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Item 1. Business

2026-03-12 compared with 2025-03-20 · 34 added, 34 removed, 76 unchanged (47% of the section changed)

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Corporate Structure

We own approximately 78.4% of the common stock of Transcontinental Realty Investors, Inc.

As of December 31, 2025, we owned approximately 78.4% of the common stock of Transcontinental Realty Investors, Inc.

("TCI") and substantially all of our operations are conducted through TCI, whose common stock is traded on the New York Stock Exchange ("NYSE") under the symbol “TCI”.

Accordingly, we include TCI’s financial results in our consolidated financial statements.

In addition, TCI owns approximately 83.2% of the common stock of Income Opportunity Realty Investors, Inc.

("IOR") a Nevada corporation, which is publicly listed and traded on the NYSE under the symbol IOR.

In addition, as of December 31, 2025, TCI owned approximately 84.6% of the common stock of Income Opportunity Realty Investors, Inc.

("IOR") a Nevada corporation, which is publicly listed and traded on the NYSE American under the symbol IOR.

Controlling Stockholder

Realty Advisors, Inc.

(“RAI”), a Nevada corporation, and its affiliates own approximate ly 90.8% of our common stock.

(“RAI”), a Nevada corporation, owns approximate ly 90.8% of our common stock.

As described in Part III, Item 13.

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“Certain Relationships and Related Transactions, and Director Independence”, we compete with related parties of Pillar having similar investment objectives related to the acquisition, development, disposition, leasing and financing of real estate and real estate-related investments.

In resolving any potential conflicts of interest which may arise, Pillar has informed us that it intends to exercise its best judgment as to what is fair and reasonable under the circumstances in accordance with applicable law.

In resolving any potential conflicts of

interest which may arise, Pillar has informed us that it intends to exercise its best judgment as to what is fair and reasonable under the circumstances in accordance with applicable law.

Portfolio Composition

At December 31, 2025, our property portfolio consisted of:

• Thirteen multifamily properties in operation, comprising 2,128 units;

• Three multifamily properties in lease-up, comprising 672 units;

• One multifamily property under development, comprising 234 units;

• Commercial pr operties , consisting of four office buildings with an aggregate of approximately 1,001,549 rentable square feet;

• Fourteen multifamily properties in operation, comprising 2,328 units;

• Four multifamily properties under development, comprising 906 units;

• Approximately 1,792 acres of developed and undeveloped land.

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.

Disposition Activities

• On March 25, 2025 , we received $3.5 million in proceeds from a condemnation settlement that provided for the conveyance of 11.2 acres from our holdings in Windmill Farms, resulting in a gain on sale of $3.1 million.

• On October 10, 2025, we sold Villas at Bon Secour , a 200 unit multifamily property in Gulf Shores, Alabama, for $28.0 million (See " Financing Activities "), resulting in a gain on sale of $12.2 million .

• During the year ended December 31, 2025, we sold 72 single family lots from our holdings in Windmill Farms for $3.3 million, resulting in a gain on sale of $2.6 million.

Financing Activities

• On January 1, 2024, we amended our cash management agreement with Pillar .

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.

• On May 30, 2025, we paid off the $10.8 million loan on 770 South Post Oak with cash on hand.

• On October 10, 2025, we paid off the $18.8 million loan on Villas at Bon Secour in connection with the sale of the underlying property (See "Disposition Activities").

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 (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.

During the year ended December 31, 2025, we expended $69.0 million in the construction of Alera , a 240 unit multifamily property in Lake Wales , Florida ;

Bandera Ridge , a 216 unit multifamily property in Temple , Texas ;

Merano , a 216 unit multifamily property in McKinney , Texas , and Mountain Creek , a 234 unit multifamily property in Dallas , Texas;

which were funded in part by $63.8 million in borrowing from our construction loans.

We substantially completed the construction of Alera , Bandera Ridge and Merano in 2025, and expect to complete Mountain Creek in 2026.

Business Plan and Investment Policy

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We also invest in mortgage receivables.

