American Realty Investors, Inc. Reports Third Quarter 2012 Results

American Realty Investors, Inc. Reports Third Quarter 2012 Results

DALLAS--(BUSINESS WIRE)-- American Realty Investors, Inc. (NYS: ARL) , a Dallas-based real estate investment company, today reported results of operations for the third quarter ended September 30, 2012. ARL announced today that the Company reported a net loss applicable to common shares of $0.05 million or $0.00 per diluted earnings per share, as compared to a net loss applicable to common shares of $0.3 million or $0.03 per diluted earnings per share for the same period ended 2011. Included in the net loss applicable to common shares of $0.05 million is $5.5 million in depreciation and amortization expense for the three months ended September 30, 2012. For the same period ending September 30, 2011, included in the net loss applicable to common shares of $0.3 million is $5.2 million in depreciation and amortization expense.

For the past year and a half, ARL has shown an unwavering commitment to fortify our portfolio and streamline our operational activity; all while maintaining our commitment to creating value. ARL is pleased that we are seeing improved results from these endeavors and will continue to adapt to market challenges with an eye on both near term economic challenges and long term prospects as the real estate market improves.


Our apartment portfolio continues to thrive in the current economic conditions with occupancies averaging over 95%. We continue to market our properties aggressively to attract new tenants and strive for continuous improvement of our properties in order to maintain our existing tenants.

Revenue and operating expenses remained consistent for the three months ended September 30, 2012, as compared to the prior period.

General and administrative expenses were $1.5 million for the three months ended September 30, 2012. This represents a decrease of $2.1 million, as compared to the prior period expenses of $3.6 million. The majority of the reduction in general and administrative expenses is related to land and corporate expenses as professional services decreased by $1.8 million and cost reimbursements to our Advisor decreased by $0.3 million.

Advisory fees were $2.2 million for the three months ended September 30, 2012. This represents a decrease of $1.0 million, as compared to the prior period advisory fees of $3.2 million. The advisory fee is calculated as a percentage of total gross assets and as we sell land and income-producing properties, this fee is reduced in correlation to the decrease in assets.

Interest income was $2.3 million for the three months ended September 30, 2012. This represents an increase of $1.3 million, as compared to the prior period interest income of $1.0 million. The majority of the increase is due to the cash received on the cash flow notes from Unified Housing Foundation, Inc. related to the mid-year surplus cash calculation.

Other income was $1.5 million for the three months ended September 30, 2012. This represents an increase of $1.4 million, as compared to the prior period other income of $0.1 million. This relates to the agreement between UHF and TCI for consulting services related to the development of apartment projects.

Mortgage and loan interest expense was $9.8 million for the three months ended September 30, 2012. This represents a decrease of $4.0 million, as compared to the prior period interest expense of $13.8 million. This change, by segment, is a decrease in our apartment portfolio of $0.7 million, a decrease in our commercial portfolio of $2.5 million, and a decrease in our land and other portfolios of $0.8 million. Within the apartment portfolio, the same properties decreased $1.6 million and the developed properties increased $0.9 million due to properties in the lease-up phase. For the developed properties, once construction is completed, interest expense is no longer capitalized. Within the commercial portfolio, the same properties decreased by $2.5 million. This decrease is related to a commercial loan that was in default in 2011 and was accruing interest at the default interest rate. The loan is no longer in default and is no longer being charged a default rate of interest in the current period. The decrease in the land and other portfolios was due to land sales.

Gain on land sales increased for the three months ended September 30, 2012, as compared to the prior period. In the current period, we sold 102.28 acres of land in seven separate transactions for an aggregate sales price of $16.1 million and recorded a gain of $2.9 million. In the prior period, we sold 3,068.60 acres of land in eight separate transactions for an aggregate sales price of $52.6 million and recorded a loss of $0.9 million.

Included in discontinued operations are a total of six and 26 properties as of 2012 and 2011, respectively. Properties sold in 2012 have been reclassified to discontinued operations for the current and prior reporting periods. The gain on sale of income-producing properties is also included in discontinued operations for those years.

About American Realty Investors, Inc.

American Realty Investors, Inc., a Dallas-based real estate investment company, holds a diverse portfolio of equity real estate located across the U.S., including office buildings, apartments, hotels, shopping centers and developed and undeveloped land. The Company invests in real estate through direct equity ownership and partnerships nationwide. For more information, visit the Company's website at www.americanrealtyinvest.com.

