Transcontinental Realty Investors, Inc. (NYSE: TCI), a
Dallas-based real estate investment company, today reported results
of operations for the second quarter ended June 30, 2017. The
reported results are directly related to the strategic initiative
we embraced at the onset of the year to grow our multi-family
apartment base through Abode Properties, our wholly owned
subsidiary.
The growth in revenue and corresponding improvement in Net
Operating Income for the six months ended June 30, 2017
demonstrates the viability of our business strategy. Management
will continue its plan for growth from its operating properties and
expects to reinvest in areas that will complement this growth;
further, management will maintain strong attention to all details
of its operations including appropriate expense controls.
During the six months ended June 30, 2017 a subsidiary of the
Company sold bonds on the Tel Aviv, Israel stock exchange. The
bonds will over time be repaid in Israeli shekels; however, upon
sale the cash received was converted into approximately $102
million US dollars. The cash has been and will be used to pay off
more expensive debt, purchase existing assets, and develop new
multifamily housing projects. The company believes that this new
source of cash will have a substantial positive impact on the
ability of the company to grow as well as pay off relative
expensive shorter term debt that will more than offset the
additional net interest expense.
The bonds will be repaid in Israeli Shekels as the bonds mature
at a rate of 20% each year from 2019 through 2023. Until such
actual payments are made, there will not be any significant need to
convert US dollars to Israeli shekels. The Company records
unrealized gains or losses each quarter based upon the relative
exchange values of the US dollar and the Israeli shekel; however,
no gain or loss will be realized until a conversion from US dollars
to Israeli shekels actually occurs in the future. The recorded
unrealized gain or loss is reflected as a separate line item to
highlight the fact that it is a non-cash transaction until such
time as actual payment of principal and interest on the bonds is
made.
For the three months ended June 30, 2017, we reported a net loss
applicable to common shares of $10.6 million or ($1.22) per diluted
loss per share compared to a net income applicable to common shares
of $4.4 million or $0.51 per diluted income per share for the same
period ended 2016. This is directly related to the increased
borrowing and we remain highly certain that dramatic additions to
the number of apartments within the portfolio during this strategic
growth period will ultimately enhance shareholder values, even
beyond the recent improvements we have experienced since we
announced this approach in Q4 2016.
The reported financial results are as follows.
Revenues
Rental and other property revenues were $31.3 million for the
three months ended June 30, 2017. This represents an increase of
$0.8 million compared to the prior period revenues of $30.5
million. The change by segment is an increase in the apartment
portfolio of approximately $1.2 million, partially offset by a
decrease in the commercial portfolio of $0.4 million. We purchased
four and sold two multifamily properties over the prior year which
resulted in a net increase of 203 units and was the primary reason
for the increase in our apartment portfolio revenues.
Expense
Property operating expenses were $15.2 million for the three
months ended June 30, 2017. This represents an increase of $0.3
million compared to the prior period operating expenses of $14.9
million. The change by segment was an increase in the other
portfolio of $0.2 million and an increase in the commercial
portfolio of $0.1 million.
Depreciation and amortization expense was $6.3 million for the
three months ended June 30, 2017 for an increase of $0.5 million as
compared to the prior period expense of $5.8 million. The change is
attributable to the depreciation on acquired apartments.
Other income (expense)
Mortgage and loan interest expense was $15.8 million for the
three months ended June 30, 2017. This represents an increase of
$3.7 million compared to the prior period expense of $12.1 million.
Interest expense for our corporate loans increased $4.5 million,
primarily due to interest expense related to the Israeli Series A
Bonds payable of $2.3 million, interest of $1.4 million on two
corporate loans that closed in 2016 and an increase of $0.7 million
in loan fee expense due to prepayment of a corporate loan during
2017. We also had an increase in our commercial portfolio of $0.4
million. These increases were partially offset by a decrease of
$1.1 million in interest expense on our apartment portfolio due to
loan prepayment penalties paid during the first three months of
2016 that exceeded the increase in interest expense that resulted
from the growth in our apartment portfolio.
