<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
June 26, 1998
------------------------------------------------
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)
1
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
This Form 8-K/A amends the Form 8-K Current Report dated June 26, 1998 and filed
July 21, 1998 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,
1997 and the six months ended June 30, 1998. A pro forma balance sheet as of
June 30, 1998 is also presented.
A summary of the pro forma transactions follows:
On June 26, 1998, the Company purchased the Atrium, a 74,603 square foot office
building in Palm Beach, Florida, for $5.4 million, approximately 1.7% of the
Company's assets at December 31, 1997. The seller of the property was U. S.
Technologies Trading, Ltd., an unrelated party. The property was constructed in
1985 and was 98% occupied on the date of purchase. The Company paid $1.3 million
in cash and obtained new mortgage financing of $4.1 million. The mortgage bears
interest at a variable rate, currently 7.93% per annum, requires monthly
payments of principal and interest of $31,455 and matures in July 2001.
On July 8, 1998, the Company purchased Valley Rim, a 54,194 square foot office
building in San Diego, California, for $5.1 million, approximately 1.6% of the
Company's assets at December 31, 1997. The seller of the property was Valley
Rim, LLC, an unrelated party. The property was constructed in 1988 and was 85%
occupied on the date of purchase. The Company paid $1.4 million in cash and
obtained new mortgage financing of $3.7 million. The mortgage bears interest at
a variable rate, currently 9.45% per annum, requires monthly payments of
principal and interest of $32,576 and matures in June 2005.
In assessing each of the office building purchases described above, the
following were among the factors considered by the Company's management,
geographic location of the property, performance of the property, new or
renovated properties in the vicinity of the property and the maintenance and
appearance of the property. Additional factors considered were the ease of
access to the property, the adequacy of related facilities, such as parking, and
the property's sensitivity to market conditions in establishing rental rates.
In addition to the purchases described above, the Company has also purchased, in
1998, seven apartment complexes, one each in El Paso, Midland, and Addison,
Texas in January 1998, two in Midland, Texas in April 1998 and one each in
Odessa and Midland, Texas in May 1998. The Company has also purchased four
office buildings, two in Dallas, Texas, one in February 1998 and the other in
March 1998, and two in San Diego, California in May 1998. In addition to these
income producing properties, the Company has also purchased four parcels of
undeveloped land, two in Dallas, Texas, one in January 1998 and the other in
February 1998, one in Midland, Texas in May 1998 and one in Austin,
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued)
Texas in July 1998. The income producing properties and undeveloped land were
purchased for a total of $48.3 million. The Company paid $17.3 million in cash
and financed the remainder of the purchase prices. The mortgages secured by the
properties bear interest at fixed and variable rates, ranging from 7.2% to 9.5%
per annum and mature from November 1999 to May 2013.
In March 1998, the Company sold Shaws Plaza, a 103,482 square foot shopping
center in Sharon, Massachusetts, for $3.8 million. The Company received net cash
of $1.2 million after the payoff of $2.6 million in existing mortgage debt and
the payment of various closing costs associated with the sale.
These Pro Forma Statements of Operations present the Company's operations as if
the transactions described above, had occurred at the beginning of each of the
periods presented. The Company's management is not aware of any material factors
relating to the purchased properties that would cause the reported financial
information not be necessarily indicative of future operating results.
