurchased in 2024 and the program has 650,250 shares remaining that can be repurchased as of December 31, 2024 . ITEM 6. [RESERVED]
The following table sets forth the high and low sales prices as reported in the consolidated reporting system of the NYSE for the quarters ended: 2023 2022 High Low High Low First Quarter $ 47.35 $ 40.12 $ 40.36 $ 37.52 Second Quarter $ 41.99 $ 34.96 $ 47.35 $ 37.01 Third Quarter $ 36.99 $ 27.52 $ 47.76 $ 37.35 Fourth Quarter $ 36.16 $ 27.23 $ 47.25 $ 39.11 On March 19, 2024, the closing price of our common stock as reported on the NYSE was $37.36 per share, and was held by 1,816 holders of record.
The following table sets forth the high and low sales prices as reported in the consolidated reporting system of the NYSE for the quarters ended: 2024 2023 High Low High Low First Quarter $ 43.40 $ 34.17 $ 47.35 $ 40.12 Second Quarter $ 37.51 $ 27.04 $ 41.99 $ 34.96 Third Quarter $ 31.92 $ 26.91 $ 36.99 $ 27.52 Fourth Quarter $ 31.47 $ 26.29 $ 36.16 $ 27.23 On March 19, 2025, the closing price of our common stock as reported on the NYSE was $28.12 per share, and was held by 1,583 holders of record.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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On March 15, 2023, we entered into a development agreement with Pillar to build a 240 unit multifamily property in Lake Wales, Florida (" Lake Wales ") that is expected to be completed in 2025 for a total cost of approximately $55.3 million.
On March 15, 2023, we entered into a development agreement with Pillar to build a 240 unit multifamily property in Lake Wales, Florida (" Alera ") that is expected to be completed in 2025 for a total cost of approximately $55.3 million.
Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis. We also present FFO excluding the impact of the effects of foreign currency translation. FFO and FFO on a diluted basis are useful to investors in comparing operating and financial results between periods.
Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis. We also present FFO excluding the impact of the effects of foreign currency translation. 22 FFO and FFO on a diluted basis are useful to investors in comparing operating and financial results between periods.
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. 18 Related Parties We apply ASC Topic 805, “Business Combinations”, to evaluate business relationships.
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.
Our results of operations for the year ended December 31, 2023 were affected by the acquisitions and disposition, refinancing activity, development activity as discussed below. Management's Overview We are an externally advised and managed real estate investment company that owns a diverse portfolio of income-producing properties and land held for development throughout the Southern United States.
Our results of operations for the year ended December 31, 2024 were affected by the acquisitions and disposition, refinancing activity, development activity as discussed below. Management's Overview We are an externally advised and managed real estate investment company that owns a diverse portfolio of income-producing properties and land held for development throughout the Southern United States.
We move a property in and out of Same Properties based on whether the property is substantially leased-up and in operation for the entirety of both periods of the comparison. For the comparison of the year ended December 31, 2023 to the year ended December 31, 2022 , the Redevelopment Property is Landing on Bayou Cane.
We move a property in and out of Same Properties based on whether the property is substantially leased-up and in operation for the entirety of both periods of the comparison. For the comparison of the year ended December 31, 2024 to the year ended December 31, 2023 , the Redevelopment Property is Landing on Bayou Cane.
We anticipate that our cash, cash equivalents and short-term investments as of December 31, 2023, along with cash that will be generated in 2024 from notes and interest receivables, will be sufficient to meet all of our cash requirements.
We anticipate that our cash, cash equivalents and short-term investments as of December 31, 2024, along with cash that will be generated in 2025 from notes and interest receivables, will be sufficient to meet all of our cash requirements.
Funds From Operations ("FFO") We use FFO in addition to net income to report our operating and financial results and considers FFO and FFO-diluted as supplemental measures for the real estate industry and a supplement to GAAP measures.
Funds From Operations ("FFO") We use FFO in addition to net income to report our operating and financial results and consider FFO and FFO-diluted as supplemental measures for the real estate industry and a supplement to GAAP measures.