Our income producing real estate is managed by external management companies.

Our multifamily properties and one of our commercial properties are managed third-party companies and three of our commercial properties are managed by Regis Realty Prime, LLC (“Regis"), collectively the "management companies".

All of our multifamily properties and one of our commercial properties are managed third-party companies and three of our commercial properties are managed by Regis Realty Prime, LLC (“Regis"), collectively the "Management Companies".

The Management Companies conduct all of the administrative functions associated with our property operations (including billing, collections, and response to tenant inquiries).

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Refer to Part III, Item 10.

“Directors, Executive Officers and Corporate Governance – Property Management and Real Estate Brokerage”.

“Directors, Executive Officers and Corporate Governance – Property Management”.

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.

These investments include notes receivables from Unified Housing Foundation, Inc.

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.

We finance our acquisitions through operating cash flow, proceeds from the sale of land and income-producing properties, and debt, which is financing primarily in the form of property-specific, first-lien mortgage loans from commercial banks and institutional lenders.

Most of the mortgage notes payable on our multifamily properties are insured with the Department of Housing and Urban Development ("HUD").

HUD backed mortgage notes payable generally provide for lower interest rates and longer term than conventional debt.

However, HUD insured mortgage notes payable are subject to extensive regulations over the origination and transfers of mortgage notes payable and restrictions on the amount and timing of distribution of cash flows from the underlying real estate.

We finance our business activities from operating cash flow, proceeds from the sale of land and income-producing properties, and debt, which is financing primarily in the form of property-specific, first-lien mortgage loans from commercial banks and institutional lenders.

Most of the mortgage loans on our multifamily properties are insured with the Department of Housing and Urban Development ("HUD").

HUD backed mortgage loans generally provide for lower interest rates and longer term than conventional loans.

However, HUD insured loans are subject to extensive regulations over the origination and transfers of mortgage loans and restrictions on the amount and timing of distribution of cash flows from the underlying real estate.

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 may also from time to time enter into partnerships or joint ventures with various investors to acquire land or income-producing properties, or to sell interests in some of our properties.

Historically, we have previously increased our portfolio of multifamily properties by partnering with third-party developers (“Developers”) to construct multifamily properties on our behalf.

In these instances, we worked with the Developer on the location, design, construction budget and initial lease plan for a potential development project (“Development Project”).

The construction costs included a development fee paid to the Developer.

To ensure that the Development Project was constructed on plan, on time and on budget, we entered into a convertible loan arrangement with the Developer, whereby we advanced the out-of-pocket capital to the developer at nominal rate of interest with an option to convert the loan into a 100% ownership interest in the entity that holds the Development Project for a price equal to development cost.

We have also used Pillar as the Developer for our land development projects, including Windmill Farms and have elected to use Pillar as the Developer for our current portfolio multifamily development projects.

We have increased our portfolio of multifamily properties by partnering with third-party developers (“Developers”) to construct the properties on our behalf.

In these instances, we determined the location, design, construction budget and initial lease plan for a potential development project (“Development Project”).

The cost of the Development Project included a development fee paid to the Developer.

To ensure that a Development Project was constructed on plan, on time and on budget, we often entered into a convertible loan arrangement with the Developer, whereby we advanced the out-of-pocket capital to the developer at nominal rate of interest with an option to convert the loan into a 100% ownership interest in the entity that held the Development Project for a price equal to development cost.

We have also contracted Pillar as the Developer to construct multifamily properties on our behalf and to manage land development projects, including Windmill Farms.

We believe direct involvement through Pillar enables us to achieve higher construction quality, greater control over construction schedules and cost savings.

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Government Regulations

Our properties are subject to various covenants, laws, ordinances and regulations, including regulations relating to common areas, fire and safety requirements, various environmental laws, HUD, the Americans with Disabilities Act and rent control laws.

We operate two business segments:

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The services for our commercial segment include primarily rental of office space and other tenant services, including parking and storage space rental.

The services for our multifamily segment include primarily rental of apartments and other tenant

services, including parking and storage space rental.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business