Edgar Filing: TRANSCONTINENTAL REALTY INVESTORS INC

Form 8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

June 20, 2004

Date of Report (Date of Earliest Event Reported)

TRANSCONTINENTAL REALTY INVESTORS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada

1-9240

94-6565852

(State or Other Jurisdiction of

Incorporation or Organization)

(Commission File No.)

(I.R.S. Employer

Identification No.)


1800 Valley View Lane, Suite 300, Dallas, Texas		75234
(Address of Principal Executive Office)		(Zip Code)

(469) 522-4200

(Registrant’s Telephone Number, Including Area Code)

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:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Securities Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM	2.01 COMPLETION OF ACQUISTION OR DISPOSITION OF ASSETS

In 2004, Transcontinental Realty Investors, Inc. (“TCI”) sold a significant amount of its assets, the last sale of which was completed on June 20, 2004. The nature and amount of consideration given principally involved cash received, seller financing provided by TCI and/or debt assumed by purchaser, and the principle followed in determining the amount of such consideration was negotiations between TCI and the purchaser. The properties sold are as follows:


Date of Completion or Sale Date	Description of Asset or Property	Location	Units/Sq. Ft./ Acres	Sales Price (in thousands)		Gain/(Loss) on Sale (in thousands)			% of TCI’s Assets		Purchaser
05/15/04	Sandstone Apartments	Mesa, AZ	238 Units	$	8,650	$	1,136		0.82	%	Palm Desert Villas, L.P.
05/21/04	Cliffs of El Dorado Apartments	McKinney, TX	208 Units		13,442		—		1.34	%	Unified Housing of McKinney, LLC⁽¹⁾
06/20/04	Waters Edge IV Apartments	Gulfport, MS	80 Units		5,000		—		0.52	%	Water’s Edge III Corporation
02/17/04	Countryside Retail	Sterling, VA	133,422 Sq. Ft.		27,100		5,475		2.20	%	Saul Holdings L.P.
02/17/04	Countryside Harmon	Sterling, VA	5,000 Sq. Ft		2,650		1,861		0.08	%	Saul Holdings L.P.
02/27/04	Brandeis Office Bldg.	Omaha, NE	319,234 Sq. Ft.		—		(92	)	1.00	%	Mack-Cali Sub XV Trust
05/07/04	Atrium Office Bldg.	Palm Beach, FL	74,603 Sq. Ft		5,775		328		0.59	%	Hayden Properties, LLC
06/04/04	4135 Beltline	Addison, TX	90,000 Sq. Ft		4,900		345		0.50	%	Beltline Realty Partners, Ltd., Three Rivers Title Co., Inc. & First American Exchange Corporation
02/26/04	Ogden Industrial	Ogden, UT	107,112 Sq. Ft.		2,600		1,374		0.12	%	Flying Colors Group, L.P.
03/01/04	Texstar Warehouse	Arlington, TX	97,846 Sq. Ft.		2,400		—		0.15	%	Basic Capital Management, Inc.⁽²⁾
03/29/04	Kelly Warehouse (Pinewood)	Dallas, TX	100,000 Sq. Ft.		1,650		153		0.15	%	BHP Sale Builders Hardware Ltd.
07/09/04	Kelly Warehouse (Cash Road)	Dallas, TX	97,150 Sq. Ft.		1,500		139		0.15	%	Larson Group, L.P.
03/01/04	K-Mart Shopping Center	Cary, NC	92,033 Sq. Ft.		3,200		—		0.29	%	Basic Capital Management, Inc. ⁽²⁾
01/30/04	Red Cross Land	Dallas, TX	2.89 Acres		8,500		—		0.85	%	Shafer Property Company
03/29/04	Allen Land	Collin County, TX	492.531 Acres		19,962		2,106		1.55	%	Blue Star Land, L.P.
08/09/04	Rasor Land	Plano, TX	24.5 Acres		2,600		54		0.29	%	Donald C. Carter

				$	109,929	$	12,879		10.60	%

(1)	Unified Housing of McKinney, LLC, is deemed to be an affiliate of TCI due to common management.

(2)	Basic Capital Management, Inc. is an affiliate of TCI.

ITEM	9.01 FINANCIAL STATEMENTS AND EXHIBITS

The unaudited pro forma statements of operations are presented for the six months ended June 30, 2004 and the year ended December 31, 2003. The unaudited pro forma statements of operations present TCI’s operations as if the transactions described above had occurred at January 1 of each of the periods presented. An unaudited pro forma balance sheet as of June 30, 2004, is also presented. The unaudited pro forma balance sheet presents the property sales described above, as if they had occurred at January 1, 2004.

