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, 2019. For the
three months ended June 30, 2019, we reported net loss applicable
to common shares of $6.3 million or ($0.73) per diluted loss per
share compared to a net income applicable to common shares of $7.0
million or ($0.81) per share for the same period ended 2018.
We would like to take a brief moment to share with you our
recent successes for TCI and affiliated Companies and thank you for
your steadfast dedication to the company.
2018 and 2019 have been met with unprecedented expansion and
repositioning for Pillar, TCI, SPC, and affiliated Companies. We
ended 2018 with our largest and most strategic transactions, the
newly created subsidiary Victory Abode Apartments, LLC (“VAA”)
Joint Venture and Bond Series B raised on the Tel Aviv Stock
Exchange. In 2019, the company recently raised an additional $78
million bond series C on the Tel Aviv Stock Exchange. This expanded
offering creates additional financial strength to our already
thriving organization. With these existing and newly engaged
projects and our continuously burgeoning multifamily asset base, we
are committed to the continued growth and education of our
staff.
The JV’s primary focus is to create a business platform that
will allow dramatic expansion in the multifamily arena. The intent
is to increase the overall size of the portfolio over the next
several years through strategic buildout of its robust development
pipeline alongside opportunistic acquisitions.
All of these initiatives further demonstrate our ability to
increase shareholder value, aligning with the strategic direction
we announced three years ago. Our company has been dramatically
transformed to a highly viable operating company with solid
development capabilities in the multifamily arena. Our main goal
has always been to act in the best interest of the company and
protect asset value for its investors. We continue to invest in new
development projects and grow the company’s asset base.
Revenues
Rental and other property revenues were $11.8 million for the
three months ended June 30, 2019, compared to $31.6 million for the
same period in 2018. The $19.8 million decrease is primarily due to
a decrease in the amount of multifamily residential apartment
buildings currently in our portfolio of nine as compared to
fifty-three multifamily residential apartment buildings for the
same period a year ago as a result of the deconsolidation of
forty-nine residential apartment properties that were sold into the
VAA Joint Venture during the fourth quarter of 2018. As the assets
are now treated as unconsolidated investments, our share of rental
revenues is part of income from unconsolidated investments in the
current period and are no longer treated as rental income.
Expenses
Property operating expenses decreased by $8.2 million to $7.3
million for the three months ended June 30, 2019 as compared to
$15.5 million for the same period in 2018. The decrease in property
operating expenses is primarily due to the deconsolidation of
forty-nine residential apartment properties that were sold into the
VAA Joint Venture during the fourth quarter of 2018 which resulted
in a decrease in salary and related payroll expenses of $1.8
million, real estate taxes of approximately $2.4 million,
management fees paid to third parties of $0.7 million, and other
general property operating and maintenance expenses of $3.3
million.
Depreciation and amortization decreased by $3.1 million to $3.4
million during the three months ended June 30, 2019 as compared to
$6.5 million for the three months ended June 30, 2018. This
decrease is primarily due to the deconsolidation of the residential
apartments in connection with our previous sale and contribution of
our interests to the VAA Joint Venture.
General and administrative expense was $3.3 million for the
three months ended June 30, 2019 and $2.2 million for the same
period in 2018. The increase of $1.1 million in general and
administrative expenses is due primarily to increases in fees paid
to our Advisors of $0.9 million and professional fees of $0.2
million.
Other income (expense)
Interest income was $4.9 million for the three months ended June
30, 2019, compared to $3.5 million for the same period in 2018. The
increase of $1.4 million was due primarily to an increase of $1.3
million in interest on the receivables owed by our Advisors.
Other income was $0.7 million for the three months ended June
30, 2019, compared to $7.5 million for the same period in 2018. The
decrease of $6.8 million was due primarily to cash proceeds of $0.2
million received during the quarter ended June 30, 2019, from the
collection of tax increment incentives related to infrastructure
development work at Mercer Crossing, located in Farmers Branch,
Texas, and other miscellaneous income of $0.5 million, compared to
insurance proceeds received during the second quarter of 2018 of
approximately $6.6 million as a result of damages caused by a
hurricane to one of our properties that was subsequently sold
during the same quarter.