3
<PAGE> 4
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA
CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
<TABLE>
<CAPTION>
Valley Rim
Office
Actual(1) Building(2) Pro Forma
--------- ----------- ---------
Assets (dollars in thousands)
<S> <C> <C> <C>
Notes and interest receivable
Performing.................... $ 4,370 $ -- $ 4,370
Nonperforming................. 416 -- 416
-------- -------- --------
4,786 -- 4,786
Less - allowance for
estimated losses.............. (891) -- (891)
Foreclosed real estate held
for sale...................... 1,356 -- 1,356
Real estate held for sale,
net of accumulated
depreciation.................. 21,571 -- 21,571
Real estate held for
investment, net of
accumulated depreciation...... 301,404 5,400 306,804
Investment in partnerships........ 4,011 -- 4,011
Cash and cash equivalents......... 7,093 (1,671) 5,422
Other assets...................... 15,058 (8) 15,050
-------- -------- --------
$354,388 $ 3,721 $358,109
======== ======== ========
Liabilities and Shareholders' Equity
Liabilities
Notes and interest payable........ $261,440 $ 3,700 $265,140
Other liabilities................. 7,199 21 7,220
-------- -------- --------
268,639 3,721 272,360
Commitments and contingencies
Shareholders' equity
Common Stock, $.01 par value;
10,000,000 shares; issued
and outstanding, 3,872,505
shares........................ 39 -- 39
Paid-in capital................... 217,431 -- 217,431
Accumulated distributions in
excess of accumulated
earnings...................... (131,721) -- (131,721)
-------- -------- --------
85,749 -- 85,749
-------- -------- --------
$354,388 $ 3,721 $358,109
======== ======== ========
</TABLE>
- -------------------------------------
(1) Includes the Mountain Plaza Apartments, Hunters Glen Apartments and
Bent Tree Garden Apartments which were acquired in January 1998, the
Parkway North Office Building acquired in February 1998, the Plaza
on Bachman Creek acquired in March 1998, the 4400 Apartments and
Ashton Way Apartments acquired in April 1998, the Woodview
Apartments, Emerald Terrace Apartments, Daley Plaza and Viewridge
Building acquired in May 1998 and the Atrium Office Building
acquired in June 1998 and excludes the Shaws Plaza Shopping Center
which was sold in March 1998.
(2) Assumes acquisition by the Company on January 1, 1998.
4
<PAGE> 5
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Valley
Other Atrium Rim
Apartment Commercial Property Office Office Shaws Pro Forma Pro Forma
Actual Complexes Properties Purchases Building Building Plaza Adjustments Combined
----------- ---------- ----------- ---------- --------- --------- ----- ----------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income
Rents................. $ 33,393 $ 280 $ 358 $ 622 $ 365 $ 336 $ (157) $ - $ 35,197
Income................ 393 - - - - - - - 393
---------- ------ ------ ------ ------ ----- ------ ------- ----------
33,786 280 358 622 365 336 (157) - 35,590
Expenses
Property operations... 17,283 241 110 419 168 124 (100) - 18,245
Interest.............. 10,944 - - - - - (41) 1,138 12,041
Depreciation.......... 5,129 - - - - - (56) 515 5,588
Advisory and net
income fee to
affiliate........... 1,303 - - - - - - - 1,303
General and
administrative...... 1,065 - - - - - - - 1,065
---------- ------ ------ ------ ------- ----- ------ ------- ----------
35,724 241 110 419 168 124 (197) 1,653 38,242
Net income (loss) from
operations............ (1,938) 39 248 203 197 212 40 (1,653) (2,652)
Equity in income of
investees............. 432 - - - - - - - 432
Gain on sale of real
estate................ 2,132 - - - - - - - 2,132
---------- ------ ------ ------ ------- ----- ------ ------- ----------
Net income (loss)........ $ 626 $ 39 $ 248 $ 203 $ 197 $ 212 $ 40 $(1,653) $ (88)
========== ====== ====== ====== ======= ===== ====== ======= ==========
Earnings per share
Net income (loss)..... $ .16 $ (.02)
========== ==========
Weighted average shares
of Common Stock used
in computing earnings
per share............. 3,879,080 3,879,080
========== ==========
</TABLE>
The accompanying footnotes are an integral part of this Pro Forma Combined
Statement of Operations.
5
<PAGE> 6
TRANSCONTINENTAL REALTY INVESTORS, INC.
NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
1. The Pro Forma Combined Statement of Operations assumes the
property was purchased or sold by the Company on January 1,
1998. Pro forma operating results for purchased properties
are from January 1 through the respective date of purchase
only. Results subsequent to the dates of purchase are
included in the "Actual" column.
2. The caption "Apartment Complexes" includes Mountain Plaza,
4400 and Ashton Way Apartments. For further information,
refer to the Company's Current Report on Form 8-K, dated May
29, 1998 as amended on Form 8-K/A, dated September 23, 1998
(collectively the "Form 8-K").
<TABLE>
<S> <C>
Revenues:
Mountain Plaza Apartments $ 46
4400 Apartments 97
Ashton Way Apartments 137
------------------
$ 280
==================
Property Operations Expenses:
Mountain Plaza Apartments $ 25
4400 Apartments 93
Ashton Way Apartments 123
------------------
$ 241
==================
</TABLE>
3. The caption "Commercial Properties" includes Parkway North
Office Building and Plaza on Bachman Creek. For further
information refer to the Company's Form 8-K.
