<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
September 16, 1997
------------------------------------------------------
Date of Report (Date of Earliest Event Reported)
TRANSCONTINENTAL REALTY INVESTORS, INC.
------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Nevada 0-13291 94-6565852
- --------------------------------------------------------------------------------
(State of Incorporation) (Commission (IRS Employer
File No.) Identification No.)
10670 North Central Expressway, Suite 300, Dallas, TX 75231
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (214) 692-4700
-----------------
Not Applicable
- --------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
This Form 8-K/A amends the Form 8-K Current Report dated September 16, 1997 and
filed October 14, 1997 by Transcontinental Realty Investors, Inc. (the
"Company") and provides required financial statements that were not available at
the date of the original filing.
(a) Pro forma financial information:
Pro forma statements of operations are presented for the year ended December 31,
1996 and the nine months ended September 30, 1997. A pro forma balance sheet as
of September 30, 1997 is also presented.
A summary of the pro forma transactions follows:
On March 5, 1997, Transcontinental Realty Investors, Inc. (the "Company" or
"Registrant") purchased the Terrace Hills Apartments, a 310 unit apartment
complex in El Paso, Texas for $6.2 million, approximately 2.5% of the Company's
assets at December 31, 1996. The seller of the property was Amstar/First Capital
Joint Venture. The Company paid $1.4 million in cash and obtained new mortgage
financing of $4.8 million. The mortgage bears interest at 8.07% per annum,
requires monthly payments of principal and interest of $35,086 and matures in
April 2007.
On March 28, 1997, the Company purchased the Crescent Place Apartments, a 120
unit apartment complex in Houston, Texas for $2.3 million, approximately 1.0% of
the Company's assets at December 31, 1996. The seller of the property was Fort
Bend Federal Savings and Loan Association. The Company paid $500,000 in cash and
obtained new mortgage financing of $1.8 million. The mortgage bears interest at
8.5% per annum, requires monthly payments of principal and interest of $13,552
and matures in April 2004.
On March 31, 1997, the Company purchased the Savings of America Building, a
68,634 square foot office building in Houston, Texas for $1.6 million in cash,
approximately .7% of the Company's assets at December 31, 1996. The seller of
the property was Houston 3003 South Loop, Inc.
On May 1, 1997, the Company purchased the Treehouse Apartments, a 160 unit
apartment complex in Irving, Texas for $3.4 million in cash, approximately 1.4%
of the Company's assets at December 31, 1996. The seller of the property was
Lennar Treehouse Limited Partnership.
On May 15, 1997, the Company purchased the Villas at Countryside Apartments, a
102 unit apartment complex in Sterling, Virginia, for $6.3 million,
approximately 2.6% of the Company's assets at December 31, 1996. The seller of
the property was R and M Villas, L.C. The Company paid $1.1 million in cash and
assumed the existing mortgage of $5.2 million. The mortgage bears interest at a
variable rate, currently 9.0% per annum, requires monthly payments of principal
and interest of $38,768 and matures in December 1997.
On September 16, 1997, the Company purchased Bonita Plaza, a 47,777 square foot
office building in Bonita, California, for $5.7 million,
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued)
approximately 2.3% of the Company's assets at December 31, 1996. The seller of
the property was Lennar U.S. Partners Limited Partnership. The Company paid $1.7
million in cash and obtained new mortgage financing of $4.0 million. The
mortgage bears interest at a variable rate, currently 10.5% per annum, requires
monthly interest only payments of $34,956 and matures in September 1998.
On September 25, 1997, the Company purchased Country Bend Apartments, a 166 unit
apartment complex in Fort Worth, Texas, for $3.4 million, approximately 1.4% of
the Company's assets at December 31, 1996. The seller of the property was
Country Bend Properties, Ltd. The Company paid $743,000 in cash and assumed the
existing mortgage of $2.6 million. The mortgage bears interest at 8.82% per
annum, requires monthly payments of principal and interest of $21,913 and
matures in May 2005.
On October 1, 1997, the Company purchased Encon Warehouse, a three building,
279,290 square foot warehouse facility in Fort Worth, Texas, for $4.7 million,
approximately 1.9% of the Company's assets at December 31, 1996. The seller of
the property was Seminary West Limited Partnership. The Company paid $1.2
million in cash and obtained new mortgage financing of $3.5 million. The
mortgage bears interest at 8.5% per annum, requires monthly interest only
payments of $24,792 for the first 36 months and thereafter requires monthly
payments of principal and interest of $26,912 and matures in October 2007.
