Transcontinental Realty Investors, Inc. Reports Third Quarter 2012 Results

Updated

Transcontinental Realty Investors, Inc. Reports Third Quarter 2012 Results

DALLAS--(BUSINESS WIRE)-- Transcontinental Realty Investors, Inc. (NYS: TCI) , a Dallas-based real estate investment company, today reported results of operations for the third quarter ended September 30, 2012. TCI announced today that the Company reported net loss applicable to common shares of $0.5 million or $0.07 per diluted earnings per share, as compared to a net income applicable to common shares of $0.6 million or $0.08 per diluted earnings per share for the same period ended 2011. Included in the net loss applicable to common shares of $0.5 million is $5.4 million in depreciation and amortization expense for the three months ended September 30, 2012. For the same period ending September 30, 2011, included in the net income applicable to common shares of $0.6 million is $5.4 million in depreciation and amortization expense.

For the past year and a half TCI has shown an unwavering commitment to fortify our portfolio and streamline our operational activity; all while maintaining our commitment to creating value. TCI is pleased that we are seeing improved results from these endeavors and will continue to adapt to market challenges with an eye on both near term economic challenges and long term prospects as the real estate market improves.


Rental and other property revenues were $28.1 million for the three months ended September 30, 2012. This represents a decrease of $1.2 million, as compared to the prior period revenues of $29.3 million. The change, by segment, is an increase in the apartment portfolio of $0.5 million, a decrease in the commercial portfolio of $1.5 million and a decrease in the land and other portfolio of $0.2 million. Our apartment portfolio continues to thrive in the current economic conditions with occupancies averaging over 95%. Within our commercial portfolio, the same properties decreased by $1.5 million, primarily due to miscellaneous non-recurring revenue received in the prior period. We continue to market our properties aggressively to attract new tenants and strive for continuous improvement of our properties in order to maintain our existing tenants.

General and administrative expenses were $1.2 million for the three months ended September 30, 2012. This represents a decrease of $1.5 million, as compared to the prior period expenses of $2.7 million. This change is primarily due to losses recorded in the prior period from investment write-offs due to potential deals not realized. Professional services decreased by $0.4 million and cost reimbursements to our Advisor decreased by $0.2 million.

Interest income was $1.0 million for the three months ended September 30, 2012. This represents an increase of $0.5 million, as compared to the prior period interest income of $0.5 million. The majority of the increase is due to the cash received on the cash flow notes from Unified Housing Foundation, Inc. related to the mid-year surplus cash calculation.

Other income was $1.5 million for the three months ended September 30, 2012. This represents an increase of $1.4 million, as compared to the prior period other income of $0.1 million. This relates to the agreement between Unified Housing Foundation, Inc. and TCI for consulting services related to the development of apartment projects.

Mortgage and loan interest was $9.0 million for the three months ended September 30, 2012. This represents a decrease of $2.8 million, as compared to the prior period interest expense of $11.8 million. This change, by segment, is a decrease in the apartment portfolio of $0.9 million and a decrease in the commercial portfolio of $1.9 million. Within the apartment portfolio, the same apartment portfolio decreased $1.8 million and the developed properties increased $0.9 million due to properties in the lease-up phase. The same store apartment portfolio decreased due to the refinances closed with long term, low interest rates. For the developed properties, once an apartment is completed, the interest expense is no longer capitalized. Within the commercial portfolio, the same properties decreased by $1.8 million. This decrease is primarily related to a commercial loan that was in default status in 2011 and was accruing interest at the default interest rate. The default rate is no longer applicable in the current period.

Gain on land sales decreased for the three months ended September 30, 2012 as compared to the prior period. In the current period we sold 102.28 acres of land in seven separate transactions for an aggregate sales price of $16.1 million and recorded a gain of $2.9 million. In the prior period, we sold 2,999.28 acres of land in six separate transactions for an aggregate sales price of $52.4 million and recorded a gain of $6.3 million.

Included in discontinued operations are a total of five and 18 properties for 2012 and 2011, respectively. Properties sold in 2012 have been reclassified to discontinued operations for current and prior year reporting periods. The gain on sale of income-producing properties is also included in discontinued operations for those years.

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 equity ownership and partnerships nationwide. 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 Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

(dollars in thousands, except share and per share amounts)

Revenues:

Rental and other property revenues (including $164 and $0 for the three months and $499 and $0 for the nine months ended 2012 and 2011 respectively from related parties)

$

28,097

$

29,347

$

87,003

$

83,846

Expenses:

Property operating expenses (including $296 and $264 for the three months and $837 and $888 for the nine months ended 2012 and 2011 respectively from related parties)

15,484

16,150

45,359

45,128

Depreciation and amortization

5,427

5,378

16,260

14,168

General and administrative (including $569 and $720 for the three months and $1,796 and $2,467 for the nine months ended 2012 and 2011 respectively from related parties)

