false --12-31 2024 Q2 0000949961 0000949961 2024-01-01 2024-06-30 0000949961 2024-08-08 0000949961 2024-06-30 0000949961 2023-12-31 0000949961 2024-04-01 2024-06-30 0000949961 2023-04-01 2023-06-30 0000949961 2023-01-01 2023-06-30 0000949961 us-gaap:RelatedPartyMember 2024-04-01 2024-06-30 0000949961 us-gaap:RelatedPartyMember 2023-04-01 2023-06-30 0000949961 us-gaap:RelatedPartyMember 2024-01-01 2024-06-30 0000949961 us-gaap:RelatedPartyMember 2023-01-01 2023-06-30 0000949961 us-gaap:CommonStockMember 2024-03-31 0000949961 us-gaap:TreasuryStockCommonMember 2024-03-31 0000949961 us-gaap:AdditionalPaidInCapitalMember 2024-03-31 0000949961 us-gaap:RetainedEarningsMember 2024-03-31 0000949961 2024-03-31 0000949961 us-gaap:CommonStockMember 2024-04-01 2024-06-30 0000949961 us-gaap:TreasuryStockCommonMember 2024-04-01 2024-06-30 0000949961 us-gaap:AdditionalPaidInCapitalMember 2024-04-01 2024-06-30 0000949961 us-gaap:RetainedEarningsMember 2024-04-01 2024-06-30 0000949961 us-gaap:CommonStockMember 2024-06-30 0000949961 us-gaap:TreasuryStockCommonMember 2024-06-30 0000949961 us-gaap:AdditionalPaidInCapitalMember 2024-06-30 0000949961 us-gaap:RetainedEarningsMember 2024-06-30 0000949961 us-gaap:CommonStockMember 2023-03-31 0000949961 us-gaap:TreasuryStockCommonMember 2023-03-31 0000949961 us-gaap:AdditionalPaidInCapitalMember 2023-03-31 0000949961 us-gaap:RetainedEarningsMember 2023-03-31 0000949961 2023-03-31 0000949961 us-gaap:CommonStockMember 2023-04-01 2023-06-30 0000949961 us-gaap:TreasuryStockCommonMember 2023-04-01 2023-06-30 0000949961 us-gaap:AdditionalPaidInCapitalMember 2023-04-01 2023-06-30 0000949961 us-gaap:RetainedEarningsMember 2023-04-01 2023-06-30 0000949961 us-gaap:CommonStockMember 2023-06-30 0000949961 us-gaap:TreasuryStockCommonMember 2023-06-30 0000949961 us-gaap:AdditionalPaidInCapitalMember 2023-06-30 0000949961 us-gaap:RetainedEarningsMember 2023-06-30 0000949961 2023-06-30 0000949961 us-gaap:CommonStockMember 2023-12-31 0000949961 us-gaap:TreasuryStockCommonMember 2023-12-31 0000949961 us-gaap:AdditionalPaidInCapitalMember 2023-12-31 0000949961 us-gaap:RetainedEarningsMember 2023-12-31 0000949961 us-gaap:CommonStockMember 2024-01-01 2024-06-30 0000949961 us-gaap:TreasuryStockCommonMember 2024-01-01 2024-06-30 0000949961 us-gaap:AdditionalPaidInCapitalMember 2024-01-01 2024-06-30 0000949961 us-gaap:RetainedEarningsMember 2024-01-01 2024-06-30 0000949961 us-gaap:CommonStockMember 2022-12-31 0000949961 us-gaap:TreasuryStockCommonMember 2022-12-31 0000949961 us-gaap:AdditionalPaidInCapitalMember 2022-12-31 0000949961 us-gaap:RetainedEarningsMember 2022-12-31 0000949961 2022-12-31 0000949961 us-gaap:CommonStockMember 2023-01-01 2023-06-30 0000949961 us-gaap:TreasuryStockCommonMember 2023-01-01 2023-06-30 0000949961 us-gaap:AdditionalPaidInCapitalMember 2023-01-01 2023-06-30 0000949961 us-gaap:RetainedEarningsMember 2023-01-01 2023-06-30 0000949961 ior:TranscontinentalRealtyInvestorsIncMember ior:IncomeOpportunityRealtyInvestorsIncMember 2024-06-30 0000949961 ior:TranscontinentalRealtyInvestorsIncAndAffiliatesMember us-gaap:CommonStockMember ior:IncomeOpportunityRealtyInvestorsIncMember 2024-06-30 0000949961 ior:AmericanRealtyInvestorsIncMember ior:TranscontinentalRealtyInvestorsInc1Member 2024-06-30 0000949961 ior:UnifiedHousingFoundationIncMember 2022-12-31 0000949961 ior:UnifiedHousingFoundationIncMember 2022-01-01 2022-12-31 0000949961 ior:UnifiedHousingFoundationIncMember 2023-10-01 2023-10-02 0000949961 ior:UnifiedHousingFoundationIncMember 2024-06-30 0000949961 ior:UnifiedHousingFoundationIncMember 2023-12-31 0000949961 ior:MayRealtyHoldingsIncMember ior:AmericanRealtyInvestorsInc1Member 2024-06-30 0000949961 ior:PillarMember 2024-04-01 2024-06-30 0000949961 ior:PillarMember 2023-04-01 2023-06-30 0000949961 ior:PillarMember 2024-01-01 2024-06-30 0000949961 ior:PillarMember 2023-01-01 2023-06-30 0000949961 ior:UnifiedHousingFoundationIncMember 2024-04-01 2024-06-30 0000949961 ior:UnifiedHousingFoundationIncMember 2023-04-01 2023-06-30 0000949961 ior:UnifiedHousingFoundationIncMember 2024-01-01 2024-06-30 0000949961 ior:UnifiedHousingFoundationIncMember 2023-01-01 2023-06-30 0000949961 ior:PillarMember 2024-06-30 0000949961 ior:PillarMember 2023-12-31 iso4217:USD xbrli:shares iso4217:USD xbrli:shares xbrli:pure

