Transcontinental Realty Investors Inc. 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.