A subsidiary of the Company issued $104.5 million in bonds
during 2017 that will be repaid in Israeli Shekels as the bonds
mature. During the three months ended June 30, 2017, the Company
recorded an unrealized foreign currency transaction loss of $3.4
million based upon the relative exchange values of the US dollar
and the Israeli shekel as applied to the bond principal and accrued
interest at quarter-end. We did not have any unrealized foreign
currency transaction gain or loss during the three months ended
June 30, 2016.
Gain on sale of income-producing properties was $5.2 million for
the three months ended June 30, 2016. The Company sold one
apartment community located in Irving, Texas to an independent
third party for a total sales price of $8.1 million which resulted
in a gain of $5.2 million. There were no sales of income-producing
properties during the three months ended June 30, 2017.
During the second quarter of 2017, we recorded a loss on land
sales of $0.5 million from the sale of two parcels totaling 8.3
acres for an aggregate sales price of $0.5 million. During the same
period of 2016, we recorded a gain on land sales of $1.7 million
for the sale of 12.2 acres of land for a total sales price of $3.1
million.
About Transcontinental Realty Investors, Inc.
Transcontinental Realty Investors
(www.transconrealty-invest.com) maintains a strong emphasis on
creating greater shareholder value through acquisition, financing,
operation, developing and the selective sale of real estate across
selective geographic regions in the United States. A New York Stock
Exchange company, Transcontinental is traded under the symbol
“TCI”. Transcontinental produces revenue through the professional
management of apartments, office buildings and select parcels of
land that can be readily developed in the near term. Value is added
under Transcontinental ownership, and the properties are
repositioned into higher classifications through physical
improvements and improved management. Transcontinental also
develops new properties, such as luxury apartment homes principally
on land it owns or acquires.
TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months EndedJune
30,
Six Months EndedJune 30,
2017 2016 2017
2016 Revenues: Rental and other property
revenues (including $199 and $174 for the three months and $389 and
$347 for the six months ended 2017 and 2016, respectively, from
related parties) $ 31,302 $ 30,521 $ 62,837 $ 59,424
Expenses: Property operating expenses (including $232 and
$223 for the three months and $460 and $423 for the six months
ended 2017 and 2016, respectively, from related parties) 15,210
14,919 31,099 29,882 Depreciation and amortization 6,378 5,843
12,681 11,651 General and administrative (including $558 and $753
for the three months and $1,072 and $1,502 for the six months ended
2017 and 2016, respectively, from related parties) 1,295 1,604
3,075 3,213 Net income fee to related party 76 54 136 126 Advisory
fee to related party 2,501 2,331
4,806 4,702 Total operating expenses
25,460 24,751 51,797
49,574 Net operating income 5,842 5,770 11,040 9,850
Other income (expenses):
Interest income (including $3,070 and
$3,274 for the three months and $6,502 and $6,008 for the six
months ended 2017 and 2016, respectively, from related parties)
3,709 3,289 7,130 7,136 Other income (expense) (104 ) 902 1,338
1,169
Mortgage and loan interest (including $283
and $165 for the three months and $836 and $627 for the six months
ended 2017 and 2016, respectively, from related parties)
(15,783 ) (12,092 ) (30,973 ) (25,258 ) Losses from unconsolidated
joint ventures and investees (10 ) - (18 ) (2 ) Foreign currency
transaction loss (3,425 ) - (3,748 )
- Total other expenses (15,613 ) (7,901
) (26,271 ) (16,955 ) Loss before gain on sale of
income-producing properties, gain (loss) on land sales,
non-controlling interest, and taxes (9,771 ) (2,131 ) (15,231 )
(7,105 ) Gain on sale of income-producing properties - 5,168
- 4,925 Gain (loss) on land sales (476 ) 1,719
(31 ) 3,370 Net income (loss) from continuing
operations before taxes (10,247 ) 4,756 (15,262 ) 1,190 Income tax