The unaudited pro forma condensed combined financial statements should be read in conjunction with TCI’s financial statements and related notes included in TCI’s Report on Form 10-Q for the quarter ended June 30, 2004 and the Report on Form 10-K for the year ended December 31, 2003 filed with the Securities and Exchange Commission.

TRANSCONTINENTAL REALTY INVESTORS, INC.

PROFORMA COMBINED CONSOLIDATED BALANCE SHEET

JUNE 30, 2004

(Dollars in thousands)


	Actual ⁽¹⁾			Kelly Warehouse (Cash Road) ⁽²⁾			Rasor Land ⁽²⁾			Totals
*ASSETS*
Real Estate held for Investment	$	882,095		$	—		$	(2,546	)	$	879,549
Less: Accumulated Depreciation		(92,055	)		—			—			(92,055	)

		790,040			—			(2,546	)		787,494

Real Estate Held for Sale		10,419			(1,308	)		—			9,111

Notes and Interest Receivable:
Performing		41,045			—			—			41,045
Non-Performing		4,303			—			—			4,303

		45,348									45,348
Less: Allowances for Estimated Losses		(1,456	)		—			—			(1,456	)

		43,892			—			—			43,892

Investment in real estate entities		14,272			—			—			14,272
Marketable equity securities, at market value		5,397			—			—			5,397
Cash and cash equivalents		4,680			(2	)		—			4,678
Other Assets		30,456			(288	)		(13	)		30,155

Total Assets	$	899,156		$	(1,598	)	$	(2,559	)	$	894,999

*LIABILITIES AND EQUITY*
Notes and interest payable	$	635,113		$	—		$	(1,260	)	$	633,853
Liabilities related to assets held for sale		3,426			(465	)		—			2,961
Other Liabilities		39,893			(2,181	)		(1,513	)		36,199

		678,432			(2,646	)		(2,773	)		673,013

Minority Interest		752			—			—			752

Stockholders’ equity:
Preferred Stock		—			—			—			—
Common Stock		81			—			—			81
Paid-in capital		256,809			—			—			256,809
Accumulated deficit		(35,546	)		1,048			214			(34,284	)
Accumulated other comprehensive loss		(1,372	)		—			—			(1,372	)

		219,972			1,048			214			221,234

Total Liabilities and Equity	$	899,156		$	(1,598	)	$	(2,559	)	$	894,999

(1)	Includes properties sold prior to June 30, 2004.

(2)	Assumes sale by TCI on January 1, 2004.

TRANSCONTINENTAL REALTY INVESTORS, INC.

PROFORMA COMBINED STATEMENT OF OPERATIONS ^{(1) (2)}

SIX MONTHS ENDED JUNE 30, 2004

(Dollars in thousands, except per share)


	Actual			Apartments ⁽³⁾			Commercial ⁽⁴⁾			Land ⁽⁵⁾			Proforma
Property revenue:
Rents	$	57,892		$	—		$	(387	)	$	—		$	57,505
Property operations		35,964			—			(268	)		(20	)		35,676

Operating income		21,928			—			(119	)		20			21,829

Land Operations:
Sales		28,462			—			—			2,600			31,062
Cost of Sales		21,374			—			—			2,546			23,920
Deferred Gain on Sale		4,982			—			—			—			4,982

Gain on Land Sales		2,106			—			—			54			2,160

Other income (loss):
Interest		1,554			—			—			—			1,554
Gain on foreign currency transaction		1,249			—			—			—			1,249
Equity in loss of equity investees		(1,510	)		—			—			—			(1,510	)

		1,293			—			—			—			1,293

Other expense:
Interest		19,759			—			(148	)		(57	)		19,554
Depreciation		10,306			—			(122	)		—			10,184
Advisory fee to affiliates		3,243			(63	)		(63	)		(24	)		3,093
General and administrative		3,960			—			—			—			3,960
Minority interest		713			—			—			—			713

		37,981			(63	)		(333	)		(81	)		37,504

Net income (loss) from continuing operations	$	(12,654	)	$	63		$	214		$	155		$	(12,222	)

Basic and Diluted Earnings Per Share:
Net Loss from Continuing Operations	$	(1.57	)										$	(1.52	)

Weighted Average Common Shares Used in Computing Earnings Per Share		8,113,669												8,113,669

(1)	The proforma combined Statement of Operations assumes that each property was sold by TCI on January 1, 2004.