Development Activities We have agreements to develop two PODs from our land holdings in Windmill Farms . The agreements provide for the development of 125 acres of raw land into approximately 470 lands lots to used for single family homes for a total of $24.3 million.
Development Activities We have agreements to develop two parcels of land (" PODs") from our land holdings in Windmill Farms . The agreements provide for the development of 125 acres of raw land into approximately 470 land lots to be used for single family homes for a total of $24.3 million.
The cost of construction will be funded in part by a $25.4 million construction loan (See "Financing Activities") . The development agreement provides for a $1.6 million fee that will be paid to Pillar over the construction period. As of December 31, 2023, we have incurred a total of $7.2 million in development costs.
The cost of construction will be funded in part by a $25.4 million construction loan (See "Financing Activities") . The development agreement provides for a $1.6 million fee that will be paid to Pillar over the construction period. As of December 31, 2024, we have incurred a total of $24.8 million in development costs.
In connection with the closing of the loan, we purchased the land and certain entitlement costs from a related party at an appraised value of $6.1 million. As of December 31, 2023, we have incurred a total of $16.9 million in development costs.
In connection with the closing of the loan, we purchased the land and certain entitlement costs from a related party at an appraised value of $6.1 million. As of December 31, 2024, we have incurred a total of $36.6 million in development costs.
In connection with the sale, we received an initial distribution of $182.8 million from VAA. On November 1, 2022, we received an additional distribution from VAA, which included the full operational control of the remaining seven properties (collectively referred to herein as the “VAA Holdback Portfolio”) and a cash payment of $204.0 million.
On November 1, 2022, we received an additional distribution from VAA, which included the full operational control of the remaining seven properties (collectively referred to herein as the “VAA Holdback Portfolio”) and a cash payment of $204.0 million.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Optional and not included. 22
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Optional and not included. 23
Financing Activities • On March 2, 2021 , we extended our loan on Athens to August 28, 2022 . • On March 4, 2021 , we extended the maturity of our loan on Windmill Farms until February 28, 2023 at a reduced interest rate of 5%. • On August 25, 2021, we replaced the existing loan on Villas at Bon Secour with a new $20.0 million loan that bears interest at 3.08% and matures on September 1, 2031. • On August 26, 2021, we paid off the $35.9 million loan on 600 Las Colinas in connection with the sale of the underlying property (See "Acquisitions and Dispositions"). • On January 14, 2022, we paid off the $14.7 million loan on Toulon in connection with the sale of the underlying property (See "Acquisitions and Dispositions"). • On March 3, 2022 , we extended the loan on Stanford Center t o February 26, 2023 . • On September 1, 2022 , we extended our loan on Athens to August 28, 2023. • On September 16, 2022 , we paid off the $9.6 million loan on Sugar Mill Phase III in connection with the sale of the underlying property (See "Acquisitions and Dispositions"). • On October 21, 2022, we paid off the $38.5 million loan on Stanford Center from a portion of our share of the proceeds from sale of the VAA Sale Portfolio (See "Other Developments"). • On November 1, 2022, we agreed to assume the $70.3 million mortgage notes payable on the VAA Holdback Portfolio in connection with the distribution of the underlying properties from VAA (See "Other Developments"). • On January 31, 2023 , we paid off our $67.5 million of Series C bonds. • On February 28, 2023 , we extended the maturity of our loan on Windmill Farms until February 28, 2024 at a revised interest rate of 7.75%. • On March 15, 2023 , we entered into a $33.0 million construction loan to finance the development of Lake Wales (See "Development Activities") that bears interest at SOFR plus 3% and matures on March 15, 2026 , with two one-year extension options. 16 • On May 4, 2023, we paid off the remaining $14.0 million of our Series A Bonds and $28.9 million of our Series B Bonds, which resulted in a loss on early extinguishment of debt of $1.7 million. • On August 28, 2023, we paid off our $1.2 million loan on Athens . • On November 6, 2023 , we entered into a $25.4 million construction loan to finance the development of Merano (See "Development Activities") that bears interest at prime plus 0.25% and matures on November 6, 2028 . • On December 15, 2023 , we entered into a $23.5 million construction loan to finance the development of Bandera Ridge (See "Development Activities") that bears interest at SOFR plus 3% and matures on December 15, 2028 . • On February 8, 2024, we extended the maturity of our loan on Windmill Farms to February 28, 2026 at an interest rate of 7.50%.