Mortgage and loan interest expense was $7.6 million for the
three months ended June 30, 2019 as compared to $14.2 million for
the same period in 2018. The decrease of $6.6 million is due to the
deconsolidation of residential apartment properties into the VAA
Joint Venture which were encumbered by mortgage debt.
Foreign currency transaction was a loss of $2.3 million for the
three months ended June 30, 2019 as compared to a gain of $5.9
million for the same period in 2018. The foreign currency loss is
due primarily to a decrease in the exchange rate of our Israel New
Shekels (NIS) denominated corporate bonds registered on the
Tel-Aviv Stock Exchange. The exchange rate of the NIS to USD went
from 3.63 at the beginning of the second quarter to an exchange
rate of 3.58 at June 30, 2019. As of June 30, 2019, we have
outstanding bonds of $159.4 million (or NIS 570 million) and
accrued interest payable of approximately $2.8 million (or NIS 10.1
million).
Loss from unconsolidated investments was a net of $0.2 million
for the three months ended June 30, 2019 as compared to a loss of
$0.009 million for the three months ended June 30, 2018. The loss
from unconsolidated investments during the second quarter just
ended was driven primarily from our share in the losses reported by
our VAA Joint Venture of $0.2 million.
Loss from the sale of income-producing property increased for
the three months ended June 30, 2019 as compared to the prior
period. In the current period, we sold a multifamily residential
property, located in Mary Ester, Florida for a sales price of $3.1
million and recorded a loss of $0.08 million. There were no
apartment sales for the three months ended June 30, 2018.
Gain on land sales increased for the three months ended June 30,
2019 as compared to the prior period. In the current period, we
sold 41.6 acres of land for an aggregate sales price of $7.6
million and recorded a gain of $2.1 million. There were no land
sales for the three months ended June 30, 2018.
About Transcontinental Realty Investors, Inc.
Transcontinental Realty Investors, Inc., a Dallas-based real
estate investment company, holds a diverse portfolio of equity real
estate located across the U.S., including apartments, office
buildings, shopping centers, and developed and undeveloped land.
The Company invests in real estate through direct ownership, leases
and partnerships and invests in mortgage loans on real estate. For
more information, visit the Company’s website at
www.transconrealty-invest.com.
TRANSCONTINENTAL REALTY
INVESTORS, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
(dollars in thousands, except
per share amounts)
Revenues:
Rental and other property revenues (including $203 and $208 for the
three months and $413 and $415 for the six months ended 2019 and
2018, respectively, from related parties)
$
11,840
$
31,607
$
23,769
$
62,689
Expenses:
Property operating expenses (including $246 and $231 for the three
months ended and $504 and 458 for the six months ended 2019 and
2018, respectively, from related parties)
7,322
15,492
13,319
29,947
Depreciation and amortization
3,439
6,522
6,548
12,968
General and administrative (including $919 and $1,187 for the three
months ended and $2,420 and $2,280 for the six months ended 2019
and 2018, respectively, from related parties)
3,334
2,173
5,662
4,365
Net income fee to related party
90
53
190
106
Advisory fee to related party
1,035
2,726
2,683
5,474
Total operating expenses
15,220
26,966
28,402
52,860
Net operating (loss) income
(3,380
)
4,641
(4,633
)
9,829
Other income (expenses):
Interest income (including $4,580 and $3,486 for the three months
ended and $8,892 and $6,722 for the six months ended 2019 and 2018,
respectively, from related parties)
4,878
3,544
9,436
7,420
Other income
688
7,482
4,580
9,308
Mortgage and loan interest (including $513 and $327 for the three
months ended and $1,003 and $645 for the six months ended 2019 and
2018, respectively, from related parties)
(7,646
)
(14,175
)
(15,605
)
(28,268
)
Foreign currency transaction (loss) gain
(2,325
)
5,889
(8,143
)
7,645
Equity loss from VAA
(236
)
-
(1,291
)
-
Earnings (losses) from other unconsolidated investees
2
(9
)
(5
)
2
Total other (expenses) income
(4,639
)
2,731
(11,028
)
(3,893
)
(Loss) income before gain on land sales, non-controlling interest,
and taxes
(8,019
)
7,372
(15,661
)
5,936
Loss on sale of income producing properties
(80
)
-
(80
)
-
Gain on land sales
2,133
-
4,349
1,335
Net (loss) income from continuing operations before taxes
(5,966
)
7,372
(11,392
)
7,271
Net (loss) income from continuing operations
(5,966
)
7,372
(11,392
)
7,271
Net (loss) income
(5,966
)
7,372
(11,392
)
7,271
Net (income) attributable to non-controlling interest
(379
)
(126
)
(562
)
(258
)
Net (loss) income attributable to Transcontinental Realty
Investors, Inc.
