<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
October 20, 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)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 20, 1998, Transcontinental Realty Investors, Inc. (the "Company")
purchased the 208 unit Cliffs of Eldorado Apartments in McKinney, Texas for
$12.8 million, approximately 4.0% of the Company's assets at December 31, 1997.
The seller of the property was 96 Eldorado I, Ltd., an unrelated party. The
property was constructed in 1997 and was 86% occupied on the date of purchase.
The Company paid $1.6 million in cash, assumed the existing mortgage of $10.6
million and issued 5,829 shares of Series A Cumulative Convertible Preferred
Stock with a total liquidation value of $583,000. The assumed mortgage bears
interest at 8.125% per annum, requires monthly payments of principal and
interest of $75,197 and matures in November 2037.
In assessing the income producing property described above, the following were
among the factors considered by 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.
In addition to the purchase described above, the Company has also purchased, in
1998, seven additional 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
six office buildings, two in Dallas, Texas, one in February 1998 and the other
in March 1998, three in San Diego, California, two in May 1998 and one in July
1998 and one in Palm Beach, Florida in June 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 Farmers Branch, Texas in May 1998 and one in Austin,
Texas in July 1998. The above income producing properties and undeveloped land
were purchased for a total of $58.4 million. The Company paid $21.8 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 9.91% per annum and mature from October 1999 to March 2018.
In 1998, the Company sold two retail centers, one in March 1998 and one in
September 1998 and an office building in September 1998. In connection with the
sales, the Company received net cash totaling $21.3 million.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Pro forma financial information:
Pro forma statements of operations are presented for the year ended December
31, 1997 and the nine months ended September 30, 1998. The pro forma statements
of operations present the Company's operations as if the transactions described
above had occurred at January 1, of each of the periods presented. A pro forma
balance sheet as of September 30, 1998 is also presented. The pro forma balance
sheet presents the Cliffs of Eldorado purchase, described above, as if it had
occurred at January 1, 1998.
2
<PAGE> 3
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Cliffs of
Eldorado
Actual(1) Apartments(2) Pro Forma
-------- ------------- ---------
(dollars in thousands)
Assets
------
<S> <C> <C> <C>
Notes and interest receivable
Performing .............. $ 1,610 $ -- $ 1,610
Nonperforming ........... 806 -- 806
---------- ---------- ----------
2,416 -- 2,416
Less - allowance for
estimated losses ........ (891) -- (891)
Foreclosed real estate held
for sale ................ 3,867 -- 3,867
Real estate held for sale,
net of accumulated
depreciation ............ 6,524 -- 6,524
Real estate held for
investment, net of
accumulated depreciation 309,039 13,236 322,275
Investment in partnerships .. 3,877 -- 3,877
Cash and cash equivalents ... 19,657 (1,830) 17,827
Other assets ................ 15,614 251 15,865
---------- ---------- ----------
$ 360,103 $ 11,657 $ 371,760
========== ========== ==========
</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, the Atrium Office Building acquired in June 1998 and the Valley
Rim Office Building acquired in July 1998 and excludes the Shaws Plaza
Shopping Center which was sold in March 1998 and the Chesapeake Ridge
Office Building and Northtown Mall Shopping Center which were sold in
September 1998.
(2) Assumes purchase by the Company on January 1, 1998.
3
<PAGE> 4
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA
CONSOLIDATED BALANCE SHEET - Continued
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Cliffs of
Eldorado
Actual(1) Apartments(2) Pro Forma
--------- ------------- ---------
(dollars in thousands,
except per share)
Liabilities and Shareholders' Equity
- ------------------------------------
<S> <C> <C> <C>
Liabilities
Notes and interest payable .... $ 258,782 $ 10,683 $ 269,465
Other liabilities ............. 8,738 391 9,129
---------- ---------- ---------
267,520 11,074 278,594
Commitments and contingencies
Shareholders' equity
Common Stock, $.01 par value;
10,000,000 shares; issued
and outstanding, 3,872,505
shares .................... 39 -- 39
Preferred Stock, $.01 par
value, authorized 1,000,000
shares, Series A issued and
outstanding, 5,829 shares
(liquidation preference
$583,000) ................. -- -- --
Paid-in capital ............... 217,431 583 218,014
Accumulated distributions in
excess of accumulated
earnings .................. (124,887) -- (124,887)
---------- ---------- ----------
92,583 583 93,166
---------- ---------- ----------
$ 360,103 $ 11,657 $ 371,760
========== ========== ==========
</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, the Atrium Office Building acquired in June 1998 and the Valley
Rim Office Building acquired in July 1998 and excludes the Shaws Plaza
Shopping Center which was sold in March 1998 and the Chesapeake Ridge
Office Building and Northtown Mall Shopping Center which were sold in
September 1998.