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2024

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to________

 

Commission File Number 001-14784

 

INCOME OPPORTUNITY REALTY INVESTORS, INC.

 

(Exact Name of Registrant as Specified in Its Charter)

 

Nevada 75-2615944

(State or Other Jurisdiction of
Incorporation or Organization) 

(I.R.S. Employer 

Identification No.) 

 

1603 Lyndon B. Johnson Freeway, Suite 800, Dallas, Texas 75234 

(Address of principal executive offices) (Zip Code)

 

(469) 522-4200

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Exchange Act:

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock IOR NYSE American Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ☐ Accelerated filer  ☐ Non-accelerated filer  ☒ Smaller reporting company   ☒
Emerging growth Company  ☐      

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No.

 

As of August 8, 2024, there were 4,066,178 shares of common stock outstanding.

 

 

 

 

 

 

INCOME OPPORTUNITY REALTY INVESTORS, INC.

FORM 10-Q

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION PAGE
   
Item 1. Financial Statements 3
     
  Consolidated Balance Sheets at June 30, 2024 and December 31, 2023 3
     
  Consolidated Statements of Operations for the three and six months ended June 30,  2024 and 2023 4
     
  Consolidated Statements of Equity for the three and six months ended June 30, 2024 and 2023 5
     
  Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 6
     
  Notes to Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11
     
Item 3. Quantitative and Qualitative Disclosures About Market Risks 13
     
Item 4. Controls and Procedures 13
     
PART II. OTHER INFORMATION  
   
Item 1. Legal Proceedings 13
     
Item 1A. Risk Factors 13
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 13
     
Item 3. Defaults Upon Senior Securities 13
     
Item 4. Mine Safety Disclosures 13
     
Item 5. Other Information 13
     
Item 6. Exhibits 14
     
Signatures 15

 

2

 

 

INCOME OPPORTUNITY REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share and par value amounts)

(Unaudited)

 

   June 30, 2024   December 31, 2023 
Assets          
Current assets          
Cash and cash equivalents  $16   $71 
Interest receivable from related parties   326    293 
Receivable from related parties   108,316    106,541 
Total current assets   108,658    106,905 
Non-current assets          
Notes receivable from related parties   11,173    11,173 
Total assets  $119,831   $118,078 
           
Shareholders’ equity          
Common stock, $0.01 par value, 10,000,000 shares authorized; 4,173,675 shares issued,  4,078,106 and 4,110,714 shares outstanding at June 30, 2024 and December 31, 2023, respectively.   42    42 
Treasury stock at cost, 95,569 shares   (1,534)   (947)
Additional paid-in capital   61,955    61,955 
Retained earnings   59,368    57,028 
Total shareholders’ equity   119,831    118,078 
Total liabilities and equity  $119,831   $118,078 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3

 

 

INCOME OPPORTUNITY REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share amounts)

(Unaudited)

 

                     
   Three Months Ended
June 30,		   Six Months Ended
June 30,		 
   2024   2023   2024   2023 
Revenues:                
Other income  $—   $—   $—   $— 
Expenses:                    
General and administrative (including $11 and $44 for the three months ended June 30, 2024 and 2023, respectively, and $23 and $142 for the six months ended June 30, 2024 and 2023, respectively, from related parties)   93    76    159    294 
Advisory fee to related party   21    380    50    699 
Total operating expenses   114    456    209    993 
Net operating loss   (114)   (456)   (209)   (993)
Interest income from related parties   1,585    2,778    3,171    4,644 
Income tax provision   (309)   (488)   (622)   (767)
Net income  $1,162   $1,834   $2,340   $2,884 
                     
Earnings per share - basic and diluted  $0.28   $0.44   $0.57   $0.69 
Weighted average common shares used in computing earnings per share   4,107,131    4,168,414    4,092,618    4,168,414 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4

 

 

INCOME OPPORTUNITY REALTY INVESTORS, INC.