Also on October 1, 1997, the Company purchased the Sandstone Apartments, a 238
unit apartment complex in Mesa, Arizona, for $7.9 million, approximately 3.2% of
the Company's assets at December 31, 1996. The seller of the property was
EAG-Mesa Villas. The Company paid $2.0 million in cash and assumed the existing
mortgage of $5.9 million. The mortgage bears interest at a variable rate,
currently 8.25% per annum, requires monthly payments of principal and interest
of $45,087 for the first sixty months and thereafter requires monthly payments
of principal and interest of $49,962 and matures in August 2004.
On October 8, 1997, the Company purchased the Sunchase Apartments, a 300 unit
apartment complex in Odessa, Texas, for $3.6 million, approximately 1.45% of the
Company's assets at December 31, 1996. The seller of the property was Mr. Dan
Martinez. The Company paid $1.5 million in cash and assumed the existing
mortgage of $2.1 million. The mortgage bears interest at 9% per annum, requires
monthly payments of principal and interest of $17,621 and matures in June 2001.
In 1997, the Company has also sold a shopping center, the Fiesta Mart, in
February 1997, a .9976 acre parcel of land in February 1997 and a single family
residence in April 1997. In connection with these sales, the Company received
cash totaling $3.8 million.
These pro forma statements of operations present the Company's operations as if
the purchases and sales transactions described above had occurred at the
beginning of each of the periods presented.
3
<PAGE> 4
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Encon Sandstone Sunchase
Actual(1) Warehouse(2) Apartments(2) Apartments(2) Pro forma
--------- ------------ ------------- ------------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Assets
Notes and interest receivable
Performing .................................... $ 4,453 $ -- $ -- $ -- $ 4,453
Nonperforming ................................. 404 -- -- -- 404
-------- -------- -------- -------- --------
4,857 -- -- -- 4,857
Less - allowance for estimated losses ............ (891) -- -- -- (891)
-------- -------- -------- -------- --------
3,966 -- -- -- 3,966
Real estate held for sale, net of accumulated
depreciation .................................. 281 -- -- -- 281
Real estate held for investment, net of
accumulated depreciation ...................... 256,636 4,918 8,293 3,709 273,556
Investments in partnerships ...................... 4,290 -- -- -- 4,290
Cash and cash equivalents ........................ 4,449 (1,418) (2,403) (1,550) (922)
Other assets ..................................... 10,577 -- 28 92 10,697
-------- -------- -------- -------- --------
$280,199 $ 3,500 $ 5,918 $ 2,251 $291,868
======== ======== ======== ======== ========
</TABLE>
- ------------------
(1) Includes the Terrace Hills Apartments, Crescent Place Apartments and
Savings of America Building which were acquired in March 1997 and the
Treehouse Apartments and Villas at Countryside Apartments which were
acquired in May 1997, the Bonita Plaza and Country Bend Apartments which
were acquired in September 1997 and excludes the Fiesta Mart Shopping
Center and a .9976 parcel of land that were sold in February 1997 and a
single family residence that was sold in April 1997.
(2) Assumes acquisition by the Company on January 1, 1997.
4
<PAGE> 5
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Encon Sandstone Sunchase
Actual(1) Warehouse(2) Apartments(2) Apartments(2) Pro forma
--------- ------------ ------------- ------------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Liabilities and Shareholders' Equity
Liabilities
Notes and interest payable ....................... $193,069 $ 3,500 $ 5,862 $ 2,134 $204,565
Other liabilities ................................ 12,160 -- 56 117 12,333
-------- -------- -------- -------- --------
205,229 3,500 5,918 2,251 216,898
Commitments and contingencies
Shareholders' equity
Common Stock, $.01 par value; 10,000,000
shares; issued and outstanding, 3,899,487
shares ........................................ 39 -- -- -- 39
Paid-in capital .................................. 217,831 -- -- -- 217,831
Accumulated distributions in excess of
accumulated earnings .......................... (142,900) -- -- -- (142,900)
-------- -------- -------- -------- --------
74,970 -- -- -- 74,970
-------- -------- -------- -------- --------
$280,199 $ 3,500 $ 5,918 $ 2,251 $291,868
======== ======== ======== ======== ========
</TABLE>
- ------------------
(1) Includes the Terrace Hills Apartments, Crescent Place Apartments and
Savings of America Building which were acquired in March 1997 and the
Treehouse Apartments and Villas at Countryside Apartments which were
acquired in May 1997, the Bonita Plaza and Country Bend Apartments which
were acquired in September 1997 and excludes the Fiesta Mart Shopping
Center and a .9976 parcel of land that were sold in February 1997 and a
single family residence that was sold in April 1997.
