TCI Transcontinental Realty Investment Inc

Transcontinental Realty Investors, Inc. (NYSE: TCI), a Dallas-based real estate investment company, today reported results of operations for the first quarter ended March 31, 2019.

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 million gain. Beginning November 19, 2018, TCI began reflecting its ownership of VAA on the Balance Sheet as an investment and its share of the Revenues, Operating Expenses, Depreciation, Amortization and Interest as “Earning from VAA”. The Statement of Operations for the three months ended March 31, 2018 and the information thereon reflect the operations for the properties contributed to VAA on a consolidated basis.

The Company believes that the completion of the joint venture creating Victory Abode Apartments has positioned the company with 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.

For the three months ended March 31, 2019, we reported a net loss applicable to common shares of $5.6 million or ($0.64) per diluted loss per share compared to a net loss applicable to common shares of $0.5 million or ($0.05) per diluted loss per share for the same period ended 2018.

Revenues

Rental and other property revenues were $11.9 million for the three months ended March 31, 2019, compared to $31.1 million for the same period in 2018. The $19.2 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 53 multifamily residential apartment buildings for the same period a year ago as a result of the deconsolidation of 49 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.

Expense

Property operating expenses decreased by $8.5 million to $6.0 million for the three months ended March 31, 2019 as compared to $14.5 million for the same period in 2018. The decrease in property operating expenses is primarily due to the deconsolidation of 49 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 $1.7 million, real estate taxes of approximately $3.0 million and general property operating and maintenance expenses of $3.8 million.

Depreciation and amortization decreased by $3.3 million to $3.1 million during the three months ended March 31, 2019 as compared to $6.4 million for the three months ended March 31, 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 $2.3 million for the three months ended March 31, 2019, compared to $2.2 million for the same period in 2018. The increase of $0.1 million in general and administrative expenses is the result of increases in advisory and management fees of approximately $0.4 million and professional and finance fees of $0.3 million offset by a decrease in accounting, tax and other general administrative fees of $0.6 million.

Other income (expense)

Interest income was $4.6 million for the three months ended March 31, 2019, compared to $3.9 million for the same period in 2018. The increase of $0.7 million was due to an increase of $1.3 million in interest on receivable owed from our Advisors, offset by a decrease of $0.8 in interest on notes receivable from other related parties.

Other income was $3.9 million for the three months ended March 31, 2019, compared to $1.8 million for the same period in 2018. The increase is primarily the result of a $3.6 million gain recognized for deferred income associated with the sale of land during the quarter just ended held by IOR to third parties.

Mortgage and loan interest expense was $7.9 million for the three months ended March 31, 2019 as compared to $14.1 million for the same period in 2018. The decrease of $6.2 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 $5.8 million for the three months ended March 31, 2019 as compared to a gain of $1.8 million for the same period in 2018. During the first quarter just ended, we paid $10.4 million in principal and $5.8 million in interests payments to our bonds denominated in Israel Shekels.

Loss from unconsolidated investments was $1.1 million for the three months ended March 31, 2019 as compared to earnings of $11 thousand for the three months ended March 31, 2018. The loss from unconsolidated investments during the first quarter just ended was driven primarily from our share in the losses reported by the VAA Joint Venture.