Financing Activities • On January 14, 2022, we paid off the $14.7 million loan on Toulon in connection with the sale of the underlying property (See "Acquisitions and Dispositions"). • On March 3, 2022 , we extended the loan on Stanford Center t o February 26, 2023 . • On September 1, 2022 , we extended our loan on Athens to August 28, 2023. • On September 16, 2022 , we paid off the $9.6 million loan on Sugar Mill Phase III in connection with the sale of the underlying property (See "Acquisitions and Dispositions"). • On October 21, 2022, we paid off the $38.5 million loan on Stanford Center from a portion of our share of the proceeds from sale of the VAA Sale Portfolio (See "Other Developments"). • On November 1, 2022, we agreed to assume the $70.3 million mortgage notes payable on the VAA Holdback Portfolio in connection with the distribution of the underlying properties from VAA (See "Other Developments"). • On January 31, 2023 , we paid off our $67.5 million of Series C bonds. • On February 28, 2023 , we extended the maturity of our loan on Windmill Farms until February 28, 2024 at a revised interest rate of 7.75%. • On March 15, 2023 , we entered into a $33.0 million construction loan to finance the development of Alera (See "Development Activities") that bears interest at SOFR plus 3% and matures on March 15, 2026 , with two one-year extension options. • On May 4, 2023, we paid off the remaining $14.0 million of our Series A Bonds and $28.9 million of our Series B Bonds, which resulted in a loss on early extinguishment of debt of $1.7 million. • On August 28, 2023, we paid off our $1.2 million loan on Athens . • On November 6, 2023 , we entered into a $25.4 million construction loan to finance the development of Merano (See "Development Activities") that bears interest at prime plus 0.25% and matures on November 6, 2028 . • On December 15, 2023 , we entered into a $23.5 million construction loan to finance the development of Bandera Ridge (See "Development Activities") that bears interest at SOFR plus 3% and matures on December 15, 2028 . • On January 1, 2024, we amended our cash management agreement with Pillar .
The following reconciles our net income attributable to FFO and FFO-basic and diluted, excluding the loss from foreign currency transactions and the loss on extinguishment of debt for the years ended December 31, 2023, 2022 and 2021 (dollars and shares in thousands): For the Year Ended December 31, 2023 2022 2021 Net income attributable to the Company $ 5,937 $ 468,262 $ 9,398 Depreciation and amortization on consolidated assets 13,646 9,686 11,870 Loss (gain) on sale, remeasurement or write down of assets 1,891 (89,196) (23,352) Gain on sale of land 188 4,752 16,645 Gain on sale of assets from unconsolidated joint venture at our pro rata share — (367,772) — Depreciation and amortization on unconsolidated joint venture at our pro rata share — 8,229 11,604 FFO-Basic and Diluted 21,662 33,961 26,165 Loss on early extinguishment of debt 1,710 2,805 1,451 Loss on early extinguishment of debt from unconsolidated joint venture at our pro rata share — 15,254 — (Gain) loss on foreign currency transactions (993) (20,067) 6,175 FFO-adjusted $ 22,379 $ 31,953 $ 33,791 ITEM 7A.
The following reconciles our net income attributable to FFO and FFO-basic and diluted, excluding the loss from foreign currency transactions and the loss on extinguishment of debt for the years ended December 31, 2024, 2023 and 2022 (dollars and shares in thousands): For the Year Ended December 31, 2024 2023 2022 Net income attributable to the Company $ 5,862 $ 5,937 $ 468,262 Depreciation and amortization on consolidated assets 12,276 13,646 9,686 Loss (gain) on sale, remeasurement or write down of assets 589 1,891 (89,196) Gain on sale of land 1,095 188 4,752 Gain on sale of assets from unconsolidated joint venture at our pro rata share — — (367,772) Depreciation and amortization on unconsolidated joint venture at our pro rata share — — 8,229 FFO-Basic and Diluted 19,822 21,662 33,961 Loss on early extinguishment of debt — 1,710 2,805 Loss on early extinguishment of debt from unconsolidated joint venture at our pro rata share — — 15,254 Gain on foreign currency transactions — (993) (20,067) FFO-adjusted $ 19,822 $ 22,379 $ 31,953 ITEM 7A.
