US District Court Clears American Realty's $61M Merger Plan

American Realty will spend $50 million to acquire outstanding shares of Transcontinental and $11 million for the balance of Income Opportunity, Phyllis Wolper, investor relations director of overseer Basic Capital Management Inc., tells GlobeSt.com. Meanwhile, American Realty and its merger-in-waiting companies are without a president. Just 12 days ago, Karl L. Blaha exited "to pursue outside business interests in real estate," Wolper confirmed. She says it has not been determined who will take over the helm.

Wolper says the merger will be wrapped up by the third quarter and is in line with an October 2001 accord reached with the plaintiffs' attorney of a drawn-out class-action lawsuit, Olive et a v National Income Realty Trust. There are no firm dates at this point for filing the merger papers or the required shareholders' approval. The document filing, she adds, could happen "fairly quickly." The merger plan still is subject to review by regulatory agencies.

American Realty and its affiliates currently own 64.5% of Transcontinental and 59.9% of Income Opportunity, according to Wolper. The Transcontinental portfolio is valued at more than $293 million and Income Opportunity's in excess of $93 million. The real estate is situated in the Southeast, Southwest and Pacific regions.

Phillips' role in the corporate hierarchy is to serve as the representative for the Gene E. Phillips Children's Trust, sole owner of Basic Capital, the 55.1% owner of American Realty. Last week, Phillips and Basic Capital were acquitted by a New York City jury on charges of securities fraud stemming from a June 2000 federal indictment. All companies are headquartered in Basic Capital's Dallas office.

Under the merger plan, shareholders can cash out their holdings or exchange for new American Realty preferred stocks bearing a 10% annual dividend. Each Transcontinental shareholder is being offered $17.50 per share or an exchange for the preferred stock with a liquidation value of $20 per share. Income Opportunity will be offered $19 per share or an exchange of the preferred stock bearing a liquidation value of $21.50 per share.

As of Sept. 30, 2001, American Realty reported gross assets of $780.3 million, of which $78 million was the carrying value of its investments in Transcontinental and Income Opportunity. Transcontinental's gross assets totaled $708.7 million as of last September and Income Opportunity's, $92.8 million.