TRANSCONTINENTAL REALTY INVESTORS INC

Previous wording

Windmill Farms is a collection of freshwater districts ("Districts") in Kaufman County Texas that is being developed into single family lots, multifamily properties and retail properties. In connection with the project, we develop the infrastructure in Windmill Farms in order for the land to appreciate and to sell land units (“lots”) to home builders for construction of single family homes. We receive reimbursement of the infrastructure costs ("District Receivables") through the issuance of municipal bonds by the Districts. As of March 31, 2025, we have $55.2 million in District Receivables.

Current wording

Windmill Farms is a collection of freshwater districts ("Districts") in Kaufman County Texas that is being developed into single family lots, multifamily properties and retail properties. In connection with the project, we develop the infrastructure in Windmill Farms in order for the land to appreciate and to sell land units (“lots”) to home builders for construction of single family homes. We receive reimbursement of the infrastructure costs ("District Receivables") through the issuance of municipal bonds by the Districts. As of June 30, 2025, we have $55.5 million in District Receivables.

Previous wording

During the three months ended March 31, 2025, we incurred $26.3 million in development costs, which were funded in part by $17.1 million in borrowing from our construction loans.

Current wording

During the six months ended June 30, 2025, we incurred $52.0 million in development costs, which were funded in part by $43.0 million in borrowing from our construction loans.

Previous wording

As provided in amendment number 31 to the Schedule 13D we filed with the SEC subsequent to the completion of the Tender Offer, if the appropriate opportunity exists at attractive prices, we may acquire additional shares of IOR. During thethree months ended March 31, 2025, we purchased an additional 12,680 common share of IOR in the market for a total cost of$0.2 million.

Current wording

As provided in amendment number 31 to the Schedule 13D we filed with the SEC subsequent to the completion of the Tender Offer, if the appropriate opportunity exists at attractive prices, we may acquire additional shares of IOR. During thesix months ended June 30, 2025, we purchased an additional 32,161 common share of IOR in the market for a total cost of$0.6 million.

Previous wording

For purposes of the discussion below, we define "Same Properties" as all of our properties with the exception of those properties that have been recently constructed or leased-up (“Redevelopment Property”), properties that have recently been acquired ("Acquisition Properties") and properties that have been disposed ("Disposition Properties"). A developed property is considered leased-up, when it achieves occupancy of 80% or more. 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. There were no Acquisition Properties, Development Activities or Disposition Properties for the comparison of the three months ended March 31, 2025 to the three months ended March 31, 2024.

Current wording

For purposes of the discussion below, we define "Same Properties" as all of our properties with the exception of those properties that have been recently constructed or leased-up (“Redevelopment Property”), properties that have recently been acquired ("Acquisition Properties") and properties that have been disposed ("Disposition Properties"). A developed property is considered leased-up, when it achieves occupancy of 80% or more. 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. There were no Acquisition Properties, Development Activities or Disposition Properties for the comparison of the three and six months ended June 30, 2025 to the three and six months ended June 30, 2024.

Previous wording

The following table (dollars in thousands) summarizes our results of operations for the three months ended March 31, 2025 and 2024:

Current wording

The following table (dollars in thousands) summarizes our results of operations for the three and six months ended June 30, 2025 and 2024:

Previous wording

Our $2.0 million increase in net income is primarily attributed to the following:

Current wording

Our $0.7 million increase 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 in rents and the increase in profit from the commercial segment is primarily due to a decrease in the cost of insurance and property taxes.

Current wording

•The increase in profit from the multifamily segment is primarily due to a decrease in the cost of insurance and the increase in profit from the commercial segment is primarily due to an increase in rent and a decrease in the cost of insurance and property taxes.

Previous wording

•The $1.4 million decrease in interest income, net is due to a $1.5 million decrease in interest income offset in part by a $0.1 million decrease in interest expense. The decrease in interest income is primarily due to a decrease in the average balance of our short term investments and interest rates.

Current wording

•The $2.5 million decrease in interest income, net is due to a $2.7 million decrease in interest income offset in part by a $0.1 million decrease in interest expense. The decrease in interest income is primarily due to a decrease in the average balance of our short term investments and interest rates.

Previous wording

•The increase in gain on sale of assets is primarily due to the $3.1 million condemnation settlement in 2025 (See "Acquisitions and Dispositions" in Management's Overview).

Current wording

•The increase in gain on sale of assets is primarily due to the $3.1 million condemnation settlement and the sale of land in 2025 (See "Acquisitions and Dispositions" in Management's Overview).

Previous wording

The $11.3 million increase in cash used in operating activities is primarily due to a $5.2 million decrease inaccounts payable and other liabilities and the $3.1 million increase inother assets.

Current wording

The $13.7 million increase in cash used in operating activities is primarily due to a $6.1 million increase in other assets and a $2.1 million decrease in accounts payable and other liabilities.

Previous wording

The $28.2 million increase in cash used in investing activities is primarily due to the $20.7 million increase in development and renovation of real estate and the $9.4 million increase in net redemption of short-term investments. The increase in development and renovation of real estate relates to the construction of Alera, Bandera Ridge and Merano. The increase in net redemption of short-term investments was due to the increase in funding of development and renovation of real estate.

Current wording

The $22.4 million increase in cash used in investing activities is primarily due to the $38.4 million increase in development and renovation of real estate offset in part by the $12.7 million increase in net redemption of short-term investments. The increase in development and renovation of real estate relates to the construction of Alera, Bandera Ridge and Merano. The increase in net redemption of short-term investments was to provide additional funds for the development and renovation of real estate and the repayment of the mortgage on 770 South Post Oak in 2025.

Previous wording

The $17.1 million increase in cash provided by financing activities was due to the borrowings on our construction loans in connection with the development of Alera, Bandera Ridge and Merano.

Current wording

The $31.8 million increase in cash provided by financing activities was due to the $43.0 million increase in borrowings on our construction loans in connection with the development of Alera, Bandera Ridge and Merano offset in part by the $10.8 million repayment of the mortgage on 770 South Post Oak in 2025.

Previous wording

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. The National Association of Real Estate Investment Trusts ("Nareit") defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains or (losses) from sales of properties, plus real estate related depreciation and amortization, impairment write-downs of real estate and write-downs of investments in an affiliate where the write-downs have been driven by a decrease in the value of real estate held by the affiliate and after adjustments for unconsolidated joint ventures. 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 transactions.

Current wording

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. The National Association of Real Estate Investment Trusts ("Nareit") defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains or (losses) from sales of properties, plus real estate related depreciation and amortization, impairment write-downs of real estate and write-downs of investments in an affiliate where the write-downs have been driven by a decrease in the value of real estate held by the affiliate and after adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis.

Previous wording

FFO and FFO on a diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization, as we believe real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. We believe that such a presentation also provides investors with a meaningful measure of our operating results in comparison to the operating results of other real estate companies. In addition, we believe that FFO excluding gain (loss) from foreign currency transactions provide useful supplemental information regarding our performance as they show a more meaningful and consistent comparison of our operating performance and allows investors to more easily compare our results.

Current wording

FFO and FFO on a diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization, as we believe real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. We believe that such a presentation also provides investors with a meaningful measure of our operating results in comparison to the operating results of other real estate companies.

Previous wording

The following table reconciles net income attributable to the Company to FFO and FFO adjusted for the three months ended March 31, 2025 and 2024 (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 six months ended June 30, 2025 and 2024 (dollars and shares in thousands):