Transcontinental Realty Investors, Inc. Reports Third Quarter 2015 Results

DALLAS--(BUSINESS WIRE)-- Transcontinental Realty Investors, Inc. (NYSE: TCI), a Dallas-based real estate investment company, reported results of operations for the third quarter ended September 30, 2015. TCI announced today that the Company reported net loss applicable to common shares of approximately ($6.8) million, including $0.9 million in gains on the sale of land and $0.7 million in gains on sale of income producing properties, or ($0.79) per diluted earnings per share, for the three months ended September 30, 2015, as compared to a net loss applicable to common shares of ($2.6) million or ($0.29) per diluted earnings per share for the same period ended 2014.

For the nine months ending September 30, 2015, a net loss applicable to common shares of ($7.0) million or ($0.81) per diluted earnings per share was reported, as compared to a net income applicable to common shares of $3.8 million or $0.45 per diluted earnings per share for the same period ended 2014.

"During the three months ended September 30, 2015, we acquired two income-producing properties. The Company remains highly focused on expanding our multifamily portfolio and enhancing the underlying value of our commercial assets. At the same time, we continue to seek out unique opportunities to secure strategic sales and/or the development of various parcels of land. We also strive aggressively in obtaining improvements associated with operating performance in terms of revenue growth and expense control. We remain significantly focused by paying close attention to all details of our business throughout our organization," said Daniel J. Moos, the Company’s President and CEO. "Most assuredly, we will continue to be very aware as to the overall economic climate and remain vigilant in our ability to rapidly adjust our business strategies accordingly."

Rental and other property revenues were $27.5 million for the three months ended September 30, 2015. This represents an increase of $9.0 million, as compared to the prior period revenues of $18.5 million. This change, by segment, is an increase in the apartment portfolio of $5.5 million, and an increase in the commercial portfolio of $3.5 million. Within the apartment portfolio there was an increase of $4.8 million in the acquired property portfolio and an increase of $0.7 million in the same property portfolio. Our apartment portfolio continues to thrive in the current economic conditions with occupancies averaging approximately 95%. We have been able to surpass expectations due to the high-quality product offered, the strength of our management team and our commitment to our tenants. Within the commercial portfolio there was an increase of $1.8 million in the acquired property portfolio and increase of $1.7 million in the same store properties. We are continuing to market our properties aggressively to attract new tenants and strive for continuous improvement of our properties to maintain our existing tenants.

Property operating expenses were $14.2 million for the three months ended September 30, 2015. This represents an increase of $4.1 million, as compared to the prior period operating expenses of $10.1 million. This change, by segment, is an increase in the apartment portfolio of $2.5 million, and an increase in the commercial portfolio of $1.6 million. Within the apartment portfolio there was an increase of $2.0 million in the acquired properties portfolio and an increase of $0.5 million in the same property portfolio. Within the commercial portfolio there was an increase of $1.5 million in the acquired properties portfolio and an increase of $0.1 million in the same store properties.

Depreciation and amortization expenses were $6.5 million for the three months ended September 30, 2015. This represents an increase of $2.1 million as compared to prior period depreciation of $4.4 million. The majority of this change is in the apartment portfolio related to an increase in the acquired properties portfolio.

Mortgage and loan interest expense, including deferred borrowing costs amortization, was $12.0 million for the three months ended September 30, 2015. This represents an increase of $4.0 million, as compared to the prior period expense of $8.0 million. This change by segment is an increase in the other portfolio of $2.4 million, and an increase in the apartment portfolio of $0.95 million. Within the other portfolio, the majority of this increase is due to the securing of a new loan in the current period, which was utilized to drive the acquisition and development activities of the Company. The increase in the apartment portfolio is the result of the addition of income producing properties offset by mortgage refinances to lower interest rates.

Interest income was $2.5 million for the three months ended September 30, 2015. This represents a decrease of $0.6 million, as compared to the prior year income of $3.1 million and is due to lower note receivable balances over the period.