5
<PAGE> 6
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Terrace Crescent Villas at
Hills Place Savings of Treehouse Countryside
Actual Apartments(1) Apartments(1) America Apartments(1) Apartments(1)
----------- ------------- ------------- ----------- ------------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income
Rents ................ $ 39,205 $ 269 $ 113 $ 127 $ 303 $ 286
Interest ............. 1,283 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
40,488 269 113 127 303 286
Expenses
Property
operations ......... 23,403 41 45 127 211 112
Interest ............. 12,004 67 36 68 114 169
Depreciation ......... 7,048 21 3 4 24 18
Advisory fee
to affiliate ........ 1,459 -- -- -- -- --
General and
administrative ...... 1,977 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
45,891 129 84 199 349 299
Net income (loss)
from operations ...... (5,403) 140 29 (72) (46) (13)
Equity in income
of investees ......... 680 -- -- -- -- --
Gain on sale of
real estate ......... 1,455 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) ....... $ (3,268) $ 140 $ 29 $ (72) $ (46) $ (13)
=========== =========== =========== =========== =========== ===========
Earnings per share
Net (loss) ........... $ (.83)
===========
Weighted average
shares of Common
Stock used in
computing
earnings per
share ................ 3,910,991
===========
</TABLE>
<TABLE>
<CAPTION>
Bonita Country Bend Encon Sandstone Sunchase Fiesta
Plaza(1) Apartments(1) Warehouse(1) Apartments(1) Apartments(1) Mart(2) Pro forma
----------- ------------- ------------ ------------- ------------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income
Rents ................ $ 580 $ 561 $ 385 $ 889 $ 668 $ (11) $ 43,375
Interest ............. -- -- -- -- -- -- 1,283
----------- ----------- ----------- ----------- ----------- ----------- -----------
580 561 385 889 668 (11) 44,658
Expenses
Property
operations ......... 140 395 -- 305 372 (4) 25,147
Interest ............. 304 166 223 363 142 (1) 13,655
Depreciation ......... 78 48 74 124 56 (39) 7,459
Advisory fee
to affiliate ........ -- -- -- -- -- -- 1,459
General and
administrative ...... -- -- -- -- -- -- 1,977
----------- ----------- ----------- ----------- ----------- ----------- -----------
522 609 297 792 570 (44) 49,697
Net income (loss)
from operations ...... 58 (48) 88 97 98 33 (5,039)
Equity in income
of investees ......... -- -- -- -- -- -- 680
Gain on sale of
real estate ......... -- -- -- -- -- -- 1,455
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) ....... $ 58 $ (48) $ 88 $ 97 $ 98 $ 33 $ (2,904)
=========== =========== =========== =========== =========== =========== ===========
Earnings per share
Net (loss)............ $ (.73)
===========
Weighted average
shares of Common
Stock used in
computing
earnings per
share ................ 3,910,991
===========
</TABLE>
- -------------------
(1) Assumes acquisition by the Company on January 1, 1997. Results of
operations subsequent to respective dates of acquisition are included in
"Actual" column.
(2) Assumes sale on January 1, 1997.
