Transcontinental Realty Investors, Inc. (NYSE: TCI), a
Dallas-based real estate investment company, is reporting its
Results of Operations for the year ended December 31, 2019. With
the current Coronavirus presenting a concern; we remain confident
the underlying need for quality multi-family housing will remain
strong. Should circumstances change or our view be less optimistic,
we have the ability to dramatically slow our pace of our new
development efforts. However, to date, TCI’s existing portfolio has
seen a significant increase in value. For FYE 2018, same store
aggregate appraised value of TCI’s holdings was approximately
$244.4 million. Whereas for FYE 2019, same store aggregate
appraised value of TCI’s holdings was $298.7 million. This
represents a $54.2 million or 22% increase in overall asset value
year over year.
Though the Company reported a net loss of $26.9 million or $3.09
per diluted share loss. This was driven by the overall strategic
direction of both investing and expanding the core multi-family
portfolio. In particular, as certain new multifamily development
projects are completed, in which the Company has made significant
new investments, it is expected that net income will be positively
impacted in 2020 and 2021. Also, the Company paid higher interest
rate debt with lower cost capital, purchased a ground lease, and
made sizeable tenant capital improvements tied to the commercial
portfolio.
The significant differences between FYE 2018 and 2019 are
specifically and directly related to the following components:
1. In November 2018 the Company created a new
subsidiary Victory Abode Apartments, LLC (“VAA”) and contributed 52
multi-family projects that it owned and operated to VAA. TCI
subsequently sold a 50% interest to a third party and recorded a
$154.1 million gain. This transaction transferred a significant
portion of Revenue to VAA and is attributed for the reduction in
revenue from $121.0 million in 2018 to $47.9 million in 2019. The
Gain on disposition of this transaction is currently being deployed
for the development of new multifamily properties according to
TCI’s overall strategy. TCI’s efforts in 2019 were to continue to
grow and develop new multifamily properties and the integration of
certain operating processes with regards to VAA.
In February of 2020, Standard & Poor’s
Global Ratings announced the increase of Southern Properties
Capital (a wholly owned subsidiary of TCI) issued rating to A- from
BBB+ for bonds (Series A and B). In addition, Series C bond rating
(secured by one of Southern Properties Capital’s commercial
properties) increased to A from A-. These credit rating increases
are due to S&P’s expectation of continued improvement in
coverage ratios tied to the expansion of The Company’s
portfolio.
In 2019, TCI deployed over $33.7 million
towards the development of over 2,600 units across more than 6
projects. There are also over a dozen projects in the pipeline that
include parcels of land already owned by the Company. This
recapitalization will strengthen TCI’s position in the marketplace
and overall financial health for the benefit of its shareholders.
There was also $25 million dedicated to Windmill Farms development;
the Company anticipates revenues exceeding that amount over the
next few years, plus recovery tied to the reimbursement of
development expenses by the issuance of revenue bond sales tied to
the Water District.
2. All new multifamily real estate projects
within TCI’s future pipeline are progressing in various stages of
development. This requires initial investment with little to no
cash flow from operations until additional assets become
stabilized.
The Company believes that both the development of new projects
and the historically low interest rate environment has positioned
the Company along the strategic lines that it previously indicated.
The Company has created a dynamic platform to continue its
expansion in the multifamily sector. The ongoing plan is to
continue to develop and acquire apartments in the geographic
markets where demand exceeds supply.
Revenues
Rental and other property revenues were $47.9 million for the
year ended December 31, 2019. This represents a decrease of $73.1
million, as compared to the prior year revenues of $121.0 million.
The decrease is primarily due to the contribution of fifty-two
properties to the joint venture VAA on November 19, 2018.
Expenses
Property operating expenses were $25.2 million for the year
ended December 31, 2019. This represents a decrease of $34.2
million, compared to the prior year operating expenses of $59.4
million. The decrease is primarily due to the contribution of
fifty-two properties to the joint venture VAA on November 19,
2018.
Depreciation and amortization expenses were $13.4 million for
the year ended December 31, 2019. This represents a decrease of
$9.4 million compared to prior year depreciation of $22.8 million.
The decrease is primarily due to the contribution of fifty-two
properties to the joint venture VAA on November 19, 2018.
General and administrative expenses were $10.9 million for the
year ended December 31, 2019. This represents a decrease of $0.5
million compared to the prior year expenses of $11.4 million. There
was a $0.5 million decrease reflected to Advisory fees. The overall
SG&A costs did not decrease associated with the JV; as the
principal partners contribute resources on a non-allocated
basis.
Other income (expense)
Interest income was $19.6 million for the year ended December
31, 2019 compared to $15.8 million for the year ended December 31,
2018 for an increase of $3.8 million. This increase was primarily
due to an increase of $3.8 million in interest on receivable owed
from the Advisor.
Mortgage and loan interest expense was $31.8 million for the
year ended December 31, 2019. This represents a decrease of $27.1
million compared to the prior year expense of $58.9 million. The
decrease is primarily due to the contribution of fifty-two
properties to the joint venture VAA on November 19, 2018.
There was no material gain or loss on sales of income producing
properties was recognized during the year ended December 31, 2019,
as our focus was not on the sale of any assets. Over the past
several years we have successfully disposed of underperforming
assets. As such, there are only a few remaining assets we have a
strong intention of selling. There are also a few more strategic
assets that we are positioned for sale as market conditions
dictate.
The company recorded a non-cash charge of $15.1 million tied to
currency rate exposure associated with TCI’s Bond Offering (SPC).
Historically, the exchange ratio reflects an imbalance which is not
expected to continue. To this point; the exchange rate has enhanced
since 12/31/19. It should be noted that we completed a currency
transaction on 3/18/20 that covered the July 2020 Bond payment. In
reality this transaction dropped the projected non-cash loss by
over $1.3 million.
