American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real estate investment company, today reported results of operations for the first quarter ended March 31, 2011. ARL announced today that the Company reported net loss applicable to common shares of $9.8 million or $0.86 per diluted earnings per share, as compared to a net loss applicable to common shares of $12.5 million or $1.09 per diluted earnings per share for the same period ended 2010.

Rental and other property revenues were $38.7 million for the three months ended March 31, 2011. This represents a decrease of $1.5 million, as compared to the prior period revenues of $40.2 million. This change, by segment, is a decrease in the commercial portfolio of $2.2 million, a decrease in the hotel portfolio of $0.3 million, and a decrease in the land and other portfolios of $0.1 million, offset by an increase in the apartment portfolio of $1.1 million. Within the apartment portfolio, there was an increase of $0.5 million due to the developed properties in the lease-up phase and an increase of $0.6 million in the same property portfolio. Within the commercial and hotel portfolios, the decrease is attributable to increased vacancies due to the current state of the economy. We have directed our efforts to apartment development and put some additional land projects on hold until the economic conditions turn around. We are continuing to market our properties aggressively to attract new tenants and strive for continuous improvement of our properties in order to maintain our existing tenants.

Property operating expenses were $23.3 million for the three months ended March 31, 2011. This represents a decrease of $1.3 million, as compared to the prior period operating expenses of $24.6 million. This change, by segment, is a decrease in our commercial properties of $0.3 million, a decrease in our apartment portfolio of $0.6 million, a decrease in our hotels of $0.1 million and a decrease in our in our land and other segments of $0.3 million. The Company has taken great strides to reduce costs and increase efficiency for repairs and maintenance of the properties.

Mortgage and loan interest expense was $17.9 million for the three months ended March 31, 2011. This represents a decrease of $1.4 million, as compared to the prior period interest expense of $19.3 million. This change, by segment, is a decrease in our commercial properties of $0.5 million, a decrease in our apartment portfolio of $0.4 million, a decrease in our hotels of $0.1 million and a decrease in our other portfolios of $0.7 million, offset by an increase in our land portfolio of $0.3 million. The commercial portfolio experienced a reduction in interest expense due to a matured loan that is being negotiated at a lower interest rate. The decrease in the apartment portfolio is primarily due to loans that were refinanced in 2010 at a lower interest rate. The decrease in the other portfolio is due to a decrease in interest expense on loan amounts due to our advisor.

Provision for impairment was $6.1 million for the three months ended March 31, 2011. Impairment was recorded as an additional loss of $0.9 million in the commercial properties we currently hold and $5.2 million in the apartments we currently hold.

Gain on land sales increased for the three months ended March 31, 2011 as compared to the prior period. In the current period, we sold 230.45 acres of land in 12 separate transactions for an aggregate sales price of $50.1 million and recorded a gain of $5.3 million. In the prior period, we sold 0.275 acres of land in one transaction for an sales price of $8,984 and recorded a gain of $6,470.

Included in discontinued operations are a total of two and 17 properties as of 2011 and 2010, respectively. The gain on sale of the 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.amrealtytrust.com.
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
    For the Three Months Ended
March 31,
  2011       2010  
(dollars in thousands, except share and per share amounts)
Revenues:
Rental and other property revenues (including $372 and $714 for the three months ended 2011 and 2010 respectively from affiliates and related parties) $ 38,741 $ 40,242
 
Expenses:
Property operating expenses (including $534 and $700 for the three months ended 2011 and 2010 respectively from affiliates and related parties) 23,255 24,553
Depreciation and amortization 7,173 6,870
General and administrative (including $1,187 and $1,226 for the three months ended 2011 and 2010 respectively from affiliates and related parties) 3,547 2,587
Provision on impairment of notes receivable and real estate assets 6,059 -
Advisory fee to affiliate   3,522     4,053  
Total operating expenses   43,556     38,063  
Operating income (loss) (4,815 ) 2,179
 
