Transcontinental Realty Investors, Inc. (NYSE: TCI), a
Dallas-based real estate investment company, today reported results
of operations for the third quarter ended September 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 nine months ended September 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 nine 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 $113
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 September 30, 2017, we reported a net
income applicable to common shares of $6.9 million or $0.79 per
diluted share, compared to a net loss applicable to common shares
of $4.8 million or $0.55 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 $31.5 million for the
three months ended September 30, 2017. This represents an increase
of $1.7 million compared to the prior period revenues of $29.8
million. The change by segment is an increase of $0.8 million in
each of the apartment and commercial portfolios and an increase of
$0.1 million in the land portfolio. We purchased three and sold one
multifamily property over the prior year which resulted in a net
increase of 103 units and was the primary reason for the increase
in revenues for our apartment portfolio.
Expense
Property operating expenses were $15.2 million for the three
months ended September 30, 2017. This represents a decrease of $0.2
million compared to the prior period operating expenses of $15.4
million. The change by segment was decreases of $0.2 million and
$0.1 million in the commercial and land portfolios, respectively,
partially offset by an increase of $0.1 million in the other
portfolio.
Depreciation and amortization expense was $6.3 million for the
three months ended September 30, 2017, an increase of $0.3 million
compared to the prior period expense of $6.0 million. The increase
is primarily attributable to the acquired apartment properties.
Other income (expense)
Mortgage and loan interest expense was $14.2 million for the
three months ended September 30, 2017. This represents an increase
of $0.7 million compared to the prior period expense of $13.6
million. Interest expense for our corporate loans increased $1.8
million, primarily due to interest expense related to the Israeli
Series A Bonds payable of $2.6 million for the third quarter of
2017, partially offset by a decrease of $0.6 million in interest
expense as a result of a $17.8 million pay down on a corporate loan
at the end of the second quarter of 2017. We also had an increase
of $0.2 million in our commercial portfolio, due to securing
additional debt obligation with the refinancing of one of our
commercial loans. These increases were partially offset by a
decrease of $1.3 million in interest expense on our apartment
portfolio, due to a loan prepayment penalty paid in the third
quarter of 2016 for refinancing of a loan.
A subsidiary of the Company issued $113 million in bonds during
2017 that will be repaid in Israeli shekels as the bonds mature.
During the three months ended September 30, 2017, the Company
recorded an unrealized foreign currency transaction gain of $1.9
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
September 30, 2016.
Gain on sale of income-producing properties was $9.8 million for
the three months ended September 30, 2017, due to recognition of
deferred gain from property sales of two apartment communities in a
prior year. There were no sales of income-producing properties
during the three months ended September 30, 2017 and 2016.
Gain on land sales was $0.5 million during the three months
ended September 30, 2017 compared to $0.6 million for the three
months ended September 30, 2016. In the current period, we sold 3.3
acres of land for a total sales price of $0.9 million and recorded
a gain of $0.5 million. During the same period of 2016, we sold 4.8
acres of land for a sales price of $0.8 million and recorded a gain
of $0.6 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 EndedSeptember
30,
Nine Months EndedSeptember
30,
2017 2016 2017
2016 Revenues: Rental and other property
revenues (including $199 and $174 for the three months and $589 and
$521 for the nine months ended 2017 and 2016, respectively, from
related parties) $ 31,491 $ 29,776 $ 94,328 $ 89,200
Expenses: Property operating expenses (including $236 and
$221 for the three months and $696 and $644 for the nine months
ended 2017 and 2016, respectively, from related parties) 15,157
15,413 46,256 45,295 Depreciation and amortization 6,326 6,014
