News Column

Transcontinental Realty Investors, Inc. Reports Second Quarter 2014 Results

August 14, 2014

DALLAS--(BUSINESS WIRE)-- 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, 2014. TCI announced today that the Company reported net income applicable to common shares of $2.1 million, including $7.0 million in gains on the sale of income-producing properties, or $0.25 per diluted earnings per share, for the three months ended June 30, 2014, as compared to net income applicable to common shares of $11.8 million, including $18.1 million in gains on the sale of income-producing properties, or $1.33 per diluted earnings per share for the same period ended 2013.

For the six months ending June 30, 2014, net income applicable to common shares of $6.4 million includes $19.2 million of depreciation expense, $3.8 million of litigation settlement expense and gains on the sale of real estate holdings of $13.1 million.

The Company’s commitment to enhance the value of our real estate holdings is proving successful in the results of operations. We continue to see growth in the multifamily market with increasing rents and stable operating expenses. We are diligent in our mission to provide high-quality living opportunities to our tenants as reflected in our occupancy rates over 95%.

In our commercial portfolio, we are seeing the benefit of our efforts with new leases executed and increasing rents as first year concessions expire. We believe that we will continue to see growth in our commercial portfolio as the economic conditions improve and we capitalize on the influx of attractive prospects in the pipeline.

Our ability to take advantage of lower-interest rate mortgages available has reduced our monthly obligations and increased cash flow within our multifamily portfolio.

The positive results of operations has allowed the Company to invest in mortgage receivables in various multifamily projects not under the Company’s ownership. We will continue to invest in the multifamily market, as conditions are optimal for achieving a high return on our investment.

Rental and other property revenues were $19.9 million for the three months ended June 30, 2014. This represents an increase of $0.3 million, as compared to the prior period revenues of $19.6 million. This change, by segment, is an increase in the apartment portfolio of $0.7 million, offset by a decrease in the commercial portfolio of $0.4 million related to some prior year larger square-foot tenants down-sizing or moving out and first year lease specials for new tenants. As the first year lease concessions expire and new leases are signed, we have and will continue to see improvements in rental income for the commercial portfolio.

Property operating expenses were $9.7 million for the three months ended June 30, 2014. This represents an increase of $0.9 million, as compared to the prior period operating expenses of $8.8 million. Our operating expenses have remained consistent with prior periods due to labor efficiencies and improvements in preventative maintenance across the portfolio, with only an increase in real estate taxes as a result of the increase in the value of our portfolio.

General and administrative expenses were $2.7 million dollars for the three months ended June 30, 2014. This represents an increase of $1.1 million, as compared to the prior period general and administrative expenses of $1.6 million. The majority of this change was due to an increase in professional fees and corporate franchise taxes.

Interest income was $4.0 million for the three months ending June 30, 2014. This represents an increase of $1.9 million, as compared to the prior period interest income of $2.1 million dollars. The majority of the increase is due to the accrued interest recognition on the cash flow notes from Unified Housing Foundation, Inc. related to the mid-year surplus cash calculation. There was no mid-year surplus cash collected for the prior period.

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 office buildings, apartments, 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
(unaudited)
 
    For the Three Months Ended     For the Six Months Ended
June 30,June 30,
  2014         2013     2014         2013  
(dollars in thousands, except per share amounts)
Revenues:
Rental and other property revenues (including $175 and $166 for the three months and $350 and $331 for the six months ended 2014 and 2013, respectively, from related parties) $ 19,859 $ 19,560 $ 39,476 $ 38,950
 
Expenses:
Property operating expenses (including $148 and $160 for the three months and $293 and $353 for the six months ended 2014 and 2013, respectively, from related parties) 9,695 8,787 19,229 18,116
Depreciation and amortization 4,430 4,298 8,868 8,026
General and administrative (including $656 and $792 for the three months and $1,400 and $1,439 for the six months ended 2014 and 2013, respectively, from related parties) 2,737 1,615 4,295 3,237
Net income fee to related party 210 48 700 104
Advisory fee to related party   1,811     2,071     3,664     4,209  
Total operating expenses   18,883     16,819     36,756     33,692  
Net operating income 976 2,741 2,720 5,258
 
