x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Nevada
|
94-6565852
|
(State or Other Jurisdiction of
Incorporation or Organization)
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer ¨
|
Accelerated filer
|
¨
|
|
Non-accelerated filer ¨ (do not check if a smaller reporting company)
|
Smaller reporting company
|
x
|
Common Stock, $.01 par value
|
8,413,469
|
(Class)
|
(Outstanding at November 5, 2011)
|
·
|
Page 6-10, Item 1 “Financial Statements.” The consolidated balance sheets, consolidated statements of operations, consolidated statements of shareholders’ equity, consolidated statements of comprehensive income (loss) and consolidated statements of cash flow have been revised, in the current period, to reflect the written request of the Staff of the Securities and Exchange Commission on March 27, 2012, to correctly adhere to the guidelines presented in paragraphs 250-10-45-22 to 24 of the FASB Accounting Standards Codification. Assets transferred to Transcontinental Realty Investors, Inc. (“TCI”), from its parent, American Realty Investors, Inc. (“ARL”) were originally, and have been historically, recorded at fair value and have been corrected to reflect ARL’s original cost basis. During an eight year period following the consolidation of TCI as of March 2003, ARL sold to TCI a total of 14 properties (most of which were transactions for undeveloped land) for a total purchase price of $116.0 million. ARL’s cost basis for such transactions was $60.0 million, resulting in a total step-up in basis for TCI of $56.0 million. The consideration provided for such acquisitions was through affiliate/intercompany obligations, not cash transfers. Of the $56.0 million step-up in TCI’s basis from such sales, approximately $26.6 million related to assets no longer held by TCI which were sold in 2011. To better comply with the accounting literature and requirements, TCI reduced its intercompany obligations to ARL and reversed the income statement effect resulting from the disposition of such assets. This results in an increase in net income of approximately 26.6 million for TCI.
|
·
|
Page 16, Item 1, Note 2 “Real Estate Activity.” An addition was made to the real estate activity disclosure to describe the correction to the asset values of those assets acquired by TCI from its parent, ARL, at cost basis.
|
·
|
Page 19, Item 1, Note 6 “Related Party Transactions.” In correcting the cost basis for assets sold from ARL to TCI, the related party obligations between TCI and ARL were reduced and the change was reflected in the footnote disclosure.
|
·
|
Page 20-22, Item 1, Note 7 “Operating Segments.” The operating segments were adjusted, in the current period, to reflect the changes in the financial statements.
|
·
|
Page 23-24, Item 1, Note 8 “Discontinued Operations.” The discontinued operations were adjusted, in the current period, to reflect the changes in the financial statements.
|
·
|
Page 25-34, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” A disclosure was added to describe the correction to the asset values of those assets acquired by TCI from its parent, ARL, at cost basis and the financial results and description of variances were adjusted to reflect the financial statement changes.
|
·
|
Exhibit 31.1 – Certification by the Principal Executive Officer required by Securities Exchange Act Rules 13a-14 and 15d-14
|
·
|
Exhibit 31.2 – Certification by the Principal Financial Officer required by Securities Exchange Act Rules 13a-14 and 15d-14
|
·
|
Exhibit 32.1 – Certification pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
TRANSCONTINENTAL REALTY INVESTORS, INC.
|
|
Date: May 1, 2012 | By:/s/ Daniel J. Moos |
Daniel J. Moos | |
President and Chief Executive Officer | |
(Principal Executive Officer) | |
Date: May 1, 2012 | By:/s/ Gene S. Bertcher |
Gene S. Bertcher | |
Executive Vice President and Chief Financial Officer | |
(Principal Financial Officer) |
PAGE
|
||
PART I.
|
FINANCIAL INFORMATION
|
|
Item 1.
|
Financial Statements
|
|
Consolidated Balance Sheets at September 30, 2011 (unaudited) and December 31, 2010
|
6
|
|
Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010 (unaudited)
|
7
|
|
Consolidated Statement of Shareholders’ Equity for the nine months ended September 30, 2011 (unaudited)
|
8
|
|
Consolidated Statements of Comprehensive Income (Loss) for the nine months ended September 30, 2011 and 2010 (unaudited)
|
9
|
|
Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010 (unaudited)
|
10
|
|
Notes to Consolidated Financial Statements
|
11
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
25
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risks
|
35
|
Item 4.
|
Controls and Procedures
|
35
|
PART II.
|
OTHER INFORMATION
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
36
|
Item 6.
|
Exhibits
|
37
|
SIGNATURES
|
38
|
TRANSCONTINENTAL REALTY INVESTORS, INC.
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
(unaudited)
|
||||||||
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
(dollars in thousands, except share and
par value amounts)
|
||||||||
Assets
|
||||||||
Real estate, at cost
|
$ | 1,009,117 | $ | 1,074,635 | ||||
Real estate subject to sales contracts at cost, net of depreciation ($39,606 for 2011 and $58,579 for 2010)
|
82,546 | 232,495 | ||||||
Less accumulated depreciation
|
(108,435 | ) | (94,016 | ) | ||||
Total real estate
|
983,228 | 1,213,114 | ||||||
Notes and interest receivable
|
||||||||
Performing (including $58,450 in 2011 and $66,011 in 2010 from affiliates and related parties)
|
58,895 | 71,766 | ||||||
Non-performing
|
1,432 | - | ||||||
Less allowance for estimated losses (including $2,097 in 2011 and $3,061 in 2010 from affiliates and
related parties)
|
(3,777 | ) | (4,741 | ) | ||||
Total notes and interest receivable
|
56,550 | 67,025 | ||||||
Cash and cash equivalents
|
7,741 | 11,259 | ||||||
Investments in unconsolidated subsidiaries and investees
|
8,015 | 8,146 | ||||||
Affiliate receivables
|
24,268 | - | ||||||
Other assets
|
68,413 | 85,217 | ||||||
Total assets
|
$ | 1,148,215 | $ | 1,384,761 | ||||
Liabilities and Shareholders’ Equity
|
||||||||
Liabilities:
|
||||||||
Notes and interest payable
|
$ | 797,400 | $ | 831,322 | ||||
Notes related to subject to sales contracts
|
64,412 | 190,693 | ||||||
Affiliate payables
|
- | 47,261 | ||||||
Deferred gain (from sales to related parties)
|
81,827 | 82,841 | ||||||
Accounts payable and other liabilities (including $1,735 in 2011 and $1,466 in 2010 from affiliates and related parties)
|
44,157 | 49,196 | ||||||
987,796 | 1,201,313 | |||||||
Shareholders’ equity:
|
||||||||
Preferred stock, Series C: $.01 par value, authorized 10,000,000 shares, issued and outstanding 30,000 shares in 2011 and 2010 respectively (liquidation preference $100 per share). Series D: $.01 par value, authorized, issued and outstanding 100,000 shares in 2011 and 2010 respectively.
|
1 | 1 | ||||||
Common stock, $.01 par value, authorized 10,000,000 shares; issued 8,413,669 and 8,113,669 for 2011 and 2010 and outstanding 8,413,469 and 8,113,469 for 2011 and 2010 respectively.
|
84 | 81 | ||||||
Treasury stock at cost; 200 shares in 2011 and 2010
|
(2 | ) | (2 | ) | ||||
Paid-in capital
|
274,165 | 271,682 | ||||||
Retained earnings
|
(127,167 | ) | (101,914 | ) | ||||
Total Transcontinental Realty Investors, Inc. shareholders' equity
|
147,081 | 169,848 | ||||||
Non-controlling interest
|
13,338 | 13,600 | ||||||
Total equity
|
160,419 | 183,448 | ||||||
Total liabilities and equity
|
$ | 1,148,215 | $ | 1,384,761 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
|
TRANSCONTINENTAL REALTY INVESTORS, INC.
