American Realty Investors, Inc. Reports Second Quarter 2011 Results

American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real estate investment company, today reported results of operations for the second quarter ended June 30, 2011. ARL announced today that the Company reported, for the three months ended June 30, 2011, net income applicable to common shares of $13.8 million or $1.20 per share, as compared to a net loss applicable to common shares of ($14.4) million or ($1.25) per share for the same period ended 2010.

Rental and other property revenues were $37.5 million for the three months ended June 30, 2011. This represents an increase of $1.0 million, as compared to the prior period revenues of $36.5 million. This change, by segment, is an increase in the commercial portfolio of $0.6 million, an increase in the apartment portfolio of $0.7 million, offset by a decrease in the hotel portfolio of $0.3 million. Our apartment portfolio has continued to thrive with the addition of several newly developed properties and continuous improvements within our existing portfolio, which has led to the rental growth in the second quarter. The commercial portfolio received a lease buyout fee in the second quarter of 2011, which led to the increase in comparison to the prior year. The hotel portfolio has suffered from the current state of the economy, resulting in higher vacancy for the hotel rooms and lower room rates.

Property operating expenses were $21.2 million for the three months ended June 30, 2011. This represents a decrease of $2.1 million, as compared to the prior period operating expenses of $23.3 million. This change, by segment, is a decrease in our commercial properties of $0.6 million, a decrease in our apartment portfolio of $0.6 million, and a decrease in our in our land and other segments of $0.9 million. Property management, in both the residential and commercial portfolios, has been diligent in reducing overall costs and unnecessary repair and maintenance expenses without compromising the quality of services provided. We have reduced the number of land development projects that are in progress, thereby reducing expenses from the year prior.

General and administrative expenses were $4.1 million for the three months ended June 30, 2011. This represents an increase of $1.4 million, as compared to the prior period general and administrative expenses of $2.7 million. This change is primarily due to an increase in legal expense accruals. The Company accrues a liability each month to reserve for legal fees unbilled or potential litigation expenses.

Mortgage and loan interest expense was $17.7 million for the three months ended June 30, 2011. This represents a decrease of $2.6 million, as compared to the prior period interest expense of $20.3 million. This change, by segment, is a decrease in our commercial properties of $1.1 million, a decrease in our apartment portfolio of $0.3 million, and a decrease in our land portfolio of $0.9 million and a decrease in our other portfolio of $0.3 million. The decrease in the apartment portfolio is primarily due to loans refinanced in 2010 at a lower interest rate, offset by the addition of several newly developed residential properties. Several land parcels were sold during the past year and satisfied their debt obligations, thereby reducing the interest expense.

Gain on land sales was $14.0 million for the three months ended June 30, 2011. This represents an increase of $18.1 million as compared to the prior period loss of $4.1 million. In the current period, we sold 1,067 acres of land in 19 separate transactions for an aggregate sales price of $60.4 million and recorded a gain of $14.0 million. In the prior period, we sold 23.56 acres of land in two transactions for an aggregate sales price of $17.6 million and recorded a loss $4.1 million.

Included in discontinued operations are a total of five and 20 income-producing properties as of 2011 and 2010, respectively. Properties sold in 2011 have been reclassified to discontinued operations for the current and prior reporting periods. The sale of these properties resulted in a gain on the sale of real estate from discontinued operations of $7.7 million and $5.7 million as of 2011 and 2010, respectively.

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 BALANCE SHEETS
(unaudited)
 
June 30, December 31,
2011 2010
(dollars in thousands, except share and par value amounts)
Assets
Real estate, at cost $ 1,081,686 $ 1,170,214
Real estate subject to sales contracts at cost, net of depreciation ($93,462 and $75,639 in 2011 and 2010) 225,836 295,921
Less accumulated depreciation   (104,765 )   (133,550 )
Total real estate 1,202,757 1,332,585
Notes and interest receivable
Performing (including $80,557 and $89,982 in 2011 and 2010 from affiliates and related parties) 87,519 99,839
Non-performing 3,141 3,123
Less allowance for estimated losses (including $8,962 and $9,926 in 2011 and 2010 from affiliates and related parties)   (13,384 )   (14,348 )
Total notes and interest receivable 77,276 88,614
Cash and cash equivalents 10,479 12,649
Investments in unconsolidated subsidiaries and investees 12,138 12,491
Affiliate receivable 4,477 -
Other assets (including $39 in 2011 and $164 in 2010 from affiliates and related parties)   94,224     110,936  
Total assets $ 1,401,351   $ 1,557,275  
 
Liabilities and Shareholders’ Equity
Liabilities:
Notes and interest payable $ 819,513 $ 913,134
Notes related to subject to sales contracts 281,246 315,547
Stock-secured notes payable and margin debt 26,120 23,100
Affiliate payables - 12,219
Deferred gain (including $88,803 and $100,212 in 2011 and 2010 from sales to related parties) 95,589 98,504
Accounts payable and other liabilities (including $1,779 and $1,539 in 2011 and 2010 to affiliates and related parties)   76,204     88,506  
1,298,672 1,451,010
 
