# Transcontinental Realty Investors Inc: Form 10-Q for the period ended Sep 30, 2023

- Company: [Transcontinental Realty Investors Inc](/companies/tci.md) (CIK 733590)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 17:49 ET
- Period: 2023-09-30
- Accession: 0000733590-23-000020
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/733590/000073359023000020/tci-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/733590/000073359023000020/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $12.5m | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $36.5m | us-gaap:Revenues |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$1.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$7.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $1.3m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $2.6m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $4.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $8.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.52 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.98 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.52 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $0.98 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 8,639,316 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 8,639,316 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $7.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-09-30 | $47.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-09-30 | $1.08bn | us-gaap:Assets |
| Total liabilities | at 2023-09-30 | $230.4m | us-gaap:Liabilities |
| Long-term debt | at 2023-09-30 | $178.9m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-09-30 | $828.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 28,981 characters.

The following discussion and analysis by management should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes included in this Quarterly Report on Form 10-Q (the “Quarterly Report”) and in our Form 10-K for the year ended December 31, 2022 (the “Annual Report”).

This Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, principally, but not only, under the captions “Business”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. We caution investors that any forward-looking statements in this report, or which management may make orally or in writing from time to time, are based on management’s beliefs and on assumptions made by, and information currently available to, management. When used, the words “anticipate”, “believe”, “expect”, “intend”, “may”, “might”, “plan”, “estimate”, “project”, “should”, “will”, “result” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you that, while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

- general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate);
- risks associated with the availability and terms of construction and mortgage financing and the use of debt to fund acquisitions and developments;
- demand for apartments and commercial properties in our markets and the effect on occupancy and rental rates;
- our ability to obtain financing, enter into joint venture arrangements in relation to or self-fund the development or acquisition of properties;
- risks associated with the timing and amount of property sales and the resulting gains/losses associated with such sales;
- failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully
- risks and uncertainties affecting property development and construction (including, without limitation, construction delays, cost overruns, inability to obtain necessary permits and public opposition to such activities);
- risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets;
- costs of compliance with the Americans with Disabilities Act and other similar laws and regulations;
- potential liability for uninsured losses and environmental contamination; and
- risks associated with our dependence on key personnel whose continued service is not guaranteed.

The risks included here are not exhaustive. Some of the risks and uncertainties that may cause our actual results, performance, or achievements to differ materially from those expressed or implied by forward-looking statements, include among others, the factors listed and described at Part I, Item 1A. “Risk Factors” Annual Report on Form 10-K, which investors should review.

### 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 portfolio of income-producing properties includes residential apartment communities ("multifamily properties"), office buildings and retail properties ("commercial properties"). Our investment strategy includes acquiring existing income-producing properties as well as developing new properties on land already owned or acquired for a specific development project.

Our operations are managed by Pillar Income Asset Management, Inc. (“Pillar”) in accordance with an Advisory Agreement. Pillar’s duties include, but are not limited to, locating, evaluating and recommending real estate and real estate-related investment opportunities. Pillar also arranges our debt and equity financing with third party lenders and investors. We have no employees. Employees of Pillar render services to us in accordance with the terms of the Advisory Agreement. Pillar is considered to be a related party due to its common ownership with American Realty Investors, Inc. (“ARL”), who is our controlling shareholder.

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 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 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 a sale of properties by VAA (See "Other Developments"), resulting in a gain on sale of $1.9 million. We used the proceeds to pay off the $9.6 million mortgage note payable on the property and for general corporate purposes.
- On November 1, 2022, we acquired 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.

#### 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 our 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, the $9.6 million loan on Sugar Mill Phase III was paid off 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 the cash generated from sale of the VAA Sale Portfolio.
- 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 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 $14.0 million of our Series A Bonds and $28.9 million of our Series B Bonds, which results 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.

#### Development Activities

On March 15, 2023, we entered into a development agreement with Pillar to build a 240 unit multifamily property in Lake Wales, Florida 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. The development agreement provides for a $1.6 million fee that will be paid to Pillar over the construction period. As of September 30, 2023, we have incurred a total of $12.3 million in development costs.