|
||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
For the Three Months Ended
|
For the Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
(dollars in thousands, except share and per share amounts)
|
||||||||||||||||
Revenues:
|
||||||||||||||||
Rental and other property revenues (including $17 and $450 for the three
months and $50 and $1,363 for the nine months ended 2011 and 2010
respectively from affiliates and related parties)
|
$ | 31,302 | $ | 28,124 | $ | 89,796 | $ | 85,441 | ||||||||
Expenses:
|
||||||||||||||||
Property operating expenses (including $245 and $331 for the three
months and $882 and $970 for the nine months ended 2011 and 2010
respectively from affiliates and related parties)
|
17,206 | 16,098 | 48,253 | 49,062 | ||||||||||||
Depreciation and amortization
|
5,812 | 5,817 | 15,470 | 17,284 | ||||||||||||
General and administrative (including $720 and $471 for the three
months and $2,467 and $2,148 for the nine months ended 2011 and
2010 respectively from affiliates and related parties)
|
2,798 | 1,338 | 7,452 | 4,955 | ||||||||||||
Provision on impairment of notes receivable and real estate assets
|
- | - | 5,622 | - | ||||||||||||
Advisory fee to affiliate
|
2,441 | 3,054 | 7,688 | 9,112 | ||||||||||||
Total operating expenses
|
28,257 | 26,307 | 84,485 | 80,413 | ||||||||||||
Operating income
|
3,045 | 1,817 | 5,311 | 5,028 | ||||||||||||
Other income (expense):
|
||||||||||||||||
Interest income (including $483 and $458 for the three months and
$1,534 and $1,679 for the nine months ended 2011 and 2010 respectively
from affiliates and related parties)
|
497 | 669 | 1,627 | 2,360 | ||||||||||||
Other income
|
113 | 640 | 1,878 | 1,554 | ||||||||||||
Mortgage and loan interest (including $47 and $698 for the three
months and $1,614 and $2,419 for the nine months ended 2011 and
2010 respectively from affiliates and related parties)
|
(12,525 | ) | (13,267 | ) | (39,553 | ) | (42,307 | ) | ||||||||
Loss on the sale of investments
|
(32 | ) | - | (483 | ) | - | ||||||||||
Earnings from unconsolidated subsidiaries and investees
|
250 | (10 | ) | 378 | (122 | ) | ||||||||||
Total other expenses
|
(11,697 | ) | (11,968 | ) | (36,153 | ) | (38,515 | ) | ||||||||
Loss before gain on land sales, non-controlling interest, and tax
|
(8,652 | ) | (10,151 | ) | (30,842 | ) | (33,487 | ) | ||||||||
Gain (loss) on land sales
|
6,285 | (371 | ) | 8,366 | (6,005 | ) | ||||||||||
Loss from continuing operations before tax
|
(2,367 | ) | (10,522 | ) | (22,476 | ) | (39,492 | ) | ||||||||
Income tax benefit (expense)
|
(1,007 | ) | (486 | ) | 1,152 | 117 | ||||||||||
Net loss from continuing operations
|
(3,374 | ) | (11,008 | ) | (21,324 | ) | (39,375 | ) | ||||||||
Discontinued operations:
|
||||||||||||||||
Income (loss) from discontinued operations
|
6 | (2,504 | ) | (2,927 | ) | (3,950 | ) | |||||||||
Gain (loss) on sale of real estate from discontinued operations
|
2,872 | 3,893 | (365 | ) | 3,754 | |||||||||||
Income tax benefit (expense) from discontinued operations
|
1,007 | 486 | (1,152 | ) | (69 | ) | ||||||||||
Net income (loss) from discontinued operations
|
3,885 | 1,875 | (4,444 | ) | (265 | ) | ||||||||||
Net loss
|
511 | (9,133 | ) | (25,768 | ) | (39,640 | ) | |||||||||
Net loss attributable to non-controlling interest
|
384 | 178 | 515 | 18 | ||||||||||||
Net loss attributable to Transcontinental Realty Investors, Inc.
|
895 | (8,955 | ) | (25,253 | ) | (39,622 | ) | |||||||||
Preferred dividend requirement
|
(279 | ) | (269 | ) | (831 | ) | (797 | ) | ||||||||
Net loss applicable to common shares
|
$ | 616 | $ | (9,224 | ) | $ | (26,084 | ) | $ | (40,419 | ) | |||||
Earnings per share - basic
|
||||||||||||||||
Loss from continuing operations
|
$ | (0.39 | ) | $ | (1.37 | ) | $ | (2.59 | ) | $ | (4.95 | ) | ||||
Income (loss) from discontinued operations
|
0.46 | 0.23 | (0.53 | ) | (0.03 | ) | ||||||||||
Net loss applicable to common shares
|
$ | 0.07 | $ | (1.14 | ) | $ | (3.12 | ) | $ | (4.98 | ) | |||||
Earnings per share - diluted
|
||||||||||||||||
Loss from continuing operations
|
$ | (0.39 | ) | $ | (1.37 | ) | $ | (2.59 | ) | $ | (4.95 | ) | ||||
Income (loss) from discontinued operations
|
0.46 | 0.23 | (0.53 | ) | (0.03 | ) | ||||||||||
Net loss applicable to common shares
|
$ | 0.07 | $ | (1.14 | ) | $ | (3.12 | ) | $ | (4.98 | ) | |||||
Weighted average common share used in computing earnings per share
|
8,413,469 | 8,113,495 | 8,356,326 | 8,113,610 | ||||||||||||
Weighted average common share used in computing diluted earnings per share
|
8,413,469 | 8,113,495 | 8,356,326 | 8,113,610 | ||||||||||||
Amounts attributable to Transcontinental Realty Investors, Inc.
|
||||||||||||||||
Loss from continuing operations
|
$ | (2,990 | ) | $ | (10,830 | ) | $ | (20,809 | ) | $ | (39,357 | ) | ||||
Income (loss) from discontinued operations
|
3,885 | 1,875 | (4,444 | ) | (265 | ) | ||||||||||
Net loss
|
$ | 895 | $ | (8,955 | ) | $ | (25,253 | ) | $ | (39,622 | ) | |||||
The accompanying notes are an integral part of these consolidated financial statements.
|
||||||||||||||||
TRANSCONTINENTAL REALTY INVESTORS, INC.
|
||||||||||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
|
||||||||||||||||||||||||||||||||||||||||
For the Nine Months Ended September 30, 2011
|
||||||||||||||||||||||||||||||||||||||||
(unaudited)
|
||||||||||||||||||||||||||||||||||||||||
(dollars in thousands)
|
||||||||||||||||||||||||||||||||||||||||
|
Accumulated
|
|||||||||||||||||||||||||||||||||||||||
Comprehensive
|
Preferred
|
Common Stock
|
Treasury
|
Paid-in
|
Retained
|
Other
Comprehensive |
Non-Controlling
|
|||||||||||||||||||||||||||||||||
Total
|
Loss
|
Stock
|
Shares
|
Amount
|
Stock
|
Capital
|
Earnings
|
Income (Loss)
|
Interest
|
|||||||||||||||||||||||||||||||
Balance, December 31, 2010
|
$ | 183,448 | $ | (105,122 | ) | $ | 1 | 8,113,669 | $ | 81 | $ | (2 | ) | $ | 271,682 | $ | (101,914 | ) | $ | - | $ | 13,600 | ||||||||||||||||||
Series C preferred stock dividends (7.0% per year)
|
(158 | ) | - | - | - | - | - | (158 | ) | - | - | - | ||||||||||||||||||||||||||||
Series D preferred stock dividends (8.5% per year)
|
(673 | ) | - | - | - | - | - | (673 | ) | - | - | - | ||||||||||||||||||||||||||||
Net loss
|
(25,768 | ) | (25,768 | ) | - | - | - | - | - | (25,253 | ) | - | (515 | ) | ||||||||||||||||||||||||||
Issuance of common stock
|
1,530 | - | - | 300,000 | 3 | - | 1,527 | - | - | - | ||||||||||||||||||||||||||||||
Sale of controlling interest
|
2,047 | - | - | - | - | - | 1,787 | - | - | 260 | ||||||||||||||||||||||||||||||
Distributions to non-controlling interests
|
(7 | ) | - | - | - | - | - | - | - | - | (7 | ) | ||||||||||||||||||||||||||||
Balance, September 30, 2011
|
$ | 160,419 | $ | (130,890 | ) | $ | 1 | 8,413,669 | $ | 84 | $ | (2 | ) | $ | 274,165 | $ | (127,167 | ) | $ | - | $ | 13,338 | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
|
TRANSCONTINENTAL REALTY INVESTORS, INC.