CONSOLIDATED STATEMENT OF EQUITY

(dollars in thousands)

(Unaudited)

  

   Common Stock  

Treasury

Stock

  

Paid-in

Capital

  

Retained

Earnings

   Total Shareholders’ Equity 
                     
Three Months Ended June 30, 2024                         
Balance,  April 1, 2024  $42   $(1,534)  $61,955   $58,206   $118,669 
Net income   —    —    —    1,162    1,162 
Balance,  June 30, 2024  $42   $(1,534)  $61,955   $59,368   $119,831 
Three Months Ended June 30, 2023                         
Balance,  April 1, 2023  $42   $(39)  $61,955   $51,077   $113,035 
Net  income   —    —    —    1,834    1,834 
Balance,  June 30, 2023  $42   $(39)  $61,955   $52,911   $114,869 
Six Months Ended June 30, 2024                         
Balance,  January 1, 2024  $42   $(947)  $61,955   $57,028   $118,078 
Net income   —    —    —    2,340    2,340 
Repurchase of common shares   —    (587)   —    —    (587)
Balance,  June 30, 2024  $42   $(1,534)  $61,955   $59,368   $119,831 
Six Months Ended June 30, 2023                         
Balance,  January 1, 2023  $42   $(39)  $61,955   $50,027   $111,985 
Net income   —    —    —    2,884    2,884 
Balance,  June 30, 2023  $42   $(39)  $61,955   $52,911   $114,869 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

5

 

 

INCOME OPPORTUNITY REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

 

           
   Six Months Ended June 30, 
   2024   2023 
Cash Flow From Operating Activities:          
Net  income  $2,340   $2,884 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:          
Changes in assets and liabilities:          
Accrued interest on related party notes receivable   (33)   11 
Related party receivables   (1,775)   (2,896)
Accounts payable   —    (3)
Net cash provided by (used in) operating activities   532    (4)
Cash Flow From Financing Activities:          
Repurchase of common shares   (587)   — 
Net cash used in financing activities   (587)   — 
Net decrease in cash and cash equivalents   (55)   (4)
Cash and cash equivalents, beginning of the period   71    6 
Cash and cash equivalents, end of the period  $16   $2 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

6

 

 

INCOME OPPORTUNITY REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share and square foot amounts)

(Unaudited)

 

1.Organization

 

Income Opportunity Investors, Inc. (the “Company”) is an externally managed company that invests in mortgage notes receivables. As used herein, the terms “IOR”, “the Company”, “We”, “Our”, or “Us” refer to the Company.

 

Transcontinental Realty Investors, Inc. (“TCI”), whose common stock is traded on the NYSE under the symbol “TCI”, owns 82.9% of our stock and with its affiliates owns approximately 89.5% of our common stock. Accordingly, our financial results are included in the consolidated financial statements of TCI’s in their Form 10-K and in their tax filings. American Realty Investors, Inc. (“ARL”), whose common stock is traded on the NYSE under the symbol “ARL”, in turn, owns approximately 78.4% of TCI.

 

Our business is managed by Pillar Income Asset Management, Inc. (“Pillar”) in accordance with an Advisory Agreement that is reviewed annually by our Board of Directors. Pillar is considered to be a related party (See Note 4 – Related Party Transactions).

 

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.

 

2.Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.

 

The consolidated balance sheet at December 31, 2023 was derived from the audited consolidated financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

We consolidate entities in which we are considered to be the primary beneficiary of a variable interest entity (“VIE”) or have a majority of the voting interest of the entity. We have determined that we are a primary beneficiary of the VIE when we have (i) the power to direct the activities of a VIE that most significantly impacts its economic performance, and (ii) the obligations to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether we are the primary beneficiary, we consider qualitative and quantitative factors, including ownership interest, management representation, ability to control decision and other contractual rights.

 

We account for entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary under the equity method of accounting. Accordingly, we include our share of the net earnings or losses of these entities in our results of operations.

 

7

 

 

INCOME OPPORTUNITY REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share and square foot amounts)

(Unaudited)

 

3.Notes Receivable

 

At January 1, 2023, we had four notes receivable issued by Unified Housing Foundation, Inc. (“UHF”) with an aggregate balance of $11,173. Each of the notes bore interest at 12.0% and was to mature on December 31, 2032.

 

On October 1, 2023, we amended the four UHF notes, whereby the four notes were consolidated into a single note and the 12.0% fixed interest rate was replaced with a floating rate indexed to the Secured Overnight Financing Rate (“SOFR”) in effect on the last day of the preceding calendar quarter. The maturity date of the new note is December 31, 2032. In connection with the amendment, $605 of accrued interest was forgiven in exchange for an increased participation in the proceeds from any future refinancing of the underlying property. The interest rate of the new note was 5.34% and 5.31% as of June 30, 2024 and December 31, 2023, respectively.

 

UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the note receivable. Principal and interest payments on the note are funded from surplus cash flow from operations, sale or refinancing of the underlying property and are cross collateralized to the extent that any surplus cash available from any of other property owned by UHF.

