UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
November 10, 2005 (August 25, 2005)
Date of Report (Date of Earliest Event Reported)
TRANSCONTINENTAL REALTY INVESTORS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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Nevada |
001-09240 |
94-6565852 |
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(State or Other Jurisdiction of |
(Commission File No.) |
(I.R.S. Employer |
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1800 Valley View Lane, Suite 300 Dallas, Texas |
75234 |
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(Address of Principal Executive Office) |
(Zip Code) |
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(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:
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Transcontinental Realty Investors, Inc. ("TCI") herby amends its Current Report on Form 8-K dated August 31, 2005 to provide certain financial statements required by Rule 3-14 of Regulation S-X of the Securities and Exchange Commission.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Page
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
600 Las Colinas Office Building
Unaudited Statement of Revenues and Certain Expenses for the year ended December 31, 2004 3
Two Hickory Office Building
Report of Independent Auditors for the years ending December 31, 2004, 2003 and 2002 4
Statements of Revenues and Certain Expenses for the years ended December 31, 2004, 2003 and 2002 5
Notes to the Statements of Revenues and Certain Expenses for the years ended December 31, 2004, 2003 and 2002 6
Foxwood Apartments
Report of Independent Auditors for the years ending December 31, 2004, 2003 and 2002 8
Statements of Revenues and Certain Expenses for the years ended December 31, 2004, 2003 and 2002 9
Notes to the Statements of Revenues and Certain Expenses for the years ended December 31, 2004, 2003 and 2002 10
(b) PRO FORMA FINANCIAL INFORMATION
Unaudited Pro Forma Consolidated Financial Information 11
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 2004 12
Unaudited Pro Forma Consolidated Statement of Operations for the
year ended December 31, 2004 13
Unaudited Pro Forma Consolidated Statement of Operations for the
six months ended June 30, 2005 14
(c) EXHIBITS
None
As of the date of this 8-K/A, TCI has not received all the information required for our auditors to issue an opinion on the revenues and direct operating expenses of the 600 Las Colinas Office Building for 2004. TCI will file an audited Statement of Revenues and Direct Operating Expenses once the information is received and the audit is complete. In this 8-K/A filing, TCI has included an unaudited Statement of Revenues and Direct Operating Expenses, which TCI believes represents the 2004 figures.
600 LAS COLINAS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 2004
(Unaudited)
REVENUES
Net rental revenue $ 7,154,065
Common area maintenance and other revenue 3,796,081
Total revenues 10,950,146
DIRECT OPERATING EXPENSES
General and administrative 635,934
Utilities 844,139
Repairs and maintenance 1,180,684
Property taxes 1,808,286
Property insurance 96,618
Total direct operating expenses 4,565,661
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 6,384,485
Independent Auditors' Report
To the Board of Directors
Transcontinental Realty Investors, Inc.
We have audited the accompanying statements of revenues and direct operating expenses of ART Two Hickory Corporation for the years ended December 31, 2004, 2003, and 2002. These statements are the responsibility of the Property's management. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements are prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in Form 8-K of Transcontinental Realty Investors, Inc.) and, as described in Note 1, are not intended to be a complete presentation of the results of operations.
In our opinion, the statements of revenues and direct operating expenses referred to above present fairly, in all material respects, the revenues and direct operating expenses of ART Two Hickory Corporation for the years ended December 31, 2004, 2003, and 2002, in conformity with accounting principles generally accepted in the United States of America.
FARMER, FUQUA, & HUFF, P.C.