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 241,247 and 276,972 shares held by TCI (consolidated) as of 2011 and 2010 (6,395 ) (6,333 )
Paid-in capital 110,916 110,419
Retained earnings (42,545 ) (47,776 )
Accumulated other comprehensive income   (786 )   (786 )
Total American Realty Investors, Inc. shareholders' equity   66,213     60,617  
Non-controlling interest   36,466     45,648  
Total equity   102,679     106,265  
Total liabilities and equity $ 1,401,351   $ 1,557,275  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
       
AMERICAN REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 

For the Three Months EndedJune 30,

 

For the Six Months EndedJune 30,

 
2011 2010 2011 2010
(dollars in thousands, except share and per share amounts)
Revenues:
Rental and other property revenues (including $358 and $781 for the three months and $730 and $1,495 for the six months ended 2011 and 2010 respectively from affiliates and related parties) $ 37,528 $ 36,548 $ 74,050 $ 74,286
 
Expenses:
Property operating expenses (including $571 and $562 for the three months and $1,028 and $1,148 for the six months ended 2011 and 2010 respectively from affiliates and related parties) 21,169 23,306 42,627 45,934
Depreciation and amortization 6,245 6,780 12,759 12,996
General and administrative (including $1,241 and $1,193 for the three months and $2,429 and $2,419 for the six months ended 2011 and 2010 respectively from affiliates and related parties) 4,078 2,701 7,611 5,286
Provision on impairment of notes receivable and real estate assets 444 - 6,503 -
Advisory fee to affiliate   3,462     3,993     6,984     8,046  
Total operating expenses   35,398     36,780     76,484     72,262  
Operating income (loss) 2,130 (232 ) (2,434 ) 2,024
 
Other income (expense):
Interest income (including $184 and 1,027 for the three months and $1,829 and $2,137 for the six months ended 2011 and 2010 respectively from affiliates and related parties) 1,203 1,326 1,871 2,828
Other income 551 1,023 1,765 1,888
Mortgage and loan interest (including $1,271 and $890 for the three months and $1,580 and $1,735 for the six months ended 2011 and 2010 respectively from affiliates and related parties) (17,731 ) (20,276 ) (34,676 ) (38,617 )
Earnings from unconsolidated subsidiaries and investees 22 (71 ) (73 ) (93 )
Gain on foreign currency translation   -     906     -     233  
Total other expenses   (15,955 )   (17,092 )   (31,113 )   (33,761 )
Loss before gain on land sales, non-controlling interest, and taxes (13,825 ) (17,324 ) (33,547 ) (31,737 )
Gain (loss) on land sales   14,029     (4,121 )   19,373     (4,115 )
Loss from continuing operations before tax 204 (21,445 ) (14,174 ) (35,852 )
Income tax benefit   2,469     1,454     3,521     2,188  
Net loss from continuing operations 2,673 (19,991 ) (10,653 ) (33,664 )
Discontinued operations:
Loss from discontinued operations (625 ) (1,507 ) (1,756 ) (1,221 )
Gain on sale of real estate from discontinued operations 7,679 5,660 11,816 5,660
Income tax expense from discontinued operations   (2,469 )   (1,454 )   (3,521 )   (1,554 )
Net income from discontinued operations 4,585 2,699 6,539 2,885
Net income (loss) 7,258 (17,292 ) (4,114 ) (30,779 )
Net gain attributable to non-controlling interests   7,175     3,543     9,345     5,119  
Net income (loss) attributable to American Realty Investors, Inc. 14,433 (13,749 ) 5,231 (25,660 )
Preferred dividend requirement   (613 )   (622 )   (1,230 )   (1,244 )
Net income (loss) applicable to common shares $ 13,820   $ (14,371 ) $ 4,001   $ (26,904 )
 
Earnings per share - basic
Income (loss) from continuing operations $ 0.80 $ (1.48 ) $ (0.22 ) $ (2.59 )
Income from discontinued operations   0.40     0.23     0.57     0.25  
Net income (loss) applicable to common shares $ 1.20   $ (1.25 ) $ 0.35   $ (2.34 )
 
Earnings per share - diluted
Income (loss) from continuing operations $ 0.80 $ (1.48 ) $ (0.22 ) $ (2.59 )
Income from discontinued operations   0.40     0.23     0.57     0.25  
Net income (loss) applicable to common shares $ 1.20   $ (1.25 ) $ 0.35   $ (2.34 )
 
Weighted average common share used in computing earnings per share 11,525,389 11,510,322 11,509,341 11,512,169
Weighted average common share used in computing diluted earnings per share 11,525,389 11,510,322 11,509,341 11,512,169
 
 
Amounts attributable to American Realty Investors, Inc.
Income (loss) from continuing operations $ 9,848 $ (16,448 ) $ (1,308 ) $ (28,545 )
Income from discontinued operations   4,585     2,699     6,539     2,885  
Net income (loss) $ 14,433   $ (13,749 ) $ 5,231   $ (25,660 )
 
 
The accompanying notes are an integral part of these consolidated financial statements.
 

Copyright Business Wire 2010

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