 

4.Related Party Transactions

 

We engage in certain business transactions with related parties, including investment in notes receivables. Transactions involving related parties cannot be presumed to be carried out on at arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in our best interest.

 

Pillar is a wholly owned by a subsidiary of the May Realty Holdings, Inc., which owns approximately 90.8% of ARL, which owns approximately 78.4% of TCI, which owns 82.9% of the Company.

 

Advisory fees paid to Pillar were $21 and $380 for the three months ended June 30, 2024 and 2023, respectively, and $50 and $699 for the six months ended June 30, 2024 and 2023, respectively.

 

Notes receivable are amounts held by UHF (See Note 3 – Notes Receivable). UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable. Interest income on these notes was $149 and $334 for the three months ended June 30, 2024 and 2023, respectively, and $299 and $665 for the six months ended June 30, 2024 and 2023, respectively.

 

Receivables from related parties were $108,316 and $106,541 at June 30, 2024 and December 31, 2023, respectively; which represents amounts outstanding advanced to Pillar net of unreimbursed fees (“Pillar Receivable”), which bears interest in accordance with a cash management agreement. On January 1, 2024, an amendment to the cash management agreement changed the interest rate on the Pillar Receivable from prime plus one percent to SOFR. Interest income on related party receivables was $1,436 and $2,444 for the three months ended June 30, 2024 and 2023, respectively, and $2,872 and $3,979 for the six months ended June 30, 2024 and 2023, respectively.

 

5.Stockholders’ Equity

 

We have a stock repurchase program that allows for the repurchase of up to 1,650,000 shares of our common stock. This repurchase program has no termination date. During the six months ended June 30, 2024, we repurchased a total of 32,608 shares in two block transactions for a total of $587.

 

As of June 30, 2024, there are 524,931 shares remaining that can be repurchased.

 

8

 

 

INCOME OPPORTUNITY REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share and square foot amounts)

(Unaudited)

 

6.Commitments and Contingencies

 

We believe that we will generate excess cash from property operations in the next twelve months; such excess, however, might not be sufficient to discharge all of our obligations as they become due.

 

9

 

 

INCOME OPPORTUNITY REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share and square foot amounts)

(Unaudited)

 

7.Subsequent Events

 

The date to which events occurring after June 30, 2024, the date of the most recent balance sheet, have been evaluated for possible adjustment to the consolidated financial statements or disclosure is August 8, 2024, which is the date on which the consolidated financial statements were available to be issued.

 

10

 

 

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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, 2023 (the “Annual Report”).

 

This Report on Form 10-Q may contain forward-looking statements within the meaning of the federal securities laws, principally, but not only, under the caption “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:

 

•risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments;

 

•failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully;

 

•risks associated with downturns in the national and local economies, increases in interest rates and volatility in the securities markets;

 

•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 in Part I, Item 1A. “Risk Factors” in the Company’s Annual Report on Form 10-K, which investors should review. There have been no changes from the risk factors previously described in the Company’s Form 10-K for the fiscal year ended December 31, 2023.

 

Management’s Overview

 

We are an externally advised and managed company that invests in notes receivable that are collateralized by income-producing properties in the Southern United States and in the past, real property. Our current principal source of income is interest income from related party receivables.

 

We have historically engaged in and may continue to engage in certain business transactions with related parties, including but not limited to asset acquisition, dispositions and financings. Transactions involving related parties cannot be presumed to be carried out on an arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in our best interest.

 

Our operations are managed by Pillar in accordance with an Advisory Agreement. Pillar’s duties include, but are not limited to, locating, evaluating and recommending investment opportunities. 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 TCI, who is our controlling shareholder.

 

11

 

 

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 the provisions for uncollectible accounts 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. 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

 

The following discussion is based on our Consolidated Financial Statements Consolidated Statement of Operations, for the three and six months ended June 30, 2024 and 2023 and is not meant to be an all-inclusive discussion of the changes in our net income applicable to common shares. Instead, we have focused on significant fluctuations within our operations that we feel are relevant to obtain an overall understanding of the change in income applicable to common shareholders.

 

Our operating expenses consist primarily of general and administrative costs such as audit, legal and administrative fees paid to a related party.

 

We also have other income and expense items including interest income from notes receivable and funds deposited with Pillar.

 

12

 

 

Comparison of the three months ended June 30, 2024 to the three months ended June 30, 2023:

 

The decrease in net income is primarily due to a decrease in interest income from related party receivables offset in part be a decrease in general, administrative and advisory fees.

 

Comparison of the six months ended June 30, 2024 to the six months ended June 30, 2023:

 

The decrease in net income is primarily due to a decrease in interest income from related party receivables offset in part be a decrease in general, administrative and advisory fees.

 

Liquidity and Capital Resources

 

Our principal liquidity needs are to fund normal recurring expenses. Our principal sources of cash are and will continue to be the collection of mortgage notes receivables, and the collections of receivables and interests from related companies.

 

We anticipate that our cash and cash equivalents as of June 30, 2024, along with cash that will be generated in the next twelve months from our related party receivables, will be sufficient to meet all of our current cash requirements.