|
||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
||||||||
(unaudited)
|
||||||||
For the Nine Months Ended
|
||||||||
September 30,
|
||||||||
2011
|
2010
|
|||||||
(dollars in thousands)
|
||||||||
Net loss
|
$ | (25,768 | ) | $ | (39,640 | ) | ||
Other comprehensive income (loss)
|
- | - | ||||||
Total other comprehensive income (loss)
|
- | - | ||||||
Comprehensive loss
|
(25,768 | ) | (39,640 | ) | ||||
Comprehensive loss attributable to non-controlling interest
|
515 | 18 | ||||||
Comprehensive loss attributable to Transcontinental Realty Investors, Inc.
|
$ | (25,253 | ) | $ | (39,622 | ) | ||
The accompanying notes are an integral part of these consolidated financial statements.
|
TRANSCONTINENTAL REALTY INVESTORS, INC.
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(unaudited)
|
||||||||
For the Nine Months Ended
|
||||||||
September 30,
|
||||||||
2011
|
2010
|
|||||||
(dollars in thousands)
|
||||||||
Cash Flow From Operating Activities:
|
||||||||
Net loss
|
$ | (25,768 | ) | $ | (39,640 | ) | ||
Adjustments to reconcile net loss applicable to common
shares to net cash used in operating activities:
|
||||||||
(Gain) loss on sale of land
|
(8,366 | ) | 6,005 | |||||
(Gain) loss on sale of income producing properties
|
365 | (3,754 | ) | |||||
Depreciation and amortization
|
17,292 | 21,649 | ||||||
Provision on impairment of notes receivable and real estate assets
|
6,503 | - | ||||||
Amortization of deferred borrowing costs
|
2,071 | 1,577 | ||||||
Earnings from unconsolidated subsidiaries and investees
|
(378 | ) | 122 | |||||
(Increase) decrease in assets:
|
||||||||
Accrued interest receivable
|
15 | (343 | ) | |||||
Other assets
|
(964 | ) | 8,561 | |||||
Prepaid expense
|
2,312 | 815 | ||||||
Escrow
|
7,624 | 5,537 | ||||||
Earnest money
|
1,385 | 900 | ||||||
Rent receivables
|
3,712 | (1,726 | ) | |||||
Affiliate receivables
|
(24,268 | ) | - | |||||
Increase (decrease) in liabilities:
|
||||||||
Accrued interest payable
|
3,786 | 1,239 | ||||||
Affiliate payables
|
(47,261 | ) | (2,055 | ) | ||||
Other liabilities
|
(6,790 | ) | (4,324 | ) | ||||
Net cash used in operating activities
|
(68,730 | ) | (5,437 | ) | ||||
Cash Flow From Investing Activities:
|
||||||||
Proceeds from notes receivable
|
12,849 | 1,443 | ||||||
Originations or advances on notes receivable
|
(1,425 | ) | (22,339 | ) | ||||
Acquisition of land held for development
|
30,419 | (4,937 | ) | |||||
Acquisition of income producing properties
|
13,588 | - | ||||||
Proceeds from sale of income producing properties
|
106,940 | 146,131 | ||||||
Proceeds from sale of land
|
107,365 | 15,674 | ||||||
Proceeds from sale of investment in unconsolidated real estate entities
|
(9 | ) | - | |||||
Proceeds from sale of investments
|
592 | - | ||||||
Investment in unconsolidated real estate entities
|
(306 | ) | 395 | |||||
Improvement of land held for development
|
(1,270 | ) | (1,820 | ) | ||||
Improvement of income producing properties
|
(2,069 | ) | (2,017 | ) | ||||
Sales of controlling interest
|
2,047 | 22 | ||||||
Construction and development of new properties
|
(39,927 | ) | (23,801 | ) | ||||
Net cash provided by investing activities
|
228,794 | 108,751 | ||||||
Cash Flow From Financing Activities:
|
||||||||
Proceeds from notes payable
|
111,987 | 122,248 | ||||||
Recurring amortization of principal on notes payable
|
(11,321 | ) | (9,484 | ) | ||||
Payments or debt assumption on maturing notes payable
|
(116,913 | ) | (115,254 | ) | ||||
Debt assumption by buyer
|
(147,742 | ) | (97,772 | ) | ||||
Deferred financing costs
|
(299 | ) | (2,876 | ) | ||||
Distributions to non-controlling interests
|
7 | (7 | ) | |||||
Common stock issuance
|
1,530 | - | ||||||
Preferred stock dividends - Series C
|
(158 | ) | (159 | ) | ||||
Preferred stock dividends - Series D
|
(673 | ) | (638 | ) | ||||
Net cash used in financing activities
|
(163,582 | ) | (103,942 | ) | ||||
Net decrease in cash and cash equivalents
|
(3,518 | ) | (628 | ) | ||||
Cash and cash equivalents, beginning of period
|
11,259 | 5,665 | ||||||
Cash and cash equivalents, end of period
|
$ | 7,741 | $ | 5,037 | ||||
Supplemental disclosures of cash flow information:
|
||||||||
Cash paid for interest
|
$ | 38,651 | $ | 47,339 | ||||
Cash received for income taxes, net of payments
|
$ | - | $ | (48 | ) | |||
Schedule of noncash investing and financing activities:
|
||||||||
Notes receivable received from affiliate
|
$ | - | $ | 21,859 | ||||
Affiliate payable/receivable for ARL cost basis sales adjustment
|
$ | (57,010 | ) | $ | - | |||
Acquisition of land for ARL cost basis sales adjustment
|
$ | 30,419 | $ | - | ||||
Acquisition of income producing properties for ARL cost basis sales adjustment
|
$ | 26,591 | $ | - | ||||
The accompanying notes are an integral part of these consolidated financial statements.
|
|
•
|
19 commercial buildings totaling 3.9 million leasable square feet, consisting of 11 office buildings, five industrial properties, and three retail properties;
|
|
•
|
49 apartment communities totaling 9,027 units; excluding apartments being developed; and
|
|
•
|
1,856 acres of developed and undeveloped land.
|
Level 1
|
–
|
Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets.
|
Level 2
|
–
|
Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
|
Level 3
|
–
|
Unobservable inputs that are significant to the fair value measurement.
