Jackson Jambalaya

JJ discovered additional lawsuits filed against Transcontinental Realty Investments (TCI) filed over the last two years by lenders seeking to repossess the property used as collateral for their loans. TCI is working with the city of Jackson to build a hotel on a site next to the convention center.

PNC Bank issued a loan to TCI for $16,250,000 in 2004. PNC states TCI stopped making payments after June 10, 2010 and owed $13,946,396 in principal and additional fees and interest of $706,466. PNC also claimed TCI told tenants in the building to make payments to TCI after the lender expressly told the them to make payments to PNC. PNC also issued another note in June 2004 on another property for $3,750,000. PNC claims TCI defaulted on that note as well and owes $3,364,166 and several hundred thousand dollars in interest and fees. The combined principal is $1,614,166.

PNC filed a lawsuit against TCI and its subsidiary Continental Common on October 21, 2010 in U.S. District Court in the Eastern District of Louisiana. PNC was able to obtain a sequestration order the same day seizing the property. However, Continental filed bankruptcy on October 28, 2010 in Dallas. The bankruptcy case is still active. There is a reorganization plan submitted to the court extending the maturity date of the note to the end of 2012. So, once again, TCI defaults on a huge loan and then scurries off to bankruptcy court where the lender is tied up while trying collect on the mortgage. Unfortunately, this is not the last time TCI pulled such a stunt.

Meet Caddo East Estates I, Ltd, a Texas company that loaned TCI and its subsidiary TCI Dedeaux Road a loan of $1,520,000. The total amount due after interest and fees are added is $2,068,048. TCI defaulted on the note and Caddo sued TCI in Dallas County on April 29, 2011. TCI sparred with Caddo in court for awhile then.........surprise....TCI Dedeaux filed a bankruptcy petition on September 26, 2011. Filing bankruptcy petitions usually "freezes" other pending lawsuits and they are transferred to the bankruptcy court.

What is emerging is a pattern by TCI. Several lenders: Wells Fargo, Armed Forces Bank, Caddo, Petra, and PNC lent TCI and its subsidiaries over $121,000,000. TCI and its subsidiaries default on the notes. When the lenders sue to collect on their mortgages, the TCI subsidiary then runs to bankruptcy court thus substantially delaying the collection efforts. Meanwhile TCI goes along its merry way. Two of the lenders allege TCI and its subsidiaries transferred title to other TCI-owned companies without their consent as it left them without collateral to seize in case of default. The bankruptcy court in Dallas twice dismissed the petition for bankruptcy filed by one TCI company after the lenders and trustee accused it of filing the petitions in bad faith. Earlier post on lawsuits

The financial statements and SEC filings of TCI paint a picture that may be at odds with the "outlook is bright" statement made by a TCI Vice-President to the Jackson City Council last week or as I wrote last week:

TCI "has lost $52 million this year and lost over $76 million each year for the last two years. The company has only earned a profit three times in the last ten years. It is leveraged at nearly 100% if one examines assets against liabilities. The share price has performed substantially worse than the industry average and is trading at around $2.50 per share. The company has been accused of committing mortgage fraud by at least three lenders in three separate lawsuits filed this year. A bankruptcy court in Texas twice this year threw out a TCI subsidiary's (FRE Real Estate) bankruptcy petition filed this year after lenders showed the court other TCI subsidiaries were transferring properties to FRE even though they were secured by nearly $100 million in loans provided by those lenders. Does this sound like a partner whose future is "bright"?