6
<PAGE> 7
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Terrace Crescent Villas at
Hills Place Savings of Treehouse Countryside
Actual Apartments(1) Apartments(1) America(1) Apartments(1) Apartments(1)
----------- ------------- ------------- ---------- ------------- -------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income
Rents ................ $ 45,405 $ 1,519 $ 532 $ 627 $ 982 $ 863
Interest ............. 1,473 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
46,878 1,519 532 627 982 863
Expenses
Property
operations .......... 28,491 756 309 451 578 332
Interest ............. 14,999 382 149 108 229 462
Depreciation ......... 8,461 129 49 34 72 132
Advisory fee to
affiliate ........... 1,784 -- -- -- -- --
General and
administrative ...... 2,685 -- -- -- -- --
Litigation
settlement .......... (1,500) -- -- -- -- --
Provision for
losses .............. 1,579 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
56,499 1,267 507 593 879 926
Income (loss)
from operations ...... (9,621) 252 25 34 103 (63)
Equity in income
of investees ......... (20) -- -- -- -- --
Gains on sale of
real estate .......... 1,579 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)
before extra-
ordinary gain ........ (8,062) 252 25 34 103 (63)
Extraordinary
gain ................. 256 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net (loss) .............. $ (7,806) $ 252 $ 25 $ 34 $ 103 $ (63)
=========== =========== =========== =========== =========== ===========
Earnings per share
Net (loss) ........... $ (1.96)
===========
Weighted average
shares of Common
Stock used in
computing
earnings per
share ................ 3,994,687
</TABLE>
<TABLE>
<CAPTION>
Bonita Country Bend Encon Sandstone Sunchase Fiesta
Plaza(1) Apartments(1) Warehouse(1) Apartments(1) Apartments(1) Mart(2) Pro forma
----------- ------------- ------------ ------------- ------------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Income
Rents ................ $ 806 $ 765 $ 513 $ 1,186 $ 890 $ (78) $ 54,010
Interest ............. -- -- -- -- -- -- 1,473
----------- ----------- ----------- ----------- ----------- ----------- -----------
806 765 513 1,186 890 (78) 55,483
Expenses
Property
operations .......... 186 527 -- 407 496 (27) 32,506
Interest ............. 439 227 298 489 175 (10) 17,947
Depreciation ......... 117 72 98 166 74 (27) 9,377
Advisory fee to
affiliate ........... -- -- -- -- -- -- 1,784
General and
administrative ...... -- -- -- -- -- -- 2,685
Litigation
settlement .......... -- -- -- -- -- -- (1,500)
Provision for
losses .............. -- -- -- -- -- -- 1,579
----------- ----------- ----------- ----------- ----------- ----------- -----------
742 826 396 1,062 745 (64) 64,378
Income (loss)
from operations ...... 64 (61) 117 124 145 (14) (8,895)
Equity in income
of investees ......... -- -- -- -- -- -- (20)
Gains on sale of
real estate .......... -- -- -- -- -- -- 1,579
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss)
before extra-
ordinary gain ........ 64 (61) 117 124 145 (14) (7,336)
Extraordinary
gain ................. -- -- -- -- -- -- 256
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net (loss) .............. $ 64 $ (61) $ 117 $ 124 $ 145 $ (14) $ (7,080)
=========== =========== =========== =========== =========== =========== ===========
Earnings per share
Net (loss) ........... $ (1.77)
===========
Weighted average
shares of Common
Stock used in
computing
earnings per
share ................ 3,994,687
===========
</TABLE>
- -----------------
(1) Assumes acquisition by the Company on January 1, 1996.
(2) Assumes sale on January 1, 1996.
7
<PAGE> 8
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Financial statements of property acquired:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
99.0 Audited Statement of Revenue and Direct Operating Expenses of Terrace
Hills Apartments for the year ended December 31, 1996.
99.1 Audited Statement of Revenue and Direct Operating Expenses of Treehouse
Apartments for the year ended December 31, 1996.
99.2 Audited Statement of Revenue and Direct Operating Expenses of Villas at
Countryside Apartments for the year ended December 31, 1996.
99.3 Audited Statement of Revenue and Direct Operating Expenses of Bonita
Plaza for the year ended December 31, 1996.
99.4 Audited Statement of Revenue of Encon Warehouse for the year ended
December 31, 1996.
99.5 Audited Statement of Revenue and Direct Operating Expenses of Sandstone
Apartments for the year ended December 31, 1996.
99.6 Audited Statement of Revenue and Direct Operating Expenses of Sunchase
Apartments for the year ended December 31, 1996.
</TABLE>
---------------------------
SIGNATURE
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 hereto duly authorized.
TRANSCONTINENTAL REALTY INVESTORS,
INC.
Date: December 3, 1997 By: /s/ Thomas A. Holland
--------------------- --------------------------
Thomas A. Holland
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
8
<PAGE> 9
TRANSCONTINENTAL REALTY INVESTORS, INC.
EXHIBITS TO
CURRENT REPORT ON FORM 8-K/A
Dated September 16, 1997
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
99.0 Audited Statement of Revenue and Direct Operating Expenses of
Terrace Hills Apartments for the year ended December 31, 1996.
