TRANSCONTINENTAL REALTY INVESTORS INC

Previous wording

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. We estimate that we will complete the development of these PODs over a two-year period starting the third quarter of 2024. During 2024, we spent $3.2 million on reimbursable infrastructure investments.

Current wording

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. 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 $3.3 million on reimbursable infrastructure investments.

Previous wording

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. 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. As of June 30, 2024, we have incurred a total of $25.1 million in development costs.

Current wording

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. 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. As of September 30, 2024, we have incurred a total of $31.9 million in development costs.

Previous wording

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. 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 June 30, 2024, we have incurred a total of $11.8 million in development costs.

Current wording

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. 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 September 30, 2024, we have incurred a total of $15.6 million in development costs.

Previous wording

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. 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 June 30, 2024, we have incurred a total of $6.2 million in development costs.

Current wording

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. 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 September 30, 2024, we have incurred a total of $11.1 million in development costs.

Previous wording

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.

Current wording

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 an orderly 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.

Previous wording

For the comparison of the three and six months ended June 30, 2024 to the three and six months ended June 30, 2023, the Redevelopment Property is Landing on Bayou Cane (See "Development Activities" in Management's Overview). 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. There were no Acquisition Properties or Disposition Properties for the comparison of the three and six months ended June 30, 2024 to the three and six months ended June 30, 2023.

Current wording

For the comparison of the three and nine months ended September 30, 2024 to the three and nine months ended September 30, 2023, the Redevelopment Property is Landing on Bayou Cane (See "Development Activities" in Management's Overview). 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. There were no Acquisition Properties or Disposition Properties for the comparison of the three and nine months ended September 30, 2024 to the three and nine months ended September 30, 2023.

Previous wording

The following table summarizes our results of operations for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our results of operations for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Our $0.1 million decrease in net income is primarily attributed to the following:

Current wording

Our $2.9 million decrease in net income is primarily attributed to the following:

Previous wording

•The increase in profit from the multifamily segment is primarily due to an increase of $0.2 million from the Redevelopment Property due to the lease up of the property in 2023. The decrease in profit from the commercial segment is primarily due to a decrease in revenue as a result of a decline in occupancy at Browning Place.

Current wording

•The increase in profit from the multifamily segment is primarily due to an increase of $0.2 million from the Redevelopment Property due to the lease up of the property in 2023. The decrease in profit from the commercial segment is primarily due to a decrease in revenue as a result of a decline in occupancy at Browning Place and Stanford Center.

Previous wording

•The $4.2 million decrease in interest income, net is due to a $6.0 million decrease in interest income offset in part by a $1.8 million decrease in interest expense. 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. The decrease in interest expense is primarily due to the repayment of the bonds payable in 2023 (See "Financing Activities" in Management's Overview).

Current wording

•The $3.9 million decrease in interest income, net is due to a $3.8 million decrease in interest income, which was 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.

Previous wording

Our $0.8 million increase in net income is primarily attributed to the following:

Current wording

Our $3.0 million decrease in net income is primarily attributed to the following:

Previous wording

•The increase in profit from the multifamily segment is primarily due to an increase of $0.4 million from the Redevelopment Property due to the lease up of the property in 2023. The decrease in profit from the commercial segment is primarily due to a decrease in revenue as a result of a decline in occupancy at Browning Place.

Current wording

•The increase in profit from the multifamily segment is primarily due to an increase of $0.7 million from the Redevelopment Property due to the lease up of the property in 2023. The decrease in profit from the commercial segment is primarily due to a decrease in revenue as a result of a decline in occupancy at Browning Place and Stanford Center.

Previous wording

•The decrease in general, administrative and advisory expenses is primarily due to a reduction in legal, auditing and other administrative expenses associated with the bonds payable, which were repaid in 2023.

Current wording

•The $4.4 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.

Previous wording

•The $2.7 million decrease in interest income, net is due to a $3.3 million decrease in interest income offset in part by a $0.6 million decrease in interest expense. 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. The decrease in interest expense is primarily due to the repayment of the bonds payable in 2023. See "Financing Activities" in Management's Overview.

Current wording

•The $8.1 million decrease in interest income, net is due to a $9.8 million decrease in interest income offset in part by a $1.6 million decrease in interest expense. 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. The decrease in interest expense is primarily due to the repayment of the bonds payable in 2023 (See "Financing Activities" in Management's Overview).

Previous wording

The increase in cash provided by operating activities is primarily due to a decrease in interest payments in comparison to prior year.

Current wording

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.

Previous wording

The $5.8 million decrease in cash used in investing activities is primarily due to the $26.2 million increase in net redemption of short-term investments offset in part by the $20.9 million decrease in distribution from joint venture. The distribution from joint venture in 2023 relates to the final distribution of proceeds from the sale of the VAA Sale Portfolio in 2022.

Current wording

The $17.5 million increase in cash used in investing activities is primarily due to the $21.1 million increase indevelopment and renovation of real estate and the $20.9 million decrease in distribution from joint venture offset in part by the $12.8 million increase in net redemption of short-term investments, the $6.5 million decrease inoriginations and advances on notes receivable and the $5.2 million increase incollection of notes receivable. The increase indevelopment 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.

Previous wording

The $132.9 million decrease in cash used in financing activities is primarily due to the $131.2 million repayment of our bonds in 2023.

Current wording

The $137.4 million decrease in cash used in financing activities is primarily due to the $131.2 million repayment of our bonds in 2023.

Previous wording

The following table reconciles net income attributable to the Company to FFO and FFO adjusted for the three and six months ended June 30, 2024 and 2023 (dollars and shares in thousands):

Current wording

The following table reconciles net income attributable to the Company to FFO and FFO adjusted for the three and nine months ended September 30, 2024 and 2023 (dollars and shares in thousands):