Plano, Texas
November 8, 2005
ART TWO HICKORY CORPORATION
STATEMENTS OF REVENUES
AND DIRECT OPERATING EXPENSES
Years Ended December 31,
2004 2003 2002
REVENUES
Gross potential rents $ 2,027,973 $ 2,064,013 $ 2,040,971
Vacancy and other lost rents (193,447) (175,651) (236,669)
Net rental revenues 1,834,526 1,888,362 1,804,302
Common area maintenance
and other revenue 146,752 160,490 149,821
Total revenues 1,981,278 2,048,852 1,954,123
DIRECT OPERATING EXPENSES
Personnel 48,452 63,256 61,594
General and administrative 90,004 101,235 115,156
Utilities 214,374 190,608 149,160
Repairs and maintenance 201,360 209,455 216,042
Property taxes 243,098 289,367 279,150
Property insurance 22,331 29,926 20,999
Total direct operating expenses 819,619 883,847 842,101
REVENUES IN EXCESS OF
DIRECT OPERATING EXPENSES $ 1,161,659 $ 1,165,005 $ 1,112,022
The accompanying notes are an integral part of these financial statements.
ART TWO HICKORY CORPORATION
NOTES TO STATEMENTS OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 2004, 2003, and 2002
NOTE A ORGANIZATION AND BASIS OF PRESENTATION
ART Two Hickory Corporation ("Two Hickory") owns the approximately 96,127 square foot Two Hickory Office Building in Farmers Branch, Texas. During 2004, 2003, and 2002, Two Hickory was owned by American Realty Investors, Inc. ("ARI").
The accompanying financial statements do not include a provision for depreciation and amortization, interest expense, income taxes or other corporate expenses. Accordingly, these statements are not intended to be a complete presentation of the results of operations.
NOTE B SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION -- Rental revenue is recorded when due from tenants and is recognized monthly as it is earned, which is not substantially different than on a straight-line basis.
NOTE C TENANT LEASES
The Two Hickory building was leased by fourteen tenants during 2004, eight of which remained at December 31, 2004. The lease agreements require the lessees to pay charges associated with the property, including property taxes, utilities, insurance and repairs and maintenance.
The building is leased under operating leases, which expire between September of 2005 and May of 2012. At December 31, 2004, the approximate future minimum rental income under the operating leases are as follows:
2005 $ 1,336,105
2006 1,005,289
2007 346,842
2008 221,767
2009 129,905
Thereafter 251,489
$ 3,291,397
ART TWO HICKORY CORPORATION
NOTES TO STATEMENTS OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 2004
NOTE D RELATED PARTIES
Two Hickory received in 2004, 2003, and 2002, approximately $305,000, $358,000, and $372,000, respectively, in rents from related parties.
At December 31, 2004, the approximate future minimum rental income from related parties under the operating leases are as follows:
2005 $ 100,067
2006 100,067
2007 33,356
$ 233,490
NOTE E SUBSEQUENT EVENT
ART Two Hickory Corporation was sold to Transcontinental Realty Investors, Inc., a Nevada corporation, a subsidiary of ARI, effective January 4, 2005 under a contract entered January 4, 2002.
Independent Auditors' Report
To the Board of Directors
Transcontinental Realty Investors, Inc.
We have audited the accompanying statements of revenues and direct operating expenses of Garden Foxwood, L.P. for the years ended December 31, 2004, 2003, and 2002. These statements are the responsibility of the Property's management. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements are prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in Form 8-K of Transcontinental Realty Investors, Inc.) and, as described in Note 1, are not intended to be a complete presentation of the results of operations.
In our opinion, the statements of revenues and direct operating expenses referred to above present fairly, in all material respects, the revenues and direct operating expenses of Garden Foxwood, L.P. for the years ended December 31, 2004, 2003, and 2002, in conformity with accounting principles generally accepted in the United States of America.
FARMER, FUQUA, & HUFF, P.C.
Plano, Texas
November 8, 2005
GARDEN FOXWOOD, L.P.