In 2021, Landing Bayou, a 240 unit multifamily property in Houma, Louisiana suffered extensive damage from Hurricane Ida. As a result, the property required extensive renovation. As of September 30, 2023, we completed the restoration and lease-up of the property for a total cost of $10.4 million, which was primarily funded by insurance proceeds.

During 2023, we spent $5.0 million on our ongoing development of Windmill Farms. Our expenditure includes $0.5 million on the development of land lots for sale to single family home developers and $4.5 million on reimbursable infrastructure investments.

#### 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 of VAA (“VAA Holdback Portfolio”) and a cash payment of $204.0 million. We are in the process of negotiating the assumption of the mortgage notes payable on the VAA Holdback Portfolio with the lenders.

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.

### 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. Actual results could differ from those estimates.

Some of these estimates and assumptions include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, the allocation of purchase price between tangible and intangible assets, capitalization of costs and fair value measurements. Our significant accounting policies are described in more detail in Note 2—Summary of Significant Accounting Policies in our notes to the consolidated financial statements in the Annual Report. However, the following policies are deemed to be critical.

#### Fair Value of Financial Instruments

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.

The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and includes three levels defined as follows:

Level 1 – Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets.

Level 2 – Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 – Unobservable inputs that are significant to the fair value measurement.

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. Related parties are persons or entities who have one or more of the following characteristics, which include entities for which investments in their equity securities would be required, trust for the benefit of persons including principal owners of the entities and members of their immediate families, management personnel of the entity and members of their immediate families and other parties with which the entity may deal if one party controls or can significantly influence the decision making of the other to an extent that one of the transacting parties might be prevented from fully pursuing our own separate interests, or affiliates of the entity.

### 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, the 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 three and nine months ended September 30, 2023 to the three and nine months ended September 30, 2022, the Redevelopment Property is Landing Bayou (See "Development Activities" in Management's Overview). The change in revenues and expenses of the Redevelopment Property from 2022 to 2023 is primarily due to the lease-up of the property in 2023 as the restored units were placed in service. The Acquisition Properties are the VAA Holdback Portfolio (See "Other Developments" in Management's Overview), which include 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. The Disposition Properties are Fruitland Park, Sugar Mill Phase III and Toulon.

The following table summarizes our results of operations for the three and nine months ended September 30, 2023 and 2022:

| Multifamily Segment | Three Months Ended September 30, 2023 | 2022 | Variance | Nine Months Ended September 30, 2023 | 2022 | Variance |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenue | $7,899 | $2,850 | $5,049 | $22,930 | $9,024 | $13,906 |
| Operating expenses | (4,811) | (1,966) | (2,845) | (12,997) | (5,395) | (7,602) |
|  | 3,088 | 884 | 2,204 | 9,933 | 3,629 | 6,304 |
| Commercial Segment |  |  |  |  |  |  |
| Revenue | 3,939 | 4,720 | (781) | 11,306 | 13,286 | (1,980) |
| Operating expenses | (2,632) | (2,735) | 103 | (7,583) | (7,146) | (437) |
|  | 1,307 | 1,985 | (678) | 3,723 | 6,140 | (2,417) |
| Segment operating income | 4,395 | 2,869 | 1,526 | 13,656 | 9,769 | 3,887 |
| Other non-segment items of income (expense) |  |  |  |  |  |  |
| Depreciation and amortization | (3,313) | (2,193) | (1,120) | (9,615) | (6,840) | (2,775) |
| General, administrative and advisory | (3,544) | (4,190) | 646 | (14,118) | (14,233) | 115 |
| Interest income, net | 7,774 | 3,387 | 4,387 | 19,583 | 4,020 | 15,563 |
| Loss on early extinguishment of debt | — | (1,166) | 1,166 | (1,710) | (2,805) | 1,095 |
| Gain on foreign currency transactions | — | 1,533 | (1,533) | 993 | 19,437 | (18,444) |
| Gain on sale or write down of assets | — | 1,539 | (1,539) | 188 | 16,580 | (16,392) |
| Income from joint venture | 85 | 464,085 | (464,000) | 798 | 470,428 | (469,630) |
| Other expense | (635) | (87,288) | 86,653 | (422) | (86,539) | 86,117 |
| Net income | $4,762 | $378,576 | $(373,814) | $9,353 | $409,817 | $(400,464) |