<TABLE>
<S> <C>
Revenues:
Parkway North Office Building $ 163
Plaza on Bachman Creek 195
------------------
$ 358
==================
Property Operations Expenses:
Parkway North Office Building $ 57
Plaza on Bachman Creek 53
------------------
$ 110
==================
</TABLE>
4. Other property purchases includes Bent Tree Garden, Hunters
Glen, Woodview and Emerald Terrace Apartments, as well as
Daley Plaza and View Ridge Office Buildings. The sellers of
these properties were not able to provide either audited
statements of operations or access to the respective
property's financial records to enable the Company to have an
audit performed. These properties in total represent
approximately 6.8% of the Company's assets at December 31,
1997.
6
<PAGE> 7
TRANSCONTINENTAL REALTY INVESTORS, INC.
NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS - Continued
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<S> <C>
Revenues:
Bent Tree Garden Apartments $ 111
Hunters Glen Apartments 27
Woodview Apartments 266
Emerald Terrace Apartments 182
Daley Plaza Office Building 29
Viewridge Office Building 7
---------
Total $ 622
=========
Property Operations Expenses:
Bent Tree Garden Apartments $ 68
Hunters Glen Apartments 17
Woodview Apartments 182
Emerald Terrace Apartments 128
Daley Plaza Office Building 22
Viewridge Office Building 2
---------
Total $ 419
=========
</TABLE>
5. Statement of operations for the one month ended October 31,
1997, November 30, 1997 and April 30, 1998 were obtained for
Mountain Plaza Apartments, Parkway North Office Building and
the Valley Rim Office Building, respectively. Such statements
were used as the basis for estimating their respective
operating results for the six months ended June 30, 1998. The
previous years' actual amounts were used to estimate the
interim period January 1 to the respective dates of purchase
for the remaining properties.
6. The pro forma interest adjustment is based on the mortgages
obtained or assumed and seller financing obtained, if any,
for each property at its respective date of purchase. The pro
forma depreciation adjustment is based on the purchase price
of each property depreciated under the Company's established
depreciation policies.
<TABLE>
<S> <C>
Interest:
Atrium Office Building $ 27
Valley Rim Office Building 29
Ashton Way Apartments 48
Bent Tree Gardens Apartments 230
Emerald Terrace Apartments 40
4400 Apartments 49
Hunters Glen Apartments 76
Mountain Plaza Apartments 121
Woodview Apartments 94
Daley Plaza Office Building 165
Plaza on Bachman Creek 108
Parkway North Office Building 88
Viewridge Office Building 63
----------
Total $ 1,138
==========
</TABLE>
7
<PAGE> 8
TRANSCONTINENTAL REALTY INVESTORS, INC.
NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS - Continued
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<S> <C>
Depreciation:
Atrium Office Building $ 57
Valley Rim Office Building 54
Ashton Way Apartments 19
Bent Tree Gardens Apartments 85
Emerald Terrace Apartments 15
Hunters Glen Apartments 26
4400 Apartments 17
Mountain Plaza Apartments 41
Woodview Apartments 36
Daley Plaza Office Building 49
Plaza on Bachman Creek 37
Parkway North Office Building 59
Viewridge Office Building 20
--------
Total $ 515
========
</TABLE>
7. Interim operating results for Shaws Plaza Shopping Center
which was sold in March 1998, are its actual operating
results from January 1 to the date of sale.
