TRANSCONTINENTAL REALTY INVESTORS, INC. (NYSE:TCI) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01. Entry into a Material Definitive Agreement

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Section 2 – Financial Information

Item 2.01. Completion of Acquisition or Disposition of Assets

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Section 8 – Other Events

Item 8.01. Other Events

During December 2017, Transcontinental Realty Investors, Inc., a Nevada corporation (“TCI” or the “Registrant”), and a subsidiary entered into an arrangement with a wholly owned indirect subsidiary of Macquarie Group (“Macquarie”), named a Contribution Agreement (the “Contribution Agreement”), under which TCI, subject to certain prerequisites, agreed to sell and convey interests in certain completed multifamily projects and projects under development to a newly formed Victory Abode Apartments, LLC (“VAbode”), which would be equally owned and controlled by subsidiaries of TCI and Macquarie. See Current Report on Form 8-K for event of June 14, 2018, as filed with the Securities and Exchange Commission (the “SEC”).

During the period of November 16-19, 2018, TCI and Macquarie completed the establishment of VAbode, which is held jointly by indirect subsidiaries of each of TCI and Macquarie in equal parts (49% of the right to participate in profits and 50% of the capital and voting rights each), to hold ownership of 53 residential multifamily real estate properties [23 stabilized multifamily properties owned by subsidiaries of TCI, 18 stabilized multifamily properties owned by Southern Properties Capital LTD (“SPC”), 10 stabilized multifamily properties under construction, which is essentially complete, owned by SPC, and 2 multifamily properties under development, owned by SPC]. At the time of transfer of the 53 properties to VAbode, VAbode also assumed all liabilities (including Mortgage Notes) related to the 53 properties. VAbode will actively participate in the future development and/or acquisition of additional multifamily assets in the future.

The completion of the agreement was subject to the approval of certain regulatory authorities and that of lenders. On September 28, 2018, TCI received HUD approval in connection with the transaction; on November 16, 2018, subsidiaries of TCI and Macquarie executed the agreement, and the transfer of properties was completed on November 19, 2018.

In consideration of the transfer of the properties to VAbode, the TCI subsidiary [Abode JVP, LLC] has a 50% ownership and voting interest in VAbode. Similarly, in exchange for the payment to TCI of approximately $233,000,000 by Macquarie, its subsidiary [Summerset Intermediate Holdings II, LLC] received a 50% ownership and voting interest in VAbode.

The 2% (Class B shares) right to participate in profits is held by Daniel J. Moos, President and Chief Executive Officer of TCI, and the 49% right to participate in profits held by each of the TCI subsidiary and Macquarie subsidiary control everything, as the 2% profits interest in VAbode held by Mr. Moos entitles Mr. Moos to 2% participation in profits generated after November 19, 2018, without any capital rights and with no voting power.

Not part of the overall transaction but at the same time, TCI transferred all of its rights in two stabilized multifamily properties to SPC [which is wholly owned by TCI] which, due to their geographical location, is inconsistent with VAbode’s business strategy, and Macquarie had passed on inclusion of such properties in VAbode.

VAbode will be managed by a single “Manager,” who initially is Daniel J. Moos. The Manager is responsible for the day-to-day management of VAbode’s affairs. Day-to-day management governs all of VAbode’s current affairs, but several major decisions are subject to the indirect subsidiaries of TCI and Macquarie’s mutual or joint approval, including:

•restructurings and mergers.

The arrangements also include provision for a “Mezzanine” owner’s loan in the amount of approximately $226,000,000 (USD), to be issued in equal parts (by Macquarie or one of its subsidiaries and TCI or one of its subsidiaries, including SPC). While the loans may be separate loans, the loans will have mirror terms, and Daniel J. Moos is entitled to up to 2% of the interest payments of the Loan. The Mezzanine loans are to have a term of 60 months. There are several other provisions of the arrangement between TCI and Macquarie.

About TRANSCONTINENTAL REALTY INVESTORS, INC. (NYSE:TCI)

Transcontinental Realty Investors, Inc. is an externally advised and managed real estate investment company that owns a portfolio of income-producing properties and land held for development. The Company’s segments are Commercial Properties, Apartments, Land and Other. Its portfolio of income-producing properties includes residential apartment communities, office buildings and other commercial properties. It acquires land mainly in in-fill locations or suburban markets. The Company’s income-producing properties consist of approximately eight commercial properties, including five office buildings, two retail properties and an industrial warehouse, comprising in aggregate approximately 1.9 million square feet; a golf course comprising approximately 96.09 acres, and approximately 50 residential apartment communities comprising over 7,980 units, excluding apartments being developed. In addition, it owns approximately 3,660 acres of land held for development.