STATEMENTS OF REVENUES
AND DIRECT OPERATING EXPENSES
Years Ended December 31,
2004 2003 2002
REVENUES
Gross potential rents $ 1,542,960 $ 1,540,800 $ 1,521,000
Vacancy and other lost rents (409,852) (394,490) (223,873)
Net rental revenues 1,133,108 1,146,310 1,297,127
Other revenue 78,144 114,533 75,796
Total revenues 1,211,252 1,260,843 1,372,923
DIRECT OPERATING EXPENSES
Personnel 198,373 186,186 169,892
General and administrative 136,197 155,571 140,792
Utilities 79,144 73,183 61,214
Repairs and maintenance 420,979 381,942 291,468
Property taxes 134,648 160,525 145,973
Property insurance 35,296 36,788 39,006
Total direct operating expenses 1,004,637 994,195 848,345
REVENUES IN EXCESS OF
DIRECT OPERATING EXPENSES $ 206,615 $ 266,648 $ 524,578
The accompanying notes are an integral part of these financial statements.
GARDEN FOXWOOD, L.P.
NOTES TO STATEMENTS OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 2004, 2003, and 2002
NOTE A ORGANIZATION AND BASIS OF PRESENTATION
Garden Foxwood, L.P. ("Foxwood") owns a 220 unit apartment complex located in Memphis, Tennessee. During 2004, 2003, and 2002, Foxwood was owned by American Realty Investors, Inc. (ARI).
The accompanying financial statements do not include a provision for depreciation and amortization, interest expense, income taxes or other corporate expenses. Accordingly, these statements are not intended to be a complete presentation of the results of operations.
NOTE B SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION -- Rental revenue is recorded when due from residents and is recognized monthly as it is earned, which is not substantially different than on a straight-line basis as lease terms are generally for periods of one year or less.
NOTE C OTHER REVENUE
Other revenue consists of deposit forfeitures, application and late fees, charges for returned checks and other miscellaneous revenues of the property.
NOTE D SUBSEQUENT EVENT
Foxwood was sold to Transcontinental Realty Investors, Inc., a Nevada corporation, a subsidiary of ARI, effective April 12, 2005 under a contract entered April 12, 2002.
Transcontinental Realty Investors, INC.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
This pro forma financial information should be read in conjunction with the financial statements and notes of Transcontinental Realty Investors, Inc. ("TCI") included in its annual report filed on Form 10-K for the year ended December 31, 2004 and its quarterly report filed on Form 10-Q for the six months ended June 30, 2005.
The unaudited pro forma consolidated balance sheet is presented with 600 Las Colinas, Luna land, Senlac land, Whorton land and Wilmer 88 land as if they were purchased on June 30, 2005. The other properties purchased by TCI prior to June 30, 2005 are already included in TCI's consolidated balance sheet as of June 30, 2005; therefore, no pro forma adjustments for these properties were made.
The unaudited pro forma statements of operations are presented for the six months ended June 30, 2005 and the year ended December 31, 2004. The unaudited pro forma consolidated statements of operations present TCI's operations as if the transactions described above had occurred at January 1 of each of the periods presented.
The pro forma consolidated balance sheet and pro forma consolidated statements of operations are not necessarily indicative of what the actual financial position would have been or what the actual results of operations would have been had TCI completed all the property acquisitions on January 1, 2004 or January 1, 2005, nor do they purport to represent our future operations from these property acquisitions.
TRANSCONTINENTAL REALTY INVESTORS, INC.
PROFORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2005
(Dollars in thousands)
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Actual (1) |
600 Las Colinas |
Two Hickory |
Foxwood Apartments |
Insignificant Acquisitions (2) |
Total Consolidated Pro Forma |
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ASSETS |
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Real Estate held for Investment |
$767,860 |
$ 57,510 |
$ -- |
$ -- |
$ 6,116 |
$ 831,486 |
Less: Accumulated Depreciation |
(76,335) |
-- |
-- |
-- |
-- |
(76,335) |
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691,525 |
57,510 |
-- |
-- |
6,116 |
755,151 |
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Real estate held for sale |
43,866 |
-- |
-- |
-- |
-- |
43,866 |
Real estate subject to sales contract |
69,544 |
-- |
-- |
-- |
-- |
69,544 |
Notes and Interest Receivable: |
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Performing |
52,854 |
-- |
-- |
-- |
-- |
52,854 |
Non-Performing |
-- |
-- |
-- |
-- |
-- |
-- |
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52,854 |
-- |
-- |
52,854 |
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Less: Allowances for Estimated Losses |
-- |
-- |
-- |
-- |
-- |
-- |
|
52,854 |
-- |
-- |
-- |
-- |
52,854 |
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Investment in real estate entities |
19,045 |
-- |
-- |
-- |
-- |
19,045 |
Marketable equity securities, at market value |
7,507 |
-- |
-- |
-- |
-- |
7,507 |
Cash and cash equivalents |
9,824 |
(7,639) |
-- |
-- |
(2,184) |
1 |
Other Assets |
42,837 |
2,352 |
-- |
-- |
(85) |
45,104 |
Total Assets |
$ 937,002 |
$52,223 |
$ -- |
$ -- |
$ 3,847 |
$ 993,072 |
LIABILITIES AND EQUITY |
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Notes and interest payable |
$ 548,053 |
$ 40,699 |
$ -- |
$ -- |
$ 3,828 |
$ 592,580 |
Liabilities related to assets held for sale |
52,897 |
-- |
-- |
-- |
-- |
52,897 |
Liabilities related to assets subject to sales contract |
59,679 |
-- |
-- |
-- |
-- |
59,679 |
Other Liabilities |
32,494 |
11,360 |
-- |
-- |
19 |
43,873 |
|
693,123 |
52,059 |
-- |
-- |
3,847 |
749,029 |
|
Minority Interest |
1,147 |
-- |
-- |
-- |
-- |
1,147 |
Stockholders' equity: |
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Preferred Stock |
-- |
-- |
-- |
-- |
-- |
-- |
Common Stock |
81 |
-- |
-- |
-- |
-- |
81 |
Paid-in capital |
256,599 |
-- |
-- |
-- |
-- |
256,599 |
Treasury stock |
(3,086) |
-- |
-- |
-- |
-- |
(3,086) |
Accumulated deficit |
(10,234) |
164 |
-- |
-- |
-- |
(10,070) |
Accumulated other comprehensive loss |
(628) |
-- |
-- |
-- |
-- |
(628) |
|
242,732 |
164 |
-- |
-- |
-- |
242,896 |
|
Total Liabilities and Equity |
$ 937,002 |
$ 52,223 |
$ -- |
$ -- |
$ 3,847 |
$ 993,072 |
TRANSCONTINENTAL REALTY INVESTORS, INC.
PROFORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2004
(Dollars in thousands, except per share amounts)
|
Actual (1) |
600 Las Colinas |
Two Hickory |
Foxwood Apartments |
Insignificant Acquisitions |
Proforma |
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Property revenue: |
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Rents |
$ 92,959 |
$ 8,215 |
$ 1,981 |
$ 1,211 |
$ 27 |
$ 104,393 |
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Expenses: |
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Property operations |
59,177 |
5,316 |
820 |
1,005 |
1,039 |
67,357 |
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Depreciation and amortization |
17,700 |
1,294 |
259 |
157 |
233 |
19,643 |
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General and administrative |
9,312 |
-- |
-- |
-- |
-- |
9,312 |
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Advisory fees |
6,733 |
449 |
90 |
54 |
216 |
7,542 |
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Total operating expenses |
92,922 |
7,059 |
1,169 |
1,216 |
1,488 |
103,854 |
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Operating income/(loss) |
37 |
1,156 |
812 |
(5) |
(1,461) |
539 |
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Other income/(expense): |
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Interest income |
3,683 |
-- |
-- |
-- |
-- |
3,683 |
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Gain on foreign currency transaction |
3,766 |
-- |
-- |
-- |
-- |
3,766 |
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Mortgage and loan interest |