Gain on land sales increased for the three months ended September 30, 2015, as compared to the prior period. In the current period we sold 155.16 acres of land in two transactions for a sales price of $2.9 million and recorded a gain of $1.0 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 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 Nine Months Ended
					September 30,											September 30,
					2015					2014						2015					2014
					(dollars in thousands, except per share amounts)
Revenues:
		Rental and other property revenues (including $211 and $175 for the three months and $591 and $526 for the nine months ended 2015 and 2014, respectively, from related parties)			$	27,539				$	18,466					$	73,599				$	55,281
Expenses:
		Property operating expenses (including $192 and $162 for the three months and $522 and $481 for the nine months ended 2015 and 2014, respectively, from related parties)				14,195					10,077						35,987					28,640
		Depreciation and amortization				6,555					4,415						16,305					12,967
		General and administrative (including $489 and $714 for the three months and $2,036 and $2,114 for the nine months ended 2015 and 2014, respectively, from related parties)				1,146					1,131						4,191					5,417
		Net income fee to related party				51					(186	)					142					514
		Advisory fee to related party				2,666					1,826						6,561					5,490
		Total operating expenses				24,613					17,263						63,186					53,028
		Net operating income				2,926					1,203						10,413					2,253
Other income (expenses):
		Interest income (including $2,503 and $2,718 for the three months and $8,861 and $8,835 for the nine months ended 2015 and 2014, respectively, from related parties)				2,505					3,064						9,260					9,181
		Other income (expense)				(77	)				344						4					741
		Mortgage and loan interest (including $0 and $0 for the three months and $31 and $31 for the six months ended 2015 and 2014, respectively, from related parties)				(12,006	)				(8,043	)					(29,703	)				(23,329	)
		Loan charges and prepayment penalties				(1,544	)				(1,044	)					(2,250	)				(2,626	)
		Earnings (losses) from unconsolidated joint ventures and investees				(4	)				10						39					(5	)
		Litigation settlement (expense)				(85	)				(86	)					(203	)				3,666
		Total other expenses				(11,211	)				(5,755	)					(22,853	)				(12,372	)
		Loss before gain on land sales, non-controlling interest, and taxes				(8,285	)				(4,552	)					(12,440	)				(10,119	)
		Gain on sale of income producing properties				735					-						735					-
		Gain on land sales				997					40						5,124					634
		Net income (loss) from continuing operations before taxes				(6,553	)				(4,512	)					(6,581	)				(9,485	)
		Income tax benefit (expense)				16					786						107					5,030
		Net income (loss) from continuing operations				(6,537	)				(3,726	)					(6,474	)				(4,455	)
		Discontinued operations:
		Net income (loss) from discontinued operations				47					477						306					(454	)
		Gain on sale of real estate from discontinued operations				-					1,770						-					14,826
		Income tax benefit (expense) from discontinued operations				(16	)				(786	)					(107	)				(5,030	)
		Net income (loss) from discontinued operations				31					1,461						199					9,342
		Net income (loss)				(6,506	)				(2,265	)					(6,275	)				4,887
		Net income (loss) attributable to non-controlling interest				(95	)				(81	)					(82	)				(292	)
		Net income attributable to Transcontinental Realty Investors, Inc.				(6,601	)				(2,346	)					(6,357	)				4,595
		Preferred dividend requirement				(227	)				(227	)					(673	)				(778	)
		Net income (loss) applicable to common shares			$	(6,828	)			$	(2,573	)				$	(7,030	)			$	3,817
Earnings per share - basic
		Net income (loss) from continuing operations			$	(0.79	)			$	(0.46	)				$	(0.83	)			$	(0.65	)
		Net income from discontinued operations				-					0.17						0.02					1.10
		Net income (loss) applicable to common shares			$	(0.79	)			$	(0.29	)				$	(0.81	)			$	0.45
Earnings per share - diluted
		Net income (loss) from continuing operations			$	(0.79	)			$	(0.46	)				$	(0.83	)			$	(0.65	)
		Net income from discontinued operations				-					0.17						0.02					1.10
		Net income (loss) applicable to common shares			$	(0.79	)			$	(0.29	)				$	(0.81	)			$	0.45
		Weighted average common shares used in computing earnings per share				8,717,767					8,688,018						8,717,767					8,505,991
		Weighted average common shares used in computing diluted earnings per share				8,717,767					8,688,018						8,717,767					8,505,991
Amounts attributable to Transcontinental Realty Investors, Inc.
		Net income (loss) from continuing operations			$	(6,632	)			$	(3,807	)				$	(6,556	)			$	(4,747	)
		Net income from discontinued operations				31					1,461						199					9,342
		Net income			$	(6,601	)			$	(2,346	)				$	(6,357	)			$	4,595

TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
						September 30,					December 31,
						2015					2014
						(dollars in thousands, except share and par value amounts)
			Assets
Real estate, at cost						$	939,024				$	781,794
Real estate subject to sales contracts at cost, net of depreciation ($194 for 2015 and $4,278 for 2014)							10,583					20,395
	Less accumulated depreciation						(133,888	)				(113,068	)
			Total real estate				815,719					689,121
Notes and interest receivable:
	Performing (including $60,443 in 2015 and $77,853 in 2014 from related parties)						67,626					84,863
	Non-performing						-					584
		Less allowance for doubtful accounts (including $1,825 in 2015 and 2014 from related parties)					(1,825	)				(1,990	)
			Total notes and interest receivable				65,801					83,457
Cash and cash equivalents							11,958					12,201
Restricted cash							42,163					48,238
Investments in unconsolidated joint ventures and investees							2,178					1,543
Receivable from related party							101,031					58,404
Other assets							37,727					37,441
			Total assets			$	1,076,577				$	930,405
			Liabilities and Shareholders’ Equity
Liabilities:
	Notes and interest payable					$	754,604				$	588,749
	Notes related to real estate held for sale						585					1,552
	Notes related to real estate subject to sales contracts						7,765					18,616
	Deferred gain (from sales to related parties)						51,356					51,356
	Accounts payable and other liabilities (including $2,872 in 2015 and $4,909 in 2014 to related parties)						35,756					36,684
			Total liabilities				850,066					696,957
Shareholders’ equity:
	Preferred stock, Series C: $0.01 par value, authorized 10,000,000 shares; issued and outstanding zero shares in 2015 and 2014 (liquidation preference $100 per share). Series D: $0.01 par value, authorized, issued and outstanding 100,000 shares in 2015 and 2014 (liquidation preference $100 per share)						1					1
	Common stock, $0.01 par value, authorized 10,000,000 shares; issued 8,717,967 shares in 2015 and 2014; outstanding 8,717,767 shares in 2015 and 2014						87					87
	Treasury stock at cost, 200 shares in 2015 and 2014						(2	)				(2	)
	Paid-in capital						270,976					271,649
	Retained earnings						(62,808	)				(56,451	)
			Total Transcontinental Realty Investors, Inc. shareholders' equity				208,254					215,284
	Non-controlling interest						18,257					18,164
			Total shareholders' equity				226,511					233,448
			Total liabilities and shareholders' equity			$	1,076,577				$	930,405

View source version on businesswire.com: http://www.businesswire.com/news/home/20151113005765/en/

Transcontinental Realty Investors, Inc.
Investors Relations
Gene Bertcher, 800-400-6407
[email protected]

Source: Transcontinental Realty Investors, Inc.

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