benefit - - - 1
Net income (loss) from continuing operations (10,247 ) 4,756
(15,262 ) 1,191 Discontinued operations: Net income from
discontinued operations - - - 3 Income tax expense from
discontinued operations - - -
(1 ) Net income from discontinued operations -
- - 2 Net income
(loss) (10,247 ) 4,756 (15,262 ) 1,193 Net income attributable to
non-controlling interest (163 ) (97 ) (282 )
(74 ) Net income (loss) attributable to Transcontinental
Realty Investors, Inc. (10,410 ) 4,659 (15,544 ) 1,119 Preferred
dividend requirement (224 ) (224 ) (446 )
(446 ) Net income (loss) applicable to common shares $
(10,634 ) $ 4,435 $ (15,990 ) $ 673
Earnings per share - basic Net income (loss) from continuing
operations $ (1.22 ) $ 0.51 $ (1.83 ) $ 0.08 Net income from
discontinued operations - - -
- Net income (loss) applicable to common
shares $ (1.22 ) $ 0.51 $ (1.83 ) $ 0.08
Earnings per share - diluted Net income (loss) from
continuing operations $ (1.22 ) $ 0.51 $ (1.83 ) $ 0.08
Net income (loss) applicable to common shares $ (1.22 ) $
0.51 $ (1.83 ) $ 0.08 Weighted average common
shares used in computing earnings per share 8,717,767 8,717,767
8,717,767 8,717,767 Weighted average common shares used in
computing diluted earnings per share 8,717,767 8,717,767 8,717,767
8,717,767
Amounts attributable to Transcontinental
Realty Investors, Inc. Net income (loss) from continuing
operations $ (10,410 ) $ 4,659 $ (15,544 ) $ 1,117 Net income from
discontinued operations - - -
2 Net income (loss) $ (10,410 ) $ 4,659
$ (15,544 ) $ 1,119
TRANSCONTINENTAL REALTY
INVESTORS, INC. CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2017 2016 (unaudited) (dollars in
thousands, except share and par value amounts) Assets
Real estate, at cost $ 1,040,761 $ 998,498 Real estate subject to
sales contracts at cost, net of depreciation 46,403 46,956 Less
accumulated depreciation (166,335 ) (154,281 ) Total
real estate 920,829 891,173 Notes and interest receivable:
Performing (including $60,821 in 2017 and $67,829 in 2016 from
related parties) 80,693 81,133 Less allowance for doubtful accounts
(including $1,825 in 2017 and 2016 from related parties)
(1,825 ) (1,825 ) Total notes and interest receivable 78,868
79,308 Cash and cash equivalents 59,034 17,506 Restricted cash
37,436 38,227 Investments in unconsolidated joint ventures and
investees 2,428 2,446 Receivable from related party 86,849 101,649
Other assets 64,647 55,605 Total assets
$ 1,250,091 $ 1,185,914
Liabilities and
Shareholders’ Equity Liabilities: Notes and interest payable $
819,395 $ 835,528 Notes related to real estate held for sale 376
376 Notes related to real estate subject to sales contracts 4,012
5,612 Bond and bond interest payable 104,505 - Deferred revenue
(including $50,669 in 2017 and $50,669 in 2016 to related parties)
70,771 71,065 Accounts payable and other liabilities (including
$6,667 in 2017 and $6,060 in 2016 to related parties) 42,263
48,856 Total liabilities 1,041,322 961,437
Shareholders’ equity:
Preferred stock, Series C: $0.01 par value, authorized 10,000,000
shares; issued and outstanding zero shares in 2017 and 2016. Series
D: $0.01 par value, authorized, issued and outstanding 100,000
shares in 2017 and 2016 (liquidation preference $100 per share) 1 1
Common stock, $0.01 par value, authorized 10,000,000 shares; issued
8,717,967 shares in 2017 and 2016; outstanding 8,717,767 shares in
2017 and 2016 87 87 Treasury stock at cost, 200 shares in 2017 and
2016 (2 ) (2 ) Paid-in capital 269,403 269,849 Retained earnings
(79,594 ) (64,050 ) Total Transcontinental Realty
Investors, Inc. shareholders' equity 189,895 205,885
Non-controlling interest 18,874 18,592
Total shareholders' equity 208,769 224,477
Total liabilities and shareholders' equity $ 1,250,091
$ 1,185,914
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version on businesswire.com: http://www.businesswire.com/news/home/20170814006003/en/
Transcontinental Realty Investors, Inc.Investor
RelationsGene Bertcher,
800-400-6407investor.relations@transconrealty-invest.com
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