Transcontinental Realty: Q3 Earnings Snapshot

Transcontinental Realty Investors, Inc. (NYSE:TCI) reported its Q3 2024 earnings on November 7, 2024, providing insights into the company's financial performance and strategic initiatives. This article will delve into the key highlights of TCI's Q3 earnings, its occupancy trends, and the significance of its recent loan replacement and construction loan for the Mountain Creek project.

**Financial Performance Overview**

TCI reported net income attributable to common shares of $1.7 million or $0.20 per diluted share for the three months ended September 30, 2024, compared to a net income of $4.5 million or $0.52 per diluted share for the same period in 2023. The decrease in net income was primarily attributed to a decline in interest income.

Rental revenues decreased by $0.8 million year-over-year, from $11.8 million to $11.1 million, primarily due to a decrease in occupancy at commercial properties. Net operating loss decreased by $0.1 million, primarily due to a decrease in general and administrative expenses.

**Occupancy Trends and Lease Activity**

TCI's total occupancy rate was 79% at September 30, 2024, with multifamily properties at 95% and commercial properties at 48%. The company completed a 45,000 square foot lease at Stanford Center, which is expected to commence in April 2025. This lease provides a 14% increase in occupancy to the property and a 20% increase in rent per square foot over recent expired leases.



**Loan Replacement and Construction Loan for Mountain Creek**

TCI replaced the existing loan on Forest Grove with a $6.6 million loan that bears interest at SOFR plus 1.85% and matures on August 1, 2031. Additionally, TCI obtained a $27.5 million construction loan to finance the development of a 234 unit multifamily property in Dallas, Texas ("Mountain Creek"), expected to be completed in 2026. The construction loan on Mountain Creek bears interest at SOFR plus 3.45% and matures on October 20, 2026.



**Impact on Long-term Growth Prospects**

TCI's 62% decline in net income for Q3 2024 compared to Q3 2023 is concerning, but the company's long-term growth prospects remain promising. The strong multifamily occupancy at 95% and the completion of the 45,000 square foot lease at Stanford Center indicate TCI's ability to secure high-quality tenants and drive growth in its property portfolio. The $27.5 million construction loan for the new 234-unit multifamily development in Dallas further demonstrates TCI's commitment to expanding its portfolio and driving long-term growth.

In conclusion, TCI's Q3 earnings snapshot reveals a mixed performance, with a decline in net income and rental revenues. However, the company's strong multifamily occupancy, lease activity, and strategic initiatives, such as loan replacement and the Mountain Creek project, suggest a positive outlook for its long-term growth prospects. Investors should monitor TCI's progress in addressing its net income decline while keeping an eye on its multifamily occupancy and expansion efforts.