The cost of construction will be funded in part by a $23.5 million construction loan (See "Financing Activities") . The development agreement provides for a $1.6 million fee that will be paid to Pillar over the construction period.
The cost of construction will be funded in part by a $23.5 million construction loan (See "Financing Activities") . The development agreement provides for a $1.6 million fee that will be paid to Pillar over the construction period. As of December 31, 2024, we have incurred a total of $26.3 million in development costs.
To the extent that inflation affects interest rates, our earnings from short-term investments, the cost of new financings and the cost of variable interest rate debt will be affected.
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, our earnings from short-term investments, the cost of new financings and the cost of variable interest rate debt will be affected.
In addition, we sold 0.9 acres of land from our holdings in Mercer Crossing for $0.7 million, resulting in a gain on sale of $0.2 million.
In addition, we sold 0.9 acres of land from our holdings in Mercer Crossing for $0.7 million, resulting in a gain on sale of $0.2 million. • On December 13, 2024 , we sold 30 single family lots from our holdings in Windmill Farms for $1.4 million, resulting in a gain on sale of $1.1 million.
We estimate that we will complete the development of these PODs over a two-year period starting the third quarter of 2024. During 2023, we spent $5.0 million on the project, which included $0.5 million on lot development and $4.5 million on reimbursable infrastructure investments.
We estimate that we will complete the development of these PODs over a two-year period starting during the fourth quarter of 2024. During 2024, we spent $3.6 million on reimbursable infrastructure investments.
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.
We used our share of the proceeds from the sale of the VAA Sale Portfolio to invest in short-term investments and real estate, pay down our debt and for general corporate purposes. 18 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.
Pillar is considered to be a related party due to its common ownership with ARL, who is our controlling stockholder. 15 The following is a summary of our recent acquisition, disposition, financing and development activities: Acquisitions and Dispositions • On March 30, 2021, we sold a 50% ownership interest in Overlook at Allensville Phase II, a 144 unit multifamily property in Sevierville, Tennessee to Macquarie, for $2.6 million, resulting in a gain on sale of $1.4 million.
Pillar is considered to be a related party due to its common ownership with ARL, who is our controlling stockholder. 16 The following is a summary of our recent acquisition, disposition, financing and development activities: Acquisitions and Dispositions • On January 14, 2022, we sold Toulon, a 240 unit multifamily property in Gautier, Mississippi for $26.8 million, resulting in a gain on sale of $9.4 million.
Comparison of the year ended December 31, 2022 to the year ended December 31, 2021: See Item 7 of Part II in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 23, 2023 for a discussion of our results of operations for the year ended December 31, 2022.
Dollar and the New Israeli Shekel conversion rate in connection with the bonds that were listed on the Tel-Aviv Stock Exchange (See "Financing Activities") . 21 Comparison of the year ended December 31, 2023 to the year ended December 31, 2022: See Item 7 of Part II in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 21, 2024 for a discussion of our results of operations for the year ended December 31, 2023.
“Consolidated Financial Statements and Supplementary Data” and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below (dollars in thousands): Year Ended December 31, 2023 2022 Variance Net cash used in operating activities $ (31,073) $ (45,394) $ 14,321 Net cash provided by investing activities $ 26,813 $ 307,357 $ (280,544) Net cash used in financing activities $ (139,020) $ (112,377) $ (26,643) The decrease in cash used in operating activities is primarily due to an increase in interest income and an increase rents provided by the Acquisition Properties (See "Acquisitions and Dispositions" in Management's Overview).
“Consolidated Financial Statements and Supplementary Data” and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below (dollars in thousands): Year Ended December 31, 2024 2023 Variance Net cash provided by (used in) operating activities $ 1,310 $ (31,073) $ 32,383 Net cash (used in) provided by investing activities $ (41,524) $ 26,813 $ (68,337) Net cash provided by (used in) financing activities $ 1,659 $ (139,020) $ 140,679 The increase in cash provided by operating activities is primarily due to a decrease in interest payments and insurance cost in comparison to prior year.
