Transcontinental Realty Investors, Inc. (NYSE: TCI), a
Dallas-based real estate investment company, today reported results
of operations for the second quarter ended September 30, 2019. For
the three months ended September 30, 2019, we reported net loss
applicable to common shares of $7.8 million or ($0.89) per diluted
loss per share compared to a net income applicable to common shares
of $21.9 million or $2.52 per share for the same period ended
2018.
Though the Company reported a net income loss, this is driven by
the overall strategic direction of expanding the core business. As
certain new multi-family development projects are completed, which
the Company has invested in, it is expected that net income should
be positively impacted.
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 enhancing the
capabilities 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 will 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 $11.9 million for the
three months ended September 30, 2019, compared to $33.5 million
for the same period in 2018. The $21.6 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-eight 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 $10.5 million to $5.4
million for the three months ended September 30, 2019 as compared
to $15.9 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
$1.9 million, real estate taxes of approximately $3.7 million,
management fees paid to third parties of $0.7 million, and other
general property operating and maintenance expenses of $4.2
million.
Depreciation and amortization decreased by $3.5 million to $3.4
million during the three months ended September 30, 2019 as
compared to $6.9 million for the three months ended September 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 $2.5 million for the
three months ended September 30, 2019 and $1.9 million for the same
period in 2018. The increase of $0.6 million in general and
administrative expenses is primarily due to increases in fees paid
to our Advisors of $0.6 million.
Other income (expense)
Interest income was $5.2 million for the three months ended
September 30, 2019, compared to $4.0 million for the same period in
2018. The increase of $1.2 million was due to an increase of $1.2
million in interest on the receivables owed by our Advisors and
related parties.
Other income was $1.5 million for the three months ended
September 30, 2019, compared to $18.7 million for the same period
in 2018. The decrease of $17.2 million was primarily due to the
recognition of gain from deferred income of $17.6 million
associated with the sale of assets during the three months ended
September 30, 2018 as opposed to $1.2 million of gain recognized
from deferred income related to the sale of assets during the three
months ended September 30, 2019.
Mortgage and loan interest expense was $8.0 million for the
three months ended September 30, 2019 as compared to $15.6 million
for the same period in 2018. The decrease of $7.6 million is
primarily 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 $5.2 million for the
three months ended September 30, 2019 as compared to a loss of $1.3
million for the same period in 2018. The increase of $3.9 million
is due to the unfavorable exchange rate between the Israel Shekels
and the U.S. Dollar related to our Israel Shekels denominated bonds
and the increase in our bonds obligations during the three months
ended September 30, 2019 as compared to the same period a year
ago.
Loss on debt extinguishment was $5.2 million with no comparable
amount in 2018. The loss is the result of debt borrowing costs
write-off of $1.4 million and prepayment penalty of approximately
$3.9 million associated with the payment of $41.5 million of
mortgage debt for one of our commercial buildings.
Loss from unconsolidated investments was a net of $0.2 million
for the three months ended September 30, 2019 as compared to a loss
of $0.004 million for the three months ended September 30, 2018.
The loss from unconsolidated investments during the third quarter
just ended was driven primarily from our share in the losses
reported by our VAA Joint Venture of $0.2 million.
Gain on land sales was $5.1 for the three months ended September
30, 2019 as compared to a gain of $12.2 million for the same period
in 2018. During the three months ended September 30, 2019, we sold
16.2 acres of land for an aggregate sales price of $7.0 million and
recognized a gain of $5.1 million. For the same period a year ago,
we sold approximately 50 acres of land for an aggregate sales price
of $35.5 million and recognized a gain of $12.2 million.
