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Item 7. Management’s Discussion and Analysis

2026-03-12 compared with 2025-03-20 · 64 added, 93 removed, 122 unchanged (56% of the section changed)

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Pillar is considered to be a related party due to its ownership by RAI.

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.

We used the proceeds from the sale to pay off the $14.7 million mortgage note payable on the property and for general corporate purposes.

• On May 17, 2022 , we sold Fruitland Park, a 6,722 square foot commercial building in Fruitland Park, Florida for $0.8 million , resulting in a gain on sale of $0.7 million .

We used the proceeds from the sale for general corporate purposes.

• On September 16, 2022, we sold Sugar Mill Phase III, a 72 unit multifamily property in Baton Rouge , Louisiana for $11.8 million in connection with the sale of properties by VAA (See "Other Developments"), resulting in a gain on sale of $1.9 million.

We used the proceeds from the sale to pay off the $9.6 million mortgage note payable on the property and for general corporate purposes.

• On November 1, 2022, we acquired the seven multifamily properties from VAA (See "Other Developments") with a fair value of $219.5 million .

• During the year ended December 31, 2022 , we sold a total of 26.9 acres of land from our holdings in Windmill Farms for $5.1 million in aggregate, resulting in gains on sale of $4.2 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.

The following is a summary of our recent disposition, financing and development activities:

Disposition Activities

• 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.

• On March 25, 2025 , we received $3.5 million in proceeds from the 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 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 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 to 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 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 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.

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• 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 .

As of December 31, 2024 , no advances have been drawn on the loan.

• 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%.

• On January 1, 2024, we amended our Cash Management agreement with Pillar .

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• 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%.

We subsequently paid off the loan on November 24, 2025.

• 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"), resulting in a loss on early extinguishment of debt of $0.3 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.

We estimate that we will complete the development of these PODs over a two-year period starting during the fourth quarter of 2024.

We have agreements to develop two parcels of land 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.

During 2025, we spent $1.8 million on reimbursable infrastructure investments.

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.

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.

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 December 31, 2024, we have incurred a total of $24.8 million in development costs.

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.

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, 2024, we have incurred a total of $26.3 million in development costs.

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 four multifamily properties ("Development Projects"), which were funded in part by $63.8 million in borrowing from our construction loans.

The following is a summary of the total projected and incurred costs (dollars in thousands) for the Development Projects as of December 31, 2025 :

Project Units Location Total Projected Cost Total Project Cost Incurred

Alera 240 Lake Wales, FL $ 55,330 $ 55,394

Bandera Ridge 216 Temple, TX 49,603 48,082

Merano 216 McKinney, TX 51,910 48,971

Mountain Creek 234 Dallas, TX 49,971 9,268

906 $ 206,814 $ 161,715

As of December 31, 2025, we have substantially completed the construction of the units from Alera , Bandera Ridge and Merano , and expect to complete construction of Mountain Creek in 2026.

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 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.

The VAA Holdback Portfolio consists of Blue Lake Villas , a 186 unit multifamily property in Waxahachie , Texas ;

Blue Lake Villas Phase II , a 70 unit multifamily property in Waxahachie , Texas ;

Northside on Travis , a 200 unit multifamily property in Sherman , Texas ;

Parc at Denham Springs , a 224 unit multifamily property in Denham Spring , Louisiana ;

Residences at Holland Lake , a 208 unit multifamily property in Weatherford , Texas ;

Villas of Park West I , a 148 unit multifamily property in Pueblo , Colorado;

and Villas of Park West II , a 112 unit multifamily property in Pueblo , Colorado.

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.

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 our joint venture in Victory Abode Apartments, LLC ("VAA") , which represented the remaining distribution of proceeds from the sale of the 45 properties in September 2022 that had been held by VAA.

We dissolved VAA in 2024.

We had been engaged in litigation with David Clapper and entities related to Mr.

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Through the years, several rulings, both for and against us, were issued with a range of settlement from zero to $148.0 million .

