Transcontinental Realty Investors, Inc. Reports Third Quarter 2019 Results

DALLAS--()--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

 

 

Contacts

Transcontinental Realty Investors, Inc.
Investor Relations
Daniel Moos (800) 400-6407
investor.relations@transconrealty-invest.com

Contacts

Transcontinental Realty Investors, Inc.
Investor Relations
Daniel Moos (800) 400-6407
investor.relations@transconrealty-invest.com