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 | ||||||||||
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 | ||||||||