#### Comparison of the three months ended September 30, 2023 to the three months ended September 30, 2022:

Our $373.8 million decrease in net income is primarily attributed to the following:

- The increase in profit from the multifamily segment is primarily due to an increase of $2.0 million from the Acquisition Properties and $0.3 million from the Same Properties offset in part by a decrease of $0.1 million from the Disposition Properties.
- The decrease in profit from the commercial segment is primarily due to a decrease in revenue as a result of decline in occupancy at Stanford Center and an increase in insurance cost.
- The increase in interest income, net is due to a $2.3 million increase in interest income and a $2.1 million decrease in interest expense. The increase in interest income is primarily due to our investment of cash distributions received from VAA in 2022 (See "Other Developments" in Management's Overview). The decrease in interest expense is primarily due to the repayment of the bonds payable in 2023 and the repayment of mortgage notes payable on properties sold in 2022 (See "Acquisitions and Dispositions" in Management's Overview).
- The loss on early extinguishment of debt in 2022 is due to the early repayment of the mortgage note payable on Sugar Mill Phase III (See Financing Activities" in Management's Overview).
- The decrease in gain on foreign currency transactions is due to the repayment of our bonds payable in 2023.
- The decrease in gain on sale or write down of assets is primarily due to the sale of Sugar Mill Phase III 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 (See "Other Developments" in Management's Overview) in 2022.
- The decrease in other expense is primarily due to the $80.4 million decrease in our tax provision as a result of the sale of the VAA Sale Portfolio in 2022.

#### Comparison of the nine months ended September 30, 2023 to the nine months ended September 30, 2022:

Our $400.5 million decrease in net income is primarily attributed to the following:

- The increase in profit from the multifamily segment is primarily due to an increase of $6.2 million from the Acquisition Properties, $0.4 million from the Redevelopment Property and $0.2 million from the Same Properties offset in part by a decrease of $0.5 million from the Disposition Properties.
- The decrease in profit from the commercial segment is primarily due to a decrease in revenue as a result of decline in occupancy at Stanford Center and an increase in insurance cost.
- The increase in interest income, net is due to a $9.8 million increase in interest income and a $5.7 million decrease in interest expense. The increase in interest income is due to a $7.7 million increase in interest income from cash equivalents and short-term investments and a $2.1 million increase in interest from notes receivables and related party receivables. The increase in interest income from investments is primarily due to our investment of cash distributions received from VAA in 2022 (See "Other Developments" in Management's Overview).

The decrease in interest expense is primarily due to the repayment of the bonds payable in 2023 and the repayment of mortgage notes payable on properties sold in 2022 (See "Acquisitions and Dispositions" in Management's Overview) offset in part by the interest on the mortgage notes payable from the Acquisition Properties.

- The decrease in gain on foreign currency transactions is due to the repayment of our bonds payable in 2023 and changes in exchange rates during the period that the bonds were outstanding.
- The decrease in gain on sale or write down of assets is primarily due to the $9.4 million gain on the sales of Toulon and Sugar Mill Phase III in 2022 (See "Acquisitions and Dispositions" in Management's Overview) and a $4.6 million decrease in gain on the sale of land parcels in 2023.
- The decrease in income from joint venture is primarily due to our share of the gain on sale of the VAA Sale Portfolio (See "Other Developments" in Management's Overview) in 2022.
- The decrease in other expense income is primarily due to the $85.5 million decrease in the tax provision as a result of the sale of the VAA Sale Portfolio in 2022.

### Liquidity and Capital Resources

Our principal sources of cash have been, and will continue to be, property operations; proceeds from land and income-producing property sales; collection of notes receivable; refinancing of existing mortgage notes payable; and additional borrowings, including mortgage notes and bonds payable, and lines of credit.

Our principal liquidity needs are to fund normal recurring expenses; meet debt service and principal repayment obligations including balloon payments on maturing debt; fund capital expenditures, including tenant improvements and leasing costs; fund development costs not covered under construction loans; and fund possible property acquisitions.