On October 31, 2024, we executed a Settlement Agreement and General Release (the “Settlement Agreement”) and paid $23.4 million to resolve all claims.

On October 31, 2024, we executed a settlement agreement and paid $23.4 million to resolve all claims.

On December 5, 2025 , we sold our interest in Gruppa Florentino, Inc.

("Gruppa" or "Milano") for $12.7 million , which resulted in gain on sale of $2.3 million .

The sales price was funded by a note receivable (See Note 9 - Notes Receivable) that is collateralize by the ownership interest in Milano.

Concurrent with the sale of Milano, we invested $1.3 million for a 20% ownership interest in Aventi Bene, Inc.

("Aventi"), a newly formed joined venture that invests in various emerging restaurant concepts.

We account for our investment in Aventi under the equity method of accounting.

Critical Accounting Policies

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Results of Operations

Many of the variations in the results of operations, discussed below, occurred because of the transactions affecting our properties described above, including those related to the Redevelopment Property, Acquisition Properties and the Disposition Properties (each as defined below).

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.

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.

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 f or the comparison of the year ended December 31, 2024 to the year ended December 31, 2023 .

Many of the variations in the results of operations, discussed below, occurred because of the transactions affecting our properties described above, including those related to the Same Properties, Development Properties, Acquisition Properties and the Disposition Properties (each as defined below).

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 are in lease-up (“Development Properties”), properties that have recently been acquired ("Acquisition Properties") and properties that have been disposed ("Disposition Properties").

A developed property is considered substantially completed or 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 complete or in operation for the entirety of both periods of the comparison.

For the comparison of the year ended December 31, 2025 to the year ended December 31, 2024 , the Development Properties were Alera, Bandera Ridge and Merano (See " Development Activities " in Management's Overview);

and t he Disposition Property was Villas at Bon Secour.

There were no Acquisition Properties .

The following table (amounts in thousands) provides a summary of the results of operations of 2025 and 2024:

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Loss on early extinguishment of debt (284) — (284)

Gain on foreign currency transactions — 993 (993)

Loss on real estate transactions (23,989) (1,923) (22,066)

Income from joint ventures 1,449 3,242 (1,793)

Other income (expense) 3,855 (861) 4,716

Net (loss) income $ (13,439) $ 5,251 $ (18,690)

Gain (loss) on real estate transactions 19,988 (23,989) 43,977

Income (loss) from joint ventures 119 1,449 (1,330)

Other (loss) income (1,713) 3,855 (5,568)

Net income (loss) $ 18,539 $ (13,439) $ 31,978

Comparison of the year ended December 31, 2025 to the year ended December 31, 2024:

Our $18.7 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 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 $5.6 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 $22.1 million increase in loss on real estate transactions is primarily due to the settlement of the Clapper litigation in 2024 (See " Other Transactions " in Management's Overview).

• The $5.2 million decrease in interest income, net is due to a $6.9 million decrease in interest income offset in part by a $1.7 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).

• 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.

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") .

Our $32.0 million increase in net income in 2025 is primarily attributed to the following:

• Our multifamily segment had a $1.0 million decrease in NOI, which was attributed to a decrease of $1.3 million from the Development Properties and $0.5 million from the Disposition Property offset in part by an increase of $0.8 million from Same Properties .

The decrease in NOI from the Disposition Property is primarily due to the lease-up of newly constructed properties in 2025 ( See " Development Activities " in Management's Overview ).

• The $2.2 million increase in NOI from our commercial segment is primarily due to an increase in occupancy at Stanford Center.

• The $1.4 million increase in general, administrative and advisory expenses is primarily due to a $1.1 million increase in advisory fees and a $0.4 million increase in pillar reimbursements.

The increase in advisory fees is due to an increase in net income and asset value in 2025.

The increase in value of assets is primarily due to the Development Projects ( See " Development Activities " in Management's Overview).

• The $4.3 million decrease in our interest income, net is due to a $5.3 million decrease in interest income offset in part by a $1.0 million decrease in interest expense.