(2) Assumes purchase by the Company on January 1, 1998.
4
<PAGE> 5
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
Cliffs
Other of
Apartment Commercial Property Eldorado
Actual Complexes Properties Purchases Apartments Sales
----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income
Rents ............... $ 51,414 $ 280 $ 1,059 $ 622 $ 1,216 $ (2,064)
Income .............. 593 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
52,007 280 1,059 622 1,216 (2,064)
Expenses
Property
operations ......... 27,355 241 402 419 682 (710)
Interest ............ 16,865 -- -- -- -- (598)
Depreciation ........ 7,882 -- -- -- -- (428)
Advisory and net
income fee to
affiliate .......... 2,578 -- -- -- -- --
General and
administrative .... 1,649 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
56,329 241 402 419 682 (1,736)
Net income (loss)
from operations .... (4,322) 39 657 203 534 (328)
Equity in income
of investees ....... 342 -- -- -- -- --
Gain on sale of
real estate ........ 12,015 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) ...... $ 8,035 $ 39 $ 657 $ 203 $ 534 $ (328)
=========== =========== =========== =========== =========== ===========
Earnings per share
Net income (loss) ... $ 2.07
===========
Weighted average shares
of Common Stock used
in computing earnings
per share ........... 3,876,505
===========
Pro Forma Pro Forma
Adjustments Combined
----------- -----------
(dollars in thousands)
<S> <C> <C>
Income
Rents ............... $ -- $ 52,527
Income .............. -- 593
----------- -----------
-- 53,120
Expenses
Property
operations ......... -- 28,389
Interest ............ 2,799 19,066
Depreciation ........ 1,029 8,483
Advisory and net
income fee to
affiliate .......... -- 2,578
General and
administrative .... -- 1,649
----------- -----------
3,828 60,165
Net income (loss)
from operations .... (3,828) (7,045)
Equity in income
of investees ....... -- 342
Gain on sale of
real estate ........ -- 12,015
----------- -----------
Net income (loss) ...... $ (3,828) $ 5,312
=========== ===========
Earnings per share
Net income (loss) ... $ 1.37
===========
Weighted average shares
of Common Stock used
in computing earnings
per share ........... 3,876,505
===========
</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
NINE MONTHS ENDED SEPTEMBER 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, see the Company's
Current Report on Form 8-K, dated May 29, 1998 as amended on Form
8-K/A, dated September 23, 1998.
<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, Plaza on Bachman Creek, Atrium Office Building and Valley Rim
Office Building. For further information on Parkway North Office
Building and Plaza on Bachman Creek see the Company's Current Report on
Form 8-K, dated May 29, 1998, as amended on Form 8-K/A, dated September
23, 1998. For the Atrium and Valley Rim Office Buildings see the
Company's Current Report on Form 8-K, dated June 26, 1998, as amended
on Form 8-K/A, dated October 16, 1998.
<TABLE>
<S> <C>
Revenues:
Parkway North Office Building $ 163
Plaza on Bachman Creek 195
Atrium Office Building 365
Valley Rim Office Building 336
------
$1,059
======
Property Operations Expenses:
Parkway North Office Building $ 57
Plaza on Bachman Creek 53
Atrium Office Building 168
Valley Rim Office Building 124
------
$ 402
======
</TABLE>
4. Other property purchases includes Bent Tree Garden, Hunters Glen,
Woodview and Emerald Terrace Apartments, as well as Daley Plaza
6
<PAGE> 7
TRANSCONTINENTAL REALTY INVESTORS, INC.
NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS - Continued
NINE MONTHS ENDED SEPTEMBER 30, 1998
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.
<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, April 30, 1998 and for the six months ended June 30,
1998 were obtained for Mountain Plaza Apartments, Parkway North Office
Building, Valley Rim Office Building and Cliffs of Eldorado Apartments,
respectively. Such statements were used as the basis for estimating
their respective operating results for the nine months ended September
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,
assumed or seller financing obtained, if any, for each property at its
respective date of purchase. The pro forma
7
<PAGE> 8
TRANSCONTINENTAL REALTY INVESTORS, INC.
NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS - Continued
NINE MONTHS ENDED SEPTEMBER 30, 1998
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 $ 246
Valley Rim Office Building 266
Ashton Way Apartments 73
Bent Tree Gardens Apartments 348
Cliffs of Eldorado Apartments 653
Emerald Terrace Apartments 61
4400 Apartments 73
Hunters Glen Apartments 115
Mountain Plaza Apartments 183
Woodview Apartments 142
Daley Plaza Office Building 249
Plaza on Bachman Creek 163
Parkway North Office Building 132
Viewridge Office Building 95
------
Total $2,799
======
Depreciation:
Atrium Office Building $ 87
Valley Rim Office Building 81
Ashton Way Apartments 29
Bent Tree Gardens Apartments 129
Cliffs of Eldorado Apartments 250
Emerald Terrace Apartments 23
Hunters Glen Apartments 39
4400 Apartments 26
Mountain Plaza Apartments 63
Woodview Apartments 54
Daley Plaza Office Building 74
Plaza on Bachman Creek 55
Parkway North Office Building 89
Viewridge Office Building 30
------
Total $1,029
======
</TABLE>
7. Interim operating results for Shaws Plaza Shopping Center which was
sold in March 1998 and the Chesapeake Ridge Office Building and
Northtown Mall Shopping Center which were both sold in September 1998
are their actual operating results from January 1 to the date of sale.
8
<PAGE> 9
<TABLE>
<CAPTION>
TRANSCONTINENTAL REALTY INVESTORS, INC.
PRO FORMA COMBINED
STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1997
Other Cliffs of
Apartment Commercial Property Eldorado
Actual Complexes Properties Purchases Apartments Sales
----------- ----------- ----------- ----------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Income
Rents ...................... $ 54,462 $ 2,022 $ 3,001 $ 3,300 $ 583 $ (2,115)
Income ..................... 1,499 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
55,961 2,022 3,001 3,300 583 (2,115)
Expenses
Property operations ........ 32,424 1,444 1,182 2,128 413 (677)
Interest ................... 16,765 -- -- -- -- (651)
Depreciation ............... 9,578 -- -- -- -- (417)
Advisory fee to affiliate .. 1,807 -- -- -- -- --
Net income fee to affiliate 1,022 -- -- -- -- --
General and administrative . 2,645 -- -- -- -- --
Provision for losses ....... 1,337 -- -- -- -- (1,337)
----------- ----------- ----------- ----------- ----------- -----------
65,578 1,444 1,182 2,128 413 (3,082)
Income (loss) from operations . (9,617) 578 1,819 1,172 170 967
Equity in income of investees . 812 -- -- -- -- --
Gain on sale of real estate ... 21,404 -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) ............. $ 12,599 $ 578 $ 1,819 $ 1,172 $ 170 $ 967
=========== =========== =========== =========== =========== ===========
Earnings per share
Net income (loss) .......... $ 3.22
===========
Weighted average shares of
Common Stock used in
computing earnings per share 3,907,221 3,907,221
=========== ===========
<CAPTION>
Pro Forma Pro Forma
Adjustments Combined
----------- -----------
<S> <C> <C>
Income
Rents ...................... $ -- $ 61,253
Income ..................... -- 1,499
----------- -----------
-- 62,752
Expenses
Property operations ........ -- 36,914
Interest ................... 3,705 19,819
Depreciation ............... 1,361 10,522
Advisory fee to affiliate .. -- 1,807
Net income fee to affiliate -- 1,022
General and administrative . -- 2,645
Provision for losses ....... -- --
----------- -----------
5,066 72,729
Income (loss) from operations . (5,066) (9,977)
Equity in income of investees . -- 812
Gain on sale of real estate ... -- 21,404
----------- -----------
Net income (loss) ............. $ (5,066) $ 12,239
=========== ===========
Earnings per share
Net income (loss) .......... $ 3.13
===========
Weighted average shares of
Common Stock used in
computing earnings per share 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.