19,008 17,665 General and administrative (including $1,018 and $753
for the three months and $2,134 and $1,501 for the nine months
ended 2017 and 2016, respectively, from related parties) 1,594
1,541 4,669 4,754 Net income fee to related party 53 67 189 193
Advisory fee to related party 2,595 2,394
7,402 7,096 Total operating
expenses 25,725 25,429 77,524
75,003 Net operating income 5,766 4,347 16,804
14,197
Other income (expenses): Interest income
(including $3,041 and $4,249 for the three months and $10,670 and
$10,269 for the nine months ended 2017 and 2016, respectively, from
related parties) 3,175 4,251 10,305 11,386 Other income 190 8 1,529
1,178 Mortgage and loan interest (including $283 and $212 for the
three months and $784 and $437 for the nine months ended 2017 and
2016, respectively, from related parties) (14,245 ) (13,568 )
(45,218 ) (38,826 ) Earnings (losses) from unconsolidated joint
ventures and investees 7 - (11 ) (2 ) Foreign currency transaction
gain (loss) 1,906 - (1,841 )
- Total other expenses (8,967 ) (9,309
) (35,236 ) (26,264 ) Loss before gain on sale of
income-producing properties, gain on land sales, non-controlling
interest, and taxes (3,201 ) (4,962 ) (18,432 ) (12,067 )
Gain on sale of income-producing properties 9,841 - 9,841 4,925
Gain on land sales 530 555
500 3,925 Net income (loss) from
continuing operations before taxes 7,170 (4,407 ) (8,091 ) (3,217 )
Income tax expense - (25 ) -
(24 ) Net income (loss) from continuing operations 7,170
(4,432 ) (8,091 ) (3,241 ) Discontinued operations: Net income from
discontinued operations - - - 3 Income tax expense from
discontinued operations - - -
(1 ) Net income from discontinued operations -
- - 2 Net income
(loss) 7,170 (4,432 ) (8,091 ) (3,239 ) Net income attributable to
non-controlling interest (96 ) (114 ) (378 )
(189 ) Net income (loss) attributable to Transcontinental
Realty Investors, Inc. 7,074 (4,546 ) (8,469 ) (3,428 ) Preferred
dividend requirement (224 ) (227 ) (670 )
(673 ) Net income (loss) applicable to common shares $ 6,850
$ (4,773 ) $ (9,139 ) $ (4,101 )
Earnings per
share - basic Net income (loss) applicable to common shares $
0.79 $ (0.55 ) $ (1.05 ) $ (0.47 )
Earnings per
share - diluted Net income (loss) applicable to common shares $
0.79 $ (0.55 ) $ (1.05 ) $ (0.47 ) 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 $ 7,074 $ (4,546 ) $ (8,469 ) $ (3,430 ) Net
income from discontinued operations - -
- 2 Net income (loss) $ 7,074 $
(4,546 ) $ (8,469 ) $ (3,428 )
TRANSCONTINENTAL REALTY INVESTORS, INC. CONSOLIDATED
BALANCE SHEETS September 30, December 31,
2017 2016 (unaudited) (dollars in
thousands, except share and par value amounts) Assets
Real estate, at cost $ 1,054,884 $ 998,498 Real estate subject to
sales contracts at cost, net of depreciation 46,403 46,956 Less
accumulated depreciation (172,352 ) (154,281 ) Total
real estate 928,935 891,173 Notes and interest receivable:
Performing (including $45,658 in 2017 and $67,912 in 2016 from
related parties) 64,523 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 62,698
79,308 Cash and cash equivalents 57,978 17,506 Restricted cash
42,752 38,227 Investments in unconsolidated joint ventures and
investees 2,435 2,446 Receivable from related party 107,696 101,649
Other assets 48,233 55,605 Total assets
$ 1,250,727 $ 1,185,914
Liabilities and
Shareholders’ Equity Liabilities: Notes and interest payable $
826,050 $ 835,528 Notes related to real estate held for sale 376
376 Notes related to real estate subject to sales contracts 3,939
5,612 Bond and bond interest payable 107,910 - Deferred revenue
(including $40,877 in 2017 and $50,689 in 2016 to related parties)
60,940 71,065 Accounts payable and other liabilities (including
$7,072 in 2017 and $6,487 in 2016 to related parties) 35,796
48,856 Total liabilities 1,035,011 961,437
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 269,179 269,849 Retained earnings (72,519 )
(64,050 ) Total Transcontinental Realty Investors, Inc.
shareholders' equity 196,746 205,885 Non-controlling interest
18,970 18,592 Total shareholders'
equity 215,716 224,477 Total
liabilities and shareholders' equity $ 1,250,727 $ 1,185,914
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version on businesswire.com: http://www.businesswire.com/news/home/20171114006744/en/
Transcontinental Realty Investors, Inc.Investor
RelationsGene Bertcher,
800-400-6407investor.relations@transconrealty-invest.com
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