99.1 Audited Statement of Revenue and Direct Operating Expenses of
Treehouse Apartments for the year ended December 31, 1996.
99.2 Audited Statement of Revenue and Direct Operating Expenses of Villas
at Countryside Apartments for the year ended December 31, 1996.
99.3 Audited Statement of Revenue and Direct Operating Expenses of Bonita
Plaza for the year ended December 31, 1996.
99.4 Audited Statement of Revenue of Encon Warehouse for the year ended
December 31, 1996.
99.5 Audited Statement of Revenue and Direct Operating Expenses of
Sandstone Apartments for the year ended December 31, 1996.
99.6 Audited Statement of Revenue and Direct Operating Expenses of
Sunchase Apartments for the year ended December 31, 1996.
</TABLE>
<PAGE> 1
EXHIBIT 99.0
TERRACE HILLS APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
<PAGE> 2
Independent Auditors' Report
To the Board of Trustees
Transcontinental Realty Investors, Inc.
We have audited the accompanying statement of revenues and direct operating
expenses of Terrace Hills Apartments for the year ended December 31, 1996. This
statement of revenues and direct operating expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
statement of revenues and direct operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
direct operating expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement of revenues and direct operating expenses
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying financial statement is 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, is not intended to be a complete presentation of the
results of operations.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of Terrace Hills Apartments for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
May 27, 1997
<PAGE> 3
TERRACE HILLS APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1996
<TABLE>
<S> <C>
REVENUES
Net rental revenues $1,452,939
Other revenues 66,333
----------
Total revenues 1,519,272
DIRECT OPERATING EXPENSES
Salaries and benefits 253,014
Repairs and maintenance 190,878
Property taxes 151,794
Utilities 126,788
Insurance 33,857
----------
Total direct operating expenses 756,331
----------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 762,941
==========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
TERRACE HILLS APARTMENTS
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 1996
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Terrace Hills Apartments is a 310-unit apartment complex located in
El Paso, Texas. During 1996, the property was owned by Amstar First
Capital Joint Venture.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: 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.
NOTE 3: OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<S> <C>
Corporate rental $29,451
Laundry revenue 11,640
Application fees 10,049
Late and NSF charges 8,314
Miscellaneous 6,879
-------
$66,333
=======
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property was sold to Transcontinental Realty Investors, Inc., a
Nevada corporation, on March 5, 1997.
<PAGE> 1
EXHIBIT 99.1
TREEHOUSE APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED NOVEMBER 30, 1996
<PAGE> 2
Independent Auditors' Report
To the Board of Trustees
Transcontinental Realty Investors, Inc.
We have audited the accompanying statement of revenues and direct operating
expenses of Treehouse Apartments for the year ended November 30, 1996. This
statement of revenues and direct operating expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
statement of revenues and direct operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
direct operating expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement of revenues and direct operating expenses
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying financial statement is 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, is not intended to be a complete presentation of the
results of operations.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of Treehouse Apartments for the year ended November 30, 1996,
in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
April 10, 1997
<PAGE> 3
TREEHOUSE APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended November 30, 1996
<TABLE>
<S> <C>
REVENUES
Net rental revenues $937,480
Other revenues 44,420
--------
Total revenues 981,900
DIRECT OPERATING EXPENSES
Repairs and maintenance 237,458
Utilities 142,140
Salaries and benefits 112,019
Property taxes 63,952
Insurance 22,752
--------
Total direct operating expenses 578,321
--------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $403,579
========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
TREEHOUSE APARTMENTS
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
November 30, 1996
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Treehouse Apartments is a 160-unit apartment complex located in
Irving, Texas. During 1996, the property was owned by Lennar Treehouse
Limited Partnership.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: 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.
NOTE 3: OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<S> <C>
Late and NSF charges $18,450
Vending and cleaning revenue 13,210
Miscellaneous 12,760
-------
$44,420
=======
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property was sold to Transcontinental Realty Investors, Inc., a
Nevada corporation, on May 1, 1997.
<PAGE> 1
EXHIBIT 99.2
VILLAS AT COUNTRYSIDE APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
<PAGE> 2
Independent Auditors' Report
To the Board of Trustees
Transcontinental Realty Investors, Inc.
