Transcontinental Realty Investors, Inc. Reports Second Quarter 2013 Results

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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,
2013201220132012
(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)11,91512,71724,35424,932
Depreciation and amortization5,4124,94710,2509,930
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)1,6167713,4413,213
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 income5,3265,76910,0319,625
 
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)2,1193,8694,2967,098
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)1441,5921803,312
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 operations2901,927231(364)
Gain on sale of real estate from discontinued operations18,0741,50224,2655,091
Income tax expense from discontinued operations (6,427) (1,200) (8,574) (1,654)
Net income from discontinued operations11,9372,22915,9223,073
Net income (loss)12,1422,4579,144(1,671)
Net income attributable to non-controlling interest (115) (175) (226) (254)
Net income (loss) attributable to Transcontinental Realty Investors, Inc.12,0272,2828,918(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 share8,413,4698,413,4698,413,4698,413,469
Weighted average common share used in computing diluted earnings per share8,413,4698,413,4698,413,4698,413,469
 
 
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)
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TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
 
June 30,December 31,
20132012
(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)29,43645,706
Less accumulated depreciation (144,281) (145,614)
Total real estate836,255896,950
Notes and interest receivable
Performing (including $57,683 in 2013 and $58,007 in 2012 from related parties)60,65560,637
Non-performing752723
Less allowance for estimated losses (including $2,097 in 2013 and 2012 from related parties) (2,262) (2,262)
Total notes and interest receivable59,14559,098
Cash and cash equivalents8,99416,620
Related party receivables7,125-
Investments in unconsolidated joint ventures and investees5,7405,439
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 contracts21,03555,976
Stock-secured notes payable2,2042,221
Related party payables-