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. We are 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.
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.
As of December 31, 2023, we completed the restoration and lease-up of the property for a total cost of $16.7 million, which was primarily funded by insurance proceeds. 17 Other Developments On September 16, 2022, VAA sold 45 properties (“VAA Sale Portfolio”) for $1.8 billion, resulting in a gain on sale of $738.4 million to the joint venture.
Other Developments On September 16, 2022, VAA sold 45 properties (“VAA Sale Portfolio”) for $1.8 billion, resulting in a gain on sale of $738.4 million to the joint venture. In connection with the sale, we received an initial distribution of $182.8 million from VAA.
On March 23, 2023, we received $18.0 million from VAA, which represented the remaining distribution of the proceeds from the sale of the VAA Sale Portfolio. We used our share of the proceeds from the sale of the VAA Sale Portfolio to invest in short-term investments and real estate, pay down our debt and for general corporate purposes.
On March 23, 2023, we received $18.0 million from VAA, which represented the remaining distribution of the proceeds from the sale of the VAA Sale Portfolio. In December 2024, we dissolved VAA.
The Disposition Properties are Fruitland Park, Sugar Mill Phase III and Toulon. 19 The following table (amounts in thousands) provides a summary of the results of operations of 2023 and 2022: For the Years Ended December 31, 2023 2022 Variance Multifamily Segment Revenue $ 32,608 $ 17,828 $ 14,780 Operating expenses (17,749) (9,524) (8,225) 14,859 8,304 6,555 Commercial Segment Revenue 14,415 16,252 (1,837) Operating expenses (10,147) (8,815) (1,332) 4,268 7,437 (3,169) Segment operating income 19,127 15,741 3,386 Other non-segment items of income (expense) Depreciation and amortization (13,646) (9,686) (3,960) General, administrative and advisory (18,355) (17,917) (438) Interest income, net 20,729 6,932 13,797 Loss on early extinguishment of debt (1,710) (2,805) 1,095 Gain on foreign currency transactions 993 20,067 (19,074) (Loss) gain on sale, remeasurement or write down of assets (1,891) 89,196 (91,087) Income from joint venture 1,060 468,086 (467,026) Other income (expense) 943 (100,610) 101,553 Net income $ 7,250 $ 469,004 $ (461,754) Comparison of the year ended December 31, 2023 to the year ended December 31, 2022: Our $461.8 million decrease in net income in 2023 is primarily attributed to the following: • The $6.6 million increase in profit from the multifamily properties is due to increases of $5.6 million from the Acquisition Properties and $2.3 million from the Redevelopment Property offset in part by decreases of $1.0 million from the Same Properties and $0.3 million from the Disposition Properties.
There were no Acquisition Properties or Disposition Properties f or the comparison of the year ended December 31, 2024 to the year ended December 31, 2023 . 20 The following table (amounts in thousands) provides a summary of the results of operations of 2024 and 2023: For the Years Ended December 31, 2024 2023 Variance Multifamily Segment Revenue $ 34,103 $ 34,962 $ (859) Operating expenses (18,252) (17,749) (503) 15,851 17,213 (1,362) Commercial Segment Revenue 12,967 14,943 (1,976) Operating expenses (8,811) (10,147) 1,336 4,156 4,796 (640) Segment operating income 20,007 22,009 (2,002) Other non-segment items of income (expense) Depreciation and amortization (12,276) (13,646) 1,370 General, administrative and advisory (13,505) (18,355) 4,850 Interest income, net 14,244 20,729 (6,485) Loss on early extinguishment of debt — (1,710) 1,710 Gain on foreign currency transactions — 993 (993) Loss on sale, remeasurement or write down of assets (589) (1,891) 1,302 Income from joint venture 708 1,060 (352) Other (expense) income (1,930) (1,939) 9 Net income $ 6,659 $ 7,250 $ (591) Comparison of the year ended December 31, 2024 to the year ended December 31, 2023: Our $0.6 million decrease in net income in 2024 is primarily attributed to the following: • The $1.4 million decrease in profit from the multifamily properties is due to a $1.0 million decrease from the Redevelopment Property.
