Transcontinental Realty Investors, Inc. Reports Second Quarter 2013 Results

Transcontinental Realty Investors, Inc. Reports Second Quarter 2013 Results

DALLAS--(BUSINESS WIRE)-- Transcontinental Realty Investors, Inc. (NYS: TCI) , a Dallas-based real estate investment company, today reported results of operations for the first quarter ended June 30, 2013. TCI announced today that the Company reported a net income applicable to common shares of $11.8 million or $1.40 per diluted earnings per share, as compared to a net income applicable to common shares of $2.0 million or $0.23 per diluted earnings per share for the same period ended 2012.

The Company has shown an unwavering commitment to fortify our portfolio and streamline our operational activity, while at the same time maintaining our commitment to creating value. We are pleased that we are seeing improvements in our operations 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.


Our apartment portfolio continues to thrive in the current economic conditions with occupancies averaging over 95%. We continue to work aggressively to attract new tenants and strive for continuous improvement of our properties in order to maintain our existing tenants. We have seen positive signs from the commercial market within the last three months, with new leases being signed and an increase in traffic and we look forward to growth in our commercial products in the near future.

Rental and other property revenues have remained in line during the three months ended June 30, 2013 as they were in the prior period.

Property operating expenses were $11.9 million for the three months ended June 30, 2013. This represents a decrease of $0.8 million, as compared to the prior period operating expenses of $12.7 million. Within the apartment portfolio, there was an increase of $0.2 million in the same properties and an increase of $0.1 million in the development properties due to an increase in real estate taxes for several properties in the current period. Within the commercial portfolio, the same properties decreased by $1.1 million due to real estate tax refunds from protests and litigations for several properties.

General and administrative expenses were $1.6 million for the three months ended June 30, 2013. This represents an increase of $0.8 million, as compared to the prior period expenses of $0.8 million due to an increase in professional services and cost reimbursements due to our Advisor.

Interest income was $2.1 million for the three months ended June 30, 2013. This represents a decrease of $1.8 million, as compared to the prior period interest income of $3.9 million. The majority of the decrease is due to the cash received on one of the surplus cash flow notes from Unified Housing Foundation, Inc., in the prior period. These were refinance proceeds received which allowed for the recognition of previously deferred interest income. This decrease was offset by an agreement made on January 1, 2013, where the Company extended the maturity on the surplus cash flow notes receivable from UHF for an additional term of five years in exchange for the early termination of the preferred interest rate. The original notes gave a five-year period of preferred interest rate at 5.25%, before returning to the original note rate of 12.0%.

Other income was $144,000 for the three months ended June 30, 2013. This represents a decrease of $1.5 million, as compared to the prior period other income of $1.6 million. The prior year income relates to the agreement between UHF and TCI for consulting services related to the development of apartment projects. There were no development projects in progress during the current period.

Mortgage and loan interest was $9.7 million for the three months ended June 30, 2013. This represents a decrease of $1.5 million, as compared to the prior period interest expense of $11.2 million. The majority of the decrease was a result of the refinances closed with long-term, low interest rates.

Deferred borrowing costs amortization was $0.9 million for the three months ended June 30, 2013. This represents a decrease of $1.1 million as compared to the prior period expense of $2.0 million due to the higher loan deferred borrowing costs written off upon the refinance into a new mortgage note in the prior period than in the current period.

Loan charges and prepayment penalties were $3.2 million for the three months ended June 30, 2013. This represents a decrease of $0.6 million, as compared to the prior period expense of $3.8 million due to the prepayment penalties from the refinancing of several existing mortgage notes. There were more refinances completed in the prior period than in the current period.

There were no land sales for the three months ended June 30, 2013. In the prior period we sold 84.75 acres of land in five separate transactions for an aggregate sales price of $12.7 million and recorded a gain of $4.7 million.

Discontinued operations relates to properties that were either sold or held for sale as of the period ended June 30, 2013. Properties sold in 2013 have been reclassified to discontinued operations for current and prior year reporting periods. In 2013, we sold two apartment complexes and three commercial properties. In 2012, we sold two apartment complexes and three commercial properties.