|
Maturity
|
Interest
|
|||||||
Borrower
|
Date
|
Rate
|
Amount
|
Security
|
||||
Performing loans:
|
||||||||
ABC Land & Development, Inc.(1)
|
10/15
|
10.00%
|
$ 272
|
Marina Landing (256 Unit Apartment Complex)
|
||||
Garden Centura, L.P. (1)
|
N/A
|
7.00%
|
3,967
|
Excess cash flow from partnership
|
||||
Miscellaneous non-related party notes
|
Various
|
Various
|
389
|
Various secured interest
|
||||
Miscellaneous related party notes (1)
|
Various
|
Various
|
393
|
Various secured interest
|
||||
Ocean Beach Partners, L.P. (1)
|
12/11
|
7.00%
|
3,279
|
Folsom Land (36 acres in Farmers Branch, TX)
|
||||
Unified Housing Foundation, Inc. (Lakeshore Villas) (1)
|
12/27
|
5.25%
|
2,000
|
Unsecured
|
||||
Unified Housing Foundation, Inc. (Lakeshore Villas) (1)
|
12/27
|
5.25%
|
6,363
|
Membership interest in Housing for Seniors of Humble, LLC
|
||||
Unified Housing Foundation, Inc. (Cliffs of El Dorado) (1)
|
12/27
|
5.25%
|
2,990
|
100% Interest in Unified Housing of McKinney, LLC
|
||||
Unified Housing Foundation, Inc. (Echo Station) (1)
|
12/27
|
5.25%
|
1,481
|
100% Interest in Unified Housing of Temple, LLC
|
||||
Unified Housing Foundation, Inc. (Limestone Canyon) (1)
|
12/27
|
5.25%
|
4,663
|
100% Interest in Unified Housing of Austin, LLC
|
||||
Unified Housing Foundation, Inc. (Limestone Canyon) (1)
|
07/15
|
5.25%
|
3,057
|
100% Interest in Unified Housing of Austin, LLC
|
||||
Unified Housing Foundation, Inc. (Limestone Ranch) (1)
|
12/27
|
5.25%
|
6,000
|
100% Interest in Unified Housing of Vista Ridge, LLC
|
||||
Unified Housing Foundation, Inc. (Limestone Ranch) (1)
|
07/15
|
5.25%
|
2,250
|
100% Interest in Unified Housing of Vista Ridge, LLC
|
||||
Unified Housing Foundation, Inc. (Parkside Crossing) (1)
|
12/27
|
5.25%
|
1,936
|
100% Interest in Unified Housing of Parkside Crossing, LLC
|
||||
Unified Housing Foundation, Inc. (Sendero Ridge) (1)
|
12/27
|
5.25%
|
4,812
|
100% Interest in Unified Housing of Sendero Ridge, LLC
|
||||
Unified Housing Foundation, Inc. (Sendero Ridge) (1)
|
07/15
|
5.25%
|
5,174
|
100% Interest in Unified Housing of Sendero Ridge, LLC
|
||||
Unified Housing Foundation, Inc. (Timbers of Terrell) (1)
|
12/27
|
5.25%
|
1,323
|
100% Interest in Unified Housing of Terrell, LLC
|
||||
Unified Housing Foundation, Inc. (Tivoli) (1)
|
12/27
|
5.25%
|
7,966
|
100% Interest in Unified Housing of Tivoli, LLC
|
||||
Accrued interest
|
580
|
|||||||
Total Performing
|
$ 58,895
|
Percentage Ownership
|
||||||||
at September 30, 2011
|
at September 30, 2010
|
|||||||
American Realty Investors, Inc.(1)
|
2.07 | % | 2.47 | % | ||||
Garden Centura, L.P.(2)
|
5.00 | % | 5.00 | % |
(1)
|
Unconsolidated subsidiary
|
(2)
|
Other investees
|
For the Nine Months Ended September 30, 2011
|
Unconsolidated Subsidiaries
|
Other
Investees
|
Total
|
|||||||||
Real estate, net of accumulated depreciation
|
$ | 155,462 | $ | 72,622 | $ | 228,084 | ||||||
Notes receivable
|
23,239 | - | 23,239 | |||||||||
Other assets
|
192,185 | 4,755 | 196,940 | |||||||||
Notes payable
|
(168,746 | ) | (47,578 | ) | (216,324 | ) | ||||||
Other liabilities
|
(121,964 | ) | (2,543 | ) | (124,507 | ) | ||||||
Shareholders' equity/partners capital
|
(80,176 | ) | (27,256 | ) | (107,432 | ) | ||||||
Revenue
|
$ | 11,356 | $ | 5,465 | $ | 16,821 | ||||||
Depreciation
|
(640 | ) | (2,352 | ) | (2,992 | ) | ||||||
Operating expenses
|
(1,459 | ) | (2,944 | ) | (4,403 | ) | ||||||
Gain on land sales
|
23,465 | - | 23,465 | |||||||||
Gain on sale of investment
|
91 | - | 91 | |||||||||
Interest expense
|
(7,902 | ) | (1,745 | ) | (9,647 | ) | ||||||
Gain (loss) from continuing operations
|
$ | 24,911 | $ | (1,576 | ) | $ | 23,335 | |||||
Income from discontinued operations
|
9,699 | - | 9,699 | |||||||||
Net income (loss)
|
$ | 34,610 | $ | (1,576 | ) | $ | 33,034 | |||||
|
||||||||||||
Company's proportionate share of earnings
|
$ | 473 | $ | (79 | ) | $ | 394 |
For the Nine Months Ended September 30, 2010
|
Unconsolidated Subsidiaries
|
Other
Investees
|
Total
|
|||||||||
Real estate, net of accumulated depreciation
|
$ | 243,090 | $ | 75,240 | $ | 318,330 | ||||||
Notes Receivable
|
45,032 | - | 45,032 | |||||||||
Other assets
|
163,231 | 6,213 | 169,444 | |||||||||
Notes payable
|
(231,901 | ) | (48,366 | ) | (280,267 | ) | ||||||
Other liabilities
|
(120,424 | ) | (2,408 | ) | (122,832 | ) | ||||||
Shareholders equity/partners capital
|
(99,028 | ) | (30,679 | ) | (129,707 | ) | ||||||
Rents and interest and other income
|
$ | 24,277 | $ | 5,992 | $ | 30,269 | ||||||
Depreciation
|
(1,933 | ) | (2,324 | ) | (4,257 | ) | ||||||
Operating expenses
|
(22,706 | ) | (2,906 | ) | (25,612 | ) | ||||||
Gain on land sales
|
1,519 | - | 1,519 | |||||||||
Interest expense
|
(12,635 | ) | (2,706 | ) | (15,341 | ) | ||||||
Loss from continuing operations
|
(11,478 | ) | (1,944 | ) | (13,422 | ) | ||||||
Income from discontinued operations
|
8,206 | - | 8,206 | |||||||||
Net loss
|
$ | (3,272 | ) | $ | (1,944 | ) | $ | (5,216 | ) | |||
|
||||||||||||
Company's proportionate share of earnings
|
$ | (81 | ) | $ | (97 | ) | $ | (178 | ) |
Prime
|
Pillar
|
ARL
|
Total
|
|||||||||||||
Balance, December 31, 2010
|
$ | - | $ | - | $ | (47,261 | ) | $ | (47,261 | ) | ||||||
Cash transfers
|
3,588 | 7,536 | - | 11,124 | ||||||||||||
Advisory fees
|
(3,528 | ) | (4,382 | ) | - | (7,910 | ) | |||||||||
Cost reimbursements
|
(1,658 | ) | (99 | ) | - | (1,757 | ) | |||||||||
Interest to advisor
|
(926 | ) | (878 | ) | - | (1,804 | ) | |||||||||
POA fees
|
(10 | ) | (42 | ) | - | (52 | ) | |||||||||
Expenses paid by advisor
|
(1,240 | ) | 2,233 | - | 993 | |||||||||||
Financing (mortgage payments)
|
(382 | ) | (5,041 | ) | - | (5,423 | ) | |||||||||
Note receivable with affiliate
|
8,016 | 2,825 | - | 10,841 | ||||||||||||
Sales/Purchases transactions
|
888 | (5,307 | ) | 57,010 | 52,591 | |||||||||||
Intercompany property transfers
|
8,543 | 4,383 | - | 12,926 | ||||||||||||
Purchase of obligations
|
(13,291 | ) | (1,228 | ) | 14,519 | - | ||||||||||
Balance, September 30, 2011