We have audited the accompanying statement of revenues and direct operating
expenses of Villas at Countryside Apartments for the year ended December 31,
1996. This statement of revenues and direct operating expenses is the
responsibility of the Property's management. Our responsibility is to express an
opinion on this statement of revenues and direct operating expenses based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
direct operating expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement of revenues and direct operating expenses
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying financial statement is 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, is not intended to be a complete presentation of the
results of operations.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of Villas at Countryside Apartments for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
November 13, 1997
<PAGE> 3
VILLAS AT COUNTRYSIDE APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1996
<TABLE>
<S> <C>
REVENUES
Net rental revenues $854,443
Other revenues 8,740
--------
Total revenues 863,183
DIRECT OPERATING EXPENSES
Repairs and maintenance 138,260
Property taxes 66,577
Utilities 59,491
Salaries and benefits 56,601
Insurance 10,806
--------
Total direct operating expenses 331,735
--------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $531,448
========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
VILLAS AT COUNTRYSIDE APARTMENTS
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 1996
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Villas at Countryside Apartments is a 102-unit apartment complex
located in Sterling, Virginia. During 1996, the property was owned by R
& M Villas, L.L.C.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: 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.
NOTE 3: OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<S> <C>
Late and NSF charges $5,401
Miscellaneous 3,339
------
$8,740
======
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property was sold to Transcontinental Realty Investors, Inc., a
Nevada corporation, on May 15, 1997.
<PAGE> 1
EXHIBIT 99.3
BONITA PROFESSIONAL BUILDING
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
<PAGE> 2
Independent Auditors' Report
To the Board of Trustees
Transcontinental Realty Investors, Inc.
We have audited the accompanying statement of revenues and direct operating
expenses of Bonita Professional Building for the year ended December 31, 1996.
This statement of revenues and direct operating expenses is the responsibility
of the Property's management. Our responsibility is to express an opinion on
this statement of revenues and direct operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
direct operating expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement of revenues and direct operating expenses
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying financial statement is 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, is not intended to be a complete presentation of the
results of operations.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of Bonita Professional Building for the year ended December
31, 1996, in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
October 31, 1997
<PAGE> 3
BONITA PROFESSIONAL BUILDING
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1996
<TABLE>
<S> <C>
REVENUES
Net rental revenues $662,682
Other revenues 143,303
--------
Total revenues 805,985
DIRECT OPERATING EXPENSES
Repairs and maintenance 71,304
Property taxes 69,292
Utilities 25,970
Insurance 19,524
--------
Total direct operating expenses 186,090
--------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $619,895
========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
BONITA PROFESSIONAL BUILDING
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 1996
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
Bonita Professional Building is a 47,777 square foot office complex
consisting of an office building and parking garage, located in Bonita,
California. During 1996, the property was owned by Lennar US Partners
Limited Partnership.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: 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.
NOTE 3: OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<S> <C>
Common area maintenance charges $141,678
Miscellaneous 1,625
--------
$143,303
========
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property was sold to Transcontinental Realty Investors, Inc., a
Nevada corporation, on September 16, 1997.
<PAGE> 1
EXHIBIT 99.4
ENCON WAREHOUSE
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
<PAGE> 2
Independent Auditors' Report
To the Board of Trustees
Transcontinental Realty Investors, Inc.
We have audited the accompanying statement of revenues and direct operating
expenses of Encon Warehouse for the year ended December 31, 1996. This statement
of revenues and direct operating expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
statement of revenues and direct operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
direct operating expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement of revenues and direct operating expenses
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying financial statement is 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, is not intended to be a complete presentation of the
results of operations.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of Encon Warehouse for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
FARMER, FUQUA, HUNT & MUNSELLE, P.C.
Dallas, Texas
November 25, 1997
<PAGE> 3
ENCON WAREHOUSE
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1996
<TABLE>
<S> <C>
REVENUES
Rental revenues $512,821
--------
Total revenues 512,821
DIRECT OPERATING EXPENSES --
--------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $512,821
========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
ENCON WAREHOUSE
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 1996
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Encon Warehouse (the Warehouse) is a 279,290 square foot warehouse
located in Ft. Worth, Texas. During 1996, the Warehouse was owned by
Seminary West Limited Partnership.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: 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.