Gain on land sales was $2.2 for the three months ended March 31, 2019, compared to $1.3 million for the same period in 2018. In the current period we sold approximately 22.3 acres of land for a sales price of $8.7 million which resulted in a gain of $2.2 million. For the same period in 2018, we sold 112.2 acres of land for a sales price of $7.2 million and recorded a total gain of $1.3 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 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 (unaudited)   For the Three Months Ended March 31, 2019 2018 (dollars in thousands, except per share amounts) Revenues: Rental and other property revenues (including $113 and $208 for the three months ended 2019 and 2018, respectively, from related parties) $ 11,929 $ 31,082   Expenses: Property operating expenses (including $257 and $227 for the three months ended 2019 and 2018, respectively, from related parties) 5,997 14,455 Depreciation and amortization 3,109 6,446 General and administrative (including $1,500 and $1,093 for the three months ended 2019 and 2018, respectively, from related parties) 2,328 2,192 Net income fee to related party 100 53 Advisory fee to related party   1,648     2,748   Total operating expenses   13,182     25,894   Net operating (loss) income (1,253 ) 5,188   Other income (expenses): Interest income (including $4,285 and $3,236 for the three months ended 2019 and 2018, respectively, from related parties) 4,558 3,876 Other income 3,892 1,826 Mortgage and loan interest (including $490 and $318 for the three months ended 2019 and 2018, respectively, from related parties) (7,959 ) (14,093 ) Foreign currency transaction (loss) gain (5,818 ) 1,756 Equity loss from VAA (1,055 ) - (Losses) earnings from other unconsolidated investees   (7 )   11   Total other expenses   (6,389 )   (6,624 ) Loss before gain on land sales, non-controlling interest, and taxes (7,642 ) (1,436 ) Gain on land sales   2,216     1,335   Net loss from continuing operations before taxes   (5,426 )   (101 ) Net loss from continuing operations (5,426 ) (101 ) Net loss (5,426 ) (101 ) Net (income) attributable to non-controlling interest   (183 )   (132 ) Net loss attributable to Transcontinental Realty Investors, Inc. (5,609 ) (233 ) Preferred dividend requirement   -     (222 ) Net loss applicable to common shares $ (5,609 ) $ (455 )   Earnings per share - basic     Net loss from continuing operations $ (0.64 ) $ (0.05 ) Net loss applicable to common shares $ (0.64 ) $ (0.05 )   Earnings per share - diluted     Net loss from continuing operations $ (0.64 ) $ (0.05 ) Net loss applicable to common shares $ (0.64 ) $ (0.05 )   Weighted average common shares used in computing earnings per share 8,717,767 8,717,767 Weighted average common shares used in computing diluted earnings per share 8,717,767 8,717,767 Amounts attributable to Transcontinental Realty Investors, Inc. Net loss from continuing operations $ (5,609 ) $ (233 ) Net loss applicable to Transcontinental Realty, Investors, Inc. $ (5,609 ) $ (233 )           TRANSCONTINENTAL REALTY INVESTORS, INC. CONSOLIDATED BALANCE SHEETS   March 31, December 31, 2019 2018 (unaudited) (audited)   (dollars in thousands, except share and par value amounts) Assets Real estate, at cost $ 452,761 $ 461,718 Real estate subject to sales contracts at cost 4,325 2,014 Real estate held for sale at cost, net of depreciation 14,737 - Less accumulated depreciation   (81,885 )   (79,228 ) Total real estate 389,938 384,504   Notes and interest receivable (including $48,646 in 2019 and $51,945 in 2018 from related parties) 82,469 83,541 Cash and cash equivalents 28,156 36,358 Restricted cash 51,983 70,207 Investment in VAA 67,229 68,399 Investment in other unconsolidated investees 22,164 22,172 Receivable from related party 143,437 133,642 Other assets   67,238     63,557   Total assets $ 852,614   $ 862,380     Liabilities and Shareholders’ Equity Liabilities: Notes and interest payable $ 283,934 $ 277,237 Bonds and bond interest payable 151,465 158,574 Deferred revenue (including $13,977 in 2019 and $17,522 in 2018 to related parties) 13,977 17,522 Deferred tax liability 2,000 2,000 Accounts payable and other liabilities (including $6 in 2019 and $3 in 2018 to related parties)   26,330     26,646   Total liabilities 477,706 481,979   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 257,983 258,050 Retained earnings   95,976     101,585   Total Transcontinental Realty Investors, Inc. shareholders' equity 354,044 359,720 Non-controlling interest   20,864     20,681   Total shareholders' equity   374,908     380,401   Total liabilities and shareholders' equity $ 852,614   $ 862,380  

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Transcontinental Realty Investors, Inc.Investor RelationsGene Bertcher (800) 400-6407investor.relations@transconrealty-invest.com