|
$ | - | $ | - | $ | 24,268 | $ | 24,268 |
Commercial
|
||||||||||||||||||||
For the Three Months Ended September 30, 2011
|
Properties
|
Apartments
|
Land
|
Other
|
Total
|
|||||||||||||||
Operating revenue
|
$ | 9,364 | $ | 21,731 | $ | 7 | $ | 200 | $ | 31,302 | ||||||||||
Operating expenses
|
5,590 | 11,244 | 344 | 28 | 17,206 | |||||||||||||||
Depreciation and amortization
|
1,799 | 4,013 | - | - | 5,812 | |||||||||||||||
Mortgage and loan interest
|
3,154 | 6,891 | 1,416 | 1,064 | 12,525 | |||||||||||||||
Interest income
|
- | - | - | 497 | 497 | |||||||||||||||
Gain on land sales
|
- | - | 6,285 | - | 6,285 | |||||||||||||||
Segment operating income (loss)
|
$ | (1,179 | ) | $ | (417 | ) | $ | 4,532 | $ | (395 | ) | $ | 2,541 | |||||||
Capital expenditures
|
1,636 | 10 | - | - | 1,646 | |||||||||||||||
Assets
|
200,052 | 604,001 | 179,175 | - | 983,228 | |||||||||||||||
Property Sales
|
||||||||||||||||||||
Sales price
|
$ | 30,200 | $ | 21,590 | $ | 52,437 | $ | - | $ | 104,227 | ||||||||||
Cost of sale
|
33,021 | 15,897 | 52,762 | - | 101,680 | |||||||||||||||
Deferred current gain
|
- | - | - | - | - | |||||||||||||||
Recognized prior deferred gain
|
- | - | 4,951 | - | 4,951 | |||||||||||||||
Gain (loss) on sale
|
$ | (2,821 | ) | $ | 5,693 | $ | 4,626 | $ | - | $ | 7,498 | |||||||||
Commercial
|
||||||||||||||||||||
For the Three Months Ended September 30, 2010
|
Properties
|
Apartments
|
Land
|
Other
|
Total
|
|||||||||||||||
Operating revenue
|
$ | 10,033 | $ | 17,970 | $ | 120 | $ | 1 | $ | 28,124 | ||||||||||
Operating expenses
|
5,826 | 9,864 | 445 | (37 | ) | 16,098 | ||||||||||||||
Depreciation and amortization
|
2,114 | 3,703 | - | - | 5,817 | |||||||||||||||
Mortgage and loan interest
|
3,006 | 7,432 | 1,868 | 961 | 13,267 | |||||||||||||||
Interest income
|
- | - | - | 669 | 669 | |||||||||||||||
Loss on land sales
|
- | - | (371 | ) | - | (371 | ) | |||||||||||||
Segment operating loss
|
$ | (913 | ) | $ | (3,029 | ) | $ | (2,564 | ) | $ | (254 | ) | $ | (6,760 | ) | |||||
Capital expenditures
|
144 | 316 | - | - | 460 | |||||||||||||||
Assets
|
314,521 | 616,400 | 375,730 | (400 | ) | 1,306,251 | ||||||||||||||
Property Sales
|
||||||||||||||||||||
Sales price
|
$ | - | $ | 33,491 | $ | 8,709 | $ | - | $ | 42,200 | ||||||||||
Cost of sale
|
- | 29,598 | 9,080 | - | 38,678 | |||||||||||||||
Deferred current gain
|
- | - | - | - | - | |||||||||||||||
Recognized prior deferred gain
|
- | - | - | - | - | |||||||||||||||
Gain (loss) on sale
|
$ | - | $ | 3,893 | $ | (371 | ) | $ | - | $ | 3,522 |
For Three Months
Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Segment operating income (loss)
|
$ | 2,541 | $ | (6,760 | ) | |||
Other non-segment items of income (expense)
|
||||||||
General and administrative
|
(2,798 | ) | (1,338 | ) | ||||
Advisory fees
|
(2,441 | ) | (3,054 | ) | ||||
Provision on impairment of notes receivable and real estate assets
|
- | - | ||||||
Other income
|
113 | 640 | ||||||
Loss on sale of investments
|
(32 | ) | - | |||||
Equity in earnings of investees
|
250 | (10 | ) | |||||
Deferred tax expense
|
(1,007 | ) | (486 | ) | ||||
Loss from continuing operations
|
$ | (3,374 | ) | $ | (11,008 | ) |
Commercial
|
||||||||||||||||||||
For the Nine Months Ended September 30, 2011
|
Properties
|
Apartments
|
Land
|
Other
|
Total
|
|||||||||||||||
Operating revenue
|
$ | 30,212 | $ | 59,086 | $ | 289 | $ | 209 | $ | 89,796 | ||||||||||
Operating expenses
|
16,867 | 30,038 | 1,225 | 123 | 48,253 | |||||||||||||||
Depreciation and amortization
|
4,151 | 11,319 | - | 15,470 | ||||||||||||||||
Mortgage and loan interest
|
7,853 | 22,212 | 6,316 | 3,172 | 39,553 | |||||||||||||||
Interest income
|
- | - | - | 1,627 | 1,627 | |||||||||||||||
Gain on land sales
|
- | - | 8,366 | - | 8,366 | |||||||||||||||
Segment operating loss
|
$ | 1,341 | $ | (4,483 | ) | $ | 1,114 | $ | (1,459 | ) | $ | (3,487 | ) | |||||||
Capital expenditures
|
1,862 | 164 | (868 | ) | - | 1,158 | ||||||||||||||
Assets
|
200,052 | 604,001 | 179,175 | - | 983,228 | |||||||||||||||
Property Sales
|
||||||||||||||||||||
Sales price
|
$ | 102,765 | $ | 21,590 | $ | 135,717 | $ | - | $ | 260,072 | ||||||||||
Cost of sale
|
111,077 | 15,897 | 137,336 | - | 264,310 | |||||||||||||||
Deferred current gain
|
- | - | - | - | - | |||||||||||||||
Recognized prior deferred gain
|
1,291 | 963 | 8,326 | - | 10,580 | |||||||||||||||
Gain (loss) on sale
|
$ | (7,021 | ) | $ | 6,656 | $ | 6,707 | $ | - | $ | 6,342 | |||||||||
Commercial
|
||||||||||||||||||||
For the Nine Months Ended September 30, 2010
|
Properties
|
Apartments
|
Land
|
Other
|
Total
|
|||||||||||||||
Operating revenue
|
$ | 31,601 | $ | 53,590 | $ | 279 | $ | (29 | ) | $ | 85,441 | |||||||||
Operating expenses
|
17,420 | 29,444 | 2,178 | 20 | 49,062 | |||||||||||||||
Depreciation and amortization
|
6,309 | 10,975 | - | - | 17,284 | |||||||||||||||
Mortgage and loan interest
|
9,095 | 23,313 | 6,944 | 2,955 | 42,307 | |||||||||||||||
Interest income
|
- | - | - | 2,360 | 2,360 | |||||||||||||||
Loss on land sales
|
- | - | (6,005 | ) | - | (6,005 | ) | |||||||||||||
Segment operating loss
|
$ | (1,223 | ) | $ | (10,142 | ) | $ | (14,848 | ) | $ | (644 | ) | $ | (26,857 | ) | |||||
Capital expenditures
|
412 | 622 | 148 | - | 1,182 | |||||||||||||||
Assets
|
314,521 | 616,400 | 375,730 | (400 | ) | 1,306,251 | ||||||||||||||
Property Sales
|
||||||||||||||||||||
Sales price
|
$ | 28,740 | $ | 58,583 | $ | 18,963 | $ | - | $ | 106,286 | ||||||||||
Cost of sale
|
28,954 | 51,016 | 24,968 | - | 104,938 | |||||||||||||||
Deferred current gain
|
- | 3,599 | - | - | 3,599 | |||||||||||||||
Recognized prior deferred gain
|
- | - | - | - | - | |||||||||||||||
Gain (loss) on sale
|
$ | (214 | ) | $ | 3,968 | $ | (6,005 | ) | $ | - | $ | (2,251 | ) |
For Nine Months
Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Segment operating loss
|
$ | (3,487 | ) | $ | (26,857 | ) | ||
Other non-segment items of income (expense)
|
||||||||
General and administrative
|
(7,452 | ) | (4,955 | ) | ||||
