Transcontinental Realty Investors, Inc. Reports Third Quarter 2010 Results

Transcontinental Realty Investors, Inc. (NYSE: TCI), a Dallas-based real estate investment company, today reported results of operations for the third quarter ended September 30, 2010. TCI announced today that the Company reported a net loss applicable to common shares of $40.4 million or $4.99 per diluted earnings per share, as compared to a net loss applicable to common shares of $54.8 million or $6.75 per diluted earnings per share for the same period ended 2009.

Rental and other property revenues were $101.8 million for the nine months ended September 30, 2010. This represents an increase of $1.2 million, as compared to the prior period revenues of $100.6 million. The change, by segment, is an increase in the apartment portfolio of $3.9 million, an increase in the land and other portfolios of $0.7 million, offset by a decrease in the commercial portfolio of $3.4 million. The addition of newly constructed apartment complexes has increased our rental revenues by $2.7 million, with the same properties increasing by $1.2 million. Within the commercial portfolio, the same property portfolio decreased by $3.4 million due to an increase in vacancy, which we attribute to the current state of the economy.

Property operating expenses were $58.6 million for the nine months ended September 30, 2010. This represents an increase of $1.8 million, as compared to the prior period operating expenses of $56.8 million. The newly constructed apartment complexes has increased our operating expenses by $1.0 million as those properties were not fully completed in the prior year and the land portfolio has increased by $0.8 million due to a prior year real estate tax accrual adjustments that reduced expenses significantly, in comparison to the current year.

Depreciation and amortization expense were $20.8 million for the nine months ended September 30, 2010. This represents an increase of $1.5 million, as compared to the prior period expense of $19.3 million. This change, by segment, is an increase in the apartment portfolio of $1.5 million, of which $1.0 million is attributable to the developed properties and $0.5 million from the same properties.

General and administrative expenses were $5.0 million for the nine months ended September 30, 2010. This represents a decrease of $2.0 million, as compared to the prior period expense of $7.0 million. This change is due to a reduction in administrative expenses and cost reimbursements to our advisor, in addition to reductions in professional services.

Other income was $1.6 million for the nine months ended September 30, 2010, as compared to $3.6 million in the prior period. This represents a decrease of $2.0 million, which is primarily due to $2.8 million of gain recorded, in the prior period, on the disposition of our investment in the Korean REIT, offset by a fee for services rendered in connection with a sale of mineral rights, owned by a third party, in Poland.

Provision on impairment of notes receivable, investments in real estate partnerships, and real estate assets decreased by $28.6 million as compared to prior period. There were no impairment reserves taken in the current period. Impairment in the prior period was recorded as an additional loss of $1.8 million in the commercial portfolio, $18.0 million in land we currently hold and $8.8 million in land that was sold for a loss in subsequent periods.

Loss on land sales was $6.0 million for the nine months ended September 30, 2010. This represents a decrease of $12.3 million as compared to the prior period gain of $6.3 million.

Included in discontinued operations are a total of 10 and 16 properties for 2010 and 2009, respectively. Properties sold in 2010 have been reclassified to discontinued operations for current and prior year reporting periods. The gain on sale of the properties is also included in discontinued operations for those years.

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 equity ownership and partnerships nationwide. For more information, visit the Company’s website at www.transconrealty-invest.com .
TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
               
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
(dollars in thousands, except share and per share amounts)
Revenues:
Rental and other property revenues $ 33,070 $ 33,643 $ 101,773 $ 100,581
 
Expenses:
Property operating expenses 19,288 19,617 58,663 56,825
Depreciation and amortization 6,996 6,381 20,842 19,309
General and administrative 1,346 2,564 4,976 7,014
Provision on impairment of notes receivable and real estate assets - - - 28,575
Advisory fee to affiliate   3,054     3,073     9,112     8,874  
Total operating expenses   30,684     31,635     93,593     120,597  
Operating income (loss) 2,386 2,008 8,180 (20,016 )
 