 

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

 

Optional and not included.

 

ITEM 4.CONTROLS AND PROCEDURES

 

Based on an evaluation by our management (with the participation of our Principal Executive Officer and Principal Financial Officer), as of the end of the period covered by this report, our Principal Executive and Principal 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 Principal 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.

 

PART II.  OTHER INFORMATION

 

ITEM 1.LEGAL PROCEEDINGS

 

None

 

ITEM 1A.RISK FACTORS

 

There have been no material changes from the risk factors previously disclosed in the 2023 10-K. For a discussion on these risk factors, please see “Item 1A. Risk Factors” contained in the 2023 10-K.

 

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

We have a program that allows for the repurchase of up to 1,650,000 shares of our common stock. This repurchase program has no termination date. There were 32,608 shares purchased under this program during the six months ended June 30, 2024. As of June 30, 2024, 1,125,069 shares have been purchased and 524,931 shares may be purchased under the program.

 

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4.MINE SAFETY DISCLOSURES

 

Not applicable

 

ITEM 5.OTHER INFORMATION

 

None

 

13

 

 

ITEM 6.EXHIBITS

 

The following exhibits are filed with this report or incorporated by reference as indicated;

 

3.1 By-laws of Income Opportunity Realty Investors, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-4, filed on December 30, 1999).
   
4.1 Certificate of Designations, Preferences and Relative Participating or Optional or Other Special Rights, and Qualifications, Limitations or Restrictions Thereof of Series F Redeemable Preferred Stock of Income Opportunity Realty Investors, Inc., dated June 11, 2001 (incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
   
4.2 Certificate of Withdrawal of Preferred Stock, Decreasing the Number of Authorized Shares of and Eliminating Series F Redeemable Preferred Stock, dated June 18, 2002 (incorporated by reference to Exhibit 3.0 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
   
4.3 Certificate of Designation, Preferences and Rights of the Series I Cumulative Preferred Stock of Income Opportunity Realty Investors, Inc., dated February 3, 2003 (incorporated by reference to Exhibit 4.3 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002).
   
4.4 Certificate of Designation for Nevada Profit Corporations designating the Series J 8% Cumulative Convertible Preferred Stock as filed with the Secretary of State of Nevada on March 16, 2006 (incorporated by reference to Registrant current report on Form 8-K for event of March 16, 2006).
   
10.1 Amended and Restated Advisory Agreement between Income Opportunity Realty Investors, Inc. and Pillar Income Asset Management, LLC, dated May 7, 2024 (incorporated by reference to Exhibit 10.0 to the Registrant’s Current Report on Form 8-K, dated May 7, 2024).
   
31.1 * Section 302 Certification by Erik L. Johnson, Chief Executive Officer.
   
31.2 * Section 302 Certification by Alla Dzyuba, Chief Accounting Officer.
   
32.1 * Section 906 Certifications of Erik Johnson and Alla Dzyuba.
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema Document
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
   
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
   
101.LAB XBRL Taxonomy Extension Label Linkbase Document
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

* Filed herewith.

 

14

 

 

SIGNATURE PAGE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  INCOME OPPORTUNITY REALTY INVESTORS, INC.
     
Date: August 8, 2024 By: /s/ ERIK L. JOHNSON
    Erik L. Johnson
    President and Chief Executive Officer

 

15

 

 

Income Opportunity Realty Investors, Inc. 10-Q

 

Exhibit 31.1

 

CERTIFICATION

 

I, Erik L. Johnson, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Income Opportunity Realty Investors, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

 

4.The registrant’s other certifying officers(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and

 

(d)Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officers(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: August 8, 2024 By: /s/ ERIK L. JOHNSON
    Erik L. Johnson
    President and Chief Executive Officer

 

 

 

 

Income Opportunity Realty Investors, Inc. 10-Q

 

Exhibit 31.2

 

CERTIFICATION

 

I, Alla Dzyuba, certify that:

 

1.I have reviewed this quarterly report on Form 10-Q of Income Opportunity Realty Investors, Inc.;

 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

 

4.The registrant’s other certifying officers(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and

 

(d)Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.The registrant’s other certifying officers(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Dated: August 8, 2024 By: /s/ ALLA DZYUBA
    Alla Dzyuba
    Vice President and Chief Accounting Officer

 

 

 

Income Opportunity Realty Investors, Inc. 10-Q

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

 

The undersigned officer of Income Opportunity Realty Investors, Inc., a Nevada corporation (the “Company”) hereby certifies that:

 

(i)The Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2024 fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended; and

 

(ii)The information contained in the Company’s Quarterly Report on Form 10-Q for the three months ended June 30, 2024 fairly presents in all material respects, the financial condition and results of operations of the Company, at and for the period indicated.