Advisory fees
|
(7,688 | ) | (9,112 | ) | ||||
Provision on impairment of notes receivable and real estate assets
|
(5,622 | ) | - | |||||
Other income
|
1,878 | 1,554 | ||||||
Loss on sale of investments
|
(483 | ) | - | |||||
Equity in earnings of investees
|
378 | (122 | ) | |||||
Deferred tax benefit
|
1,152 | 117 | ||||||
Loss from continuing operations
|
$ | (21,324 | ) | $ | (39,375 | ) |
September 30,
|
||||||||
2011
|
2010
|
|||||||
Segment assets
|
$ | 983,228 | $ | 1,306,251 | ||||
Investments in real estate partnerships
|
8,015 | 8,745 | ||||||
Other assets
|
156,972 | 159,863 | ||||||
Assets held for sale
|
- | 16,251 | ||||||
Total assets
|
$ | 1,148,215 | $ | 1,491,110 |
For the Three Months Ended
|
For the Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenue
|
||||||||||||||||
Rental
|
$ | 968 | $ | 6,109 | $ | 7,789 | $ | 22,764 | ||||||||
Property operations
|
587 | 4,127 | 5,007 | 13,203 | ||||||||||||
$ | 381 | $ | 1,982 | 2,782 | 9,561 | |||||||||||
Expenses
|
||||||||||||||||
Other income
|
- | 50 | - | 50 | ||||||||||||
Interest
|
(103 | ) | (3,141 | ) | (2,546 | ) | (9,087 | ) | ||||||||
General and administrative
|
(170 | ) | (55 | ) | (457 | ) | (101 | ) | ||||||||
Depreciation
|
(102 | ) | (1,340 | ) | (1,825 | ) | (4,373 | ) | ||||||||
Provision on impairment of real estate assets
|
- | - | (881 | ) | - | |||||||||||
(375 | ) | (4,486 | ) | (5,709 | ) | (13,511 | ) | |||||||||
Net income (loss) from discontinued operations before gains on sale of
real estate, taxes, and fees
|
6 | (2,504 | ) | (2,927 | ) | (3,950 | ) | |||||||||
Gain (loss) on sale of discontinued operations
|
2,872 | 3,893 | (365 | ) | 3,754 | |||||||||||
Income (loss) from discontinued operations
|
$ | 2,878 | $ | 1,389 | (3,292 | ) | (196 | ) | ||||||||
Tax benefit (expense)
|
1,007 | 486 | (1,152 | ) | (69 | ) | ||||||||||
Net income (loss) from discontinued operations
|
$ | 3,885 | $ | 1,875 | $ | (4,444 | ) | $ | (265 | ) |
|
•
|
general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants’ financial condition, and competition from other developers, owners and operators of real estate);
|
|
•
|
risks associated with the availability and terms of construction and mortgage financing and the use of debt to fund acquisitions and developments;
|
|
•
|
demand for apartments and commercial properties in the Company’s markets and the effect on occupancy and rental rates;
|
|
•
|
the Company’s ability to obtain financing, enter into joint venture arrangements in relation to or self-fund the development or acquisition of properties;
|
|
•
|
risks associated with the timing and amount of property sales and the resulting gains/losses associated with such sales;
|
|
•
|
failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully;
|
|
•
|
risks and uncertainties affecting property development and construction (including, without limitation, construction delays, cost overruns, inability to obtain necessary permits and public opposition to such activities);
|
|
•
|
risks associated with downturns in the national and local economies, increases in interest rates, and volatility in the securities markets;
|
|
•
|
costs of compliance with the Americans with Disabilities Act and other similar laws and regulations;
|
|
•
|
potential liability for uninsured losses and environmental contamination;
|
|
•
|
risks associated with our dependence on key personnel whose continued service is not guaranteed; and
|
|
•
|
the other risk factors identified in this Form 10-Q, including those described under the caption “Risk Factors.”
|
Level 1
|
–
|
Unadjusted quoted prices for identical and unrestricted assets or liabilities in active markets.
|
Level 2
|
–
|
Quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
|
Level 3
|
–
|
Unobservable inputs that are significant to the fair value measurement.
|
September 30,
|
||||||||
2011
|
2010
|
|||||||
Continuing operations
|
67 | 62 | ||||||
Sales subsequent to period end
|
1 | - | ||||||
Discontinued operations
|
- | 13 | ||||||
Total property portfolio
|
68 | 75 |
For the Three Months Ended
|
||||||||
September 30,
|
||||||||
Revenue
|
2011
|
2010
|
||||||
Rental
|
$ | 968 | $ | 6,109 | ||||
Property operations
|
587 | 4,127 | ||||||
381 | 1,982 | |||||||
Expenses
|
||||||||
Other income
|
- | 50 | ||||||
Interest
|
(103 | ) | (3,141 | ) | ||||
General and administrative
|
(170 | ) | (55 | ) | ||||
Depreciation
|
(102 | ) | (1,340 | ) | ||||
(375 | ) | (4,486 | ) | |||||
Net income (loss) from discontinued operations before gains on sale of real estate, taxes, and fees
|
6 | (2,504 | ) | |||||
Gain on sale of discontinued operations
|
2,872 | 3,893 | ||||||
Income from discontinued operations
|
2,878 | 1,389 | ||||||
Tax benefit
|
1,007 | 486 | ||||||
Net income from discontinued operations
|
$ | 3,885 | $ | 1,875 |
For the Nine Months Ended
September 30,
|
||||||||
2011
|
2010
|
|||||||
Revenue
|
||||||||
Rental
|
$ | 7,789 | $ | 22,764 | ||||
Property operations
|
5,007 | 13,203 | ||||||
2,782 | 9,561 | |||||||
Expenses
|
||||||||
Other income
|
- | 50 | ||||||
Interest
|
(2,546 | ) | (9,087 | ) | ||||
General and administrative
|
(457 | ) | (101 | ) | ||||
Depreciation
|
(1,825 | ) | (4,373 | ) | ||||
Provision on impairment of real estate assets
|
(881 | ) | - | |||||
(5,709 | ) | (13,511 | ) | |||||
Net loss from discontinued operations before gains on sale of real estate
|
(2,927 | ) | (3,950 | ) | ||||
Gain (loss) on sale of discontinued operations
|
(365 | ) | 3,754 | |||||
Loss from discontinued operations
|
(3,292 | ) | (196 | ) | ||||
Tax expense
|
(1,152 | ) | (69 | ) | ||||
Net loss from discontinued operations
|
$ | (4,444 | ) | $ | (265 | ) |
|
•
|
fund normal recurring expenses;
|
|
•
|
meet debt service and principal repayment obligations including balloon payments on maturing debt;
|
|
•
|
fund capital expenditures, including tenant improvements and leasing costs;
|
|
•
|
fund development costs not covered under construction loans; and
|
|
•
|
fund possible property acquisitions.