8
<PAGE> 9
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Valley
Other Atrium Rim
Apartment Commercial Property Office Office Shaws Pro Forma Pro Forma
Actual Complexes Properties Purchases Building Building Plaza Adjustments Combined
----------- --------- ---------- --------- -------- -------- ------ ----------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income
Rents.................. $ 54,462 $ 2,022 $ 1,444 $ 3,300 $ 885 $ 672 $ (656) $ - $ 62,129
Income................. 1,499 - - - - - - - 1,499
----------- --------- ---------- --------- -------- -------- ------ ----------- ----------
55,961 2,022 1,444 3,300 885 672 (656) - 63,628
Expenses
Property operations.... 32,424 1,444 645 2,128 290 247 (332) - 36,846
Interest............... 16,765 - - - - - (276) 2,840 19,329
Depreciation........... 9,578 - - - - - (265) 1,031 10,344
Advisory fee to
affiliate........... 1,807 - - - - - - - 1,807
Net income fee to
affiliate........... 1,022 - - - - - - - 1,022
General and
administrative...... 2,645 - - - - - - - 2,645
Provision for losses... 1,337 - - - - - (1,337) - -
----------- --------- ---------- --------- -------- -------- ------- ---------- ----------
65,578 1,444 645 2,128 290 247 (2,210) 3,871 71,993
Income (loss) from
operations............. (9,617) 578 799 1,172 595 425 1,554 (3,871) (8,365)
Equity in income of
investees.............. 812 - - - - - - - 812
Gain on sale of real
estate................. 21,404 - - - - - - - 21,404
----------- --------- ---------- --------- -------- -------- ------- ---------- ----------
Net income (loss)......... $ 12,599 $ 578 $ 799 $ 1,172 $ 595 $ 425 $ 1,554 $ (3,871) $ 13,851
=========== ========= ========== ========= ======== ======== ======= ========== ==========
Earnings per share
Net income (loss)...... $ 3.22 $ 3.55
=========== ==========
Weighted average shares
of Common Stock used
in computing earnings
per share............. 3,907,221 3,907,221
=========== ==========
</TABLE>
The accompanying footnotes are an integral part of this Pro Forma Combined
Statement of Operations.
9
<PAGE> 10
TRANSCONTINENTAL REALTY INVESTORS, INC.
NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
1. The Pro Forma Combined Statement of Operations assumes the
property was purchased or sold by the Company on January 1,
1997.
2. The caption "Apartment Complexes" includes Mountain Plaza,
4400 and Ashton Way Apartments. For further information,
refer to the Company's Current Report on Form 8-K, dated May
29, 1998 as amended on Form 8-K/A, dated September 23, 1998
(collectively "Form 8-K").
<TABLE>
<S> <C>
Revenues:
Mountain Plaza Apartments $ 1,085
4400 Apartments 389
Ashton Way Apartments 548
---------
$ 2,022
=========
Property Operations Expenses:
Mountain Plaza Apartments $ 592
4400 Apartments 372
Ashton Way Apartments 480
---------
$ 1,444
=========
</TABLE>
3. The caption "Commercial Properties" includes Parkway North
Office Building and Plaza on Bachman Creek. For further
information refer to the Company's Form 8-K.
<TABLE>
<S> <C>
Revenues:
Parkway North Office Building $ 938
Plaza on Bachman Creek 506
---------
$ 1,444
=========
Property Operations Expenses:
Parkway North Office Building $ 393
Plaza on Bachman Creek 252
---------
$ 645
=========
</TABLE>
4. Other property purchases includes Bent Tree Garden, Hunters
Glen, Woodview and Emerald Terrace Apartments, as well as
Daley Plaza and View Ridge Office Buildings. The sellers of
these properties were not able to provide either audited
statements of operations or access to the respective
property's financial records to enable the Company to have an
audit performed. These properties in total represent
approximately 6.8% of the Company's assets at December 31,
1997.
5. The amounts for Mountain Plaza Apartments, Parkway North
Office Building, Plaza on Bachman Creek, 4400 Apartments,
Ashton Way Apartments, Atrium Office Building and Valley Rim
Office Building are from their respective audited statements
of operations.
10
<PAGE> 11
TRANSCONTINENTAL REALTY INVESTORS, INC.
NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS - Continued
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Revenues:
Bent Tree Garden Apartments $ 1,338
Hunters Glen Apartments 643
Woodview Apartments 797
Emerald Terrace Apartments 436
Viewridge Office Building 69
Daley Plaza Office Building 17
-----------
Total $ 3,300
===========
Property Operations:
Bent Tree Garden Apartments $ 809
Hunters Glen Apartments 406
Woodview Apartments 546
Emerald Terrace Apartments 307
Viewridge Office Building 54
Daley Plaza Office Building 6
-----------
Total $ 2,128
===========
</TABLE>
6. The amounts for Bent Tree Gardens Apartments, Hunters Glen
Apartments, Woodview Apartments, Emerald Terrace Apartments,
Viewridge Office Building and Daley Plaza are based on
available financial information or estimates made in
conjunction with the respective purchase.
7. The pro forma interest adjustment is based on the mortgages
obtained or assumed and seller financing obtained, if any,
for each property at its respective date of purchase. The pro
forma depreciation adjustment is based on the purchase price
of each property depreciated under the Company's established
depreciation policies.
