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8-K - AMERICAN REALTY INVESTORS, INC. - AMERICAN REALTY INVESTORS INCari8k111512.htm
 
NEWS RELEASE
 
FOR IMMEDIATE RELEASE
 
Contact:
American Realty Investors, Inc.
Investor Relations
(800) 400-6407
investorelations@americanrealtyinvest.com
 
 
 
American Realty Investors, Inc. Reports Third Quarter 2012 Results
 
Dallas (November 14, 2012) - American Realty Investors, Inc. (NYSE: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 How notes from Unified !lousing Foundation, Inc. related to the mid-year surplus cash calculation.
 
Other income was SI.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.americanrealtvinvest.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  
Related party payables
    -       10,294  
Deferred gain (including $74,846 and $71,964 in 2012 and 2011 from sales to related parties)
    76,691       78,750  
Accounts payable and other liabilities (including $2,007 and $1,822 in 2012 and 2011 to  related parties)
    95,886       110,307  
      1,042,379       1,140,214  
                 
Shareholders’ equity:
               
Preferred stock, Series A: $2.00 par value, authorized 15,000,000 shares, issued and outstanding 3,353,954
shares in 2012 and 2011 (liquidation preference $10 per share), including 900,000 shares in 2012 and 2011
held by subsidiaries
    4,908       4,908  
Common stock, $.01 par value, authorized 100,000,000 shares; issued 11,941,174 shares and outstanding
11,525,389 shares in 2012 and 2011
    115       115  
Treasury stock at cost; 415,785 shares in 2012 and 2011 and 229,214 and 236,587 shares held by TCI as
of 2012 and 2011
    (6,395 )     (6,395 )
Paid-in capital
    106,396       105,388  
Retained earnings
    (48,559 )     (47,486 )
Accumulated other comprehensive income
    (786 )     (786 )
Total American Realty Investors, Inc. shareholders' equity
    55,679       55,744  
Non-controlling interest
    35,532       39,513  
Total equity
    91,211       95,257  
Total liabilities and equity
  $ 1,133,590     $ 1,235,471