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| 8-K - AMERICAN REALTY INVESTORS, INC. - AMERICAN REALTY INVESTORS INC | ari8k040312.htm |
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NEWS RELEASE
FOR IMMEDIATE RELEASE
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Contact:
American Realty Investors, Inc.
Investor Relations
(800) 400-6407
investor.relations@americanrealtyinvest.com
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American Realty Investors, Inc. Reports Fourth Quarter and Full Year 2011 Results
Dallas (April 2, 2012) – American Realty Investors, Inc. (NYSE:ARL), a Dallas-based real estate investment company, today reported results of operations for the fourth quarter ended December 31, 2011. For the three months ended December 31, 2011, the Company reported net income applicable to common shares of $0.2 million or $0.02 per share, as compared to a net loss applicable to common shares of $60.7 million or $5.35 per share for the same period ended 2010.
Our net income applicable to common shares increased $95 million as compared to the prior year. The current year net loss applicable to common shares was a loss of $2.2 million, which includes gain on land sales of $34.2 million and net income from discontinued operations of $33.5 million. The prior year net loss applicable to common shares was $97.2 million, which includes loss on land sales of $10.1 million and net income from discontinued operations, of $2.6 million.
Rental and other property revenues were $118.3 million for the twelve months ended December 31, 2011. This represents an increase of $2.2 million as compared to the prior year revenues of $116.1 million. This change, by segment, is an increase in the apartment portfolio of $8.0 million, an increase in the hotel portfolio of $0.1 million, offset by a decrease in the commercial portfolio of $5.9 million. Within the apartment portfolio, the same properties increased by $3.2 million and the developed properties increased by $4.8 million. The multifamily housing portfolio has continued to thrive, with effective rates and occupancy increasing. Within the commercial portfolio, the same properties decreased by $5.9 million due to an increase in vacancy, which we attribute 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 $67.2 million for the twelve months ended December 31, 2011. This represents an increase of $0.4 million as compared to the prior year operating expenses of $66.8 million. This change, by segment, is an increase in our apartment portfolio of $2.2 million, an increase in our hotel portfolio of $0.2 million, offset by a decrease in our commercial portfolio of $1.0 million and a decrease in our land and other portfolios of $1.0 million. Within the apartment portfolio, the same properties decreased by $0.2 million due to a decrease in overall costs and additional repairs and maintenance. The developed properties increased expenses by $2.4 million. The increase in our hotel portfolio is due to the increase in variable costs that are directly associated with stays within the hotel. Within the commercial portfolio, the same properties decreased by $1.0 million.
Depreciation expense was $20.4 million for the twelve months ended December 31, 2011. This represents a decrease of $1.7 million as compared to the prior year depreciation expense of $22.1 million. This change, by segment, is an increase in our apartment portfolio of $0.6 million, an increase in our other portfolio of $0.2 million, offset by a decrease in our commercial portfolio of $2.5 million. Within the apartment portfolio, the same properties decreased by $0.6 million and the developed properties in the lease—up phase increased by $1.2 million. Once an apartment complex is considered “stabilized”, we begin to depreciate the assets. The decrease in the commercial portfolio of $2.5 million was attributable to the same properties.
The current year provision for impairment of notes receivable, investment in real estate partnerships, and real estate assets was $49.1 million. This was a decrease of $2.5 million as compared to the prior year expense of $51.6 million. In the current year, impairment was recorded as an additional loss in the investment portfolio of $5.2 million in the apartment properties we currently hold, $5.3 million in commercial properties we currently hold, $21.6 million in land parcels we currently hold, $6.6 million in land that was sold, $0.4 million in impairment on our investments in unconsolidated entities and a $10.0 million reserve related to the assets held by American Realty Trust, Inc. at December 31, 2011. The majority of the impairment losses were taken on the properties that are treated as “subject to sales contract” where, subsequent to the sale to a related party under common control, negotiations have occurred for the property ownership to transfer to the lender and estimated current property values are lower than our current basis. In 2010, impairment was recorded as an additional loss in the investment portfolio of $47.6 million in land we currently hold and a $4.0 million increase in impairment on notes receivable.
Other income was $2.4 million for the twelve months ended December 31, 2011. This represents a decrease of $6.4 million as compared to the prior year income of $8.8 million. The decrease was due to revenue received in the prior year for an incentive fee.
Interest income was $10.9 million for the twelve months ended December 31, 2011. This represents an increase of $2.5 million as compared to the prior year income of $8.4 million. This change was due to the receipt of interest payments due on our Unified Housing surplus cash flow notes. Interest is recognized when interest payments are received. More interest payments were received in the current year.
Mortgage and loan interest expense was $60.7 million for the twelve months ended December 31, 2011. This represents a decrease of $5.5 million as compared to the prior year expense of $66.2 million. This change, by segment, is a decrease in the apartment portfolio of $0.8 million, a decrease in the commercial portfolio of $0.3 million, a decrease in the land portfolio of $2.8 million and a decrease in the other portfolio of $1.6 million. Within the apartment portfolio, the same apartment portfolio decreased $3.4 million and the developed properties increased $2.6 million due to properties in the lease-up phase. Once an apartment is completed, the interest expense is no longer capitalized. The land portfolio decrease was due to land sales.
Gain on land sales increased for the twelve months ended December 31, 2011, as compared to the prior period. In the current period, we sold 7,821.97 acres of land in 46 separate transactions for an aggregate sales price of $249.5 million, receiving $121,710 in cash and recorded a gain of $34.2 million. The average sales price was $31,896 per acre. In the prior year, we sold 1,243.88 acres of land in 17 separate transactions for an aggregate sales price of $31.0 million, receiving $8,984 in cash and recorded a loss of $10.1 million.
Discontinued operations relates to properties that were either sold or held for sale as of the year ended December 31, 2011. Included in discontinued operations are a total of 20 and 31 properties as of 2011 and 2010, respectively. Properties sold in 2011 that were held in 2010 have been reclassified to discontinued operations for 2010.
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.