Other income (expenses):
Interest income (including $4,004 and $2,149 for the three months and $6,117 and $4,288 for the six months ended 2014 and 2013, respectively, from related parties) 4,005 2,119 6,118 4,296
Other income 244 144 401 180
Mortgage and loan interest (including $0 and $439 for the three months and $31 and $926 for the six months ended 2014 and 2013, respectively, from related parties) (7,932 ) (7,874 ) (14,765 ) (15,797 )
Deferred borrowing costs amortization (334 ) 46 (1,266 ) (2,371 )
Loan charges and prepayment penalties - (26 ) (1,582 ) (3,963 )
Loss on the sale of investments - - - (8 )
Losses from unconsolidated joint ventures and investees (11 ) 15 (16 ) 2
Litigation settlement   (86 )   57     3,753     12  
Total other expenses   (4,114 )   (5,519 )   (7,357 )   (17,649 )
Loss before gain on land sales, non-controlling interest, and taxes (3,138 ) (2,778 ) (4,637 ) (12,391 )
Gain (loss) on land sales   (159 )   -     594     (48 )
Net loss from continuing operations before taxes (3,297 ) (2,778 ) (4,043 ) (12,439 )
Income tax benefit   2,035     5,222     3,918     7,554  
Net income (loss) from continuing operations (1,262 ) 2,444 (125 ) (4,885 )
Discontinued operations:
Net loss from discontinued operations (1,189 ) (3,154 ) (1,862 ) (2,682 )
Gain on sale of real estate from discontinued operations 7,003 18,074 13,057 24,265
Income tax expense from discontinued operations   (2,035 )   (5,222 )   (3,918 )   (7,554 )
Net income from discontinued operations 3,779 9,698 7,277 14,029
Net income 2,517 12,142 7,152 9,144
Net loss attributable to non-controlling interest   (127 )   (115 )   (211 )   (226 )
Net income attributable to Transcontinental Realty Investors, Inc. 2,390 12,027 6,941 8,918
Preferred dividend requirement   (277 )   (277 )   (551 )   (551 )
Net income applicable to common shares $ 2,113   $ 11,750   $ 6,390   $ 8,367  
 
Earnings per share - basic
Net income (loss) from continuing operations $ (0.20 ) $ 0.24 $ (0.11 ) $ (0.67 )
Net income from discontinued operations   0.45     1.15     0.86     1.67  
Net income applicable to common shares $ 0.25   $ 1.39   $ 0.75   $ 1.00  
 
Earnings per share - diluted
Net income (loss) from continuing operations $ (0.20 ) $ 0.23 $ (0.11 ) $ (0.67 )
Net income from discontinued operations   0.45     1.10     0.86     1.67  
Net income applicable to common shares $ 0.25   $ 1.33   $ 0.75   $ 1.00  
 
Weighted average common shares used in computing earnings per share 8,413,469 8,413,469 8,413,469 8,413,469
Weighted average common shares used in computing diluted earnings per share 8,413,469 8,796,699 8,413,469 8,413,469
 
 
Amounts attributable to Transcontinental Realty Investors, Inc.
Net income (loss) from continuing operations $ (1,389 ) $ 2,329 $ (336 ) $ (5,111 )
Net income from discontinued operations   3,779     9,698     7,277     14,029  
Net income $ 2,390   $ 12,027   $ 6,941   $ 8,918  
 
 
TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
       
June 30,December 31,
  2014     2013  
(dollars in thousands, except share and par value amounts)
Assets
Real estate, at cost $ 742,615 $ 777,974
Real estate held for sale at cost, net of depreciation ($1,489 for 2014 and $2,390 for 2013) 627 16,427
Real estate subject to sales contracts at cost, net of depreciation ($2,124 for 2014 and $1,949 for 2013) 24,842 29,353
Less accumulated depreciation   (106,832 )   (127,952 )
Total real estate 661,252 695,802
Notes and interest receivable:
Performing (including $67,458 in 2014 and $66,431 in 2013 from related parties) 70,773 69,626
Non-performing 564 543
Less allowance for doubtful accounts (including $2,098 in 2014 and $2,098 in 2013 from related parties)   (2,263 )   (2,262 )
Total notes and interest receivable 69,074 67,907
Cash and cash equivalents 13,382 16,086
Restricted cash 25,052 31,799
Investments in unconsolidated joint ventures and investees 1,509 1,697
Receivable from related party 74,406 52,380
Other assets   36,548     32,000  
Total assets $ 881,223   $ 897,671  
 
Liabilities and Shareholders’ Equity
Liabilities:
Notes and interest payable $ 569,199 $ 562,734
Notes related to real estate held for sale 3,006 17,100
Notes related to real estate subject to sales contracts 20,758 23,011
Deferred gain (from sales to related parties) 53,096 53,096
Accounts payable and other liabilities (including $5,103 in 2014 and $4,697 in 2013 to related parties)   37,008     50,160  
Total liabilities 683,067 706,101
 
Shareholders’ equity:
Preferred stock, Series C: $0.01 par value, authorized 10,000,000 shares, issued and outstanding 30,000 shares in 2014 and 2013 (liquidation preference $100 per share). Series D: $0.01 par value, authorized, issued and outstanding 100,000 shares in 2013 and 2012 (liquidation preference $100 per share) 1 1
Common stock, $0.01 par value, authorized 10,000,000 shares, issued 8,413,669 shares in 2014 and 2013 and outstanding 8,413,469 shares in 2014 and 2013 84 84
Treasury stock at cost, 200 shares in 2014 and 2013 (2 ) (2 )
Paid-in capital 271,169 271,720
Retained earnings   (91,088 )   (98,029 )
Total Transcontinental Realty Investors, Inc. shareholders' equity 180,164 173,774
Non-controlling interest   17,992     17,796  
Total shareholders' equity   198,156     191,570  
Total liabilities and shareholders' equity $ 881,223   $ 897,671  





Transcontinental Realty Investors, Inc.

Investors Relations

Gene Bertcher, 800-400-6407

investor.relations@transconrealty-invest.com


Source: Transcontinental Realty Investors, Inc.


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