(32,433) |
(2,170) |
(596) |
(388) |
(963) |
(36,550) |
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Net income fee |
(1,933) |
88 |
23 |
48 |
211 |
(1,563) |
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Provision for asset impairment |
(1,722) |
-- |
-- |
-- |
-- |
(1,722) |
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Provision for losses |
1,456 |
-- |
-- |
-- |
-- |
1,456 |
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Other income/(expense) |
555 |
-- |
-- |
-- |
-- |
555 |
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Total other income/(expense) |
(26,628) |
(2,082) |
(573) |
(340) |
(752) |
(30,375) |
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Loss before gain on land sales, minority interest and equity in earnings of investees |
(26,591) |
(926) |
239 |
(345) |
(2,213) |
(29,836) |
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Gain on land sales |
7,110 |
-- |
-- |
-- |
-- |
7,110 |
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Equity in earnings of investees |
(1,497) |
-- |
-- |
-- |
-- |
(1,497) |
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Minority interests |
(1,194) |
-- |
-- |
-- |
-- |
(1,194) |
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Net income (loss) from continuing operations |
$ (22,172) |
$ (926) |
$ 239 |
$ (345) |
$ (2,213) |
$ (25,417) |
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Basic and Diluted Earnings Per Share: |
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Net Loss from Continuing Operations |
$ (2.74) |
$ (3.14) |
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Weighted Average Common Shares Used in Computing Earnings Per Share |
8,082,854 |
8,082,854 |
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TRANSCONTINENTAL REALTY INVESTORS, INC.
PROFORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2005
(Dollars in thousands, except per share amounts)
|
Actual (1) |
600 Las Colinas |
Two Hickory |
Foxwood Apartments |
Insignificant Acquisitions (2) |
Proforma |
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Property revenue: |
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Rents |
$ 50,002 |
$ 4,112 |
$ 155 |
$ 435 |
$ -- |
$ 54,704 |
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Expenses: |
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Property operations |
31,673 |
2,560 |
96 |
340 |
341 |
35,010 |
|
Depreciation and amortization |
7,910 |
647 |
22 |
39 |
117 |
8,735 |
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General and administrative |
3,394 |
-- |
-- |
-- |
-- |
3,394 |
|
Advisory fees |
3,538 |
225 |
-- |
14 |
54 |
3,831 |
|
Total operating expenses |
46,515 |
3,432 |
118 |
393 |
512 |
50,970 |
|
Operating income/(loss) |
3,487 |
680 |
37 |
42 |
(512) |
3,734 |
|
Other income/(expense): |
||||||
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Interest income |
1,897 |
-- |
-- |
-- |
-- |
1,897 |
|
Gain on foreign currency transaction |
228 |
-- |
-- |
-- |
-- |
228 |
|
Mortgage and loan interest |
(18,698) |
(1,085) |
(35) |
(133) |
(262) |
(20,213) |
|
Other income/(expense) |
234 |
-- |
-- |
-- |
-- |
234 |
|
Total other income/(expense) |
(16,339) |
(1,085) |
(35) |
(133) |
(262) |
(17,854) |
|
Loss before gain on land sales, minority interest and equity in earnings of investees |
(12,852) |
(405) |
2 |
(91) |
(774) |
(14,120) |
|
Gain on land sales |
2,404 |
-- |
-- |
-- |
-- |
2,404 |
|
Equity in earnings of investees |
1,146 |
-- |
-- |
-- |
-- |
1,146 |
|
Minority interests |
(26) |
-- |
-- |
-- |
-- |
(26) |
|
Net income (loss) from continuing operations |
$ (9,328) |
$ (405) |
$ 2 |
$ (91) |
$ (774) |
$ (10,596) |
|
Basic and Diluted Earnings Per Share: |
||||||
|
Net Loss from Continuing Operations |
$ (1.18) |
$ (1.34) |
||||
|
Weighted Average Common Shares Used in Computing Earnings Per Share |
7,900,869 |
7,900,869 |
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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. |
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Date: November 10, 2005 |
By: |
/s/ Steven A. Abney |
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Steven A. Abney |
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Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer and Acting Principal Executive Officer) |
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