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Transcontinental Realty Investors, Inc. Reports Second Quarter 2018 Results

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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, 2018. For the three months ended June 30,
2018, we reported net income applicable to common shares of $7.0 million
or ($0.81) per share compared to a net loss applicable to common shares
of $10.6 million or ($1.22) per share for the same period ended 2017.

The Company maintained its overall focus on growing its portfolio and is
working on several strategic initiatives that we previously announced
earlier this year. Overall, management remains very encouraged about the
overall performance of the company; especially tied to the quality of
our assets in our portfolio, and the new multifamily apartment projects
under various stages of development.

Revenues

Rental and other property revenues were $31.6 million for the three
months ended June 30, 2018. This represents an increase of $0.3 million
compared to the prior period revenues of $31.3 million. The increase is
driven primarily by an increase in revenues of $1.2 million from our
apartment operating segment, offset by a decrease of $0.9 million from
our commercial segment.

Expense

Property operating expenses were $15.5 million for the three months
ended June 30, 2018. This represents an increase of $0.3 million
compared to the prior period operating expenses of $15.2 million. The
increase is due to increases in operating expenses in the apartment
portfolio of $1.0 million, offset by a decrease in the commercial
portfolio of $0.5 million and a decrease in the land portfolio of $0.1
million.

Depreciation and amortization expense was $6.5 million for the three
months ended June 30, 2018 for an increase of $0.1 million as compared
to the prior period expense of $6.4 million. The change is attributable
to the depreciation on acquired apartments.

General and Administrative expenses were $2.2 million for the three
months ended June 30, 2018. This represents an increase of $0.9 million
compared to the prior period expense of $1.3 million. The increase is
due to an increase in expense reimbursements paid to our advisor of
approximately $0.7 million and professional fees for audit and tax
services of approximately $0.2 million.

Other income (expense)

Mortgage and loan interest expense was $14.2 million for the three
months ended June 30, 2018. This represents a decrease of $1.6 million
compared to the prior period expense of $15.8 million. The change by
segment is a decrease in the other portfolio of $1.2 million, land
portfolio of $0.5 million and a decrease in the commercial portfolio of
$0.2 million, offset by an increase in the apartment portfolio of $0.3
million. Within the other portfolio, the decrease is primarily due to
$1.2 million of interest expense savings related to maturing notes
payable paid during the first quarter of 2018.

Other income was $7.5 million for the three months ended June 30, 2018.
This represents an increase of $7.6 million compared to prior period
other expense of $0.1 million. The increase is the result of insurance
proceeds of approximately $6.6 million received subsequent to the "as
is" sale of a property damaged by a hurricane, and other miscellaneous
income of approximately $1.0 million.

Foreign currency transaction was a gain of $5.9 million for the three
months ended June 30, 2018. This represents an increase of $9.3 million
compared to prior period foreign currency transaction loss of $3.4
million. The increase is the result of a gain in foreign currency
exchange as a result of the favorable exchange rate between the Israel
Shekels and the U.S. Dollar related to our Bond program.

For the three months ended June 30, 2018, we sold a golf course for a
total sales price of $2.3 million and recorded no gain or loss on the
sale. For the same period in 2017, the Company recorded a loss of
approximately $0.5 million from the sale of 8.3 acres of land for a
sales price of $0.5 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)
 
    Three Months Ended       Six Months Ended
June 30,

June 30,

2018     2017 2018     2017
(dollars in thousands, except share and par value amounts)
Revenues:
Rental and other property revenues (including $208 and $199 for the
three months and $415 and $389 for the six months ended 2018 and
2017, respectively, from related parties)
$ 31,607 $ 31,302 $ 62,689 $ 62,837
 
Expenses:
Property operating expenses (including $231 and $232 for the three
months and $458 and $460 for the six months ended 2018 and 2017,
respectively, from related parties)
15,492 15,210 29,947 31,099
Depreciation and amortization 6,522 6,378 12,968 12,681
General and administrative (including $1,187 and $558 for the three
months and $2,280 and $1,072 for the six months ended 2018 and 2017,
respectively, from related parties)
2,173 1,295 4,365 3,075
Net income fee to related party 53 76 106 136
Advisory fee to related party   2,726     2,501     5,474     4,806  
Total operating expenses   26,966     25,460     52,860     51,797  
Net operating income 4,641 5,842 9,829 11,040
 
Other income (expenses):

Interest income (including $3,486 and $3,070 for the three months
and $6,722 and $6,502 for the six months ended 2018 and 2017,
respectively, from related parties)