The decrease in cash provided by investing activities is primarily due to a $362.9 million decrease in distribution from joint venture and a $44.4 million decrease in proceeds from the sale of real estate (See " Acquisitions and Dispositions " in Management's Overview), offset in part by a $131.7 million net decrease in investment in short-term investments.
The $68.3 million increase in cash used in investing activities is primarily due to the $39.5 million increase in development and renovation of real estate, the $21.4 million decrease in distribution from joint venture and the $18.7 million decrease in net redemption of short-term investments offset in part by the $6.5 million decrease in originations and advances on notes receivable and the $3.6 million increase in collection of notes receivable .
The decrease in interest expense is primarily due to the pay down of our bonds payable in 2023 (See " Financing Activities " in Management's Overview).
The decrease in interest income is primarily due to a decrease in interest rates on the UHF notes in 2023 and a decrease in interest rates on the Pillar Receivable in 2024 (See " Financing Activities " in Management's Overview).
Inflation The effects of inflation on our operations are not quantifiable. Revenues from property operations tend to fluctuate proportionately with inflationary increases and decreases in housing costs. Fluctuations in the rate of inflation also affect sales values of properties and the ultimate gain to be realized from property sales.
We are 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. 19 Inflation The effects of inflation on our operations are not quantifiable. Revenues from property operations tend to fluctuate proportionately with inflationary increases and decreases in housing costs.
The decrease in profit from the Same Properties is primarily due to an increase in insurance cost in 2023. • The $3.2 million decrease in profit from the commercial properties is primarily due to a decline in occupancy and an increase in insurance cost . • The $13.8 million increase in interest income, net is due to a $8.0 million decrease in interest expense and a $5.8 million increase in interest income.
The decrease in profit from the Redevelopment property is due to the receipt of $1.3 million of business interruption insurance proceeds in 2023. • The $0.4 million decrease in profit from the commercial properties is primarily due to a decline in occupancy. • The $4.9 million decrease in general, administrative and advisory expenses is primarily due to a reduction in legal cost associated with the Nixdorf litigation in 2023 and due to auditing and other administrative expenses associated with the bonds payable, which were repaid in 2023. • The $6.5 million decrease in interest income, net is due to a $8.1 million decrease in interest income offset in part by a $1.6 million decrease in interest expense.
The increase in profit from the Redevelopment property is due to the completion of the restoration and lease-up of Landing on Bayou Cane in 2023.
The change in revenues and expenses of the Redevelopment Property from 2023 to 2024 is primarily due to the lease-up of the property in 2023 as the restored units were placed in service.
The decrease in interest income from notes receivable is primarily due to the forgiveness of $3.6 million in interest income in connection with the UHF loan modification in 2023. • The decrease in gain on foreign currency transactions is due to the change in the U.S.
The decrease in interest expense is primarily due to the repayment of the bonds payable in 2023 (See " Financing Activities " in Management's Overview). • The loss from early extinguishment of debt and the gain on foreign currency transactions are due to the bonds payable that were outstanding in 2023. • The decrease in gain on foreign currency transactions is due to the change in the U.S.
Removed
Concurrent with the sale, we each contributed our 50% ownership interests in the property into VAA. • On August 26, 2021, we sold 600 Las Colinas, a 512,173 square foot office building in Irving, Texas for $74.8 million, resulting in a gain on sale of $27.3 million.
Added
As a result, the interest rate on the related party receivable (" Pillar Receivable ") changed from prime plus one to SOFR. • On February 8, 2024, we extended the maturity of our loan on Windmill Farms to February 28, 2026 at an interest rate of 7.50%. • On July 10, 2024, we replaced the existing loan on Forest Grove with a $6.6 million loan that bears interest at SOFR plus 2.15% and matures on August 1, 2031. 17 • On October 21, 2024 , we entered into a $27.5 million construction loan to finance the development of Mountain Creek (See "Development Activities") that bears interest at SOFR plus 3.45% and matures on October 20, 2026.