(6,345
)
7,246
(11,954
)
7,013
Preferred dividend requirement
-
(224
)
-
(446
)
Net (loss) income applicable to common shares
$
(6,345
)
$
7,022
$
(11,954
)
$
6,567
(Loss) earnings per share -
basic
Net (loss) income from continuing operations
$
(0.73
)
$
0.81
$
(1.37
)
$
0.75
Net (loss) income applicable to common shares
$
(0.73
)
$
0.81
$
(1.37
)
$
0.75
(Loss) earnings per share -
diluted
Net (loss) income from continuing operations
$
(0.73
)
$
0.81
$
(1.37
)
$
0.75
Net (loss) income applicable to common shares
$
(0.73
)
$
0.81
$
(1.37
)
$
0.75
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 (loss) income from continuing operations
$
(6,345
)
$
7,246
$
(11,954
)
$
7,013
Net (loss) income applicable to Transcontinental Realty, Investors,
Inc.
$
(6,345
)
$
7,246
$
(11,954
)
$
7,013
TRANSCONTINENTAL REALTY
INVESTORS, INC.
CONSOLIDATED BALANCE
SHEETS
June 30,
December 31,
2019
2018
(unaudited)
(audited)
(dollars in thousands, except
share and par value amounts)
Assets
Real estate, at cost
$
454,350
$
461,718
Real estate subject to sales contracts at
cost
1,626
2,014
Real estate held for sale at cost, net of
depreciation
14,737
-
Less accumulated depreciation
(84,213
)
(79,228
)
Total real estate
386,500
384,504
Notes and interest receivable (including
$68,687 in 2019 and $51,945 in 2018 from related parties)
116,864
83,541
Cash and cash equivalents
37,579
36,358
Restricted cash
44,602
70,207
Investment in VAA
67,078
68,399
Investment in other unconsolidated
investees
22,167
22,172
Receivable from related party
125,430
133,642
Other assets
53,667
63,557
Total assets
$
853,887
$
862,380
Liabilities and Shareholders’
Equity
Liabilities:
Notes and interest payable
$
283,780
$
277,237
Bonds and bond interest payable
157,328
158,574
Deferred revenue (including $13,837 in
2019 and $17,522 in 2018 to related parties)
13,837
17,522
Deferred tax liability
2,000
2,000
Accounts payable and other liabilities
(including $931 in 2019 and $3 in 2018 to related parties)
28,045
26,646
Total liabilities
484,990
481,979
Shareholders’ equity:
Common stock, $0.01 par value, authorized
10,000,000 shares; issued 8,717,967 shares in 2019 and 2018;
outstanding 8,717,767 shares in 2019 and 2018
87
87
Treasury stock at cost, 200 shares in 2019
and 2018
(2
)
(2
)
Paid-in capital
257,938
258,050
Retained earnings
89,631
101,585
Total Transcontinental Realty Investors,
Inc. shareholders' equity
347,654
359,720
Non-controlling interest
21,243
20,681
Total shareholders' equity
368,897
380,401
Total liabilities and shareholders'
equity
$
853,887
$
862,380
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190814005772/en/
Transcontinental Realty Investors, Inc. Investor
Relations Michele Rougon (800) 400-6407
investor.relations@transconrealty-invest.com
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