<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, Plaza on Bachman Creek, Atrium Office Building and Valley Rim
Office Building. For further information on the Parkway North Office
Building and Plaza on Bachman Creek see the Company's Current Report on
Form 8-K, dated May 29, 1998, as amended on Form 8-K/A, dated September
23, 1998. For the Atrium and Valley Rim Office Buildings see the
Company's Current Report on Form 8-K, dated June 26, 1998, as amended
on Form 8-K/A, dated October 16, 1998.
<TABLE>
<S> <C>
Revenues:
Parkway North Office Building $ 938
Plaza on Bachman Creek 506
Atrium Office Building 885
Valley Rim Office Building 672
------
$3,001
======
Property Operations Expenses:
Parkway North Office Building $ 393
Plaza on Bachman Creek 252
Atrium Office Building 290
Valley Rim Office Building 247
------
$1,182
======
</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
10
<PAGE> 11
TRANSCONTINENTAL REALTY INVESTORS, INC.
NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS - Continued
YEAR ENDED DECEMBER 31, 1997
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.
<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
11
<PAGE> 12
TRANSCONTINENTAL REALTY INVESTORS, INC.
NOTES TO PRO FORMA COMBINED
STATEMENT OF OPERATIONS - Continued
YEAR ENDED DECEMBER 31, 1997
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
Cliffs of Eldorado Apartments 865
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 $3,705
======
Depreciation:
Atrium Office Building $ 115
Valley Rim Office Building 108
Ashton Way Apartments 38
Bent Tree Gardens Apartments 170
Cliffs of Eldorado Apartments 330
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 $1,361
======
</TABLE>
8. Operating results for Shaws Plaza Shopping Center which was sold in
March 1998 and the Chesapeake Ridge Office Building and Northtown Mall
Shopping Center which were both sold in September 1998 are their 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:
Exhibit
Number Description
- ------- -----------------------------------------------------------------
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
(incorporated by reference to Exhibit 99.7 of the Registrant's
Current Report on Form 8-K/A, dated June 26, 1998).
99.8 Audited Statement of Revenue and Direct Operating Expenses of
Valley Rim Building for the year ended December 31, 1997
(incorporated by reference to Exhibit 99.8 of the Registrant's
Current Report on Form 8-K/A, dated June 26, 1998).
13
<PAGE> 14
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (Continued)
Exhibit
Number Description
- ------- -----------------------------------------------------------------
99.9 Valley Rim Building Statement of Operations for the four months
ended April 30, 1998 (incorporated by reference to Exhibit 99.9 of
the Registrant's Current Report on Form 8-K/A, dated June 26,
1998).
99.10 Audited Statement of Revenue and Direct Operating Expenses of
Cliffs of Eldorado Apartments for the year ended December 31,
1997, filed herewith.
99.11 Cliffs of Eldorado Apartments Statement of Operations for the six
months ended June 30, 1998, filed herewith.
14
<PAGE> 15
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: December 4, 1998 By: /s/ Thomas A. Holland
---------------------- --------------------------
Thomas A. Holland
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
15
<PAGE> 16
TRANSCONTINENTAL REALTY INVESTORS, INC.
EXHIBITS TO
CURRENT REPORT ON FORM 8-K/A
Dated October 20, 1998
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------------------------------------------------------------
<S> <C>
99.10 Audited Statement of Revenue and Direct Operating Expenses of
Cliffs of Eldorado Apartments for the year ended December 31,
1997, filed herewith.
99.11 Cliffs of Eldorado Apartments Statement of Operations for the six
months ended June 30, 1998.