We anticipate that our cash and cash equivalents as of September 30, 2023, along with cash that will be generated from notes, related party receivables and investment in cash equivalents and short-term investments, will be sufficient to meet all of our cash requirements. We may 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. Although history cannot predict the future, historically, we have been successful at refinancing and extending a portion of our current maturity obligations.

The following summary discussion of our cash flows is based on the consolidated statements of cash flows in our consolidated financial statements, 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):

|  | Nine Months Ended September 30, 2023 | 2022 | Variance |
| --- | ---: | ---: | ---: |
| Net cash provided by (used in) operating activities | $7,846 | $(5,394) | $13,240 |
| Net cash (used in) provided by investing activities | $(9,566) | $153,350 | $(162,916) |
| Net cash used in financing activities | $(137,260) | $(71,524) | $(65,736) |

25

The increase in cash provided by operating activities is primarily due to an increase in interest income and rents provided by the Acquisition Properties (See "Acquisitions and Dispositions" in Management's Overview). The increase in interest income is primarily due to an increase in short-term investments and cash equivalents and an increase in interest rates.

The $162.9 million change in cash from investing activities is primarily due the $159.3 million distribution from joint venture in 2022 (See "Other Developments" in Management's Overview) and the $44.4 million proceeds from the sale of real estate in 2022 (See "Acquisitions and Dispositions" in Management's Overview), offset in part by the $44.7 million net redemption of short-term investments in 2023.

The $65.7 million increase in cash used in financing activities is primarily due to the $87.4 million increase in the payments of the bond payable offset in part by the $20.8 million decrease in repayment of mortgage and other notes payable. The increase in payments on 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 repayment 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.

### 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. 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.

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.

We believe that FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP, and is not indicative of cash available to fund all cash flow needs. We also caution that FFO, as presented, may not be comparable to similarly titled measures reported by other real estate companies.

We compensate for the limitations of FFO by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of FFO and a reconciliation of net income to FFO and FFO-diluted. We believe that to further understand our performance, FFO should be compared with our reported net income and considered in addition to cash flows in accordance with GAAP, as presented in our consolidated financial statements.

The following table reconciles net income attributable to the Company to FFO and FFO adjusted for the three and nine months ended September 30, 2023 and 2022 (dollars and shares in thousands):

|  | Three Months Ended September 30, 2023 | 2022 | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Net income attributable to the Company | $4,451 | $378,351 | $8,498 | $409,314 |
| Depreciation and amortization | 3,313 | 2,193 | 9,615 | 6,840 |
| Gain on sale or write down of assets, net | — | (1,539) | (188) | (16,580) |
| Gain on sale of land | — | — | 188 | 4,752 |
| Gain on sale of assets from unconsolidated joint ventures at our pro rata share | — | (392,051) | — | (392,051) |
| Depreciation and amortization on unconsolidated joint venture at our pro rata share | — | 4,509 | — | 8,229 |
| FFO-Basic and Diluted | 7,764 | (8,537) | 18,113 | 20,504 |
| Loss on early extinguishment of debt | — | 1,166 | 1,710 | 2,805 |
| Loss on early extinguishment of debt from unconsolidated joint venture at our pro rata share | — | 15,254 | — | 15,254 |
| Gain on foreign currency transactions | — | (1,533) | (993) | (19,437) |
| FFO-adjusted | $7,764 | $6,350 | $18,830 | $19,126 |

## Controls and procedures

As filed, 1,117 characters.

Based on an evaluation by our management (with the participation of our Principal Executive and Financial Officer), as of the end of the period covered by this report, our Principal Executive and Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Principal Executive and Financial Officer, to allow timely decisions regarding required disclosures.

There has been no change in our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 199 characters.

There have been no material changes from the risk factors previously disclosed in the 2022 10-K. For a discussion on these risk factors, please see “Item 1A. Risk Factors” contained in the 2022 10-K.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000733590-23-000020. Last ingested by Listed: Oct 24, 2026, 14:55 ET. No prices; not investment advice.