<TABLE>
<S> <C>
Interest:
Atrium Office Building $ 325
Valley Rim Office Building 352
Ashton Way Apartments 96
Bent Tree Gardens Apartments 461
Emerald Terrace Apartments 81
4400 Apartments 96
Hunters Glen Apartments 152
Mountain Plaza Apartments 242
Woodview Apartments 188
Daley Plaza Office Building 330
Plaza on Bachman Creek 216
Parkway North Office Building 175
Viewridge Office Building 126
----------
Total $ 2,840
==========
</TABLE>
11
<PAGE> 12
TRANSCONTINENTAL REALTY INVESTORS, INC.
NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS - Continued
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
Depreciation:
Atrium Office Building $ 115
Valley Rim Office Building 108
Ashton Way Apartments 38
Bent Tree Gardens Apartments 170
Emerald Terrace Apartments 31
Hunters Glen Apartments 52
4400 Apartments 36
Mountain Plaza Apartments 83
Woodview Apartments 72
Daley Plaza Office Building 97
Plaza on Bachman Creek 73
Parkway North Office Building 117
Viewridge Office Building 39
---------
Total $ 1,031
=========
</TABLE>
8. Operating results for Shaws Plaza Shopping Center which was
sold in March 1998, are its actual operating results for the
year ended December 31, 1997.
12
<PAGE> 13
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
Mountain View Apartments for the year ended December 31, 1997
(incorporated by reference to Exhibit 99.0 of the Registrant's
Current Report on Form 8-K/A, dated May 29, 1998).
99.1 Audited Statement of Revenue and Direct Operating Expenses of
Parkway North for the year ended December 31, 1997
(incorporated by reference to Exhibit 99.1 of the Registrant's
Current Report on Form 8-K/A, dated May 29, 1998).
99.2 Audited Statement of Revenue and Direct Operating Expenses of
Plaza on Bachman Creek for the year ended December 31, 1997
(incorporated by reference to Exhibit 99.2 of the Registrant's
Current Report on Form 8-K/A, dated May 29, 1998).
99.3 Audited Statement of Revenue and Direct Operating Expenses of
4400 Apartments for the year ended December 31, 1997
(incorporated by reference to Exhibit 99.3 of the Registrant's
Current Report on Form 8-K/A, dated May 29, 1998).
99.4 Audited Statement of Revenue of Ashton Way Apartments for the
year ended December 31, 1997 (incorporated by reference to
Exhibit 99.4 of the Registrant's Current Report on Form 8-K/A,
dated May 29, 1998).
99.5 Mountain Plaza Statement of Operations for the ten months ended
October 31, 1997, (incorporated by reference to Exhibit 99.5 of
the Registrant's Current Report on Form 8-K/A, dated May 29,
1998).
99.6 Parkway North Statement of Operations for the eleven months
ended November 30, 1997, (incorporated by reference to Exhibit
99.6 of the Registrant's Current Report on Form 8-K/A, dated
May 29, 1998).
99.7 Audited Statement of Revenue and Direct Operating Expenses of
Atrium Office Building for the year ended December 31, 1997,
filed herewith.
99.8 Audited Statement of Revenue and Direct Operating Expenses of
Valley Rim Building for the year ended December 31, 1997, filed
herewith.
99.9 Valley Rim Building Statement of Operations for the four months
ended April 30, 1998, filed herewith.
</TABLE>
13
<PAGE> 14
SIGNATURE PAGE
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: October 16, 1998 By: /s/ THOMAS A. HOLLAND
----------------------- -------------------------------
Thomas A. Holland
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
14
<PAGE> 15
TRANSCONTINENTAL REALTY INVESTORS, INC.
EXHIBITS TO
CURRENT REPORT ON FORM 8-K/A
Dated MAY 29, 1998
<TABLE>
<CAPTION>
Exhibit Page
Number Description Number
- ------- ------------------------------------------------- ------
<S> <C> <C>
99.7 Audited Statement of Revenue and Direct Operating 16
Expenses of Atrium Office Building for the year
ended December 31, 1997.
99.8 Audited Statement of Revenue and Direct Operating 20
Expenses of Valley Rim Building for the year
ended December 31, 1997.
99.9 Valley Rim Building Statement of Operations for 24
the four months ended April 30, 1998.
</TABLE>
15
<PAGE> 1
EXHIBIT 99.7
Statement of Revenues and
Direct Operating Expenses
Year Ended December 31, 1997
THE ATRIUM BUILDING
[GOODMAN & COMPANY, L.L.P. LETTERHEAD]
16
<PAGE> 2
[GOODMAN & COMPANY, L.L.P. LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees
TRANSCONTINENTAL REALTY INVESTORS, INC.