</TABLE>
16
<PAGE> 1
EXHIBIT 99.10
THE CLIFFS OF ELDORADO
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
NINE MONTHS ENDED DECEMBER 31, 1997
<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 The Cliffs of Eldorado for the nine months 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 The Cliffs of Eldorado for the nine months ended
December 31, 1997, in conformity with generally accepted accounting principles.
FARMER, FUQUA, HUNT & MUNSELLE, P.C.
Dallas, Texas
October 30, 1998
<PAGE> 3
THE CLIFFS OF ELDORADO
STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
Nine months ended December 31, 1997
<TABLE>
<S> <C>
REVENUES
Net rental revenues $572,693
Other revenues 10,177
--------
Total revenues 582,870
DIRECT OPERATING EXPENSES
Repairs and maintenance 162,483
Salaries and benefits 131,774
Utilities 71,995
Property taxes 39,026
Insurance 7,813
--------
Total direct operating expenses 413,091
--------
REVENUES IN EXCESS OF DIRECT OPERATING EXPENSES $169,779
========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE> 4
THE CLIFFS OF ELDORADO
NOTES TO STATEMENT OF REVENUES
AND DIRECT OPERATING EXPENSES
December 31, 1997
NOTE 1: ORGANIZATION AND BASIS OF PRESENTATION
The Cliffs of Eldorado is a 208-unit apartment complex located in
McKinney, Texas. During 1997, the property was owned by 96 Eldorado I,
Ltd. The property is operated under the provisions of Section
221(d)(4) of the National Housing Act, with mortgage insurance
provided by the Federal Housing Administration (FHA) of the Department
of Housing and Urban Development.
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 consists of the following:
<TABLE>
<S> <C>
NSF Fees $ 5,093
Other Income 5,084
-------
$10,177
=======
</TABLE>
NOTE 4: SUBSEQUENT EVENT
The property was sold to Transcontinental Realty Investors, Inc., a
Nevada corporation, on October 20, 1998.
<PAGE> 1
EXHIBIT 99.11
Report Date: 07/25/98 INCOME STATEMENT Page: 1
Company: SW SOUTHWEST PROPERTIES GROUP, INC. Date: 08/12/98
Development ID: ELA 96 ELDORADO I LTD Time: 12:10:29
<TABLE>
<CAPTION>
CURRENT PERIOD
1 MONTH 1 MONTH
THRU: JUN 1998 BUDGET VARIANCE %
---------- ---------- ---------- ----------
REVENUES
<S> <C> <C> <C> <C>
RENTAL INCOME
Gross Scheduled Income 168,960 168,960 0 0.00
Vacancies - Apartments (30,433) (11,827) (18,606) (157.32)
Concession/Mkt Gain (Loss) (9,533) (1,250) (8,283) (662.64)
Employee Rent Allowances (638) (589) (49) (8.23)
Month to Month Premium 0 100 (100) (100.00)
Security Deposit Forfeit 150 200 (50) (25.00)
---------- ---------- ---------- ----------
TOTAL RENT REVENUE 128,506 155,594 (27,088) (17.41)
BAD DEBT
Low Delinquencies (3,352) (2,500) (852) (34.07)
Paid Delinquencies 920 1,652 (732) (44.31)
---------- ---------- ---------- ----------
TOTAL BAD DEBT (2,432) (848) (1,584) (186.77)
PREPAID RENT
Prepaid Rents 23,525 595 22,930 3,853.71
Prepaid Rents Applied (25,591) (595) (24,996) ****.**
---------- ---------- ---------- ----------
NET PREPAID RENT (2,066) 0 (2,066) 0.00
---------- ---------- ---------- ----------
NET RENTAL COLLECTION 124,008 154,746 (30,738) (19.86)
OTHER INCOME