|
|
•
|
property operations;
|
|
•
|
proceeds from land and income-producing property sales;
|
|
•
|
collection of mortgage notes receivable;
|
|
•
|
collection of receivables from affiliated companies;
|
|
•
|
refinancing of existing debt; and
|
|
•
|
additional borrowing, including mortgage notes payable and lines of credit.
|
September 30,
|
||||||||||||
2011
|
2010
|
Variance
|
||||||||||
Net cash used in operating activities
|
$ | (68,730 | ) | $ | (5,437 | ) | $ | (63,293 | ) | |||
Net cash provided by investing activities
|
$ | 228,794 | $ | 108,751 | $ | 120,043 | ||||||
Net cash used in financing activities
|
$ | (163,582 | ) | $ | (103,942 | ) | $ | (59,640 | ) |
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
|
Weighted
|
Effect of 1%
|
|||||||||||
Average
|
Increase In
|
|||||||||||
Balance
|
Interest Rate
|
Base Rates
|
||||||||||
Notes payable:
|
||||||||||||
Variable rate
|
$ | 189,918 | 5.15 | % | $ | 1,899 | ||||||
Total decrease in TCI’s annual net income
|
1,899 | |||||||||||
Per share
|
$ | 0.23 |
ITEM 4.
|
CONTROLS AND PROCEDURES
|
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Total Number of
|
Maximum Number of
|
|||||||||||||||
Shares Purchased
|
Shares that May
|
|||||||||||||||
Total Number of
|
Average Price
|
as Part of Publicly
|
Yet be Purchased
|
|||||||||||||
Period
|
Shares Purchased
|
Paid per share
|
Announced Program
|
Under the Program
|
||||||||||||
Balance at June 30, 2011
|
1,230,535 | 406,465 | ||||||||||||||
July 31, 2011
|
- | - | 1,230,535 | 406,465 | ||||||||||||
August 31, 2011
|
- | - | 1,230,535 | 406,465 | ||||||||||||
September 30, 2011
|
- | - | 1,230,535 | 406,465 | ||||||||||||
Total
|
- |
ITEM 6.
|
EXHIBITS
|
Exhibit
Number
|
Description
|
3.0
|
Articles of Incorporation of Transcontinental Realty Investors, Inc., (incorporated by reference to Exhibit No. 3.1 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991).
|
3.1
|
Certificate of Amendment to the Articles of Incorporation of Transcontinental Realty Investors, Inc., (incorporated by reference to the Registrant’s Current Report on Form 8-K, dated June 3, 1996).
|
3.2
|
Certificate of Amendment of Articles of Incorporation of Transcontinental Realty Investors, Inc., dated October 10, 2000 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
|
3.3
|
Articles of Amendment to the Articles of Incorporation of Transcontinental Realty Investors, Inc., setting forth the Certificate of Designations, Preferences and Rights of Series A Cumulative Convertible Preferred Stock, dated October 20, 1998 (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1998).
|
3.4
|
Certificate of Designation of Transcontinental Realty Investors, Inc., setting forth the Voting Powers, Designations, References, Limitations, Restriction and Relative Rights of Series B Cumulative Convertible Preferred Stock, dated October 23, 2000 (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2000).
|
3.5
|
Certificate of Designation of Transcontinental Realty Investors, Inc., setting forth the Voting Powers, Designating, Preferences, Limitations, Restrictions and Relative Rights of Series C Cumulative Convertible Preferred Stock, dated September 28, 2001 (incorporated by reference to Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001).
|
3.6
|
Articles of Amendment to the Articles of Incorporation of Transcontinental Realty Investors, Inc., Decreasing the Number of Authorized Shares of and Eliminating Series B Preferred Stock dated December 14, 2001 (incorporated by reference to Exhibit 3.7 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
|
3.7
|
By-Laws of Transcontinental Realty Investors, Inc. (incorporated by reference to Exhibit No. 3.2 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1991).
|
3.8
|
Certificate of Designation of Transcontinental Realty Investors, Inc., setting forth the Voting Powers, Designations, Preferences, Limitations, Restrictions and Relative Rights of Series D Cumulative Preferred Stock filed August 14, 2006 with the Secretary of State of Nevada (incorporated by reference to Registrant’s Current Report on Form 8-K for event dated November 21, 2006 at Exhibit 3.8 thereof).
|
10.1
|
Advisory Agreement dated as of April 30, 2011, between Transcontinental Realty Investors, Inc., and Pillar Income Asset Management, Inc. (incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K for event occurring May 2, 2011).
|
31.1*
|
Certification of the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
|
31.2*
|
Certification by the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
|
32.1*
|
Certification pursuant to 18 U.S.C. 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
101 | Interactive data files pursuant to Rule 405 of Regulation S-T. |
*
|
Filed herewith.
|
TRANSCONTINENTAL REALTY INVESTORS, INC.
|
||
Date: May 1, 2012
|
By:
|
/s/ Daniel J. Moos
|
Daniel J. Moos
|
||
President and Chief Executive Officer
(Principal Executive Officer)
|
||
Date: May 1, 2012
|
By:
|
/s/ Gene S. Bertcher
|
Gene S. Bertcher
|
||
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
Exhibit
Number
|
Description of Exhibits
|
31.1*
|
Certification by the Principal Executive Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
|
31.2*
|
Certification by the Principal Financial Officer pursuant to Rule 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended.
|
32.1*
|
Certification pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
*
|
Filed herewith
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Transcontinental Realty Investors, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
|
|
(d)
|
Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: May 1, 2012
|
/s/ Daniel J. Moos
|
Daniel J. Moos
|
|
President and Chief Executive Officer
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Transcontinental Realty Investors, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officers(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluations; and
|
|
(d)
|
Disclosed in the report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officers(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: May 1, 2012
|
/s/ Gene S. Bertcher
|
Gene S. Bertcher
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
(i)
|
The Company’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2011, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and
|
|
(ii)
|
The information contained in the Company’s Quarterly Report on Form 10-Q for the three months ended September 30, 2011, fairly presents in all material respects, the financial condition and results of operations of the Company, at and for the periods indicated.
|
TRANSCONTINENTAL REALTY INVESTORS, INC.
|
||
Date: May 1, 2012
|
By:
|
/s/ Daniel J. Moos
|
Daniel J. Moos
|
||
President and Chief Executive Officer
(Principal Executive Officer)
|
||
Date: May 1, 2012
|
By:
|
/s/ Gene S. Bertcher
|
Gene S. Bertcher
|
||
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
ORGANIZATION AND BASIS OF PRESENTATION
|
9 Months Ended | |||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011
|
||||||||||||||||||||||||||||
ORGANIZATION AND BASIS OF PRESENTATION | ||||||||||||||||||||||||||||
ORGANIZATION AND BASIS OF PRESENTATION | NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
As used herein, the terms TCI, the Company, we, our or us refer to Transcontinental Realty Investors, Inc., a Nevada corporation. TCI is the successor to a California business trust which was organized on September 6, 1983, and commenced operations on January 31, 1984. Effective March 31, 2003, TCIs financial results were consolidated in American Realty Investors, Inc. (ARL) Form 10-K and related consolidated financial statements.