NOTE 3: TENANT LEASE
The Warehouse was leased by one tenant during 1996. The lease agreement
requires the lessee to pay all expenses associated with the property,
including property taxes, utilities, insurance and repairs and
maintenance. Accordingly, there were no direct operating expenses
incurred by the owner.
The Warehouse is leased under an operating lease, which expires in
August, 2005. At December 31, 1996, the approximate future minimum
rental income under the operating lease are as follows:
<TABLE>
<S> <C>
1997 $ 412,822
1998 562,824
1999 562,824
2000 512,820
2001 512,820
Thereafter 1,880,340
----------
$4,444,450
==========
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The Warehouse was sold to Transcontinental Realty Investors, Inc., a
Nevada corporation, on October 1, 1997.
<PAGE> 1
EXHIBIT 99.5
SANDSTONE APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
<PAGE> 2
Independent Auditors' Report
To the Board of Trustees
Transcontinental Realty Investors, Inc.
We have audited the accompanying statement of revenues and direct operating
expenses of Sandstone Apartments for the year ended December 31, 1996. This
statement of revenues and direct operating expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
statement of revenues and direct operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
direct operating expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement of revenues and direct operating expenses
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying financial statement is 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, is not intended to be a complete presentation of the
results of operations.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of Sandstone Apartments for the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
July 18, 1997
<PAGE> 3
SANDSTONE APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1996
<TABLE>
<S> <C>
REVENUES
Net rental revenues $1,118,464
Other revenues 67,301
----------
Total revenues 1,185,765
DIRECT OPERATING EXPENSES
Salaries and benefits 145,539
Repairs and maintenance 105,772
Utilities 83,588
Property taxes 53,965
Insurance 17,679
----------
Total direct operating expenses 406,543
----------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 779,222
==========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
SANDSTONE APARTMENTS
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 1996
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Sandstone Apartments is a 238-unit apartment complex located in
Mesa, Arizona. During 1996, the property was owned by EAG Mesa Villas.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: 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.
NOTE 3: OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<S> <C>
Security deposit $20,629
Late and NSF charges 14,289
Washer and dryer income 11,200
Lease termination and processing fees 8,373
Eviction fees 7,168
Miscellaneous 5,642
-------
$67,301
=======
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property was sold to Transcontinental Realty Investors, Inc., a
Nevada corporation, on October 1, 1997.
<PAGE> 1
EXHIBIT 99.6
SUNCHASE APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1996
<PAGE> 2
Independent Auditors' Report
To the Board of Trustees
Transcontinental Realty Investors, Inc.
We have audited the accompanying statement of revenues and direct operating
expenses of Sunchase Apartments for the year ended December 31, 1996. This
statement of revenues and direct operating expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
statement of revenues and direct operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of revenues and direct operating expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of revenues and
direct operating expenses. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement of revenues and direct operating expenses
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying financial statement is 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, is not intended to be a complete presentation of the
results of operations.
In our opinion, the statement of revenues and direct operating expenses referred
to above presents fairly, in all material respects, the revenues and direct
operating expenses of Sunchase Apartments for the year ended December 31, 1996,
in conformity with generally accepted accounting principles.
Farmer, Fuqua, Hunt & Munselle, P.C.
Dallas, Texas
August 14, 1997
<PAGE> 3
SUNCHASE APARTMENTS
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1996
<TABLE>
<S> <C>
REVENUES
Net rental revenues $868,170
Other revenues 21,791
--------
Total revenues 889,961
DIRECT OPERATING EXPENSES
Utilities 173,865
Salaries and benefits 137,422
Repairs and maintenance 75,437
Property taxes 67,012
Insurance 41,828
--------
Total direct operating expenses 495,564
--------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $394,397
========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
SUNCHASE APARTMENTS
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 1996
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Sunchase Apartments is a 300-unit apartment complex located in
Midland, Texas. During 1996, the property was owned by Daniel Martinez,
an individual.
The accompanying financial statement does not include a provision for
depreciation and amortization, bad debt expense, interest expense or
income taxes. Accordingly, this statement is not intended to be a
complete presentation of the results of operations.
NOTE 2: 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.
NOTE 3: OTHER REVENUES
Other revenues consist of the following:
<TABLE>
<S> <C>
Security deposits $14,858
Late and NSF charges 6,833
Miscellaneous 100
-------
$21,791
=======
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property was sold to Transcontinental Realty Investors, Inc., a
Nevada corporation, on October 8, 1997.