(2)

Operating results for properties are their actual operating results from January 1 to their respective dates of sale. Rents, property operations, interest expense and depreciation for non-land properties sold prior to August 15, 2004 were excluded from the actual results of continuing operations at June 30, 2004.

(3)	Includes the Cliffs of El Dorado and Sandstone Apartments sold in May 2004, and the Waters Edge IV Apartments sold in June 2004.

(4)	Includes Countryside Retail and Harmon, Brandeis and Odgen Industrial sold in February 2004, K-Mart, Texstar Warehouse and the Pinewood Warehouse (Kelly) sold in March 2004, the Atrium sold in May 2004, 4135 Beltline sold in June 2004 and the Cash Road Warehouse (Kelly) sold in July 2004.

(5)	Includes Red Cross sold in January 2004, Allen sold in March 2004 and Rasor sold in August 2004.

TRANSCONTINENTAL REALTY INVESTORS, INC.

PROFORMA COMBINED STATEMENT OF OPERATIONS ^{(1) (2)}

YEAR ENDED DECEMBER 31, 2003

(Dollars in thousands, except per share)


	Actual⁽³⁾			Apartments⁽⁴⁾			Commercial⁽⁵⁾			Land⁽⁶⁾			Proforma
Property revenue:
Rents	$	114,422		$	(2,093	)	$	(9,564	)	$	(11	)	$	102,754
Property operations		73,603			(1,163	)		(4,509	)		(267	)		67,664

Operating income		40,819			(930	)		(5,055	)		256			35,090

Land Operations:
Sales		11,087			—			—			31,062			42,149
Cost of Sales		7,730			—			—			23,920			31,650
Deferred Gain on Sale		1,716			—			—			4,982			6,698

Gain on Land Sales		1,641			—			—			2,160			3,801

Other income (loss):
Interest		6,683			—			—			—			6,683
Equity in loss of equity investees		(4,291	)		—			—			—			(4,291	)
Gain on debt extinguishment		4,392			—			—			—			4,392
Gain on condemnation award		4,800			—			—			—			4,800

		11,584			—			—			—			11,584

Other expense:
Interest		38,943			(744	)		(2,060	)		(1,553	)		34,586
Depreciation		21,199			(390	)		(1,395	)		—			19,414
Provision for asset impairment		4,713			—			—			—			4,713
Discount on sale of note receivable		104			—			—			—			104
Advisory fee to affiliates		4,935			(185	)		(420	)		(169	)		4,161
General and administrative		9,149			—			—			—			9,149
Loss on foreign currency translation		3,309			—			—			—			3,309
Minority interest		(2,230	)		—			1,064			—			(1,166	)

		80,122			(1,319	)		(7,326	)		(1,920	)		74,270

Net income (loss) from continuing operations	$	(26,078	)	$	389		$	2,271		$	4,336		$	(23,795	)

Basic and Diluted Earnings Per Share:
Net Loss from Continuing Operations	$	(3.23	)										$	(2.95	)

Weighted Average Common Shares Used in Computing Earnings Per Share		8,078,108												8,078,108

(1)	The proforma combined Statement of Operations assumes that each property was sold by TCI on January 1, 2003.

(2)

Operating results for properties are their actual operating results from January 1 to their respective dates of sale. Rents, property operations, interest expense and depreciation for non-land properties sold prior to April 1, 2003 were excluded from the actual results of continuing operations at December 31, 2003.

(3)	TCI’s land operations were not separately disclosed in the Consolidated Statement of Operations for the year ending December 31, 2003.

(4)	Includes the Cliffs of El Dorado and Sandstone Apartments sold in May 2004, and the Waters Edge IV Apartments sold in June 2004.

(5)	Includes Countryside Retail and Harmon, Brandeis and Odgen Industrial sold in February 2004, K-Mart, Texstar Warehouse and the Pinewood Warehouse (Kelly) sold in March 2004, the Atrium sold in May 2004, 4135 Beltline sold in June 2004 and the Cash Road Warehouse (Kelly) sold in July 2004.

(6)	Includes Red Cross sold in January 2004, Allen sold in March 2004 and Rasor sold in August 2004.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	TRANSCONTINENTAL REALTY INVESTORS, INC.

Date: August 24, 2004	By:	/s/ J. C. Lowenberg III
		J. C. Lowenberg III
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer and Acting Principal Executive Officer)


Date: August 24, 2004	By:	/s/ Scott T. Lewis
		Scott T. Lewis
		Vice President and Chief Accounting Officer