The decrease in interest income was primarily due to a decrease in funds available for investments and a decline in interest rates.

Our decrease in interest expense is primarily due to the pay off of the loan on 770 South Post Oak in 2025 and the refinance of Forest Grove in 2024 (See " Financing Activities " in Management's Overview).

• The $44.0 million increase in gain on sale or write down of assets, net is primarily due to $23.4 million loss from Clapper in 2024 ( See " Other Developments " in Management's Overview ) , the sale of Villas at Bon Secour in 2025 (See "Disposition Activities" in Management's Overview), an increase in dispositions of land at Windmill Farms (See "Disposition Activities" in Management's Overview) and decrease in write off of development costs.

• The increase in other expense is primarily due to an increase in income tax provision as a result of the sale of Villas at Bon Secour (See "Disposition Activities" in Management's Overview) in 2025 and a change in the estimate of tax liability in connection with the VAA properties sold in 2022.

Comparison of the year ended December 31, 2024 to the year ended December 31, 2023:

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and fund possible property acquisitions.

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.

We anticipate that our cash, cash equivalents and short-term investments as of December 31, 2025, along with cash that will be generated in 2026 from operations, notes receivable and construction loans will be sufficient to meet all of our cash requirements.

We may also selectively sell land and income-producing assets, refinance or extend real estate debt and seek additional borrowings secured by real estate to meet our liquidity requirements.

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2025 2024 Variance

Net cash provided by (used in) operating activities $ 1,089 $ (31,054) $ 32,143

Net cash (used in) provided by investing activities $ (41,340) $ 26,813 $ (68,153)

Net cash provided by (used in) financing activities $ 1,659 $ (139,020) $ 140,679

The increase in cash from operating activities is primarily due to a decrease in interest payments and insurance cost in comparison to prior year.

The $68.2 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 $3.8 million increase in collection of notes receivable .

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.

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.

Net cash (used in) provided by operating activities $ (5,553) $ 1,089 $ (6,642)

Net cash used in investing activities $ (33,055) $ (41,340) $ 8,285

Net cash provided by financing activities $ 27,546 $ 1,659 $ 25,887

The $8.3 million increase in cash used in investing activities is primarily due to the $33.5 million increase in proceeds from sale of assets offset in part by the $21.6 million increase in development and renovation of real estate and the $5.8 million increase in net purchase of short-term investments.

The increase in proceeds from sale of assets is primarily due to the sale of Villas at Bon Secour in 2025 (See " Disposition Activities " in Management's Overview).

The increase in development and renovation of real estate relates to the Development Projects (See " Development Activities " in Management's Overview).

The increase in net redemption of short-term investments provided additional funds for the development and renovation of real estate and the repayment of the mortgage note on 770 South Post Oak in 2025.

The $25.9 million increase in cash provided by financing activities was due to the $48.7 million increase in borrowings on our construction loans in connection with our development projects (See "Development Activities" in Management's Overview) offset in part by a $22.7 million increase in payments of mortgages and other notes payable (See " Financing Activities " in Management's Overview).

Funds From Operations ("FFO")

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2025 2024 2023

Net (loss) income attributable to the Company $ (14,703) $ 3,968 $ 373,349

Net income (loss) attributable to the Company $ 15,703 $ (14,703) $ 3,968

Depreciation and amortization on consolidated assets 12,577 12,276 13,646

Loss (gain) on real estate transactions 23,989 1,923 (87,132)

(Gain) loss on real estate transactions (19,988) 23,989 1,923

Gain on sale of land 4,720 1,095 188

Gain on sale of assets from unconsolidated joint venture at our pro rata share — — (265,804)

Depreciation and amortization on unconsolidated joint ventures at pro rata share 239 206 272

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Loss on early extinguishment of debt 284 — 1,710

Loss on early extinguishment of debt from unconsolidated joint venture at our pro rata share — — 15,254

Gain on foreign currency transactions — — (993)

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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 7. Management’s Discussion and Analysis