UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act

Date of Report (Date of earliest event reported): July 13, 2021                                                            

TRANSCONTINENTAL REALTY INVESTORS, INC.

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code 469-522-4200                                                                   

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.

[  ]

Section 8 - Other Events

Item 8.01. Other Events

On July 13, 2021, Transcontinental Realty Investors, Inc. (“TCI” or the “Company”) and its subsidiary, Southern Properties Capital Ltd., a British Virgin Islands company (“SPC”), received an arbitration result involving a dispute between SPC and the Macquarie Group (“Macquarie”) in connection with the formation of a joint venture between Macquarie and SPC, named Victory Abode Apartments LLC (“VAA”), concerning the settling of certain accounts under the joint venture agreement.

VAA was formed on November 19, 2018 upon the sale and transfer from SPC to Macquarie of a 50% ownership interest in 52 multifamily properties (collectively, the “VAA Portfolio”), under which VAA also assumed all liabilities of the VAA Portfolio. SPC and TCI account for the investment in VAA under the equity method. In connection with the formation of VAA, ten out of the 52 properties are subject to an earn-out provision that provides for a remeasurement of value after a two-year period following the completion of construction. As of March 31, 2021, SPC recorded a liability of $10.0 million, which it believed to be the amount that would be required to settle the obligation (“Earn Out Obligation”).

Macquarie and SPC were unable to reach agreement on the measurement of the Earn Out Obligation and, therefore, submitted the issue to arbitration in accordance with a provision of the joint venture agreement, Following presentation by both parties, SPC’s position and claims were declined, and the position of Macquarie was fully accepted. As a result, SPC expects to be required to pay approximately $39.6 million to Macquarie to satisfy the Earn Out Obligation. SPC and counsel are reviewing the arbitration result and determining next steps.

The joint venture agreement provides that SPC may settle the Earn Out Obligation by a continual offset (payment to Macquarie) of future distributions from VAA which generally occur each six months to both members.

As a result, SPC expects to take approximately a $29.6 million charge for the quarter ended June 30, 2021. SPC has issues of debentures outstanding and listed on the Tel Aviv Stock Exchange (“TASE”) and is accordingly subject to the rules of the TASE and the Israel Securities Authority. In satisfaction of those requirements, on July 15, 2021, SPC issued an “immediate report,” a copy of the English version of which is attached as an exhibit to this report.

Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits

(d)       Exhibits.

The following exhibit is furnished with this Report:

                    Exhibit No. Description

_________________________

* Furnished herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned, hereunto duly authorized.