 

Dated: August 8, 2024 By: /s/ ERIK L. JOHNSON
    Erik L. Johnson
    President and Chief Executive Officer
     
    /s/ ALLA DZYUBA
    Alla Dzyuba
    Vice President and Chief Accounting Officer

 

 

v3.24.2.u1
Cover - shares
 6 Months Ended
Jun. 30, 2024
Aug. 08, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Jun. 30, 2024  
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 001-14784  
Entity Registrant Name INCOME OPPORTUNITY REALTY INVESTORS, INC.  
Entity Central Index Key 0000949961  
Entity Tax Identification Number 75-2615944  
Entity Incorporation, State or Country Code NV  
Entity Address, Address Line One 1603 Lyndon B. Johnson Freeway  
Entity Address, Address Line Two Suite 800  
Entity Address, City or Town Dallas  
Entity Address, State or Province TX  
Entity Address, Postal Zip Code 75234  
City Area Code (469)  
Local Phone Number 522-4200  
Title of 12(b) Security Common Stock  
Trading Symbol IOR  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   4,066,178
v3.24.2.u1
CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)
$ in Thousands
Jun. 30, 2024
Dec. 31, 2023
Current assets    
Cash and cash equivalents $ 16 $ 71
Interest receivable from related parties 326 293
Receivable from related parties 108,316 106,541
Total current assets 108,658 106,905
Non-current assets    
Notes receivable from related parties 11,173 11,173
Total assets 119,831 118,078
Shareholders’ equity    
Common stock, $0.01 par value, 10,000,000 shares authorized; 4,173,675 shares issued,  4,078,106 and 4,110,714 shares outstanding at June 30, 2024 and December 31, 2023, respectively. 42 42
Treasury stock at cost, 95,569 shares (1,534) (947)
Additional paid-in capital 61,955 61,955
Retained earnings 59,368 57,028
Total shareholders’ equity 119,831 118,078
Total liabilities and equity $ 119,831 $ 118,078
v3.24.2.u1
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares
Jun. 30, 2024
Dec. 31, 2023
Statement of Financial Position [Abstract]    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, authorized 10,000,000 10,000,000
Common stock, issued 4,173,675 4,173,675
Common stock, outstanding 4,078,106 4,110,714
Treasury stock 95,569 95,569
v3.24.2.u1
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Revenues:        
Other income
Expenses:        
General and administrative (including $11 and $44 for the three months ended June 30, 2024 and 2023, respectively, and $23 and $142 for the six months ended June 30, 2024 and 2023, respectively, from related parties) 93 76 159 294
Advisory fee to related party 21 380 50 699
Total operating expenses 114 456 209 993
Net operating loss (114) (456) (209) (993)
Interest income from related parties 1,585 2,778 3,171 4,644
Income tax provision (309) (488) (622) (767)
Net income $ 1,162 $ 1,834 $ 2,340 $ 2,884
Earnings per share - basic $ 0.28 $ 0.44 $ 0.57 $ 0.69
Earnings per share - diluted $ 0.28 $ 0.44 $ 0.57 $ 0.69
Weighted average common shares used in computing basic earnings per share 4,107,131 4,168,414 4,092,618 4,168,414
Weighted average common shares used in computing diluted earnings per share 4,107,131 4,168,414 4,092,618 4,168,414
v3.24.2.u1
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
General and administrative $ 93 $ 76 $ 159 $ 294
Related Party [Member]        
General and administrative $ 11 $ 44 $ 23 $ 142
v3.24.2.u1
CONSOLIDATED STATEMENT OF EQUITY (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock [Member]
Treasury Stock, Common [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Beginning balance, value at Dec. 31, 2022 $ 111,985 $ 42 $ (39) $ 61,955 $ 50,027
Net income 2,884 2,884
Ending balance, value at Jun. 30, 2023 114,869 42 (39) 61,955 52,911
Beginning balance, value at Mar. 31, 2023 113,035 42 (39) 61,955 51,077
Net income 1,834 1,834
Ending balance, value at Jun. 30, 2023 114,869 42 (39) 61,955 52,911
Beginning balance, value at Dec. 31, 2023 118,078 42 (947) 61,955 57,028
Net income 2,340 2,340
Repurchase of common shares (587) (587)
Ending balance, value at Jun. 30, 2024 119,831 42 (1,534) 61,955 59,368
Beginning balance, value at Mar. 31, 2024 118,669 42 (1,534) 61,955 58,206
Net income 1,162 1,162
Ending balance, value at Jun. 30, 2024 $ 119,831 $ 42 $ (1,534) $ 61,955 $ 59,368
v3.24.2.u1
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Cash Flow From Operating Activities:        
Net  income $ 1,162 $ 1,834 $ 2,340 $ 2,884
Changes in assets and liabilities:        
Accrued interest on related party notes receivable     (33) 11
Related party receivables     (1,775) (2,896)
Accounts payable     (3)
Net cash provided by (used in) operating activities     532 (4)
Cash Flow From Financing Activities:        
Repurchase of common shares     (587)
Net cash used in financing activities     (587)
Net decrease in cash and cash equivalents     (55) (4)
Cash and cash equivalents, beginning of the period     71 6
Cash and cash equivalents, end of the period $ 16 $ 2 $ 16 $ 2
v3.24.2.u1
Organization
 6 Months Ended
Jun. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Organization

 

1.Organization

 

Income Opportunity Investors, Inc. (the “Company”) is an externally managed company that invests in mortgage notes receivables. As used herein, the terms “IOR”, “the Company”, “We”, “Our”, or “Us” refer to the Company.