Other income (expense):
Interest income (including $466 and $1,186 for the three months ended 2011 and 2010 respectively from affiliates and related parties) 668 1,502
Other income 1,467 867
Mortgage and loan interest (including $306 and $845 for the three months ended 2011 and 2010 respectively from affiliates and related parties) (17,862 ) (19,254 )
Earnings from unconsolidated subsidiaries and investees (95 ) (22 )
Gain on foreign currency translation - (673 )
Litigation settlement   -     -  
Total other expenses   (15,822 )   (17,580 )
Loss before gain on land sales, non-controlling interest, and taxes (20,637 ) (15,401 )
Gain on land sales   5,344     6  
Loss from continuing operations before tax (15,293 ) (15,395 )
Income tax benefit   1,372     1,080  
Net loss from continuing operations (13,921 ) (14,315 )
Discontinued operations:
Income (loss) from discontinued operations (217 ) 1,274
Gain on sale of real estate from discontinued operations 4,137 -
Income tax expense from discontinued operations   (1,372 )   (446 )
Net income from discontinued operations 2,548 828
Net loss (11,373 ) (13,487 )
Net loss attributable to non-controlling interests   2,170     1,577  
Net loss attributable to American Realty Investors, Inc. (9,203 ) (11,910 )
Preferred dividend requirement   (617 )   (622 )
Net loss applicable to common shares $ (9,820 ) $ (12,532 )
 
Earnings per share - basic
Loss from continuing operations $ (1.08 ) $ (1.16 )
Income from discontinued operations   0.22     0.07  
Net loss applicable to common shares $ (0.85 ) $ (1.09 )
 
Earnings per share - diluted
Loss from continuing operations $ (1.08 ) $ (1.16 )
Income from discontinued operations   0.22     0.07  
Net loss applicable to common shares $ (0.85 ) $ (1.09 )
 
Weighted average common share used in computing earnings per share 11,493,115 11,514,038
Weighted average common share used in computing diluted earnings per share 11,493,115 11,514,038
 
 
Amounts attributable to American Realty Investors, Inc.
Loss from continuing operations $ (11,751 ) $ (12,738 )
Income from discontinued operations   2,548     828  
Net loss $ (9,203 ) $ (11,910 )
 
 
The accompanying notes are an integral part of these consolidated financial statements.
     
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
 
March 31, December 31,
  2011     2010  
(dollars in thousands, except share and par value amounts)
Assets
Real estate, at cost $ 1,047,080 $ 1,170,214
Real estate subject to sales contracts at cost, net of depreciation ($106,728 for 2011 and $75,639 for 2010) 354,301 295,921
Less accumulated depreciation   (107,967 )   (133,550 )
Total real estate 1,293,414 1,332,585
Notes and interest receivable
Performing (including $82,692 in 2011 and $89,982 in 2010 from affiliates and related parties) 91,178 99,839
Non-performing 3,132 3,123
Less allowance for estimated losses (including $9,926 in 2011 and 2010 from affiliates and related parties)   (14,348 )   (14,348 )
Total notes and interest receivable 79,962 88,614
Cash and cash equivalents 8,393 12,649
Investments in unconsolidated subsidiaries and investees 12,152 12,491
Affiliate receivable 4,048 -
Other assets (including $160 in 2011 and $164 in 2010 from affiliates and related parties)   97,664     110,936  
Total assets $ 1,495,633   $ 1,557,275  
 
Liabilities and Shareholders’ Equity
Liabilities:
Notes and interest payable $ 815,567 $ 913,134
Notes related to subject to sales contracts 382,566 315,547
Stock-secured notes payable and margin debt 25,598 23,100
Affiliate payables - 12,219
Deferred revenue (including $98,473 in 2011 and $100,212 in 2010 from sales to related parties) 102,787 104,534
Accounts payable and other liabilities (including $1,783 in 2011 and $1,539 in 2010 to affiliates and related parties)   79,278     88,506  
1,405,796 1,457,040
 
Shareholders’ equity:
Preferred stock, $2.00 par value, authorized 15,000,000 shares, issued and outstanding Series A, 3,353,954 shares in 2011 and $3,389,546 in 2010 (liquidation preference $10 per share), including 900,000 shares in 2011 and 2010 held by subsidiaries 4,908 4,979
Common stock, $.01 par value, authorized 100,000,000 shares; issued 11,941,174 and 11,874,138, and outstanding 11,525,389 and 11,466,853 shares in 2011 and in 2010 115 114
Treasury stock at cost; 415,785 and 407,285 shares in 2011 and 2010 and 276,972 shares held by TCI (consolidated) as of 2011 and 2010 (6,395 ) (6,333 )
Paid-in capital 90,407 88,620
Retained earnings (57,596 ) (47,776 )
Accumulated other comprehensive income (loss)   (786 )   (786 )
Total American Realty Investors, Inc. shareholders' equity   30,653     38,818  
Non-controlling interest   59,184     61,417  
Total equity   89,837     100,235  
Total liabilities and equity $ 1,495,633   $ 1,557,275  
 
The accompanying notes are an integral part of these consolidated financial statements.

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