AMERICAN REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

(dollars in thousands, except share and per share amounts)

Revenues:

Rental and other property revenues (including $164 and $0 for the three months and $499 and $0 for the nine months ended 2012 and 2011 respectively from related parties)

$

28,918

$

29,109

$

89,515

$

85,589

Expenses:

Property operating expenses (including $305 and $274 for the three months and $855 and $872 for the nine months ended 2012 and 2011 respectively from related parties)

16,045

15,990

47,132

46,657

Depreciation and amortization

5,495

5,218

16,317

15,380

General and administrative (including $769 and $1,011 for the three months and $2,587 and $3,440 for the nine months ended 2012 and 2011 respectively from related parties)

1,546

3,641

5,052

10,556

Provision on impairment of notes receivable and real estate assets

-

-

-

5,622

Advisory fee to related party

2,215

3,241

7,573

10,225

Total operating expenses

25,301

28,090

76,074

88,440

Operating income (loss)

3,617

1,019

13,441

(2,851

)

Other income (expense):

Interest income (including $2,169 and $448 for the three months and $9,797 and $2,071 for the nine months ended 2012 and 2011 respectively from related parties)

2,280

1,039

10,342

2,910

Other income (including $1,500 and $0 for the three months and $4,500 and $0 for the nine months ended 2012 and 2011 respectively from related parties)

1,535

115

5,334

1,881

Mortgage and loan interest (including $903 and $48 for the three months and $2,756 and $1,628 for the nine months ended 2012 and 2011 respectively from related parties)

(9,790

)

(13,813

)

(44,009

)

(43,710

)

Loss on sale of investments

-

91

(361

)

91

Earnings from unconsolidated subsidiaries and investees

134

(30

)

284

(104

)

Total other expenses

(5,841

)

(12,598

)

(28,410

)

(38,932

)

Loss before gain on land sales, non-controlling interest, and taxes

(2,224

)

(11,579

)

(14,969

)

(41,783

)

Gain (loss) on land sales

2,898

(942

)

6,615

18,431

Income (loss) from continuing operations before tax

674

(12,521

)

(8,354

)

(23,352

)

Income tax benefit (expense)

(13

)

2,815

2,535

5,166

Net income (loss) from continuing operations

661

(9,706

)

(5,819

)

(18,186

)

Discontinued operations:

Loss from discontinued operations

(621

)

(212

)

(1,596

)

(5,312

)

Gain on sale of real estate from discontinued operations

585

8,256

8,840

20,073

Income tax benefit (expense) from discontinued operations

13

(2,815

)

(2,535

)

(5,166

)

Net income (loss) from discontinued operations

(23

)

5,229

4,709

9,595

Net income (loss)

638

(4,477

)

(1,110

)

(8,591

)

Net (income) loss attributable to non-controlling interest

(74

)

4,830

37

14,175

Net income (loss) attributable to American Realty Investors, Inc.

564

353

(1,073

)

5,584

Preferred dividend requirement

(613

)

(613

)

(1,839

)

(1,843

)

Net income (loss) applicable to common shares

$

(49

)

$

(260

)

$

(2,912

)

$

3,741

Earnings per share - basic

Loss from continuing operations

$

-

$

(0.48

)

$

(0.66

)

$

(0.51

)

Income from discontinued operations

-

0.45

0.41

0.83

Net income (loss) applicable to common shares

$

-

$

(0.03

)

$

(0.25

)

$

0.32

Earnings per share - diluted

Loss from continuing operations

$

-

$

(0.48

)

$

(0.66

)

$

(0.51

)

Income from discontinued operations

-

0.45

0.41

0.83

Net income (loss) applicable to common shares

$

-

$

(0.03

)

$

(0.25

)

$

0.32

Weighted average common share used in computing earnings per share

11,525,389

11,525,389

11,525,389

11,514,749

Weighted average common share used in computing diluted earnings per share

11,525,389

11,525,389

11,525,389

11,514,749

Amounts attributable to American Realty Investors, Inc.

Loss from continuing operations

$

587

$

(4,876

)

$

(5,782

)

$

(4,011

)

Income (loss) from discontinued operations

(23

)

5,229

4,709

9,595

Net income (loss)

$

564

$

353

$

(1,073

)

$

5,584

AMERICAN REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited)

September 30,

December 31,

2012

2011

(dollars in thousands, except share and
par value amounts)

Assets

Real estate, at cost

$

1,056,941

$

1,120,122

Real estate held for sale at cost, net of depreciation ($0 for 2012 and $1,752 for 2011)

-

15,015

Real estate subject to sales contracts at cost, net of depreciation ($15,290 and $9,790 in 2012 and 2011)

46,601

49,982

Less accumulated depreciation

(159,747

)

(158,489

)

Total real estate

943,795

1,026,630

Notes and interest receivable

Performing (including $110,987 and $104,969 in 2012 and 2011 from related parties)

117,767

110,136

Non-performing

4,256

4,787

Less allowance for estimated losses (including $18,962 and $8,962 in 2012 and 2011 from related parties)

(21,704

)

(13,383

)

Total notes and interest receivable

100,319

101,540

Cash and cash equivalents

6,738

20,312

Investments in unconsolidated subsidiaries and investees

7,625

10,746

Related party receivable

1,063

-

Other assets (including $21 in 2012 and $11 in 2011 from related parties)

74,050

76,243

Total assets

$

1,133,590

$

1,235,471

Liabilities and Shareholders' Equity

Liabilities:

Notes and interest payable

$

789,623

$

855,619

Notes related to assets held for sale

-

13,830

Notes related to subject to sales contracts

53,442

44,516

Stock-secured notes payable and margin debt

26,737

26,898