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,

2013

2012

2013

2012

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

Revenues:

Rental and other property revenues (including $166 and $167 for the three months and $331 and $335 for the six months ended 2013 and 2012 respectively from related parties)

$

26,340

$

26,421

$

52,285

$

52,221

Expenses:

Property operating expenses (including $185 and $236 for the three months and $405 and $500 for the six months ended 2013 and 2012 respectively from related parties)

11,915

12,717

24,354

24,932

Depreciation and amortization

5,412

4,947

10,250

9,930

General and administrative (including $839 and $682 for the three months and $1,544 and $1,345 for the six months ended 2013 and 2012 respectively from related parties)

1,616

771

3,441

3,213

Provision on impairment of notes receivable and real estate assets

-

-

-

-

Advisory fee to related party

2,071

2,217

4,209

4,521

Total operating expenses

21,014

20,652

42,254

42,596

Operating income

5,326

5,769

10,031

9,625

Other income (expense):

Interest income (including $2,149 and $3,866 for the three months and $4,140 and $7,091 for the six months ended 2013 and 2012 respectively from related parties)

2,119

3,869

4,296

7,098

Other income (including $0 and $1,500 for the three months and $0 and $3,000 for the six months ended 2013 and 2012 respectively from related parties)

144

1,592

180

3,312

Mortgage and loan interest (including $439 and $1,107 for the three months and $487 and $1,861 for the six months ended 2013 and 2012 respectively from related parties)

(9,654

)

(11,207

)

(19,246

)

(22,398

)

Deferred borrowing costs amortization

(946

)

(1,957

)

(3,378

)

(2,852

)

Loan charges and prepayment penalties

(3,226

)

(3,769

)

(7,209

)

(6,162

)

Loss on the sale of investments

-

(16

)

-

(118

)

Earnings from unconsolidated joint ventures and investees

15

9

22

(63

)

Total other expenses

(11,548

)

(11,479

)

(25,335

)

(21,183

)

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

(6,222

)

(5,710

)

(15,304

)

(11,558

)

Gain (loss) on land sales

-

4,738

(48

)

5,160

Loss from continuing operations before tax

(6,222

)

(972

)

(15,352

)

(6,398

)

Income tax benefit

6,427

1,200

8,574

1,654

Net income (loss) from continuing operations

205

228

(6,778

)

(4,744

)

Discontinued operations:

Income (loss) from discontinued operations

290

1,927

231

(364

)

Gain on sale of real estate from discontinued operations

18,074

1,502

24,265

5,091

Income tax expense from discontinued operations

(6,427

)

(1,200

)

(8,574

)

(1,654

)

Net income from discontinued operations

11,937

2,229

15,922

3,073

Net income (loss)

12,142

2,457

9,144

(1,671

)

Net income attributable to non-controlling interest

(115

)

(175

)

(226

)

(254

)

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

12,027

2,282

8,918

(1,925

)

Preferred dividend requirement

(277

)

(277

)

(551

)

(554

)

Net income (loss) applicable to common shares

$

11,750

$

2,005

$

8,367

$

(2,479

)

Earnings per share - basic

Loss from continuing operations

$

(0.02

)

$

(0.03

)

$

(0.90

)

$

(0.66

)

Income from discontinued operations

1.42

0.26

1.89

0.37

Net income (loss) applicable to common shares

$

1.40

$

0.23

$

0.99

$

(0.29

)

Earnings per share - diluted

Loss from continuing operations

$

(0.02

)

$

(0.03

)

$

(0.90

)

$

(0.66

)

Income from discontinued operations

1.42

0.26

1.89

0.37

Net income (loss) applicable to common shares

$

1.40

$

0.23

$

0.99

$

(0.29

)

Weighted average common share used in computing earnings per share

8,413,469

8,413,469

8,413,469

8,413,469

Weighted average common share used in computing diluted earnings per share

8,413,469

8,413,469

8,413,469

8,413,469

Amounts attributable to Transcontinental Realty Investors, Inc.

Income (loss) from continuing operations

$

90

$

53

$

(7,004

)

$

(4,998

)

Income from discontinued operations

11,937

2,229

15,922

3,073

Net income (loss)

$

12,027

$

2,282

$

8,918

$

(1,925

)

TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

June 30,

December 31,

2013

2012

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

Assets

Real estate, at cost

$

951,100

$

978,781

Real estate held for sale at cost, net of depreciation ($0 for 2013 and $4,658 for 2012)

-

18,077

Real estate subject to sales contracts at cost, net of depreciation ($1,773 for 2013 and $16,412 for 2012)

29,436

45,706

Less accumulated depreciation

(144,281

)

(145,614

)

Total real estate

836,255

896,950

Notes and interest receivable

Performing (including $57,683 in 2013 and $58,007 in 2012 from related parties)

60,655

60,637

Non-performing

752

723

Less allowance for estimated losses (including $2,097 in 2013 and 2012 from related parties)

(2,262

)

(2,262

)

Total notes and interest receivable

59,145

59,098

Cash and cash equivalents

8,994

16,620

Related party receivables

7,125

-

Investments in unconsolidated joint ventures and investees

5,740

5,439

Other assets

52,555

67,237

Total assets

$

969,814

$

1,045,344

Liabilities and Shareholders' Equity

Liabilities:

Notes and interest payable

$

718,255

$

730,931

Notes related to assets held for sale

-

18,915

Notes related to subject to sales contracts

21,035

55,976

Stock-secured notes payable

2,204

2,221

Related party payables

-