Damages and Cleaning Fees 0 0 0 0.00
Other Revenue 481 7,260 (6,779) (93.37)
Rent Inc. - Application Fee 965 600 365 60.83
Interest Income 0 0 0 0.00
Pending/Tel./Utility/Etc. 523 100 423 422.85
Rent Income-Late Charges 1,301 250 1,051 420.21
NSF Fees 50 100 (50) (50.00)
Rent Inc.-Furniture/Eqpts 1,103 1,040 63 6.04
Rent Inc.-Garage/Storage 2,478 4,485 (2,007) (44.74)
Rent Income-Pet Income 600 0 600 0.00
Insufficient Notice Penalty 1,715 200 1,515 757.35
---------- ---------- ---------- ----------
TOTAL OTHER INCOME 9,216 14,035 (4,819) (34.34)
---------- ---------- ---------- ----------
EFFECTIVE GROSS INCOME 133,224 168,781 (35,557) (21.07)
</TABLE>
<TABLE>
<CAPTION>
YEAR-TO-DATE
6 MONTHS 6 MONTHS
THRU: JUN 1998 BUDGET VARIANCE %
----------- ---------- ---------- ----------
REVENUES
<S> <C> <C> <C> <C>
RENTAL INCOME
Gross Scheduled Income 1,013,760 1,013,760 0 0.00
Vacancies - Apartments (213,873) (135,166) (78,707) (58.23)
Concession/Mkt Gain (Loss) (37,406) (31,910) (5,496) (17.22)
Employee Rent Allowances (2,922) (3,534) 612 17.31
Month to Month Premium 100 600 (500) (83.33)
Security Deposit Forfeit 2,350 1,200 1,150 95.83
----------- ---------- ---------- ----------
TOTAL RENT REVENUE 762,008 844,950 (82,942) (9.82)
BAD DEBT
Low Delinquencies (22,843) (15,000) (7,843) (52.29)
Paid Delinquencies 19,157 10,499 8,658 82.46
----------- ---------- ---------- ----------
TOTAL BAD DEBT (3,686) (4,501) 815 18.10
PREPAID RENT
Prepaid Rents 98,853 3,570 95,283 2,668.98
Prepaid Rents Applied (104,005) (3,570) (100,435) ****.**
----------- ---------- ---------- ----------
NET PREPAID RENT (5,152) 0 (5,152) 0.00
----------- ---------- ---------- ----------
NET RENTAL COLLECTION 753,170 840,449 (87,279) (10.38)
OTHER INCOME
Damages and Cleaning Fees 2,735 0 2,735 0.00
Other Revenue (270) 14,520 (14,790) (101.86)
Rent Inc. - Application Fee 2,345 3,600 (1,255) (34.86)
Interest Income 5,461 0 5,461 0.00
Pending/Tel./Utility/Etc. 7,820 600 7,220 1,203.31
Rent Income-Late Charges 4,421 1,500 2,921 194.71
NSF Fees 750 600 150 25.00
Rent Inc.-Furniture/Eqpts 7,882 6,240 1,642 26.32
Rent Inc.-Garage/Storage 15,007 26,910 (11,903) (44.23)
Rent Income-Pet Income 1,800 0 1,800 0.00
Insufficient Notice Penalty 9,528 1,200 8,328 693.98
----------- ---------- ---------- ----------
TOTAL OTHER INCOME 57,479 55,170 2,309 4.18
----------- ---------- ---------- ----------
EFFECTIVE GROSS INCOME 810,649 895,619 (84,970) (9.49)
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Report Date: 07/25/98 Income Statement Page: 2
Company: SW SOUTHWEST PROPERTIES GROUP, INC. Date: 08/12/98
Development ID: ELA 96 ELDORADO I LTD Time: 12:10:31
- ----------------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 6 Months 6 Months
Thru: Jun 1998 Budget Variance % Jun 1998 Budget Variance %
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PAYROLL/BENEFITS
Manager/Assistant 5,133 3,694 (1,439) (38.94) 28,877 25,131 (3,746) (14.91)
Rental Agent Payroll 2,044 1,203 (841) (69.91) 10,096 7,218 (2,878) (39.87)
Maintenance Payroll 5,044 3,523 (1,521) (43.16) 27,100 22,269 (4,831) (21.69)