Removed
We used the proceeds from the sale to pay off the mortgage note payable on the property (See "Financing Activities") and for general corporate purposes. • During the year ended December 31, 2021, we sold a total of 134.7 acres of land from our holdings in Windmill Farms for $20.2 million in aggregate, resulting in gains on sale of $10.3 million .
Added
On October 21, 2024, we entered into a development agreement with Pillar to build a 234 unit multifamily property in Dallas , Texas (" Mountain Creek ") that is expected to be completed in 2026 for a total cost of approximately $49.8 million.
Removed
In addition, we sold 14.1 acres of land from our holdings in Mercer Crossing for $9.0 million , resulting in a gain on sale of $6.4 million . • On January 14, 2022, we sold Toulon, a 240 unit multifamily property in Gautier, Mississippi for $26.8 million, resulting in a gain on sale of $9.4 million.
Added
The cost of construction will be funded in part by a $27.5 million construction loan (See "Financing Activities") . The development agreement provides for a $1.6 million fee that will be paid to Pillar over the construction period. As of December 31, 2024, we have incurred a total of $5.0 million in development costs.
Removed
In connection with the closing of the loan, we purchased the land from a related party at an appraised value of $2.7 million. As of December 31, 2023, we have incurred a total of $3.1 million in development costs.
Added
The increase in development and renovation of real estate relates to the construction start of Merano and Bandera Ridge in 2024. The distribution from joint venture in 2023 relates to the final distribution of proceeds from the sale of the VAA Sale Portfolio in 2022.
Removed
In 2021, Landing on Bayou Cane, a 240 unit multifamily property in Houma , Louisiana suffered extensive damage from Hurricane Ida and required extensive renovation.
Added
The $140.7 million decrease in cash used in financing activities is primarily due to the $131.2 million repayment of our bonds in 2023.
Removed
The Acquisition Properties are Blue Lake Villas, Blue Lake Villas Phase II, Northside on Travis, Parc at Denham Springs, Residences at Holland Lake, Villas of Park West I and Villas of Park West II.
Removed
The increase in interest income is primarily due to a $9.9 million increase in interest on short term investments offset in part by a $4.1 million decrease in interest income from notes receivable and receivable from related party.
Removed
The increase in short-term investments is primarily due to the $388.0 million in cash distributions received from VAA in 2022 (See " Other Developments" in Management's Overview ).
Removed
Dollar and the New Israeli Shekel conversion rate in connection with the bonds that were listed on the Tel-Aviv Stock Exchange (See "Financing Activities") . 20 • (Loss) gain on sale, remeasurement or write down of assets changed $91.1 million from a gain of $89.2 million in 2022 to a loss of $1.9 million in 2023.
Removed
The decease in gain is primarily due to the $73.2 million gain on remeasurement of the VAA Holdback Portfolio in 2022 (See "Other Developments" in Management's Overview) and property dispositions in 2022 (See "Acquisitions and Dispositions" in Management's Overview). • The decrease in income from joint venture is primarily due to our share of the gain on the sale of the VAA Sale Portfolio in 2022 (See "Other Developments" in Management's Overview). • The $101.3 million change in other income (expense) is primarily due to the income tax expense incurred in connection with the sale of the VAA Sale Portfolio in 2022 (See "Other Developments" in Management's Overview).
Removed
The increase in interest income is primarily due to an increase in short-term investments and cash equivalents and an increase in interest rates.
Removed
The decrease in distribution from joint venture is due to the sale of the VAA Sale Portfolio in 2022 (See "Other Developments" in Management's Overview) and the decrease in investment in short-term investments is due to the investment of those distributions in 2022. 21 The $26.6 million increase in cash used in financing activities is primarily due to a $87.4 million increase in repayments of bond payable offset in part by a $60.8 million decrease in repayments of mortgage and other notes payable.
Removed
The increase in repayments of bonds payable is primarily due to the payoff of our bonds in 2023 (See " Financing Activities " in Management's Overview) and the decrease in the repayments of the mortgage and other notes payable is primarily due to the payoff of the mortgage notes on Toulon and Sugar Mill Phase III in 2022 in connection with the sales of the underlying properties.

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