Gain on land sales was $14.9 million and $17.4 million for the
years ended December 31, 2019 and 2018, respectively.
Other income was $0.084 million and $28.2 million for the years
ended December 31, 2019 and 2018, respectively. TCI’s Other income
category is traditionally low and was abnormally high in 2018 due
to a $17.6 million gain recognized in September 2018 for deferred
income associated with the sale of assets, as well as income of
approximately $7.6 million from insurance proceeds on Mahogany Run
Golf Course.
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.
TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December
31,
2019
2018
2017
(dollars in thousands, except per share
amounts) Revenues:
Rental and other
property revenues (including $841, $767 and $839 for the years
ended 2019, 2018 and 2017, respectively, from related parties)
$
47,970
$
120,955
$
125,233
Expenses:
Property operating expenses (including $991,
$943 and $929 for the years ended 2019, 2018 and 2017,
respectively, from related parties)
25,213
59,420
63,056
Depreciation and amortization
13,379
22,761
25,558
General and administrative (including $4,144, $4,578 and
$3,120 for the years ended 2019, 2018 and 2017, respectively,
from related parties)
10,951
11,359
6,269
Net income fee to related party
357
631
250
Advisory fee to related party
5,806
10,663
9,995
Total
operating expenses
55,706
104,834
105,128
Net operating (loss) income
(7,736
)
16,121
20,105
Other
income (expenses):
Interest income (including $17,413, $13,132 and $11,485 for
the years ended 2019, 2018 and 2017, respectively, from related
parties)
19,607
15,793
13,862
Other income
84
28,150
625
Mortgage and loan interest (including $1,999, $423 and
$1,174 for the year ended 2019, 2018 and 2017, respectively,
from related parties)
(31,816
)
(58,872
)
(59,944
)
Foreign currency transaction (loss) gain
(15,108
)
12,399
(4,536
)
Loss on debt extinguishment
(5,219
)
-
-
Equity (loss) earnings from VAA
(2,774
)
44
-
Earnings from other unconsolidated investees
16
1,085
26
Total
other expenses
(35,210
)
(1,401
)
(49,967
)
(Loss) income before gain on disposition of 50% interest in
VAA, gain on land sales, non-controlling interest, and taxes
(42,946
)
14,720
(29,862
)
Gain
on disposition of 50% interest in VAA
-
154,126
-
(Loss) gain on sale of income producing properties
(80
)
-
9,842
Gain on land sales
14,889
17,404
4,884
Net (loss) income from continuing operations before taxes
(28,137
)
186,250
(15,136
)
Income tax expense - current
-
(1,210
)
(180
)
Income tax benefit (expense) - deferred
2,000
(2,000
)
-
Net (loss) income from continuing operations
(26,137
)
183,040
(15,316
)
Net (loss) income
(26,137
)
183,040
(15,316
)
Net (income) attributable to non-controlling interest
(783
)
(1,590
)
(499
)
Net (loss) income attributable to Transcontinental Realty
Investors, Inc.
(26,920
)
181,450
(15,815
)
Preferred dividend requirement
-
(900
)
(900
)
Net (loss) income applicable to common shares
$
(26,920
)
$
180,550
$
(16,715
)
Earnings
per share - basic
Net (loss) income from continuing operations
$
(3.00
)
$
20.89
$
(1.86
)
Net (loss) income applicable to common shares
$
(3.09
)
$
20.71
$
(1.92
)
Earnings
per share - diluted
Net (loss) income from continuing operations
$
(3.00
)
$
20.89
$
(1.86
)
Net (loss) income applicable to common shares
$
(3.09
)
$
20.71
$
(1.92
)
Weighted average common shares used in computing earnings per share
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
Amounts attributable to Transcontinental Realty Investors,
Inc. Net
(loss) income from continuing operations
$
(26,137
)
$
183,040
$
(15,316
)
Net (loss) income applicable to common shares
$
(26,920
)
$
180,550
$
(16,715
)
TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS December 31,
2019
2018
(dollars in thousands, except share and par value
amounts) Assets Real estate, at cost
$
469,997
$
461,718
Real estate subject to sales contracts at cost
7,966
2,014
Less accumulated depreciation
(90,173
)
(79,228
)
Total real estate
387,790
384,504
Notes and interest receivable (including $57,260 in 2019 and
$51,945 in 2018 from related parties)
120,986
83,541
Cash and cash equivalents
51,179
36,358
Restricted cash
32,082
70,207
Investment in VAA
59,148
68,399
Investment in other unconsolidated investees
22,632
22,172
Receivable from related parties
141,541
133,642
Other assets
50,560
63,557
Total assets
$
865,918
$
862,380
Liabilities and Shareholders’ Equity
Liabilities: Notes and interest payable
$
246,546
$
277,237
Bonds and bond interest payable
229,722
158,574
Deferred revenue (including $9,468 in 2019 and $17,522 in 2018 to
related parties)
9,468
17,522
Deferred tax liability
-
2,000
Accounts payable and other liabilities (including $935 in 2019 and
$3 in 2018 to related parties)
26,115
26,646
Total liabilities
511,851
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
257,853
258,050
Retained earnings
74,665
101,585
Total Transcontinental Realty Investors, Inc. shareholders' equity
332,603
359,720
Non-controlling interest
21,464
20,681
Total shareholders' equity
354,067
380,401
Total liabilities and shareholders' equity
$
865,918
$
862,380
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200330005744/en/
Income Opportunity Realty Investors, Inc. Investor
Relations Daniel Moos (469) 522-4200
investor.relations@transconrealty-invest.com
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