Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the Registrant under any of the following
provisions:
Indicate by check mark whether the Registrant is an emerging growth company as defined in Rule 405 of the Securities Act of
1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the
extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act.
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf
by the undersigned, hereunto duly authorized.
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Dated: April 2, 2020
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TRANSCONTINENTAL REALTY INVESTORS, INC.
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By:
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/s/ Daniel J. Moos
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Daniel J. Moos
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President and
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Chief Executive Officer
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Exhibit "99.1"
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NEWS RELEASE
FOR IMMEDIATE RELEASE
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Contact:
Transcontinental Realty Investors, Inc.
Investor Relations
Daniel Moos
(469) 522-4200
investor.relations@transconrealty-invest.com
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Transcontinental Realty
Investors, Inc. reports 2019 results
Dallas (April 1, 2020) - 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:
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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.
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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.
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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.
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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.
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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.