We have audited the accompanying statement of revenues and direct
operating expenses of "THE ATRIUM OFFICE BUILDING" for the year ended December
31, 1997. 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 an 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 2, 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 "THE ATRIUM OFFICE BUILDING" for the
year ended December 31, 1997, in conformity with generally accepted accounting
principles.
One Commercial Place
Norfolk, Virginia
May 26, 1998
/s/GOODMAN & COMPANY, L.L.P.
GOODMAN & COMPANY, L.L.P.
- 1 -
17
<PAGE> 3
"THE ATRIUM BUILDING"
STATEMENT OF REVENUES AND DIRECT OPERATING EXPENSES
===============================================================================
<TABLE>
<CAPTION>
Year Ended December 31, 1997
<S> <C>
REVENUES
Net rental revenues $ 663,522
Tenant reimbursements 221,199
----------
TOTAL REVENUES 884,721
----------
DIRECT OPERATING EXPENSES
Property taxes 82,631
Repairs and maintenance 52,058
Utilities 46,001
Salaries and benefits 40,050
Insurance 28,299
Management fees 26,353
Administrative 7,737
Land rent 6,292
Advertising 99
----------
TOTAL DIRECT OPERATING EXPENSES 289,520
----------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $ 595,201
==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
- 2 -
18
<PAGE> 4
"THE ATRIUM BUILDING"
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
DECEMBER 31, 1997
===============================================================================
NOTE 1 - ORGANIZATION AND BUSINESS
"The Atrium Building" is a 63,017 square foot office rental building
located in North Palm Beach, Florida and is currently owned by U.S. Technology
Trading, Ltd.
NOTE 2 - BASIS OF PRESENTATION
INCOME AND EXPENSE RECOGNITION
Rental income and expenses are recorded on the accrual method of
accounting. Tenant leases vary in terms at varying rental rates. 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.
ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses and disclosure of contingent assets and
liabilities for the reported periods. Actual results could differ from those
estimates and assumptions.
NOTE 3 - RELATED PARTY TRANSACTIONS
In 1997, the Company paid management fees of $26,353 to a related
party. The Company also paid $31,250 in salaries to a shareholder.
*****
- 3 -
19
<PAGE> 1
EXHIBIT 99.8
VALLEY RIM
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
YEAR ENDED DECEMBER 31, 1997
20
<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 Valley Rim for the year ended December 31, 1997. 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 Valley Rim for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
FARMER, FUQUA, HUNT & MUNSELLE, P.C.
Dallas, Texas
July 14, 1998
21
<PAGE> 3
VALLEY RIM
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Year Ended December 31, 1997
<TABLE>
<CAPTION>
<S> <C>
REVENUES
Net rental revenues $663,468
Other revenues 9,208
--------
Total revenues 672,676
DIRECT OPERATING EXPENSES
Repairs and maintenance 146,380
Utilities 43,073
Property taxes 25,466
Salaries and benefits 21,300
Insurance 11,016
--------
Total direct operating expenses 247,235
--------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $425,441
========
</TABLE>
The accompanying notes are an integral part of this statement.
22
<PAGE> 4
VALLEY RIM
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 1997
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
Valley Rim is a 49,377 square foot office building located in San
Diego, California. During 1997, the property was owned by Valley
Rim, LLC.
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>
<CAPTION>
<S> <C>
CAM Reimbursement $4,570
Other Income 2,666
Other Expense Reimbursement 1,355
Utilities Reimbursement 428
Interest Income 189
------
$9,208
======
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property was sold to Transcontinental Realty Investors, Inc.,
a Nevada corporation, on July 8, 1998.
