DALLAS, Aug. 16, 1999 (PRIMEZONE) -- Continental Mortgage and Equity Trust (Nasdaq:CMETS) Monday announced higher gains on the sale of real estate and increased rental income contributed to significant improvements in net income for the three and six months ended June 30, 1999.
Continental Mortgage reported second quarter and six month 1999 net income of $4.6 million, or $1.13 per share, and $3 million, or $.74 per share, on revenues of $17.4 million and $34 million, respectively. The increases were primarily due to $5.5 million and $5.7 million gains on sales of real estate and a mortgage note receivable during the three and six months. In comparison, second quarter 1998's net loss of $1.1 million, or $.28 per share, included a $154,000 loss on the sale of real estate, and six month 1998 net income of $2.5 million, or $.61 per share, included a $5.5 million gain on the sale of real estate.
Rental income increased to $17.4 million and $33.9 million in second quarter and first six months of 1999, from $15.9 million and $30.7 million for the corresponding periods in 1998. The increase was due to the acquisition of three income-producing properties in 1998 and another in 1999, the buyout of a lease by a tenant and increased rental and occupancy rates at Continental's commercial and residential properties. The increase was partially offset by $604,000 and $1 million decreases due to the sale of four properties in 1998 and four additional properties in 1999. For the same three-month and six-month periods, interest income decreased to $29,000 and $125,000 in 1999, as compared to $140,000 and $371,000 in 1998. The decrease was due to the collection of two notes receivable and the sale of six notes receivable in 1998 and 1999, as well as a decrease in short-term investment income.
Funds from operations (FFO) was $1 million in second quarter 1999 and $1.4 million for the six months as compared to $1 million and $1.1 million for the same periods last year. FFO is defined as net income minus extraordinary gains and gains from the sale of property, plus depreciation and amortization.
Property expenses for the second quarter and six months of 1999 rose to $9.4 million and $19.1 million, due to operation expenses associated with eight properties acquired in 1998 and 1999. The increase was partially offset by a decrease of $357,000 due to sales of eight properties in 1998 and 1999.
Interest expense increased to $5.3 million and $10.8 million in the three and six months ended June 30, 1999, as compared to $5.1 million and $10.2 million in 1998. The increases were due to new mortgages on purchased properties and the refinancing of properties where loan balances increased. The increases were partially offset by the sale of eight properties and a note receivable in 1998 and 1999.
General and administrative expenses increased due to franchise taxes and other corporate taxes in the second quarter and six months ended June 30, 1999. G&A rose to $844,000 and $1.4 million in 1999, as compared to $535,000 and $1.1 million in the same periods last year.
A net income fee of $242,000 was paid in the three and six months ended June 30, 1999, from a refund of $93,000 and a payment of $198,000 in the comparable periods in 1998. The fee is based on a percentage of net income. Depreciation and advisory fees for the second quarter and six months of 1999 were comparable to those in 1998.
As previously announced, Continental Mortgage and Transcontinental Realty Investors, Inc. (NYSE:TCI) have signed a definitive merger agreement for Transcontinental to acquire Continental in a tax-free exchange of 1.181 Transcontinental common shares for each outstanding Continental share of beneficial interest. The merger and share exchange is subject to customary closing conditions, including a vote of shareholders of both entities. Special shareholder meetings are set for September 28, 1999.
Continental Mortgage & Equity Trust, a real estate investment trust, invests in real estate nationwide.
FINANCIAL HIGHLIGHTS
(dollars in thousands, except share and per share data)
For the 3 months For the 6 months
ended June 30, ended June 30,
1999 1998 1999 1998
Revenue $ 17,380 $ 16,078 $ 34,017 $ 31,119
Expenses 18,406 17,098 36,841 34,203
Loss from
operations (1,026) (1,020) (2,824) (3,084)
Equity in income
of partnerships 55 35 111 70
Gain (loss) on sale
of real estate
and note receivable 5,531 (154) 5,683 5,462
Net income (loss) $ 4,560 $ (1,139) $ 2,970 $ 2,448
Earnings per share
Net income (loss) $ 1.13 $ (.28) $ .74 $ .61
Weighted average
shares of beneficial
interest used to
compute earnings
per share 4,022,006 4,007,538 4,021,591 4,010,342
Funds from
Operations $ 1,000 $ 691 $ 1,370 $ 1,060
CONTACT: Phyllis Wolper
Director, Investor Relations
(214) 692-4902/(800) 400-6407