1,181

2,658

4,132

7,100

Provision on impairment of notes receivable and real estate assets

-

-

-

5,581

Advisory fee to related party

2,198

2,441

6,719

7,688

Total operating expenses

24,290

26,627

72,470

79,665

Operating income

3,807

2,720

14,533

4,181

Other income (expense):

Interest income (including $1,016 and $483 for the three months and $7,870 and $1,534 for the nine months ended 2012 and 2011 respectively from related parties)

1,031

497

8,129

1,627

Other income (including $1,500 and $0 for the three months and $4,500 and $0 for the nine months ended 2012 and 2011 respectively from related parties)

1,525

114

4,655

1,879

Mortgage and loan interest (including $714 and $47 for the three months and $2,575 and $1,614 for the nine months ended 2012 and 2011 respectively from related parties)

(9,031

)

(11,792

)

(41,146

)

(37,517

)

Loss on the sale of investments

-

(32

)

(118

)

(483

)

Earnings (losses) from unconsolidated subsidiaries and investees

5

189

(58

)

246

Total other expenses

(6,470

)

(11,024

)

(28,538

)

(34,248

)

Loss before gain on land sales, non-controlling interest, and taxes

(2,663

)

(8,304

)

(14,005

)

(30,067

)

Gain on land sales

2,913

6,285

8,074

8,366

Income (loss) from continuing operations before tax

250

(2,019

)

(5,931

)

(21,701

)

Income tax benefit (expense)

(164

)

886

1,414

(1,423

)

Net income (loss) from continuing operations

86

(1,133

)

(4,517

)

(23,124

)

Discontinued operations:

Loss from discontinued operations

(551

)

(342

)

(1,132

)

(3,702

)

Gain (loss) on sale of real estate from discontinued operations

82

2,872

5,173

(365

)

Income tax benefit (expense) from discontinued operations

164

(886

)

(1,414

)

1,423

Net income (loss) from discontinued operations

(305

)

1,644

2,627

(2,644

)

Net income (loss)

(219

)

511

(1,890

)

(25,768

)

Net (income) loss attributable to non-controlling interest

(43

)

384

(297

)

515

Net income (loss) attributable to Transcontinental Realty Investors, Inc.

(262

)

895

(2,187

)

(25,253

)

Preferred dividend requirement

(277

)

(279

)

(831

)

(831

)

Net income (loss) applicable to common shares

$

(539

)

$

616

$

(3,018

)

$

(26,084

)

Earnings per share - basic

Loss from continuing operations

$

(0.03

)

$

(0.12

)

$

(0.67

)

$

(2.81

)

Income (loss) from discontinued operations

(0.04

)

0.20

0.31

(0.32

)

Net income (loss) applicable to common shares

$

(0.07

)

$

0.08

$

(0.36

)

$

(3.13

)

Earnings per share - diluted

Loss from continuing operations

$

(0.03

)

$

(0.12

)

$

(0.67

)

$

(2.81

)

Income (loss) from discontinued operations

(0.04

)

0.20

0.31

(0.32

)

Net income (loss) applicable to common shares

$

(0.07

)

$

0.08

$

(0.36

)

$

(3.13

)

Weighted average common share used in computing earnings per share

8,413,469

8,413,469

8,413,469

8,356,326

Weighted average common share used in computing diluted earnings per share

8,413,469

8,413,469

8,413,469

8,356,326

Amounts attributable to Transcontinental Realty Investors, Inc.

Income (loss) from continuing operations

$

43

$

(749

)

$

(4,814

)

$

(22,609

)

Income (loss) from discontinued operations

(305

)

1,644

2,627

(2,644

)

Net income (loss)

$

(262

)

$

895

$

(2,187

)

$

(25,253

)

TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

September 30,

December 31,

2012

2011

(dollars in thousands, except share and par value amounts)

Assets

Real estate, at cost

$

1,004,209

$

1,069,699

Real estate held for sale at cost, net of depreciation ($0 for 2012 and $1,752 for 2011)

-

15,015

Real estate subject to sales contracts at cost, net of depreciation ($15,742 for 2012 and $7,213 for 2011)

50,033

52,555

Less accumulated depreciation

(145,117

)

(148,930

)

Total real estate

909,125

988,339

Notes and interest receivable

Performing (including $55,208 in 2012 and $78,852 in 2011 from related parties)

57,891

79,161

Non-performing

820

2,152

Less allowance for estimated losses (including $2,097 in 2012 and $2,097 in 2011 from related parties)

(2,262

)

(3,942

)

Total notes and interest receivable

56,449

77,371

Cash and cash equivalents

6,322

19,991

Investments in unconsolidated subsidiaries and investees

4,992

6,362

Other assets

67,377

68,261

Total assets

$

1,044,265

$

1,160,324

Liabilities and Shareholders' Equity

Liabilities:

Notes and interest payable

$

753,542

$

829,617

Notes related to assets held for sale

-

13,830

Notes related to subject to sales contracts

53,442

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