8-K 1 transcontinental8k.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act

 

 

Date of Report (Date of earliest event reported): June 30, 2019                                                              

 

 

TRANSCONTINENTAL REALTY INVESTORS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Nevada

 

001-09240

 

94-6565852

(State or other

jurisdiction of incorporation)

(Commission

File No.)

(I.R.S. Employer

Identification No.)

     
   

1603 LBJ Freeway, Suite 800

Dallas, Texas

75234
(Address of principal executive offices) (Zip Code)
       

 

Registrant’s telephone number, including area code 469-522-4200                                                                   

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following provisions:

 

¨Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

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Section 2 - Financial Information

 

Item 2.02Results of Operations and Financial Condition.

 

On August 14, 2019, Transcontinental Realty Investors, Inc. (“TCI” or the “Company”) announced its operational results for the quarter ended June 30, 2019. A copy of the announcement is attached as Exhibit “99.1.”

 

The information furnished pursuant to Item 2.02 in this Form 8-K, including Exhibit “99.1” attached hereto, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, unless we specifically incorporate it by reference in a document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934. We undertake no duty or obligation to publicly update or revise the information furnished pursuant to Item 2.02 of this Current Report on Form 8-K.

 

Section 9 – Financial Statements and Exhibits

 

Item 9.01Financial Statement and Exhibits.

 

(d)       Exhibits.

 

The following exhibit is furnished with this Report:

 

                    Exhibit No. Description

 

99.1*       Press release dated August 14, 2019 

 

_________________________

* Furnished herewith

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SIGNATURES

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned, hereunto duly authorized.

 

Dated: August 14, 2019

 

 

 

      TRANSCONTINENTAL REALTY INVESTORS, INC.
       
       
By: /s/ Gene S. Bertcher
    Gene S. Bertcher
    Executive Vice President and
    Chief Financial Officer

 

 

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Exhibit 99.1

 

NEWS RELEASE

 

FOR IMMEDIATE RELEASE

 

 

Contact:

Transcontinental Realty Investors, Inc. Investor Relations

Gene Bertcher (800) 400-6407 investor.relations@transconrealty-invest.com

 

Transcontinental Realty Investors, Inc. Reports First Quarter 2019 Results

DALLAS (August 14, 2019 -- 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, 2019. For the three months ended June 30, 2019, we reported net loss applicable to common shares of $6.3 million or ($0.73) per diluted loss per share compared to a net income applicable to common shares of $7.0 million or ($0.81) per share for the same period ended 2018.

 

We would like to take a brief moment to share with you our recent successes for TCI and affiliated Companies and thank you for your steadfast dedication to the company.

 

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 education 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 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 $11.8 million for the three months ended June 30, 2019, compared to $31.6 million for the same period in 2018. The $19.8 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-three 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 $8.2 million to $7.3 million for the three months ended June 30, 2019 as compared to $15.5 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 $1.8 million, real estate taxes of approximately $2.4 million, management fees paid to third parties of $0.7 million, and other general property operating and maintenance expenses of $3.3 million.

 

Depreciation and amortization decreased by $3.1 million to $3.4 million during the three months ended June 30, 2019 as compared to $6.5 million for the three months ended June 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 $3.3 million for the three months ended June 30, 2019 and $2.2 million for the same period in 2018. The increase of $1.1 million in general and administrative expenses is due primarily to increases in fees paid to our Advisors of $0.9 million and professional fees of $0.2 million.

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Other income (expense) 

 

Interest income was $4.9 million for the three months ended June 30, 2019, compared to $3.5 million for the same period in 2018. The increase of $1.4 million was due primarily to an increase of $1.3 million in interest on the receivables owed by our Advisors.

 

Other income was $0.7 million for the three months ended June 30, 2019, compared to $7.5 million for the same period in 2018. The decrease of $6.8 million was due primarily to cash proceeds of $0.2 million received during the quarter ended June 30, 2019, from the collection of tax increment incentives related to infrastructure development work at Mercer Crossing, located in Farmers Branch, Texas, and other miscellaneous income of $0.5 million, compared to insurance proceeds received during the second quarter of 2018 of approximately $6.6 million as a result of damages caused by a hurricane to one of our properties that was subsequently sold during the same quarter.

 

Mortgage and loan interest expense was $7.6 million for the three months ended June 30, 2019 as compared to $14.2 million for the same period in 2018. The decrease of $6.6 million is 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 $2.3 million for the three months ended June 30, 2019 as compared to a gain of $5.9 million for the same period in 2018. The foreign currency loss is due primarily to a decrease in the exchange rate of our Israel New Shekels (NIS) denominated corporate bonds registered on the Tel-Aviv Stock Exchange. The exchange rate of the NIS to USD went from 3.63 at the beginning of the second quarter to an exchange rate of 3.58 at June 30, 2019. As of June 30, 2019, we have outstanding bonds of $159.4 million (or NIS 570 million) and accrued interest payable of approximately $2.8 million (or NIS 10.1 million).

 

Loss from unconsolidated investments was a net of $0.2 million for the three months ended June 30, 2019 as compared to a loss of $0.009 million for the three months ended June 30, 2018. The loss from unconsolidated investments during the second quarter just ended was driven primarily from our share in the losses reported by our VAA Joint Venture of $0.2 million.

 

Loss from the sale of income-producing property increased for the three months ended June 30, 2019 as compared to the prior period. In the current period, we sold a multifamily residential property, located in Mary Ester, Florida for a sales price of $3.1 million and recorded a loss of $0.08 million. There were no apartment sales for the three months ended June 30, 2018.