 

Transcontinental Realty Investors, Inc. (“TCI”), whose common stock is traded on the NYSE under the symbol “TCI”, owns 82.9% of our stock and with its affiliates owns approximately 89.5% of our common stock. Accordingly, our financial results are included in the consolidated financial statements of TCI’s in their Form 10-K and in their tax filings. American Realty Investors, Inc. (“ARL”), whose common stock is traded on the NYSE under the symbol “ARL”, in turn, owns approximately 78.4% of TCI.

 

Our business is managed by Pillar Income Asset Management, Inc. (“Pillar”) in accordance with an Advisory Agreement that is reviewed annually by our Board of Directors. Pillar is considered to be a related party (See Note 4 – Related Party Transactions).

 

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.
v3.24.2.u1
Summary of Significant Accounting Policies
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

 

2.Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.

 

The consolidated balance sheet at December 31, 2023 was derived from the audited consolidated financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

We consolidate entities in which we are considered to be the primary beneficiary of a variable interest entity (“VIE”) or have a majority of the voting interest of the entity. We have determined that we are a primary beneficiary of the VIE when we have (i) the power to direct the activities of a VIE that most significantly impacts its economic performance, and (ii) the obligations to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether we are the primary beneficiary, we consider qualitative and quantitative factors, including ownership interest, management representation, ability to control decision and other contractual rights.

 

We account for entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary under the equity method of accounting. Accordingly, we include our share of the net earnings or losses of these entities in our results of operations.
v3.24.2.u1
Notes Receivable
 6 Months Ended
Jun. 30, 2024
Receivables [Abstract]  
Notes Receivable

 

3.Notes Receivable

 

At January 1, 2023, we had four notes receivable issued by Unified Housing Foundation, Inc. (“UHF”) with an aggregate balance of $11,173. Each of the notes bore interest at 12.0% and was to mature on December 31, 2032.

 

On October 1, 2023, we amended the four UHF notes, whereby the four notes were consolidated into a single note and the 12.0% fixed interest rate was replaced with a floating rate indexed to the Secured Overnight Financing Rate (“SOFR”) in effect on the last day of the preceding calendar quarter. The maturity date of the new note is December 31, 2032. In connection with the amendment, $605 of accrued interest was forgiven in exchange for an increased participation in the proceeds from any future refinancing of the underlying property. The interest rate of the new note was 5.34% and 5.31% as of June 30, 2024 and December 31, 2023, respectively.

 

UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the note receivable. Principal and interest payments on the note are funded from surplus cash flow from operations, sale or refinancing of the underlying property and are cross collateralized to the extent that any surplus cash available from any of other property owned by UHF.
v3.24.2.u1
Related Party Transactions
 6 Months Ended
Jun. 30, 2024
Related Party Transactions [Abstract]  
Related Party Transactions

 

4.Related Party Transactions

 

We engage in certain business transactions with related parties, including investment in notes receivables. Transactions involving related parties cannot be presumed to be carried out on at arm’s length basis due to the absence of free market forces that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in our best interest.

 

Pillar is a wholly owned by a subsidiary of the May Realty Holdings, Inc., which owns approximately 90.8% of ARL, which owns approximately 78.4% of TCI, which owns 82.9% of the Company.

 

Advisory fees paid to Pillar were $21 and $380 for the three months ended June 30, 2024 and 2023, respectively, and $50 and $699 for the six months ended June 30, 2024 and 2023, respectively.

 

Notes receivable are amounts held by UHF (See Note 3 – Notes Receivable). UHF is determined to be a related party due to our significant investment in the performance of the collateral secured by the notes receivable. Interest income on these notes was $149 and $334 for the three months ended June 30, 2024 and 2023, respectively, and $299 and $665 for the six months ended June 30, 2024 and 2023, respectively.

 

Receivables from related parties were $108,316 and $106,541 at June 30, 2024 and December 31, 2023, respectively; which represents amounts outstanding advanced to Pillar net of unreimbursed fees (“Pillar Receivable”), which bears interest in accordance with a cash management agreement. On January 1, 2024, an amendment to the cash management agreement changed the interest rate on the Pillar Receivable from prime plus one percent to SOFR. Interest income on related party receivables was $1,436 and $2,444 for the three months ended June 30, 2024 and 2023, respectively, and $2,872 and $3,979 for the six months ended June 30, 2024 and 2023, respectively.
v3.24.2.u1
Stockholders’ Equity
 6 Months Ended
Jun. 30, 2024
Equity [Abstract]  
Stockholders’ Equity

 

5.Stockholders’ Equity

 

We have a stock repurchase program that allows for the repurchase of up to 1,650,000 shares of our common stock. This repurchase program has no termination date. During the six months ended June 30, 2024, we repurchased a total of 32,608 shares in two block transactions for a total of $587.