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 September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
(dollars in thousands, except per share amounts)
Revenues: Rental and other property revenues (including $212
and $207 for the three months and $527 and $623 for the nine months
ended 2019 and 2018, respectively, from related parties)
$
11,883
$
33,505
$
35,652
$
96,194
Expenses: Property operating expenses (including $237
and $231 for the three months ended and $741 and $689 for the nine
months ended 2019 and 2018, respectively, from related parties)
5,403
15,867
18,722
45,814
Depreciation and amortization
3,416
6,891
9,964
19,859
General and administrative (including $935 and $1,119 for the three
months ended and $3,355 and $3,399 for the nine months ended 2019
and 2018, respectively, from related parties)
2,491
1,858
8,153
6,223
Net income fee to related party
83
383
273
489
Advisory fee to related party
1,555
2,735
4,238
8,209
Total operating expenses
12,948
27,734
41,350
80,594
Net operating (loss) income
(1,065
)
5,771
(5,698
)
15,600
Other income (expenses): Interest income (including
$4,618 and $3,303 for the three months ended and $13,483 and $9,380
for the nine months ended 2019 and 2018, respectively, from related
parties)
5,232
4,021
14,668
11,441
Other income
1,514
18,722
6,094
28,030
Mortgage and loan interest (including $514 and $364 for the three
months ended and $1,517 and $1,009 for the nine months ended 2019
and 2018, respectively, from related parties)
(8,037
)
(15,555
)
(23,642
)
(43,823
)
Foreign currency transaction (loss) gain
(5,153
)
(1,288
)
(13,296
)
6,357
Loss on debt extinguishment
(5,219
)
-
(5,219
)
-
Equity loss from VAA
(189
)
-
(1,480
)
-
Earnings (losses) from other unconsolidated investees
11
(4
)
6
(2
)
Total other (expenses) income
(11,841
)
5,896
(22,869
)
2,003
(Loss) income before gain on land sales, non-controlling interest,
and taxes
(12,906
)
11,667
(28,567
)
17,603
Loss on sale of income producing properties
-
-
(80
)
-
Gain on land sales
5,140
12,243
9,489
13,578
Net (loss) income from continuing operations before taxes
(7,766
)
23,910
(19,158
)
31,181
Income tax (expense)
-
(792
)
-
(792
)
Net (loss) income from continuing operations
(7,766
)
23,118
(19,158
)
30,389
Net (loss) income
(7,766
)
23,118
(19,158
)
30,389
Net (income) attributable to non-controlling interest
(21
)
(915
)
(583
)
(1,173
)
Net (loss) income attributable to Transcontinental Realty
Investors, Inc.
(7,787
)
22,203
(19,741
)
29,216
Preferred dividend requirement
-
(227
)
-
(673
)
Net (loss) income applicable to common shares
$
(7,787
)
$
21,976
$
(19,741
)
$
28,543
(Loss) earnings per share - basic Net (loss) income
from continuing operations
$
(0.89
)
$
2.65
$
(2.20
)
$
3.49
Net (loss) income applicable to common shares
$
(0.89
)
$
2.52
$
(2.26
)
$
3.27
(Loss) earnings per share - diluted Net (loss) income
from continuing operations
$
(0.89
)
$
2.65
$
(2.20
)
$
3.49
Net (loss) income applicable to common shares
$
(0.89
)
$
2.52
$
(2.26
)
$
3.27
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
$
(7,766
)
$
23,118
$
(19,158
)
$
30,389
Net (loss) income applicable to Transcontinental Realty, Investors,
Inc.
$
(7,787
)
$
22,203
$
(19,741
)
$
29,216
TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
September 30,
December 31,
2019
2018
(unaudited)
(audited)
(dollars in thousands, except
share and par value amounts)
Assets
Real estate, at cost
$
469,209
$
461,718
Real estate subject to sales contracts at cost
1,626
2,014
Less accumulated depreciation
(87,218
)
(79,228
)
Total real estate
383,617
384,504
Notes and interest receivable (including $66,606 in 2019 and
$51,945 in 2018 from related parties)
118,638
83,541
Cash and cash equivalents
63,069
36,358
Restricted cash
36,883
70,207
Investment in VAA
64,962
68,399
Investment in other unconsolidated investees
22,177
22,172
Receivable from related parties
135,228
133,642
Other assets
48,295
63,557
Total assets
$
872,869
$
862,380
Liabilities and Shareholders’
Equity
Liabilities: Notes and interest payable
$
241,439
$
277,237
Bonds and bond interest payable
223,433
158,574
Deferred revenue (including $12,565 in 2019 and $17,522 in 2018 to
related parties)
12,565
17,522
Deferred tax liability
2,000
2,000
Accounts payable and other liabilities (including $932 in 2019 and
$3 in 2018 to related parties)
32,386
26,646
Total liabilities
511,823
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
257,853
258,050
Retained earnings
81,844
101,585
Total Transcontinental Realty Investors, Inc. shareholders' equity
339,782
359,720
Non-controlling interest
21,264
20,681
Total shareholders' equity
361,046
380,401
Total liabilities and shareholders' equity
$
872,869
$
862,380
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191114005767/en/
Transcontinental Realty Investors, Inc. Investor
Relations Daniel Moos (800) 400-6407
investor.relations@transconrealty-invest.com
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