The Company is headquartered in Dallas, Texas and its common stock trades on the New York Stock Exchange under the symbol NYSE: TCI. Subsidiaries of ARL own approximately 82.7% of the Companys common stock. TCI is a C corporation for U.S. federal income tax purposes and files an annual consolidated income tax return with ARL, whose common stock trades on the New York Stock Exchange under the symbol NYSE: ARL.
TCI owns approximately 82.7% of the common stock of Income Opportunity Realty Investors, Inc. (IOT). Effective July 17, 2009, IOTs financial results were consolidated with those of ARL and TCI and their subsidiaries. Shares of IOT are traded on the American Stock Exchange under the symbol AMEX: IOT.
TCI invests in real estate through direct ownership, leases and partnerships and it also invests in mortgage loans on real estate. Prior to April 30, 2011, Prime Income Asset Management, LLC (Prime) was the Companys external Advisor and Cash Manager. Prime also served as an Advisor and Cash Manager to ARL and IOT. Effective April 30, 2011, Pillar Income Asset Management, Inc. (Pillar) became the Companys external Advisor and Cash Manager under the same terms as the previous agreement with Prime. Pillar also serves as an Advisor and Cash Manager to ARL and IOT. Prior to December 31, 2010, Triad Realty Services, L.P. (Triad) managed the Companys commercial properties and Regis Realty I, LLC (Regis Realty) provided brokerage services. Triad and Regis Realty are affiliates of Prime. Effective January 1, 2011, Regis Realty Prime, LLC (Regis), an affiliate of Prime, manages our commercial properties and provides brokerage services under the same terms as the previous agreements with Triad and Regis Realty for a term of five years. TCI engages third-party companies to lease and manage its apartment properties. We have no employees.
Properties
We own or had interests in a total property portfolio of 68 income producing properties as of September 30, 2011. The properties consisted of:
We are involved in the construction of one apartment complex as of September 30, 2011. In addition, we invest in several tracts of land and are at various stages of predevelopment on many of these properties. We partner with several third-party developers to construct residential projects. The third-party developer typically takes a general partner and majority limited partner interest in the development partnership while we take a minority limited partner interest. We are required to fund the equity contributions. The third-party developer is responsible for obtaining financing, for hiring a general contractor and for the overall management and delivery of the project, and is compensated with a fee equal to a certain percentage of the construction costs.
Basis of presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, have been condensed or omitted in accordance with such rules and regulations, although management believes the disclosures are adequate to prevent the information presented from being misleading. In the opinion of management, all adjustments (consisting of normal recurring matters) considered necessary for a fair presentation have been included. The results of operations for the nine months ended September 30, 2011, are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.
The year-end Consolidated Balance Sheet at December 31, 2010, was derived from the audited financial statements at that date, but does not include all of the information and disclosures required by GAAP for complete financial statements. For further information, refer to the financial statements and notes thereto included in the Companys Annual Report on Form 10-K for the year ended December 31, 2010. Certain 2010 financial statement amounts have been reclassified to conform to the 2011 presentation, including adjustments for discontinued operations.
Principles of consolidation
The accompanying Consolidated Financial Statements include the accounts of the Company, its subsidiaries, generally all of which are wholly-owned, and all entities in which we have a controlling interest. Arrangements that are not controlled through voting or similar rights are accounted for as a Variable Interest Entity (VIE), in accordance with the provisions and guidance of ASC Topic 810 Consolidation, whereby we have determined that we are a primary beneficiary of the VIE and meet certain criteria of a sole general partner or managing member as identified in accordance with Emerging Issues Task Force (EITF) Issue 04-5, Investors Accounting for an Investment in a Limited Partnership when the Investor is the Sole General Partner and the Limited Partners have Certain Rights (EITF 04-5). VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders as a group lack adequate decision making ability, the obligation to absorb expected losses or residual returns of the entity, or have voting rights that are not proportional to their economic interests. The primary beneficiary generally is the entity that provides financial support and bears a majority of the financial risks, authorizes certain capital transactions, or makes operating decisions that materially affect the entitys financial results. All significant intercompany balances and transactions have been eliminated in consolidation.
In determining whether we are the primary beneficiary of a VIE, we consider qualitative and quantitative factors, including, but not limited to: the amount and characteristics of our investment; the obligation or likelihood for us or other investors to provide financial support; our and the other investors ability to control or significantly influence key decisions for the VIE; and the similarity with and significance to the business activities of us and the other investors. Significant judgments related to these determinations include estimates about the current future fair values and performance of real estate held by these VIEs and general market conditions.
For entities in which we have less than a controlling financial interest or entities where we are not deemed to be the primary beneficiary, the entities are accounted for using the equity method of accounting. Accordingly, our share of the net earnings or losses of these entities is included in consolidated net income. Our investments in ARL and Garden Centura, L.P. are accounted for under the equity method.
During the second quarter of 2011, we evaluated the non-controlling equity interests and made certain reclassifications among equity accounts to correctly reflect non-controlling interest. In connection with that evaluation, we reclassified approximately $6.3 million of deferred gain to non-controlling interest related to the 2009 acquisition of the controlling interest in IOT, a consolidated entity. These amounts have been reclassified for all periods presented in the consolidated financial.
Real estate, depreciation, and impairment
Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and improvements 10-40 years; furniture, fixtures and equipment 5-10 years). The Company continually evaluates the recoverability of the carrying value of its real estate assets using the methodology prescribed in ASC Topic 360, Property, Plant and Equipment. Factors considered by management in evaluating impairment of its existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Under ASC Topic 360, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding period are in excess of the assets net book value at the balance sheet date. If any real estate asset held for investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value.
Real estate held for sale
We periodically classify real estate assets as held for sale. An asset is classified as held for sale after the approval of our board of directors and after an active program to sell the asset has commenced. Upon the classification of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded. Real estate assets held for sale are stated separately on the accompanying Consolidated Balance Sheets. Upon a decision to no longer market as an asset for sale, the asset is classified as an operating asset and depreciation expense is reinstated. The operating results of real estate assets held for sale and sold are reported as discontinued operations in the accompanying statements of operations. Income from discontinued operations includes the revenues and expenses, including depreciation and interest expense, associated with the assets. This classification of operating results as discontinued operations applies retroactively for all periods presented. Additionally, gains and losses on assets designated as held for sale are classified as part of discontinued operations.
Cost capitalization
Costs related to planning, developing, leasing and constructing a property are capitalized and classified as Real Estate in the Consolidated Balance Sheets. We capitalize interest to qualifying assets under development based on average accumulated expenditures outstanding during the period. In capitalizing interest to qualifying assets, we first use the interest incurred on specific project debt, if any, and next use the weighted average interest rate of non-project specific debt. We capitalize interest, real estate taxes and certain operating expenses until building construction is substantially complete and the building is ready for its intended use, but no later than one year from the cessation of major construction activity.
We capitalize leasing costs which include commissions paid to outside brokers, legal costs incurred to negotiate and document a lease agreement and any internal costs that may be applicable. We allocate these costs to individual tenant leases and amortize them over the related lease term.
Fair value measurement
We apply the guidance in ASC Topic 820, Fair Value Measurements and Disclosures, to the valuation of real estate assets. These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy. The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the reporting entitys own data.
The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date and includes three levels defined as follows:
A financial instruments categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Newly issued accounting pronouncements
We have considered all other newly issued accounting guidance that is applicable to our operations and the preparation of our consolidated statements, including that which we have not yet adopted. We do not believe that any such guidance will have a material effect on our financial position or results of operations. |