 

As of June 30, 2024, there are 524,931 shares remaining that can be repurchased.
v3.24.2.u1
Commitments and Contingencies
 6 Months Ended
Jun. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

 

6.Commitments and Contingencies

 

We believe that we will generate excess cash from property operations in the next twelve months; such excess, however, might not be sufficient to discharge all of our obligations as they become due.
v3.24.2.u1
Subsequent Events
 6 Months Ended
Jun. 30, 2024
Subsequent Events [Abstract]  
Subsequent Events

 

7.Subsequent Events

 

The date to which events occurring after June 30, 2024, the date of the most recent balance sheet, have been evaluated for possible adjustment to the consolidated financial statements or disclosure is August 8, 2024, which is the date on which the consolidated financial statements were available to be issued.
v3.24.2.u1
Summary of Significant Accounting Policies (Policies)
 6 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included.

 

The consolidated balance sheet at December 31, 2023 was derived from the audited consolidated financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

We consolidate entities in which we are considered to be the primary beneficiary of a variable interest entity (“VIE”) or have a majority of the voting interest of the entity. We have determined that we are a primary beneficiary of the VIE when we have (i) the power to direct the activities of a VIE that most significantly impacts its economic performance, and (ii) the obligations to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether we are the primary beneficiary, we consider qualitative and quantitative factors, including ownership interest, management representation, ability to control decision and other contractual rights.

 

We account for entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary under the equity method of accounting. Accordingly, we include our share of the net earnings or losses of these entities in our results of operations.
v3.24.2.u1
Organization (Details Narrative)
Jun. 30, 2024
Transcontinental Realty Investors, Inc [Member] | IOR [Member]  
Percentage of ownership 82.90%
Transcontinental Realty Investors, Inc. and Affiliates [Member] | IOR [Member] | Common Stock [Member]  
Percentage of ownership 89.50%
American Realty Investors, Inc. [Member] | Transcontinental Realty Investors, Inc. [Member]  
Percentage of ownership 78.40%
v3.24.2.u1
Notes Receivable (Details Narrative) - USD ($)
$ in Thousands
 12 Months Ended
Oct. 02, 2023
Dec. 31, 2022
Jun. 30, 2024
Dec. 31, 2023
Accounts, Notes, Loans and Financing Receivable [Line Items]        
Notes receivable from related parties     $ 11,173 $ 11,173
Unified Housing Foundation, Inc. [Member]        
Accounts, Notes, Loans and Financing Receivable [Line Items]        
Notes receivable from related parties   $ 11,173    
Fixed interest rate   12.00%    
Maturity date Dec. 31, 2032 Dec. 31, 2032    
Accrued Interest forgiven $ 605      
Interest rate     5.34% 5.31%
v3.24.2.u1
Related Party Transactions (Details Narrative) - USD ($)
$ in Thousands
 3 Months Ended 6 Months Ended
Jun. 30, 2024
Jun. 30, 2023
Jun. 30, 2024
Jun. 30, 2023
Dec. 31, 2023
Related Party Transaction [Line Items]          
Advisory fees paid $ 21 $ 380 $ 50 $ 699  
Interest income from related parties 1,585 2,778 3,171 4,644  
Related party receivables $ 108,316   $ 108,316   $ 106,541
May Realty Holdings, Inc. [Member] | American Realty Investors, Inc. [Member]          
Related Party Transaction [Line Items]          
Percentage of ownership 90.80%   90.80%    
American Realty Investors, Inc. [Member] | Transcontinental Realty Investors, Inc. [Member]          
Related Party Transaction [Line Items]          
Percentage of ownership 78.40%   78.40%    
Transcontinental Realty Investors, Inc [Member] | IOR [Member]          
Related Party Transaction [Line Items]          
Percentage of ownership 82.90%   82.90%    
Pillar [Member]          
Related Party Transaction [Line Items]          
Advisory fees paid $ 21 380 $ 50 699  
Interest income from related parties 1,436 2,444 2,872 3,979  
Related party receivables 108,316   108,316   $ 106,541
Unified Housing Foundation, Inc. [Member]          
Related Party Transaction [Line Items]          
Interest income from related parties $ 149 $ 334 $ 299 $ 665  
v3.24.2.u1
Stockholders’ Equity (Details Narrative)
$ in Thousands
 6 Months Ended
Jun. 30, 2024
USD ($)
shares
Equity [Abstract]  
Common stock repurchase limit 1,650,000
Common stock repurchased 32,608
Common stock repurchased, value | $ $ 587
Remaining shares for repurchase 524,931
Income Opportunity Realt... (AMEX:IOR)
Graphique Historique de l'Action
De Nov 2024 à Déc 2024 Plus de graphiques de la Bourse Income Opportunity Realt...
Income Opportunity Realt... (AMEX:IOR)
Graphique Historique de l'Action
De Déc 2023 à Déc 2024 Plus de graphiques de la Bourse Income Opportunity Realt...