Grounds Payroll 746 737 (9) (1.20) 4,924 4,422 (502) (11.34)
Cleaning Payroll 746 737 (9) (1.20) 4,926 4,422 (504) (11.39)
Courtesy Officer Allowance 595 595 0 0.00 3,570 3,570 0 0.00
Payroll Taxes-Unemployment 112 532 420 78.86 1,709 2,956 1,247 42.18
Payroll Taxes - FICA 938 1,025 87 8.45 6,003 5,696 (307) (5.39)
Health Ins. & Other Bene. 735 1,145 410 35.79 7,813 6,870 (943) (13.73)
Payroll-Workers Compensation 1,186 1,295 109 8.41 7,779 7,198 (581) (8.07)
---------- ---------- ---------- ---------- -------- -------- ----------- ------
TOTAL PAYROLL/BENEFITS 17,279 14,486 (2,793) (19.28) 102,797 89,752 (13,045) (14.53)
RENTING EXPENSES
Advertising & Promotions 2,220 1,085 (1,135) (104.61) 16,977 7,550 (9,427) (124.85)
Advertising-Publications 0 0 0 0.00 675 0 (675) 0.00
Promotional Expense 283 0 (283) 0.00 1,771 0 (1,771) 0.00
Outside Commissions 1,800 500 (1,300) (260.00) 6,357 3,000 (3,357) (111.88)
Commissions 700 3,500 2,800 80.00 7,775 11,000 3,225 29.32
Credit Checks 374 500 126 25.20 2,277 3,000 723 24.10
Resident Retention 214 0 (214) 0.00 671 0 (671) 0.00
Misc. Renting Expenses 0 100 100 100.00 1,855 1,000 (855) (85.53)
---------- ---------- ---------- ---------- ---------- ---------- ----------- ------
TOTAL RENTING EXPENSE 5,592 5,685 93 1.64 38,357 25,550 (12,807) (50.13)
ADMINISTRATIVE EXPENSE
Telephone Expenses 581 313 (268) (85.47) 3,926 2,176 (1,750) (80.42)
Office Supplies 1,927 150 (1,777) ****.** 6,547 900 (5,647) (627.41)
Postage & Delivery 275 32 (243) (757.81) 1,066 192 (874) (454.96)
Management Fee 5,108 5,664 556 9.83 26,070 33,984 7,914 23.29
Asset Management Fee 2,189 2,427 238 9.81 14,557 14,562 5 0.03
Legal Expenses (Project) 0 200 200 100.00 225 1,200 975 81.25
Misc. Administr. Expenses 85 50 (35) (70.60) 2,337 300 (2,037) (678.95)
---------- ---------- ---------- ---------- ---------- ---------- ----------- ------
TOTAL ADMINISTRATIVE EXP 10,164 8,836 (1,328) (15.03) 54,727 53,314 (1,413) (2.65)
UTILITIES
Electricity-Common Areas 2,243 2,550 307 12.03 15,546 15,300 (246) (1.61)
Electricity-Vacant Units 1,984 250 (1,734) (693.45) 10,347 1,500 (8,847) (589.83)
Water/Sewer - Common Area 6,230 3,000 (3,230) (107.65) 27,719 18,000 (9,719) (53.99)
---------- ---------- ---------- ---------- ---------- ---------- ----------- ------
TOTAL UTILITY EXPENSE 10,456 5,800 (4,656) (80.28) 53,612 34,800 (18,812) (54.06)
OPERATING EXPENSE
Cleaning Supplies 66 100 34 33.92 771 600 (171) (28.52)
Security Contract 476 513 37 7.29 2,771 3,078 307 9.98
Exterminating Contract 270 271 1 0.30 1,621 1,626 5 0.30
</TABLE>
22
<PAGE> 3
Report Date: 07/25/98 INCOME STATEMENT Page: 3
Company: SW SOUTHWEST PROPERTIES GROUP, INC. Date: 08/12/98
Development ID: ELA 96 ELDORADO I LTD Time: 12:10:33
<TABLE>
<CAPTION>
CURRENT PERIOD Year-to-Date
1 Month 1 Month 6 Months 6 Months
Thru: Jun 1998 Budget Variance % Jun 1998 Budget Variance %
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Garbage & Trash Removal 230 1,010 780 77.18 3,288 6,060 2,772 45.74
Uniforms 1,000 0 (1,000) 0.00 1,000 2,500 1,500 60.02
Licenses/Permits/Signs 715 0 (715) 0.00 715 0 (715) 0.00