23
<PAGE> 1
Report Date: 05/08/98 Page: 1
Company: VR Date: 05/08/98
Development ID: V01 Time: 08:34:41
EXHIBIT 99.9
Detail Income Statement
Valley Rim LLC
Valley Rim Office Building
<TABLE>
<CAPTION>
CURRENT PERIOD YEAR-TO-DATE
1 MONTH 1 MONTH 4 MONTHS 4 MONTHS
THRU: APR 1998 STD. BUDGET VARIANCE APR 1998 STD. BUDGET VARIANCE
-------- ----------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
INCOME
------
RENTAL INCOME
Industrial Rent 59,572.31 0.00 59,572.31 241,825.96 0.00 241,825.96
--------- ---- --------- ---------- ---- ----------
TOTAL RENTAL INCOME 59,572.31 0.00 59,572.31 241,825.96 0.00 241,825.96
REIMBURSEMENTS
CAM Reimbursement 255.00 0.00 255.00 1,902.34 0.00 1,902.34
Other Expense Reimb. 502.50 0.00 502.50 691.50 0.00 691.50
--------- ---- --------- ---------- ---- ----------
TOTAL REIMBURSEMENTS 757.50 0.00 757.50 2,593.84 0.00 2,593.84
OTHER INCOME
Interest Income 19.80 0.00 19.80 63.87 0.00 63.87
Other Income 498.44 0.00 498.44 1,556.84 0.00 1,556.84
--------- ---- --------- ---------- ---- ----------
TOTAL OTHER INCOME 518.24 0.00 518.24 1,620.71 0.00 1,620.71
--------- ---- --------- ---------- ---- ----------
TOTAL INCOME 60,848.05 0.00 60,848.05 246,040.51 0.00 246,040.51
EXPENSES
--------
INTEREST
Interest Expense 100.00 0.00 (100.00) 36,383.13 0.00 (36,383.13)
--------- ---- --------- ---------- ---- ----------
TOTAL INTEREST 100.00 0.00 (100.00) 36,383.13 0.00 (36,383.13)
REPAIRS & MAINTENANCE
Elec Contract Services 207.29 0.00 (207.29) 207.29 0.00 (207.29)
Struct Contract Services 0.00 0.00 0.00 2,416.75 0.00 (2,416.75)
Roof Contract Services 169.55 0.00 (169.55) 322.55 0.00 (322.55)
HVAC Contract Services 1,402.47 0.00 (1,402.47) 2,956.03 0.00 2,956.03
Elev Contract Services 18.54 0.00 (18.54) 1,208.58 0.00 (1,208.58)
Plumb Contract Services 0.00 0.00 0.00 140.83 0.00 (140.83)
Other General Supplies 0.00 0.00 0.00 144.46 0.00 (144.46)
Other Decorating 94.98 0.00 (94.98) 379.92 0.00 (379.92)
Other Pest Control 37.00 0.00 (37.00) 148.00 0.00 (148.00)
Other R & M Expenses 669.66 0.00 (669.66) 3,436.93 0.00 (3,436.93)
Locks/Keys 459.70 0.00 (459.70) 651.19 0.00 (651.19)
Directory Signage 616.46 0.00 (616.46) 783.47 0.00 (783.47)
--------- ---- --------- ---------- ---- ----------
TOTAL REPAIRS & MAINT. 3,675.65 0.00 (3,675.65) 12,796.00 0.00 (12,796.00)
COMMON AREA MAINT.
Contract Services 3,361.00 0.00 (3,361.00) 13,424.00 0.00 (13,424.00)
Supplies/Materials 818.79 0.00 (818.79) 3,585.58 0.00 (3,585.58)
Trash Removal 166.74 0.00 (166.74) 622.74 0.00 (622.74)
Cleaning-Other 550.00 0.00 (550.00) 1,050.00 0.00 (1,050.00)
Safety Contract Services 0.00 0.00 0.00 550.00 0.00 (550.00)
Fire Protection 36.77 0.00 (36.77) 858.96 0.00 (858.96)
Landscaping 295.00 0.00 (295.00) 1,250.01 0.00 (1,250.01)
Parking Facilities 699.38 0.00 (699.38) 2,861.61 0.00 (2,861.61)
--------- ---- --------- ---------- ---- ----------
TOTAL COMMON AREA MAINT. 5,927.68 0.00 (5,927.68) 24,202.90 0.00 (24,202.90)
ADMINISTRATIVE
Telephone 0.00 0.00 0.00 3.97 0.00 (3.97)
Legal Fees 0.00 0.00 0.00 2,908.30 0.00 (2,908.30)
Other Professional Fees 115.00 0.00 (115.00) 1,006.50 0.00 (1,006.50)
