TRANSCONTINENTAL REALTY INVESTORS ANNOUNCES ACQUISITION OF REAL ESTATE AND ISSUANCE OF ADDITIONAL SECURITIES
TRANSCONTINENTAL REALTY INVESTORS ANNOUNCES ACQUISITION
OF REAL ESTATE AND ISSUANCE OF ADDITIONAL SECURITIES
DALLAS, Feb. 26 /PRNewswire/ -- Transcontinental Realty Investors Inc. (NYSE: TCI), today announced it has obtained the right to acquire four multi-family apartment properties, five mortgage receivables, two operating commercial properties and four parcels of developed land from Southmark Corporation and its affiliates. The properties are being sold by Southmark as part of the global settlement of litigation between Southmark Corporation and affiliates and American Realty Trust, Inc. (NYSE: ART) and its affiliates announced last October.
TCI has agreed to pay a portion of the $13.2 million total settlement due Southmark equal to the lesser of 80 percent of the current market value of the properties conveyed or $7.4 million. An initial payment of $3 million was made today with the balance due over a period of 26 months without interest. Several of the properties have already been transferred to TCI and the remainder are to be transferred by May 1, 1992. As collateral for the future payments, TCI has pledged to Southmark 450,000 shares of newly issued TCI common stock. TCI intends to cancel the newly issued shares when they are released from the pledge to Southmark. Voting rights to the newly issued collateral shares are held by the independent directors of TCI.
TCI's decision to acquire these properties and the purchase price was determined by the related party transaction committee of the TCI board with the advice of their special counsel and real estate appraisers. This transaction was negotiated by the committee over a period of more than five months. The final transaction reflects the committee's insistence that the properties acquired make a good fit with TCI's existing portfolio, that the purchase price reflects the current "bargain sale" environment for real estate purchases and that TCI's advisor, National Realty Advisors, Inc. and its controlling shareholder, ART, provide additional assurances to TCI concerning matters affecting the valuation of the properties to supplement the contractual warranties and representations of Southmark.
In addition to the property purchase, TCI also paid Southmark $240,000 in complete settlement of the much larger liquidated and unliquidated claims asserted by Southmark against TCI. Continental Mortgage and Equity Trust (NASDAQ: CMETS), Income Opportunity Realty Trust (AMEX: IOT), National Income Realty Trust (NASDAQ: NIRTS) and Vinland Property Trust (NASDAQ: VIPTS) paid Southmark Corporation a total of $357,000 to settle all of Southmark's claims against them. The amount paid by each of the REITs was based on the recommendation of their respective boards and board committees; which evaluated Southmark's claims against each trust and that trust's claims against Southmark as well as the cost and hazards of further litigation.
As part of this global settlement, National Realty, L.P. (AMEX: NLP) agreed to pay Southmark the net amount which it showed on its financial statements as due to Southmark -- approximately $1.8 million. The amount is to be paid over the next 26 months. NLP's obligations are secured by the pledge to Southmark of 300,000 newly issued limited partnership units. ART will pay Southmark approximately $2.3 million by October 1994 and, as previously reported, will transfer a 19.2 percent limited partnership interest in the entity which is the general partner of National Realty. The transfer is subject to a three-year buy-back option for $2.4 million, less any distributions. In exchange, ART is acquiring from Southmark certain real estate and securities which it believes have an aggregate value at least equal in value to the consideration ART has agreed to pay Southmark.
To secure its payment obligations, as well as those of all other affiliated parties to the settlement, ART has pledged to Southmark certain securities. These include 390,000 newly issued shares of ART and the balance of its limited partnership interest in the general partner of National Realty, which have a total value in excess of $10 million.
A spokesperson for TCI and ART stated, "We look forward to maximizing the value of the under-managed real estate assets we are acquiring and expect to turn the series of unfortunate lawsuits with Southmark into profitable investments for our shareholders. All of us welcome an end to this acrimonious litigation."
/CONTACT: Jean Krone Bono, investor relations representative for TCI, 214-692-4800./
(TCI) CO: Transcontinental Realty Investors, Inc.; Southmark Corporation ST: Texas IN: SU: TNM TQ -- NY064 -- 2900 02/26/92 15:02 EST