 

Gain on land sales increased for the three months ended June 30, 2019 as compared to the prior period. In the current period, we sold 41.6 acres of land for an aggregate sales price of $7.6 million and recorded a gain of $2.1 million.  There were no land sales for the three months ended June 30, 2018.

 

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.

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TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2019   2018   2019   2018 
   (dollars in thousands, except per share amounts) 
Revenues:                
Rental and other property revenues (including $203 and $208 for the three months and $413 and $415 for the six months ended 2019 and 2018, respectively, from related parties)  $11,840   $31,607   $23,769   $62,689 
                     
Expenses:                    
Property operating expenses (including $246 and $231 for the three months ended and $504 and 458 for the six months ended 2019 and 2018, respectively, from related parties)   7,322    15,492    13,319    29,947 
Depreciation and amortization   3,439    6,522    6,548    12,968 
General and administrative (including $919 and $1,187 for the three months ended and $2,420 and $2,280 for the six months ended 2019 and 2018, respectively, from related parties)   3,334    2,173    5,662    4,365 
Net income fee to related party   90    53    190    106 
Advisory fee to related party   1,035    2,726    2,683    5,474 
Total operating expenses   15,220    26,966    28,402    52,860 
Net operating (loss) income   (3,380)   4,641    (4,633)   9,829 
                     
Other income (expenses):                    
Interest income (including $4,580 and $3,486 for the three months ended and $8,892 and $6,722 for the six months ended 2019 and 2018, respectively, from related parties)   4,878    3,544    9,436    7,420 
Other income   688    7,482    4,580    9,308 
Mortgage and loan interest (including $513 and $327 for the three months ended and $1,003 and $645 for the six months ended 2019 and 2018, respectively, from related parties)   (7,646)   (14,175)   (15,605)   (28,268)
Foreign currency transaction (loss) gain   (2,325)   5,889    (8,143)   7,645 
Equity loss from VAA   (236)       (1,291)    
Earnings (losses)  from other unconsolidated investees   2    (9)   (5)   2 
Total other (expenses) income   (4,639)   2,731    (11,028)   (3,893)
(Loss) income before gain on land sales, non-controlling interest, and taxes   (8,019)   7,372    (15,661)   5,936 
                     
Loss on sale of income producing properties   (80)       (80)    
Gain on land sales   2,133        4,349    1,335 
Net (loss) income from continuing operations before taxes   (5,966)   7,372    (11,392)   7,271 
Net (loss) income from continuing operations   (5,966)   7,372    (11,392)   7,271 
Net (loss) income   (5,966)   7,372    (11,392)   7,271 
Net (income) attributable to non-controlling interest   (379)   (126)   (562)   (258)
Net (loss) income attributable to Transcontinental Realty Investors, Inc.   (6,345)   7,246    (11,954)   7,013 
Preferred dividend requirement       (224)       (446)
Net (loss) income applicable to common shares  $(6,345)  $7,022   $(11,954)  $6,567 
                     
(Loss) earnings per share - basic                    
Net (loss) income from continuing operations  $(0.73)  $0.81   $(1.37)  $0.75 
Net (loss) income applicable to common shares  $(0.73)  $0.81   $(1.37)  $0.75 
                     
(Loss) earnings per share - diluted                    
Net (loss) income from continuing operations  $(0.73)  $0.81   $(1.37)  $0.75 
Net (loss) income applicable to common shares  $(0.73)  $0.81   $(1.37)  $0.75 
                     
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  $(6,345)  $7,246   $(11,954)  $7,013 
Net (loss) income applicable to Transcontinental Realty, Investors, Inc.  $(6,345)  $7,246   $(11,954)  $7,013 
                     

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 

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TRANSCONTINENTAL REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

 

    June 30,    

December 31,

 
    2019    2018 
    (unaudited)    (audited) 
    (dollars in thousands, except share and par value amounts) 
Assets          
Real estate, at cost  $454,350   $461,718 
Real estate subject to sales contracts at cost   1,626    2,014 
Real estate held for sale at cost, net of depreciation   14,737     
Less accumulated depreciation   (84,213)   (79,228)
Total real estate   386,500    384,504 
           
Notes and interest receivable (including $68,687 in 2019 and $51,945 in 2018 from related parties)   116,864    83,541 
Cash and cash equivalents   37,579    36,358 
Restricted cash   44,602    70,207 
Investment in VAA   67,078    68,399 
Investment in other unconsolidated investees   22,167    22,172 
Receivable from related party   125,430    133,642 
Other assets   53,667    63,557 
Total assets  $853,887   $862,380 
           
Liabilities and Shareholders’ Equity          
Liabilities:          
Notes and interest payable  $283,780   $277,237 
Bonds and bond interest payable   157,328    158,574 
Deferred revenue (including $13,837 in 2019 and $17,522 in 2018 to related parties)   13,837    17,522 
Deferred tax liability   2,000    2,000 
Accounts payable and other liabilities (including $931 in 2019 and $3 in 2018 to related parties)   28,045    26,646 
Total liabilities   484,990    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   257,938    258,050 
Retained earnings   89,631    101,585 
Total Transcontinental Realty Investors, Inc. shareholders’ equity   347,654    359,720 
Non-controlling interest   21,243    20,681 
Total shareholders’ equity   368,897    380,401 
Total liabilities and shareholders’ equity  $853,887   $862,380 

 

The accompanying notes are an integral part of these consolidated financial statements.