Cleaning-Contract 405 0 (405) 0.00 405 0 (405) 0.00
Corporate Unit Expenses 469 0 (469) 0.00 7,548 0 (7,548) 0.00
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL OPERATING EXPENSE 3,631 1,894 (1,737) (91.69) 18,119 13,864 (4,255) (30.69)
REPAIRS & MAINTENANCE
Fence & Gate Repairs 2,016 0 (2,016) 0.00 2,600 0 (2,600) 0.00
Plumbing Repairs 0 150 150 100.00 165 500 335 66.94
Electrical Repairs 0 150 150 100.00 150 500 350 70.03
Electrical-Contract 0 0 0 0.00 11 0 (11) 0.00
Air Conditioning 0 510 510 100.00 451 1,120 669 59.76
Swimming Pool/Parts/Suppl 0 175 175 100.00 487 1,025 538 52.47
Misc. Maintenance Expense 11 150 139 92.97 927 900 (27) (3.03)
Equipment Parts/Supplies 40 200 160 79.99 193 800 607 75.86
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL REPAIR & MAINT EXP 2,066 1,335 (731) (54.79) 4,985 4,845 (140) (2.88)
GROUNDS EXPENSE
Grounds Contract 2,517 2,500 (17) (0.67) 15,101 15,000 (101) (0.67)
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL GROUNDS EXPENSE 2,517 2,500 (17) (0.67) 15,101 15,000 (101) (0.67)
DECORATING EXPENSE
Painting/Decorating Contr 450 50 (400) (800.90) 777 300 (477) (159.10)
Make Ready Supplies 933 1,000 67 6.71 5,300 6,000 700 11.66
Carpet Cleaning & Repairs 3,608 510 (3,098) (607.49) 11,085 2,050 (9,035) (440.72)
Misc. Operating Expenses 100 0 (100) 0.00 1,230 0 (1,230) 0.00
-------- -------- -------- -------- -------- -------- -------- --------
DECORATING EXPENSE 5,092 1,560 (3,532) (226.39) 18,392 8,350 (10,042) (120.26)
OTHER EXPENSE
Property Insurance 1,333 1,333 0 0.00 7,998 7,998 0 0.00
Taxes 22,670 22,670 0 0.00 136,020 136,020 0 0.00
Other Insurance 0 0 0 0.00 4,317 0 (4,317) 0.00
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL OTHER EXPENSE 24,003 24,003 0 0.00 148,335 144,018 (4,317) (3.00)
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL OPERATING EXPENSE 80,801 66,099 (14,702) (22.24) 454,427 389,493 (64,934) (16.67)
-------- -------- -------- -------- -------- -------- -------- --------
NET OPERATING INCOME 52,423 102,682 (50,259) (48.95) 356,222 506,126 (149,904) (29.62)
</TABLE>
23
<PAGE> 4
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Report Date: 07/25/98 INCOME STATEMENT Page: 4
Company: SW SOUTHWEST PROPERTIES GROUP, INC. Date: 08/12/98
Development ID: ELA 96 ELDORADO I LTD Time: 12:10:35
- ----------------------------------------------------------------------------------------------------------------------------------
Current Period Year-to-Date
1 Month 1 Month 6 Months 6 Months
Thru: Jun 1998 Budget Variance % Jun 1998 Budget Variance %
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ESCROW/RESERVE ACTIVITY
Replacement Reserve 3,155 3,155 0 0.00 18,930 18,930 0 0.00
---------- ---------- ---------- ---------- -------- -------- ----------- ------
TOTAL ESCROW/RESERVE 3,155 3,155 0 0.00 18,930 18,930 0 0.00
---------- ---------- ---------- ---------- -------- -------- ----------- ------
NET OPERATING INCOME 49,268 99,527 (50,259) (50.50) 337,292 487,196 (149,904) (30.77)
========== ========== ========== ========== ======== ======== =========== ======
</TABLE>
24