Other Administrative Exp. 0.00 0.00 0.00 470.96 0.00 (470.96)
Lease Advertising/Promo 0.00 0.00 0.00 181.02 0.00 (181.02)
--------- ---- --------- ---------- ---- ----------
</TABLE>
24
<PAGE> 2
Report Date: 05/08/98 DETAIL INCOME STATEMENT Page: 2
Company: VR VALLEY RIM LLC Date: 05/08/98
Development ID: V01 VALLEY RIM OFFICE BUILDING Time: 08:34:44
<TABLE>
<CAPTION>
CURRENT PERIOD YEAR-TO-DATE
1 MONTH 1 MONTH 4 MONTHS 4 MONTHS
THRU: APR 1998 STD. BUDGET VARIANCE APR 1998 STD. BUDGET VARIANCE
-------- ----------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
TOTAL ADMINISTRATIVE 115.00 0.00 (115.00) 4,570.75 0.00 (4,570.75)
MANAGEMENT FEES
Management Fees 1,775.00 0.00 (1,775.00) 7,100.00 0.00 (7,100.00)
--------- ---- ---------- ---------- ---- -----------
TOTAL MANAGEMENT FEES 1,775.00 0.00 (1,775.00) 7,100.00 0.00 (7,100.00)
UTILITIES
Electricity 1,341.65 0.00 (1,341.65) 9,153.05 0.00 (9,153.05)
Gas 0.00 0.00 0.00 1,004.24 0.00 (1,004.24)
Water/Sewer 2,075.23 0.00 (2,075.23) 2,550.46 0.00 (2,550.46)
--------- ---- ---------- ---------- ---- -----------
TOTAL UTILITIES 3,416.88 0.00 (3,416.88) 12,707.75 0.00 (12,707.75)
INSURANCE
Primary Property 1,940.00 0.00 (1,940.00) 1,940.00 0.00 (1,940.00)
--------- ---- ---------- ---------- ---- -----------
TOTAL INSURANCE 1,940.00 0.00 (1,940.00) 1,940.00 0.00 (1,940.00)
REAL ESTATE TAXES
Real Estate Taxes 10,983.27 0.00 (10,983.27) 10,983.27 0.00 (10,983.27)
--------- ---- ---------- ---------- ---- -----------
TOTAL REAL ESTATE TAXES 10,983.27 0.00 (10,983.27) 10,983.27 0.00 (10,983.27)
INCOME TAX EXPENSE
Income Tax Expense 0.00 0.00 0.00 2,300.00 0.00 (2,300.00)
--------- ---- ---------- ---------- ---- -----------
TOTAL INCOME TAX EXPENSE 0.00 0.00 0.00 2,300.00 0.00 (2,300.00)
--------- ---- ---------- ---------- ---- -----------
TOTAL OPER EXPENSES 27,933.48 0.00 (27,933.48) 112,983.80 0.00 (112,983.80)
--------- ---- ---------- ---------- ---- -----------
NET OPERATING INCOME 32,914.57 0.00 32,914.57 133,056.71 0.00 133,056.71
CAPITAL EXPENDITURES
Capital Improvements 0.00 0.00 0.00 3,150.00 0.00 (3,150.00)
Leasing Commissions 0.00 0.00 0.00 4,235.17 0.00 (4,235.17)
Tenant Improvements 7,577.40 0.00 (7,577.40) 16,262.35 0.00 (16,262.35)
ADA Costs 0.00 0.00 0.00 3,260.00 0.00 (3,260.00)
--------- ---- ---------- ---------- ---- -----------
TOTAL CAPITAL EXPENDITURE 7,577.40 0.00 (7,577.40) 26,907.52 0.00 (26,907.52)
LIABILITIES
Mortgage Note Payable (7,772.24) 0.00 (7,772.24) (13,564.08) 0.00 (13,564.08)
Security Deposits 0.00 0.00 0.00 4,289.10 0.00 (4,289.10)
--------- ---- ---------- ---------- ---- -----------
TOTAL LIABILITIES (7,772.24) 0.00 (7,772.24) (9,274.98) 0.00 (9,274.98)
--------- ---- ---------- ---------- ---- -----------
TOTAL CASH FLOW 17,564.93 0.00 17,564.93 96,874.21 0.00 96,874.21
EQUITY
Due to/(from) Owner 26,500.00 0.00 (26,500.00) 97,369.18 0.00 (97,369.18)
--------- ---- ---------- ---------- ---- -----------
TOTAL EQUITY 26,500.00 0.00 (26,500.00) 97,369.18 0.00 (97,369.18)
--------- ---- ---------- ---------- ---- -----------
NET CHANGE IN CASH (8,935.07) 0.00 (8,935.07) (494.97) 0.00 (494.97)
</TABLE>
25