Other income (expense):
Interest income 669 582 2,360 1,949
Other income 640 295 1,554 3,579
Mortgage and loan interest (15,262 ) (16,717 ) (48,376 ) (47,999 )
Earnings from unconsolidated subsidiaries and investees (70 ) (53 ) (323 ) (353 )
Litigation settlement   -     (64 )   -     681  
Total other expenses   (14,023 )   (15,957 )   (44,785 )   (42,143 )
Loss before gain on land sales, non-controlling interest, and tax (11,637 ) (13,949 ) (36,605 ) (62,159 )
Gain (loss) on land sales   (371 )   -     (6,005 )   6,296  
Loss from continuing operations before tax (12,008 ) (13,949 ) (42,610 ) (55,863 )
Income tax benefit   1,006     951     1,071     490  
Net loss from continuing operations   (11,002 )   (12,998 )   (41,539 )   (55,373 )
Discontinued operations:
Loss from discontinued operations (1,018 ) (309 ) (832 ) (1,658 )
Gain on sale of real estate from discontinued operations 3,893 3,027 3,754 3,559
Income tax expense from discontinued operations   (1,006 )   (951 )   (1,023 )   (665 )
Net income from discontinued operations 1,869 1,767 1,899 1,236
Net loss (9,133 ) (11,231 ) (39,640 ) (54,137 )
Net (income) loss attributable to non-controlling interest   178     (62 )   18     136  
Net loss attributable to Transcontinental Realty Investors, Inc. (8,955 ) (11,293 ) (39,622 ) (54,001 )
Preferred dividend requirement   (269 )   (254 )   (797 )   (756 )
Net loss applicable to common shares $ (9,224 ) $ (11,547 ) $ (40,419 ) $ (54,757 )
 
Earnings per share - basic
Loss from continuing operations $ (1.37 ) $ (1.64 ) $ (5.22 ) $ (6.90 )
Discontinued operations   0.23     0.22     0.23     0.15  
Net loss applicable to common shares $ (1.14 ) $ (1.42 ) $ (4.99 ) $ (6.75 )
 
Earnings per share - diluted
Loss from continuing operations $ (1.37 ) $ (1.64 ) $ (5.22 ) $ (6.90 )
Discontinued operations   0.23     0.22     0.23     0.15  
Net loss applicable to common shares $ (1.14 ) $ (1.42 ) $ (4.99 ) $ (6.75 )
 
Weighted average common share used in computing earnings per share 8,113,495 8,113,669 8,113,610 8,113,669
Weighted average common share used in computing diluted earnings per share 8,113,495 8,113,669 8,113,610 8,113,669
 
 
Amounts attributable to Transcontinental Realty Investors, Inc.
Loss from continuing operations $ (10,824 ) $ (13,060 ) $ (41,521 ) $ (55,237 )
Income from discontinued operations   1,869     1,767     1,899     1,236  
Net loss $ (8,955 ) $ (11,293 ) $ (39,622 ) $ (54,001 )
 
TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
     
September 30, December 31,
2010 2009
(dollars in thousands, except share and par value amounts)
Assets
Real estate, at cost $ 1,424,078 $ 1,520,043
Real estate held for sale at cost, net of depreciation 16,251 5,147
Real estate subject to sales contracts at cost, net of depreciation 23,985 59,048
Less accumulated depreciation   (141,812 )   (137,054 )
Total real estate 1,322,502 1,447,184
Notes and interest receivable
Performing 69,579 48,051
Less allowance for estimated losses   (2,804 )   (2,804 )
Total notes and interest receivable 66,775 45,247
Cash and cash equivalents 5,037 5,665
Investments in unconsolidated subsidiaries and investees 8,745 9,358
Other assets   88,051     100,833  
Total assets $ 1,491,110   $ 1,608,287  
 
Liabilities and Shareholders’ Equity
Liabilities:
Notes and interest payable $ 1,055,811 $ 1,121,737
Notes related to assets held-for-sale 15,036 5,002
Notes related to subject to sales contracts 18,754 61,886
Affiliate payables 48,108 50,163
Deferred revenue (from sales to related parties) 89,129 60,678
Accounts payable and other liabilities   59,375     63,405  
1,286,213 1,362,871
Shareholders’ equity:
Preferred stock, Series C: $.01 par value, authorized 10,000,000 shares, issued and outstanding 30,000 shares in 2010 and 2009 respectively (liquidation preference $100 per share). Series D: $.01 par value, authorized, issued and outstanding 100,000 shares in 2010 and 2009 respectively 1 1
Common stock, $.01 par value, authorized 10,000,000 shares; issued 8,113,669 and outstanding 8,113,469 and 8,113,669 for 2010 and 2009 81 81
Treasury stock at cost; 200 and 0 shares in 2010 and 2009 (2 ) -
Paid-in capital 261,321 262,118
Retained earnings   (74,340 )   (34,718 )
Total Transcontinental Realty Investors, Inc. shareholders' equity 187,061 227,482
Non-controlling interest   17,836     17,934  
Total equity   204,897     245,416  
Total liabilities and equity $ 1,491,110   $ 1,608,287  

Copyright Business Wire 2010

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