3,544 3,709 7,420 7,130
Other income (expense) 7,482 (104 ) 9,308 1,338
Mortgage and loan interest (including $327 and $283 for the three
months and $645 and $836 for the six months ended 2018 and 2017,
respectively, from related parties)
(14,175 ) (15,783 ) (28,268 ) (30,973 )
Foreign currency transaction gain (loss) 5,889 (3,425 ) 7,645 (3,748 )
Earnings (losses) from unconsolidated joint ventures and investees   (9 )   (10 )   2     (18 )
Total other income (expenses)   2,731     (15,613 )   (3,893 )   (26,271 )
Gain (Loss) before gain on land sales, non-controlling interest, and
taxes
7,372 (9,771 ) 5,936 (15,231 )
(Loss) gain on land sales   -     (476 )   1,335     (31 )
Net income (loss) from continuing operations before taxes   7,372     (10,247 )   7,271     (15,262 )
Net income (loss) from continuing operations 7,372 (10,247 ) 7,271 (15,262 )
Net income (loss) 7,372 (10,247 ) 7,271 (15,262 )
Net (income) attributable to non-controlling interest   (126 )   (163 )   (258 )   (282 )
Net income (loss) attributable to Transcontinental Realty Investors,
Inc.
7,246 (10,410 ) 7,013 (15,544 )
Preferred dividend requirement   (224 )   (224 )   (446 )   (446 )
Net income (loss )applicable to common shares $ 7,022   $ (10,634 ) $ 6,567   $ (15,990 )
 
Earnings per share - basic        
Net income (loss) from continuing operations $ 0.81   $ (1.22 ) $ 0.75   $ (1.83 )
 
Earnings per share - diluted        
Net income (loss) from continuing operations $ 0.81   $ (1.22 ) $ 0.75   $ (1.83 )
 
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 income (loss) from continuing operations $ 7,246   $ (10,410 ) $ 7,013   $ (15,544 )
Net income (loss) applicable to Transcontinental Realty, Investors,
Inc.
$ 7,246   $ (10,410 ) $ 7,013   $ (15,544 )
 
 
TRANSCONTINENTAL REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
       
June 30, December 31,
2018 2017
(unaudited) (audited)
(dollars in thousands, except share and par value amounts)
Assets
Real estate, at cost $ 1,150,055 $ 1,112,721
Real estate subject to sales contracts at cost 43,767 45,739
Less accumulated depreciation   (184,741 )   (178,590 )
Total real estate 1,009,081 979,870
 
Notes and interest receivable (including $50,020 in 2018 and $45,155
in 2017 from related parties)
83,463 70,166
 
Cash and cash equivalents 28,105 42,705
Restricted cash 64,669 45,637
Investments in unconsolidated joint ventures and investees 2,474 2,472
Receivable from related party 126,181 111,665
Other assets   54,772     60,907  
Total assets $ 1,368,745   $ 1,313,422  
 
Liabilities and Shareholders' Equity
Liabilities:
Notes and interest payable $ 915,183 $ 892,149
Notes related to real estate held for sale 376 376
Notes related to real estate subject to sales contracts - 1,957
Bond and bond interest payable 143,897 113,047
Deferred revenue (including $40,907 in 2018 and $40,574 in 2017 to
related parties)
62,166 60,949

Accounts payable and other liabilities (including $6,930 in 2018
and $7,236 in 2017 to related parties)

  32,037     36,683  
Total liabilities 1,153,659 1,105,161
 
Shareholders' equity:
Preferred stock, Series C: $0.01 par value, authorized 10,000,000
shares; issued and outstanding zero shares in 2018 and 2017. Series
D: $0.01 par value, authorized, issued and outstanding 100,000
shares in 2018 and 2017 (liquidation preference $100 per share)
1 1
Common stock, $0.01 par value, authorized 10,000,000 shares; issued
8,717,967 shares in 2018 and 2017; outstanding 8,717,767 shares in
2018 and 2017
87 87
Treasury stock at cost, 200 shares in 2018 and 2017 (2 ) (2 )
Paid-in capital 268,503 268,949
Retained deficit   (72,852 )   (79,865 )
Total Transcontinental Realty Investors, Inc. shareholders' equity 195,737 189,170
Non-controlling interest   19,349     19,091  
Total shareholders' equity   215,086     208,261  
Total liabilities and shareholders' equity $ 1,368,745   $ 1,313,422  
 

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